<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
(AMENDMENT NO. 3)
CYPRUS AMAX MINERALS COMPANY
(NAME OF SUBJECT COMPANY)
CAV CORPORATION
AND
PHELPS DODGE CORPORATION
(BIDDERS)
COMMON STOCK, NO PAR VALUE
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
(TITLE OF CLASSES OF SECURITIES)
------------------------
232809103 (COMMON STOCK)
(CUSIP NUMBER OF CLASS OF SECURITIES)
------------------------
S. DAVID COLTON, ESQ.
VICE PRESIDENT AND GENERAL COUNSEL
PHELPS DODGE CORPORATION
2600 NORTH CENTRAL AVENUE
PHOENIX, ARIZONA 85004-3014
(602) 234-8100
------------------------
COPIES TO:
<TABLE>
<S> <C>
MICHAEL W. BLAIR, ESQ. STEPHEN R. VOLK, ESQ.
DEBEVOISE & PLIMPTON DAVID W. HELENIAK, ESQ.
875 THIRD AVENUE SHEARMAN & STERLING
NEW YORK, NY 10022 599 LEXINGTON AVENUE
(212) 909-6000 NEW YORK, NEW YORK 10022
TELEPHONE: (212) 848-4000
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------
1 NAME OF REPORTING PERSONS:
Phelps Dodge Corporation
S.S. OR I.R.S. IDENTIFICATION NUMBER OF ABOVE PERSON:
13-1808503
- ---------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF GROUP
(a) [ ] (b) [ ]
- ---------------------------------------------------------------------------
3 SEC USE ONLY
- ---------------------------------------------------------------------------
4 SOURCES OF FUNDS
WC, BK
- ---------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO
ITEM 2(e) or 2(f)
[ ]
- ---------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
New York
- ---------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
100 shares of common stock, no par value
- ---------------------------------------------------------------------------
8 CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN
SHARES
[ ]
- ---------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
nominal
- ---------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON
CO
- ---------------------------------------------------------------------------
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------
1. NAME OF REPORTING PERSONS:
CAV Corporation
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON:
N/A
- ---------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF GROUP
(a) [ ] (b) [ ]
- ---------------------------------------------------------------------------
3. SEC USE ONLY
- ---------------------------------------------------------------------------
4. SOURCE OF FUNDS
WC, BK
- ---------------------------------------------------------------------------
5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(e) or 2(f)
[ ]
- ---------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- ---------------------------------------------------------------------------
7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
none
- ---------------------------------------------------------------------------
8. CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN
SHARES
[ ]
- ---------------------------------------------------------------------------
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
none
- ---------------------------------------------------------------------------
10. TYPE OF REPORTING PERSON
CO
- ---------------------------------------------------------------------------
</TABLE>
<PAGE> 4
Phelps Dodge Corporation, a New York corporation ("Phelps Dodge"), and its
wholly owned subsidiary, CAV Corporation, a Delaware corporation ("Purchaser"),
hereby amend and supplement their Tender Offer Statement on Schedule 14D-1 (the
"Schedule 14D-1") filed with the Securities and Exchange Commission (the
"Commission") on September 3, 1999, as amended on September 22 and 27, 1999,
with respect to the Purchaser's exchange offer to acquire all outstanding shares
of common stock, no par value per share (including the associated preferred
share purchase rights the "Cyprus Amax Shares") of Cyprus Amax Minerals Company,
a Delaware corporation ("Cyprus Amax") upon the terms and subject to the
conditions by filing this Amendment No. 3 to the Schedule 14D-1 ("Amendment No.
3"), and an amended Prospectus dated as of October 1, 1999 (the "Prospectus")
and the related Letter of Election and Transmittal which together constitute the
Offer.
Item 1 is hereby amended and supplemented as follows:
ITEM 1. SECURITY AND SUBJECT COMPANY.
(c) The information set forth under the caption "Market Prices and
Dividends" in the Prospectus is incorporated herein by reference.
Item 3 is hereby amended and supplemented as follows:
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth under the captions "Summary -- The
Offer," "Background of the Offer" and "The Offer -- Relationships with Cyprus
Amax" in the Prospectus is incorporated herein by reference.
Item 4 is hereby amended and supplemented as follows:
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) Information set forth under the captions "Summary -- The Offer," "The
Offer -- Source and Amount of Funds" and "The Offer" in the Prospectus is
incorporated herein by reference.
Item 5 is hereby amended and supplemented as follows:
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(g) The information set forth under the captions "The Offer -- Effect
of Offer on Market for Cyprus Amax Shares; Registration Under the Exchange Act,"
"The Offer -- Purpose of Our Offer; the Phelps Dodge/Cyprus Amax Merger,"
"Comparison of Rights of Holders of Phelps Dodge Shares and Cyprus Amax Shares,"
"Market Prices and Dividends" and "The Phelps Dodge/Cyprus Amax Merger
Agreement" in the Prospectus is incorporated herein by reference.
Item 8 is hereby amended and supplemented as follows:
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth under the caption "The Offer -- Fees and
Expenses" in the Prospectus and under the caption "Solicitation of Proxies" in
the proxy statement of Phelps Dodge on Schedule 14A, dated September 22, 1999,
is incorporated herein by reference.
Item 9 is hereby amended and supplemented as follows:
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth under the captions "Summary," "The
Companies -- Phelps Dodge" and "Unaudited Pro Forma Combined Financial
Information" in the Prospectus is incorporated herein by reference.
<PAGE> 5
The incorporation by reference herein of the above-referenced financial
information does not constitute an admission that such information is material
to a decision by a security holder of Cyprus Amax whether to exchange, tender or
hold securities being sought in the Offer.
Item 10 is hereby amended and supplemented as follows:
ITEM 10. ADDITIONAL INFORMATION.
(a) None.
(b)-(c) The information set forth under the captions "Background of the
Offer," "Regulatory Matters" and "The Offer -- Conditions of Our Offer" in the
Prospectus is incorporated herein by reference.
(d) The information set forth under the caption "The Offer -- Effect of
Offer on Market for Cyprus Amax Shares; Registration under the Exchange Act" in
the Prospectus is incorporated herein by reference.
(e) The information set forth under the caption "The Offer -- Litigation"
in the Prospectus is incorporated herein by reference.
(f) The information set forth in the Prospectus and the related Letter of
Election and Transmittal, attached as Exhibits (a)(14) and (a)(15) hereto, is
incorporated herein by reference.
Item 11 is hereby amended and supplemented by the addition of the following
exhibits thereto:
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(14) Prospectus of Phelps Dodge dated October 1, 1999.
(a)(15) Form of Letter of Election and Transmittal.
(a)(16) Form of Notice of Guaranteed Delivery.
(a)(17) Form of Letter from Morgan Stanley & Co. Incorporated to Brokers,
Dealers, Commercial Banks, Trust Companies and Nominees.
(a)(18) Form of Letter from Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees to Clients.
(a)(19) Form of Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(c)(1) Agreement and Plan of Merger, dated as of September 30, 1999.
(d)(3) Tax opinion of Shearman & Sterling.
(e)(3) See exhibit (a)(14).
(f)(6) Proxy Statement of Phelps Dodge dated September 22, 1999
(incorporated by reference).
<PAGE> 6
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Phelps Dodge Corporation
By /s/ RAMIRO G. PERU
Name: Ramiro G. Peru
Title: Chief Financial Officer and
Senior Vice President
October 1, 1999
<PAGE> 7
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
CAV Corporation
By /s/ RAMIRO G. PERU
Name: Ramiro G. Peru
Title: Vice President and Treasurer
October 1, 1999
<PAGE> 8
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------
<S> <C> <C>
(a)(14) Prospectus of Phelps Dodge dated October 1, 1999.
(a)(15) Form of Letter of Election and Transmittal.
(a)(16) Form of Notice of Guaranteed Delivery.
(a)(17) Form of Letter from Morgan Stanley & Co. Incorporated to
Brokers, Dealers, Commercial Banks, Trust Companies and
Nominees.
(a)(18) Form of Letter from Brokers, Dealers, Commercial Banks,
Trust Companies and Nominees to Clients.
(a)(19) Form of Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.
(c)(1) Agreement and Plan of Merger dated as of September 30, 1999.
(d)(3) Tax opinion of Shearman & Sterling.
(e)(3) See exhibit (a)(14).
(f)(5) Proxy Statement of Phelps Dodge dated September 22, 1999
(incorporated by reference).
</TABLE>
<PAGE> 1
The information contained in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED OCTOBER 1, 1999
LOGO
Phelps Dodge Corporation
Amended Offer to Exchange Each Outstanding Share
of Common Stock
(Including Associated Preferred Share Purchase Rights)
of
Cyprus Amax Minerals Company
For 0.3500 Shares of Common Stock
of
Phelps Dodge Corporation
or $20.54 net to the seller in cash
subject, in each case, to the election and proration procedures described in
this
prospectus and the related letter of election and transmittal.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON OCTOBER 15, 1999 UNLESS EXTENDED. SHARES TENDERED PURSUANT TO THIS
OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION OF THE OFFER. THIS
AMENDED PROSPECTUS AMENDS AND RESTATES OUR PROSPECTUS DATED SEPTEMBER 22, 1999.
ON SEPTEMBER 30, 1999, WE ENTERED INTO AN AGREEMENT AND PLAN OF MERGER WITH
CYPRUS AMAX PURSUANT TO WHICH WE AGREED TO AMEND OUR OFFER TO CYPRUS AMAX
SHAREHOLDERS.
We are offering to exchange $7.61176875 net in cash plus 0.2203 shares of
Phelps Dodge common stock for each outstanding share of Cyprus Amax Minerals
Company common stock, on a fully prorated basis. You may elect to receive either
$20.54 in cash or 0.3500 shares of Phelps Dodge common stock for each of your
Cyprus Amax common shares that are validly tendered and not properly withdrawn,
subject, in each case, to the election and proration procedures described in
this prospectus and the related letter of election and transmittal. We are also
making a separate offer to exchange $9.00 net in cash and 0.2880 shares of
Phelps Dodge common stock for each outstanding common share of Asarco
Incorporated on a fully prorated basis and subject to the same election and
proration procedures.
THE BOARD OF DIRECTORS OF CYPRUS AMAX HAS APPROVED THE PHELPS DODGE/CYPRUS
AMAX MERGER AGREEMENT, DETERMINED THAT THE OFFER IS FAIR TO, AND IN THE BEST
INTERESTS OF, CYPRUS AMAX STOCKHOLDERS, AND RECOMMENDS THAT CYPRUS AMAX
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
Our obligation to exchange Phelps Dodge common stock and cash for Cyprus
Amax common stock is subject to the conditions listed under "The
Offer -- Conditions of Our Offer." Our offer to Cyprus Amax shareholders is not,
however, conditioned on the success of our offer to Asarco shareholders, nor is
our offer to Asarco shareholders conditioned on the success of our offer to
Cyprus Amax shareholders.
Phelps Dodge's common stock trades on the New York Stock Exchange under the
symbol "PD."
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY. A solicitation of proxies will be unanimously made only pursuant to
separate proxy solicitation materials complying with the requirements of Section
14(a) of the Securities Exchange Act of 1934.
-------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
-------------------------
The Dealer Manager for the Offer is
MORGAN STANLEY DEAN WITTER
-------------------------
The date of this prospectus is October , 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE PROPOSED COMBINATION........ iii
WHERE YOU CAN FIND MORE INFORMATION......................... vi
SUMMARY..................................................... 1
The Proposed Combination.................................. 1
Reasons for the Proposed Combination...................... 1
The Offer................................................. 3
The Companies............................................. 4
Risk Factors.............................................. 5
RISK FACTORS................................................ 6
Benefits of the Combination May Not Be Realized........... 6
Fixed Exchange Ratio of Our Offer Could Work to Your
Disadvantage........................................... 6
You May Not Receive All Consideration in the Form that You
have Elected........................................... 7
Copper Price Volatility May Reduce Income................. 7
Environmental and Regulatory Compliance May Impose
Substantial Costs...................................... 8
Operations Outside the United States Are Subject to
Risks.................................................. 10
Mining Is Subject to Risks................................ 11
Reserve Levels Are Subject To Uncertainty................. 11
Year 2000 Poses Potential Risks........................... 12
THE PROPOSED COMBINATION.................................... 13
REASONS FOR THE PROPOSED COMBINATION........................ 14
BACKGROUND OF THE OFFER..................................... 16
THE OFFER................................................... 41
Description of Election and Proration Procedures.......... 42
Timing of Our Offer....................................... 43
Litigation................................................ 43
Extension, Termination and Amendment...................... 44
Exchange of Cyprus Amax Shares; Delivery of Phelps Dodge
Common Stock and Cash.................................. 45
Cash Instead of Fractional Shares of Phelps Dodge Common
Stock.................................................. 46
Withdrawal Rights......................................... 46
Procedure for Tendering................................... 46
Material U.S. Federal Income Tax Consequences............. 48
Cyprus Amax Rights........................................ 51
Effect of Offer on Market for Cyprus Amax Shares;
Registration Under the Exchange Act.................... 51
Purpose of Our Offer; the Phelps Dodge/Cyprus Amax
Merger................................................. 52
Conditions of Our Offer................................... 54
Source and Amount of Funds................................ 55
Relationships with Cyprus Amax............................ 56
Fees and Expenses......................................... 56
Accounting Treatment...................................... 57
Stock Exchange Listings................................... 57
Regulatory Matters........................................ 57
THE COMPANIES............................................... 58
Phelps Dodge Corporation.................................. 58
ASARCO Incorporated....................................... 58
Cyprus Amax Minerals Company.............................. 59
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE PHELPS DODGE/CYPRUS AMAX MERGER AGREEMENT...............
Form of Merger............................................
Consideration to be Received in the Merger................
Exchange Agent; Procedures for Exchange of Certificates...
Surviving Corporation following the Merger................
Representations and Warranties in the Merger Agreement....
Covenants in the Merger Agreement.........................
Stockholder Approvals and Other Cooperation...............
No Solicitation of Alternate Takeover Proposals...........
Stock Option and other Stock-Based Awards.................
Benefits Matters..........................................
Indemnification; Directors' and Officers' Insurance.......
Conditions Precedent to the Merger........................
Termination...............................................
Closing...................................................
Termination Fees..........................................
Costs and Expenses........................................
Amendment.................................................
Waiver....................................................
MARKET PRICES AND DIVIDENDS................................. 60
PHELPS DODGE CORPORATION SELECTED HISTORICAL FINANCIAL
DATA...................................................... 61
ASARCO INCORPORATED SELECTED HISTORICAL FINANCIAL DATA...... 62
CYPRUS AMAX MINERALS COMPANY SELECTED HISTORICAL FINANCIAL
DATA...................................................... 64
PHELPS DODGE COMPARATIVE PER SHARE INFORMATION.............. 66
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION.......... 68
DESCRIPTION OF PHELPS DODGE CAPITAL STOCK................... 88
Authorized Capital Stock.................................. 88
Phelps Dodge Common Stock................................. 88
Phelps Dodge Preferred Stock.............................. 88
Transfer and Dividend Paying Agent and Registrar.......... 88
COMPARISON OF RIGHTS OF HOLDERS OF PHELPS DODGE SHARES AND
CYPRUS AMAX SHARES........................................ 89
Comparison of Charter and By-law Provisions............... 89
Comparison of Certain Statutory Provisions................ 95
ASARCO AND CYPRUS AMAX INFORMATION.......................... 98
FORWARD-LOOKING INFORMATION................................. 98
LEGAL MATTERS............................................... 99
EXPERTS..................................................... 99
SCHEDULE A -- DIRECTORS AND EXECUTIVE OFFICERS.............. A-1
SCHEDULE B -- ADDITIONAL INFORMATION REGARDING PHELPS DODGE
CORPORATION'S EXPLORATION AND MINING PROPERTIES........... B-1
</TABLE>
THIS PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION
ABOUT PHELPS DODGE THAT IS NOT INCLUDED IN OR DELIVERED WITH THE PROSPECTUS.
THAT INFORMATION IS AVAILABLE WITHOUT CHARGE TO YOU UPON WRITTEN OR ORAL
REQUEST. YOU MUST ADDRESS YOUR REQUEST TO CORPORATE SECRETARY, PHELPS DODGE
CORPORATION, 2600 NORTH CENTRAL AVENUE, PHOENIX, ARIZONA 85004-3014, TELEPHONE
(602) 234-8598. TO OBTAIN TIMELY DELIVERY, YOU MUST REQUEST THE INFORMATION NO
LATER THAN OCTOBER 7, 1999.
ii
<PAGE> 4
QUESTIONS AND ANSWERS ABOUT THE PROPOSED COMBINATION
Q: WHY IS PHELPS DODGE AMENDING ITS OFFER?
A: Phelps Dodge and Cyprus Amax have reached an agreement to combine their
businesses. Phelps Dodge has agreed to amend its exchange offer to increase
the premium we are offering for your shares -- to approximately 44% above
the last trading price of Cyprus Amax common shares just before trading was
halted on August 20, 1999, the day we publicly announced our proposed
business combination. In addition, we're still offering you a choice to
receive Phelps Dodge common shares or cash for your Cyprus Amax common
shares.
Q: DOES CYPRUS AMAX NOW SUPPORT YOUR OFFER?
A: Yes. Your Board of Directors has determined that the offer is fair to, and
in the best interests of, Cyprus Amax stockholders, and recommends that
Cyprus Amax stockholders accept the offer and tender their shares pursuant
to the offer.
Q: WHAT WOULD I RECEIVE IN EXCHANGE FOR MY SHARES?
A: We are offering to exchange $7.61176875 net in cash plus 0.2203 shares of
Phelps Dodge common stock per Cyprus Amax common share, on a fully prorated
basis. You may elect to receive either $20.54 in cash or 0.3500 shares of
Phelps Dodge common stock for each of your Cyprus Amax common shares that
are validly tendered and not properly withdrawn. You will receive either
cash, Phelps Dodge common stock, or a combination of cash and Phelps Dodge
common stock. To the extent the demand for either the cash component or the
stock component of our offer exceeds the aggregate amount of cash or stock
in our offer, we will prorate the total cash or stock, as the case may be,
proportionally among the shareholders who elect that component. Shareholders
who do not make an election will be allocated whatever component is
remaining (or a proportionate share of each component if neither is
oversubscribed), after taking into account the preferences of the tendering
shareholders who make elections. We describe our procedures for prorating
cash and common stock under the caption "The Offer -- Description of
Election and Proration Procedures." You will not receive any fractional
Phelps Dodge shares. Instead, you will receive cash in an amount equal to
the market value of any fractional Phelps Dodge shares you would otherwise
have been entitled to receive.
Q: WILL I BE TAXED ON THE PHELPS DODGE SHARES I RECEIVE?
A: The tax treatment will depend on the extent to which you receive cash or our
common stock pursuant to our offer and the Phelps Dodge/Cyprus Amax merger
in exchange for your Cyprus Amax shares:
- If you elect to receive solely our common stock and no proration of the
number of shares of our common stock is required, we expect that the
transaction will be tax-free to you.
- If you elect to receive solely cash and no proration of cash is required,
we expect that, in general, you will recognize gain or loss in respect of
your Cyprus Amax shares.
- If, because of proration, you receive some cash and some shares, we expect
that, in general, you will recognize some or all of the gain, if any, in
your Cyprus Amax shares but will not recognize loss, if any.
Q: HAS CYPRUS AMAX RECEIVED A FAIRNESS OPINION IN CONNECTION WITH THE OFFER?
A: Yes. Cyprus Amax has received an opinion from Merrill Lynch, Pierce, Fenner
& Smith Incorporated dated September 30, 1999, substantially to the effect
that, as of such date, the consideration to be received by Cyprus Amax
stockholders in the offer and the Cyprus Amax/Phelps Dodge merger is fair
from a financial point of view to the stockholders of Cyprus Amax. Cyprus
Amax has included this opinion as an exhibit to Cyprus Amax's
Solicitation/Recommendation Statement on Schedule 14D-9, which is being
mailed to Cyprus Amax shareholders together with this prospectus.
iii
<PAGE> 5
Q: WHAT ARE THE CONDITIONS TO YOUR OFFER?
A: Our offer is subject to several conditions, including:
- tender of at least a majority of Cyprus Amax's shares; and
- our stockholders having approved the issuance of our stock pursuant to our
offer.
These conditions and other conditions to our offer are discussed in this
prospectus under "The Offer -- Conditions of Our Offer."
Q: ARE YOU STILL TRYING TO INCLUDE ASARCO INCORPORATED IN A THREE-WAY
COMBINATION WITH PHELPS DODGE AND CYPRUS AMAX?
A: Yes. We are making a separate exchange offer to the shareholders of Asarco.
However, we have not reached an agreement with Asarco, as we have with
Cyprus Amax, and there can be no assurance that we will reach an agreement.
Another company, Grupo Mexico S.A. de C.V., has also offered to acquire
Asarco.
Q: WHAT HAPPENED TO CYPRUS AMAX'S AGREEMENT FOR A TWO-WAY COMBINATION WITH
ASARCO?
A: Cyprus Amax has terminated its merger agreement with Asarco in order to
enter into a merger agreement with us.
Q: HOW IS YOUR CYPRUS AMAX OFFER RELATED TO YOUR ASARCO OFFER?
A: While we would prefer to combine all three companies, the two offers are
separate, and neither is conditioned on the other.
Q: HOW WOULD YOU GO ABOUT COMPLETING YOUR PROPOSED ACQUISITION?
A: Once we acquire shares in the offer, our wholly owned subsidiary CAV
Corporation will merge with Cyprus Amax, so that Cyprus Amax will become a
wholly owned subsidiary of Phelps Dodge.
Q: HOW LONG WILL IT TAKE TO COMPLETE YOUR PROPOSED COMBINATION?
A: We expect to complete our combination with Cyprus Amax early in the fourth
quarter of this year.
Q: WHERE CAN I FIND MORE INFORMATION ABOUT PHELPS DODGE, CYPRUS AMAX AND
ASARCO?
A: You can find more information about Phelps Dodge, Cyprus Amax and Asarco
from various sources described under "Where You Can Find More Information"
on page vi.
Q: HOW DO I PARTICIPATE IN YOUR OFFER?
A: To tender your shares, you should do the following:
- If you hold your shares in your own name, complete and sign the enclosed
letter of election and transmittal and return it with your share
certificates to ChaseMellon Shareholder Services, L.L.C., the exchange
agent for the offer, at one of its addresses on the back cover of this
prospectus.
- If you hold your shares in "street name" through a broker, ask your broker
to tender your shares and make the election on your behalf.
- If you have a preference for receiving cash or Phelps Dodge shares,
express your preference on the enclosed letter of election and
transmittal. You may change your election only by properly withdrawing
your shares and tendering them again before our offer expires.
Q: AM I REQUIRED TO MAKE AN ELECTION?
A: No. If you do not make an election, you will still receive payment for your
Cyprus Amax shares. However, if you have a preference for receiving either
Phelps Dodge shares or cash and do not make an election, we will not take
your preference into account and you will be allocated whatever component is
remaining (or a proportionate share of each component if neither is
oversubscribed) after taking into account the preferences of other tendering
shareholders.
iv
<PAGE> 6
Q: IF I HAVE ALREADY TENDERED MY SHARES, DO I NEED TO TAKE FURTHER ACTION?
A: No, but if you tendered pursuant to our initial offer (prospectus dated
September 2, 1999), you must withdraw and re-tender your shares if you wish
to make an election to receive cash or Phelps Dodge shares. If you tendered
pursuant to our amended offer (prospectus dated September 22, 1999), you
need not take any further action unless you wish to make or change any cash
or stock election.
Q: WHAT SHOULD I DO IF I HAVE QUESTIONS?
A: If you have any questions about our offer, please call our information
agent, Innisfree M&A Incorporated, toll-free at 1-877-750-5838.
v
<PAGE> 7
WHERE YOU CAN FIND MORE INFORMATION
Phelps Dodge, Asarco and Cyprus Amax file annual, quarterly and special
reports, proxy statements and other information with the Securities and Exchange
Commission (the SEC). You may read and copy any reports, statements or other
information we file at the SEC's public reference room at 450 Fifth Street,
N.W., Washington, D.C. 20549, or at the SEC's public reference rooms in New
York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Our SEC filings are also
available to the public from commercial document retrieval services and at the
Internet world wide web site maintained by the SEC at www.sec.gov. Phelps Dodge
filed a registration statement on Form S-4 to register with the SEC the Phelps
Dodge common shares to be issued pursuant to our offer. This prospectus is a
part of that registration statement. As allowed by SEC rules, this prospectus
does not contain all the information you can find in the registration statement
or the exhibits to the registration statement.
When we commenced our offer, we filed with the SEC a statement on Schedule
14D-1 pursuant to rule 14d-3 under the Securities Exchange Act of 1934
furnishing certain information about our offer. We filed an amended Schedule
14D-1 on September 22, 1999. Today we are filing a further amended Schedule
14D-1. You may read and copy the Schedule 14D-1 (and any amendments to it) at
the SEC's public reference room in Washington, D.C. referred to above.
The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this prospectus, except for
any information superseded by information contained directly in this prospectus.
This prospectus incorporates by reference the documents set forth below that
Phelps Dodge, Asarco or Cyprus Amax have previously filed with the SEC. These
documents contain important information about Phelps Dodge, Asarco and Cyprus
Amax and their financial condition.
DOCUMENTS INCORPORATED BY REFERENCE ARE AVAILABLE WITHOUT CHARGE UPON
REQUEST TO: CORPORATE SECRETARY, PHELPS DODGE CORPORATION, 2600 NORTH CENTRAL
AVENUE, PHOENIX, AZ 85004-3014, TELEPHONE (602) 234-8598. IN ORDER TO ENSURE
TIMELY DELIVERY, ANY REQUEST FOR DOCUMENTS SHOULD BE SUBMITTED NO LATER THAN
OCTOBER 7, 1999.
The following documents filed with the SEC by Phelps Dodge are
incorporated herein by reference:
(i) Phelps Dodge's Annual Report on Form 10-K for the year ended
December 31, 1998 (revised information regarding Phelps Dodge's exploration
and mining properties is set forth in Schedule B to this prospectus);
(ii) Phelps Dodge's Proxy Statement for the Annual Meeting of Phelps
Dodge Stockholders held on May 5, 1999;
(iii) Phelps Dodge's Quarterly Reports on Form 10-Q for the periods
ended March 31, 1999 and June 30, 1999;
(iv) Phelps Dodge's Annual Report on Form 11-K for the fiscal year
ended December 31, 1998;
(v) Phelps Dodge's Current Reports on Form 8-K dated August 23, 1999
and August 26, 1999, September 3, 1999, September 22, 1999 and September
30, 1999;
(vi) Phelps Dodge's Definitive Proxy Statement for the special meeting
of Asarco shareholders to be held on September 30, 1999;
(vii) Phelps Dodge's Definitive Proxy Statement for the special
meeting of Cyprus Amax stockholders to be held on September 30, 1999; and
(viii) Phelps Dodge's Definitive Proxy Statement for the special
meeting of Phelps Dodge stockholders to be held on October 13, 1999.
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<PAGE> 8
The following documents filed with the SEC by Asarco are incorporated
herein by reference:
(i) Asarco's Annual Report on Form 10-K for the year ended December
31, 1998 (except for the
report of Asarco's independent accountants contained therein which is not
incorporated herein by reference because the consent of Asarco's independent
accountants has not yet been obtained);
(ii) Asarco's Proxy Statement for the Annual Meeting of Shareholders
held on April 28, 1999;
(iii) Asarco's Quarterly Reports on Form 10-Q for the periods ended
March 31, 1999 and June 30, 1999; and
(iv) Asarco's Current Reports on Form 8-K dated July 20, 1999,
September 7, 1999, September 20, 1999 and September 28, 1999.
The following documents filed with the SEC by Cyprus Amax are incorporated
herein by reference:
(i) Cyprus Amax's Annual Report on Form 10-K for the year ended
December 31, 1998 (except for the report of Cyprus Amax's independent
accountants contained therein which is not incorporated herein by reference
because the consent of Cyprus Amax's independent accountants has not yet
been obtained);
(ii) Cyprus Amax's Proxy Statement for the Annual Meeting of
Shareholders held on May 6, 1999;
(iii) Cyprus Amax's Quarterly Reports on Form 10-Q for the periods
ended March 31, 1999 and June 30, 1999; and
(iv) Cyprus Amax's Current Reports on Form 8-K dated July 21, 1999,
July 14, 1999, February 24, 1999 and September 28, 1999.
All documents filed by Phelps Dodge, Asarco or Cyprus Amax pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 from
the date of this prospectus to the date that shares are accepted for exchange
pursuant to our offer (or the date that our offer is terminated) shall also be
deemed to be incorporated herein by reference.
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<PAGE> 9
SUMMARY
This summary highlights selected information from this prospectus, and may
not contain all of the information that is important to you. To better
understand the proposed Phelps Dodge/Asarco/Cyprus Amax combination and our
separate offers to the shareholders of Asarco and Cyprus Amax, you should read
this entire document carefully, as well as those additional documents to which
we refer you. See "Where You Can Find More Information" on page vi.
THE PROPOSED COMBINATION
We have agreed to combine the businesses of Phelps Dodge Corporation
(Phelps Dodge) and Cyprus Amax Minerals Company (Cyprus Amax). Pursuant to our
agreement with Cyprus Amax, we are offering to exchange $7.61176875 net in cash
plus 0.2203 shares of Phelps Dodge common stock per Cyprus Amax common share, on
a fully prorated basis. You may elect to receive either $20.54 in cash or 0.3500
shares of Phelps Dodge common stock for each of your Cyprus Amax common shares
that are validly tendered and not properly withdrawn, subject, in each case, to
the election and proration procedures described in this prospectus under the
caption "The Offer -- Description of Election and Proration Procedures." The
consideration we are offering you has a value of $19.80, based on the closing
price of Phelps Dodge common stock on September 29, 1999 of $55 5/16. If you
receive all consideration in the form of stock, at the exchange ratio of 0.3500
Phelps Dodge common shares per Cyprus Amax share, your consideration would be
worth $19.36, based on the same closing price. We are also making a separate
offer to shareholders of ASARCO Incorporated (Asarco) to exchange $9.00 in cash
and 0.2880 shares of Phelps Dodge common stock per Asarco common share, on a
fully prorated basis and subject to the same election and proration procedures.
In July 1999, Asarco and Cyprus Amax announced that they had agreed to
combine their companies. In August 1999, we proposed a three-way combination
that we believe would be much more valuable to shareholders of Asarco and Cyprus
Amax than the proposed two-party Asarco/Cyprus Amax merger. Since then, we have
reached an agreement to combine with Cyprus Amax. We are continuing our offer to
Asarco shareholders. Another company, Grupo Mexico, has also offered to acquire
Asarco. See "Background of the Offer" beginning on page 16.
We continue to prefer to combine all three companies. However, our
agreement with Cyprus Amax and our offer to Cyprus Amax shareholders are not
conditioned on the success of our offer to Asarco shareholders, nor is our offer
to Asarco shareholders conditioned on the success of our offer to Cyprus Amax
shareholders. See "The Offer" beginning on page 37.
REASONS FOR THE PROPOSED COMBINATION
We believe that our proposed combination of Phelps Dodge, Asarco and Cyprus
Amax presents a unique opportunity to create a large, resource-rich portfolio of
lower-cost global copper assets with enhanced flexibility to deliver superior
results in all business cycles. In addition to the substantial dividend increase
for Asarco and Cyprus Amax shareholders, we believe that the combination of
Phelps Dodge, Asarco and Cyprus Amax will produce the following benefits:
- Substantial premium. The exchange ratios and cash that we are offering
imply premiums of approximately 44% for Cyprus Amax shareholders and
approximately 40% for Asarco shareholders based on the last trading
prices of Phelps Dodge, Cyprus Amax and Asarco common stock just before
trading was halted on August 20, 1999, the day we publicly announced our
proposed business combination.
- Accretion to cash flow and earnings. The combination would result in
immediate and substantial accretion to the cash flow of the combined
company. We expect the combination to result in significant accretion to
earnings per share of the combined company beginning in the second year
after closing, assuming copper prices of $0.80 -- $0.85 per pound in
2001.
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<PAGE> 10
- Ability to integrate operations. We expect the combined company to have
significantly greater ability to integrate southwest U.S. mining
operations, administrative functions in the U.S., Chile and Peru, and
worldwide exploration and development activities.
- Management strength. The combined company would have a strong and deep
management team, at both the operating and corporate levels, with strong
credibility in the marketplace.
- Cost savings. We expect to achieve annual cash cost savings of at least
$200 million by the end of the second year after closing, as a result of
reductions in overhead, purchasing, exploration and other expenses. We
also expect at least another $40 million in annual savings from lower
depreciation expenses, bringing the total annual savings to at least
$245 million. These cost savings are based on public information and our
expectation that we can deliver at least $75 million in incremental
savings above the cash synergy figure of $125 million projected in the
proposed Asarco-Cyprus Amax merger. This does not include any cost
savings from the rationalization of high-cost production during periods
of low copper prices.
- Operating leverage. The combined company would have tremendous
operating leverage, together with enough diversity in other businesses
to mitigate cyclical downturns.
- Superior production capability. The total annual copper production of
the combined company would be approximately 3.8 billion pounds at
current levels, with total attributable copper reserves of approximately
80 billion recoverable pounds.
- Increased competitiveness. The combined company would have increased
ability to compete for world-class projects.
- Reduced capital expenditures. By combining their businesses, Phelps
Dodge, Asarco and Cyprus Amax would be able to reduce capital
expenditures.
- Financial strength. The company would have a strong, liquid balance
sheet, with excellent access to capital.
See "Reasons for the Proposed Combination" beginning on page 14.
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<PAGE> 11
THE OFFER
SUMMARY OF THE OFFER
We are offering, upon the terms and subject to the conditions set forth in
this prospectus and in the related letter of election and transmittal, to
exchange 0.3500 shares of Phelps Dodge common stock, or $20.54 in cash, for each
outstanding share of common stock of Cyprus Amax that is validly tendered on or
prior to the expiration date and not properly withdrawn, subject, in each case,
to the election and proration procedures described in this prospectus and the
related letter of election and transmittal. We are making our offer through our
wholly owned subsidiary, CAV Corporation, which is a Delaware corporation. The
term "expiration date" means 12:00 midnight, New York City time, on October 15,
1999, unless we extend the period of time for which this offer is open, in which
case the term "expiration date" means the latest time and date on which the
offer, as so extended, expires. We are also making a separate offer to exchange
0.4413 shares of Phelps Dodge common stock, or $25.90 in cash, for each
outstanding share of common stock of Asarco, subject to the same election and
proration procedures.
CONDITIONS OF THE OFFER
Our obligation to exchange shares of Phelps Dodge common stock and cash for
Cyprus Amax shares pursuant to the offer is subject to several conditions
referred to below under "The Offer -- Conditions of Our Offer," including
conditions as to the minimum number of shares tendered, approval by our
stockholders, and other conditions that are discussed below.
TIMING OF THE OFFER
Our offer is currently scheduled to expire on October 15, 1999; however, we
currently intend to extend our offer from time to time as necessary until all
the conditions to the offer have been satisfied or waived. See "The
Offer -- Extension, Termination and Amendment."
EXTENSION, TERMINATION AND AMENDMENT
We expressly reserve the right (subject to our merger agreement with Cyprus
Amax), in our sole discretion, at any time or from time to time, to extend the
period of time during which our offer remains open, and we can do so by giving
oral or written notice of such extension to the exchange agent. If we decide to
extend our offer, we will make an announcement to that effect no later than 9:00
A.M., New York City time, on the next business day after the previously
scheduled expiration date. We are not making any assurance that we will exercise
our right to extend our offer, although we currently intend to do so until all
conditions have been satisfied or waived. During any such extension, all Cyprus
Amax shares previously tendered and not withdrawn will remain subject to the
offer, subject to your right to withdraw your Cyprus Amax shares.
Subject to the SEC's applicable rules and regulations, we also reserve the
right (subject to our merger agreement with Cyprus Amax), in our sole
discretion, at any time or from time to time, (a) to delay our acceptance for
exchange or our exchange of any Cyprus Amax shares pursuant to our offer,
regardless of whether we previously accepted Cyprus Amax shares for exchange, or
to terminate our offer and not accept for exchange or exchange any Cyprus Amax
shares not previously accepted for exchange or exchanged, upon the failure of
any of the conditions of the offer to be satisfied and (b) to waive any
condition (other than the condition relating to the Phelps Dodge stockholder
approval and the condition relating to the effectiveness of the registration
statement for the Phelps Dodge shares to be issued in our offer) or otherwise to
amend the offer in any respect, by giving oral or written notice of such delay,
termination or amendment to the exchange agent and by making a public
announcement. We will follow any extension, termination, amendment or delay, as
promptly as practicable, with a public announcement. In the case of an
extension, any such announcement will be issued no later than 9:00 A.M., New
York City time, on the next business day after the previously scheduled
expiration date. Subject to applicable law (including Rules 14d-4(c) and
14d-6(d) under the Securities Exchange Act of 1934, which require that any
material change in the information published, sent or given to the stockholders
in connection with the offer be promptly sent to stockholders in a manner
reasonably designed to inform stockholders of such change) and without limiting
the manner in which we may choose to
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<PAGE> 12
make any public announcement, we assume no obligation to publish, advertise or
otherwise communicate any such public announcement other than by making a
release to the Dow Jones News Service.
EXCHANGE AND SHARES; DELIVERY OF PHELPS DODGE COMMON STOCK AND CASH
Upon the terms and subject to the conditions of our offer (including, if
our offer is extended or amended, the terms and conditions of any such extension
or amendment), Phelps Dodge will accept for exchange, and will exchange, shares
validly tendered and not properly withdrawn as promptly as practicable after the
expiration date.
WITHDRAWAL RIGHTS
Your tender of Cyprus Amax shares pursuant to the offer is irrevocable,
except that Cyprus Amax shares tendered pursuant to the offer may be withdrawn
at any time prior to the expiration date, and, unless we previously accepted
them pursuant to the offer, may also be withdrawn at any time after November 2,
1999.
PROCEDURE FOR TENDERING SHARES
For you to validly tender Cyprus Amax shares pursuant to our offer, (a) a
properly completed and duly executed letter of election and transmittal (or
manually executed facsimile of that document), along with any required signature
guarantees, or an agent's message, which is explained below, in connection with
a book-entry transfer, and any other required documents, must be transmitted to
and received by the exchange agent at one of its addresses set forth on the back
cover of this prospectus, and certificates for tendered Cyprus Amax shares must
be received by the exchange agent at such address or those Cyprus Amax shares
must be tendered pursuant to the procedures for book-entry tender set forth in
"The Offer" (and a confirmation of receipt of such tender received), in each
case before the expiration date, or (b) you must comply with the guaranteed
delivery procedures set forth in "The Offer."
ELECTION AND PRORATION PROCEDURES
You will be able to elect to receive either cash or Phelps Dodge common
shares in exchange for your Cyprus Amax common shares, subject to the election
and proration procedures described under the caption "The Offer -- Description
of Election and Proration Procedures." You can make this election by filling out
the appropriate box in the letter of election and transmittal or, if you hold
your Cyprus Amax shares through a broker, by asking your broker to make an
election on your behalf. If you tendered your Cyprus Amax shares pursuant to our
initial offer (prospectus dated September 2, 1999), you must withdraw and
re-tender your shares if you wish to make an election. Otherwise, you will be
treated as having made no election. If you tendered pursuant to our amended
offer (prospectus dated September 22, 1999), you need not take any further
action unless you wish to make or change any cash or stock election.
THE COMPANIES
PHELPS DODGE CORPORATION
2600 North Central Avenue
Phoenix, AZ 85004-3014
(602) 234-8100
Phelps Dodge Corporation is among the world's largest producers of copper,
carbon black and magnet wire, and is the world's largest producer of
continuous-cast copper rod. Phelps Dodge comprises two divisions:
- Phelps Dodge Mining Company, which includes our worldwide copper
operations and worldwide mineral exploration and development programs;
and
- Phelps Dodge Industries, which includes our specialty chemicals segment
and our wire and cable segment.
As of June 30, 1999, Phelps Dodge and its subsidiaries had 13,193
employees.
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<PAGE> 13
ASARCO INCORPORATED
180 Maiden Lane
New York, NY 10038
(212) 510-2000
Asarco Incorporated, a New Jersey corporation organized in 1899, is one of
the world's leading producers of copper. Asarco also produces specialty
chemicals and aggregates. Asarco's copper business includes integrated mining,
smelting and refining operations in North America and in Peru through its 54.3%
owned subsidiary, Southern Peru Copper Corporation. Enthone-OMI, Inc., a wholly
owned subsidiary, operates a worldwide specialty chemicals business focused on
functional and decorative coatings for the electronics and metal finishing
industries. American Limestone Company, a wholly owned subsidiary, produces
construction aggregates, ready-mixed concrete and agricultural limestone. Asarco
also operates a custom lead smelting business, a zinc mining business and a
specialty metals business. Asarco owns Encycle, Inc., which operates a waste
recycling facility and Hydrometrics, an environmental consulting and
construction firm. As of June 30, 1999, Asarco and its subsidiaries employed
approximately 10,100 employees.
CYPRUS AMAX MINERALS COMPANY
9100 East Mineral Circle
Englewood, CO 80112
(303) 643-5000
Cyprus Amax Minerals Company, a Delaware corporation, is a major mining
company engaged, directly or through its subsidiaries and affiliates, in the
exploration for and extraction, processing, and marketing of mineral resources.
Cyprus Amax is a leading copper producer, the world's largest producer of
molybdenum and has a significant position in gold via its 30% interest in
Kinross Gold Corporation. Cyprus Amax sold certain eastern and midwestern coal
operations in June of 1998 and sold its lithium business in October of 1998.
Cyprus Amax sold its remaining U.S. coal operations in June 1999. Cyprus Amax
still holds its Australian coal properties. As of June 30, 1999, Cyprus Amax and
its subsidiaries employed approximately 4,600 employees.
RISK FACTORS
In deciding whether to tender your shares pursuant to our offer, you should
read carefully this prospectus and the documents to which we refer you. You
should also carefully consider the following factors:
- the risks associated with integrating Cyprus Amax and Asarco into our
company, including the risk that the amount and timing of the cost
savings and other expected benefits from the business combination may be
different from what we expect;
- the fixed exchange ratio of our offer, which may work to your
disadvantage if you receive Phelps Dodge shares in our offer and Cyprus
Amax stock increases in value or Phelps Dodge stock decreases in value;
- the possibility that, due to the election and proration procedures, you
may not receive all consideration in the form that you have elected;
- the fact that we may not be able to complete business combinations with
both Cyprus Amax and Asarco, which would reduce the expected cost savings
and other benefits, and would likely cause additional transaction
expenses;
- the volatility of copper prices;
- the extensive governmental regulations, including regulations relating to
environmental matters, to which Phelps Dodge, Asarco and Cyprus Amax are
subject;
- the risks associated with conducting operations outside the United
States, especially in less developed countries;
- the risks associated with mining;
- the fact that reserve levels are subject to uncertainties; and
- potential risks associated with the Year 2000.
See "Risk Factors" beginning on the following page for a more complete
discussion of these factors.
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<PAGE> 14
RISK FACTORS
In deciding whether to tender your shares pursuant to our offer, you should
read carefully this prospectus and the documents to which we refer you. You
should also carefully consider the following factors:
BENEFITS OF THE COMBINATION MAY NOT BE REALIZED
If we complete the proposed Phelps Dodge/Cyprus Amax/Asarco business
combination, we will integrate three companies that have previously operated
independently. This will involve integrating:
- corporate headquarters and mining administration offices;
- worldwide exploration and development activities;
- mining operations, particularly in the southwestern United States; and
- administrative functions in the U.S., Chile and Peru.
We may not be able to integrate the operations of Asarco and Cyprus Amax and
Asarco without encountering difficulties. The diversion of the attention of
management to the integration effort and any difficulties encountered in
combining operations could adversely affect the combined company's businesses.
Although we expect at least $200 million in annual cash cost savings from the
combination by the end of the second year (excluding any savings from
rationalizations of high-cost production during periods of low copper prices),
together with $40 million in annual savings from lower depreciation expenses, we
cannot be sure that we will be able to achieve them in the amounts expected or
as quickly as we now expect. Actual cost savings may be higher or lower than we
currently expect, and may take a longer or shorter time to achieve than we
currently expect. Our estimates concerning the amount and timing of cost savings
have been developed by our management and reflect our best judgment based on
publicly available information about Asarco and Cyprus Amax.
More generally, our views about the expected benefits of our proposed
combination are based on publicly available information about Asarco and Cyprus
Amax. Those companies may have other information, not available to us, that
would significantly affect our estimates or views.
Because our offers to acquire Asarco and Cyprus Amax are separate, and
neither offer is dependent on the success of the other, it is possible that one
of the following scenarios will occur:
- we will acquire Cyprus Amax, but not Asarco;
- we will acquire Asarco, but not Cyprus Amax; or
- we will acquire both Asarco and Cyprus Amax, but it will take us much
longer to acquire one company than the other.
In any of these cases, the cost savings we expect from the combination will be
less than if all three companies combined promptly. If we acquire only one of
Asarco or Cyprus Amax, we may still encounter difficulties in integrating its
operations, and may not be able to achieve the cost savings we expect in the
amounts or time periods anticipated.
FIXED EXCHANGE RATIO OF OUR OFFER COULD WORK TO YOUR DISADVANTAGE
We are offering to exchange 0.3500 shares of Phelps Dodge common stock, or
$20.54 in cash, at your election, for each outstanding share of Cyprus Amax
common stock, subject, in each case, to the election and proration procedures
described in this prospectus and the related letter of election and transmittal.
If you receive Phelps Dodge common stock (either because you have elected to
receive Phelps Dodge shares or because of the proration procedures), once you
have tendered your stock and your withdrawal rights have expired, you will be
locked into that exchange ratio, and you will not be able to capture gains from
possible
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<PAGE> 15
increases in value of Cyprus Amax common stock. While you may benefit from
possible increases in value of Phelps Dodge common stock, you may incur losses
from possible decreases in value of Phelps Dodge common stock.
YOU MAY NOT RECEIVE ALL CONSIDERATION IN THE FORM THAT YOU HAVE ELECTED
We are offering to exchange $7.61176875 net in cash plus 0.2203 shares of
Phelps Dodge common stock per Cyprus Amax common share, on a fully prorated
basis. At the time you tender your shares and make your election, you will not
know exactly what combination of stock and/or cash you will receive because it
will also depend upon the elections made by other tendering shareholders. You
can tell us your preference to receive either $20.54 cash or 0.3500 shares of
Phelps Dodge common stock for each of your Cyprus Amax common shares, and you
will receive either cash, Phelps Dodge common stock, or a combination of cash
and Phelps Dodge common stock. To the extent the demand for either the cash or
the stock component of our offer exceeds the aggregate amount of cash or stock
in our offer, we will prorate the total cash or stock, as the case may be,
proportionally among the shareholders who elect that component. Shareholders who
do not make an election will be allocated whatever component is remaining (or a
proportionate share of each component if neither is oversubscribed), after
taking into account the preferences at the tendering. We describe our procedures
for prorating cash and common stock under the caption "The Offer -- Description
of Election Proration Procedures."
COPPER PRICE VOLATILITY MAY REDUCE INCOME
Copper is an internationally traded commodity. Its prices are effectively
determined on the two major metals exchanges -- New York Mercantile Exchange
(COMEX) and London Metal Exchange (LME). The prices on these exchanges reflect
the worldwide balance of copper demand and supply and various domestic and
international macroeconomic and political conditions. Prices are also sometimes
influenced significantly by numerous other factors, including speculative
actions, the availability and cost of substitute materials, and currency
exchange fluctuations. The copper market is volatile and cyclical, as
illustrated by the following chart showing the high, low and average COMEX spot
price per pound of copper cathode for the years indicated:
<TABLE>
<CAPTION>
YEAR HIGH LOW AVERAGE
- ---- ------ ------ -------
<S> <C> <C> <C>
1989........................................... $ 1.55 $ 1.03 $ 1.27
1990........................................... 1.38 0.96 1.19
1991........................................... 1.20 0.96 1.05
1992........................................... 1.16 0.93 1.03
1993........................................... 1.07 0.72 0.85
1994........................................... 1.40 0.78 1.07
1995........................................... 1.46 1.21 1.35
1996........................................... 1.31 0.86 1.06
1997........................................... 1.23 0.76 1.04
1998........................................... 0.86 0.64 0.75
1999 (through September 29).................... 0.83 0.61 0.69
</TABLE>
- ---------------
SOURCE: COMEX
On September 29, 1999, the closing spot price of copper cathode on the COMEX was
$0.80 per pound.
Any material change in the price we receive for copper, or in our unit
production costs, has a significant effect on our results. Our share of current
annual production is approximately 1.6 billion pounds of copper. Accordingly,
each 1 cent per pound change in the average annual copper price, or in average
annual unit production costs, causes a variation in annual operating income
before taxes of approximately $16 million. Following the completion of our
proposed Phelps Dodge/Asarco/Cyprus Amax combination, the combined company's
annual production would be approximately 3.8 billion pounds, based on current
levels. We estimate that each 1 cent per pound change in the average annual
copper price, or in average unit production costs,
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<PAGE> 16
would cause a variation in annual operating income before taxes of approximately
$38 million at these production levels.
If we combined with Cyprus Amax but not with Asarco, our combined annual
production would be approximately 2.8 billion pounds, based on current levels.
We estimate that each 1 cent per pound change in the average annual copper
price, or in average unit production costs, would cause a variation in annual
operating income before taxes of approximately $28 million at these production
levels.
While Phelps Dodge, Asarco and Cyprus Amax historically have used limited
financial risk management techniques to reduce a portion of their exposure to
the volatility of commodity market prices, there can be no assurance that the
combined company will continue to be able to do so effectively in the future. In
addition, depending upon the specific techniques employed, market conditions and
other factors, these activities could reduce the earnings or cash flow that the
combined company otherwise would realize or could result in losses.
Cyprus Amax is the world's largest producer of molybdenum, which, like
copper, is characterized by volatile and cyclical prices. Molybdenum consumption
depends heavily on worldwide demand from the specialty steel industry and, to a
lesser extent, on chemical applications. World molybdenum consumption remained
at record levels in the first half of 1998, continuing the growth trend begun in
1994. Beginning in the second half of 1998, molybdenum consumption declined as a
result of the economic downturn in Asia. Overall 1998 molybdenum worldwide
consumption declined an estimated four percent primarily in metallurgical
applications. The molybdenum market remained oversupplied during the second half
of 1998, and production curtailments were announced in China and at three
primary mines in North America during the fourth quarter. The molybdenum market
continued to be oversupplied in the first half of 1999. Western World
metallurgical grade molybdenum dealer oxide prices averaged about $2.65 per
pound in the first half of 1999 compared with full-year averages of about $3.40
per pound in 1998 and about $4.30 per pound in 1997. Cyprus Amax molybdenum
realizations averaged $4.11 per pound in the first half of 1999 compared with
full-year averages of $4.95 per pound in 1998 and $5.50 per pound in 1997, with
realizations positively impacted by higher-valued molybdenum chemical products.
A substantial portion of world molybdenum production is a by-product of copper
mining, which is relatively insensitive to molybdenum price levels. Exports to
the Western World, especially from China, can also influence competitive
conditions.
ENVIRONMENTAL AND REGULATORY COMPLIANCE MAY IMPOSE SUBSTANTIAL COSTS
The mining operations and exploration activities of Phelps Dodge, Asarco
and Cyprus Amax, both inside and outside the United States, are subject to
extensive laws and regulations governing prospecting, developing, production,
exports, taxes, labor standards, occupational health, waste disposal, protection
and remediation of the environment, protection of endangered and protected
species, mine safety, toxic substances and other matters. Mining is also subject
to risks and liabilities associated with pollution of the environment and the
disposal of waste products occurring as a result of mineral exploration and
production. Compliance with these laws and regulations could impose substantial
costs and subject the combined company to significant potential liabilities.
ENVIRONMENTAL MATTERS
Our operations in the United States are subject to stringent federal, state
and local laws and regulations relating to improving or maintaining
environmental quality. Our global operations are also subject to many
environmental protection laws. Environmental laws often require parties to pay
for remedial action or to pay damages regardless of fault. Environmental laws
also often impose liability with respect to divested or terminated operations,
even if the operations were terminated or divested many years ago. The federal
Clean Air Act has had a significant impact, particularly on our smelters. Costs
associated with environmental compliance have increased over time, and we expect
these costs to continue to rise in the future.
We are subject to the Comprehensive Environmental Response, Compensation
and Liability Act (CERCLA or Superfund), as amended by the Superfund Amendments
and Reauthorization Act of 1986. Under Superfund, the Environmental Protection
Agency (EPA) has identified on its CERCLIS database approximately 35,000 sites
throughout the United States for review, ranking and possible inclusion on the
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National Priorities List (NPL). The EPA has included 13 sites owned by us on the
CERCLIS database. Even though we believe that most, if not all, of the sites
identified do not qualify for listing on the NPL, we may be required to remove
hazardous waste or remediate the alleged effects of hazardous substances on the
environment. In many cases, this involves past disposal practices at sites not
owned by us. We have received notice that we are a potentially responsible party
from the EPA or individual states under CERCLA or an equivalent state law. We
are participating in environmental assessment and remediation activity at 39
sites.
At December 31, 1998, we had reserves of $106.0 million for remediation of
some of the sites discussed above and other environmental costs. We record
liabilities for environmental expenditures when it is probable that obligations
have been incurred and the costs can be reasonably estimated. The amounts of
these liabilities are very difficult to estimate. This is due to factors such as
the unknown extent of the remedial actions that may be required. In the case of
sites not owned by us, the extent of our probable liability in proportion to the
probable liability of other parties is difficult to estimate. We have other
possible environmental liabilities that in our judgment cannot be reasonably
estimated. Losses attributable to remediation costs are reasonably possible at
other sites. Based on the information available to us, the accruals, both
individually and in the aggregate, from known environmental liabilities are not
expected to result in a material additional loss beyond that already accrued. We
cannot currently estimate the total additional loss we may incur for
environmental liabilities resulting from such things as frequently changing
environmental laws, regulations or agency interpretations, which are beyond our
control, but that loss could be potentially material.
The U.S. and non-U.S. operations of Asarco and Cyprus Amax are also subject
to stringent environmental laws, including CERCLA. The following excerpts are
from Asarco's quarterly report on Form 10-Q for the period ended June 30, 1999:
Reserves for closed plants and environmental matters, including mine
reclamation costs for active and closed properties, totaled $123.8 million
at June 30, 1999. Asarco anticipates that expenditures relating to these
reserves will be made over the next several years. Net cash expenditures
against these reserves for the three months ended June 30, 1999 and 1998
were $12.6 million and $25.4 million, respectively. Expenditures for the
six months ended June 30, 1999 and 1998 were $25.6 million and $40.2
million, respectively.
. . .
Asarco and certain of its subsidiaries have received notices from EPA
and other federal and state agencies that they and in most cases numerous
other parties are potentially responsible to remediate alleged hazardous
substance releases at certain sites under CERCLA or similar state laws. In
addition, Asarco and certain of its subsidiaries are defendants in lawsuits
brought under CERCLA or state laws that seek substantial damages and
remediation. Remedial action is being undertaken by Asarco at some of the
sites.
The following excerpt is from Cyprus Amax's quarterly report on Form 10-Q for
the period ended June 30, 1999:
At June 30, 1999, Cyprus Amax had accruals of approximately $252
million for expected future mine closure, reclamation, and environmental
remediation liabilities. Total reclamation costs for Cyprus Amax at the end
of current mine lives are estimated at about $253 million of which
approximately $110 million was reserved at June 30, 1999. Additionally, the
cost range of reasonably possible outcomes for sites where remediation
costs are estimable is from $120 million to $450 million, of which
approximately $142 million was accrued at June 30, 1999. Work on these
sites is expected to be substantially completed in the next several years,
subject to the inherent delays involved in the process. Remediation costs
that could not be reasonably estimated at June 30, 1999, are not expected
to have a material impact on the financial condition and ongoing operations
of Cyprus Amax.
9
<PAGE> 18
OTHER REGULATORY MATTERS
In recent years, the U.S. Congress has considered a number of proposed
amendments to the General Mining Law of 1872 which governs mining claims and
related activities on federal lands. Although Congress has not adopted any such
legislation, it could do so in the future. If ever adopted, such legislation
could impose royalties on minerals extracted from federal lands, require payment
of fair market value for patenting federal lands, and required that patented
lands used for non-mining purposes revert to the federal government. Passage of
mining law amendments or revisions to the hardrock mining surface management
regulations could result in additional expenses in the development and operation
of new mines on federal lands.
Phelps Dodge, Asarco and Cyprus Amax are also subject to federal and state
laws and regulations pertaining to plant and mine safety and health conditions.
These laws include the Occupational Safety and Health Act of 1970 and the Mine
Safety and Health Act of 1977. Present and proposed regulations govern worker
exposure to a number of substances and conditions present in work environments.
These include dust, mist, fumes, heat and noise. Compliance with these
regulations may require significant expenditures.
The global operations of Phelps Dodge, Asarco and Cyprus Amax are also
subject to extensive laws and regulations governing mining operations and
exploration, including laws and regulations pertaining to plant and mine safety
and health conditions. These laws and regulations may impose substantial costs
on our operations outside the United States.
PRODUCT AND PERSONAL INJURY LITIGATION
Asarco may also be subject to risks from product liability and personal
injury lawsuits. The following excerpt is from Asarco's quarterly report on Form
10-Q for the period ended June 30, 1999:
Asarco and two subsidiaries, as of June 30, 1999, are defendants in
1,169 lawsuits brought by 5,221 primary and 924 secondary plaintiffs
seeking substantial actual and punitive damages for personal injury or
death allegedly caused by exposure to asbestos. Three of these lawsuits are
purported class actions, two of which are allegedly brought on behalf of
persons who are not known to have asbestos-related injury. The third is
purportedly brought on behalf of persons suing both tobacco-related and
asbestos-related entities claiming damages for personal injury or death
arising from exposure to asbestos and cigarette smoke. In addition, Asarco
and certain subsidiaries are defendants in product liability lawsuits
involving various other products, including metals.
OPERATIONS OUTSIDE THE UNITED STATES ARE SUBJECT TO RISKS
We are a global company with substantial operations outside the United
States, including in Latin America, Asia and Europe. Both Asarco and Cyprus Amax
also have significant operations located in countries outside the United States,
including Chile, Peru and throughout Europe, Asia and Australia.
Mining and other investments outside the United States are subject to the
risks normally associated with conducting business in non-U.S. countries,
particularly those that are less developed or have emerging economies:
- uncertain political and economic environments;
- risks of war and civil disturbances;
- government restrictions on the movement of funds;
- government actions to deprive us of our contract rights or to take our
property without fair compensation;
- adverse changes in laws or policies of particular countries;
- increases in foreign taxation;
- delays in obtaining or the inability to obtain necessary governmental
permits;
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<PAGE> 19
- limitations on ownership and on repatriation of earnings; and
- foreign exchange controls and currency fluctuations.
Although we are not currently experiencing any significant problems in
non-U.S. countries arising from these risks, problems could arise in the future.
Investments made by Phelps Dodge, Asarco and Cyprus Amax outside the U.S. may
also be adversely affected by U.S. government laws and policies affecting
foreign trade, investment and taxation.
MINING IS SUBJECT TO RISKS
The business of mining is subject to a number of risks and hazards,
including:
- environmental hazards;
- labor disputes;
- encountering unusual or unexpected geologic formations or other
geological or grade problems;
- metallurgical and other processing problems;
- encountering unanticipated ground or water conditions;
- cave-ins, pit-wall failures and rock falls; and
- periodic interruptions due to inclement or hazardous weather conditions
or other unfavorable operating conditions.
In addition to the foregoing items, in the case of development projects,
the economic feasibility of any individual project is based upon, among other
things:
- the interpretation of geological data obtained from drill holes and other
sampling techniques;
- feasibility studies, which derive estimates of cash operating costs based
upon anticipated tonnage and grade of ore to be mined and processed;
- the configuration of the ore body;
- expected recovery rates of metals from the ore;
- comparable facility and equipment costs;
- environmental and regulatory requirements;
- anticipated climatic conditions; and
- estimates of labor productivity.
Such development projects also are subject to the successful completion of
final feasibility studies, issuance of necessary permits, and receipt of
adequate financing. Accordingly, uncertainties related to development projects
are more significant than those pertaining to existing operations.
The risks associated with mining described above could cause personal
injury or death, environmental damage, delays in mining, monetary losses and
possible legal liability. These risks could also cause mining projects to be
more expensive to develop or operate than expected, or to produce less than
expected, and could result in damage to mines or producing facilities.
RESERVE LEVELS ARE SUBJECT TO UNCERTAINTY
There are a number of uncertainties inherent in estimating quantities of
reserves, including many factors beyond the control of Phelps Dodge, Asarco and
Cyprus Amax. The reserve data incorporated by reference in this prospectus are
in large part only estimates. We cannot assure you that the volume and grade of
reserves recovered and rates of production will not be less than anticipated.
Declines in the market price of a particular metal also may render reserves
containing relatively lower grades of mineralization uneconomic to exploit. If
11
<PAGE> 20
the price we realized for a particular commodity were to decline substantially
below the price at which ore reserves were calculated for a sustained period of
time, we potentially could experience reductions in reserves and asset
write-downs. Under certain such circumstances, we may discontinue the
development of a project or mining at one or more properties. Further, changes
in operating and capital costs and other factors, including but not limited to
short-term operating factors such as the need for sequential development of ore
bodies and the processing of new or different ore grades, may materially and
adversely affect reserves.
YEAR 2000 POSES POTENTIAL RISKS
We continue to review our "Year 2000" readiness. The Year 2000 issue stems
from the predominant use in computer applications of a two-digit field to
capture the year (e.g., "99" for 1999). Because the "19" is assumed in the date,
when computers turn their clocks to the year 2000, the two-digit field will read
"00" and some computer programs will assume the year is 1900. Programs that
calculate, compare or sort on a date field may cause erroneous results and
errors leading to the risk of business interruption or shutdown and other
potential problems. The Year 2000 issue is a global issue that is very complex
because of the many programs that may be impacted in any computer system. These
computer systems are used to support the activities of our businesses including
financial systems, process control technology and other computer-controlled
equipment.
The following is a list of representative types of risks that could result
in the event of one or more major failures of our information systems, mining
sites, or facilities to be Year 2000 ready, or similar major failures by one or
more of our major third party suppliers or customers:
- Information systems -- could include disruptions of business and
transaction processing such as customer billing, payroll, accounts
payable, purchasing, and other information processes until the systems
can be remedied or replaced;
- Mining facilities -- could include disruptions of mining processes and
facilities resulting in delays in delivery of products until
non-compliant components can be remedied;
- Major suppliers -- could include disruptions in the provision of supplies
and components and transportation that could cause subsequent
interruptions of mining activities and delays in product deliveries; and
- Major customers -- could include disruptions in sales, revenue, and cash
inflow as a particular customer may not be Year 2000 compliant or one of
their suppliers may experience failures that could impact the amount of
copper, molybdenum, or coal they require.
Failure to correct a material Year 2000 problem could materially and adversely
affect our results of operations, liquidity and financial condition. Due to the
general uncertainty inherent in the Year 2000 issue, resulting in part from the
uncertainty of the readiness of suppliers and customers, we are unable to
determine with any certainty the consequences of Year 2000 failures and the
materiality of these potential failures. In addition, we cannot make any
assurances about the Year 2000 readiness of Asarco or Cyprus Amax.
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<PAGE> 21
THE PROPOSED COMBINATION
We have agreed to combine the businesses of Phelps Dodge and Cyprus Amax in
a transaction that we believe will create superior value for the shareholders of
both companies.
Pursuant to our agreement with Cyprus Amax, we are offering to exchange
$7.61176875 net in cash plus 0.2203 shares of Phelps Dodge common stock per
Cyprus Amax common share, on a fully prorated basis. You may elect to receive
either $20.54 in cash or 0.3500 shares of Phelps Dodge common stock for each of
your Cyprus Amax common shares that are validly tendered and not properly
withdrawn, subject, in each case, to the election and proration procedures
described in this prospectus and the related letter of election and transmittal.
We expect our proposed transaction to be tax-free to you except that gain, if
any, generally will be recognized to the extent of cash received by you.
In July 1999, Asarco and Cyprus Amax announced that they had agreed to
combine their companies. In August 1999, we proposed a three-way combination
that we believe would be much more valuable to shareholders of Asarco and Cyprus
Amax than a two-party Asarco/Cyprus Amax merger. Since then, we have reached an
agreement to combine with Cyprus Amax. We are also making a separate offer to
Asarco shareholders to exchange $9.00 in cash and 0.2880 shares of Phelps Dodge
common stock per Asarco common share, on a fully prorated basis and subject to
the same election and proration procedures as are applicable to our offer to
Cyprus Amax shareholders. Another company, Grupo Mexico, has also offered to
acquire Asarco.
We continue to prefer to combine all three companies. However, our
agreement with Cyprus Amax and our offer to Cyprus Amax shareholders are not
conditioned on the success of our offer to Asarco shareholders, nor is our offer
to Asarco shareholders conditioned on the success of our offer to Cyprus Amax
shareholders. See "The Offer" beginning on page 37.
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<PAGE> 22
REASONS FOR THE PROPOSED COMBINATION
We believe the combination of Phelps Dodge, Cyprus Amax and Asarco
represents a unique opportunity to create a large, resource-rich portfolio of
lower-cost global copper assets with enhanced flexibility to excel through
business cycles. We believe that the combination of Phelps Dodge, Cyprus Amax
and Asarco will produce the following valuable benefits:
- Ability to integrate operations. We expect the combined company to have
significantly greater ability to integrate southwest U.S. mining
operations, administrative functions in the U.S., Chile and Peru, and
worldwide exploration and development activities. Following the
combination, we would expect to operate all properties in accordance with
Phelps Dodge's disciplined management approach. This means that each
property would be run on a basis intended to earn in excess of the cost
of capital over the full copper price cycle.
- Accretion to cash flow. The combination would result in immediate and
substantial accretion to the cash flow of the combined company.
- Accretion to earnings. We expect the combination to result in
significant accretion to earnings per share of the combined company in
the second year, assuming copper prices of $0.80 -- $0.85 per pound.
- Superior production capability. The total annual worldwide copper
production of the combined company would be approximately 3.8 billion
pounds at current levels, with total attributable copper reserves of
approximately 80 billion recoverable pounds.
- Substantial cost savings. We expect the combined company to achieve
annual cash cost savings of at least $200 million by the end of the
second year after closing, as a result of reductions in overhead,
purchasing, exploration and other expenses. We also expect at least
another $40 million in annual savings from reduced depreciation expenses,
bringing the total annual savings to at least $245 million. These cost
savings are based on public information and our expectation that we can
deliver at least $75 million in incremental savings above the cash
synergy figure of $125 million projected in the proposed Asarco-Cyprus
Amax merger. This does not include any cost savings from the
rationalization of high-cost production during periods of low copper
prices.
- Management strength. The combined company would have a strong and deep
management team, at both the operating and corporate levels, with strong
credibility in the marketplace. Phelps Dodge's management team would have
the opportunity to implement value-based portfolio management. We believe
that Phelps Dodge's management team has the credibility to make the tough
decisions necessary to integrate all three businesses rapidly and to
build sustainable long-term shareholder value.
- Portfolio of world-class copper mines. The combined company would have a
core portfolio of world-class copper mines, including Morenci, Southern
Peru Copper Corporation, El Abra, Cerro Verde and Candelaria. This core
portfolio would represent more than 50% of the combined company's current
annual production. At current levels, these properties would produce
approximately 2 billion pounds of copper annually, at an average cash
cost of less than $0.50 per pound.
- Operating leverage. The combined company would have tremendous operating
leverage, together with enough diversity in other businesses to mitigate
cyclical downturns.
- Increased competitiveness. The combined company would have increased
ability to compete for world-class projects.
- Reduced capital expenditures. By combining their businesses, Phelps
Dodge, Asarco and Cyprus Amax would be able to reduce maintenance and
growth capital expenditures significantly.
- Financial strength. The combined company would have a strong, liquid
balance sheet, with excellent access to capital. The company's financial
strength would give it the ability to create a world-class portfolio of
cost-competitive mining assets.
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<PAGE> 23
We believe these factors will provide superior value creation
opportunities, on an ongoing basis, for the shareholders of all three companies.
While we would expect to maximize the benefits outlined above in a three-way
combination involving Phelps Dodge, Asarco and Cyprus Amax, we believe similar
benefits, though on a smaller scale, would result from a two-way combination
with Cyprus Amax.
15
<PAGE> 24
BACKGROUND OF THE OFFER
In the autumn of 1996, Douglas C. Yearley, Chairman and CEO of Phelps
Dodge, had an informal conversation with Richard de J. Osborne, then Chairman,
Chief Executive Officer and President of Asarco, regarding a possible
combination of the two companies. Mr. Osborne declined to hold discussions on
this subject.
On July 15, 1999, Asarco and Cyprus Amax announced that they had agreed to
combine their companies into a new company to be called "Asarco Cyprus
Incorporated." According to the press release issued by Asarco and Cyprus Amax,
Cyprus Amax shareholders would receive 0.765 shares of the combined company for
each of their Cyprus Amax shares, while Asarco shareholders would receive one
share of the combined company for each of their Asarco shares. The combined
company would have an initial dividend rate of $0.05 per share per quarter. The
transaction was approved by the Boards of Directors of Asarco and Cyprus Amax,
but remains subject to regulatory approvals and shareholder approvals.
On August 10, 1999, Douglas C. Yearley, Phelps Dodge's Chairman and Chief
Executive Officer, telephoned Milton H. Ward, Cyprus Amax's Chairman, Chief
Executive Officer and President, and Francis R. McAllister, Asarco's Chairman
and Chief Executive Officer, to propose a meeting to discuss the possibility of
a three-way combination involving Phelps Dodge, Asarco and Cyprus Amax. Shortly
thereafter, Messrs. Ward and McAllister sent the following letter to Mr.
Yearley:
August 10, 1999
Douglas C. Yearley
Chairman, President and
Chief Executive Officer
Phelps Dodge Corporation
2600 North Central Avenue -- 16th Floor
Phoenix, AZ 85004-3014
Dear Doug:
We have discussed your request to meet with us jointly. We would like to
advise you that Cyprus Amax and Asarco are pursuing a combination under a Merger
Agreement dated July 15, 1999. Under the terms of that Agreement we are not at
liberty to have a discussion of the nature you were suggesting earlier today.
Best regards.
/s/ MILTON H. WARD
- ------------------------------------------
Milton H. Ward
Chairman, Chief Executive Officer
and President
Cyprus Amax Minerals Company
/s/ FRANCIS R. MCALLISTER
- ------------------------------------------
Francis R. McAllister
Chairman and Chief Executive Officer
ASARCO Incorporated
16
<PAGE> 25
On August 11, 1999, during the late afternoon, Mr. Yearley and J. Steven
Whisler, Phelps Dodge's President and Chief Operating Officer, sent the
following letter to Messrs. McAllister and Ward:
[LETTERHEAD OF PHELPS DODGE CORPORATION]
August 11, 1999
Francis R. McAllister
Chairman and Chief Executive Officer
ASARCO Incorporated
180 Maiden Lane
New York, NY 10038
Milton H. Ward
Chairman, Chief Executive Officer and President
Cyprus Amax Minerals Company
9100 East Mineral Circle
Englewood, CO 80112
Dear Frank and Milt:
We are disappointed that you have declined to meet with us. As you know
from our telephone conversations, we have considered your pending business
combination and would like to discuss with you our proposal, described in more
detail below, to combine all three of our companies in a negotiated transaction.
We believe that a three-way combination of Phelps Dodge, Asarco and Cyprus
Amax would create superior shareholder value for the shareholders of Asarco and
Cyprus Amax. A three-way combination, by creating a lower-cost global
competitor, would also benefit the employees and customers of all three
companies. For these reasons, we are approaching you to discuss the concept of a
three-way combination.
We propose that all of the outstanding common stock of both Asarco and
Cyprus Amax be exchanged for Phelps Dodge common stock. The transaction would be
tax-free to your shareholders.
A combination of these businesses would result in cost savings well in
excess of the amounts you have indicated to be achievable through your pending
merger. Preliminarily we estimate that the annual cash cost savings should reach
at least $150 million.
We propose to reward your shareholders for these substantial incremental
benefits by offering your shareholders an exchange ratio of 0.3756 Phelps Dodge
common shares for each Asarco common share and 0.2874 Phelps Dodge common shares
for each Cyprus Amax common share. These exchange ratios preserve the relative
economics of your proposed combination and imply premiums of approximately 25%
based on current market prices for Asarco and Cyprus Amax.
We believe this proposal creates superior value for your shareholders based
on:
- the sizeable premium we are offering which, in effect, represents an
up-front payment to your shareholders for the substantial cost savings we
expect to achieve;
- their opportunity to participate in the ongoing value creation of the
combined company; and
- our planned continuation of the current $2.00 per share Phelps Dodge
common stock dividend resulting in substantial dividend increases for
both Asarco and Cyprus Amax shareholders to 3.76 times the level
contemplated in your pending merger.
Our preference is for a combination of all three companies, which would of
course involve the consent of both Asarco and Cyprus Amax to a modification of
your existing agreement.
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<PAGE> 26
Since your merger agreement has not been publicly filed, we have not had
the opportunity to review its terms. Based on your August 10, 1999 letter, it is
unclear to us whether discussions may proceed once you receive a written
proposal such as this letter. In any event, if necessary under your merger
agreement, we request that you grant one another waivers to allow meetings with
us on our proposal which, as discussed below, would be far more favorable to
your shareholders than your proposed merger.
We are confident that the market reaction to a three-way combination would
be positive. In particular we believe the market would recognize:
- the significantly stronger ability of the combined company, relative to
the Asarco-Cyprus Amax combination, to integrate southwest U.S. mining
operations, administrative functions in Chile and Peru and world-wide
exploration and development activities;
- the financial strength of the combined company and ability to create a
world class portfolio of cost competitive mining assets;
- a strong and deep management team, at both the operating and corporate
levels, with strong credibility in the marketplace;
- the ability to eliminate substantial overhead, exploration, purchasing
and other expenses through the consolidation;
- the tremendous operating leverage of the combined company, together with
enough diversity in other businesses to mitigate cyclical downturns;
- the ability of the combined company to reduce capital expenditures;
- a strong, liquid balance sheet, with excellent access to capital; and
- how all of these factors would build greater shareholder value, on an
ongoing basis, for the shareholders of all three companies.
This is intended to be a confidential proposal which is subject to the
execution of a definitive merger agreement and receipt of customary approvals,
including approval by our respective Boards of Directors and shareholders. We
have conducted in-depth analyses of the proposed three-way combination from a
regulatory perspective and have concluded that it will be possible to obtain the
necessary approvals on a timely basis.
We believe that our proposal is substantially more attractive to your
shareholders than your pending merger. In addition to the sizeable premium we
are offering, your shareholders would participate, through their ongoing Phelps
Dodge common stock ownership, in a larger enterprise with greater realizable
cost savings and synergies, a stronger portfolio of cost competitive assets and
a deep management team with a strong operating record. We have no doubt that
your shareholders will enthusiastically embrace our proposal once they learn of
it.
We have discussed this proposal with our Board, which fully supports it. We
are confident of our ability, with your cooperation, to complete this
transaction as quickly as your proposed two-party Asarco-Cyprus Amax merger.
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<PAGE> 27
We are firmly committed to moving forward quickly to consummate this
transaction. As we mentioned, we would be happy to meet with you in New York or
another mutually convenient location to amplify our proposal. In any event, we
would appreciate a response by 5:00 p.m., New York time, on Wednesday, August
18, 1999.
Sincerely,
/s/ DOUGLAS C. YEARLEY
- ------------------------------------------
Douglas C. Yearley
Chairman and
Chief Executive Officer
/s/ J. STEVEN WHISLER
- ------------------------------------------
J. Steven Whisler
President and Chief
Operating Officer
On the morning of August 12, 1999, Messrs. McAllister and Ward telephoned
Mr. Yearley and once again refused to meet to discuss Phelps Dodge's proposal.
That afternoon, Phelps Dodge sent the following letter to the Board of Directors
of Cyprus Amax (and sent a substantially similar letter to the Board of
Directors of Asarco):
[LETTERHEAD OF PHELPS DODGE CORPORATION]
August 12, 1999
Board of Directors of Cyprus Amax Minerals Company
c/o Mr. Milton H. Ward
Chairman, Chief Executive Officer and President
Cyprus Amax Minerals Company
9100 East Mineral Circle
Englewood, CO 80112
Ladies and Gentlemen:
We would like to engage in discussions on our proposal to combine Cyprus
Amax, Asarco and Phelps Dodge in a negotiated transaction. Our proposal,
described in more detail in the attached correspondence, is far better for the
shareholders of your company than your pending merger with Asarco because of:
- the sizeable premium we are offering which, in effect, represents an
up-front payment to your shareholders for the substantial cost savings we
expect to achieve;
- our planned continuation of the current $2.00 per share Phelps Dodge
common stock dividend resulting in a substantial dividend increase for
Cyprus Amax shareholders to more than three times the level contemplated
in your pending merger; and
- their opportunity to participate in the ongoing value creation of the
combined company through the ownership of Phelps Dodge common stock.
In our attached letter of August 11, we proposed specific exchange ratios
of Phelps Dodge shares for Asarco and Cyprus Amax shares. Based on the August 11
closing price of Phelps Dodge, Cyprus Amax and Asarco shares, these ratios
implied premiums of approximately 25% for each of Cyprus Amax and Asarco and
preserved the relative economics of your proposed combination with Asarco. We
would reiterate our intention on the basis of the current levels of Phelps
Dodge, Cyprus Amax and Asarco share prices to pay premiums of approximately 25%
for Cyprus Amax and Asarco.
We believe that consideration in the form of Phelps Dodge common stock
should be particularly attractive to your shareholders. Over the past several
years Phelps Dodge's stock price has significantly
19
<PAGE> 28
outperformed the stock prices of Cyprus Amax and Asarco. As a result of Phelps
Dodge's higher dividend, the level of outperformance is even greater when viewed
on the basis of the total return to shareholders assuming reinvestment of
dividends. Over the past 10 years Phelps Dodge's total return has been 161% as
compared to -26% and -20% for Cyprus Amax and Asarco, respectively. Similarly,
over the past five years, Phelps Dodge's total return has been 20% as compared
to -40% for Cyprus Amax and -27% for Asarco. We are very proud of this strong
management and operational track record over a difficult copper environment.
Thus far, however, your management has refused to listen to, or consider,
our proposal.
On Tuesday afternoon, August 10, 1999, following a meeting of our board of
directors, we spoke by telephone with Messrs. Ward and McAllister to request a
meeting to discuss our proposal. Just a few hours later, we received from them
the attached letter, dated August 10, 1999, advising that under the terms of a
non-public July 15, 1999 Merger Agreement they were "not at liberty" to have
such a discussion.
Since Messrs. Ward and McAllister refused to meet with us, late yesterday
we sent them the enclosed August 11 letter laying out the basic terms of our
proposal and again requesting a meeting.
This morning we received a telephone call from Messrs. Ward and McAllister
again refusing to discuss our proposal.
Although it would have been our preference to communicate through your CEO,
his adamant refusal to meet with us, or even to give our written proposal any
serious consideration, has required that we communicate with you directly. Since
you and Asarco are the only parties to your merger agreement, and may amend it
or waive its provisions at any time, for management of the two companies to
state that their own agreement prevents such discussions seems a particularly
weak basis for their refusal even to meet with us.
We are making a similar proposal to Asarco. Our willingness to enter into
discussions with each of you is not conditioned on the participation of the
other (assuming this is consistent with any applicable, binding contracts).
We are resolute in our determination to complete this transaction with both
companies. We are confident that your shareholders will recognize the superior
benefits of our proposal, and will accept nothing less.
We still strongly prefer to consummate this transaction on a mutually
satisfactory, negotiated basis. Accordingly, we do not plan to disclose our
proposal publicly at this time. Because of the importance of this matter to your
shareholders, we request that you make a commitment, by 5:00 p.m. Friday, August
20, 1999, to meet with us promptly to commence serious negotiations.
Sincerely,
/s/ DOUGLAS C. YEARLEY
- ------------------------------------------
Douglas C. Yearley
Chairman and
Chief Executive Officer
/s/ J. STEVEN WHISLER
- ------------------------------------------
J. Steven Whisler
President and Chief
Operating Officer
20
<PAGE> 29
On August 20, 1999, Asarco and Cyprus Amax filed a joint proxy
statement/prospectus in connection with their proposed merger, and for the first
time disclosed the terms of their merger agreement. In addition, Asarco and
Cyprus Amax issued a press release announcing that they had set August 25, 1999
as the record date for determining shareholders entitled to vote at the
shareholder meetings, scheduled for September 30, 1999, to consider approval of
their proposed merger. Asarco and Cyprus Amax also disclosed Phelps Dodge's
proposal for a three-way business combination and announced that they were
rejecting it. Asarco and Cyprus Amax also revised upward their estimates of
synergies resulting from their proposed two-party merger. The text of the press
release was as follows:
DENVER, CO. and NEW YORK, N.Y., August 20, 1999 -- Cyprus Amax Minerals
(NYSE:CYM) and ASARCO Incorporated (NYSE:AR) announced that they have set
shareholder meetings for September 30, 1999 to approve their previously
announced merger of equals. Asarco Cyprus Incorporated will be the largest
publicly traded copper company with an estimated cash cost of under 50 cents.
Definitive proxy materials will be mailed to shareholders of record on August
25, 1999.
Cyprus and Asarco also announced that joint Asarco and Cyprus merger teams
are reviewing all operating and administrative aspects of the new organization
to identify organizational and other profit driven changes in the way they do
business. The companies have engaged outside consultants to assist in
identification of cost savings to facilitate the process. As a result of these
reviews, the estimate of annual expense reductions is now approaching $200
million including $50 million in reduced administrative and overhead costs, $50
million from lower costs of purchased materials and services, $25 million in
other costs and $75 million in lower depreciation. As part of the cost
reductions, Cyprus' Denver office will be closed and Asarco's New York office
will be downsized and relocated to New Jersey. In addition, the companies
believe the merger will provide the flexibility to rationalize higher cost
production during periods of low copper prices, which could be expected to
result in operational cash improvements approaching $75 million annually.
Cyprus and Asarco also jointly reported that the Boards of both companies
had received an unsolicited proposal from Phelps Dodge Corporation to negotiate
an agreement for Phelps Dodge to acquire both companies for stock. Phelps Dodge
proposed an exchange of .3756 of a Phelps Dodge share for each Asarco share and
.2874 of a Phelps Dodge share for each Cyprus share. Phelps Dodge's proposal is
subject to a number of contingencies.
On August 19, 1999, the Asarco Board of Directors and the Cyprus Amax Board
of Directors, together with their respective legal and financial advisors, met
separately to consider the unsolicited proposal from Phelps Dodge. Both the
Asarco Board of Directors and the Cyprus Amax Board of Directors determined that
pursuing the Asarco Cyprus merger was in best interests of Asarco and Cyprus
Amax stockholders, respectively, and reconfirmed their respective
recommendations of the merger.
Since the merger announcement, both Boards noted that the share prices of
Cyprus and Asarco have outperformed the other U.S. listed copper companies.
Asarco Cyprus expects that at its estimated cash costs of under 50 cents per
pound, it will require a copper price of less than 65 cents per pound to
breakeven on a net earnings basis. Asarco Cyprus will have a strong, experienced
management team and the financial capacity to further enhance operating
efficiencies, expand or develop low cost copper properties and otherwise
rationalize operations to achieve optimum operating levels.
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<PAGE> 30
Also on August 20, 1999, Asarco and Cyprus Amax sent the following letter
to Phelps Dodge:
August 20, 1999
Mr. Douglas C. Yearley
Chairman, President and
Chief Executive Officer
Phelps Dodge Corporation
2600 North Central Avenue
Phoenix, AZ 85004-3050
Dear Doug:
We have tried to reach you this morning to convey the response of our
respective Boards and to share with you the attached press release.
Each of our companies has convened its Boards and received thorough
presentations from financial and legal advisors. After full consideration of
your proposal, each Board unanimously decided that it was in the best interests
of its shareholders to pursue the Asarco Cyprus merger. That is what we intend
to do.
Sincerely,
/s/ FRANCIS R. MCALLISTER
- ------------------------------------------
Francis R. McAllister
Chairman and Chief
Executive Officer
Asarco Incorporated
/s/ MILTON H. WARD
- ------------------------------------------
Milton H. Ward
Chairman, Chief Executive
Officer and President
Cyprus Amax Minerals Company
During the afternoon of August 20, 1999, Phelps Dodge made the following
announcement by press release:
PHELPS DODGE PROPOSES TO ACQUIRE ASARCO AND CYPRUS AMAX IN
STOCK TRANSACTIONS AT APPROXIMATE 30% PREMIUMS
UNIQUE OPPORTUNITY TO CREATE PORTFOLIO OF LOWER-COST GLOBAL COPPER ASSETS
PHOENIX, AZ, August 20, 1999 -- Phelps Dodge Corporation (NYSE: PD)
announced today that it is proposing to acquire both Asarco Incorporated (NYSE:
AR) and Cyprus Amax Minerals Company (NYSE: CYM) in stock-for-stock mergers that
would provide approximate 30% premiums to the shareholders of both companies.
Neither proposal is conditioned upon acceptance of the other.
On July 15, 1999, Asarco and Cyprus Amax announced a no-premium merger
subject to shareholder approval. Phelps Dodge has since made numerous
unsuccessful attempts to negotiate business combinations with both companies on
terms that are greatly superior for Asarco and Cyprus Amax shareholders.
Phelps Dodge would acquire Asarco in a tax-free merger in which each share
of Asarco common stock would be converted into 0.4098 Phelps Dodge common
shares. Based on the share prices of Phelps Dodge and Asarco before the stocks
were halted this morning, the proposal values Asarco at $24.05 per share, or a
total equity value of approximately $960 million, representing an approximate
30% premium for Asarco shareholders.
Phelps Dodge would acquire Cyprus Amax in a tax-free merger in which each
share of Cyprus Amax common stock would be converted into 0.3135 Phelps Dodge
common shares. Based on share prices of Phelps Dodge and Cyprus Amax before the
stocks were halted this morning, the proposal values Cyprus Amax at $18.40 per
share, or a total of equity value of approximately $1.7 billion, representing an
approximate 29% premium for Cyprus Amax shareholders.
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<PAGE> 31
The Phelps Dodge proposals represent a unique opportunity to create a
large, resource-rich portfolio of lower-cost global copper assets with enhanced
flexibility to excel through business cycles. This three-way combination would
also provide significantly greater opportunities to integrate operations in the
southwestern United States, administrative functions in the United States, Chile
and Peru, and worldwide exploration and development activities than the proposed
Asarco/Cyprus Amax merger. Consistent with demonstrated Phelps Dodge standards,
all Asarco and Cyprus Amax properties would be operated to earn more than the
cost of capital over the copper cycle. At current levels, annual worldwide
copper production of the combined companies would be approximately 3.8 billion
pounds, with attributable copper reserves of approximately 80 billion pounds,
predominantly in the U.S., Chile and Peru.
Phelps Dodge expects the three-way combination to be immediately and
substantially accretive to its cash flow, with significant opportunities to
improve return on capital at the combined entity. The transactions would be
significantly accretive to Phelps Dodge's earnings per share beginning in the
second year after closing, based on the current portfolio of the combined
companies and analysts' estimates of copper prices of $0.80 to $0.85 per pound
in 2001.
Phelps Dodge expects to achieve annual cash cost savings of at least $200
million, to be fully phased in by the end of the second year after closing,
through reductions in SG&A expenses, operating improvements and efficiencies in
exploration. Additional non-cash savings of approximately $65 million per year
are expected to result from lower depreciation charges. These cost savings are
based on public information and the Company's expectation that it can deliver at
least $75 million in incremental savings above the new cash synergy figure of
$125 million now projected in the proposed Asarco/Cyprus Amax combination. This
does not include any cost savings for the rationalization of high-cost
production during periods of low copper prices. The transactions would use
purchase accounting.
Phelps Dodge intends to continue its current annual cash dividend of $2.00
per share. This would provide a substantial dividend increase to shareholders of
both Asarco and Cyprus Amax -- equal to 4.1 times the dividend they would
receive in the proposed Asarco/Cyprus Amax merger.
Douglas C. Yearley, Chairman and Chief Executive Officer of Phelps Dodge,
said, "We are very disappointed that Asarco and Cyprus Amax have declined our
repeated attempts to enter into negotiated agreements. Our proposed three-way
combination provides superior value to shareholders of Asarco and Cyprus Amax,
including substantial premiums, the opportunity to participate in the tremendous
upside potential of the combined entity, and a cash dividend that is more than
quadruple what they would receive in the proposed Asarco/Cyprus Amax
transaction."
Yearley continued, "This compelling combination would create a more
cost-effective global copper producer with the operating expertise, broad
resource base and financial strength to deliver enhanced value to shareholders
of all three companies. The improved efficiencies of the combined companies
would also benefit other stakeholders, including our customers, employees and
communities. In the global copper market, efficient and low-cost operations are
critical, and this transaction would enhance our ability to compete and give us
greater ability to satisfy our customers' needs. Customers would continue to
enjoy Phelps Dodge's high standard of on-time delivery and quality products and
benefit from our combined lower cost structure; employees would become part of a
stronger organization with enhanced ability to compete for large-scale projects;
and communities would benefit from our corporate citizenship and philanthropy
and continued commitment to responsible environmental practices."
J. Steven Whisler, President and Chief Operating Officer of Phelps Dodge,
said, "We are committed to optimizing the combined operations of the three
companies and delivering superior returns on capital throughout the entire
copper cycle. Phelps Dodge has generated much better shareholder returns than
Asarco and Cyprus Amax through copper cycles -- greatly outperforming both
companies over the past three, five, 10 and 15-year periods. For example, during
the past 10 years on a total return basis with dividends reinvested Phelps Dodge
has produced a positive shareholder return of 161% versus negative 20% for
Asarco and negative 26% for Cyprus Amax. Over the 15-year period, Phelps Dodge
has produced a positive shareholder return of 1024% versus 25% for Asarco and
102% for Cyprus Amax.
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<PAGE> 32
Phelps Dodge's strong and deep management and operating teams have a proven
track record of active, value-based portfolio management and of taking decisive
actions required to build sustainable long-term shareholder value. We intend to
take advantage of the substantial opportunities to integrate the combined
companies' mining assets and will ensure that every property in the portfolio
provides an appropriate return on invested capital."
Yearley concluded, "This innovative three-way combination fits well with
our strategy of sustaining a strong and liquid balance sheet, achieving earnings
and cash flow accretion and improving our resource base, while maintaining a
cost-competitive profile. While we continue to prefer negotiated transactions,
this three-way combination is so compelling, both strategically and financially,
that we are determined to take all necessary steps to complete it expeditiously.
We are confident we will obtain the necessary regulatory approvals to complete
the transactions and believe shareholders of Asarco and Cyprus Amax will
strongly support this unique opportunity to create value in the global copper
market in which we compete."
Phelps Dodge's financial advisor is Morgan Stanley Dean Witter and its
legal advisors are Debevoise & Plimpton and Shearman & Sterling.
Phelps Dodge Corporation is among the world's largest producers of copper.
The company also is one of the world's largest producers of carbon black, one of
the world's largest manufacturers of magnet wire, and has operations and
investments in mines and wire and cable manufacturing facilities around the
world. Phelps Dodge has operations in 28 countries.
Statements in this press release include "forward-looking statements" that
express expectations of future events or results. All statements based on future
expectations rather than on historical facts are forward-looking statements that
involve a number of risks and uncertainties, and the company cannot give
assurance that such statements will prove to be correct. Please refer to the
Management's Discussion and Analysis sections of the company's report on Form
10-K for the year ended December 31, 1998.
Later that day, Phelps Dodge sent the following letter to the Board of
Directors of Cyprus Amax (and sent a substantially similar letter to the Board
of Directors of Asarco):
[LETTERHEAD OF PHELPS DODGE CORPORATION]
August 20, 1999
Board of Directors of Cyprus Amax Minerals Company
c/o Mr. Milton H. Ward
Chairman, Chief Executive Officer and President
Cyprus Amax Minerals Company
9100 East Mineral Circle
Englewood, CO 80112
Ladies and Gentlemen:
We are disappointed in your response to our proposed three-way combination
of Cyprus Amax, Asarco and Phelps Dodge. As you know, we have on three recent
occasions requested the opportunity to discuss our proposal, which we believe
would be far superior to your shareholders than your proposed combination with
Asarco.
We are particularly disappointed that instead of accepting our previous
requests to meet to discuss our proposal to acquire Cyprus Amax for a
substantial premium, you chose today to announce unilaterally our interest in
acquiring Cyprus Amax and Asarco and to reject our proposal in favor of your
no-premium merger proposal with Asarco. This appears consistent with the manner
in which you have chosen to treat your own shareholders by announcing just
today, at the same time you first disclosed the
24
<PAGE> 33
terms of your July 15 merger agreement, that the record date for your
shareholder vote on the no-premium merger with Asarco would be August 25. Since
trades after today will settle after August 25, this effectively precluded any
significant trading in the market on an informed basis before the determination
of shareholders eligible to vote at your meeting.
In light of your unilateral announcement, we have no other choice than to
publicly announce our proposal to enter into a business combination with Cyprus
Amax and Asarco, so that share owners of all three companies are fully informed.
Terms of our Proposal
We propose a business combination of Phelps Dodge and Cyprus Amax pursuant
to which all of the outstanding common stock of Cyprus Amax would be exchanged
for Phelps Dodge common stock at an exchange ratio of 0.3135 Phelps Dodge common
shares for each Cyprus Amax common share. We are also independently proposing to
Asarco a business combination of Phelps Dodge and Asarco pursuant to which all
of the outstanding common stock of Asarco would be exchanged for Phelps Dodge
common stock at an exchange ratio of 0.4098 Phelps Dodge common shares for each
Asarco common share. Based on share prices for the three companies' common
shares before trading was halted this morning, these ratios imply a premium of
approximately 29% for Cyprus Amax and a premium of approximately 30% for Asarco,
while preserving the relative economics of the exchange ratio under your
proposed combination with Asarco.
Following the combination, we plan to continue the current $2.00 per share
Phelps Dodge common dividend. This would result in a substantial dividend
increase for Cyprus Amax shareholders to 4.1 times the dividend contemplated in
your proposed merger with Asarco.
Our proposed transaction would be tax-free for your shareholders. In
addition, through their ownership of Phelps Dodge common stock, your
shareholders would continue to participate in the ongoing value creation of the
combined company. Although we prefer a transaction involving all three
companies, we are prepared to enter into a negotiated business combination with
either Cyprus Amax or Asarco, regardless of whether the other company is willing
to proceed on a negotiated basis.
We believe that consideration in the form of Phelps Dodge common stock
should be particularly attractive to your shareholders. Over the past several
years Phelps Dodge's stock price has significantly outperformed the stock prices
of Cyprus Amax and Asarco. As a result of Phelps Dodge's higher dividend, the
level of outperformance is even greater when viewed on the basis of the total
return to shareholders assuming reinvestment of dividends. Over the past 10
years Phelps Dodge's total return has been 161% as compared to negative 26% and
negative 20% for Cyprus Amax and Asarco, respectively. Similarly, over the past
15 years, Phelps Dodge's total return has been 1024% as compared to 102% for
Cyprus Amax and 25% for Asarco. We are very proud of this strong management and
operational track record over a difficult copper environment.
The Combined Company
We believe that our proposal presents a unique opportunity to create a
large, resource-rich portfolio of lower-cost global copper assets with enhanced
flexibility to deliver superior results in all business cycles. Our proposal
would create a much stronger company than would your proposed merger with Asarco
through:
- the significantly stronger ability of the combined company, relative to
the Cyprus Amax-Asarco combination, to integrate southwestern U.S.
mining operations, administrative functions in the U.S., Chile and Peru,
and worldwide exploration and development activities;
- the financial strength of the combined company and ability to create a
world class portfolio of cost-competitive mining assets;
- a strong and deep management team, at both the operating and corporate
levels, with strong credibility in the marketplace;
- the ability to eliminate substantial overhead, exploration, purchasing
and other expenses through the consolidation;
25
<PAGE> 34
- the tremendous operating leverage of the combined company, together with
enough diversity in other businesses to mitigate cyclical downturns;
- the immediate and substantial accretion to the cash flow of the combined
company resulting from the transaction;
- the significant accretion to earnings per share of the combined company
beginning in the second year after closing, based on the current
portfolio of the combined companies and analysts' estimates of copper
prices of $0.80 to $0.85 per pound in 2001;
- the total current annual copper production of the combined company of
3.8 billion pounds and the total attributable copper reserves of 80
billion pounds;
- the increased ability of the combined company to compete for world-class
projects;
- the ability of the combined company to reduce capital expenditures;
- the strong, liquid balance sheet of the combined company, with excellent
access to capital; and
- the way all of these factors would build greater shareholder value, on
an ongoing basis, for the shareholders of all three companies.
Through the measures described above we estimate that in a three-way
combination we could achieve approximately $200 million in annual cash cost
savings, fully phased in by the end of the second year after closing of the
transaction. In addition, we expect lower depreciation of approximately $65
million annually, bringing total estimated annual savings to approximately $265
million. These cost savings are based on public information and our expectation
that we can deliver at least $75 million in incremental savings above the new
cash synergy figure of $125 million that you have projected in the proposed
Cyprus Amax-Asarco combination. This does not include any cost savings from the
rationalization of high-cost production during periods of low copper prices.
Following the combination, we would expect to operate all properties in
accordance with Phelps Dodge's disciplined management approach. This means that
each property would be run on a basis intended to earn in excess of the cost of
capital over a full copper price cycle. We believe that Phelps Dodge's
management team has the credibility to make the tough decisions necessary to
rapidly integrate all three businesses and to create value for shareholders.
A three-way combination, by creating a more efficient global competitor,
would also benefit the employees and customers of all three companies. We have
conducted an in-depth analysis of the three-way combination from a regulatory
perspective and have concluded that it will be possible to obtain the necessary
approvals on a timely basis.
Our Board of Directors has authorized this proposal and we are resolutely
committed to its consummation. We are confident that your shareholders will find
our proposal to be a unique and compelling opportunity. We continue to prefer to
proceed on a mutually satisfactory, negotiated basis but are prepared to pursue
all other avenues should that be necessary. We are ready to meet with you or
your management at any time.
Sincerely,
/s/ DOUGLAS C. YEARLEY
- ------------------------------------------
Douglas C. Yearley
Chairman and Chief Executive Officer
/s/ J. STEVEN WHISLER
- ------------------------------------------
J. Steven Whisler
President and Chief
Operating Officer
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<PAGE> 35
On August 25, 1999, Asarco and Cyprus Amax sent the following letter to
Phelps Dodge:
August 25, 1999
Mr. Douglas C. Yearley
Chairman, President and
Chief Executive Officer
Phelps Dodge Corporation
2600 North Central Avenue
Phoenix, AZ 85004-3050
Dear Doug:
We and our respective boards have considered your revised proposal to
acquire our companies. We have the following issues with your proposal:
1. The exchange ratios proposed in your August 20 press release do not
allocate to Cyprus Amax and Asarco holders a fair share of the value
created by uniting their two companies. We are prepared to negotiate a
transaction with Phelps Dodge that would provide our holders with .4055
shares of Phelps Dodge common stock for each Cyprus Amax share, and
.5300 Phelps Dodge shares for each Asarco share.
2. In order for us to proceed with Phelps Dodge, you must make clear that
Phelps Dodge will undertake all actions necessary to secure regulatory
approval for your proposed transaction including any divestiture or
similar action required, and will provide credible assurances that such
regulatory approval will be forthcoming. The statements in your letters
concerning antitrust issues are not sufficient on this point.
3. You have not proposed a form of contract for your transaction. We would
be prepared to proceed on the basis of representations, warranties and
covenants made by Cyprus Amax and Asarco to each other in their merger
agreement, with similar representations, warranties and covenants made
by Phelps Dodge.
4. Your letter did not indicate whether your proposal was subject to due
diligence. A due diligence requirement introduces substantial
uncertainty as to your proposal. We would expect, as part of our effort
to close our pending merger or any potential transaction with you as
quickly as possible, that you would not require any further due
diligence with respect to either Cyrus Amax or Asarco.
We strongly believe that the combination of Cyprus Amax and Asarco, without
the effect of combining further with Phelps Dodge, provides greater value to
Cyprus Amax and Asarco holders than your August 20 proposal, poses fewer
regulatory issues and can be completed more quickly. Accordingly, we will be
proceeding to present that transaction to our stockholders and to closing on
September 30, 1999. We are prepared, however, to negotiate a transaction that
involves all three companies that satisfies all the foregoing requirements. For
your information, we are attaching to this letter a copy of the press release
Asarco and Cyprus Amax issued today concerning our response to Phelps Dodge. We
also want to advise you that apart from this communication, neither party has
waived any of its legal or other rights, or rights or obligations under our
merger agreement.
Sincerely,
<TABLE>
<S> <C>
/s/ FRANCIS R. MCALLISTER /s/ MILTON H. WARD
- ----------------------------------------- ---------------------------------------------------
Francis R. McAllister Milton H. Ward
Chairman and Chief Chairman, Chief Executive
Executive Officer Officer and President
ASARCO Incorporated Cyprus Amax Minerals Company
</TABLE>
27
<PAGE> 36
The text of the attached press release was as follows:
DENVER, CO AND NEW YORK, NY, AUGUST 25, 1999 -- Cyprus Amax Minerals
Company (NYSE: CYM) and ASARCO Incorporated (NYSE: AR) today jointly announced
that they have improved the terms of their own combination transaction. In
addition they have written to Phelps Dodge outlining their willingness to
negotiate with Phelps Dodge on terms included in the letter. According to the
letter, Asarco and Cyprus Amax would be willing to proceed with a three-way
combination with Phelps Dodge if its proposed exchange ratios are increased, if
Phelps Dodge fully underwrites the risk of antitrust problems with its proposal
and if the contract terms mirror those of the Asarco/Cyprus contract. Asarco and
Cyprus Amax said the exchange ratios they would require were .5300 of a Phelps
Dodge share for Asarco holders and .4055 of a Phelps Dodge share for Cyprus Amax
holders. The letter to Phelps Dodge is attached.
The two companies also said they have decided to improve the financial
terms of their own combination by including a special payment of $5.00 per share
to the stockholders of the combined Asarco Cyprus Incorporated. The special
payment would be paid to stockholders as soon as possible after consummation of
the merger. Asarco and Cyprus Amax emphasized that they were proceeding with
their two-way combination which, subject to stockholder approval, will close on
September 30, 1999.
Speaking together, Milton H. Ward, Chairman and Chief Executive Officer of
Cyprus Amax and Francis R. McAllister, Chairman and Chief Executive Officer of
Asarco said "Our response to Phelps Dodge evidences our intent to secure the
best value for our shareholders whether through a three way combination
including Phelps Dodge or through consummation of the merger previously
announced. We have presented very simple terms to Phelps Dodge which we believe
recognize the contributions our two companies make to a three way combination.
The proposal previously communicated by Phelps Dodge fails to reward our
stockholders for the values derived from the Asarco Cyprus transaction. Our
proposed exchange ratio gives recognition to the fact that our shareholders
would be contributing approximately 50% of the value of a three way combination.
"We intend to move forward to complete our own merger transaction as soon
as possible and as a sign of confidence of our ability to achieve cost
reductions of at least $200 million annually, Asarco Cyprus will make a special
payment to shareholders when the merger closes. This special $5.00 per share
payment reflects the Boards' and managements' confidence in their ability to
deliver benefits from the merger. Asarco Cyprus is expected to have in excess of
$1 billion in cash at the time of closing and the Boards of both companies have
agreed that Asarco Cyprus will pursue the sale of Cyprus Amax's investments in
Kinross Gold and its Australian coal holdings and Asarco's specialty chemicals
business. We would expect the sales to be completed within six months after
closing. Proceeds are expected to approach $1 billion and cash taxes would be
minimized due to tax benefits from the sale of the Kinross shares. Proceeds
would be used to pay down debt and improve the liquidity of the company."
Messrs. Ward and McAllister stated that they and their respective Boards
are committed to maximizing shareholder value and will continue to do so after
the merger is completed. In order to ensure that Phelps Dodge or any interested
buyer is able to present a bona fide proposal to acquire 100% of the stock of
the Company, during the first 90 days following completion of the merger,
stockholders will have the right to call a meeting to redeem the rights plan. In
addition, change in control provisions in any employment contracts entered into
by the Company will be waived for that same 90 day period.
In response, Phelps Dodge issued the following press release:
PHELPS DODGE CONFIRMS RECEIPT OF LETTER FROM ASARCO AND CYPRUS AMAX
PHOENIX, Aug. 25 -- Phelps Dodge Corporation (NYSE: PD) confirmed that it
has received a letter from Asarco Incorporated (NYSE: AR) and Cyprus Amax
Minerals Company (NYSE: CYM) and issued the following response:
28
<PAGE> 37
"The proposal put forth by Asarco and Cyprus Amax does not change Phelps
Dodge's commitment to complete a three-way combination that is beneficial to
shareholders of all three companies. While Phelps Dodge will review the most
recent proposal from Asarco and Cyprus Amax, we believe that the Phelps Dodge
proposal, which already provides Asarco and Cyprus Amax shareholders a 30%
premium, a $2.00 annual dividend and very substantial participation in the
greater upside potential of the three-way combination, is fully priced based on
public information and Phelps Dodge's best estimates of the real, achievable
cost synergies in a three-way combination. Phelps Dodge indicated that the
economic aspects of Asarco and Cyprus Amax's proposed three-way merger terms are
totally unreasonable and would deliver nearly all of the economic value of the
three-way combination to Asarco and Cyprus shareholders."
Douglas C. Yearley, Chairman and Chief Executive Officer of Phelps Dodge,
added, "If Asarco and Cyprus Amax are truly interested in a negotiated
transaction and not just posturing, we would be more than willing to begin real
discussions. Neither company has attempted to sit down with us."
Phelps Dodge indicated that it intends to complete its review in the near
term and to make a more definitive and comprehensive response thereafter.
On August 27, 1999, Phelps Dodge issued the following press release:
PHELPS DODGE FILES REGISTRATION STATEMENTS FOR
EXCHANGE OFFERS FOR ASARCO AND CYPRUS AMAX
------------------------------------
FILES PRELIMINARY PROXY STATEMENTS TO OPPOSE ASARCO/CYPRUS AMAX MERGER;
COMMENCES LITIGATION AGAINST BOTH COMPANIES
PHELPS DODGE WILL WITHDRAW OFFER AND NOT BID FURTHER IF ASARCO AND CYPRUS AMAX
SHAREHOLDERS APPROVE TWO-WAY MERGER AT SEPTEMBER 30 VOTE
PHOENIX, AZ, AUGUST 27, 1999 -- Phelps Dodge Corporation (NYSE: PD)
announced today that it has filed registration materials with the Securities and
Exchange Commission for exchange offers for all outstanding Asarco Incorporated
(NYSE: AR) and Cyprus Amax Minerals Company (NYSE: CYM) common shares. Phelps
Dodge will commence the exchange offers as soon as the registration statements
are declared effective.
In addition, the Company filed preliminary proxy materials with the
Securities and Exchange Commission to solicit proxies from Asarco and Cyprus
Amax stockholders to vote against the proposed merger of Asarco and Cyprus Amax.
Asarco and Cyprus Amax have set shareholder meetings for September 30, 1999 to
vote on their proposed merger.
Separately, Phelps Dodge announced that it has commenced litigation in New
Jersey and Delaware against Asarco and Cyprus Amax, respectively, and their
directors, for breaching their fiduciary duties by impermissibly prohibiting
directors from informing themselves of any third-party merger or acquisition
proposal and providing excessive break-up fees.
"While we continue to prefer negotiated transactions, we are committed to
this compelling three-way combination, and are taking all necessary steps to
complete it," said Douglas C. Yearley, Chairman and Chief Executive Officer of
Phelps Dodge. "If Asarco and Cyprus Amax are truly interested in a negotiated
transaction we are ready to begin discussions immediately. We continue to
believe our offer is fully priced and compelling. We are confident that
shareholders of Asarco and Cyprus Amax will recognize that our proposals are
clearly superior to the Asarco/Cyprus Amax no-premium two-way merger. We view
the September 30 vote as a referendum. If Asarco and Cyprus Amax shareholders do
approve their two-way combination, we will withdraw our substantial premium
proposal and will not bid further."
29
<PAGE> 38
Phelps Dodge also today sent the following letter to the Chairmen of Asarco
and Cyprus Amax:
August 27, 1999
Francis R. McAllister
Chairman and Chief Executive Officer
ASARCO Incorporated
180 Maiden Lane
New York, NY 10038
Milton H. Ward
Chairman, Chief Executive and President
Cyprus Amax Minerals Company
9100 East Mineral Circle
Englewood, CO 80112
Dear Frank and Milt:
We continue to believe that our proposed three-way combination is clearly
superior for your shareholders than your proposed no-premium, two-party
transaction. Our fully priced proposal provides a substantial premium, our $2.00
annual dividend and opportunity for participation in greater upside potential.
In your August 25 letter to us you identified four issues with our
proposal. We are prepared to accept three of your points. On the fourth point,
your demand on exchange ratios, we hope that you will reconsider your
unreasonable position and sit down at the table with us to complete our proposed
three-way combination.
Should you proceed to complete your two-way merger, you will proceed alone
because we will withdraw our substantial premium proposal and will not bid
further. Your September 30 vote will be a referendum on our proposal.
Your proposal on exchange ratios is so unreasonable that its sincerity is
questionable. It seems to be premised on the flawed assumption that since your
combined production would be comparable to Phelps Dodge's, you should be valued
at the same level as Phelps Dodge. Of course, this is clearly not what investors
believe since it is not reflected in the relative market valuations of the three
companies. The simplistic assumption you seem to be making fails to reflect
Phelps Dodge's long track record of making tough management decisions and
delivering significantly greater value to shareholders than either ASARCO or
Cyprus Amax. Over a fifteen year period we have delivered total returns to
shareholders of 1,024% in contrast to 25% for ASARCO and 102% for Cyprus Amax.
Moreover, based on the information in your August 20 Form S-4 registration
statement, it appears that the conclusions arrived at by your own investment
bankers do not support your exchange ratio demand. The exchange ratios you have
demanded would deliver nearly all of the incremental value to be derived from a
three-way combination to your shareholders and very little to our shareholders.
This is, as you no doubt anticipated, completely unacceptable to us.
In addition, we don't believe that your shareholders will be fooled by the
flawed measures you announced which purport to accommodate the possibility of a
third party transaction during the 90 days following completion of your merger.
None of your public statements address in any meaningful way all of the many
steps that would be necessary to give your shareholders a realistic opportunity
to benefit from an attractive third party proposal. Among the additional matters
that would have to be addressed if you were serious about accommodating third
party transactions would be to eliminate your staggered Board and the highly
unusual management entrenchment arrangements built into your two-party merger
agreement.
Those unusual management-entrenchment provisions guarantee no change in the
roles of the proposed four senior executives of the ASARCO-Cyprus combined
company prior to the 2002 annual
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<PAGE> 39
meeting except upon a vote of 75% of the Board. Since management will hold 25%
of the Board seats, this effectively requires a unanimous vote of the
non-management directors. Because your Board is divided into three classes, this
means that a buyer of 100% of the outstanding stock of the ASARCO-Cyprus
combined company would not be able to obtain management control for nearly three
years.
Indeed, even in the two aspects of your 90-day proposal for which you try
to take credit, there is confusion, contradiction and unnecessary complexity.
You propose an unspecified shareholder mechanism to redeem your poison pill
which is inevitably more cumbersome than simple Board action. Secondly, we noted
with interest the statement in your August 25 press release that "In addition,
change in control provisions in any employment contracts entered into by the
Company will be waived for that same 90 day period." We were therefore surprised
to read the contradictory statement in the Form 8-K you filed yesterday that:
"The rights and benefits under the existing [change of control]
arrangements with the employees... of each of Cyprus Amax and
ASARCO, however, will remain in full force and effect and will be
unaffected during the 90 days following completion of the business
combination, as will any rights under arrangements entered into
with such employees in substitution for any existing
arrangements."
Frankly, we believe that all of your statements concerning the 90 day
period are no more than a public relations gambit. There is no evidence in your
conduct to date that you have any willingness to pursue transactions that are in
the best interests of your shareholders.
With regard to the three points in your August 25 letter other than the
exchange ratio, we are pleased to confirm that:
- We are prepared to enter into a merger agreement with substantially the
same representations, warranties and covenants as those contained in your
July 15 merger agreement.
- This proposal is not subject to due diligence.
- We have studied the regulatory issues carefully and are confident that
all necessary regulatory approvals for our three way combination will be
obtained on a timely basis. We would be pleased to give you strong
contractual assurances on this point.
If you take seriously your fiduciary duty and want to inform yourselves
about a compelling transaction that would be in the best interests of your
shareholders, let's sit down and negotiate. If not, your shareholders will
decide which alternative they prefer on September 30.
Sincerely,
<TABLE>
<S> <C>
/s/ DOUGLAS C. YEARLEY /s/ J. STEVEN WHISLER
------------------------------------------ ------------------------------------------
Douglas C. Yearley J. Steven Whisler
Chairman and President and
Chief Executive Officer Chief Operating Officer
</TABLE>
On September 3, 1999, Phelps Dodge commenced its exchange offers for Asarco
and Cyprus Amax common shares and issued the following press release:
PHELPS DODGE COMMENCES EXCHANGE OFFERS FOR
ASARCO AND CYPRUS AMAX
PHOENIX, AZ, September 3, 1999 -- Phelps Dodge Corporation (NYSE: PD)
announced today that it has formally commenced exchange offers for all
outstanding Asarco Incorporated (NYSE: AR) and Cyprus Amax Minerals Company
(NYSE: CYM) common shares.
Phelps Dodge's registration statements for its previously announced
exchange offers to acquire Asarco and Cyprus Amax were declared effective
by the Securities and Exchange Commission yesterday. Under the terms of the
Phelps Dodge exchange offers, Asarco shareholders would receive 0.4098
Phelps Dodge shares for each share of Asarco stock tendered and Cyprus Amax
shareholders would receive
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<PAGE> 40
0.3135 Phelps Dodge shares for each share of Cyprus Amax stock tendered.
The expiration date of the exchange offers will be 12:00 midnight, New York
City time, on Friday, October 1, 1999 and may be extended from time to time
by Phelps Dodge until the various conditions of the exchange offers have
been satisfied or waived.
"We are pleased to formally commence our exchange offers for Asarco
and Cyprus Amax," said Douglas C. Yearley, Chairman and CEO of Phelps
Dodge. "We look forward to a swift completion of these transactions."
On September 7, 1999, Asarco and Cyprus Amax issued the following
press release:
DENVER, CO. AND NEW YORK, N.Y., SEPTEMBER 7, 1999 -- Cyprus Amax
Minerals Company (NYSE: CYM) and ASARCO Incorporated (NYSE: AR) today
announced that they were urging the shareholders of Cyprus Amax and Asarco
to vote for the proposed Cyprus Amax and Asarco merger on September 30th.
Cyprus Amax and Asarco emphasized that their boards view the Asarco
Cyprus merger as the only transaction which is assured of completion on
September 30th and the only transaction which will give their shareholders
a fair share of the value created by combining their two companies.
Speaking jointly, Milton H. Ward, Chairman and Chief Executive Officer
of Cyprus Amax, and Francis R. McAllister, Chairman and Chief Executive
Officer of Asarco, emphasized that the benefits to shareholders of the
Asarco Cyprus merger, include:
- A special cash payment of $5 per share immediately after the merger;
- Ownership in the largest publicly traded copper company in the world,
producing 2.0 billion pounds annually;
- 100% share in $275 million of annual cost savings which should enhance
earnings and cash flow substantially; and
- Ownership in a company with a strong balance sheet and the operational
advantages of a 50 cent per pound cash cost and a net earnings
break-even price at 65 cents per pound of copper.
Cyprus Amax and Asarco warned stockholders that Phelps Dodge's
unsolicited, hostile attempt to break up the fully negotiated Asarco Cyprus
merger seeks to leave Asarco and Cyprus Amax stockholders with only 43% of
a three-way enterprise.
The companies stated, "We believe this percentage ownership is
inequitable, as evidenced by the stark contrast of the much greater
contributions Asarco and Cyprus Amax stockholders are being asked to make
to such a three-way enterprise. Specifically:
- 57% of the production
- 61% of the ore reserves
- 4 of the 5 lowest cost mines
- 60% of the copper margin
- 92% of the synergies
- 91% of the cash
- Lower cash costs
Cyprus Amax and Asarco also warned shareholders: "The Phelps Dodge
proposal is subject to numerous conditions which cannot be fulfilled by
September 30, including Phelps Dodge's own stockholder approval. We urge
our stockholders to beware this effort to break up our value-creating
merger, beware Phelps Dodge's 'spin campaign' of letters, lawsuits and
public relations and beware that Phelps Dodge cannot guarantee when or if
either of its hostile transactions will close. In contrast, our
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<PAGE> 41
Boards of Directors are committed to creating the premier public copper
investment in the world on September 30, and will do so with the approval
of our stockholders -- which we are vigorously seeking."
Cyprus Amax and Asarco urged their stockholders to vote for the merger
by signing, dating and mailing the white proxy card sent to them by Asarco
or Cyprus Amax.
Actual results may vary materially from any forward-looking statement
the Company makes. Refer to the Cautionary Statement and Risk Factors
contained in Cyprus Amax's and Asarco's 1998 Form 10Ks.
On September 8, 1999, Asarco and Cyprus Amax issued the following
press release:
DENVER, CO., and NEW YORK, NY, September 8, 1999 -- Cyprus Amax
Minerals Company (NYSE: CYM) and ASARCO Incorporated (NYSE: AR) today
announced that their respective Boards of Directors unanimously rejected
Phelps Dodge's exchange offers to their shareholders as inadequate and not
in the best interests of their shareholders. The Boards also unanimously
recommended that their shareholders reject the exchange offers and not
tender their shares, and unanimously reaffirmed that the terms of the
Asarco Cyprus business combination are fair to, and in the best interests
of, their shareholders.
In their recommendations to their shareholders, the Cyprus Amax and
Asarco Boards cited, among other things:
- The advantages to the shareholders of becoming shareholders in Asarco
Cyprus, including, that they retain 100% of the $275 million of annual
savings created by the combination.
- The Phelps Dodge exchange offers are inadequate and fail to compensate
Cyprus Amax and Asarco shareholders for their relative contribution to
a three-way combination with Phelps Dodge.
- The opinion, rendered on September 8, 1999, of their respective
financial advisors that the consideration offered to the shareholders
is inadequate to such holders from a financial point of view.
- The special $5.00 per share cash payment to the stockholders of Asarco
Cyprus immediately following the combination provides them with
immediate and significant value.
- A three-way combination raises substantial issues under the antitrust
laws. The Boards noted that the Phelps Dodge exchange offers are
conditioned on the expiration of the Hart-Scott antitrust waiting
period but Phelps Dodge has not even filed the required notification
yet. In contrast, the applicable waiting period for the Asarco Cyprus
combination has already expired.
- The highly conditional nature of the Phelps Dodge exchange offers,
including with respect to antitrust regulatory approval and Phelps
Dodge's own stockholder approval which is not being sought until after
the Cyprus Amax and Asarco September 30 shareholder meeting date.
Accordingly, each Board recommends to its shareholders that they do
not tender their shares to Phelps Dodge and strongly urges them to vote in
favor of the Asarco Cyprus combination on September 30.
Milton H. Ward, Chairman and Chief Executive Officer of Cyprus Amax
and Francis R. McAllister, Chairman and Chief Executive Officer of Asarco,
speaking together said, "It is absolutely clear from Phelps Dodge's actions
over the course of the last few weeks that it is trying to coerce Cyprus
Amax and Asarco shareholders into a situation that is not in their best
interests. First, Phelps Dodge's opportunistic and inadequate exchange
offers do not give our shareholders their fair ownership interest in the
combined entity. Second, a three-way combination with Phelps Dodge raises
substantial antitrust issues that Phelps Dodge has not yet begun to
address. Third, Phelps Dodge has never offered any persuasive reason why it
would walk away if our shareholders approve our two-way combination, if in
fact Phelps Dodge is sincere in wanting to merge with both companies."
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<PAGE> 42
Messrs. Ward and McAllister went on to say that "The Boards of Cyprus
Amax and Asarco are committed to achieving the best value for their
shareholders and will not sacrifice their shareholders' interest for Phelps
Dodge's own agenda, which is to maximize value for Phelps Dodge and its
shareholders. It is for this reason that we strongly recommend shareholders
vote for the Asarco Cyprus transaction on September 30."
Cyprus Amax and Asarco also announced today that they were each filing
with the Securities and Exchange Commission, and will mail to their
shareholders, a Solicitation/Recommendation Statement on Schedule 14D-9
setting forth the Board's formal recommendation with respect to the Phelps
Dodge exchange offer and the reasons for the recommendation. Additional
information with respect to each Board's decision to recommend that
shareholders reject the Phelps Dodge offer is contained in the Schedule
14D-9.
Actual results may vary materially from any forward-looking statements
the companies make. Refer to the cautionary statement risk factors
contained in Cyprus Amax's and Asarco's 1998 Form 10K's.
On September 22, 1999, Phelps Dodge amended its exchange offers for Asarco
and Cyprus Amax common shares and issued the following press release:
PHELPS DODGE INCREASES OFFERS TO ACQUIRE ASARCO AND CYPRUS AMAX;
ADDS SUBSTANTIAL CASH COMPONENTS TO BOTH OFFERS
OFFERS PROVIDE 40% PREMIUMS TO ASARCO, CYPRUS AMAX SHAREHOLDERS
PHOENIX, AZ, September 22, 1999 -- Phelps Dodge Corporation (NYSE: PD)
announced today that it has increased its offers to acquire Asarco
Incorporated (NYSE: AR) and Cyprus Amax Minerals Company (NYSE: CYM) and
added a substantial cash component to both offers. The revised offers would
provide approximately 40% premiums to the shareholders of both Asarco and
Cyprus Amax, based on the unaffected stock prices of all three companies.
Phelps Dodge is now offering to acquire all shares of Asarco for $9.00
in cash and 0.2880 Phelps Dodge shares per Asarco share on a fully prorated
basis. Based on Phelps Dodge's closing share price yesterday, the revised
offer currently values Asarco at $25.47 per share, or a total equity value
of $1.01 billion, based on approximately 39.8 million Asarco shares
outstanding.
Phelps Dodge is now offering to acquire all shares of Cyprus Amax for
$6.89 in cash and 0.2203 Phelps Dodge shares per Cyprus Amax share on a
fully prorated basis, maintaining the Asarco/Cyprus Amax announced exchange
ratio of 0.765. Based on Phelps Dodge's closing share price yesterday, the
revised offer currently values Cyprus Amax at $19.49 per share, or a total
equity value of $1.76 billion, based on approximately 90.5 million Cyprus
Amax shares outstanding.
In the revised offers, shareholders of Asarco and Cyprus Amax will
have the right to elect to receive all cash or all Phelps Dodge shares. The
all-cash election for Asarco shareholders is $25.90 per Asarco share and
the all-stock election is 0.4413 Phelps Dodge shares per Asarco share,
subject to proration to maintain the overall cash/stock allocation. The
all-cash election for Cyprus Amax shareholders is $19.81 per Cyprus Amax
share and the all-stock election is 0.3376 Phelps Dodge shares per Cyprus
Amax share, subject to proration to maintain the overall cash/stock
allocation. The stock portion of the consideration received will be
tax-free to shareholders of both companies.
Phelps Dodge expects the revised three-way merger to remain
immediately and substantially accretive to its cash flow and significantly
accretive to its earnings per share beginning in the second year after
closing, based on the current portfolio of the combined companies and
analysts' estimates of copper prices of $0.80 to $0.85 per pound in 2001.
Based on its strong balance sheet, Phelps Dodge expects to finance the
approximately $1 billion cash portion of the offers primarily through
existing credit facilities and cash on hand.
"With these substantial increases, there can be no question that our
offers provide clearly superior value to Asarco and Cyprus Amax
shareholders compared to the no-premium two-way merger," said
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<PAGE> 43
Douglas C Yearley, Chairman and Chief Executive Officer of Phelps Dodge.
"It is now time for Asarco and Cyprus Amax to come to the table. With their
cooperation, we will be in a position to close this compelling three-way
merger immediately following the October 13 Phelps Dodge shareholder
meeting."
Yearley added: "The Asarco and Cyprus Amax shareholder votes on
September 30 will be a clear-cut referendum. If shareholders approve the
two-way no-premium merger, we will immediately withdraw our clearly
superior offers and will not bid further."
On September 22, 1999, Phelps Dodge sent the following letter to
Messrs. McAllister and Ward:
[LETTERHEAD OF PHELPS DODGE CORPORATION]
September 22, 1999
Francis R. McAllister
Chairman and Chief Executive Officer
ASARCO Incorporated
180 Maiden Lane
New York, NY 10038
Milton H. Ward
Chairman, Chief Executive and President
Cyprus Amax Minerals Company
9100 East Mineral Circle
Englewood, CO 80112
Dear Frank and Milt:
In an effort to reach a definitive agreement now to combine our three
companies, Phelps Dodge is significantly enhancing its proposal to you and
the shareholders of Asarco and Cyprus Amax. Under our revised proposal,
shareholders would, subject to the election feature described below,
receive in the case of (i) each Asarco share, $9.00 in cash and 0.2880
Phelps Dodge shares and (ii) each Cyprus Amax share, $6.89 in cash and
0.2203 Phelps Dodge shares. This revised offer reflects premiums of
approximately 40% for Asarco and Cyprus Amax shareholders over the price of
their shares immediately prior to the announcement of our initial proposal.
The stock portion of our transaction would be tax-free for your
shareholders. Our revised proposal allocates the additional value we are
offering proportionately between the shareholders of your two companies and
preserves the value ratio between the companies that you have set in your
proposed no-premium merger transaction. It remains our intention to
continue the current $2.00 per share annual dividend for Phelps Dodge
common stock.
Our proposal is compelling. It pays a full and highly attractive
premium to your shareholders. And, most importantly, it creates a
world-class global copper company in which your shareholders can maintain a
continuing interest and participate in its upside potential.
We know our proposal is consistent with what we have been hearing from
your shareholders and ours. Now is the time for each of you to meet with us
to conclude a merger agreement in the interests of all. We remain prepared
to meet with you or your management at any time.
Should you decide not to meet with us, we assume your Boards will
review and revise their recommendations to your shareholders with respect
to your existing Asarco/Cyprus Amax no-premium offer and allow your
shareholders to decide what is in their own best interests at your
September 30 meetings. We believe that this proposal is clearly a superior
offer for your shareholders.
You will note that in the exchange offer material we send you
concerning our revised proposals that we offer an election feature that
will allow individual shareholders to express a preference for receipt of
35
<PAGE> 44
cash or Phelps Dodge shares, subject to proration in the event of over
subscription of either. We are certain your shareholders will find such an
election to be appealing.
While our strong preference is to do a three-way merger, we remain
ready to complete a transaction with either company separately.
<TABLE>
<S> <C>
Very truly yours,
/s/ DOUGLAS C. YEARLEY /s/ J. STEVEN WHISLER
------------------------------------------ ------------------------------------------
Douglas C. Yearley J. Steven Whisler
Chairman and President and
Chief Executive Officer Chief Operating Officer
</TABLE>
cc: Boards of Directors of Asarco and Cyprus Amax
On September 24, 1999, the Federal Trade Commission granted Phelps Dodge
early termination of the waiting periods under the Hart-Scott-Rodino Act for its
offers to acquire Asarco and Cyprus Amax.
Also on September 24, 1999, at the request of Asarco and Cyprus Amax,
Messrs. Yearley and Whisler, of Phelps Dodge, Messrs. McAllister and Morano, of
Asarco, and Mr. Ward and Gerald J. Malys, of Cyprus Amax, met in New York City.
At the meeting, Asarco and Cyprus Amax indicated that they were unwilling to
negotiate a three way business combination unless Phelps Dodge offered a price
reflecting a premium of 55% above their unaffected share prices prior to the
August 20 public announcement of Phelps Dodge's initial proposal. Phelps Dodge
rejected this proposal and reiterated its willingness to proceed at prices
representing premiums of 40% to the unaffected share prices of Asarco and Cyprus
Amax.
Later on September 24, 1999, Messrs. Yearley and Whisler sent a proposed
form of merger agreement to Messrs. McAllister and Ward, together with the
following letter:
[LETTERHEAD OF PHELPS DODGE CORPORATION]
September 24, 1999
Francis R. McAllister
Chairman and Chief Executive Officer
ASARCO Incorporated
180 Maiden Lane
New York, New York 10038
Milton H. Ward
Chairman, Chief Executive Officer and President
Cyprus Amax Minerals Company
9100 East Mineral Circle
Englewood, Colorado 80112
Dear Frank and Milt:
In order to avoid any further misunderstandings concerning the terms
of our proposal, we are enclosing a form of merger agreement we would be
prepared to sign immediately. You will note that the agreement is a mark-up
of your existing merger agreement and maintains the same representations,
warranties and closing conditions as your existing merger agreement. The
draft agreement contains the economic terms that we previously discussed
and that are contained in our exchange offers to your
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<PAGE> 45
respective shareholders. It also contains a "hell or high water" covenant
with respect to regulatory matters, honors the provisions of Sections 5.5
and 5.6 of your existing merger agreement, contains a "no shop" covenant
with a fiduciary out and provides for break-up fees of 2% of each of ASARCO
and Cyprus Amax's respective market capitalization.
Sincerely,
<TABLE>
<S> <C>
/s/ DOUGLAS C. YEARLEY /s/ J. STEVEN WHISLER
- ------------------------------ ------------------------------
Douglas C. Yearley J. Steven Whisler
Chairman and President and
Chief Executive Officer Chief Operating Officer
</TABLE>
On the evening of September 24, 1999, Grupo Mexico, S.A. de C.V. announced
that it planned to commence a tender offer to acquire all outstanding Asarco
shares at $26.00 per share.
On September 27, 1999, Asarco announced that it would explore strategic
alternatives to maximize shareholder value. Separately, Cyprus Amax announced
that it would explore alternatives to the Asarco/ Cyprus Amax merger.
On September 27, 1999, Grupo Mexico commenced a tender offer to acquire all
outstanding Asarco shares at $26.00 per share. Also on September 27, 1999, the
Chancery Court in Delaware, while denying Phelps Dodge's motion for injunctive
relief, stated that it was troubled by the termination fee and "no-talk"
provisions of the Asarco/Cyprus Amax Merger Agreement (see "The
Offer -- Litigation"). Thereafter, Phelps Dodge sent the following letter to
Asarco:
[LETTERHEAD OF PHELPS DODGE CORPORATION]
September 27, 1999
Mr. Francis R. McAllister
Chairman and Chief Executive Officer
Board of Directors
c/o Francis R. McAllister
ASARCO Incorporated
180 Maiden Lane
New York, New York 10038
Dear Frank and Members of the Board:
In light of the ruling of the Chancery Court in Delaware regarding the
exercise of your fiduciary duties (a copy of the transcript is enclosed)
and the disclosure by Grupo Mexico in its Schedule 14D-1 (a copy of the
relevant portion also enclosed) that their all cash bid was a direct
response to your specific price guidance, we believe you are required to
treat us fairly in the auction process in which you are now engaged.
We remain determined to acquire ASARCO and are prepared to meet with
you to discuss a revised proposal superior to those you are now
considering. We expect that in those discussions you will share with us any
information shared with any other bidder, including identical guidance as
to price or any other terms.
As you know, we have responded fully and favorably to each of your
contract requests previously.
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<PAGE> 46
We look forward to meeting with you at your earliest convenience.
Very truly yours,
<TABLE>
<S> <C>
/s/ DOUGLAS C. YEARLEY /s/ J. STEVEN WHISLER
- ------------------------------------ ------------------------------------
Douglas C. Yearley J. Steven Whisler
Chairman and President and
Chief Executive Officer Chief Operating Officer
</TABLE>
On September 28, 1999, Asarco and Cyprus Amax announced that they had
amended the Asarco/ Cyprus Amax Merger Agreement to allow them, for a period
ending on October 5, 1999, to negotiate with other parties and to unilaterally
terminate the Asarco/Cyprus Amax Merger Agreement for any reason, subject to
payment of a termination fee of $45 million, in the case of termination by
Cyprus Amax, and $40 million, in the case of termination by Asarco.
Also on September 28, 1999, representatives of Phelps Dodge and Cyprus Amax
began negotiating the Phelps Dodge/Cyprus Amax Merger Agreement.
On September 29, 1999, the Board of Directors of Phelps Dodge approved the
Phelps Dodge/Cyprus Amax Merger Agreement. At the Board meeting, Morgan Stanley
& Co. Incorporated rendered its oral opinion, subsequently confirmed in writing,
that as of the date of its opinion, and based upon and subject to the various
considerations in its opinion, the consideration to be paid by Phelps Dodge
pursuant to the Phelps Dodge/Cyprus Amax Merger Agreement was fair from a
financial point of view to Phelps Dodge. On September 30, 1999, the Board of
Directors of Cyprus Amax approved the Phelps Dodge/Cyprus Amax Merger Agreement
and Cyprus Amax terminated its merger agreement with Asarco. Cyprus Amax
received an opinion from Merrill Lynch, Pierce, Fenner & Smith Incorporated
dated September 30, 1999, substantially to the effect that, as of such date, the
consideration to be received by Cyprus Amax stockholders in the offer and the
Cyprus Amax/Phelps Dodge merger is fair from a financial point of view to the
stockholders of Cyprus Amax. The Phelps Dodge/Cyprus Amax Merger Agreement was
signed on September 30, 1999. Phelps Dodge and Cyprus Amax issued the following
press release:
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<PAGE> 47
PHELPS DODGE TO ACQUIRE CYPRUS AMAX
------------------------
PHOENIX, AZ and DENVER, CO, September 30, 1999 -- Phelps Dodge Corporation
(NYSE: PD) and Cyprus Amax Minerals Company (NYSE: CYM) today announced they
have signed a definitive merger agreement under which Phelps Dodge will acquire
Cyprus Amax for $7.61 in cash and 0.2203 Phelps Dodge shares per Cyprus Amax
share on a fully prorated basis.
Phelps Dodge is amending its exchange offer for Cyprus Amax, which will now
be scheduled to expire at midnight on October 15, 1999. Cyprus Amax shareholders
will have the right to elect to receive cash or Phelps Dodge shares for each
Cyprus Amax share. The all-cash election for Cyprus Amax shareholders is $20.54
per Cyprus Amax share and the all-stock election is 0.3500 Phelps Dodge shares
per Cyprus Amax share, subject to proration to maintain the overall cash/stock
allocation of approximately 63% stock and 37% cash. The stock portion of the
consideration received will be tax-free to Cyprus Amax shareholders.
Based on Phelps Dodge's closing share price yesterday, the agreement
currently values Cyprus Amax at $19.80 per share, or a total equity value of
approximately $1.8 billion, based on approximately 90.7 million Cyprus Amax
shares outstanding.
Phelps Dodge expects the transaction to be immediately and substantially
accretive to its cash flow per share and accretive to its earnings per share
beginning in 2001, based on the current portfolio of the combined companies and
analysts' estimates of copper prices of $0.80 to $0.85 per pound in 2001. Based
on its strong balance sheet, Phelps Dodge expects to finance the $690 million
cash portion of the offer through existing credit facilities and cash on hand.
Phelps Dodge has already received U.S. antitrust approval for the
acquisition. Completion of the exchange offer is subject to a majority of Cyprus
Amax's shares being tendered and not withdrawn, approval of Phelps Dodge
shareholders at a special meeting on October 13, 1999, and customary closing
conditions.
Prior to entering into the agreement with Phelps Dodge, Cyprus Amax
terminated its merger agreement with Asarco Incorporated (NYSE: AR) in
accordance with the procedures agreed to with Asarco earlier this week.
The combination of Phelps Dodge and Cyprus Amax will create a world-class,
lower-cost global copper producer and provide significant opportunities to
integrate operations in the southwestern United States, administrative
functions, and exploration and development activities. Consistent with
demonstrated Phelps Dodge standards, all properties will be operated to earn
more than the cost of capital over the copper cycle.
"We are extremely pleased that we were able to reach a negotiated agreement
with Cyprus Amax that is clearly in the best interest of both companies," said
Douglas C. Yearley, Chairman and Chief Executive Officer of Phelps Dodge. "We
will move quickly to close this compelling transaction and to begin realizing
the strategic and financial benefits of the combination."
Yearley added, "Phelps Dodge remains interested in acquiring Asarco to
realize the additional benefits of a three-way combination -- if we can do so on
terms that make economic sense for our shareholders. Our 40% premium exchange
offer remains on the table, and we hope to have further discussions with
Asarco."
Milton H. Ward, Chairman, President and Chief Executive Officer of Cyprus
Amax, said, "This premium transaction provides significant current value to
Cyprus Amax shareholders as well as the opportunity to participate in what we
believe is the substantial upside potential of the combination. We are confident
that Cyprus Amax customers will be well served, and our shareholders and
employees will benefit from being part of a world-class global copper producer."
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<PAGE> 48
Phelps Dodge expects to achieve annual cash cost savings of at least $100
million from the combination, to be fully phased in by the end of 2001, through
reductions in SG&A expenses, operating improvements and efficiencies in
exploration.
J. Steven Whisler, President and Chief Operating Officer of Phelps Dodge,
said, "We have done a great deal of advance planning and, working closely with
representatives of Cyprus Amax, our integration teams will move swiftly to
realize the full benefits of this combination."
Morgan Stanley Dean Witter served as financial advisor to Phelps Dodge and
Merrill Lynch served as financial advisor to Cyprus Amax. Shearman & Sterling
and Debevoise & Plimpton served as legal advisors to Phelps Dodge and Wachtell,
Lipton, Rosen & Katz served as legal advisor to Cyprus Amax.
40
<PAGE> 49
THE OFFER
We are offering to exchange $7.61176875 net in cash plus 0.2203 shares of
Phelps Dodge common stock for each outstanding share of Cyprus Amax Minerals
Company common stock, on a fully prorated basis. You may elect to receive either
$20.54 in cash or 0.3500 shares of Phelps Dodge common stock for each of your
Cyprus Amax common shares that are validly tendered and not properly withdrawn,
subject, in each case, to the election and proration procedures described in
this prospectus and the related letter of election and transmittal. This
consideration has a value of $19.80, based on the closing price of Phelps Dodge
common stock on September 29, 1999 of $55 5/16. If you receive all consideration
in the form of stock, at the exchange ratio of 0.3500 Phelps Dodge common shares
per Cyprus Amax share, your consideration would be worth $19.36, based on the
same closing price. We are making our offer through our wholly owned subsidiary,
CAV Corporation, which is a Delaware corporation. The term "expiration date"
means 12:00 midnight, New York City time, on October 15, 1999, unless we extend
the period of time for which this offer is open, in which case the term
"expiration date" means the latest time and date on which the offer, as so
extended, expires. We are also making a separate offer to exchange $9.00 net in
cash and 0.2880 shares of Phelps Dodge common stock for each outstanding common
share of Asarco Incorporated on a fully prorated basis and subject to the same
election and proration procedures.
If you tender your shares, you will not be obligated to pay any charges or
expenses of the exchange agent or any brokerage commissions. Except as set forth
in the instructions to the letter of election and transmittal, transfer taxes on
the exchange of Cyprus Amax common stock pursuant to our offer will be paid by
us or on our behalf.
We are making this offer in order to acquire control of, and ultimately the
entire common equity interest in, Cyprus Amax. Pursuant to the Phelps
Dodge/Cyprus Amex merger agreement, as soon as possible after consummation of
the offer, Cyprus Amax will consummate the Phelps Dodge/Cyprus Amax merger with
us in which each outstanding share of Cyprus Amax common stock (except for
Cyprus Amax common stock held by Cyprus Amax, us or any of our subsidiaries)
would be converted into the right to receive 0.2203 shares of Phelps Dodge
common stock and $7.61176875 in cash, without interest, on a fully prorated
basis.
If we obtain all of the shares of Cyprus Amax pursuant to our offer to you,
and all of the shares of Asarco pursuant to our separate offer to its
shareholders, former shareholders in Cyprus Amax and Asarco would own
approximately 22% and 13%, respectively, of the shares of common stock of Phelps
Dodge Corporation, based upon the number of shares outstanding of Phelps Dodge,
Cyprus Amax and Asarco on August 13, 1999, August 3, 1999 and July 31, 1999,
respectively. If we obtain all of the common shares of Cyprus Amax pursuant to
our offer and do not acquire any Asarco common shares, former shareholders in
Cyprus Amax would own approximately 26% of the common stock of the Phelps
Dodge/Cyprus Amax combined entity.
Our obligation to exchange shares of Phelps Dodge common stock and cash for
Cyprus Amax shares pursuant to the offer is conditioned upon several conditions
referred to below under "Conditions of Our Offer," including the Minimum Tender
Condition, the Phelps Dodge Stockholder Approval Condition, and other conditions
that are discussed below.
Our offer to acquire Cyprus Amax common stock is also an offer to acquire
Cyprus Amex preferred share purchase rights ("Cyprus Amax Rights"), and, when we
refer to the shares of Cyprus Amax common stock, we are also referring to the
associated rights, unless we indicate otherwise. In addition, all references to
the rights include the benefits to holders of those rights pursuant to the
Cyprus Amax rights agreement (the "Cyprus Amax Rights Agreement"), including the
right to receive any payment due upon redemption of those rights.
We have asked Cyprus Amax for its stockholder list and security position
listings to communicate with you and to distribute our offer to you. We may send
this prospectus, related letter of election and transmittal and other relevant
materials to you and to brokers, dealers, commercial banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on Cyprus
Amax's stockholder list or, if applicable, who are listed as participants in a
clearing agency's security position listing so that we can later send these
materials to beneficial owners of Cyprus Amax shares after we receive these
lists from Cyprus Amax.
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DESCRIPTION OF ELECTION AND PRORATION PROCEDURES
These are the rules that will govern the allocation of the cash and stock
consideration in our offer.
CASE 1: MORE CASH CONSIDERATION IS ELECTED THAN THE AMOUNT OF CASH
AVAILABLE FOR PAYMENT
In this case, Phelps Dodge will calculate a proration factor for the Cyprus
Amax shares making a cash election. This cash proration factor will equal (1)
the total amount of cash available for payment, which will be $7.61176875
multiplied by the total number of Cyprus Amax shares outstanding immediately
prior to closing of our offer, divided by (2) the total amount of cash that
would have to be paid if all cash elections were honored in full, which is
determined by multiplying the number of Cyprus Amax shares electing cash by
$20.54.
- Each Cyprus Amax share electing to receive Phelps Dodge shares will be
exchanged for 0.3500 Phelps Dodge shares;
- Each Cyprus Amax share as to which no election has been made will be
exchanged for 0.3500 Phelps Dodge shares; and
- Each Cyprus Amax share electing cash will be exchanged for:
1. $20.54 in cash multiplied by the cash proration factor; and
2. a number of Phelps Dodge shares equal to 0.3500 multiplied by 1
minus the cash proration factor.
For example, if 90 million Cyprus Amax shares are outstanding
immediately prior to closing of our offer and 70% of those shares elect
cash, the cash proration factor would be 52.94%, calculated as follows:
$685.1 million ($7.61176875 multiplied by 90 million), / $1,294
million ($20.54 multiplied by 63 million, the number of Cyprus Amax
shares that elected to receive cash)
Each of the Cyprus Amax shares electing to receive Phelps Dodge shares and
each of the Cyprus Amax shares as to which no election has been made, would
receive 0.3500 Phelps Dodge shares. Each of the Cyprus Amax shares electing to
receive cash would receive $10.87 in cash, without interest, and 0.1647 Phelps
Dodge shares.
CASE 2: MORE STOCK CONSIDERATION IS ELECTED THAN THE NUMBER OF PHELPS DODGE
SHARES AVAILABLE FOR ISSUANCE UNDER OUR OFFER
In this case, Phelps Dodge will calculate a proration factor for the Cyprus
Amax shares making a stock election. This stock proration factor will equal (1)
the total number of Phelps Dodge shares available for issuance in our offer,
which will be 0.2203 multiplied by the total number of Cyprus Amax shares
outstanding immediately prior to closing of our offer, divided by (2) the total
number of Phelps Dodge shares that would have to be issued if all stock
elections were honored in full, which is determined by multiplying the number of
Cyprus Amax shares electing stock by 0.3500.
- Each Cyprus Amax share electing to receive cash will be exchanged for
$20.54 in cash, without interest;
- Each Cyprus Amax share as to which no election has been made will be
exchanged for $20.54 in cash, without interest; and
- Each Cyprus Amax share electing stock will be exchanged for:
1. A number of Phelps Dodge shares equal to 0.3500 multiplied by the
stock proration factor; and
2. Cash equal to $20.54 multiplied by 1 minus the stock proration
factor.
For example, if 90 million Cyprus Amax shares are outstanding
immediately prior to closing of our offer and 70% of those shares elect
stock, the stock proration factor would be 89.93%, calculated as follows:
19.83 million (0.2203 multiplied by 90 million), / 22.05 million
(0.3500 multiplied by 63 million, the number of Cyprus Amax shares
that elected to receive stock)
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Each of the Cyprus Amax shares electing to receive cash and each of the
Cyprus Amax shares as to which no election has been made, would receive $20.54
in cash, without interest. Each of the Cyprus Amax shares electing to receive
stock would receive 0.3148 Phelps Dodge shares and $2.07 in cash, without
interest.
CASE 3: THE NUMBER OF CYPRUS AMAX SHARES AS TO WHICH NO ELECTION IS MADE IS
SUFFICIENTLY LARGE SO THAT CASH CONSIDERATION ELECTED IS LESS THAN THE CASH
AVAILABLE FOR PAYMENT AND THE STOCK CONSIDERATION ELECTED IS LESS THAN THE
NUMBER OF PHELPS DODGE COMMON SHARES AVAILABLE FOR DELIVERY
In this case, Phelps Dodge will calculate a proration factor for the shares
that make no election. This non electing proration factor will equal (1) the
difference between the total number of Cyprus Amax shares that must receive cash
less the total number of Cyprus Amax shares that have elected cash, divided by
(2) the total number of shares as to which no election has been made. The total
number of shares that must receive cash is determined by dividing the total cash
consideration ($7.61176875 multiplied by the number of Cyprus Amax shares
outstanding immediately prior to closing of our offer) by $20.54.
- Each Cyprus Amax share electing cash will be exchanged for $20.54 in
cash, without interest;
- Each Cyprus Amax share electing stock will be exchanged for 0.3500 Phelps
Dodge shares, and
- Each Cyprus Amax share as to which no election has been made will be
exchanged for:
1. $20.54 in cash multiplied by the non electing proration factor; and
2. a number of Phelps Dodge shares equal to 0.3529 multiplied by 1 minus
the non electing proration factor.
For example, if 90 million Cyprus Amax shares are outstanding immediately
prior to the closing of our offer and cash is elected with respect to 30% of
those shares, stock is elected with respect to 50% of those shares and no
election is made with respect to 20% of those shares, the non electing proration
factor would be 35.29%, calculated as follows:
$685.1 million ($7.61176875 multiplied by 90 million) / $20.54 = $33.35
million
33.35 million - 27 million = 6.35 million
6.35 million / 18 million = 0.3529
Each of the Cyprus Amax shares electing to receive cash will be exchanged
for $20.54 in cash, without interest and each Cyprus Amax share electing stock
consideration will be exchanged for 0.3500 Phelps Dodge shares. Each of the
Cyprus Amax as to which no election has been made will be exchanged for $7.25 in
cash, without interest, and 0.2265 Phelps Dodge shares.
TIMING OF OUR OFFER
Our offer is scheduled to expire at 12:00 midnight, New York City time on
October 15, 1999. For more information, you should read the discussion under the
caption "Extension, Termination and Amendment."
We have called a special meeting of our stockholders to be held on October
13, 1999 so that we can obtain the approvals necessary to satisfy the Phelps
Dodge Stockholder Approval Condition.
LITIGATION
On August 23, 1999, Phelps Dodge, through its directly owned subsidiary CAV
Corporation, sent a written demand to Cyprus Amax for records of its
shareholders, pursuant to Section 220 of the Delaware General Corporation Law.
On August 24, 1999, Phelps Dodge and its directly owned subsidiary AAV
Corporation commenced an action by order to show cause in the Superior Court of
the State of New Jersey, Chancery Division, Mercer County, pursuant to N.J.S.A.
14A:5-28 to seek shareholder records from Asarco. This action is captioned
Phelps Dodge Corp. and AAV Corp. v. ASARCO Inc., Docket No. MER-C-81-99. In
connection with this action, Phelps Dodge made an application for summary
injunctive relief. Asarco opposed the application and argument was heard before
Judge Judith Yaskin on August 26, 1999. At the hearing, the court ruled that
shareholder lists and related documents must be made available to Phelps Dodge
and AAV within forty-eight hours after the filing of their preliminary proxy
materials with the SEC. Some of these materials were delivered to Phelps Dodge
on August 29, 1999, and others have been delivered since then.
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In addition, Phelps Dodge commenced actions in the Superior Court of the
State of New Jersey and in the Court of Chancery of the State of Delaware
against Asarco and Cyprus Amax and their respective Boards of Directors for
their breach of fiduciary duties including their refusals to consider and to
allow the shareholders of both companies to consider the Phelps Dodge proposal.
In particular, Phelps Dodge alleges that Cyprus Amax and Asarco have entered
into an illegal merger agreement that purports to prohibit the companies from
taking any action or entering into any discussions relating to a takeover
proposal. In light of these provisions of the Asarco/Cyprus Amax Merger
Agreement, Asarco and Cyprus Amax are incapable of evaluating meaningfully the
Phelps Dodge proposal and cannot make informed recommendations to their
shareholders. Phelps Dodge also challenged the termination or "break up" fee
payable to Asarco in certain circumstances as grossly excessive; that fee
amounts to more than 6% of Asarco's equity value as of July 15, 1999, the date
of the Asarco/Cyprus Amax merger agreement.
Furthermore, the Asarco/Cyprus Amax merger agreement includes corporate
governance provisions that disenfranchise shareholders by guaranteeing until
2002 the management positions of the chief executive officers of Asarco and
Cyprus Amax unless the positions are changed with the approval of 75% of the
full board. The complaints also allege that, in addition to their persistent
refusals to negotiate with Phelps Dodge, Asarco and Cyprus Amax set their
shareholder meetings and record dates to favor their own merger and have
rewarded management with lavish compensation and benefit packages. These and
other efforts undertaken by the companies amount to an attempt to favor and
entrench management at the expense of shareholders.
Phelps Dodge sought injunctive relief to remedy these breaches of duty,
including court orders declaring that the boards of Asarco and Cyprus Amax
failed to make good faith efforts to obtain information about and adequately
consider the Phelps Dodge proposal and compelling the boards of those two
companies to consider the proposal and remove impediments preventing
consideration of the proposal.
On September 7, 1999, the Superior Court of the State of New Jersey stayed
the New Jersey action, and Phelps Dodge thereafter filed an amended complaint in
the Delaware Chancery Court, naming Asarco and its directors as defendants and
seeking the same relief as that sought in the New Jersey action. The Delaware
Chancery Court ordered expedited discovery, and scheduled a hearing on Phelps
Dodge's motion for a preliminary injunction, in Wilmington, Delaware, on
September 27, 1999. At the hearing on September 27, 1999, the Chancery Court
denied Phelps Dodge's motion for a preliminary injunction, finding that Phelps
Dodge had not demonstrated that irreparable injury would ensue in the absence of
injunctive relief.
On September 20, 1999, Asarco filed suit against Phelps Dodge in the U.S.
District Court for the Southern District of New York, alleging that Phelps
Dodge's proposed acquisition of Asarco and Cyprus Amax would violate the U.S.
antitrust laws, tortiously interferes with the proposed merger between Asarco
and Cyprus Amax and constitutes unfair competition. Although the complaint makes
reference to preliminary injunctive relief, no request for such relief has yet
been made to the court. Phelps Dodge believes this lawsuit is without merit.
EXTENSION, TERMINATION AND AMENDMENT
We expressly reserve the right (subject to our merger agreement with Cyprus
Amax), in our sole discretion, at any time or from time to time, to extend the
period of time during which our offer remains open, and we can do so by giving
oral or written notice of such extension to the exchange agent. If we decide to
so extend our offer, we will make an announcement to that effect no later than
9:00 A.M., New York City time, on the next business day after the previously
scheduled Expiration Date. We are not making any assurance that we will exercise
our right to extend our offer, although we currently intend to do so until all
conditions have been satisfied or waived. During any such extension, all Cyprus
Amax shares previously tendered and not withdrawn will remain subject to the
offer, subject to your right to withdraw your Cyprus Amax shares. You should
read the discussion under the caption "Withdrawal Rights" for more details.
Subject to the SEC's applicable rules and regulations, we also reserve the
right (subject to our merger agreement with Cyprus Amax), in our sole
discretion, at any time or from time to time, (a) to delay acceptance for
exchange of or, regardless of whether we previously accepted Cyprus Amax shares
for exchange, exchange of any Cyprus Amax shares pursuant to our offer or to
terminate our offer and not accept for exchange or exchange any Cyprus Amax
Shares not previously accepted for exchange, or exchanged, upon
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the failure of any of the conditions of the offer to be satisfied and (b) to
waive any condition (other than the Phelps Dodge Stockholder Approval Condition
and the condition relating to the effectiveness of the Registration Statement)
or otherwise amend the offer in any respect, by giving oral or written notice of
such delay, termination or amendment to the exchange agent and by making a
public announcement. We will follow any extension, termination, amendment or
delay, as promptly as practicable, with a public announcement. In the case of an
extension, any such announcement will be issued no later than 9:00 A.M., New
York City time, on the next business day after the previously scheduled
Expiration Date. Subject to applicable law (including Rules 14d-4(c) and
14d-6(d) under the Exchange Act, which require that any material change in the
information published, sent or given to stockholders in connection with the
offer be promptly sent to stockholders in a manner reasonably designed to inform
stockholders of such change) and without limiting the manner in which we may
choose to make any public announcement, we assume no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
making a release to the Dow Jones News Service.
We confirm to you that if we make a material change in the terms of our
offer or the information concerning the offer, or if we waive a material
condition of the offer, we will extend the offer to the extent required under
the Exchange Act. If, prior to the Expiration Date, we change the percentage of
Cyprus Amax shares being sought or the consideration offered to you, that change
will apply to all holders whose Cyprus Amax shares are accepted for exchange
pursuant to our offer. If at the time notice of that change is first published,
sent or given to you, the offer is scheduled to expire at any time earlier than
the tenth business day from and including the date that such notice is first so
published, sent or given, we will extend the offer until the expiration of that
ten business-day period. For purposes of our offer, a "business day" means any
day other than a Saturday, Sunday or federal holiday and consists of the time
period from 12:01 A.M. through 12:00 midnight, New York City time.
EXCHANGE OF CYPRUS AMAX SHARES; DELIVERY OF PHELPS DODGE COMMON STOCK AND CASH
Upon the terms and subject to the conditions of our offer (including, if
the offer is extended or amended, the terms and conditions of any such extension
or amendment), we will accept for exchange, and will exchange, Cyprus Amax
shares validly tendered and not withdrawn as promptly as practicable after the
Expiration Date. In addition, subject to applicable rules of the SEC, we
expressly reserve the right to delay acceptance for exchange or the exchange of
Cyprus Amax shares in order to comply with any applicable law. In all cases,
exchange of Cyprus Amax shares tendered and accepted for exchange pursuant to
the offer will be made only after timely receipt by the exchange agent of
certificates for those Cyprus Amax shares (or a confirmation of a book-entry
transfer of those Cyprus Amax shares in the exchange agent's account at The
Depository Trust Company (which we refer to as the "DTC")) a properly completed
and duly executed letter of election and transmittal (or a facsimile of that
document) and any other required documents.
For purposes of the offer, we will be deemed to have accepted for exchange
Cyprus Amax shares validly tendered and not withdrawn as, if and when we notify
the exchange agent of our acceptance of the tenders of those Cyprus Amax shares
pursuant to the offer. The exchange agent will deliver cash and Phelps Dodge
common stock in exchange for Cyprus Amax shares pursuant to the offer and cash
instead of fractional shares of Phelps Dodge common stock as soon as practicable
after receipt of such notice. The exchange agent will act as agent for tendering
stockholders for the purpose of receiving Phelps Dodge common stock and cash
(including cash to be paid instead of fractional shares of Phelps Dodge common
stock) from us and transmitting such stock and cash to you. You will not receive
any interest on any cash that we pay you, even if there is a delay in making the
exchange.
If we do not accept any tendered Cyprus Amax shares for exchange pursuant
to the terms and conditions of the offer for any reason, or if certificates are
submitted for more Cyprus Amax shares than are tendered, we will return
certificates for such unexchanged Cyprus Amax shares without expense to the
tendering stockholder or, in the case of Cyprus Amax shares tendered by
book-entry transfer of such Cyprus Amax shares into the exchange agent's account
at DTC pursuant to the procedures set forth below under the discussion entitled
"Procedure for Tendering," those Cyprus Amax shares will be credited to an
account maintained within DTC, as soon as practicable following expiration or
termination of the offer.
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CASH INSTEAD OF FRACTIONAL SHARES OF PHELPS DODGE COMMON STOCK
We will not issue certificates representing fractional shares of our common
stock pursuant to the offer. Instead, each tendering stockholder who would
otherwise be entitled to a fractional share of our common stock will receive
cash in an amount equal to such fraction (expressed as a decimal and rounded to
the nearest 0.01 of a share) multiplied by the closing price for shares of our
common stock on the NYSE Composite Tape on the date that we accept those Cyprus
Amax shares for exchange.
WITHDRAWAL RIGHTS
Your tender of Cyprus Amax shares pursuant to the offer is irrevocable,
except that Cyprus Amax shares tendered pursuant to the offer may be withdrawn
at any time prior to the Expiration Date, and, unless we previously accepted
them pursuant to the offer, may also be withdrawn at any time after November 2,
1999.
For your withdrawal to be effective, the exchange agent must receive from
you a written, telegraphic, telex or facsimile transmission notice of withdrawal
at one of its addresses set forth on the back cover of this prospectus, and your
notice must include your name, the number of Cyprus Amax shares to be withdrawn
and the name of the registered holder, if it is different from that of the
person who tendered those Cyprus Amax shares.
A financial institution must guarantee all signatures on the notice of
withdrawal. Most banks, savings and loan associations and brokerage houses are
able to effect these signature guarantees for you. The financial institution
must be a participant in the Securities Transfer Agents Medallion Program, the
New York Stock Exchange Medallion Signature Program or the Stock Exchange
Medallion Program, any of which are an "eligible institution," unless those
Cyprus Amax shares have been tendered for the account of any eligible
institution. If Cyprus Amax shares have been tendered pursuant to the procedures
for book-entry tender discussed under the caption entitled "Procedure for
Tendering," any notice of withdrawal must specify the name and number of the
account at DTC to be credited with the withdrawn Cyprus Amax shares and must
otherwise comply with DTC's procedures. If certificates have been delivered or
otherwise identified to the exchange agent, the name of the registered holder
and the serial numbers of the particular certificates evidencing the Cyprus Amax
shares withdrawn must also be furnished to the exchange agent, as stated above,
prior to the physical release of such certificates. We will decide all questions
as to the form and validity (including time of receipt) of any notice of
withdrawal, in our sole discretion, and our decision shall be final and binding.
Neither we, the exchange agent, the Information Agent, the Dealer Manager nor
any other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or will incur any liability for
failure to give any such notification. Any Cyprus Amax shares properly withdrawn
will be deemed not to have been validly tendered for purposes of our offer.
However, you may retender withdrawn Cyprus Amax shares by following one of the
procedures discussed under the caption entitled "Procedure for Tendering" at any
time prior to the expiration date.
If you withdraw any of your Cyprus Amax shares, you automatically withdraw
the associated Cyprus Amax Rights. You may not withdraw Cyprus Amax Rights
unless you also withdraw the associated Cyprus Amax shares.
PROCEDURE FOR TENDERING
For you to validly tender Cyprus Amax shares pursuant to the offer, (a) a
properly completed and duly executed letter of election and transmittal (or
manually executed facsimile of that document), along with any required signature
guarantees, or an agent's message in connection with a book-entry transfer, and
any other required documents, must be transmitted to and received by the
exchange agent at one of its addresses set forth on the back cover of this
prospectus, and certificates for tendered Cyprus Amax shares must be received by
the exchange agent at such address or those Cyprus Amax shares must be tendered
pursuant to the procedures for book-entry tender set forth below (and a
confirmation of receipt of such tender received (we refer to this confirmation
below as a "Book-Entry Confirmation")), in each case before the Expiration Date,
or (b) you must comply with the guaranteed delivery procedures set forth below.
The term "agent's message" means a message, transmitted by DTC to, and
received by, the exchange agent and forming a part of a Book-Entry Confirmation,
which states that DTC has received an express
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acknowledgment from the participant in DTC tendering the Cyprus Amax shares and,
if applicable, Cyprus Amax Rights, which are the subject of such Book-Entry
Confirmation, that such participant has received and agrees to be bound by the
terms of the letter of election and transmittal and that we may enforce that
agreement against such participant.
The exchange agent will establish accounts with respect to the Cyprus Amax
shares at DTC for purposes of the offer within two business days after the date
of this prospectus, and any financial institution that is a participant in DTC
may make book-entry delivery of the Cyprus Amax shares by causing DTC to
transfer such Cyprus Amax shares into the exchange agent's account in accordance
with DTC's procedure for such transfer. However, although delivery of Cyprus
Amax shares may be effected through book-entry at DTC, the letter of election
and transmittal (or facsimile thereof), with any required signature guarantees,
or an agent's message in connection with a book-entry transfer, and any other
required documents, must, in any case, be transmitted to and received by the
exchange agent at one or more of its addresses set forth on the back cover of
this prospectus prior to the Expiration Date, or the guaranteed delivery
procedures described below. We cannot assure you, however, that book-entry
delivery of Cyprus Amax Rights will be available. If book-entry delivery is not
available, you must tender Cyprus Amax Rights by means of delivery of Cyprus
Amax Rights certificates or pursuant to the guaranteed delivery procedure set
forth below.
Signatures on all letters of election and transmittal must be guaranteed by
an eligible institution, except in cases in which Cyprus Amax shares are
tendered either by a registered holder of Cyprus Amax shares who has not
completed either the box entitled "Special Payment Instructions" or the box
entitled "Special Delivery Instructions" on the letter of election and
transmittal or for the account of an eligible institution.
If the certificates for Cyprus Amax shares or Cyprus Amax Rights (if any)
are registered in the name of a person other than the person who signs the
letter of election and transmittal, or if certificates for unexchanged Cyprus
Amax shares or Cyprus Amax Rights (if any) are to be issued to a person other
than the registered holder(s), the certificates must be endorsed or accompanied
by appropriate stock powers, in either case signed exactly as the name or names
of the registered owner or owners appear on the certificates, with the
signature(s) on the certificates or stock powers guaranteed in the manner we
have described above.
THE METHOD OF DELIVERY OF CYPRUS AMAX SHARE CERTIFICATES AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH DTC, IS AT YOUR OPTION AND RISK,
AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE
AGENT. IF DELIVERY IS BY MAIL, WE RECOMMEND REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO
ENSURE TIMELY DELIVERY.
TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO CASH
RECEIVED PURSUANT TO OUR OFFER, YOU MUST PROVIDE THE EXCHANGE AGENT WITH YOUR
CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY WHETHER YOU ARE SUBJECT TO
BACKUP WITHHOLDING OF FEDERAL INCOME TAX BY COMPLETING THE SUBSTITUTE FORM W-9
INCLUDED IN THE LETTER OF ELECTION AND TRANSMITTAL. SOME STOCKHOLDERS
(INCLUDING, AMONG OTHERS, ALL CORPORATIONS AND SOME FOREIGN INDIVIDUALS) ARE NOT
SUBJECT TO THESE BACKUP WITHHOLDING AND REPORTING REQUIREMENTS. IN ORDER FOR A
FOREIGN INDIVIDUAL TO QUALIFY AS AN EXEMPT RECIPIENT, THE STOCKHOLDER MUST
SUBMIT A FORM W-8, SIGNED UNDER PENALTIES OF PERJURY, ATTESTING TO THAT
INDIVIDUAL'S EXEMPT STATUS.
If you have previously tendered Cyprus Amax shares pursuant to the
prospectus dated September 2, 1999, you will be deemed not to have made an
election. Such shareholders must properly withdraw and re-tender their shares in
order to make an election. If you have previously tendered Cyprus Amax shares
pursuant to the prospectus dated September 22, 1999, you need not take any
action unless you wish to make or change any cash or stock election.
If you wish to tender Cyprus Amax shares pursuant to our offer and your
certificates are not immediately available or you cannot deliver the
certificates and all other required documents to the exchange agent prior to the
expiration date or cannot complete the procedure for book-entry transfer on a
timely basis, your Cyprus Amax shares may nevertheless be tendered, so long as
all of the following conditions are satisfied:
(a) you make your tender by or through an eligible institution;
(b) a properly completed and duly executed notice of guaranteed
delivery, substantially in the form made available by us, is received by
the exchange agent as provided below on or prior to the expiration date;
and
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(c) the certificates for all tendered Cyprus Amax shares (or a
confirmation of a book-entry transfer of such securities into the exchange
agent's account at DTC as described above), in proper form for transfer,
together with a properly completed and duly executed letter of election and
transmittal (or facsimile thereof), with any required signature guarantees
(or, in the case of a book-entry transfer, an agent's message) and all
other documents required by the letter of election and transmittal are
received by the exchange agent within three NYSE trading days after the
date of execution of such notice of guaranteed delivery.
You may deliver the notice of guaranteed delivery by hand or transmit it by
telegram, telex, facsimile transmission or mail to the exchange agent and you
must include a guarantee by an eligible institution in the form set forth in
that notice.
In all cases, we will exchange Cyprus Amax shares tendered and accepted for
exchange pursuant to our offer only after timely receipt by the exchange agent
of certificates for Cyprus Amax shares (or timely confirmation of a book-entry
transfer of such securities into the exchange agent's account at DTC as
described above), properly completed and duly executed letter(s) of election and
transmittal (or facsimile(s) thereof), or an agent's message in connection with
a book-entry transfer, and any other required documents. Accordingly, you may be
paid at different times depending upon when the exchange agent actually receives
certificates for Cyprus Amax shares or confirmations of book-entry transfers of
those shares.
By executing a letter of election and transmittal as set forth above, you
irrevocably appoint our designees as your attorneys-in-fact and proxies, each
with full power of substitution, to the full extent of your rights with respect
to your Cyprus Amax shares tendered and accepted for exchange by us and with
respect to any and all other Cyprus Amax shares and other securities issued or
issuable in respect of the Cyprus Amax shares on or after September 2, 1999.
That appointment is effective, and voting rights will be affected, when and only
to the extent that we deposit the shares of our common stock for Cyprus Amax
shares that you have tendered with the exchange agent. All such proxies shall be
considered coupled with an interest in the tendered Cyprus Amax shares and
therefore shall not be revocable. Upon the effectiveness of such appointment,
all prior proxies that you have given will be revoked, and you may not give any
subsequent proxies (and, if given, they will not be deemed effective). Our
designees will, with respect to the Cyprus Amax shares for which the appointment
is effective, be empowered, among other things, to exercise all of your voting
and other rights as they, in their sole discretion, deem proper at any annual,
special or adjourned meeting of Cyprus Amax's stockholders or otherwise. We
reserve the right to require that, in order for Cyprus Amax shares to be deemed
validly tendered, immediately upon our exchange of those Cyprus Amax shares, we
must be able to exercise full voting rights with respect to such Cyprus Amax
shares.
We will determine questions as to the validity, form, eligibility
(including time of receipt) and acceptance for exchange of any tender of Cyprus
Amax shares, in our sole discretion, and our determination shall be final and
binding. We reserve the absolute right to reject any and all tenders of Cyprus
Amax shares that we determine are not in proper form or the acceptance of or
exchange for which may, in the opinion of our counsel, be unlawful. We also
reserve the absolute right to waive any of the conditions of our offer (other
than the Phelps Dodge Stockholder Approval Condition and the condition relating
to the effectiveness of the Registration Statement) or any defect or
irregularity in the tender of any Cyprus Amax shares. No tender of Cyprus Amax
shares will be deemed to have been validly made until all defects and
irregularities in tenders of Cyprus Amax shares have been cured or waived.
Neither we, the exchange agent, the Information Agent, the Dealer Manager nor
any other person will be under any duty to give notification of any defects or
irregularities in the tender of any Cyprus Amax shares or will incur any
liability for failure to give any such notification. Our interpretation of the
terms and conditions of our offer (including the letter of election and
transmittal and instructions thereto) will be final and binding.
The tender of Cyprus Amax shares pursuant to any of the procedures
described above will constitute a binding agreement between us and you upon the
terms and subject to the conditions of the offer.
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following summarizes the anticipated material U.S. federal income tax
consequences of the acquisition of our common stock and/or cash by you, pursuant
to our offer and the Phelps Dodge/Cyprus
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Amax merger contemplated by this prospectus. This discussion applies only to a
"U.S. Holder," which is a term that we explain below. This summary does not
address any tax consequences of our offer or the Phelps Dodge/Cyprus Amax merger
to U.S. Holders who exercise dissenters' rights, if any. It applies only to
shares of Cyprus Amax common stock held as capital assets and does not address
aspects of U.S. federal income tax that may apply to holders that are subject to
special tax rules, including:
- insurance companies,
- tax-exempt organizations,
- financial institutions,
- dealers in securities,
- traders in securities who elect to apply a mark-to-market method of
accounting,
- foreign persons,
- persons who acquired shares of Cyprus Amax common stock pursuant to an
exercise of employee stock options or rights or otherwise as
compensation, and
- persons who hold shares of Cyprus Amax common stock as part of a
straddle, conversion transaction, or constructive sale.
Also, this summary does not address state, local or foreign tax consequences of
our offer or the Phelps Dodge/ Cyprus Amax merger. This summary is based on
current law, and future legislative, judicial or administrative changes or
interpretations, which may be retroactive, could affect the accuracy of this
discussion.
For purposes of this discussion, a "U.S. Holder" means a holder of Cyprus
Amax shares that is
- a citizen or resident of the United States,
- a corporation organized in or under the laws of the United States or any
political subdivision thereof or therein,
- an estate the income of which is subject to U.S. federal income taxation
regardless of its source, or
- a trust if a U.S. court can exercise primary supervision over the
administration of such trust and one or more U.S. persons has the
authority to control all of the substantial decisions of such trust.
Reorganization Treatment
In the opinion of Shearman & Sterling, special counsel to us, while not
entirely free from doubt, the exchange of Cyprus Amax common stock for our
common stock and/or cash pursuant to our offer and the Phelps Dodge/Cyprus Amax
merger will be treated as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code (the "Code"). This opinion is based on certain
factual assumptions and representations including that (i) none of Cyprus Amax,
Phelps Dodge or any related party will acquire or redeem, in connection with the
transaction, shares of Phelps Dodge issued to Cyprus Amax shareholders pursuant
to our offer or the Phelps Dodge/Cyprus Amax merger or shares of Cyprus Amax, to
the extent inconsistent with the continuity of shareholder interest requirements
for corporate reorganizations; (ii) the value of our common stock issued
pursuant to our offer and the Phelps Dodge/Cyprus Amax merger will constitute
more than 40% of the overall consideration furnished to Cyprus Amax shareholders
in the transaction (including to Cyprus Amax shareholders who exercise
dissenters' rights and to holders of Cyprus Amax Series A convertible preferred
stock); (iii) Cyprus Amax will be merged into CAV Corporation; (iv) Cyprus Amax
and its successor will continue its historic business or will use a significant
portion of its historic business assets in a business, and will continue to hold
substantially all of its pre-merger assets; and (v) our offer and the Phelps
Dodge/Cyprus Amax merger will generally be consummated as provided by this
prospectus. The tax opinions referred to in this summary will not be binding on
the Internal Revenue Service (the "IRS") or the courts, and the parties do not
intend to request a ruling from the IRS with respect to the merger. Accordingly,
we cannot be certain that the IRS will not challenge the conclusions reflected
in those opinions or that a court will not sustain such challenge.
Assuming that the exchange of Cyprus Amax common stock for our common stock
pursuant to our offer and the Phelps Dodge/Cyprus Amax merger will be treated
for U.S. federal income tax purposes as an
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exchange pursuant to a plan of reorganization within the meaning of Section
368(a) of the Code, as described above, Shearman & Sterling is further of the
opinion that the following summarizes the material U.S. federal income tax
consequences will result to a U.S. Holder of the exchange of Cyprus Amax shares
for our common stock and/or cash pursuant to our offer and the Phelps
Dodge/Cyprus Amax merger.
Receipt only of cash
In general, a U.S. Holder who receives only cash in exchange for Cyprus
Amax shares pursuant to our offer and the Phelps Dodge/Cyprus Amax merger will
recognize capital gain or loss equal to the difference between the amount of
cash received and such U.S. Holder's adjusted tax basis in the Cyprus Amax
shares surrendered (unless the U.S. Holder actually or constructively owns our
common stock and the receipt of cash has the effect of the distribution of a
dividend for U.S. federal income tax purposes as discussed below under
"-- Receipt of Phelps Dodge common stock and cash"). Such gain or loss will be
long-term capital gain or loss if, as of the effective date of the Phelps
Dodge/Cyprus Amax merger, the holding period for such Cyprus Amax shares is more
than one year.
Receipt only of Phelps Dodge common stock
A U.S. Holder who receives only our common stock in exchange for Cyprus
Amax shares pursuant to our offer and the Phelps Dodge/Cyprus Amax merger will
not recognize any gain or loss upon such exchange (except to the extent cash is
received in lieu of a fractional share of our common stock, which will be taxed
as discussed below). The aggregate adjusted tax basis of our common stock
received in such exchange, including any fractional interest in our common stock
for which cash is received, will be equal to the aggregate adjusted tax basis of
the Cyprus Amax shares surrendered therefor. The holding period of our common
stock will include the holding period of such Cyprus Amax shares.
Receipt of Phelps Dodge common stock and cash
A U.S. Holder who receives a combination of cash and our common stock in
exchange for Cyprus Amax shares pursuant to our offer and the Phelps
Dodge/Cyprus Amax merger will recognize gain, if any, with respect to the shares
so exchanged but only to the extent of the lesser of (a) the amount of gain
realized with respect to the Cyprus Amax shares and (b) the amount of cash
received (other than cash received in lieu of a fractional share of our common
stock, which will be taxed as discussed below). The amount of gain realized with
respect to the Cyprus Amax shares exchanged will equal the excess, if any, of
the sum of the cash (including cash received in lieu of a fractional share) and
the fair market value of our common stock received over the U.S. Holder's
adjusted tax basis in such Cyprus Amax shares. No loss will be recognized by a
U.S. Holder who receives a combination of cash and our common stock pursuant to
our offer and the Phelps Dodge/Cyprus Amax merger (except in connection with
cash received in lieu of a fractional share, as discussed below). Each Cyprus
Amax share, or block of shares acquired at the same price, will be treated as
exchanged for a pro rata portion of cash and our common stock.
Any gain recognized will be treated as capital gain unless, as discussed
below, the receipt of the cash has the effect of the distribution of a dividend
for U.S. federal income tax purposes, in which case such gain will be treated as
ordinary dividend income to the extent of the U.S. Holder's ratable share of
Cyprus Amax's accumulated earnings and profits. Any capital gain will be
long-term capital gain if, as of the date of the exchange, the holding period
for the Cyprus Amax shares exchanged is more than one year.
The adjusted tax basis of our common stock received by a U.S. Holder in
exchange for Cyprus Amax shares pursuant to our offer and the Phelps
Dodge/Cyprus Amax merger, including any fractional interest in a share of our
common stock for which cash is received, generally will be equal to the tax
basis of the shares surrendered therefor, decreased by the amount of cash
received and increased by the amount of gain or dividend income recognized, if
any. The holding period of our common stock received with include the holding
period of the Cyprus Amax shares, exchanged therefor.
The exchange will not have the effect of a dividend with respect to a U.S.
Holder if either the exchange is substantially disproportionate with respect to
the U.S. Holder or the exchange results in a meaningful reduction in the U.S.
Holder's interest in our stock. The exchange would be substantially
disproportionate with respect to the U.S. Holder if the U.S. Holder's percentage
interest in our stock (including stock constructively
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owned by such U.S. Holder) immediately after the Phelps Dodge/Cyprus Amax merger
is less than 80 percent of what the percentage interest would have been if,
hypothetically, the U.S. Holder had elected to receive solely our common stock
in exchange for all Cyprus Amax shares owned or constructively owned by the U.S.
Holder before the Phelps Dodge/Cyprus Amax merger and no consideration other
than shares of our common stock were received. Whether an exchange would result
in a meaningful reduction depends on the particular U.S. Holder's facts and
circumstances. However, the exchange should generally result in a meaningful
reduction if the U.S. Holder's percentage interest in our stock, immediately
after the Phelps Dodge/Cyprus Amax merger (including shares owned and
constructively owned), is minimal, the U.S. Holder exercises no control over
corporate affairs of Cyprus Amax or Phelps Dodge, and the U.S. Holder's
percentage interest in our common stock is actually reduced from what the
interest would have been if, hypothetically, the U.S. Holder had elected to
receive solely our common stock in exchange for all Cyprus Amax shares owned or
constructively owned by the U.S. Holder before the Phelps Dodge/Cyprus Amax
merger. In determining a U.S. Holder's interest in our stock, the U.S. Holder
would be deemed to own any shares of our common stock owned, or constructively
owned, by certain persons related to such U.S. Holder or that are subject to an
option held by the U.S. Holder or a related person.
U.S. Holders should consult their own tax advisors as to the possibility
that all or a portion of any cash received in exchange for their Cyprus Amax
common stock will be treated as a dividend and with respect to the consequences
thereof, including the eligibility of U.S. Holders that are corporations for a
dividends received deduction and treatment of the dividend as an "extraordinary
dividend" under section 1059 of the Code.
Cash received in lieu of a fractional Phelps Dodge common share
A U.S. Holder who receives cash in lieu of a fractional share of our common
stock and who does not otherwise hold shares of our common stock generally will
recognize gain or loss equal to the difference between the amount of cash
received and the U.S. Holder's tax basis in such fractional share. Such gain or
loss will be long-term capital gain or loss if, as of the date of the exchange,
the holding period for such shares is more than one year. U.S. Holders who
separately hold shares of our common stock should consult their own tax advisors
concerning the treatment of cash received for a fractional share.
CYPRUS AMAX RIGHTS
Because there is no specific binding authority dealing with securities such
as the Cyprus Amax Rights, Shearman & Sterling expresses no view with respect to
the U.S. federal income tax treatment of the Cyprus Amax Rights becoming
separately transferable apart from the Cyprus Amax shares (the date on which
such event occurs being a "Cyprus Amax Distribution Date"), the redemption of
the Cyprus Amax Rights or the acquisition by us of the Cyprus Amax Rights.
Stockholders should consult their tax advisors as to the tax consequences of
transactions with respect to the Cyprus Amax Rights.
THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY AND DOES NOT PURPORT
TO BE A COMPLETE ANALYSIS OR LISTING OF ALL POTENTIAL TAX EFFECTS OF THE
TRANSACTION. CYPRUS AMAX STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS
CONCERNING THE UNITED STATES FEDERAL, STATE, LOCAL AND NON-UNITED STATES TAX
CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM.
EFFECT OF OFFER ON MARKET FOR CYPRUS AMAX SHARES; REGISTRATION UNDER THE
EXCHANGE ACT
The exchange of Cyprus Amax shares pursuant to our offer will reduce the
number of holders of Cyprus Amax shares and the number of Cyprus Amax shares
that might otherwise trade publicly and could adversely affect the liquidity and
market value of the remaining Cyprus Amax shares held by the public. Cyprus Amax
shares are listed and principally traded on the NYSE and are also listed on the
Philadelphia and Pacific Stock Exchanges. Depending on the number of Cyprus Amax
shares acquired pursuant to the offer, following consummation of the offer,
Cyprus Amax shares may no longer meet the requirements of such exchanges for
continued listing. For example, published guidelines of the NYSE indicate that
the NYSE would consider delisting the outstanding Cyprus Amax shares if, among
other things, (i) the number of publicly held Cyprus Amax shares (exclusive of
holdings of officers, directors and members of their immediate families and
other concentrated holdings of 10 percent or more) should fall below 600,000,
(ii) the number of record holders of
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100 or more Cyprus Amax shares should fall below 1,200 or (iii) the aggregate
market value of publicly held shares should fall below $5 million.
According to publicly available information, there were, as of August 18,
1999, approximately 90.5 million Cyprus Amax common shares outstanding.
If such exchanges were to delist the Cyprus Amax shares, the market for
them could be adversely affected. It is possible that Cyprus Amax shares would
be traded on other securities exchanges or in the over-the-counter market, and
that price quotations would be reported by such exchanges, or through the
National Association of Securities Dealers, Inc., Automated Quotations System
("Nasdaq") or by other sources. The extent of the public market for the Cyprus
Amax shares and the availability of such quotations would, however, depend upon
the number of holders and/or the aggregate market value of the Cyprus Amax
shares remaining at such time, the interest in maintaining a market in the
Cyprus Amax shares on the part of securities firms, the possible termination of
registration of Cyprus Amax shares under the Exchange Act, as described below,
and other factors.
The Cyprus Amax shares are presently "margin securities" under the
regulations of the Federal Reserve Board, which has the effect, among other
things, of allowing brokers to extend credit on the collateral of Cyprus Amax
shares. Depending on the factors similar to those described above with respect
to listing and market quotations, following consummations of the offer, the
Shares may no longer constitute "margin securities" for the purposes of the
Federal Reserve Board's margin regulations, in which event the Cyprus Amax
Shares would be ineligible as collateral for margin loans made by brokers. For a
description of the treatment of Shares in the Merger, you should refer to
"Purpose of Our Offer; the Phelps Dodge/Cyprus Amax Merger."
Cyprus Amax shares are currently registered under the Exchange Act. Cyprus
Amax can terminate that registration upon application to the SEC if the
outstanding shares are not listed on a national securities exchange and if there
are fewer than 300 holders of record of Cyprus Amax shares. Termination of
registration of the Cyprus Amax shares under the Exchange Act would reduce the
information that Cyprus Amax must furnish to its shareholders and to the SEC and
would make certain provisions of the Exchange Act, such as the short-swing
profit recovery provisions of Section 16(b) and the requirement of furnishing a
proxy statement in connection with shareholders meetings pursuant to Section
14(a) and the related requirement of furnishing an annual report to
shareholders, no longer applicable with respect to Cyprus Amax shares.
Furthermore, the ability of "affiliates" of Cyprus Amax and persons holding
"restricted securities" of Cyprus Amax to dispose of such securities pursuant to
Rule 144 under the Securities Act may be impaired or eliminated. If registration
of the shares under the Exchange Act were terminated, they would no longer be
eligible for Nasdaq reporting or for continued inclusion on the Federal Reserve
Board's list of "margin securities."
PURPOSE OF OUR OFFER; THE PHELPS DODGE/CYPRUS AMAX MERGER
We are making the offer in order to acquire control of, and ultimately the
entire common equity interest in, Cyprus Amax. The offer is the first step in
our acquisition of Cyprus Amax, and is intended to facilitate the acquisition of
all Cyprus Amax shares. You will not have appraisal rights as a result of
consummation of our offer. We intend, as soon as practicable after consummation
of the offer, to seek to merge Cyprus Amax with and into a wholly owned
subsidiary. The purpose of the Phelps Dodge/Cyprus Amax merger is to acquire all
Cyprus Amax shares not tendered and exchanged pursuant to the offer. In the
Phelps Dodge/Cyprus Amax merger, each then outstanding Cyprus Amax share (except
for Cyprus Amax shares held in Cyprus Amax's treasury and Cyprus Amax shares
that we or one of our subsidiaries owns) would be converted into the right to
receive 0.2203 shares of Phelps Dodge common stock and $7.61176875 in cash,
without interest, on a fully prorated basis. If the cash component of our offer
is oversubscribed, each outstanding Cyprus Amax share will be converted in the
merger into 0.3500 Phelps Dodge shares. If the stock component of our offer is
oversubscribed, each outstanding Cyprus Amax share will be converted in the
merger into $20.54 in cash, without interest. If neither the cash nor the stock
component of our offer is oversubscribed, you will receive in the merger a pro
rata portion of the cash consideration and the stock consideration based on the
number of Cyprus Amax shares you own compared to the total number of Cyprus Amax
shares converted in the merger.
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The Phelps Dodge/Cyprus Amax merger may be consummated pursuant to Section 253
of the DGCL. Under Section 253 of the DGCL, a parent corporation owning at least
90% of the outstanding shares of each class of a subsidiary corporation may
merge the subsidiary corporation into itself without the approval of the
stockholders of the parent corporation or of the board of directors or
stockholders of the subsidiary corporation. Assuming the Minimum Tender
Condition is satisfied and we consummate the offer, we would have sufficient
voting power to effect the Phelps Dodge/Cyprus Amax merger under Section 251 of
the DGCL without the vote of any other stockholder of Cyprus Amax.
Although stockholders do not have appraisal rights as a result of the
offer, if the Phelps Dodge/Cyprus Amax merger is consummated pursuant to Section
253 of the DGCL, Cyprus Amax stockholders at the time of the Phelps Dodge/Cyprus
Amax merger who do not vote in favor of the Phelps Dodge/Cyprus Amax merger will
have the right under the DGCL to dissent and demand appraisal of their Cyprus
Amax shares in accordance with Section 262 of the DGCL. Under Section 262,
dissenting stockholders who comply with the applicable statutory procedures will
be entitled to receive a judicial determination of the fair value of their
Cyprus Amax shares (exclusive of any element of value arising from the
accomplishment or expectation of the Phelps Dodge/Cyprus Amax merger) and to
receive payment of such fair value in cash, together with a fair rate of
interest, if any. In Cede & Co. and Cinerama, Inc. v. Technicolor, Inc., the
Supreme Court of the State of Delaware construed Section 262 of the DGCL and
held that the "accomplishment or expectation" exclusion from the calculation of
fair value set forth in the preceding sentence is narrow and is designed to
eliminate use of pro forma data and projections of a speculative variety
relating to the completion of a merger. The court held that it is appropriate to
include in the calculation of fair value any known elements of value, including
those elements of value which exist on the date of the merger because of a
majority acquiror's interim action in a two-step cash-out transaction. We cannot
assure you as to the methodology a court would use to determine fair value or
how a court would select which of the elements of value are to be included in
such a determination. Any such judicial determination of the fair value of
Cyprus Amax shares could be based upon factors other than, or in addition to,
the price per Cyprus Amax share to be paid in the Phelps Dodge/ Cyprus Amax
merger or the market value of the Cyprus Amax shares. The value so determined
could be more or less than the price per Cyprus Amax share to be paid in the
Phelps Dodge/Cyprus Amax merger.
Even if the Minimum Tender Condition is satisfied and the offer is
consummated, we reserve the right to effect the Phelps Dodge/Cyprus Amax merger
pursuant to Section 251 of the DGCL. Assuming the Cyprus Amax shares remain
listed on a national securities exchange or are then quoted through NASDAQ or
held of record by more than 2,000 holders, the holders of Cyprus Amax shares
will not have appraisal rights if the Phelps Dodge/Cyprus Amax merger is
consummated pursuant to Section 251 of the DGCL. However, if the Phelps
Dodge/Cyprus Amax merger is so consummated, and if, on the date fixed to
determine stockholders entitled to vote on the Phelps Dodge/Cyprus Amax merger,
the Cyprus Amax shares are not listed on a national securities exchange or
quoted through NASDAQ or held of record by more than 2,000 holders, you may have
appraisal rights pursuant to the provisions of Section 262 of the DGCL as
described above.
Rule 13e-3 of the General Rules and Regulations under the Exchange Act,
which we do not believe would apply to the Phelps Dodge/Cyprus Amax merger if
the Phelps Dodge/Cyprus Amax merger occurred within one year of consummation of
our offer, would require, among other things, that some financial information
concerning Cyprus Amax, and some information relating to the fairness of the
proposed transaction and the consideration offered to stockholders of Cyprus
Amax therein, be filed with the SEC and disclosed to you prior to consummation
of the Phelps Dodge/Cyprus Amax merger.
In addition, we reserve the right to acquire, following the consummation or
termination of our offer, additional Cyprus Amax shares through open market
purchases, privately negotiated transactions, a tender offer or exchange offer,
or otherwise, upon such terms and at such prices as we decide, which may be more
or less favorable than those of the offer. We and our affiliates also reserve
the right to dispose of any or all Cyprus Amax shares acquired by us pursuant to
the offer or otherwise, upon such terms and at such prices as we shall
determine.
It is our current intention that, following consummation of our offer, we
would cause Cyprus Amax to redeem all 4,664,000 shares of its Series A
Convertible Preferred Stock, which are redeemable at Cyprus
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Amax's option. Any final decision as to whether to redeem those shares will be
made in light of circumstances existing at that time.
Upon consummation of our offer, we intend to take appropriate actions to
optimize and rationalize the combined entities' assets, operations, exploration
activities, management, personnel general and administrative functions and
corporate structure. Except as we have otherwise discussed elsewhere in this
prospectus, we do not have any plans or proposals right now that would result in
an extraordinary corporate transaction, such as a merger, reorganization or
liquidation, or sale of a material amount of assets, involving Cyprus Amax or
any of its subsidiaries, or any material changes in Cyprus Amax's corporate
structure or business, or any change in its management. We have not had access
to Cyprus Amax's books and records, however, so we might decide upon such
changes once we complete such a review.
As described under the caption entitled "Reasons for the Proposed
Combination," upon consummation of the Phelps Dodge/Cyprus Amax merger, we
expect to realize substantial cost savings in both administrative and
operational areas.
Upon consummation of our offer, we may also elect or seek the election of
nominees of our choice to Cyprus Amax's Board of Directors.
CONDITIONS OF OUR OFFER
Our offer is subject to a number of conditions, which are described below:
MINIMUM TENDER CONDITION
There must be validly tendered, prior to the expiration of the offer and
not withdrawn, a number of Cyprus Amax shares which will constitute at least a
majority of the total number of outstanding Cyprus Amax shares on a fully
diluted basis (as though all options or other securities convertible into or
exercisable or exchangeable for Cyprus Amax shares had been so converted,
exercised or exchanged) as of the date that we accept the Cyprus Amax shares for
exchange pursuant to our offer.
PHELPS DODGE STOCKHOLDER APPROVAL CONDITION
Pursuant to the rules of the NYSE (on which our common stock is listed),
the issuance of our common stock pursuant to the offer and the Phelps
Dodge/Cyprus Amax merger must be approved by the holders of a majority of the
shares voted at a meeting of such holders at which the total number of votes
cast represents over 50% in interest of all shares of our common stock entitled
to vote on the proposal, because the number of shares of our common stock to be
issued will be equal to or in excess of 20% of the shares outstanding prior to
such issuance. We will seek this approval at a special stockholders meeting
scheduled to be held on October 13, 1999.
OTHER CONDITIONS OF OUR OFFER
Notwithstanding any other provision of our offer, we shall not be required
to accept for exchange or exchange any Cyprus Amax shares, may postpone the
acceptance for exchange of or exchange for tendered Cyprus Amax shares, and may
(subject to our merger agreement with Cyprus Amax), in our sole discretion,
terminate or amend the offer as to any Cyprus Amax shares not then exchanged (a)
if at the expiration date, either the Minimum Tender Condition or the Phelps
Dodge Stockholder Approval has not been satisfied or, with respect to the
Minimum Tender Condition, waived, or (b) if on or after the date of this
prospectus and at or prior to the expiration date, any of our other conditions
are not satisfied. Those conditions are as follows:
(a) The shares of our common stock which shall be issued to Cyprus
Amax stockholders in the offer and the Phelps Dodge/Cyprus Amax merger have
been authorized for listing on the NYSE, subject to official notice of
issuance;
(b) The Registration Statement and any post-effective amendments
thereto shall be effective under the Securities Act, and no stop order
suspending the effectiveness of the Registration Statement shall have been
issued nor shall there have been proceedings for that purpose initiated or
threatened by the SEC and we shall have received all necessary state
securities law or "blue sky" authorizations;
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(c) No temporary restraining order, preliminary or permanent
injunction or other order or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the offer or any of the other transactions contemplated
by this prospectus shall be in effect; no statute, rule, regulation, order,
injunction or decree shall have been enacted, entered, promulgated or
enforced by any court, administrative agency or commission or other
governmental authority or instrumentality which prohibits, or makes illegal
the consummation of our offer; nor shall there have been a failure to
obtain any required consent or approval under foreign laws or regulations
which would prohibit the consummation of the offer or would have a material
adverse effect on us or on Cyprus Amax;
(d) There shall not have been after the date of the Phelps
Dodge/Cyprus Amax merger agreement any (i) amendment of the Code, (ii)
amendment or adoption of final or temporary Treasury Regulations under the
Code, (iii) Internal Revenue Service revenue ruling, revenue procedures,
technical advice memorandum or notices, or (iv) final decision of a court
of competent jurisdiction, in each case that would be inconsistent with the
Phelps Dodge/Cyprus Amax merger qualifying as a reorganization under
Section 368(a) of the Code; and
(e) The representations and warranties of Cyprus Amax in the Phelps
Dodge/Cyprus Amax merger agreement shall be true and correct (without
giving effect to any qualification as to "materiality" or "Material Adverse
Effect" set forth therein) as of the date of this prospectus and as of the
expiration date as though made on and as of the date of this prospectus and
the expiration date except where the failure of such representations and
warranties to be so true and correct would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect (as
defined therein) on Cyprus Amax; and Cyprus Amax shall have performed or
complied in all material respects with all the material agreements and
covenants required by the Phelps Dodge/Cyprus Amax merger agreement.
The foregoing conditions are solely for our benefit and we may assert them
regardless of the circumstances giving rise to any such conditions (including
any action or inaction by us). We may waive these conditions in whole or in part
(other than the Phelps Dodge Stockholder Approval Condition and the condition
relating to effectiveness of the Registration Statement). The determination as
to whether any condition has been satisfied shall be in our judgment and will be
final and binding on all parties. The failure by us at any time to exercise any
of the foregoing rights shall not be deemed a waiver of any such right and each
such right shall be deemed a continuing right which may be asserted at any time
and from time to time. Notwithstanding the fact that we reserve the right to
assert the failure of a condition following acceptance for exchange but prior to
exchange in order to delay exchange or cancel its obligation to exchange
properly tendered Cyprus Amax shares, we will either promptly exchange such
Cyprus Amax shares or promptly return such Cyprus Amax shares.
SOURCE AND AMOUNT OF FUNDS
We estimate that the total amount of funds required pursuant to our offer
to pay the cash consideration in connection with the exchange of all Cyprus Amax
and Asarco shares outstanding will be approximately $1,049 million. We expect to
obtain these funds from cash on hand and from borrowing under our amended and
restated revolving credit facility with The Chase Manhattan Bank, Bank of Nova
Scotia, Bank of Tokyo-Mitsubishi Trust Co., Citibank, N.A., Morgan Guaranty
Trust Co., Bank of America, Barclays Bank, Canadian Imperial Bank of Commerce,
Deutsche Bank, First Union National Bank, Wells Fargo, Industrial Bank of Japan
and Royal Bank of Canada & Mercantile Bank.
Our revolving credit facility allows us to borrow up to $1 billion from
time to time until its scheduled maturity on June 25, 2002. The agreement allows
for two, one-year renewals beyond the scheduled maturity date if we request and
receive approval from those lenders representing at least two-thirds of the
commitments provided by the facility. In the event of such approval, total
commitments under the facility would depend upon the willingness of other
lenders to assume the commitments of those lenders electing not to participate
in the renewal. Interest is payable at a fluctuating rate based on the agent
bank's prime rate, or a fixed rate, based on the LIBOR, or at fixed rates
offered independently by the several lenders, for maturities of between seven
and 360 days. This agreement provides for a facility fee of six and one-half
basis points (0.065 percent) on
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total commitments. The agreement requires us to maintain a minimum consolidated
tangible net worth of $1.1 billion and limits indebtedness to 50 percent of
total consolidated capitalization.
Although we have not made definitive plans for the repayment of borrowings
under our revolving credit facility, we expect to repay the borrowings using
internally generated funds, including, if the Phelps Dodge/Cyprus Amax merger is
completed, those of Cyprus Amax. We may also use funds obtained from other
sources, including future issuances of debt securities and/or bank refinancings.
Our decision as to how to repay the borrowings will be based on our review of
circumstances existing at that time, including prevailing interest rates,
financial and other economic conditions and other factors that we consider
appropriate.
RELATIONSHIPS WITH CYPRUS AMAX
Except as set forth herein, neither we nor, to the best of our knowledge,
any of our directors, executive officers or other affiliates has any contract,
arrangement, understanding or relationship with any other person with respect to
any securities of Cyprus Amax, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the voting
of any such securities, joint ventures, loan or option arrangements, puts or
calls, guaranties of loans, guaranties against loss or the giving or withholding
of proxies. Except as described herein, there have been no contacts,
negotiations or transactions since January 1, 1996, between us or, to the best
of our knowledge, any of our directors, executive officers or other affiliates
on the one hand, and Cyprus Amax or its affiliates, on the other hand,
concerning a merger, consolidation or acquisition, a tender offer or other
acquisition of securities, an election of directors, or a sale or other transfer
of a material amount of assets. Except as set forth herein, neither we, nor, to
the best of our knowledge, any of our directors, executive officers or other
affiliates has since January 1, 1996 had any transaction with Cyprus Amax or any
of its executive officers, directors or affiliates that would require disclosure
under the rules and regulations of the SEC applicable to the offer.
Shares of Apache Nitrogen Products, Inc. are held 49.2% by Phelps Dodge,
and 11.42% by Cyprus Miami Corporation and 0.66% by Cyprus Mines Corporation,
both subsidiaries of Cyprus Amax. Apache Nitrogen has contracts with several
affiliates of Cyprus Amax, including the shareholders of Apache Nitrogen and
Cyprus Sierrita Corporation, Cyprus Bagdad Copper Corporation, Cyprus Tohono
Corporation and Cyprus Mineral Park Corporation, for the sale of ANFO, an
explosive mixture. Sales to Phelps Dodge annually range from $16-17 million, and
sales to Cyprus Amax annually range from $6-8 million.
FEES AND EXPENSES
We have retained Innisfree M&A Incorporated to act as the information agent
in connection with our offer. The information agent may contact holders of
Cyprus Amax shares by mail, telephone, telex, telegraph and personal interviews
and may request brokers, dealers and other nominee stockholders to forward our
offer materials to beneficial owners of Cyprus Amax shares. The information
agent will be paid a customary fee for such services, plus reimbursement of
out-of-pocket expenses, and we will indemnify the information agent against
certain liabilities and expenses in connection with our offer, including
liabilities under federal securities laws.
Pursuant to a letter agreement dated August 16, 1999 (the "Letter
Agreement"), Morgan Stanley & Co. Incorporated ("Morgan Stanley") is providing
certain financial advisory services to Phelps Dodge in connection with our
offer. Under the terms of the Letter Agreement, Phelps Dodge has agreed to pay
Morgan Stanley for its financial advisory services, including its services as
Dealer Manager, in connection with our offer a financial advisory fee of (i)
$11.0 million per acquired company if Phelps Dodge acquires control, as defined
in the Letter Agreement, of Asarco or Cyprus Amax, with certain amounts payable
upon the announcement of defined events, and (ii) an additional $2.0 million if
Phelps Dodge acquires either Asarco or Cyprus Amax within two years of acquiring
the other. Phelps Dodge has also agreed to reimburse Morgan Stanley for its
out-of-pocket expenses, including the fees and expenses of its legal counsel
incurred in connection with this engagement, and has agreed to indemnify each of
Morgan Stanley and certain related persons and entities against certain
liabilities and expenses in connection with Morgan Stanley's engagement,
including certain liabilities under federal securities laws.
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In addition to the fees to be received by Morgan Stanley in connection with
its engagement as financial advisor to Phelps Dodge, Morgan Stanley has in the
past rendered various investment banking and financial advisory services for
Phelps Dodge for which it has received customary compensation.
We will not pay any fees or commissions to any broker, dealer or other
persons (other than the dealer manager and the information agent) for soliciting
tenders of Cyprus Amax shares pursuant to our offer.
ACCOUNTING TREATMENT
The merger of Cyprus Amax into Phelps Dodge would be accounted for under
the purchase method of accounting under U.S. generally accepted accounting
principles, which means that Cyprus Amax's results of operations will be
included with ours from the closing date and its consolidated assets and
liabilities will be recorded at their fair values at the same date.
STOCK EXCHANGE LISTINGS
Our common stock is listed on the NYSE, as well as on the Boston,
Cincinnati, Philadelphia, Pacific and Chicago Stock Exchanges. We will make an
application to list on the NYSE the common stock that we will issue pursuant to
our offer and the subsequent Phelps Dodge/Cyprus Amax merger. As described above
under "The Offer -- Conditions of Our Offer -- Phelps Dodge Stockholder Approval
Condition," pursuant to the rules of the NYSE, the issuance of our common stock
in the offer and the subsequent Phelps Dodge/Cyprus Amax merger must be approved
by the holders of a majority of the Phelps Dodge common stock voting at a
meeting at which the total number of votes cast represents over 50% in interest
of all shares of our common stock entitled to vote on the proposal.
REGULATORY MATTERS
Under the HSR Act, and the rules that have been promulgated thereunder (the
"Rules"), some acquisitions may not be consummated unless information has been
furnished to the Antitrust Division of the Department of Justice (the "Antitrust
Division") and the Federal Trade Commission (the "FTC") and some waiting period
requirements have been satisfied. The acquisition of Cyprus Amax shares pursuant
to our offer is subject to the HSR Act. On September 10, 1999 we filed with the
Antitrust Division and the FTC Hart-Scott-Rodino Notification and Report Forms
with respect to our offers. On September 24, 1999, the FTC granted Phelps Dodge
early termination of the waiting period under the HSR Act for Phelps Dodge's
offers to acquire Asarco and Cyprus Amax. Federal and state antitrust
enforcement agencies frequently scrutinize under the antitrust laws transactions
such as our acquisition of Cyprus Amax shares pursuant to our offer. At any time
before or after we acquire Cyprus Amax shares, any such agency could take such
action under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the acquisition of Cyprus Amax shares
pursuant to the offer or otherwise or seeking divestiture of Cyprus Amax shares
acquired by us or divestiture of assets of Phelps Dodge and/or Cyprus Amax.
Private parties may also bring legal action under the antitrust laws under some
circumstances. On September 20, 1999, Asarco initiated such an action against
Phelps Dodge, which is discussed above under " -- Litigation." Phelps Dodge,
Asarco and Cyprus Amax conduct operations in a number of jurisdictions where
other regulatory filings or approvals may be required or advisable in connection
with the completion of our offer. See "-- Other Conditions of Our Offer."
Some large Cyprus Amax stockholders (those that would receive more than $15
million in Phelps Dodge shares or, in certain cases, more than 10% of Phelps
Dodge's shares) may be required to make separate filings with the FTC and
Antitrust Division under the HSR Act and the Rules in conjunction with the
receipt of shares of our common stock. If you must make such a filing, you will
then be required to observe applicable waiting periods under the HSR Act and the
Rules before receiving shares of Phelps Dodge common stock. If you are obligated
to make such a filing, we will hold in escrow the shares of our common stock to
be exchanged, pursuant to the Rules, pending expiration or early termination of
the waiting period.
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THE COMPANIES
PHELPS DODGE CORPORATION
Phelps Dodge Corporation is among the world's largest producers of copper,
carbon black and magnet wire, and is the world's largest producer of
continuous-cast copper rod. Phelps Dodge comprises two divisions: (i) Phelps
Dodge Mining Company and (ii) Phelps Dodge Industries.
- Phelps Dodge Mining Company is a business segment that includes our
worldwide copper operations from mining through rod production, marketing
and sales, other mining operations and investments, and worldwide mineral
exploration and development programs.
- Phelps Dodge Industries includes our specialty chemicals segment, our
wire and cable segment, and, until they were sold in 1998, our wheel and
rim operations.
In 1998, Phelps Dodge Mining Company produced 874,000 tons of copper for
our account from worldwide mining operations, and an additional 178,700 tons of
copper for the accounts of our minority interest partners. Gold, silver,
molybdenum, copper chemicals and sulfuric acid are by-products of our copper
operations. Production of copper for our own account from our U.S. operations
constituted approximately 33 percent of the copper mined in the United States in
1998. Much of our U.S. cathode copper production, together with additional
copper purchased from others, is used to produce continuous-cast copper rod, the
basic feed for the electrical wire and cable industry.
Our international mining interests include Candelaria, a major copper mine
in Chile, and other operations and investments in Chile and Peru. These
operations produce a variety of metals and minerals including copper, gold,
silver, and zinc. We also explore for metals and minerals throughout the world.
In addition to our mining interests, we produce engineered products
principally for the global energy, telecommunications, transportation and
specialty chemicals sectors through Phelps Dodge Industries. Specialty chemicals
are produced at Columbian Chemicals Company which is among the world's largest
producers of carbon black. Carbon black is a reinforcing agent in natural and
synthetic rubber that increases the service life of tires, hoses, belting and
other products for the rubber industry. We also produce specialty carbon black
for other industrial applications such as pigments for printing, coatings,
plastics and other non-rubber applications.
Our wire and cable segment comprises Phelps Dodge Magnet Wire Company and
its subsidiaries and Phelps Dodge International Corporation and its affiliates.
This segment produces wire and cable products and specialty conductors at U.S.
and international operations. Phelps Dodge Magnet Wire Company produces magnet
wire and other copper products for sale principally to original equipment
manufacturers for use in electrical motors, generators, transformers and other
products. Phelps Dodge International Corporation manufactures telecommunication
and energy cables and specialty conductors.
Our company employed 13,193 people on June 30, 1999.
We have our principal executive offices at 2600 North Central Avenue,
Phoenix, Arizona 85004-3014 (telephone number (602) 234-8100).
ASARCO INCORPORATED
Asarco, a New Jersey corporation organized in 1899, is one of the world's
leading producers of copper. Asarco also produces specialty chemicals and
aggregates. Asarco's copper business includes integrated mining, smelting and
refining operations in North America and in Peru through its 54.3% owned
subsidiary, Southern Peru Copper Corporation. Enthone-OMI, Inc., a wholly owned
subsidiary, operates a worldwide specialty chemicals business focused on
functional and decorative coatings for the electronics and metal finishing
industries. American Limestone Company, a wholly owned subsidiary, produces
construction aggregates, ready-mixed concrete and agricultural limestone. Asarco
also operates a custom lead smelting business, a silver mining business, a zinc
mining business and a specialty metals business. Asarco owns Encycle, Inc.,
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which operates a waste recycling facility and Hydrometrics, an environmental
consulting and construction firm. As of June 30, 1999, Asarco and its
subsidiaries employed approximately 10,100 employees.
Asarco has its principal executive offices at 180 Maiden Lane, New York,
New York 10038 (telephone number (212) 510-2000).
CYPRUS AMAX MINERALS COMPANY
Cyprus Amax, a Delaware corporation organized in 1969, is a major mining
company engaged, directly or through its subsidiaries and affiliates, in the
exploration for and extraction, processing, and marketing of mineral resources.
Cyprus Amax is a leading copper producer, the world's largest producer of
molybdenum, and has a significant position in gold via its 30% interest in
Kinross Gold Corporation. Cyprus Amax sold certain eastern and midwestern coal
operations in June of 1998 and sold its lithium business in October of 1998.
Cyprus Amax sold its remaining U.S. coal operations in June of 1999. Cyprus Amax
still holds its Australian coal properties. As of June 30, 1999, Cyprus Amax and
its subsidiaries employed approximately 4,600 employees.
Cyprus Amax has its principal executive offices at 9100 East Mineral
Circle, Englewood, Colorado 80112 (telephone number (212) 643-500).
THE MERGER AGREEMENT
We believe this summary describes the material terms of the merger
agreement. However, we recommend that you read carefully the complete agreement
for the precise legal terms of the merger agreement and other information that
may be important to you.
THE OFFER
Conditions. Our obligation to complete the offer is subject to the
following conditions:
- a majority of the outstanding shares of Cyprus Amax shall have been
tendered and not withdrawn (the "Minimum Condition");
- the approval by our stockholders of the issuance of our common stock in
the offer and the merger;
- such shares of our common stock shall have been authorized for listing on
the NYSE, subject to official notice of issuance;
- the effectiveness of the registration statement for such common stock;
- no legal restraint such as an injunction shall be in effect that would
prevent consummation of the offer;
- no change in tax law that would be inconsistent with the merger
qualifying as a reorganization under Section 368(a) of the Code;
- accuracy of representations and warranties of Cyprus Amax, unless failure
to be accurate would not reasonably be expected to have a material
adverse effect on Cyprus Amax; and
- compliance by Cyprus Amax with all material respects of material
agreements and covenants in the merger agreement.
We have agreed that, without the prior written consent of Cyprus Amax, no
change may be made to the Minimum Condition or which decreases the price per
share of Cyprus Amax common stock payable in the offer, which changes the form
of consideration payable in the offer, which reduces the maximum number of
shares of Cyprus Amax common stock to be acquired in the offer, which imposes
conditions to the offer in addition to those set forth in the merger agreement,
or which amends any other term of the offer in any manner adverse to the holders
of the Cyprus common stock. Without the prior written consent of Cyprus, we will
not waive the Minimum Condition if, as a result, Sub C would acquire less than a
majority of the Cyprus Amax common stock outstanding.
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Consideration and Election Procedure. The merger agreement provides for
the consideration that we will pay in the offer, including the election and
proration procedures. For a description of those matters, refer to the
discussion under "The Offer," including under the caption "-- Description of
Election and Proration Procedures."
Expiration or Termination of Amended Offer. We have agreed that, without
the prior written consent of Cyprus Amax, we shall not terminate or withdraw the
offer or extend the expiration date of the offer unless at the expiration date
of the offer the conditions to the offer shall not have been satisfied or
earlier waived. If, at the expiration date of the offer, the conditions to the
offer shall not have been satisfied or earlier waived but there is a reasonable
possibility that such conditions may be satisfied prior to March 31, 2000, we
shall extend the expiration date of the offer for an additional period or
periods of time, each of which being no longer than five business days, until,
the date such conditions are satisfied or earlier waived and we become obligated
to accept for payment and pay for shares of Cyprus Amax common stock tendered
pursuant to the offer; provided, however, that if the condition to the offer
relating to a material breach by Cyprus Amax has not been satisfied at the
expiration date and we have given notice of the breach that has caused such
condition not to be satisfied, we shall have no further obligation to extend the
expiration date of the offer if such breach has not been cured within 30 days of
such notice.
FORM OF MERGER
If all the conditions to the merger are satisfied or waived in accordance
with the merger agreement, CAV Corporation ("SubC"), a wholly owned subsidiary
of Phelps Dodge, will merge with Cyprus Amax, with SubC surviving (the
"Surviving Corporation"). As a result of the merger, the identity and separate
existence of Cyprus Amax shall cease. The merger will become effective when the
applicable certificate of merger is filed with the Secretary of State of the
State of Delaware. It is currently anticipated that the merger will become
effective during the fourth quarter of 1999.
CONSIDERATION TO BE RECEIVED IN THE MERGER
At the time the merger becomes effective,
CONVERSION OF CYPRUS AMAX COMMON STOCK. Subject to no fractional shares
being issued, each issued and outstanding share of Cyprus Amax common stock
(other than shares to be canceled in accordance with the merger agreement) shall
be converted into the Cyprus Stock Consideration, the Cyprus Cash Consideration
or a combination thereof, determined pursuant to provisions of the merger
agreement (such consideration is referred to herein as the "Merger
Consideration"). If there is an excess of cash elections with respect to the
offer, each outstanding share of Cyprus Amax common stock will be converted in
the merger into the right to receive 0.3500 Phelps Dodge common shares (the
"Cyprus Amax Stock Consideration"). If there is an excess of stock elections
with respect to the offer, each outstanding share of Cyprus Amax common stock
will be converted in the merger into the right to receive $20.54 net in cash,
without interest (the "Cyprus Amax Cash Consideration"). If there is not an
excess in cash or stock election, each outstanding share of Cyprus Amax common
stock will be converted in the merger into (i) an amount of cash equal to the
Cyprus Amax Merger Cash Amount (as hereinafter defined), without interest, and
(ii) a number of shares of Phelps Dodge common stock equal to the Cyprus Amax
Merger Stock Amount (as hereinafter defined). The Cyprus Amax Merger Cash Amount
and the Cyprus Amax Merger Stock Amount will be determined as follows:
1. The aggregate amount of Cyprus Amax Cash Consideration actually
paid in the Offer will be subtracted from the Total Cyprus Amax Available
Cash (as hereinafter defined) to determine the amount of cash available to
be paid in the merger (the "Aggregate Cyprus Amax Merger Cash
Consideration"). "Total Cyprus Amax Available Cash" equals (i) the number
of shares of Cyprus Amax common stock exchanged in the offer plus the
number of shares of Cyprus Amax common stock to be converted in the Cyprus
Amax Merger, multiplied by (ii) $7.61176875.
2. The Aggregate Cyprus Amax Merger Cash Consideration will be
divided by the number of shares of Cyprus Amax common stock to be converted
in the merger, to determine the amount of cash
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consideration to be paid in respect of each such share of Cyprus Amax
common stock in the merger (the "Cyprus Amax Merger Cash Amount").
3. The aggregate number of shares of Phelps Dodge common stock
actually issued as Cyprus Amax Stock Consideration in the offer will be
subtracted from the Total Cyprus Amax Available Stock (as hereinafter
defined) to determine the number of shares of Phelps Dodge common stock
available to be paid in the merger (the "Aggregate Cyprus Amax Merger Stock
Consideration"). "Total Cyprus Amax Available Stock" equals (i) the number
of shares of Cyprus Amax common stock exchanged in the offer plus the
number of shares of Cyprus Amax common stock to be converted in the merger,
multiplied by (ii) 0.2203.
4. The Aggregate Cyprus Amax Merger Stock Consideration will be
divided by the number of shares of Cyprus Amax common stock to be converted
in the merger, to determine the number of shares of Phelps Dodge common
stock to be issued in respect of each such share of Cyprus Amax common
stock in the merger (the "Cyprus Amax Merger Stock Amount").
As of the effective time of the merger, all such shares of Cyprus Amax
common stock shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a
certificate or certificates which immediately prior to the effective time
represented outstanding shares of Cyprus Amax common stock shall cease to
have any rights with respect thereto, except the right to receive (x) if
the Merger Consideration includes Phelps Dodge common stock, (i) Phelps
Dodge certificates, (ii) certain dividends and other distributions in
accordance with the merger agreement, and (iii) cash instead of fractional
shares of Phelps Dodge common stock in accordance with the merger
agreement, without interest, and (y) if the Merger Consideration includes
cash, the appropriate cash amounts.
DISSENTING SHARES. Shares of Cyprus Amax common stock that are outstanding
immediately prior to the time the merger becomes effective and which are held by
persons who have properly demanded appraisal for their shares in accordance with
Section 262 of the Delaware General Corporation Law shall not be converted into
the right to receive the Merger Consideration. Such persons shall be entitled to
receive payment of the appraised value of such shares.
EXCHANGE AGENT; PROCEDURES FOR EXCHANGE OF CERTIFICATES
EXCHANGE AGENT. At the time the merger becomes effective, Phelps Dodge
shall enter into an agreement with a bank or trust company that is satisfactory
to Cyprus Amax, which Phelps Dodge shall deposit with the exchange agent cash
and certificates representing the number of whole shares of Phelps Dodge common
stock issuable pursuant to the merger agreement in exchange for outstanding
shares of Cyprus Amax common stock. Soon after the completion of the merger, we
will send a letter to each person who was a Cyprus Amax stockholder at the time
the merger became effective. The letter will contain instructions on how to
surrender Cyprus Amax stock certificates to the exchange agent and receive
shares of Phelps Dodge and cash. See "-- Consideration to be Received in the
Merger."
DIVIDENDS. Holders of Cyprus Amax common stock will not be entitled to
receive any dividends or other distributions payable by Phelps Dodge until they
exchange their Cyprus Amax stock certificates for certificates representing
shares of Phelps Dodge common stock. Once they deliver their Cyprus Amax stock
certificates to the exchange agent, those stockholders will receive, subject to
applicable laws, accumulated dividends and distributions, without interest.
FRACTIONAL SHARES. No fractional shares of Phelps Dodge common stock will
be issued upon the surrender of certificates representing shares of Cyprus Amax
common stock. No dividend or other distribution of Phelps Dodge will relate to
any such fractional shares and no such fractional shares will entitle the owner
thereof to any voting or other rights of a stockholder of Phelps Dodge.
Holders of Cyprus Amax common stock otherwise entitled to fractional shares
of Phelps Dodge common stock will receive a cash payment instead of such
fractional shares. Following the effective time, the exchange agent will
determine the excess of the number of whole shares of Phelps Dodge common stock
delivered to the
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exchange agent by Phelps Dodge for distribution to Cyprus Amax stockholders over
the aggregate number of whole shares of Phelps Dodge common stock to be
distributed to Cyprus Amax stockholders. The exchange agent will then, on behalf
of the former stockholders of Cyprus Amax, sell the excess shares at then
prevailing prices on the New York Stock Exchange, all in the manner provided in
the merger agreement.
As soon as practicable after the determination of the amount of cash to be
paid to holders of Cyprus Amax common stock with respect to any fractional share
interests, the exchange agent will make available such amounts to such holders
of Cyprus Amax stock subject to and in accordance with the terms of the merger
agreement.
SURVIVING CORPORATION FOLLOWING THE MERGER
NAME OF SURVIVING CORPORATION. The name of the surviving corporation from
and after the effective time of the merger (the "effective time") shall be
"Cyprus Amax Minerals Company" until changed or amended in accordance with
applicable Law.
CHARTER DOCUMENTS. At the effective time, the certificate of incorporation
and the bylaws of SubC, as in effect immediately prior to the effective time,
shall be the certificate of incorporation and bylaws, respectively, of the
Surviving Corporation.
DIRECTORS AND OFFICERS. The directors of SubC at the effective time shall
be the directors of the Surviving Corporation until their respective successors
are duly elected and qualified, as the case may be. The officers of SubC at the
effective time shall be the officers of the Surviving Corporation until their
respective successors are duly appointed.
REPRESENTATIONS AND WARRANTIES IN THE MERGER AGREEMENT
In the merger agreement both parties make representations and warranties to
each other about their companies with respect to, among other things:
- their organization, existence, good standing, corporate power,
subsidiaries and similar corporate matters;
- their capitalization;
- their authorization, execution, delivery and performance and the
enforceability of the merger agreement and related matters;
- the recommendation by their boards of directors to their shareholders of
the merger agreement and the transactions contemplated thereby;
- the absence of conflicts, defaults or violations under their certificates
of incorporation and bylaws, certain other agreements and laws as a
result of the contemplated transactions, and related matters;
- filings with the SEC and the accuracy and completeness of the information
contained in such filings;
- environmental matters;
- employee benefit matters;
- this prospectus, the Phelps Dodge proxy statement, the registration
statement and other SEC filings and the accuracy of the information
contained therein;
- the inapplicability of the Cyprus Amax shareholder rights plan to the
merger;
- tax matters;
- the receipt of fairness opinions from our financial advisors;
- required stockholder approvals with respect to the contemplated
transactions;
- the absence of certain material changes in our businesses since December
31, 1998;
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- the absence of undisclosed material liabilities;
- labor relations; and
- no prior activities conducted by SubC.
All representations and warranties of Phelps Dodge and Cyprus Amax expire
at the time the merger becomes effective.
COVENANTS IN THE MERGER AGREEMENT
The merger agreement provides that, until the merger has been completed,
neither of us will take certain actions without the consent of the other party
or as otherwise permitted by the merger agreement. More specifically, we have
agreed to the following with respect to ourselves and, where applicable, our
subsidiaries, except as otherwise permitted by the merger agreement:
- Conduct of Operations. We will conduct our business operations according
to their ordinary and usual course of business in substantially the same
manner as conducted prior to the merger agreement.
- Preserve Organizations. We will use our reasonable best efforts to
preserve intact our business organizations and goodwill, keep available
the services of our current officers and other key employees, and
preserve our business relationships.
- Parties to Confer. We will confer with each other and report on material
operational matters and the general status of ongoing operations.
- Notice of Certain Events. We will notify each other of certain changes
or events which would have a material adverse effect on Phelps Dodge or
Cyprus Amax, as the case may be.
- Dividends and Reclassifications. We will not declare or pay any
dividends on or make any distribution with respect to our outstanding
shares of stock other than regular quarterly dividends on, in the case of
Phelps Dodge, its common stock, and, in the case of Cyprus Amax, its
common stock and preferred stock, and we will not split, combine or
reclassify any shares of our capital stock.
- Amendments to Plans. We will not enter into or amend our employee
benefit plans or employment agreements, except in the ordinary course of
business consistent with past practice, as otherwise provided in the
merger agreement or as required by law.
- Business Combinations; Assets. We will not enter into any business
combinations, acquisitions or dispositions of material amounts of assets
or securities, or release any material contract rights, in each case not
in the ordinary course of business.
- Governing Documents. We will not propose or adopt any amendments to our
corporate charters or by-laws.
- Issuance of Capital Stock. We will not issue or authorize the issuance
of any shares of our capital stock of any class, except that each of us
is permitted to issue shares of our common stock upon the exercise of
stock options or other rights outstanding on the date of the merger
agreement and in accordance with the terms of such options or other
rights in effect on the date of the merger agreement.
- Repurchase of Stock. We will not purchase or redeem any shares of our
stock or any rights, warrants or options to acquire any such shares,
except in the ordinary course of business in connection with employee
incentive and benefit plans or arrangements in existence on the date of
the merger agreement.
- Indebtedness. We will not incur, assume or prepay any indebtedness or
other material liabilities, other than indebtedness with a wholly owned
subsidiary or between wholly owned subsidiaries.
- Properties and Assets. We will not sell, lease, mortgage or otherwise
encumber or subject to any lien or otherwise dispose of any of our
properties or assets (including securitizations), other than in the
ordinary course of business consistent with past practice.
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<PAGE> 72
- Tax Treatment. We will not take any actions that would reasonably be
expected to cause the merger not to constitute transactions described in
Section 368(a) of the Internal Revenue Code.
- Tax Election. We will not make any material tax election or settle or
compromise any material tax liability, other than in the ordinary course
of business consistent with past practice. Cyprus Amax may make an
election under Section 338(h)(10) of the tax code relating to the
completed sale of Cyprus Amax Coal Company.
- Agree to Take Actions. We agree not to take any of the foregoing actions
or take any action which would:
- make any of our representations or warranties contained in the merger
agreement untrue or incorrect, or
- result in any of the conditions to the merger set forth in the merger
agreement not being satisfied.
- Investigation. We have agreed that, subject to applicable laws or
regulations, prior to the time the merger becomes effective we will
afford one another's authorized representatives full and complete access
to our properties, books, contracts, commitments and records and any
document filed or received by us pursuant to applicable securities laws.
Also, we will each use our reasonable best efforts to cause our
representatives to furnish promptly to one another any additional
information about our respective businesses and properties as the other
or its duly authorized representatives may reasonably request. However,
neither of us will be required to disclose information to the other that
would cause significant competitive harm to the disclosing party or its
affiliates if the merger is not completed. All confidential information
obtained by Phelps Dodge or Cyprus Amax will be kept confidential.
Confidential information will be used only in connection with
consummating the transactions contemplated by the merger agreement.
STOCKHOLDER APPROVALS AND OTHER COOPERATION.
We have agreed that we will together:
- prepare and file with the SEC, as soon as is reasonably practicable, an
information statement to be sent to Cyprus Amex after the offer;
- use our reasonable best efforts to have the information statement cleared
by the SEC;
- amend as necessary the registration statement of which this prospectus is
a part;
- as soon as is reasonably practicable, take all actions required under
state blue sky or securities laws in connection with the issuance of
shares of Phelps Dodge common stock in the merger;
- promptly prepare and file stock exchange listing applications covering
the shares of Phelps Dodge common stock issuable under the merger
agreement and use our reasonable best efforts to obtain, prior to the
time the merger becomes effective, approval for the listing of Phelps
Dodge common stock, subject only to official notice of issuance;
- cooperate with one another in order to lift any injunctions or remove any
other impediment to the consummation of the contemplated transactions;
and
- cooperate with one another in obtaining opinions of Shearman & Sterling,
special counsel to Phelps Dodge, and Wachtell, Lipton, Rosen & Katz,
special counsel to Cyprus Amax, concerning certain tax matters.
Each of us has also agreed:
- that Cyprus Amex will cause the information statement to be mailed to its
stockholders as promptly as practicable after it is cleared by the SEC;
- as soon as practicable following the date of the merger agreement, to
duly call and hold a meeting of our respective stockholders to obtain
approval of the merger and the other contemplated transactions;
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<PAGE> 73
- subject to our ability to change our recommendation as described under
"--No Solicitation of Alternative Takeover Proposals" below, through our
boards of directors, to recommend to our respective stockholders that
they approve the merger and the other contemplated transactions;
- to use our best efforts to hold our stockholders meetings as soon as
practicable after the date of the merger agreement;
- that Phelps Dodge shall vote, or cause to be voted, all of the Cyprus
Amax Common Stock then owned by it or any of its subsidiaries or over
which it has direct or indirect voting authority in favor of the approval
of the Phelps Dodge Merger and of the approval and adoption of the merger
agreement; and
- that after SubC has purchased shares of Cyprus Amax common stock through
the offer, Phelps Dodge will be entitled to designate a number of
directors on the Cyprus Amax Board that will give Phelps Dodge a
percentage of representation on the Cyprus Amax Board equal to the
percentage of shares of Cyprus Amax Common Stock that it then owns.
- that the obligation of Phelps Dodge to obtain approvals under antitrust
laws is unconditional and not qualified by best efforts.
In addition, the merger agreement contains general covenants requiring each
of us to take any further action necessary or desirable to carry out the
purposes of the merger agreement and to use reasonable efforts to take all
actions necessary, proper or advisable to consummate the contemplated
transactions. These general requirements are limited so that neither of us will
be required to undertake divestitures which would have material adverse effects
on our companies.
NO SOLICITATION OF ALTERNATIVE TAKEOVER PROPOSALS
Cyprus Amax agreed that it will not, nor will it permit any of its
subsidiaries to, authorize or permit any of their respective directors,
officers, employees or any representative retained by Cyprus Amax or any of its
subsidiaries to, directly or indirectly through another person:
- solicit, initiate or encourage (whether by furnishing information or
otherwise), or take any other action designed to facilitate, any
inquiries or the making of any proposal which constitutes or reasonably
could be expected to lead to any Takeover Proposal (as defined below), or
- participate in any discussions or negotiations regarding any Takeover
Proposal.
A "Takeover Proposal" means, other than the transactions contemplated by
the merger agreement,
- any inquiry, proposal or offer, or any improvement, restatement,
amendment, renewal or reiteration of any such inquiry, proposal or offer,
from any person relating to any direct or indirect acquisition of a
business or equity securities of a Cyprus Amax or any of its
subsidiaries,
- any tender offer or exchange offer that if consummated would result in
any person beneficially owning any class of equity securities of Cyprus
Amax or any of its subsidiaries or
- any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving Cyprus Amax or
any of its subsidiaries,
Except as provided in the next two paragraphs, neither the board of
directors of Cyprus Amax nor any committee of such board will do any of the
following:
- withdraw or modify, or propose publicly to withdraw or modify, in a
manner adverse to the other party, the approval or recommendation by the
board of director or any committee, of the merger or the merger
agreement,
- approve or recommend, or propose publicly to approve or recommend, any
Takeover Proposal, or
- cause Cyprus Amax to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement related to
any Takeover Proposal.
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<PAGE> 74
However, if the board of directors of Cyprus Amax receives a Takeover
Proposal and the board of directors of Cyprus Amax determines in good faith,
after consultation with outside counsel and its financial advisor that such
Takeover Proposal is reasonably capable of being completed, taking into account
all legal, financial, regulatory and other aspects of the proposal and would, if
consummated, result in a transaction more favorable to Cyprus Amax shareholders
than the transaction contemplated by the merger agreement, the board of
directors of Cyprus Amax may (x) take any of the actions described above or (y)
terminate the merger agreement (and concurrently with or after such termination,
if it so chooses, cause Cyprus Amax to enter into any Acquisition Agreement with
respect to any Takeover Proposal) but only after the fifth business day
following Phelps Dodge's receipt of written notice advising Phelps Dodge that
the board of directors of Cyprus Amax is prepared to accept a Takeover Proposal,
specifying the material terms and conditions of such Takeover Proposal and
identifying the person making such Takeover Proposal.
Notwithstanding any subsequent determination by the Board of Directors of
Cyprus Amax to change such recommendation, the merger agreement shall be
submitted to the stockholders of Cyprus Amax at the Cyprus Amax stockholder
meeting for the purpose of obtaining the Cyprus Amax stockholder approval and
nothing contained in the merger agreement shall be deemed to relieve Cyprus Amax
of such obligation.
The merger agreement does not prohibit us
- from taking and disclosing to our respective shareholders a position with
respect to a tender offer required by law, or
- from making any disclosure to our respective shareholders if, in the good
faith judgment of the board of directors, after consultation with outside
counsel, failure to disclose would be inconsistent with its obligations
under applicable law.
Each of us has agreed to notify promptly the other party orally and in
writing of any request for information or of any Takeover Proposal, the material
terms and conditions of such request or proposal and the identity of the person
making such request or proposal, and will keep the other party reasonably
informed of the status and details of any such request or proposal.
STOCK OPTIONS AND OTHER STOCK-BASED AWARDS
Simultaneously with the merger, each outstanding option to purchase Cyprus
Amax common stock and related stock appreciation right (SAR), if any, will be
converted into an option (together with an SAR, if applicable) to acquire the
number of shares of Phelps Dodge common stock equal to the number of shares of
Cyprus Amax common stock which could have been obtained upon the exercise of the
option immediately prior to the time the merger becomes effective multiplied by
the Cyprus Amax Stock Consideration.
In the case of an option to purchase Cyprus Amax common stock, the exercise
price per share of Phelps Dodge common stock will be adjusted to equal the
exercise price for such option as in effect immediately prior to the time the
merger becomes effective divided by the Cyprus Amax Stock Consideration. Phelps
Dodge will assume the obligations of Cyprus Amax with respect to such options.
Phelps Dodge will assume the obligations of Cyprus Amax under their respective
option plans and, except as described above, the terms of such options (and
SARs) shall continue to apply in accordance with the terms of the plans and
agreements under which they were issued, including any provisions for
acceleration.
Simultaneously with the merger, each outstanding award (including
restricted stock, performance units, shares units and performance shares) under
any employee incentive or benefit plan or arrangement and non-employee director
plan presently maintained by Cyprus Amax will be converted into a similar
instrument of Phelps Dodge, with appropriate adjustments to preserve the
inherent value of the awards with no detrimental effects on the holders. The
other terms of each award will continue to apply, including any provisions which
the restrictions will have lapsed on or prior to the time the merger becomes
effective, shares of such previously restricted stock will be converted in
accordance with the conversion provisions applicable to other shares of common
stock.
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<PAGE> 75
Following the completion of the business combination, Phelps Dodge will
reserve for issuance and delivery a sufficient number of shares of Phelps Dodge
common stock upon the exercise of any Cyprus Amax stock options.
BENEFITS MATTERS
It is the intention of the parties that for a period of one year following
the completion of the business combination, Phelps Dodge will maintain the
employee benefit plans of Cyprus Amax generally in accordance with its terms in
effect at the completion of the business combination, with only amendments that
are required by applicable law or permitted by the terms of that agreement, and
which do not adversely affect the rights of participants under such agreement.
In addition, following the completion of the business combination, Phelps Dodge
will guarantee the performance of certain existing employment agreements and
benefit plans of Cyprus Amax.
Phelps Dodge has also agreed that it will
- waive any limitations regarding pre-existing conditions and eligibility
waiting periods under any welfare or employee benefit plan maintained by
Cyprus Amax following the completion of the business combination;
- provide employees of Cyprus Amax with credit for any co-payments and
deductibles paid in the calendar year prior to the completion of the
business combination; and
- generally, treat all service by employees of Cyprus Amax prior to the
completion of the business combination as service with Phelps Dodge under
all compensation and benefit plans and policies of Cyprus Amax.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE
Phelps Dodge has agreed that all exculpation and indemnification provisions
now existing in favor of the current or former directors or officers of Cyprus
Amax as provided in its charter or bylaws or in any agreement will survive the
business combination. Phelps Dodge has agreed that, for six years from the time
the business combination becomes effective, it will indemnify such indemnified
parties to the same extent as they were entitled while working on behalf of
Cyprus Amax.
Phelps Dodge has also agreed that, for three years from the time the
business combination becomes effective, it will maintain in effect Cyprus Amax's
current directors' and officers' liability insurance policies for those persons
who are currently covered by the policies. However, Phelps Dodge will not be
required to expend in any one year more than 150% of the annual premiums
currently paid by Cyprus Amax. If the annual premiums of such insurance coverage
exceed the 150% limit, Phelps Dodge only will be obligated to obtain a policy
with the greatest coverage available for a cost not exceeding the limit. Phelps
Dodge is entitled to meet its obligations under this paragraph by covering the
relevant persons under its own insurance policies.
LITIGATION
Prior to the effective time of the merger, each of the parties will
terminate all litigation commenced against the other in connection with the
business combination and the Phelps Dodge exchange offer for Cyprus Amax shares.
Each party will also use its reasonable best efforts to have lawsuits commenced
by third parties in connection with those transactions to be dismissed with
prejudice.
CONDITIONS PRECEDENT TO THE MERGER
The merger agreement contains certain conditions to both parties,
obligations to complete the merger. Neither party will be obligated to complete
the business combination unless at or prior to the time the business combination
becomes effective:
- Stockholder Approval. The approval of the stockholders of Phelps Dodge
and Cyprus Amax have been obtained in accordance with applicable law.
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<PAGE> 76
- Legality. No statute, rule, regulation, executive order, decree, ruling
or injunction by any tribunal or governmental authority prohibits the
consummation of the merger substantially on the terms contemplated by the
merger agreement.
- SubC shall have accepted for exchange all shares of Cyprus Amax common
stock validly tendered and not withdrawn pursuant to the offer; provided,
however, that this condition shall not be applicable to the obligations
of SubC if, in breach of the merger agreement, SubC fails to accept for
exchange and exchange any such shares validly tendered and not withdrawn
pursuant to such offer.
TERMINATION
The merger agreement may be terminated at any time prior to the time the
merger becomes effective, in any of the following circumstances:
- by our mutual written consent;
- by either of us if, without fault of either terminating party, the
purchase of Cyprus Amax common stock pursuant to the offer has not
occurred on or before March 31, 2000, which date can be extended by
mutual written consent;
- by either of us if the offer expires or is terminated or withdrawn
without any Cyprus Amax common stock being purchased; or
- by either of us if a court or governmental body has issued an order
(other than a temporary restraining order) enjoining or prohibiting the
purchase of Cyprus Amax common stock pursuant to the offer or the merger,
if such order has become final and nonappealable, so long as the party
seeking to terminate has used its reasonable best efforts to remove or
lift such order; or a statute, rule, regulation, order, injunction or
decree has been enacted, entered or promulgated which prohibits or makes
illegal the consummation of the merger substantially on the terms
contemplated by the merger agreement, and which order, injunction, or
decree has become final and nonappealable; or there shall have been a
failure to obtain any required consent or approval under foreign laws or
regulations which would prohibit consummation of the offer or the merger
or would have a material adverse effect on Phelps Dodge or Cyprus Amax;
- by the Phelps Dodge board of directors, at any time prior to the purchase
of any shares of Cyprus Amax common stock pursuant to the offer, if (i)
the Board of Cyprus Amax or any committee thereof shall have withdrawn or
modified in a manner which is adverse to Phelps Dodge its approval or
recommendation of the offer or the merger agreement, (ii) the Cyprus Amax
board shall have recommended another Takeover Proposal, (iii) there is a
public disclosure of another Takeover Proposal and the Minimum Tender
Condition is not satisfied, or (iv) the representations and warranties of
Cyprus Amax are not correct as of the date of this prospectus and as of
the expiration date of the offer as though made on and as of the date of
this prospectus and the expiration date of the offer except where the
failure of such representations and warranties to be so true and correct
would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Cyprus; and Cyprus shall have
performed or complied in all material respects with all the material
agreements and covenants required by this Agreement and such condition is
not satisfied within 30 days of notice;
- by Cyprus Amax, at any time prior to the acceptance for payment shares of
Cyprus Amax common stock under the offer if there is a material breach of
any of Phelps Dodge's representations, warranties or covenants contained
in the agreement which is not cured within 10 days of notice; and
- by Cyprus Amax in accordance with the provisions described under the
caption "-- No Solicitation of Alternative Takeover Proposals"; provided
that Cyprus Amax shall have complied with all provision of such section
and shall have paid the termination fee described below to Phelps Dodge.
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<PAGE> 77
CLOSING
The closing of the Merger will take place within two business days after
the later of the Phelps Dodge shareholder meeting and the Cyprus Amax
shareholder meeting.
TERMINATION FEES
Cyprus Amax is liable to Phelps Dodge for a termination fee of $45 million
if the merger agreement is terminated under certain circumstances.
In general, the termination fee is payable by Cyprus Amax if:
- prior to the date of the Cyprus Amax stockholder meeting a Takeover
Proposal is made known to Cyprus Amax or is made directly to its
stockholders generally or any person has publicly announced an intention
(whether or not conditional) to make a Takeover Proposal and thereafter
the merger agreement is terminated by either party pursuant to certain
specified provisions of the merger agreement.
However, no termination fee is payable unless within eighteen months of the
termination, Cyprus Amax or any of its subsidiaries enters into an agreement for
or consummates a transaction whereby a third party acquires twenty percent of
any class of stock of Cyprus Amax and its subsidiaries, or a business that
constitutes twenty percent or more of the revenues, net income or assets of the
Cyprus Amax, or otherwise consummates a Takeover Proposal.
The merger agreement also provides that if Cyprus Amax fails to pay any
termination fee which is judged to be due, Cyprus must pay the costs and
expenses of any action taken to collect payment, together with interest on the
termination fee.
In addition, in the event the merger agreement is terminated under certain
circumstances, Phelps Dodge will reimburse Cyprus Amax for the termination fee
that has been paid to Asarco Incorporated pursuant to an agreement and plan of
merger between Cyprus Amax, Asarco Incorporated and other parties, dated as of
July 15, 1999, or under the amendment to such merger agreement, dated September
27, 1999. There will be no reimbursement if the termination is a result of a
breach by Cyprus Amax or if the termination is in connection with a Takeover
Proposal for Cyprus Amax other than by Phelps Dodge.
COSTS AND EXPENSES
Each of us will pay our own costs and expenses in connection with the
merger agreement and the contemplated transactions whether or not the merger is
completed, except that we will equally share
- the filing fee in connection with any HSR Act filing or any other
required statutory approval;
- the commissions and other out-of-pocket transaction costs, including the
expenses and compensation of the exchange agent, incurred in connection
with the sale of shares of Phelps Dodge common stock to generate cash to
pay in lieu of fractional shares;
- all transfer taxes.
AMENDMENT
At any time prior to the time the merger becomes effective, we may amend or
supplement any of the terms of the merger agreement in writing by both of us,
provided that, following the purchase of Cyprus Amax common stock pursuant to
the offer, the merger agreement shall not be supplemented or amended unless such
supplement or amendment is approved by a vote of the majority of "continuing
directors" of Cyprus Amax, and provided further that following approval by our
respective stockholders we may not amend or change any provision relating to the
Merger Consideration or make any other change not permitted under applicable law
without further approval by the Cyprus Amax stockholders.
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<PAGE> 78
WAIVER
At any time prior to the effective time, the merger agreement permits
either of us in writing to:
- extend the time for the performance of any of the obligations or other
acts of the other party;
- waive any inaccuracies in the representations and warranties of the other
party; and
- waive compliance with any of the agreements or conditions of the other
party contained in the merger agreement.
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<PAGE> 79
MARKET PRICES AND DIVIDENDS
The Phelps Dodge common shares are listed and principally traded on the
NYSE under the symbol "PD". The Asarco common shares are listed and principally
traded on the NYSE under the symbol "AR". The Cyprus Amax common shares are
listed and principally traded on the NYSE under the symbol "CYM". The following
table sets forth, for the periods indicated, (1) the high and low last reported
prices per Phelps Dodge share, Asarco share and Cyprus Amax share, in each case
as reported on the New York Stock Exchange Composite Transaction Tape; and (2)
the cash dividends per Phelps Dodge share, Asarco share and Cyprus Amax share.
<TABLE>
<CAPTION>
PHELPS DODGE COMMON STOCK ASARCO COMMON STOCK
---------------------------------- -----------------------------------
HIGH LOW DIVIDEND HIGH LOW DIVIDEND
---- --- -------- ---- --- --------
<S> <C> <C> <C> <C> <C> <C>
1997
First Quarter.............. $79 $68 $0.50 $32 1/2 $25 1/8 $0.20
Second Quarter............. 89 5/8 70 1/4 0.50 32 1/2 26 1/8 0.20
Third Quarter.............. 87 15/16 75 1/16 0.50 34 30 0.20
Fourth Quarter............. 79 13/16 59 7/8 0.50 31 7/8 21 3/4 0.20
1998
First Quarter.............. $69 1/4 $58 1/16 $0.50 $26 3/4 $20 1/2 $0.20
Second Quarter............. 71 3/4 56 1/8 0.50 27 13/16 21 3/8 0.20
Third Quarter.............. 62 9/16 43 7/8 0.50 24 15 7/16 0.20
Fourth Quarter............. 61 3/4 49 9/16 0.50 23 14 7/8 0.10
1999
First Quarter.............. $61 5/16 $41 7/8 $0.50 $18 3/8 $13 11/16 $0.05
Second Quarter............. 70 5/8 48 7/8 0.50 19 1/4 13 7/16 0.05
Third Quarter (through
September 29)............ 66 3/4 54 9/16 0.50 27 7/16 17 1/2 0.05
<CAPTION>
CYPRUS AMAX COMMON STOCK
-----------------------------------
HIGH LOW DIVIDEND
---- --- --------
<S> <C> <C> <C>
1997
First Quarter.............. $24 7/8 $21 1/4 $0.20
Second Quarter............. 26 3/8 21 5/8 0.20
Third Quarter.............. 26 13/16 22 3/8 0.20
Fourth Quarter............. 25 14 7/16 0.20
1998
First Quarter.............. $17 7/8 $14 $0.20
Second Quarter............. 17 7/8 13 0.20
Third Quarter.............. 13 13/16 9 3/16 0.20
Fourth Quarter............. 14 3/8 9 0.20
1999
First Quarter.............. $13 1/8 $ 9 3/8 $0.20
Second Quarter............. 16 1/16 11 3/8 0.05
Third Quarter (through
September 29)............ 19 9/16 12 7/8 0.05
</TABLE>
On August 19, 1999, the last full trading day before Phelps Dodge publicly
announced its proposal to combine with Asarco and Cyprus Amax, the last reported
closing prices per Phelps Dodge common share, Asarco common share and Cyprus
Amax common share were $58 9/16, $18 7/16 and $14 1/2, respectively. On
September 29, 1999, the most recent practicable date prior to the filing of this
prospectus, the last reported closing prices per Phelps Dodge common share,
Asarco common share and Cyprus Amax common share were $55 5/16, $27 7/16 and
$19 1/4, respectively. We urge you to obtain current market quotations before
making any decision with respect to our offer.
On August 19, 1999, the last full trading day before Phelps Dodge publicly
announced its proposal to combine with Asarco and Cyprus Amax, the closing
prices per Asarco common share and Cyprus Amax common share on an equivalent
share basis (based on 0.2203 Phelps Dodge common shares plus $7.61176875 in cash
for each Cyprus Amax common share and 0.2880 Phelps Dodge common shares plus
$9.00 in cash for each Asarco common share) were as follows:
<TABLE>
<S> <C>
Asarco...................................................... $24.48
Cyprus Amax................................................. $20.51
</TABLE>
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<PAGE> 80
PHELPS DODGE CORPORATION
SELECTED HISTORICAL FINANCIAL DATA
The following is a summary of selected consolidated financial data of
Phelps Dodge for each of the years in the five-year period ended December 31,
1998 and the six-month periods ended June 30, 1999 and 1998. This information is
derived from the selected audited financial data of Phelps Dodge contained in
Phelps Dodge's Annual Report on Form 10-K for the year ended December 31, 1998
and from the unaudited financial statements of Phelps Dodge contained in Phelps
Dodge's Quarterly Report on Form 10-Q for the period ended June 30, 1999, which
are incorporated by reference herein, and from Phelps Dodge's Quarterly Report
on Form 10-Q for the period ended June 30, 1998. See "Where You Can Find More
Information" on page vi. You should read this summary together with these
financial statements and their accompanying notes.
<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
----------------- --------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
------ ------ ------ ------ ------ ------ ------
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Sales........................ $1,354 $1,593 $3,063 $3,914 $3,787 $4,185 $3,289
Operating income (loss)...... (27)(a) 348(b) 423(c) 611(d) 713(e) 1,101(f) 400(g)
Earnings (loss) before
minority interests......... (61) 208 199 414 478 760 279
Minority interests........... -- (4) (8) (5) (16) (13) (8)
Net earnings (loss).......... (61) 204 191 409 462 747 271
Net earnings (loss) per
Common Share:
-- Basic................... $(1.04) $ 3.49 $ 3.28 $ 6.68 $ 7.02 $10.72 $ 3.84
-- Diluted................. $(1.04) $ 3.48 $ 3.26 $ 6.63 $ 6.98 $10.66 $ 3.82
Cash dividend per Common
Share...................... $ 1.00 $ 1.00 $ 2.00 $ 2.00 $ 1.95 $ 1.80 $ 1.69
BALANCE SHEET DATA
Cash and marketable
securities................. $ 144 $ 336 $ 222 $ 158 $ 470 $ 609 $ 287
Working capital.............. 196 516 329 350 736 950 558
Total assets................. 4,902 5,061 5,037 4,965 4,816 4,646 4,134
Stockholder's Equity......... 2,373 2,621 2,587 2,510 2,756 2,678 2,188
OTHER FINANCIAL DATA
Book value per common
share...................... $40.91 $44.66 $44.68 $42.81 $42.59 $39.04 $30.95
Debt as a % of
capitalization(h).......... 30.5% 26.6% 27.6% 27.7% 18.8% 20.2% 23.6%
Cash provided from operating
activities................. $ 46 $ 109 $ 378 $ 765 $ 838 $ 959 $ 543
</TABLE>
- ---------------
(a) Includes non-recurring restructuring charges of $83.0.
(b) Includes before-tax gain of $186.1 from the disposition of a 90 percent
interest in Accuride Corporation.
(c) Includes before-tax gain of $198.7 from the disposition of the 100 percent
interest in Accuride Corporation and a non-recurring, before-tax provision
of $7.8 for curtailments and indefinite closures primarily at Phelps Dodge
Mining Company.
(d) Includes $45.9 charge primarily for additional provisions of $23.0 for
estimated future costs associated with environmental matters and $19.1 for a
voluntary early retirement program.
(e) Includes reclamation reserves of $10.0 for the court-ordered rescission of a
1986 sale of property in Maspeth, New York, by the Corporation to the United
States Postal Service.
(f) Includes before-tax gain of $26.8 from the disposition of a Phelps Dodge
Industries' operating facility.
(g) Includes $98.7 charge for environmental costs and a before-tax loss of $59.0
for the disposition of certain operating facilities and mining properties.
(h) Total capitalization includes Debt, Minority Interest and Stockholders'
Equity.
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<PAGE> 81
ASARCO INCORPORATED
SELECTED HISTORICAL FINANCIAL DATA
The following is a summary of selected consolidated financial data of
Asarco for each of the years in the five-year period ended December 31, 1998 and
the six-month periods ended June 30, 1999 and 1998. This information is derived
from the Form S-4 Registration Statement filed by Asarco Cyprus Incorporated in
connection with the proposed Asarco-Cyprus Amax merger. This information is only
a summary and should be read together with the financial statements and
accompanying notes contained in Asarco's Annual Report on Form 10-K for the year
ended December 31, 1998, Asarco's Quarterly Report on Form 10-Q for the period
ended June 30, 1999 and Asarco's Quarterly Report on Form 10-Q for the period
ended June 30, 1998. See "Where You Can Find More Information" on page vi.
<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
---------------- -----------------------------------------------
1999 1998 1998 1997 1996 1995(F) 1994
------ ------ ------ ------ ------ ------- ------
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Sales............................... $ 966 $1,186 $2,233 $2,721 $2,717 $3,198 $2,032
Operating income (loss)............. (49) (33) (118)(a) 275(b) 303(d) 487(g) 18(h)
Earnings (loss) before minority
interests......................... (52) (31) (104) 234 226 299 65
Minority interests.................. (4) (15) (27) (91) (88) (130) (1)
Net earnings (loss)................. (56) (46) (131) 143(c) 138(e) 169 64(i)
Earnings (loss) per Common Share:
Net earnings (loss) --
Basic............................. $(1.42) $(1.17) $(3.29) $ 3.42 $ 3.24 $ 4.00 $ 1.53
Net earnings (loss) --
Diluted........................... $(1.42) $(1.17) $(3.29) $ 3.42 $ 3.23 $ 3.98 $ 1.52
Cash Dividend per Common Share...... $ 0.10 $ 0.40 $ 0.70 $ 0.80 $ 0.80 $ 0.70 $ 0.40
BALANCE SHEET DATA
Cash and marketable securities...... $ 156 $ 285 $ 216 $ 416 $ 193 $ 281 $ 18
Working capital..................... 335 502 502 726 511 565 282
Total assets........................ 3,977 4,020 4,024 4,110 4,120 4,327 3,291
Inventories -- replacement cost in
excess of LIFO inventory costs.... 80 78 74 86 115 137 143
Stockholders' Equity................ 1,459 1,623 1,525 1,694 1,737 1,707 1,517
OTHER FINANCIAL DATA
Book value per common share......... $36.68 $40.92 $38.45 $42.71 $40.56 $40.11 $36.04
Debt as a % of capitalization(j).... 34.8% 30.0% 33.7% 28.3% 26.7% 34.1% 38.1%
Debt as a % of capitalization, net
of excess cash(j)................. 32.4% 24.3% 30.0% 20.2% 24.1% 32.1% 38.1%
Cash provided from (used for)
operating activities.............. $ 74 $ 65 $ 62 $ 321 $ 267 $ 489 $ (10)
</TABLE>
- ------------
(a) Includes charges of $20.0 to reflect the effect of the sale of Asarco's
Missouri Lead Division and $10.0 related to Southern Peru Copper
Corporation's $30.0 cost reduction program. Includes charges of $9.5 for the
three year suspension of operations at Asarco's copper smelter in El Paso,
Texas, $9.8 to write down the book value and provide for the closure costs
of Asarco's Black Cloud lead-zinc mine in Leadville, Colorado, $10.9 for the
transfer of Southern Peru Copper Corporation's ownership of the Ilo townsite
to its worker occupants and the city of Ilo, Peru and $7.7 to increase
reserves for certain employee benefit plans and for severance and other
costs related to Asarco's cost reduction program. Includes a charge of $33.2
($54 in charges offset by $20.8 in anticipated insurance and other
recoveries) to increase reserves for closed plants and environmental
matters.
(b) Environmental charges of $22.1 in 1997, include charges of $30.0 offset
entirely by anticipated insurance recoveries.
(c) Includes a $47.6 after-tax gain ($73.3 pre-tax) from the sale of shares of
Grupo Mexico, S.A. de C.V.
(footnotes continued on next page)
73
<PAGE> 82
(d) Includes a $15.0 charge ($67.7 in charges offset by $52.7 in insurance
settlements and other recoveries) for closed plant and environmental
matters.
(e) Includes a $39.0 after-tax gain ($60.1 pre-tax) from the sale of Asarco's
remaining interest in MIM and a $7.2 after-tax gain ($11.1 pre-tax) from the
sale of a 25% interest in Asarco's Silver Bell project.
(f) On April 5, 1995, ASARCO acquired an additional 10.7% interest in Southern
Peru Copper Corporation for $116.4 increasing its ownership from 52.3% to
63%. The additional shares acquired enabled Asarco to elect a majority of
the directors of Southern Peru Copper Corporation. As a result, Asarco has
consolidated Southern Peru Copper Corporation in its financial statements
based on its 52.3% ownership, effective January 1, 1995, and 63% ownership,
effective April 5, 1995. Asarco previously accounted for its investment in
Southern Peru Copper Corporation by the equity method. As of June 30, 1999,
Asarco's ownership interest in Southern Peru Copper Corporation was 54.3%.
(g) Includes a $139.4 charge to add to Asarco's reserve for closed plant and
environmental matters, to provide for asset impairments and plant closures
and to write down certain in-process inventory to net realizable value.
(h) Includes a $65.5 pre-tax charge to add to Asarco's reserve for closed plant
and environmental matters.
(i) Includes a $31.9 after-tax gain ($58.5 pre-tax) from the sale of Asarco's
remaining interest in Asarco Australia Limited.
(j) Total capitalization includes Debt, Minority Interest and Stockholders'
Equity.
74
<PAGE> 83
CYPRUS AMAX MINERALS COMPANY
SELECTED HISTORICAL FINANCIAL DATA
The following is a summary of selected consolidated financial data of
Cyprus Amax for each of the years in the five-year period ended December 31,
1998 and the six-month periods ended June 30, 1999 and 1998. This information is
derived from the Form S-4 Registration Statement filed by Asarco Cyprus
Incorporated in connection with the proposed Asarco-Cyprus Amax merger. This
information is only a summary and should be read together with the financial
statements and accompanying notes contained in Cyprus Amax's Annual Report on
Form 10-K for the year ended December 31, 1998, Cyprus Amax's Quarterly Report
on Form 10-Q for the period ended June 30, 1999 and Cyprus Amax's Quarterly
Report on Form 10-Q for the period ended June 30, 1998. See "Where You Can Find
More Information" on page vi.
<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
---------------- ----------------------------------------------
1999 1998 1998 1997 1996 1995 1994
------ ------ ------ ------ ------ ------ ------
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(a)
Revenue.............................. $ 561 $ 870 $1,661 $1,978 $1,584 $1,908 $1,540
Operating income (loss).............. (13) 18 52 249 63 485 202
Income (loss) from Continuing
Operations(b)...................... (77) (53) (134) 89 15 367 104
Net Income (loss)(c)................. (74) (32) (75) 69 77 124 175
Earnings (loss) per Common Share:
Income (loss) from Continuing
Operations(b).................... $(0.95) $(0.67) $(1.65) $ 0.76 $(0.04) $ 3.75 $ 0.92
Net earnings (loss)(c)............. $(0.92) $(0.44) $(1.02) $ .54 $ 0.62 $ 1.13 $ 1.69
Cash Dividend per Common Share....... $ 0.25 $ 0.40 $ 0.80 $ 0.80 $ 0.80 $ 0.80 $ 0.90
BALANCE SHEET DATA
Cash and Cash Equivalents............ $1,275 $ 180 $ 353 $ 250 $ 193 $ 191 $ 139
Working capital...................... 970 232 250 297 304 292 423
Total assets......................... 4,746 5,441 5,341 6,459 6,786 6,196 5,407
Long-Term Debt and Capital Lease
Obligations........................ 1,525 1,791 1,718 2,202 2,554 1,877 1,391
Stockholders' Equity................. 2,059 2,264 2,157 2,330 2,360 2,365 2,329
OTHER FINANCIAL DATA
Book Value Per Common Share.......... $20.17 $22.21 $21.32 $22.99 $23.43 $23.62 $23.39
Long-Term Debt/Total
Capitalization(d).................. 42.3% 43.8% 43.9% 46.9% 50.4% 42.6% 37.4%
Net Long-Term Debt/Total
Capitalization(d)(e)............... 10.7% 41.2% 38.4% 44.0% 48.4% 40.0% 34.9%
Cash Provided by Operating
Activities......................... $ 47 $ 129 $ 237 $ 481 $ 440 $ 675 $ 110
</TABLE>
- ---------------
(a) The Cyprus Amax historical consolidated income statement data has been
restated to reflect the Domestic Coal Division as a Discontinued Operation
due to its sale effective June 30, 1999.
(b) Income (loss) from Continuing Operations reflects net after-tax copper
charges of $94 for environmental remediation liabilities and write-downs,
net after-tax gains of $123 from the sale of the lithium business, an
Oakbridge coal mine in Australia, and real estate, a net after-tax charge of
$22 for legal settlements, a net after-tax charge of $37 for Cyprus Amax's
share of the Kinross asset impairment and the sale by Kinross of the
pre-merger Amax Gold hedging portfolio, and an after-tax charge of $4 for
various special items in 1998; an after-tax charge of $13 for the write-
down of Oakbridge's Clarence mine in Australia, favorable tax adjustments of
$38, an after-tax gain of $19 on the sale of Kubaka to Amax Gold, and an
after-tax charge of $5 for the costs of redeeming the 9 7/8% Notes in 1997;
an after-tax charge of $74 for environmental remediation liabilities, costs
to temporarily close a copper mine, the write-down of the net assets of the
Guanaco gold mine, and an unrelated favorable tax adjustment for Amax Gold
in 1996; an after-tax charge of $4 to write-down assets of an Oakbridge mine
in Australia in 1995; and an after-tax gain of $21 for various special items
in 1994.
(c) Discontinued Operations for the six months ended June 30, 1999 included
earnings from the domestic coal business of $16 after-tax and a $13
after-tax loss on the sale of the coal assets. In addition, for the six
months ended June 30, 1998 and for the years 1994 through 1998, the results
have been restated to reflect the Domestic Coal Division as a discontinued
operation. Discontinued
(footnotes continued on next page)
75
<PAGE> 84
Operations included for the six months ended 1998 after-tax earnings of $21;
after-tax earnings of $59 that reflects a loss on the sale of certain
eastern and midwestern coal properties of $12 and favorable legal
settlements of $5 for 1998; after-tax loss of $20 that reflects charges of
$66 for write-downs for 1997; after-tax earnings of $62 for 1996; after-tax
loss of $243 that reflects a charge of $334 for the write-down of certain
coal assets and provisions for associated liabilities for 1995; and
after-tax earnings of $62 that reflects a write-down of $8 for the Orchard
Valley mine for 1994. Also in 1994 Discontinued Operations included income
from the Oil and Gas business for the first quarter of 1994 of $7 after-tax
and a $2 after-tax gain on the sale of Cyprus Amax-owned oil and gas assets.
(d) Total Capitalization includes Debt, Minority Interest and Stockholders'
Equity.
(e) Net Long-Term Debt includes Long-term debt less Cash and Cash Equivalents.
76
<PAGE> 85
PHELPS DODGE
COMPARATIVE PER SHARE INFORMATION
The following table presents historical per common share information for
Phelps Dodge and Cyprus Amax, and the pro forma and equivalent pro forma per
common share data giving effect to the combination of Phelps Dodge and Cyprus
Amax and Phelps Dodge, Cyprus Amax and Asarco, for the six months ended June 30,
1999 and the year ended December 31, 1998. The pro forma combined per share
information does not purport to represent what the combined financial position
or results of operations would actually have been if the combinations had
occurred at January 1, 1998, nor are they necessarily indicative of Phelps
Dodge's future consolidated results of operations or financial position. The
information tabled below should be read in conjunction with the historical
financial statements of the combining corporations and the "Selected Historical
Financial Data" of Phelps Dodge, Asarco and Cyprus Amax on pages 61 through 65,
and the "Unaudited Pro Forma Combined Financial Information" on page 68.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998
------------- -----------------
<S> <C> <C>
Per common share
Historical:
Phelps Dodge
Book value(1)..................................... $40.91 $44.68
Net income(loss)
Basic.......................................... (0.98) 3.28
Diluted........................................ (0.98) 3.26
Cash dividends.................................... 1.00 2.00
Cyprus Amax
Book value(1)..................................... 20.17 21.32
Net income(loss)
Basic.......................................... (0.95) (1.65)
Diluted........................................ (0.95) (1.65)
Cash dividends.................................... 0.25 0.80
Pro forma:
Combined Phelps Dodge and Cyprus Amax
Book value(1)..................................... 44.92 49.06
Income(loss) from continuing operations--Basic and
Diluted........................................ (1.88) 0.10
Cash dividends(2)................................. 1.00 2.00
Cyprus Amax Equivalent(3)
Book value(1)..................................... 15.72 17.17
Income(loss) from continuing operations--Basic and
Diluted........................................ (0.66) 0.04
Cash dividends.................................... 0.35 0.70
Combined Phelps Dodge, Asarco and Cyprus Amax
Book value(1)..................................... 48.01 52.37
Income(loss) from continuing operations--Basic and
Diluted........................................ (2.00) (0.84)
Cash dividends(2)................................. 1.00 2.00
</TABLE>
(footnotes on next page)
77
<PAGE> 86
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998
------------- -----------------
<S> <C> <C>
Asarco Equivalent(3)
Book value(1)..................................... 21.19 23.11
Income(loss) from continuing operations--Basic and
Diluted........................................ (0.88) (0.37)
Cash dividends.................................... 0.44 0.88
Cyprus Amax Equivalent(3)
Book value(1)..................................... 16.80 18.33
Income(loss) from continuing operations--Basic and
Diluted........................................ (0.70) (0.29)
Cash dividends.................................... 0.35 0.70
</TABLE>
- ---------------
(1) Book value per share is determined as at June 30, 1999 and December 31,
1998.
(2) Pro forma combined cash dividends per share of Phelps Dodge common stock
reflect Phelps Dodge's historical dividend rate per share declared in the
periods presented.
(3) Pro forma combined equivalent per share of Asarco and Cyprus Amax common
stocks reflects the pro forma combined per share of Phelps Dodge's common
stock amount multiplied by the exchange ratio of 0.4413 and 0.3500 shares of
Phelps Dodge stock for each share of Asarco and Cyprus Amax, respectively.
78
<PAGE> 87
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The Unaudited Pro Forma Combined Financial Information of Phelps Dodge
Corporation (Phelps Dodge) presented following is derived from the historical
consolidated financial statements of Phelps Dodge, ASARCO Incorporated (Asarco)
and Cyprus Amax Minerals Company (Cyprus Amax). The Unaudited Pro Forma Combined
Financial Information is presented under two separate scenarios (collectively
the "Transactions"): (i) the acquisition by Phelps Dodge of Cyprus Amax; and
(ii) the acquisition by Phelps Dodge of Asarco and Cyprus Amax. The acquisitions
of Asarco and Cyprus Amax are not dependent upon each other. Under each of the
scenarios, the Unaudited Pro Forma Combined Financial Information is prepared
using the purchase method of accounting, with Phelps Dodge treated as the
acquirer and as if the transactions had been completed as of January 1, 1998,
for statement of operations purposes and on June 30, 1999, for balance sheet
purposes.
For a summary of the proposed business combinations, see "The Offer"
beginning on page 41 of this prospectus.
The Unaudited Pro Forma Combined Financial Information is based upon the
historical financial statements of Phelps Dodge, Asarco and Cyprus Amax adjusted
to give effect to the proposed business combinations. The pro forma assumptions
and adjustments for each transaction scenario are described in the accompanying
notes presented on the following pages. The assumptions and related pro forma
adjustments have been developed from information available to Phelps Dodge from
the December 31, 1998, Form 10-K filings and June 30, 1999, Form 10-Q filings of
Asarco and Cyprus Amax and the Form 8-K filing dated June 30, 1999, of Cyprus
Amax and the merger agreement with Cyprus Amax dated September 30, 1999 (the
"Merger Agreement"). Such pro forma adjustments have been included only to the
extent known and reasonably available to Phelps Dodge.
Phelps Dodge also has reviewed the Form S-4 Registration Statement of
Asarco Cyprus Incorporated filed on August 20, 1999, in connection with the
proposed merger of Asarco and Cyprus Amax. Their filing included unaudited pro
forma combined financial information for Asarco and Cyprus Amax as if the merger
had occurred at specific assumed dates. Certain pro forma adjustments that
Phelps Dodge noted in reviewing this unaudited pro forma combined financial
information have not been incorporated in the accompanying Unaudited Pro Forma
Combined Financial Information because information necessary to make or assess
such adjustments is not available to Phelps Dodge.
Phelps Dodge has agreed to combine its business with Cyprus Amax pursuant
to the Merger Agreement. Phelps Dodge is also making a separate offer to
shareholders of Asarco to acquire all the issued and outstanding common shares
of Asarco. As a consequence of the nature of the Asarco transaction, there may
be, and likely will be, actions and other events or changes initiated by Asarco
that would significantly change purchase prices and purchase price allocations.
Also, Phelps Dodge has not had access to additional proprietary and confidential
corporate financial and other information of Asarco and Cyprus Amax and has not
had an opportunity to undertake any due diligence procedures. Such information
and procedures may provide Phelps Dodge with additional information that could
materially affect the purchase price paid for the acquisition of Asarco or
Cyprus Amax, the purchase price allocation and, accordingly, the assumptions and
pro forma adjustments. Identified factors which may have a significant impact on
the basis and results of the combinations are described in Note 2 of the
accompanying notes to the Unaudited Pro Forma Combined Balance Sheet and
Combined Statements of Operations for each scenario.
Furthermore, the ultimate determination of the purchase price paid for the
acquisition of Cyprus Amax and Asarco may change significantly from the current
estimate. For the purpose of this Unaudited Pro Forma Combined Financial
Information, the purchase price has been estimated based upon the market price
of $55.3125 for each Phelps Dodge common share, that being the closing market
price at September 29, 1999. The final purchase price will be based largely upon
the average market price of Phelps Dodge common stock at the earlier of the
dates the combinations are announced or consummated between Phelps Dodge, Asarco
and Cyprus Amax. As a result of these uncertainties, the final determination and
allocation of purchase price may differ from the amounts assumed in this
Unaudited Pro Forma Combined Financial Information and those differences may be
material.
79
<PAGE> 88
The Unaudited Pro Forma Combined Financial Information is provided for
illustrative purposes only and does not purport to represent what the actual
consolidated results of operations or the consolidated financial positions of
Phelps Dodge would have been had the acquisitions of Asarco and/or Cyprus Amax
occurred on the respective dates assumed, nor is it necessarily indicative of
future consolidated operating results or financial position.
The Unaudited Pro Forma Combined Financial Information does not include the
realization of cost savings from operating efficiencies, synergies or other
restructurings resulting from the Transactions and does not contemplate the
liabilities that may be incurred in any related restructurings. Phelps Dodge
estimated consolidated annual cash cost savings of at least $200 million as a
result of synergies, reduced overhead costs and other actions resulting from the
combination of all three companies. Phelps Dodge believes that the Transactions
and the resulting activities would yield substantial cash cost savings of at
least $75 million beyond those that can be realized by Asarco Cyprus
Incorporated which were estimated to be $125 million in the Form S-4
Registration Statement of Asarco Cyprus Incorporated filed on August 20, 1999.
There is no assurance that these cost savings can or will be realized. Also, the
Unaudited Pro Forma Combined Financial Information does not reflect the impact
of any potential sale of acquired assets.
This Unaudited Pro Forma Combined Financial Information should be read in
conjunction with the separate historical consolidated financial statements and
accompanying notes of Phelps Dodge, Asarco and Cyprus Amax that are incorporated
by reference in this Registration Statement. You should not rely on the
Unaudited Pro Forma Combined Financial Information as an indication of the
consolidated results of operations or financial position that would have been
achieved if the business combinations had taken place earlier or of the
consolidated results of operations or financial position of Phelps Dodge after
the completion of such transactions.
80
<PAGE> 89
PHELPS DODGE CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS
PHELPS DODGE, ASARCO AND CYPRUS AMAX COMBINED
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------- PRO FORMA PRO FORMA
PHELPS DODGE ASARCO CYPRUS AMAX ADJUSTMENTS COMBINED
------------ ------ ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Sales and other operating
revenues....................... $1,354 966 561 -- 2,881
------ ----- --- ------ -----
Operating costs and expenses
Cost of products sold.......... 1,073 855 428 -- 2,356
Depreciation, depletion and
amortization................ 144 73 104 (31)(I) 290
Selling and general
administrative expense...... 60 72 34 -- 166
Exploration and research
expense..................... 21 11 8 -- 40
Non-recurring charges and
provision for asset
dispositions*............... 83 4 -- -- 87
------ ----- --- ------ -----
1,381 1,015 574 (31) 2,939
------ ----- --- ------ -----
Operating income (loss).......... (27) (49) (13) 31 (58)
Interest expense............... (48) (38) (69) (9)(E)
(4)(A)
(3)(K) (171)
Capitalized interest........... -- -- 2 4(A) 6
Miscellaneous income and
expense, net................ (7) 10 (11) (1)(J)
6(A) (3)
------ ----- --- ------ -----
Income (loss) before taxes,
minority interests and equity
in net earnings of affiliated
companies...................... (82) (77) (91) 24 (226)
Provision for taxes on
income...................... 19 25 14 (1)(A)
(8)(F) 49
Minority interests in
consolidated subsidiaries... 1 (4) -- 1(J) (2)
Equity in net earnings (losses)
of affiliated companies..... 5 -- -- (5)(A) --
------ ----- --- ------ -----
Income (loss) from continuing
operations..................... (57) (56) (77) 11 (179)
Preferred stock dividends...... -- -- (9) 9(E) --
------ ----- --- ------ -----
Income (loss) from continuing
operations applicable to common
shares......................... $ (57) (56) (86) 20 (179)
====== ===== === ====== =====
Net earnings (loss) per share
Basic.......................... $(0.98) (2.00)
Diluted........................ $(0.98) (2.00)
Weighted average shares
outstanding
Basic.......................... 57.8 89.3
Diluted........................ 57.8 89.3
</TABLE>
- ------------
* See historical financial statements incorporated by reference in this
prospectus for a description of non-recurring charges and provision for asset
dispositions.
81
<PAGE> 90
PHELPS DODGE CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS
PHELPS DODGE, ASARCO AND CYPRUS AMAX COMBINED
YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------- PRO FORMA PRO FORMA
PHELPS DODGE ASARCO CYPRUS AMAX ADJUSTMENTS COMBINED
------------ ------ ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Sales and other operating
revenues......................... $3,064 2,233 1,660 (218)(A) 6,739
------ ----- ----- ------- ------
Operating costs and expenses
Cost of products sold............ 2,361 1,963 1,087 (200)(A) 5,211
Depreciation, depletion and
amortization................... 293 145 254 (7)(A)
(61)(I) 624
Selling and general
administrative expense......... 123 144 105 -- 372
Exploration and research
expense........................ 55 27 45 -- 127
Non-recurring charges and
provision for asset
dispositions*.................. (191) 72 118 -- (1)
------ ----- ----- ------- ------
2,641 2,351 1,609 (268) 6,333
------ ----- ----- ------- ------
Operating income (loss)............ 423 (118) 51 50 406
Interest expense................. (97) (68) (157) (19)(E)
(13)(A)
(5)(K) (359)
Capitalized interest............. 2 -- 2 13(A) 17
Miscellaneous income and expense,
net............................ 9 29 17 (6)(J)
(4)(A) 45
------ ----- ----- ------- ------
Income (loss) before taxes,
minority interests and equity in
net earnings of affiliated
companies........................ 337 (157) (87) 16 109
Provision for taxes on income.... (134) 53 (11) (13)(F) (105)
Minority interests in
consolidated subsidiaries...... (8) (27) 1 8(J) (26)
Equity in net earnings (losses)
of affiliated companies........ (4) -- (53) 4(A) (53)
------ ----- ----- ------- ------
Income (loss) from continuing
operations....................... 191 (131) (150) 15 (75)
Preferred stock dividends........ -- -- (19) 19(E) --
------ ----- ----- ------- ------
Income (loss) from continuing
operations applicable to common
shares........................... $ 191 (131) (169) 34 $ (75)
====== ===== ===== ======= ======
Net earnings (loss) per share
Basic............................ $ 3.28 (0.84)
Diluted.......................... $ 3.26 (0.84)
Weighted average shares outstanding
Basic............................ 58.2 89.7
Diluted.......................... 58.5 89.7
</TABLE>
- ------------
* See historical financial statements incorporated by reference in this
prospectus for a description of non-recurring charges and provision for asset
dispositions.
82
<PAGE> 91
PHELPS DODGE CORPORATION
PRO FORMA COMBINED BALANCE SHEET
PHELPS DODGE, ASARCO AND CYPRUS AMAX COMBINED
JUNE 30, 1999
(UNAUDITED)
(AMOUNTS IN MILLIONS)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------- PRO FORMA PRO FORMA
PHELPS DODGE ASARCO CYPRUS AMAX ADJUSTMENTS COMBINED
------------ ------ ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents......... $ 144 125 1,275 (1,049)(B)
(30)(C)
(5)(E)
(41)(B) 419
Accounts receivable, net.......... 396 404 37 -- 837
Inventories....................... 263 305 239 (127)(A)
84(D) 764
Supplies.......................... 104 -- 55 127(A) 286
Prepaid expenses and other
assets.......................... 15 135 74 5(D)
(33)(A) 196
Deferred income taxes............. 45 -- 32 33(A) 110
------ ----- ----- ------ ------
Current assets.................. 967 969 1,712 (1,036) 2,612
Investments and long-term accounts
receivable...................... 95 190 328 29(D)
(13) (J)
9(A) 638
Property, plant and equipment,
net............................. 3,501 2,592 2,546 (769)(D) 7,870
Other assets and deferred
charges......................... 339 226 160 (9)(A)
41(B)
5(E) 762
------ ----- ----- ------ ------
Total Assets............... $4,902 3,977 4,746 (1,743) 11,882
====== ===== ===== ====== ======
LIABILITIES
Short-term debt................... $ 214 16 249 -- 479
Current portion of long-term
debt............................ 62 31 79 -- 172
Accounts payable and accrued
expenses........................ 456 496 324 20(L) 1,296
Dividends payable................. 29 -- 9 -- 38
Accrued income taxes.............. 11 90 81 -- 182
------ ----- ----- ------ ------
Current liabilities............. 772 633 742 20 2,167
Long-term debt.................... 801 1,017 1,499 244(E)
(95)(D) 3,466
Deferred income taxes............. 493 28 14 (204)(F) 331
Other liabilities and deferred
credits......................... 376 306 412 52(D) 1,146
------ ----- ----- ------ ------
2,442 1,984 2,667 17 7,110
------ ----- ----- ------ ------
Minority interests in consolidated
subsidiaries...................... 86 534 20 (147)(J) 493
------ ----- ----- ------ ------
Shareholders' equity
Common shares..................... 362 525 1 (526)(H)
197(G) 559
Treasury shares................... -- -- (86) 86(A) --
Preferred shares.................. -- -- 5 (5)(E) --
Capital in excess of par value.... 5 -- 2,912 (86)(A)
(2,826)(H)
1,544(G)
30(B) 1,579
Retained earnings................. 2,198 949 (768) 134(J)
(181)(H) 2,332
Accumulated other comprehensive
income (loss)................... (183) (15) (5) 20(H) (183)
Other............................. (8) -- -- -- (8)
------ ----- ----- ------ ------
Total Shareholders'
Equity................... 2,374 1,459 2,059 (1,613) 4,279
------ ----- ----- ------ ------
Total Liabilities and
Shareholders' Equity..... $4,902 3,977 4,746 (1,743) 11,882
====== ===== ===== ====== ======
</TABLE>
83
<PAGE> 92
COMBINATION OF PHELPS DODGE, ASARCO AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION
1. BASIS OF PRESENTATION
The Unaudited Pro Forma Combined Financial Information has been derived
from historical consolidated financial statements of Phelps Dodge, Asarco and
Cyprus Amax incorporated by reference into this prospectus. See Phelps Dodge
"Unaudited Pro Forma Combined Financial Information" on page 68 of this
prospectus.
The assumptions and related pro forma adjustments described below have been
developed from public historical information available to Phelps Dodge. Pro
forma adjustments have been included only to the extent known and reasonably
available to Phelps Dodge. Additional information may exist that could
materially affect the assumptions and related pro forma adjustments. Such
information is not available to Phelps Dodge because it is within the particular
and singular knowledge of Asarco and Cyprus Amax.
2. THE OFFER
Phelps Dodge is proposing a three-way business combination of Phelps Dodge,
Asarco and Cyprus Amax through separate offerings to exchange all the issued and
outstanding Asarco and Cyprus Amax common shares for a combination of Phelps
Dodge common shares and cash. See "The Offer" on page 41 of this prospectus.
Phelps Dodge is offering to exchange $9.00 net in cash plus 0.2880 shares
of Phelps Dodge common stock for each outstanding share of Asarco common stock,
on a fully prorated basis. Asarco shareholders may elect to receive either
$25.90 in cash or 0.4413 shares of Phelps Dodge common stock for each Asarco
common share that is validly tendered and not properly withdrawn, subject to
proration if the stock portion or the cash portion of the offer is
oversubscribed. Separately, Phelps Dodge is offering to exchange $7.61176875 net
in cash plus 0.2203 shares of Phelps Dodge common stock for each outstanding
common share of Cyprus Amax, on a fully prorated basis. Cyprus Amax shareholders
may elect to receive either $20.54 in cash or 0.3500 shares of Phelps Dodge
common stock for each Cyprus Amax common share that is validly tendered and not
properly withdrawn, subject to proration.
Debt will be incurred to finance the cash component of the acquisitions. An
equivalent amount of debt is expected to be repaid upon consummation of the
acquisitions.
84
<PAGE> 93
COMBINATION OF PHELPS DODGE, ASARCO AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION -- (CONTINUED)
The transactions would be accounted for under the purchase method. The
purchase price for the business combinations is estimated as follows (dollars in
millions and shares in thousands except per share data):
<TABLE>
<CAPTION>
ASARCO CYPRUS AMAX COMBINED
------ ----------- --------
<S> <C> <C> <C>
Common shares outstanding (as reported in Asarco's June
30, 1999, Form 10-Q and the Merger Agreement with
Cyprus Amax).......................................... 39,783 90,867
Exchange offer ratio of Phelps Dodge common shares for
each common share..................................... 0.2880 0.2203
Phelps Dodge common shares to be issued................. 11,458 20,018 31,476
Closing market price of each Phelps Dodge common share
on September 29, 1999................................. $55.3125
========
Fair value of Phelps Dodge common shares issued,
comprising par value of $197 ($6.25 per share) and
capital in excess of par of $1,544.................... $ 1,741
Cash consideration of $9.00 for each Asarco common share
and $7.61176875 for each Cyprus Amax common share..... 1,049
Redemption of Cyprus Amax Series A Preferred Stock (Note
3E)................................................... 244
Estimated fair value of Cyprus Amax outstanding stock
options (as reported in the Merger Agreement)......... 30
Estimated transaction costs............................. 30
--------
Purchase price.......................................... $ 3,094
========
</TABLE>
The final purchase price could change materially from the purchase price
estimated above as a result of changes in the market price of common shares of
Phelps Dodge and/or the relative market price of Asarco and Cyprus Amax common
shares. There are arrangements in place at Asarco and Cyprus Amax that could
impact the purchase price including employment agreements, change of control
agreements, severance agreements, restricted stock awards, stock appreciation
rights, and certain pension and other employee benefit plans. In addition,
actions may be taken by the management of Asarco in a defensive posture or for
other reasons, that could impact the purchase price including amending existing
agreements or issuing stock options and other similar bonus awards. The
potential impact of these factors cannot be estimated but could be material.
The estimated purchase price does not give effect to outstanding Asarco
stock options which could impact the number of Phelps Dodge shares issued and/or
the purchase price either by their exercise or their conversion to outstanding
stock options of Phelps Dodge. Such effects prior to completion of the business
combination cannot be reasonably estimated from available public information. As
reported in their December 31, 1998 Form 10-K, Asarco had 1,721,249 stock
options outstanding, with an average exercise price of $26.12, more than the per
share equivalent value of Asarco's common stock as determined by the exchange
offer. If all of Asarco's outstanding stock options were exercised prior to
consummation of the business combinations, the estimated purchase price would be
increased by approximately $43 million which would be substantially offset by
cash and cash equivalents received as proceeds from such exercises. Although it
is Phelps Dodge's desire that all outstanding Asarco stock options be converted
to Phelps Dodge stock options at the exchange offering bases, it is not assured
whether such conversion can be achieved in whole or in part nor, consequently,
the potential effect on the purchase price.
The estimated purchase price does not include any effect of Asarco's
Shareholder Rights Plan. As described in Asarco's December 31, 1998, Form 10-K,
Asarco adopted a new Shareholder Rights Plan in
85
<PAGE> 94
COMBINATION OF PHELPS DODGE, ASARCO AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION -- (CONTINUED)
January 1998 that provides certain common stock purchase rights if a person or
group becomes the beneficial owner of 15% or more of Asarco's common stock, with
certain exceptions.
The final determination of the purchase price may differ from the amount
assumed in the Unaudited Pro Forma Combined Financial Information and that
difference may be material.
3. PRO FORMA ASSUMPTIONS AND ADJUSTMENTS
The following assumptions and related pro forma adjustments give effect to
the proposed business combinations of Phelps Dodge, Asarco and Cyprus Amax as if
such combinations occurred on January 1, 1998, in the Unaudited Pro Forma
Combined Statements of Operations for the six-month interim period ended June
30, 1999, and for the year ended December 31, 1998, respectively, and on June
30, 1999, for the Unaudited Pro Forma Combined Balance Sheet.
The Unaudited Pro Forma Combined Financial Information is provided for
illustrative purposes only and does not purport to represent what the actual
consolidated results of operations or the consolidated financial position of
Phelps Dodge would have been had the business combinations with Asarco and
Cyprus Amax occurred on the respective dates assumed, nor is it necessarily
indicative of future consolidated operating results or financial position.
Future cash cost savings, which Phelps Dodge estimated will be at least
$200 million annually, are not recognized in this Unaudited Pro Forma Combined
Financial Information. Non-recurring items related to 1998 and the six-month
interim period ended June 30, 1999, are included (see "Selected Historical
Financial Data" at pages 61 through 65 for a summary of non-recurring items and
special charges) and
(A) Reclassifications have been made to the Asarco and Cyprus Amax
historical consolidated financial information to conform to Phelps Dodge's
presentation. The historical financial information of Cyprus Amax excludes
the results of operations and assets of its discontinued Coal segment as
reported for 1998 operations in Cyprus Amax's Form 8-K dated June 30, 1999,
and as reported as of and for the six months ended June 30, 1999, in its
Form 10-Q filing for such period. Cyprus Amax's historical financial
information for the year ended December 31, 1998, also has been adjusted to
exclude the identifiable results of recurring operations of its Lithium
segment which was sold in October 1998.
86
<PAGE> 95
COMBINATION OF PHELPS DODGE, ASARCO AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION -- (CONTINUED)
<TABLE>
<CAPTION>
BALANCE SHEET SIX MONTHS YEAR ENDED
AT JUNE 30, ENDED JUNE 30, DECEMBER 31,
(IN $ MILLIONS): 1999 1999 1998
- ---------------------------------- ------------- -------------- ------------
<S> <C> <C> <C>
Asarco reclassification
adjustments:
Inventories..................... (127)
Supplies........................ 127
Deferred income taxes (current
asset)....................... 33
Prepaid expenses and other
assets....................... (33)
Miscellaneous income and
expense, net................. (2) (4)
Equity in net earnings of
affiliated companies......... 2 4
Interest expense................ 4 13
Capitalized interest............ (4) (13)
Cyprus Amax reclassification
adjustments:
Investments and notes
receivable................... 9
Other assets and deferred
charges...................... (9)
Treasury shares................. 86
Capital in excess of par
value........................ (86)
Miscellaneous income and
expense, net................. 8
Provision for taxes on income... (1)
Equity in net earnings (losses)
of affiliated companies...... (7)
Elimination of recurring results
from the disposed Cyprus Amax
Lithium segment:
Sales and other operating
revenues..................... (218)
Cost of products sold
(derived).................... (200)
Depreciation, depletion and
amortization expense......... (7)
</TABLE>
(B) This pro forma adjustment represents payment of the cash component
of the purchase price of $1,049 million, the estimated fair value of Cyprus
Amax outstanding stock options of $30 million and the funding of certain
Cyprus Amax employee benefits of $41 million.
(C) Phelps Dodge estimates it will incur approximately $30 million of
transaction costs, consisting primarily of investment bankers, attorneys
and accountant fees, and financial printing and other charges. These
estimates are preliminary and therefore are subject to change.
(D) If the business combinations are consummated, they will be
accounted for using the purchase method of accounting in accordance with
generally accepted accounting principles. Accordingly, the assets and
liabilities of Asarco and Cyprus Amax would be recorded at their estimated
fair values.
Phelps Dodge has not had access to information that is within the
peculiar knowledge of Asarco and Cyprus Amax and has not performed its due
diligence necessary to determine the fair value of their assets or
liabilities or to identify unknown liabilities or obligations. Pro forma
adjustments to allocate the
87
<PAGE> 96
COMBINATION OF PHELPS DODGE, ASARCO AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION -- (CONTINUED)
purchase price have been recorded in the Unaudited Pro Forma Combined
Financial Information on the basis of fair values reported for certain
assets and liabilities in public information of Asarco and Cyprus Amax.
Because fair value information for the remaining assets and liabilities and
any possible identifiable intangible assets are not reasonably available to
Phelps Dodge, the excess of the historical net book values of Asarco's and
Cyprus Amax's assets acquired over the estimated purchase price has been
allocated as a reduction of their combined net property, plant and
equipment.
Additionally, Phelps Dodge believes that cost savings will be realized
upon the consolidation and integration of the three companies. Phelps Dodge
has not developed formal plans for combining the three operations.
Accordingly, additional liabilities may be incurred in connection with the
business combinations and any ultimate restructuring. These additional
liabilities and costs have not been contemplated in the Unaudited Pro Forma
Combined Financial Information because information necessary to reasonably
estimate such costs and to formulate detailed restructuring plans is not
available to Phelps Dodge. Accordingly, the allocation of the purchase
price cannot be estimated with a reasonable degree of accuracy and may
differ materially from the amounts assumed in the Unaudited Pro Forma
Combined Financial Information.
The pro forma purchase price allocation adjustments are estimated as
follows (in millions):
<TABLE>
<S> <C>
Reduction of debt to fair value (as reported in Cyprus
Amax's June 30, 1999, Form 10-Q and the Form S-4
Registration Statement of Asarco Cyprus Incorporated filed
August 20, 1999).......................................... $ 95
Restricted investment in Grupo Mexico (as reported in
Asarco's December 31, 1998, Form 10-K).................... $ 29
Increase in LIFO based inventory to replacement cost (as
reported in Asarco's June 30, 1999, Form 10-Q and in
Cyprus Amax's December 31, 1998, Form 10-K)............... $ 84
Excess projected benefit obligation over the fair value of
pension plan assets (as reported in Cyprus Amax's December
31, 1998, Form 10-K, comprising a $5 million reduction of
prepaid expenses and other assets and a $52 million
increase in other liabilities and deferred credits)....... $ 57
Excess fair value of pension plan assets over the projected
benefit obligation (as reported in Asarco's December 31,
1998, Form 10-K).......................................... $ 10
Reduction in deferred tax liabilities (Note F).............. $204
Reduction in net property, plant and equipment (derived).... $769
</TABLE>
(E) The pro forma adjustments reflect the redemption of all 4,664,000
outstanding shares of Cyprus Amax's Series A Preferred Stock which are
redeemable at Cyprus Amax's option at $52.40 per share and the issuance of
$244 million of ten-year debt to finance the redemption. Interest is
estimated to be fixed at 7.75% resulting in annual interest expense of $19
million. The interest rate estimate was based upon ten-year treasury bill
rates for September 1999, plus commercially indicative rate basis points. A
change in the interest rate on the debt by 1/8 percent would impact annual
interest expense by approximately $300,000. Debt issue costs associated
with the debt are estimated to be approximately $5 million with annual
amortization of approximately $500,000.
(F) The estimated income tax effect of the pro forma adjustments has
been recorded based upon the estimated effective tax rates of approximately
32% for Asarco and 15% for Cyprus Amax which rates have been derived from
public quarterly and annual filings of Asarco and Cyprus Amax. The business
combinations are expected to be tax-free transactions with Asarco's and
Cyprus Amax's historical tax bases surviving for income tax reporting
purposes.
88
<PAGE> 97
COMBINATION OF PHELPS DODGE, ASARCO AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION -- (CONTINUED)
Provisions for pro forma income tax expense have been recorded for pro
forma adjustments to the Pro Forma Combined Statements of Operations
resulting from pro forma purchase price allocation adjustments and other
items.
Cyprus Amax has reported $176 million of U.S. net operating loss
carryforwards through 1998, expiring from 1999 to 2012, which along with
other deferred tax assets are subject to an existing valuation allowance.
Asarco has reported $573.7 million of net loss carryforwards, which expire
if unused from 2008 through 2018. The net operating loss carryforwards may
be subject to annual limitations after the acquisitions because of the
change in ownership rules. The annual limits will be calculated as the
long-term tax exempt rate (currently 5.18%) times the separate fair market
values of Cyprus Amax and Asarco, with Asarco's value potentially
determined without Southern Peru Copper Corporation ("SPCC"). Once all
facts are known, the annual limits may necessitate an increase in the
consolidated valuation allowance for deferred tax assets.
Income tax expense and deferred tax allocations recorded upon
consummation of the business combinations could vary significantly from the
pro forma estimates because information regarding Asarco's and Cyprus
Amax's income tax reporting is not available to Phelps Dodge.
(G) This pro forma adjustment reflects the issue of 31,476,000 shares
of Phelps Dodge common stock in connection with the exchange offers for all
the outstanding common shares of Asarco and Cyprus Amax. The common stock
of Phelps Dodge represents common shares of $197 million at $6.25 per share
par value and capital in excess of par of $1,544 million. No common shares
have been included for the potential share issues in connection with the
outstanding stock options of Asarco.
(H) These pro forma adjustments eliminate the historical shareholders'
equity accounts of Asarco and Cyprus Amax.
(I) This pro forma adjustment records the estimated reduction in
depreciation, depletion and amortization expense related to the pro forma
reduction in property, plant and equipment recorded in connection with the
business combination purchase price allocation. Because neither fair value
nor book value information regarding the composition of Asarco's or Cyprus
Amax's property, plant and equipment is available to Phelps Dodge, actual
adjustments to depreciation, depletion and amortization expense could
differ substantially from these estimates.
(J) Phelps Dodge holds a 14.0% equity interest in SPCC which is
accounted for as a cost basis investment with a book value of $13.2 million
at June 30, 1999. Asarco reports a 54.3% equity interest in SPCC which it
consolidated in both its June 30, 1999, Form 10-Q and December 31, 1998,
Form 10-K. As a result of Phelps Dodge's increased ownership in SPCC that
would arise through the acquisition of Asarco, Phelps Dodge would qualify
for use of the consolidation method of reporting for its investment in
SPCC. Accordingly, a pro forma adjustment is recorded to consolidate Phelps
Dodge's interest in SPCC including the elimination of Phelps Dodge's cost
basis investment in SPCC and its recognition of dividend income from SPCC,
the reduction of minority interests in consolidated subsidiaries
representing Phelps Dodge's 14.0% interest, and the retroactive restatement
of Phelps Dodge's retained earnings.
(K) This pro forma adjustment recognizes imputed interest expense
resulting from the fair value adjustment of Asarco's long-term debt as
reported in the Form S-4 Registration Statement of Asarco Cyprus
Incorporated filed August 20, 1999. A pro forma adjustment to recognize
imputed interest resulting from the $42 million fair value adjustment of
Cyprus Amax's debt has not been provided because information necessary to
calculate such adjustment is not reasonably available to Phelps Dodge.
(L) This pro forma adjustment recognizes certain change of control
obligations arising from the merger of Cyprus Amax and Phelps Dodge.
89
<PAGE> 98
COMBINATION OF PHELPS DODGE, ASARCO AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION -- (CONTINUED)
(M) Pro forma weighted average common stock and common stock
equivalents outstanding are estimated as follows (in millions):
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1999 1998
---------------- ----------------
BASIC DILUTED BASIC DILUTED
----- ------- ----- -------
<S> <C> <C> <C> <C>
Average number of Phelps Dodge common
shares outstanding.................... 57.8 57.8 58.2 58.5
Anti dilutive Phelps Dodge potential
common shares on pro forma net loss... (0.3)
Phelps Dodge common shares to be issued
in connection with the business
combination (Note 2).................. 31.5 31.5 31.5 31.5
---- ---- ---- ----
89.3 89.3 89.7 89.7
==== ==== ==== ====
</TABLE>
The average number of common shares outstanding does not give effect
to Asarco's and Cyprus Amax's outstanding stock options or other common
stock equivalents, which cannot be estimated because information for Asarco
is not available to Phelps Dodge. Based upon public information reported
and the current exchange offer bases, Phelps Dodge estimates that the
incremental number of Phelps Dodge shares issueable upon the exercise of
all Cyprus Amax and Asarco outstanding stock options is approximately 3
million.
90
<PAGE> 99
PHELPS DODGE CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS
PHELPS DODGE AND CYPRUS AMAX COMBINED
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
HISTORICAL
-------------------------- PRO FORMA PRO FORMA
PHELPS DODGE CYPRUS AMAX ADJUSTMENTS COMBINED
------------ ----------- ----------- ---------
<S> <C> <C> <C> <C>
Sales and other operating revenues... $1,354 561 -- 1,915
------ --- ---- -----
Operating costs and expenses
Cost of products sold.............. 1,073 428 -- 1,501
Depreciation, depletion
and amortization................ 144 104 5(I) 253
Selling and general administrative
expense......................... 60 34 -- 94
Exploration and research expense... 21 8 -- 29
Non-recurring charges and provision
for asset dispositions*......... 83 -- -- 83
------ --- ---- -----
1,381 574 5 1,960
------ --- ---- -----
Operating income (loss).............. (27) (13) (5) (45)
Interest expense................... (48) (69) (9)(E) (126)
Capitalized interest............... -- 2 -- 2
Miscellaneous income and
expense, net.................... (7) (11) 8(A) (10)
------ --- ---- -----
Income (loss) before taxes, minority
interests and equity in net
earnings of affiliated companies... (82) (91) (6) (179)
Provision for taxes on income...... 19 14 2(F)
(1)(A) 34
Minority interests in consolidated
subsidiaries.................... 1 -- -- 1
Equity in net earnings (losses) of
affiliated companies............ 5 -- (7)(A) (2)
------ --- ---- -----
Income (loss) from continuing
operations......................... (57) (77) (12) (146)
Preferred stock dividends.......... -- (9) 9(E) --
------ --- ---- -----
Income (loss) from continuing
operations applicable to common
shares............................. $ (57) (86) (3) (146)
====== === ==== =====
Net earnings (loss) per share
Basic.............................. $(0.98) (1.88)
Diluted............................ $(0.98) (1.88)
Weighted average shares outstanding
Basic.............................. 57.8 77.8
Diluted............................ 57.8 77.8
</TABLE>
- ------------
* See historical financial statements incorporated by reference in this
prospectus for a description of non-recurring charges and provision for asset
dispositions.
91
<PAGE> 100
PHELPS DODGE CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS
PHELPS DODGE AND CYPRUS AMAX COMBINED
FOR THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
HISTORICAL
--------------------------- PRO FORMA PRO FORMA
PHELPS DODGE CYPRUS AMAX ADJUSTMENTS COMBINED
------------ ----------- ----------- ---------
<S> <C> <C> <C> <C>
Sales and other operating
revenues........................ $3,064 1,660 (218)(A) 4,506
------ ----- ---- -----
Operating costs and expenses
Cost of products sold............. 2,361 1,087 (200)(A) 3,248
Depreciation, depletion and
amortization................. 293 254 (7)(A)
9(I) 549
Selling and general
administrative expense....... 123 105 -- 228
Exploration and research
expense...................... 55 45 -- 100
Non-recurring charges and
provision for asset
dispositions*................ (191) 118 -- (73)
------ ----- ---- -----
2,641 1,609 (198) 4,052
------ ----- ---- -----
Operating income (loss)........... 423 51 (20) 454
Interest expense................ (97) (157) (19)(E) (273)
Capitalized interest............ 2 2 -- 4
Miscellaneous income and
expense, net................. 9 17 -- 26
------ ----- ---- -----
Income (loss) before taxes,
minority interests and equity in
net earnings of affiliated
companies....................... 337 (87) (39) 211
Provision for taxes on income... (134) (11) 6(F) (139)
Minority interests in
consolidated subsidiaries.... (8) 1 -- (7)
Equity in net earnings (losses)
of affiliated companies...... (4) (53) -- (57)
------ ----- ---- -----
Income (loss) from continuing
operations...................... 191 (150) (33) 8
Preferred stock dividends....... -- (19) 19(E) --
------ ----- ---- -----
Income (loss) from continuing
operations applicable to common
shares.......................... $ 191 (169) (14) 8
====== ===== ==== =====
Net earnings (loss) per share
Basic........................... $ 3.28 0.10
Diluted......................... $ 3.26 0.10
Weighted average shares
outstanding
Basic........................... 58.2 78.2
Diluted......................... 58.5 78.5
</TABLE>
- ------------
* See historical financial statements incorporated by reference in this
prospectus for a description of non-recurring charges and provision for asset
dispositions.
92
<PAGE> 101
PHELPS DODGE CORPORATION
PRO FORMA COMBINED BALANCE SHEET
PHELPS DODGE AND CYPRUS AMAX COMBINED
JUNE 30, 1999
(UNAUDITED)
(AMOUNTS IN MILLIONS)
<TABLE>
<CAPTION>
HISTORICAL
-------------------------- PRO FORMA PRO FORMA
PHELPS DODGE CYPRUS AMAX ADJUSTMENTS COMBINED
------------ ----------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents................... $ 144 1,275 (691)(B)
(20)(C)
(45)(D)
(41)(B)
(5)(E) 617
Accounts receivable, net.................... 396 37 -- 433
Inventories................................. 263 239 4(D) 506
Supplies.................................... 104 55 -- 159
Prepaid expenses............................ 15 74 (5)(D) 84
Deferred income taxes....................... 45 32 -- 77
------ ----- ------ -----
Current assets............................ 967 1,712 (803) 1,876
Investments and long-term accounts
receivable................................ 95 328 9(A) 432
Property, plant and equipment, net.......... 3,501 2,546 127(D) 6,174
Other assets and deferred charges........... 339 160 (9)(A)
41(B)
5(E) 536
------ ----- ------ -----
Total Assets......................... $4,902 4,746 (630) 9,018
====== ===== ====== =====
LIABILITIES
Short-term debt............................. $ 214 249 -- 463
Current portion of long-term debt........... 62 79 -- 141
Accounts payable and accrued expenses....... 456 324 20(K) 800
Dividends payable........................... 29 9 -- 38
Accrued income taxes........................ 11 81 -- 92
------ ----- ------ -----
Current liabilities....................... 772 742 20 1,534
Long-term debt.............................. 801 1,499 244(E)
(42)(D) 2,502
Deferred income taxes....................... 493 14 18(F) 525
Other liabilities and deferred credits...... 376 412 52(D) 840
------ ----- ------ -----
2,442 2,667 292 5,401
------ ----- ------ -----
Minority interests in consolidated
subsidiaries................................ 86 20 -- 106
------ ----- ------ -----
Shareholders' equity
Common shares............................... 362 1 (1)(H)
125(G) 487
Treasury shares............................. -- (86) 86(A) --
Preferred shares............................ -- 5 (5)(E) --
Capital in excess of par value.............. 5 2,912 (86)(A)
(2,826)(H)
30(B)
982(G) 1,017
Retained earnings........................... 2,198 (768) 768(H) 2,198
Accumulated other comprehensive income
(loss).................................... (183) (5) 5(H) (183)
Other....................................... (8) -- -- (8)
------ ----- ------ -----
Total Shareholders' Equity........... 2,374 2,059 (922) 3,511
------ ----- ------ -----
Total Liabilities and Shareholders'
Equity............................. $4,902 4,746 (630) 9,018
====== ===== ====== =====
</TABLE>
93
<PAGE> 102
COMBINATION OF PHELPS DODGE AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION
1. BASIS OF PRESENTATION
The Unaudited Pro Forma Combined Financial Information has been derived
from historical consolidated financial statements of Phelps Dodge and Cyprus
Amax incorporated by reference into this prospectus. See Phelps Dodge "Unaudited
Pro Forma Combined Financial Information" on page 68 of this prospectus.
The assumptions and related pro forma adjustments described below have been
developed from public historical information available to Phelps Dodge. Pro
forma adjustments have been included only to the extent known and reasonably
available to Phelps Dodge. Additional information may exist that could
materially affect the assumptions and related pro forma adjustments. Such
information is not available to Phelps Dodge because it is within the particular
and singular knowledge of Cyprus Amax.
2. THE OFFER
Phelps Dodge has agreed to a business combination with Cyprus Amax pursuant
to the Merger Agreement through an offering to exchange all the issued and
outstanding Cyprus Amax common shares for a combination of Phelps Dodge common
shares and cash. See "The Offer" on page 41 of this prospectus.
Phelps Dodge is offering to exchange $7.61176875 net in cash plus 0.2203
shares of Phelps Dodge common stock for each outstanding share of Cyprus Amax
common stock, on a fully prorated basis. Cyprus Amax shareholders may elect to
receive either $20.54 in cash or 0.3500 shares of Phelps Dodge common stock for
each Cyprus Amax common share that is validly tendered and not properly
withdrawn, subject to proration if the stock portion or the cash portion of the
offer is oversubscribed.
Debt will be incurred to finance the cash component of the acquisition. An
equivalent amount of debt is expected to be repaid upon consummation of the
acquisition.
The transaction would be accounted for under the purchase method. The
purchase price for the business combinations is estimated as follows (dollars in
millions and shares in thousands except per share data):
<TABLE>
<CAPTION>
CYPRUS
AMAX
--------
<S> <C>
Common shares outstanding (as reported in the Merger
Agreement)................................................ 90,867
Exchange offer ratio of Phelps Dodge common shares for each
common share.............................................. 0.2203
Phelps Dodge common shares to be issued..................... 20,018
Closing market price of each Phelps Dodge common share on
September 29, 1999........................................ $55.3125
========
Fair value of Phelps Dodge common shares issued, comprising
par value of $125 ($6.25 per share) and capital in excess
of par of $982............................................ $ 1,107
Cash Consideration at $7.61176875 for each Cyprus Amax
common share.............................................. 691
Redemption of Cyprus Amax Series A Preferred Stock (Note
3E)....................................................... 244
Estimated fair value of Cyprus Amax outstanding options (as
reported in the Merger Agreement)......................... 30
Estimated transaction costs................................. 20
--------
Purchase price.............................................. $ 2,092
========
</TABLE>
The final purchase price could change materially from the purchase price
estimated above as a result of changes in the market price of common shares of
Phelps Dodge and/or the relative market price of Cyprus Amax common shares.
There are arrangements in place at Cyprus Amax that could impact the purchase
price including employment agreements, change of control severance agreements,
stock appreciation rights, and
94
<PAGE> 103
COMBINATION OF PHELPS DODGE AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION--(CONTINUED)
certain pension and other employee benefit plans. The potential impact of these
factors cannot be estimated but could be material.
3. PRO FORMA ASSUMPTIONS AND ADJUSTMENTS
The following assumptions and related pro forma adjustments give effect to
the proposed business combination of Phelps Dodge and Cyprus Amax as if such
combination occurred on January 1, 1998, in the Unaudited Pro Forma Combined
Statements of Operations for the six-month interim period ended June 30, 1999,
and for the year ended December 31, 1998, respectively, and on June 30, 1999,
for the Unaudited Pro Forma Combined Balance Sheet.
The Unaudited Pro Forma Combined Financial Information is provided for
illustrative purposes only and does not purport to represent what the actual
consolidated results of operations or the consolidated financial position of
Phelps Dodge would have been had the business combination with Cyprus Amax
occurred on the respective dates assumed, nor is it necessarily indicative of
future consolidated operating results or financial position.
Future cash cost savings are not recognized in this Unaudited Pro Forma
Combined Financial Information. Non-recurring items related to 1998 and the
six-month interim period ended June 30, 1999 are included (see "Selected
Historical Financial Data" at pages 61 through 65 for a summary of non-recurring
items and special charges).
(A) Reclassifications have been made to the Cyprus Amax historical
consolidated financial information to conform to Phelps Dodge's
presentation. The historical financial information of Cyprus Amax excludes
the results of operations and assets of its discontinued Coal segment as
reported for 1998 operations in Cyprus Amax's Form 8-K dated June 30, 1999,
and as reported as of and for the six months ended June 30, 1999, in its
Form 10-Q filing for such period. Cyprus Amax's historical financial
information for the year ended December 31, 1998, also has been adjusted to
exclude the identifiable results of recurring operations of its Lithium
segment which was sold in October 1998.
95
<PAGE> 104
COMBINATION OF PHELPS DODGE AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION--(CONTINUED)
<TABLE>
<CAPTION>
BALANCE SHEET SIX MONTHS YEAR ENDED
AT JUNE 30, ENDED DECEMBER 31,
1999 JUNE 30, 1999 1998
------------- ------------- ------------
(IN $ MILLIONS)
<S> <C> <C> <C>
Reclassification adjustments:
Investments and notes
receivable............... 9
Other assets and deferred
charges.................. (9)
Treasury shares............. 86
Capital in excess of par
value.................... (86)
Miscellaneous income and
expense, net............. 8
Provision for taxes on
income................... (1)
Equity in net earnings
(losses) of affiliated
companies................ (7)
Elimination of recurring
results from sold Lithium
segment:
Sales and other operating
revenues................. (218)
Cost of products sold
(derived)................ (200)
Depreciation, depletion and
amortization expense..... (7)
</TABLE>
(B) This pro forma adjustment represents payment of the cash component
of the purchase price of $691 million, the estimated fair value of Cyprus
Amax outstanding stock options of $30 million and the funding of certain
Cyprus Amax benefits of $41 million.
(C) Phelps Dodge estimates it will incur approximately $20 million of
transaction costs, consisting primarily of investment bankers, attorneys
and accountant fees, and financial printing and other charges. These
estimates are preliminary and therefore are subject to change.
(D) If the business combination is consummated, it will be accounted
for using the purchase method of accounting in accordance with generally
accepted accounting principles. Accordingly, the assets and liabilities of
Cyprus Amax would be recorded at their estimated fair values.
Phelps Dodge has not had access to information that is within the
peculiar knowledge of Cyprus Amax and has not performed its due diligence
necessary to determine the fair value of its assets or liabilities or to
identify unknown liabilities or obligations. Pro forma adjustments to
allocate the purchase price have been recorded in the Unaudited Pro Forma
Combined Financial Information on the basis of fair values reported for
certain assets and liabilities in public information of Cyprus Amax.
Because fair value information for the remaining assets and liabilities and
any possible identifiable intangible assets are not reasonably available to
Phelps Dodge, the excess of the historical net book values of Cyprus Amax's
assets acquired over the estimated purchase price has been allocated as a
reduction of its combined net property, plant and equipment.
Additionally, Phelps Dodge believes that cost savings will be realized
upon the consolidation and integration of Cyprus Amax. Phelps Dodge has not
developed formal plans for combining the operations. Accordingly,
additional liabilities may be incurred in connection with the business
combination and any ultimate restructuring. These additional liabilities
and costs have not been contemplated in the Unaudited Pro Forma Combined
Financial Information because information necessary to reasonably estimate
such
96
<PAGE> 105
COMBINATION OF PHELPS DODGE AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION--(CONTINUED)
costs and to formulate detailed restructuring plans is not available to
Phelps Dodge. Accordingly, the allocation of the purchase price cannot be
estimated with a reasonable degree of accuracy and may differ materially
from the amounts assumed in the Unaudited Pro Forma Combined Financial
Information.
The merger agreement by and between Asarco and Cyprus Amax has a $40
million termination fee for Asarco and $45 million for Cyprus Amax under
certain circumstances. If such fee is required to be paid upon consummation
of Phelps Dodge's proposed acquisition of Cyprus Amax, cash and cash
equivalents of Cyprus Amax would be decreased by the fee payment which in
turn would impact the purchase price allocation. The Unaudited Pro Forma
Combined Financial Information has been adjusted to give effect to payment
of the termination fee.
The pro forma purchase price allocation adjustments are estimated as
follows (in millions):
<TABLE>
<S> <C>
Reduction of debt to fair value (as reported in Cyprus
Amax's June 30, 1999, Form 10-Q).......................... $ 42
Increase in LIFO based inventory to replacement cost (as
reported in Cyprus Amax's December 31, 1998, Form 10-K)... $ 4
Excess projected benefit obligation over the fair value of
pension plan assets (as reported in Cyprus Amax's December
31, 1998, Form 10-K, comprising a $5 million reduction of
prepaid expenses and other assets and a $52 million
increase in other liabilities and deferred credits)....... $ 57
Increase in deferred tax liabilities (Note F)............... $ 18
Increase in net property, plant and equipment (derived)..... $127
</TABLE>
(E) The pro forma adjustments reflect the redemption of all 4,664,000
outstanding shares of Cyprus Amax's Series A Preferred Stock which are
redeemable at Cyprus Amax's option at $52.40 per share and the issuance of
$244 million of ten-year debt to finance the redemption. Interest is
estimated to be fixed at 7.75% resulting in annual interest expense of $19
million. The interest rate estimate was based upon ten-year treasury bill
rates for September 1999, plus commercially indicative rate basis points. A
change in the interest rate on the debt by 1/8 percent would impact annual
interest expense by approximately $300,000. Debt issue costs associated
with the debt are estimated to be approximately $5 million with annual
amortization of approximately $500,000.
(F) The estimated income tax effect of the pro forma adjustments has
been recorded based upon the estimated effective tax rate of approximately
15% for Cyprus Amax which rate has been derived from public quarterly and
annual filings. The business combination is expected to be a tax-free
transaction with Cyprus Amax's historical tax bases surviving for income
tax reporting purposes.
A provision for pro forma income tax expense has been recorded for pro
forma adjustments to the Pro Forma Combined Statements of Operations
resulting from pro forma purchase price allocation adjustments and other
items.
Cyprus Amax has reported $176 million of U.S. net operating loss
carryforwards through 1998, expiring from 1999 to 2012, which along with
other deferred tax assets are subject to an existing valuation allowance.
The net operating loss carryforwards may be subject to annual limitations
after the acquisition because of the change in ownership rules. The annual
limits will be calculated as the long-term tax exempt rate (currently
5.18%) times the fair market value of Cyprus Amax. Once all facts are
known, the annual limits may necessitate an increase in the consolidated
valuation allowance for deferred tax assets.
Pro forma income tax expense and deferred tax allocations recorded
upon consummation of the business combination could vary significantly from
the pro forma estimates because information regarding Cyprus Amax's income
tax reporting is not available to Phelps Dodge.
97
<PAGE> 106
COMBINATION OF PHELPS DODGE AND CYPRUS AMAX
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION--(CONTINUED)
(G) This pro forma adjustment reflects the issue of 20,018,000 shares
of Phelps Dodge common stock in connection with the exchange offers for all
the outstanding common shares of Cyprus Amax. The common stock of Phelps
Dodge represents common shares of $125 million at $6.25 per share par value
and capital in excess of par of $982 million.
(H) These pro forma adjustments eliminate the historical shareholders'
equity accounts of Cyprus Amax.
(I) This pro forma adjustment records the estimated increase in
depreciation, depletion and amortization expense related to the pro forma
increase in property, plant and equipment recorded in connection with the
business combination purchase price allocation. Because neither fair value
nor book value information regarding the composition of Cyprus Amax's
property, plant and equipment is available to Phelps Dodge, actual
adjustments to depreciation, depletion and amortization expense could
differ substantially from these estimates.
(J) A pro forma adjustment to recognize imputed interest resulting
from the $42 million fair value adjustment of Cyprus Amax's debt has not
been provided because information necessary to calculate such adjustment is
not reasonably available to Phelps Dodge.
(K) This pro forma adjustment recognizes certain change of control
obligation arising from the merger of Cyprus Amax and Phelps Dodge.
(L) Pro forma weighted average common stock and common stock
equivalents outstanding are estimated as follows (in millions):
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1999 1998
---------------- ----------------
BASIC DILUTED BASIC DILUTED
----- ------- ----- -------
<S> <C> <C> <C> <C>
Average number of Phelps Dodge
common shares outstanding......... 57.8 57.8 58.2 58.5
Phelps Dodge common shares to be
issued in connection with the
business combination (Note 2)..... 20.0 20.0 20.0 20.0
---- ---- ---- ----
77.8 77.8 78.2 78.5
==== ==== ==== ====
</TABLE>
The average number of common shares outstanding does not give effect to
Cyprus Amax's outstanding stock options or other common stock equivalents. Based
upon public information reported and the current exchange offer basis, Phelps
Dodge estimates that the potential dilutive effect would be approximately 0.6
million shares.
98
<PAGE> 107
DESCRIPTION OF PHELPS DODGE CAPITAL STOCK
The following description of the terms of the capital stock of Phelps Dodge
is not meant to be complete and is qualified by reference to Phelps Dodge's
Restated Certificate of Incorporation (the Phelps Dodge charter), which is
incorporated herein by reference. See "Where You Can Find Additional
Information."
AUTHORIZED CAPITAL STOCK
Under the Phelps Dodge charter, Phelps Dodge's authorized capital stock
consists of 200,000,000 shares of Phelps Dodge common stock, par value $6.25 per
share, and 6,000,000 shares of Phelps Dodge preferred stock, par value $1.00 per
share.
PHELPS DODGE COMMON STOCK
Phelps Dodge Common Stock Outstanding. The outstanding shares of Phelps
Dodge common stock are, and the shares of Phelps Dodge common stock issued
pursuant to the exchange offers will be, duly authorized, validly issued, fully
paid and nonassessable.
Voting Rights. Each holder of Phelps Dodge common stock is entitled to one
vote for each share of Phelps Dodge common stock held of record on the
applicable record date on all matters submitted to a vote of shareholders.
Dividend Rights; Rights upon Liquidation. The holders of Phelps Dodge
common stock are entitled to receive, from funds legally available for the
payment thereof, dividends when and as declared by resolution of the Phelps
Dodge Board of Directors, subject to any preferential dividend rights granted to
the holders of any outstanding Phelps Dodge preferred stock. In the event of
liquidation, each share of Phelps Dodge common stock is entitled to share pro
rata in any distribution of Phelps Dodge's assets after payment or providing for
the payment of liabilities and the liquidation preference of any outstanding
Phelps Dodge preferred stock.
Preemptive Rights. Holders of Phelps Dodge common stock have no preemptive
rights to purchase, subscribe for or otherwise acquire any unissued or treasury
shares or other securities.
PHELPS DODGE PREFERRED STOCK
Phelps Dodge Preferred Stock Outstanding. As of the date of this
prospectus, no shares of Phelps Dodge preferred stock were issued and
outstanding.
Authorized Preferred Stock. Under Phelps Dodge's charter, the Phelps Dodge
Board of Directors has the authority, without shareholder approval, to create
one or more classes or series within a class of preferred stock, to issue shares
of preferred stock in such class or series up to the maximum number of shares of
the relevant class or series of preferred stock authorized, and to determine the
preferences, rights, privileges and restrictions of any such class or series,
including the dividend rights, voting rights, the rights and terms of
redemption, the rights and terms of conversion, liquidation preferences, the
number of shares constituting any such class or series and the designation of
such class or series.
The Phelps Dodge Board of Directors has designated a series of preferred
stock as Junior Participating Cumulative Preferred Shares, and has issued rights
to purchase those shares which are exercisable only upon the occurrence of
certain events described below under "Comparison of Rights of Holders of Phelps
Dodge Shares and Cyprus Amax Shares -- Comparison of Charter and By-law
Provisions -- Capitalization."
TRANSFER AND DIVIDEND PAYING AGENT AND REGISTRAR
ChaseMellon Shareholder Services, L.L.C. is the transfer and dividend
paying agent and registrar for the Phelps Dodge common stock.
99
<PAGE> 108
COMPARISON OF RIGHTS OF HOLDERS OF
PHELPS DODGE SHARES AND CYPRUS AMAX SHARES
Upon completion of our proposed business combination, the shareholders of
Cyprus Amax will become shareholders of Phelps Dodge, rather than shareholders
of Asarco Amax. As Phelps Dodge shareholders, the rights of former Cyprus Amax
shareholders will be governed by Phelps Dodge's charter and by-laws, which
differ in certain material respects from Cyprus Amax's charter and by-laws. In
addition, New York is the jurisdiction of incorporation of Phelps Dodge, while
Delaware is the jurisdiction of incorporation of Cyprus Amax. As Phelps Dodge
shareholders, the rights of former Cyprus Amax shareholders will therefore be
governed by the New York Business Corporation Law (NYBCL) instead of the
Delaware General Corporation Law (DGCL).
The following is a comparison of:
- the current rights of Cyprus Amax shareholders under the DGCL and the
Cyprus Amax charter and by-laws; and
- the rights Cyprus Amax shareholders would have as Phelps Dodge
shareholders under the NYBCL and the Phelps Dodge charter and by-laws
upon the consummation of a business combination between Phelps Dodge and
Cyprus Amax.
The comparison summarizes the material differences but is not intended to
list all differences and is qualified by reference to New York law, Delaware
law, the Phelps Dodge charter and by-laws and the Cyprus Amax charter and
by-laws. The summary of the Cyprus Amax charter and by-laws is derived from the
disclosure in the Form S-4 filed by Asarco Cyprus Incorporated on August 20,
1999.
COMPARISON OF CHARTER AND BY-LAW PROVISIONS
<TABLE>
<CAPTION>
CYPRUS AMAX PHELPS DODGE
----------------------------- -----------------------------
<S> <C> <C>
BOARD OF DIRECTORS
Classified Board Divided into three classes, Divided into three classes,
as nearly equal in number as as nearly equal in number as
possible, with each class possible, with each class
serving a staggered serving a staggered
three-year term. three-year term.
Removal of Directors Under Cyprus Amax's charter A director may be removed by
and by-laws, a director may the stockholders only for
be removed only for cause, cause.
and only by the affirmative
vote of holders of 75% of the
outstanding voting stock. The
DGCL generally provides that
directors may be removed,
with or without cause, by
stockholder majority vote. An
exception applies to
corporations with classified
boards like Cyprus Amax.
Unless the charter provides
otherwise, stockholders of
such a corporation may remove
directors only for cause.
Filling of Board Vacancies With some exceptions, Vacancies on the board of
vacancies on the board may be directors may be filled only
filled by majority vote of by vote of the directors.
the remaining directors then
in office.
</TABLE>
100
<PAGE> 109
<TABLE>
<CAPTION>
CYPRUS AMAX PHELPS DODGE
----------------------------- -----------------------------
<S> <C> <C>
Size of Board Board must consist of not Board must consist of not
less than three directors, as less than 9 nor more than 12
fixed from time to time by directors, as fixed from time
resolution of the board. The to time by resolution of the
current number of directors board. The current number of
is 10. directors is 11.
STOCKHOLDER MEETINGS
Annual Meeting Held on date fixed by board. Held on the first Wednesday
in May, or on another date
fixed by the board from time
to time.
Calling a Special Meeting Only the Chairman of the Only the board of directors
Board, the President, the or the Chairman of the Board
board of directors or the may call a special meeting.
holders of a majority of the
voting stock may call a
special meeting.
Quorum Requirements The presence, in person or by Generally, the presence, in
proxy, of the holders of person or by proxy, of the
33 1/3% of the outstanding holders of a majority of the
voting stock constitutes a shares entitled to vote at
quorum at the meeting. the meeting constitutes a
quorum for that meeting.
Certain Voting Requirements Stockholder action approving Phelps Dodge's charter and
a merger or consolidation or by- laws contain no
a sale of all or comparable supermajority
substantially all of Cyprus voting requirements. Under
Amax's assets requires the the NYBCL, the consummation
affirmative vote by the by Phelps Dodge of a merger,
holders of the majority of consolidation or disposition
outstanding voting stock; of substantially all of its
stockholder action on other assets requires the approval
matters, except for elections of two- thirds of all the
of directors, certain shares of Phelps Dodge
amendments of organizational entitled to vote on the
documents and certain proposal including, in
transactions with the certain situations, the
beneficial owner of more than affirmative vote by the
10% of any class of capital holders of a majority of all
stock of Cyprus Amax, outstanding shares of each
requires affirmative vote of class or series of shares.
the majority of votes cast at Abstentions have the effect
a meeting. Abstentions have of a vote against a proposed
the effect of a vote against matter only if the
a proposed matter only if the affirmative vote required is
affirmative vote required is that of the majority of the
that of the majority of the total votes represented by
total votes represented by the outstanding voting stock.
the outstanding voting stock.
Cyprus Amax's charter
requires the vote of 75% of
the outstanding shares of
Cyprus Amax's voting stock,
voting together as a single
class, for the
</TABLE>
101
<PAGE> 110
<TABLE>
<CAPTION>
CYPRUS AMAX PHELPS DODGE
----------------------------- -----------------------------
<S> <C> <C>
approval of business
combinations specified in the
charter, including certain
transactions involving
beneficial owners of 10% or
more of Cyprus Amax's
outstanding voting stock.
Business combinations include
any merger or consolidation
of Cyprus Amax with any
interested stockholder, any
sale, lease or other
disposition of Cyprus Amax
assets having a fair market
value of $50 million or more
to an interested stockholder,
the issuance or transfer of
Cyprus Amax securities to an
interested stockholder for
consideration having a fair
market value of $50 million
or more, the adoption of any
plan or proposal by or on
behalf of an interested
stockholder for the
liquidation or dissolution of
Cyprus Amax in which the
interested stockholder
receives anything other than
cash, or any transaction
which has the effect of
increasing the proportionate
share of any class of Cyprus
Amax's stock owned by the
interested stockholder. The
charter's supermajority
requirements do not apply if
a majority of Cyprus Amax's
disinterested directors
approve the transaction and
certain other conditions are
met.
Separately, Cyprus Amax's
charter precludes Cyprus
Amax, among other things,
from repurchasing its stock,
securities convertible into
its stock, or similar
securities from an interested
stockholder who has
beneficially owned such
securities for less than two
years before the repurchase,
without the affirmative vote
of a majority of Cyprus
Amax's voting stock
(excluding voting stock owned
by the interested
stockholder),
</TABLE>
102
<PAGE> 111
<TABLE>
<CAPTION>
CYPRUS AMAX PHELPS DODGE
----------------------------- -----------------------------
<S> <C> <C>
voting as a single class,
subject to some exceptions.
Stockholder Action by Written Stockholder action must be Stockholder action must be
Consent taken at an annual or special taken at an annual or special
meeting and not by written meeting and not by written
consent. consent, except that the
NYBCL permits stockholder
action by unanimous written
consent.
Advance Notice for To bring a matter (including Generally, to bring a matter
Stockholder Nominations and the nomination of directors) (including the nomination of
Other Business before an annual meeting, a directors) before an annual
stockholder generally must meeting, a stockholder must
give notice of a proposed give notice not less than 60
matter not less than 90 days days nor more than 90 days
prior to the anniversary of prior to the meeting, but if
the previous year's meeting, the meeting is scheduled for
but if less than 70 days a day other than the first
notice of the annual meeting Wednesday in May and less
is given to stockholders, a than 70 days' notice is given
stockholder must give notice or prior public announcement
of a proposed matter by the is made to stockholders, a
tenth day following the date stockholder must give notice
at which notice of the annual by the tenth day following
meeting was mailed. Cyprus the date at which notice of
Amax's by-laws contain the annual meeting was mailed
requirements as to the form or announcement thereof made.
and content of the notice. If the number of directors to
be elected at the election
meeting is increased or there
is a vacancy to be filled at
the election meeting in a
class of directors whose
terms do not expire at the
election meeting and there is
no public announcement at
least 70 days prior to the
election meeting naming all
of the nominees for director
or specifying the size of the
increased board of directors
or the number of directors to
be elected, a nominating
stockholder's notice is
timely if given by the tenth
day following the date on
which the public announcement
is first made, but only with
respect to nominees for any
positions created by the
increase or vacancy. Phelps
Dodge's by-laws contain
requirements as to the form
and content of the
stockholder's notice.
</TABLE>
103
<PAGE> 112
<TABLE>
<CAPTION>
CYPRUS AMAX PHELPS DODGE
----------------------------- -----------------------------
<S> <C> <C>
AMENDMENTS TO ORGANIZATIONAL
DOCUMENTS
Certificate of Incorporation Generally may be amended by Under the NYBCL, subject to
board resolutions and the limited exceptions,
affirmative vote by the amendments to Phelps Dodge's
holders of a majority of the charter must be approved by
outstanding voting stock, vote of a majority of all
except that amendments to outstanding shares entitled
provisions relating to the to vote on the proposed
directors, stockholder amendment, except that
nominations and action, charter provisions requiring
by-law amendments, and a greater or class vote may
certain transactions with only be amended by such vote.
beneficial owners of 10% or In addition, an amendment
more of the outstanding that negatively affects in
common stock require the certain ways holders of
affirmative vote of the shares of a class or series
holders of 75% of the requires authorization by a
outstanding voting stock. majority of the votes of all
outstanding shares of the
class or series.
By-laws Generally may be amended by Phelps Dodge's by-laws permit
the affirmative vote of the the amendment of the by-laws
holders of a majority of the by a vote of a majority of
voting stock at the relevant all the directors at any
meeting, or by the regular or special meeting of
affirmative vote of a the board, except that
majority of the board. provisions relating to the
Amendments to certain repurchase of stock by Phelps
provisions of Cyprus Amax's Dodge may only be amended by
charter governing the majority vote of the
by-laws, including those stockholders. Generally,
relating to stockholder under the NYBCL, the by-laws
meetings and action, and the may also be amended by a
number, election and removal majority of the votes cast by
of directors, require the the shares entitled to vote
affirmative vote of the in the election of any
holders of 75% of the directors.
outstanding voting stock.
CAPITALIZATION
Authorized Stock Common stock: 150 million Common stock: 200 million
shares; preferred stock: 20 shares; preferred stock: 6
million shares. million shares.
Preferred Stock The board is authorized to The board is authorized to
issue preferred stock from issue preferred stock from
time to time in one or more time to time in one or more
series, with terms to be series, with terms to be
fixed by the board. fixed by the board.
Rights Plans Cyprus Amax has a rights Phelps Dodge has a rights
agreement, dated as of agreement, dated as of
February 28, 1999. The rights February 5, 1998. The rights
agreement triggers upon the agreement triggers upon the
acquisition by a third party acquisition by a third party
of 15% of Cyprus Amax's of 20% of Phelps Dodge's
</TABLE>
104
<PAGE> 113
<TABLE>
<CAPTION>
CYPRUS AMAX PHELPS DODGE
----------------------------- -----------------------------
<S> <C> <C>
outstanding common stock. The outstanding common stock. The
board may redeem rights at board may redeem rights at
any time prior to the time any time prior to the time
such an acquisition takes such an acquisition takes
place. place.
Share Repurchases Cyprus Amax may generally The NYBCL prohibits Phelps
repurchase its own shares, Dodge from repurchasing more
although there are specific than 10% of its stock for
restrictions on such more than market value from a
repurchases when the seller stockholder who has held the
is a beneficial owner of 10% stock for less than two
or more of the voting power years, unless the repurchase
of the outstanding voting is approved by the board and
stock. by majority vote of the
outstanding voting stock.
Phelps Dodge's by-laws
provide that Phelps Dodge may
repurchase its stock only in
the regular course of
legitimate business or for
the purpose of retiring the
stock.
EXCULPATION AND Cyprus Amax's charter Phelps Dodge's charter
INDEMNIFICATION OF provides that no director provides that the personal
DIRECTORS, OFFICERS AND will be personally liable for liability of Phelps Dodge's
EMPLOYEES damages for breach of directors for any breach of
fiduciary duty, except in duty in such capacity is
cases where the director's eliminated to the fullest
acts or omissions breached extent permitted by the
his duty of loyalty to the NYBCL. The NYBCL permits
corporation or its Phelps Dodge to eliminate or
stockholders, were not in limit the personal liability
good faith or involved of directors to Phelps Dodge
intentional misconduct or a or its shareholders for
knowing violation of law, or damages for any breach of
provided an improper personal duty in such capacity except
benefit to the director. liability (i) of a director
(a) whose acts or omissions
The Cyprus Amax by-laws were in bad faith, involved
provide that Cyprus Amax will intentional misconduct or a
indemnify any director or knowing violation of law, (b)
officer to the fullest extent who personally gained a
permitted by law if such financial profit or other
director or officer is advantage to which he or she
involved in litigation by was not legally entitled or
reason of the fact that he is (c) whose acts violated
(or was) a director or certain provisions of New
officer, and provide in York law or (ii) for acts or
addition that Cyprus Amax may omissions prior to the
indemnify any person, other adoption in 1988 of Phelps
than a director or officer, Dodge's charter amendment.
if such person is involved in
litigation by reason of the Phelps Dodge's by-laws
fact that he is (or was) an provide that Phelps Dodge
employee. will indemnify any person
involved in litigation by
reason of the fact that he is
or was a director or officer
of Phelps Dodge, unless
</TABLE>
105
<PAGE> 114
<TABLE>
<CAPTION>
CYPRUS AMAX PHELPS DODGE
----------------------------- -----------------------------
<S> <C> <C>
the director's or officer's
acts were committed in bad
faith or were the result of
his active and deliberate
dishonesty and were material
to the proceeding or the
director or officer
personally gained in fact a
financial profit or other
advantage to which he was not
legally entitled. Further,
Phelps Dodge's directors and
officers are covered by
insurance policies maintained
against certain liabilities,
including liabilities arising
under the Securities Act of
1933.
</TABLE>
COMPARISON OF CERTAIN STATUTORY PROVISIONS
APPRAISAL RIGHTS
CYPRUS AMAX STOCKHOLDER RIGHTS
Under Delaware law, appraisal rights, or rights of a stockholder to receive
the fair value of his stock in connection with a merger or consolidation, may be
available in connection with a merger or consolidation in certain specific
situations. Appraisal rights are not available to a corporation's stockholders
under Delaware law where the corporation is to be the surviving corporation and
no vote of its stockholders is required to approve the merger.
In addition, unless otherwise provided in the certificate of incorporation,
no appraisal rights are available under Delaware law to holders of shares of any
class of stock which is either (1) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by NASD or (2) held of record by more than 2,000 stockholders, unless
such stockholders are required by the terms of the merger to accept anything
other than:
- shares of stock of the surviving corporation;
- shares of stock of another corporation which, as of the effective date of
the merger or consolidation, are the kind described in clauses (1) and
(2) above;
- cash instead of fractional shares of such stock; or
- any combination of the consideration described in the three bullet items
above.
In addition, appraisal rights are not available under Delaware law in the
event of the sale of all or substantially all of a corporation's assets or the
adoption of an amendment to its certificate of incorporation, unless such rights
are granted in the corporate charter. The Cyprus Amax charter does not grant
such rights.
PHELPS DODGE STOCKHOLDER RIGHTS
Under New York law, appraisal rights are generally available in connection
with a merger or consolidation, except that no appraisal rights are available:
- to the stockholder of a parent corporation merging with its subsidiary
where the parent owns at least 90% of the subsidiary's outstanding stock
and certain additional requirements are met;
- to the stockholder of the surviving corporation in a merger (other than a
merger described in the previous bullet item) unless the merger adversely
affects rights of the shares held by the stockholder in a certain way; or
106
<PAGE> 115
- to a shareholder of shares of any class or series of stock listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers.
Under the statutory provisions described above, since shares of Phelps Dodge
common stock are listed on the New York Stock Exchange, Phelps Dodge common
stockholders are not entitled to appraisal rights in connection with a merger or
consolidation.
Appraisal rights are also available under the NYBCL in connection with the
sale, lease, exchange or other disposition of all or substantially all of a
corporation's assets other than a transaction wholly for cash where shareholder
approval is conditioned upon the corporation's dissolution and the distribution
of all of the corporation's net assets within one year after the transaction.
Further, appraisal rights are available in connection with a share exchange
between two corporation as authorized by the NYBCL, except with respect to
shares of a subject corporation that are not acquired in the exchange or that
are listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers.
In addition, appraisal rights are available to a shareholder of a
subsidiary corporation that merges with its parent corporation, or is acquired
by it in a share exchange, where the parent owns at least 90% of the
subsidiary's outstanding stock and certain additional requirements are met.
Appraisal rights are also available to a shareholder who is not entitled to
vote with respect to a plan of merger or consolidation and whose shares will be
canceled or exchanged in the merger or consolidation for cash or other
consideration other than shares of the surviving or consolidated corporation or
another corporation.
CERTAIN BUSINESS COMBINATIONS
CYPRUS AMAX STOCKHOLDER RIGHTS
Delaware law restricts the ability of certain persons to acquire control of
a Delaware corporation.
Under the DGGL, if a person acquires 15% or more of the stock of a Delaware
corporation without the approval of the board of directors of that corporation,
thereby becoming an interested stockholder, that person generally may not engage
in certain transactions with the corporation for a period of three years unless
one of the following three exceptions applies:
- the board of directors approved the acquisition of stock or the
transaction prior to the time that the person became an interested
stockholder;
- upon consummation of the transaction in which the person became an
interested stockholder, the interested stockholder became an 85% owner of
the voting stock of the corporation in the transaction, excluding voting
stock owned by directors who are also officers and certain employee stock
plans; or
- the transaction is approved by the board of directors and by the
affirmative vote of 66 2/3% of the outstanding voting stock which is not
owned by the interested stockholder.
The Cyprus Amax charter provides that certain transactions with the
beneficial owner of 10% of the voting power of the outstanding voting stock,
including a merger, significant dispositions of assets, certain issuances or
transfers of securities, certain plans of liquidation and dissolution, and
certain reclassifications of securities, generally require the affirmative vote
of 75% of the voting power of the outstanding shares of stock entitled to vote
in the election of directors, unless Cyprus Amax's disinterested directors
approve the transaction and certain other conditions are met.
107
<PAGE> 116
PHELPS DODGE STOCKHOLDER RIGHTS
New York law restricts the ability of certain persons to acquire control of
a Delaware corporation.
In general, a New York corporation may not engage in a business combination
with an interested stockholder for a period of five years following the
interested stockholder's becoming such. Such a business combination would be
permitted where it is approved by the board of directors prior to the interested
stockholder's becoming such, or within 30 days thereafter, if a good faith
proposal regarding a business combination is made in writing.
Covered business combinations include certain mergers and consolidations,
dispositions of assets or stock, plans for liquidation or dissolution,
reclassifications of securities, recapitalizations and similar transactions. An
interested stockholder is generally a stockholder owning at least 20% of a
corporation's outstanding voting stock.
In addition, New York corporations may not engage at any time with any
interested stockholder in a business combination other than:
- a business combination approved by the board of directors prior to the
stock acquisition, or where the acquisition of the stock had been
approved by the board of directors prior to the stock acquisition,
- a business combination approved by the affirmative vote of the holders of
a majority of the outstanding voting stock not beneficially owned by the
interested stockholder at a meeting for that purpose no earlier than five
years after the stock acquisition, or
- a business combination in which the interested stockholder pays a formula
price designed to ensure that all other stockholders receive at least the
highest price per share paid by the interested stockholder and that meets
certain other requirements.
Phelps Dodge is governed by the NYBCL, as described above. Phelps Dodge's
charter does not contain a provision regarding transactions with interested
stockholders.
108
<PAGE> 117
ASARCO AND CYPRUS AMAX INFORMATION
While we have included in this prospectus information concerning Asarco and
Cyprus Amax that is known to us based on publicly available information
(primarily filings by Asarco and Cyprus Amax with the SEC), we are not
affiliated with Asarco or Cyprus Amax and neither Asarco nor Cyprus Amax has
permitted us to have access to their books and records. Therefore, non-public
information concerning Asarco or Cyprus Amax was not available to us for the
purpose of preparing this prospectus. Although we have no knowledge that would
indicate that statements relating to Asarco or Cyprus Amax contained or
incorporated by reference in this prospectus are inaccurate or incomplete, we
were not involved in the preparation of those statements and cannot verify them.
Pursuant to rule 409 under the Securities Act of 1933 and rule 12b-21 under
the Securities Exchange Act of 1934, we are requesting that Asarco and Cyprus
Amax provide us with information required for complete disclosure regarding the
businesses, operations, financial condition and management of Asarco and Cyprus
Amax. We will amend or supplement this prospectus to provide any and all
information we receive from Asarco or Cyprus Amax, if we receive the information
before our offer expires and we consider it to be material, reliable and
appropriate. In addition, pursuant to rule 439 under the Securities Act, we are
requesting that PricewaterhouseCoopers LLP, the independent accountants of both
Asarco and Cyprus Amax, provide us with the consents required for us to
incorporate by reference into this prospectus the PricewaterhouseCoopers audit
reports included in Asarco's and Cyprus Amax's Annual Reports on Form 10-K for
the year ended December 31, 1998. If we receive those consents, we will promptly
file them as exhibits to our registration statement.
FORWARD-LOOKING INFORMATION
The U.S. securities laws provide a "safe harbor" for certain
forward-looking statements. This prospectus contains forward-looking statements,
including statements concerning the business, future financial position, results
of operations, business strategy, estimated cost savings and other benefits of
our proposed business combination, plans as to dividends and plans and
objectives of management for future operations of Phelps Dodge, Asarco and
Cyprus Amax. Forward-looking statements can be found, among other places, under
"The Proposed Combination," "Reasons for the Proposed Combination," "Background
of the Offer" and "Unaudited Pro Forma Combined Financial Information."
Generally, the words "will," "may," "should," "continue," "believes," "expects,"
"anticipates" or similar expressions identify forward-looking statements.
Forward-looking statements involve risks and uncertainties that could cause
actual results to differ materially from those projected.
Statements regarding the expected benefits of our proposed business
combination with Asarco and Cyprus Amax, the expected commencement dates of
operations, projected quantities of future production, capital costs, production
rates and other operating and financial data are based on expectations that
Phelps Dodge believes are reasonable, but we can give no assurance that such
expectations will prove to have been correct. Factors that could cause actual
results to differ materially include, among others:
- risks and uncertainties relating to the timing of completion of the
proposed Phelps Dodge/Asarco/ Cyprus Amax business combination;
- the possibility that we will be unable to realize the expected cost
savings and other benefits from the combination,
- difficulties related to the integration of the businesses of Phelps
Dodge, Asarco and Cyprus Amax,
- the possibility that Phelps Dodge will not be able to combine with both
Asarco and Cyprus Amax,
- general U.S. and international economic, financial market and political
conditions,
- political and economic risks associated with operations outside the U.S.,
- the cyclical and volatile price of copper and other metals,
109
<PAGE> 118
- unanticipated ground, water, weather or operating conditions or force
majeure events,
- unanticipated ore grade and geological problems or metallurgical and
other processing problems,
- delays in the receipt of or failure to receive necessary government
permits,
- changes in laws or regulations or the interpretation and enforcement
thereof,
- labor relations and accidents, and
- environmental risks.
These and other risk factors are discussed in more detail in this prospectus.
See "Risk Factors" beginning on page 6. Many such factors are beyond our ability
to control or predict. Readers are cautioned not to put undue reliance on
forward-looking statements. We disclaim any intent or obligation to update these
forward-looking statements, whether as a result of new information, future
events or otherwise.
LEGAL MATTERS
The validity of the Phelps Dodge common shares offered hereby will be
passed upon for Phelps Dodge by Debevoise & Plimpton, 875 Third Avenue, New
York, New York.
EXPERTS
The audited consolidated financial statements of Phelps Dodge incorporated
by reference in this Prospectus have been audited by PricewaterhouseCoopers LLP,
independent public accountants, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in auditing and accounting.
110
<PAGE> 119
SCHEDULE A
DIRECTORS AND EXECUTIVE OFFICERS OF PHELPS DODGE CORPORATION
The name, business address, present principal occupation or employment and
five-year employment history of each of the directors and executive officers of
Phelps Dodge Corporation are set forth below. Unless otherwise indicated, each
occupation set forth opposite an individual's name refers to employment with
Phelps Dodge and each individual has held such occupation for at least the last
five years. Each director and executive officer listed below is a citizen of the
United States.
<TABLE>
<CAPTION>
POSITION WITH PHELPS DODGE; PRINCIPAL
OCCUPATION OR EMPLOYMENT; 5-YEAR
NAME AND BUSINESS ADDRESS EMPLOYMENT HISTORY
- --------------------------------------------- ---------------------------------------------------
<S> <C>
Archie W. Dunham Mr. Dunham has been a Phelps Dodge director since
Conoco, Inc. 1998. He has been Chairman of the Board of Conoco,
600 North Dairy Hartford Road Inc. (integrated energy company) since 1999 and
Houston, TX 77079-1175 President and Chief Executive Officer since January
1996. He was an Executive Vice President of E.I.
duPont de Nemours and Company (chemical materials
and energy company), Conoco's former parent, from
1995 to October 1998. He was a Senior Vice
President -- DuPont Polymers and DuPont Chemicals
and Pigments from 1987 to 1992, and an Executive
Vice President -- Exploration Production of Conoco
from 1992 to 1995. Mr. Dunham is a director of
Conoco Inc. and Louisiana Pacific Corporation. Age
60.
William A. Franke Mr. Franke has been a Phelps Dodge director since
Franke & Company, Inc. 1980. He has been Chairman and Chief Executive
2525 E. Camelback Road Officer of America West Holdings Corporation since
Suite 800 February 1997 and Chairman of the Board of its
Phoenix, AZ 85016 principal subsidiary, America West Airlines, Inc.
(airline carrier), since 1992. He was the
subsidiary's Chief Executive Officer from December
1993 until February 1997, and its President from
May 1996 until February 1997. He has been President
of Franke & Company, Inc., Phoenix, Arizona, an
investment firm, since 1987. He is a director of
America West Holdings Corporation, America West
Airlines, Inc., Central Newspapers, Inc., Beringer
Wine Estates, Mtel Latin America, Inc., AerFi Group
Plc, and the Air Transport Association of America.
Age 62.
Southwood J. Morcott Mr. Morcott has been a Phelps Dodge director since
Dana Corporation 1991. He has been Chairman of the Board of Dana
4500 Dort St. Corporation (manufacturer and distributor of
Toledo, OH 43615 automotive and vehicular parts) since 1990. From
1987 to 1995, he served as Chairman of Hayes-Dana
Inc. He was Chief Executive Officer of Dana
Corporation from 1989 until February 1999, and
Chief Operating Officer from 1986 until January
1997. He was President of Dana Corporation from
1986 to 1995. Mr. Morcott is a director of Dana
Corporation, CSX Corporation and Johnson Controls,
Inc. Age 61.
</TABLE>
A-1
<PAGE> 120
<TABLE>
<CAPTION>
POSITION WITH PHELPS DODGE; PRINCIPAL
OCCUPATION OR EMPLOYMENT; 5-YEAR
NAME AND BUSINESS ADDRESS EMPLOYMENT HISTORY
- --------------------------------------------- ---------------------------------------------------
<S> <C>
J. Steven Whisler Mr. Whisler has been a Phelps Dodge director since
Phelps Dodge Corporation 1995 and has been Phelps Dodge's President and
2600 North Central Avenue Chief Operating Officer since December 1997, and
Phoenix, AZ 85004-3104 President of Phelps Dodge Mining Company, a
division of Phelps Dodge, from 1991 to October
1998. He was a Senior Vice President of Phelps
Dodge from 1988 to December 1997 and Vice President
of Phelps Dodge from 1987 until 1988. He was
General Counsel of Phelps Dodge from 1987 until
1991. He is a director of Burlington Northern Santa
Fe Corporation and Southern Peru Copper
Corporation. Age 44.
Robert N. Burt Mr. Burt has been a Phelps Dodge director since
FMC Corporation 1993. He has been Chairman of the Board and Chief
200 East Randolph Drive Executive Officer of FMC Corporation (chemicals and
Chicago, IL 60601 machinery for industry, agriculture and government)
since 1991. He is a director of FMC Corporation and
Warner-Lambert Company. Age 61.
Robert D. Krebs Mr. Krebs has been a Phelps Dodge director since
Burlington Northern Santa Fe Corporation 1987. He has been Chairman and Chief Executive
2650 Lou Menk Drive Officer of Burlington Northern Santa Fe Corporation
Fort Worth, TX 76131-2830 (transportation) since June 1, 1999. From April
1997 to May 31, 1999, he was Chairman, President
and Chief Executive Officer of Burlington Northern
Santa Fe Corporation. From September 1995 to April
1997, he was President and Chief Executive Officer
of Burlington Northern Santa Fe Corporation. From
June 1988 to January 1998, he was Chairman,
President and CEO of Santa Fe Pacific Corporation.
He is a director of Burlington Northern Santa Fe
Corporation. Age 57.
Douglas C. Yearley Mr. Yearley has been a Phelps Dodge director since
Phelps Dodge Corporation 1986 and has been Phelps Dodge's Chairman of the
2600 North Central Avenue Board and Chief Executive Officer since 1989. He
Phoenix, AZ 85004-3014 was President of Phelps Dodge from 1991 until
December 1997. He was President of Phelps Dodge
Industries, a division of Phelps Dodge, from 1988
until 1990, Executive Vice President of Phelps
Dodge from 1987 until 1989 and Senior Vice
President of Phelps Dodge from 1982 through 1986.
He is a director of J. P. Morgan & Co.,
Incorporated and its principal banking subsidiary,
Morgan Guaranty Trust Company of New York, Lockheed
Martin Corporation, USX Corporation and Southern
Peru Copper Corporation. Age 63.
</TABLE>
A-2
<PAGE> 121
<TABLE>
<CAPTION>
POSITION WITH PHELPS DODGE; PRINCIPAL
OCCUPATION OR EMPLOYMENT; 5-YEAR
NAME AND BUSINESS ADDRESS EMPLOYMENT HISTORY
- --------------------------------------------- ---------------------------------------------------
<S> <C>
Paul Hazen Mr. Hazen has been a Phelps Dodge director since
Wells Fargo Bank 1988. He has been Chairman of Wells Fargo & Co.
420 Montgomery Street since November 1998. He was Chairman and Chief
San Francisco, CA 94104 Executive Officer of Wells Fargo & Co., San
Francisco (bank holding company) and of Wells Fargo
Bank, N.A. (national banking association) from
January 1995 until November 1998. He was President
of Wells Fargo & Co. and of Wells Fargo Bank, N.A.
from 1984 to 1994. He is a director of Wells Fargo
& Co., Safeway, Inc., Shanghai Commercial Bank
Ltd., Vodaphone AirTouch Plc and E.piphany, Inc.
Age 57.
Manuel J. Iraola Mr. Iraola has been a Phelps Dodge director since
Phelps Dodge Corporation 1997 and has been President of Phelps Dodge
2600 North Central Avenue Industries, a division of Phelps Dodge, since 1995,
Phoenix, AZ 85004-3014 and a Senior Vice President of Phelps Dodge since
1995. From 1992 until 1995 he was President of
Phelps Dodge International Corporation. Age 51.
Marie L. Knowles Mrs. Knowles has been a Phelps Dodge director since
ARCO 1994. She has been Executive Vice President and
333 South Hope Street Chief Financial Officer of Atlantic Richfield
Los Angeles, CA 90071 Company (diversified energy company) since 1996.
From 1993 until 1996 she was Senior Vice President
of Atlantic Richfield Company, and President of
ARCO Transportation Company, a former subsidiary of
Atlantic Richfield Company. From 1990 to 1993 she
was Vice President and Controller of Atlantic
Richfield Company. Mrs. Knowles is a director of
Vastar Resources, Inc., URS Corporation and America
West Holdings Corporation. Age 52.
Gordon R. Parker Mr. Parker has been a Phelps Dodge director since
10101 East Dry Creek Road 1995. He was Chairman of Newmont Mining Corporation
Englewood, CO 80112 from 1986 until his retirement in 1994. He was
Chief Executive Officer from 1985 until 1993. Mr.
Parker is a director of Caterpillar, Inc., Gold
Fields of South Africa, Gold Fields Limited and The
Williams Companies, Inc. Age 63.
Ramiro G. Peru Mr. Peru has been Chief Financial Officer of Phelps
Phelps Dodge Corporation Dodge since May 1999 and has been a Senior Vice
2600 North Central Avenue President since 1997. He previously was appointed
Phoenix, AZ 85004-3014 Vice President of Phelps Dodge Mining Company in
1993 and Vice President and Treasurer of Phelps
Dodge in 1995.
</TABLE>
A-3
<PAGE> 122
<TABLE>
<CAPTION>
POSITION WITH PHELPS DODGE; PRINCIPAL
OCCUPATION OR EMPLOYMENT; 5-YEAR
NAME AND BUSINESS ADDRESS EMPLOYMENT HISTORY
- --------------------------------------------- ---------------------------------------------------
<S> <C>
Timothy R. Snider Mr. Snider has been a Senior Vice President of
Phelps Dodge Corporation Phelps Dodge since 1998. He is also President of
2600 North Central Avenue Phelps Dodge Mining Company. Before becoming Senior
Phoenix, AZ 85004-3014 Vice President, he was a Vice President of Phelps
Dodge, a position he held since 1997. He was Vice
President, Arizona operations, of Phelps Dodge
Mining Company. He previously served as President
of Phelps Dodge Morenci, Inc.
David L. Pulatie Mr. Pulatie joined Phelps Dodge as Senior Vice
Phelps Dodge Corporation President -- Human Resources in March 1999. Before
2600 North Central Avenue that, he was a Senior Vice President of Motorola
Phoenix, AZ 85004-3014 Inc.
S. David Colton Mr. Colton has been Vice President and General
Phelps Dodge Corporation Counsel of Phelps Dodge since April 1998. Before
2600 North Central Avenue that, he was Vice President and Counsel for Phelps
Phoenix, AZ 85004-3014 Dodge Exploration, a position he held since 1995.
Prior to that time, he was Senior Exploration
Counsel for the exploration and development group
of Phelps Dodge Mining Company.
</TABLE>
DIRECTORS AND EXECUTIVE OFFICERS OF CAV CORPORATION
The present directors and executive officers of CAV Corporation are set
forth below, along with their respective positions with CAV. Each of these
individuals is an executive officer of Phelps Dodge Corporation. Further
information concerning each of them is set forth above.
<TABLE>
<S> <C>
Douglas C. Yearley Director and Chairman
J. Steven Whisler Director and President
Ramiro G. Peru Director, Vice President and Treasurer
S. David Colton Director, Vice President and Secretary
</TABLE>
A-4
<PAGE> 123
SCHEDULE B
ADDITIONAL INFORMATION REGARDING PHELPS
DODGE CORPORATION'S EXPLORATION AND MINING PROPERTIES
PD MINING -- EXPLORATION & DEVELOPMENT
Our exploration group's primary objectives are to increase copper reserves
through discoveries, acquisitions and joint ventures and, where appropriate, to
diversify into other metals, minerals and geographic areas. This group operates
in more than 30 countries and maintains offices in Australia, Austria, Brazil,
Canada, Chile, Eritrea, India, Indonesia, Madagascar, Mexico, Peru, the
Philippines, South Africa, the United States and Zambia.
The 1998 exploration program continued to place emphasis on the search for
and delineation of large scale copper, gold and other base metal deposits. We
expended $42.0 million on worldwide exploration during 1998, compared with $74.1
million in 1997 and $70.7 million in 1996. Approximately 26 percent of the 1998
expenditures occurred in the United States with 19 percent being spent at our
mine sites. This compares with 33 percent in 1997 (23 percent at mine sites) and
47 percent in 1996 (33 percent at mine sites). The balance of exploration
expenditures was spent principally in Australasia, Brazil, Canada, Chile,
Mexico, Peru and Madagascar.
During 1998, exploration efforts continued at our existing copper
operations. In New Mexico, additional mine-for-leach reserves were delineated in
the Tyrone area.
On May 7, 1997, we announced plans to resume production at our Ajo copper
mine in southern Arizona where mining operations have been suspended since 1984.
Environmental permitting is continuing while the project is on hold pending an
improvement in market conditions.
Environmental permitting is in progress to advance the development of our
Dos Pobres and San Juan deposits in the Safford District in eastern Arizona. The
Dos Pobres deposit contains a total of 286 million tons of leach material with a
grade of 0.39 percent copper. The San Juan deposit contains 272 million tons of
leach material with a grade of 0.28 percent copper. Additionally, the Dos Pobres
deposit contains 330 million tons of concentrator material with a grade of 0.65
percent copper.
Internationally, our explorations group completed a feasibility study on
the Ambatovy nickel/cobalt deposit in central Madagascar. Detailed drilling in
the district, which is located 80 kilometers east of the capital city of
Antananarivo, defined mineralized material of 210 million tons at 1.1 percent
nickel and 0.1 percent cobalt. Acid consumption by the ore is low, and the ore
is amenable to high pressure acid leach extraction for nickel and cobalt. The
feasibility study indicated there was a need for the price of nickel to increase
to make the project economical.
We completed a pre-feasibility study on our 70 percent-owned Piedras Verdes
property in Sonora, Mexico, in 1998. Results indicated leachable mineralized
material of 310 million tons at 0.37 percent copper. Metallurgical testwork is
continuing.
In 1998, we formed a Brazilian joint venture company with Companhia Vale do
Rio Doce (CVRD) under the name Mineracao Serra do Sossego S.A. (Sossego). The
venture agreement required us to spend approximately $4.5 million on exploration
and related activities in order to earn a 50 percent share in the venture.
Having completed our earn-in, the mineral rights and all initial investments
were transferred into the new company in December 1998. The deposit contains an
estimated 200 million tons at 1.2 percent copper with 0.31 grams of gold per
ton. Sossego is starting the necessary work to develop a pre-feasibility study
to further define the mineralized material and determine the viability of the
project.
B-1
<PAGE> 124
ORE RESERVES
Ore reserves at each of our active copper operations and at Safford, Ajo,
Ojos del Salado and Cobre have been estimated as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ESTIMATED AT DECEMBER 31, 1998 ESTIMATED AT DECEMBER 31, 1997
---------------------------------------------- -----------------------------------------------
MILLING LEACHING MILLING LEACHING
RESERVES RESERVES PHELPS RESERVES RESERVES PHELPS
---------------- ---------------- DODGE ---------------- ----------------- DODGE
MILLION % MILLION % INTEREST MILLION % MILLION % INTEREST
TONS COPPER TONS COPPER (%) TONS COPPER TONS COPPER (%)
------- ------ ------- ------ -------- ------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Morenci.................. 475.8 0.63 2,076.9 0.22 85.0 543.3 0.68 1,628.1 0.26 85.0
Chino.................... 350.3 0.62 483.0 0.30 66.7 368.9 0.62 520.8 0.30 66.7
Tyrone................... - - 466.3 0.32 100.0 - - 455.0 0.34 100.0
Cobre.................... 133.6 0.73 98.0 0.35 100.0 N/A N/A N/A N/A -
Candelaria*.............. 456.1 0.85 - - 80.0 475.8 0.88 - - 80.0
Safford**................ 330.0 0.65 558.2 0.34 100.0 330.0 0.65 285.0 0.39 100.0
Ajo...................... 150.0 0.56 - - 100.0 150.0 0.56 - - 100.0
Ojos del Salado*......... 18.7 1.32 - - 100.0 19.7 1.32 - - 100.0
</TABLE>
- ---------------
* The Candelaria and Ojos del Salado deposits also contained, respectively,
0.006 ounces and 0.008 ounces of gold per ton in 1998 and 1997.
** Safford deposit includes Dos Pobres and San Juan reserves in 1998 and Dos
Pobres reserves in 1997.
- --------------------------------------------------------------------------------
Our estimated share of aggregate ore reserves at the above named properties
at December 31 is as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Milling reserves (billion tons)............................. 1.6 1.6 1.3 1.2 1.0
Leaching reserves (billion tons)............................ 3.2 2.5 2.2 1.8 1.7
Commercially recoverable copper (million tons).............. 14.5 13.7 12.1 12.3 10.6
</TABLE>
- --------------------------------------------------------------------------------
Ore reserves are those estimated quantities of ore that may be profitably
mined and processed for extraction of their constituent values. Estimates of our
reserves are based upon our engineering evaluations of assay values derived from
samplings of drill holes and other openings. In our opinion, the sites for such
samplings are spaced sufficiently close and the geologic characteristics of the
deposits are sufficiently well defined to render the estimates reliable. Stated
tonnages and grades of ore do not reflect waste dilution in mining or losses in
processing. Leaching reserves include copper estimated to be recoverable from
leach reserves remaining to be mined at Morenci, Chino, Tyrone, Cobre and
Safford. Commercially recoverable copper includes copper estimated to be
recoverable from milling and leaching reserves and from existing stockpiles of
leach material at Morenci, Chino, Tyrone, Cobre and Safford after taking into
consideration waste dilution and losses in processing.
B-2
<PAGE> 125
Ore reserves at each of our other mining operations and investments at
year-end 1998 are estimated as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ORE PHELPS
RESERVES % DODGE
MILLION % CALCIUM INTEREST
TONS COPPER FLUORIDE (%)
-------- ------ -------- --------
<S> <C> <C> <C> <C>
Southern Peru Copper Corporation*........................... 1.695.9 0.67 -- 13.9
Phelps Dodge Mining Limited................................. 27.9 -- 16.45 100.0
</TABLE>
- ---------------
* Southern Peru Copper Corporation deposits also contain approximately 790
million tons of leach material at a grade of 0.22 percent copper.
- --------------------------------------------------------------------------------
We hold various other properties containing mineral deposits that we
believe could be brought into production should market conditions warrant.
Permitting and significant capital expenditures would be required before
operations could commence at these properties. The deposits are estimated to
contain the following mineralized material as of December 31, 1998:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SULFIDE MATERIAL LEACH MATERIAL PHELPS
---------------- ------------------------- DODGE
MILLION % MILLION % % INTEREST
LOCATION TONS COPPER TONS COPPER NICKEL (%)
---------- ------- ------ ------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
American Mountain........................ Arizona -- -- 140 0.25 -- 85.0
Cochise.................................. Arizona -- -- 210 0.40 -- 100.0
Copper Basin............................. Arizona 70 0.53 -- -- -- 100.0
Garfield................................. Arizona -- -- 1,000 0.27 -- 85.0
Lone Star................................ Arizona -- -- 1,600 0.38 -- 100.0
Sanchez.................................. Arizona -- -- 230 0.29 -- 100.0
Western Copper........................... Arizona 530 0.55 500 0.31 -- 85.0
Piedras Verdes........................... Mexico -- -- 310 0.37 -- 70.0
Southern Peru Copper Corporation......... Peru 370 0.62 -- -- -- 13.9
Ambatovy*................................ Madagascar -- -- 210 -- 1.10 100.0
</TABLE>
- ---------------
* Ambatovy deposit also contains 0.10 percent cobalt.
** Mineralized deposit or mineralized material is a mineralized body which has
been delineated by appropriately spaced drilling and/or underground sampling
to support a sufficient tonnage and average grade of metal(s). Such a deposit
does not qualify as a reserve, until comprehensive evaluation based upon unit
cost, grade, recoveries, and other material factors conclude legal and
economic feasibility.
- --------------------------------------------------------------------------------
B-3
<PAGE> 126
The letter of election and transmittal, certificates for Cyprus Amax shares
and any other required documents should be sent or delivered by each Cyprus Amax
shareholder or his or her broker, dealer, commercial bank, trust company or
other nominee to the Exchange Agent at one of its addresses set forth below.
The Exchange Agent for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES
<TABLE>
<S> <C> <C>
By Mail: By Hand: By Overnight Delivery:
Reorganization Department Reorganization Department Reorganization Department
PO Box 3301 120 Broadway, 13 (th) Floor 85 Challenger Road
South Hackensack, NJ 07606 New York, NY 10271 Mail Stop-Reorg
Ridgefield Park, NJ 07660
By Facsimile:
(for eligible institutions
only)
Fax: (201) 296-4293
</TABLE>
Confirm Facsimile by Telephone ONLY:
(201) 296-4860
Any questions or requests for assistance or additional copies of the
prospectus, the letter of election and transmittal and the notice of guaranteed
delivery may be directed to the Information Agent or the Dealer Manager at their
respective telephone numbers and locations listed below. You may also contact
your local broker, commercial bank, trust company or nominee for assistance
concerning the offer.
The Information Agent for the Offer is:
INNISFREE M&A INCORPORATED
501 Madison Avenue, 20(th) Floor
New York, NY 10022
CALL TOLL-FREE: 1-877-750-5838
Banks and Brokers Call Collect: (212) 750-5833
The Dealer Manager for the Offer is:
MORGAN STANLEY DEAN WITTER
1585 Broadway
New York, NY 10036
(212) 761-4000
<PAGE> 1
LETTER OF ELECTION AND TRANSMITTAL
TO EXCHANGE EACH OUTSTANDING SHARE OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
CYPRUS AMAX MINERALS COMPANY
FOR 0.3500 SHARES OF COMMON STOCK
OF
PHELPS DODGE CORPORATION
OR $20.54 NET TO THE SELLER IN CASH
SUBJECT, IN EACH CASE, TO THE ELECTION AND PRORATION PROCEDURES DESCRIBED IN THE
PROSPECTUS AND THIS LETTER OF ELECTION AND TRANSMITTAL
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON OCTOBER 15, 1999, UNLESS THE OFFER IS EXTENDED.
THE EXCHANGE AGENT FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
By Mail: By Hand: By Overnight Delivery:
Reorganization Department
Reorganization Department Reorganization Department 85 Challenger Road
PO Box 3301 120 Broadway, 13(th) Floor Mail Stop-Reorg
South Hackensack, NJ 07606 New York, NY 10271 Ridgefield Park, NJ 07660
By Facsimile Transmission:
(for Eligible Institutions only)
Fax: (201) 296-4293
Confirm by Telephone:
(201) 296-4860
</TABLE>
DELIVERY OF THIS LETTER OF ELECTION AND TRANSMITTAL TO AN ADDRESS OTHER
THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE
TRANSMISSION OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
YOU MUST SIGN THIS LETTER OF ELECTION AND TRANSMITTAL WHERE INDICATED BELOW AND
COMPLETE THE SUBSTITUTE FORM W-9 PROVIDED BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF ELECTION AND TRANSMITTAL
SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF ELECTION AND TRANSMITTAL IS
COMPLETED.
This Letter of Election and Transmittal is to be completed by shareholders
if certificates for Cyprus Amax Shares (including the Cyprus Amax Rights) (as
each is defined herein) are to be forwarded herewith or, unless an Agent's
Message is utilized, if delivery of Cyprus Amax Shares are to be made by
book-entry transfer to the account maintained by the Exchange Agent at The
Depository Trust Company (the "Book-Entry Transfer Facility"), pursuant to the
procedures set forth under "The Offer -- Procedure for Tendering" in the
Prospectus. SHAREHOLDERS WILL BE REQUIRED TO TENDER ONE CYPRUS AMAX RIGHT FOR
EACH CYPRUS AMAX SHARE TENDERED IN ORDER TO EFFECT A VALID TENDER OF CYPRUS AMAX
SHARES. UNLESS THE CYPRUS AMAX DISTRIBUTION DATE (AS DEFINED IN THE PROSPECTUS)
OCCURS, A TENDER OF CYPRUS AMAX SHARES WILL CONSTITUTE A TENDER OF THE
ASSOCIATED CYPRUS AMAX RIGHTS. Shareholders who tender Cyprus Amax Shares by
book-entry transfer are referred to herein as "Book-Entry Shareholders" and
other shareholders are referred to herein as "Certificate Shareholders."
Shareholders whose certificates are not immediately available or who cannot
deliver their certificates and all other documents required hereby to the
Exchange Agent on or prior to the Expiration Date (as defined in the
Prospectus), or who cannot comply with the book-entry transfer procedures on a
timely basis, may nevertheless tender their Cyprus Amax Shares according to the
guaranteed delivery procedures set forth under "The Offer -- Procedure for
Tendering" in the Prospectus. See Instruction 2. DELIVERY OF DOCUMENTS TO A
BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT
FOR THIS OFFER (AS DEFINED HEREIN).
<PAGE> 2
BOX A: ELECTION
(SEE GENERAL INSTRUCTIONS 2, 12 AND 13)
- --------------------------------------------------------------------------------
Please list the number of Cyprus Amax Shares
for which you wish to make the following elections: __________
- --------------------------------------------------------------------------------
Number of Cyprus Amax Shares for which you are electing to receive
cash: __________
- --------------------------------------------------------------------------------
Number of Cyprus Amax Shares for which you are electing to receive
Phelps Dodge Common Stock: __________
- --------------------------------------------------------------------------------
*Number of Cyprus Amax Shares for which you are not making any
election: __________
- --------------------------------------------------------------------------------
Total Number of Cyprus Amax Shares held by you: __________
* If you previously tendered your shares pursuant to the prospectus dated
September 2, 1999, you will be deemed not to have made an election. Such
shareholders must properly withdraw and re-tender their shares in order to
make an election. If you tendered pursuant to our amended offer (prospectus
dated September 22, 1999), you need not take any further action unless you
wish to make or change any cash or stock election.
[ ] CHECK HERE IF CYPRUS AMAX SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s)
-----------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
---------------------------------------------------------------------
Name of Institution which Guaranteed Delivery
--------------------------------------------------------------------------
[ ] CHECK HERE IF CYPRUS AMAX SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE ACT WITH A BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
DTC Account Number
-----------------------------------------------------------------------------
Transaction Code Number
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF CYPRUS AMAX SHARES TENDERED
- ------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN EXACTLY AS NAME(S) CYPRUS AMAX SHARES TENDERED
APPEAR(S) ON CERTIFICATE(S) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ------------------------------------------------------------------------------------------------------------------------
NUMBER OF
CYPRUS AMAX
SHARES CYPRUS AMAX
CERTIFICATE EVIDENCED BY SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
Total Cyprus
Amax Shares
- ------------------------------------------------------------------------------------------------------------------------
* Need not be completed by shareholders delivering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Cyprus Amax Shares evidenced by a certificate(s) delivered
to the Exchange Agent are being tendered. See Instruction 4.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby delivers to CAV Corporation, a Delaware corporation
and a wholly owned subsidiary of Phelps Dodge Corporation, a New York
corporation ("Phelps Dodge"), the above-described shares of common stock, no par
value (each, an "Cyprus Amax Share" and, collectively, the "Cyprus Amax
Shares"), of Cyprus Amax Minerals Company, a Delaware corporation ("Cyprus
Amax"), including the associated preferred share purchase rights (each, an
"Cyprus Amax Right" and, collectively, the "Cyprus Amax Rights") issued pursuant
to the Rights Agreement, dated as of February 28, 1999, as amended, between
Cyprus Amax and The Bank of New York, as Rights Agent, pursuant to Phelps
Dodge's offer to exchange 0.2203 shares of common stock, par value $6.25 per
share, of Phelps Dodge (the "Phelps Dodge Common Shares") plus $7.61176875 net
to the seller in cash for each outstanding Cyprus Amax Share, on a fully
prorated basis, subject, in each case, to the election and allocation procedures
and upon the terms and subject to the conditions set forth in the Prospectus
dated October 1, 1999 (the "Prospectus"), receipt of which is hereby
acknowledged, and in this Letter of Election and Transmittal (which together
with the Prospectus constitutes the "Offer"). The undersigned elects to have
each of such Cyprus Amax Share converted pursuant to one or more of the
following three election options, in the manner indicated in Box A above:
(A) CASH ELECTION: The right to receive cash equal to $20.54;
(B) STOCK ELECTION: The right to receive 0.3500 Phelps Dodge Shares;
or
(C) NO ELECTION: The right not to make any election.
Unless the context otherwise requires and unless and until the Cyprus Amax
Rights are redeemed, all references to Cyprus Amax Shares shall include the
associated Cyprus Amax Rights.
Upon the terms and subject to the conditions of the Offer, subject to, and
effective upon, acceptance of the Cyprus Amax Shares tendered herewith in
accordance with the terms of the Offer, the undersigned hereby sells, assigns
and transfers to, or upon the order of, Phelps Dodge, all right, title and
interest in and to all of the Cyprus Amax Shares that are being tendered hereby
and any and all Cyprus Amax Shares and other securities issued or issuable in
respect thereof on or after September 2, 1999 (collectively, "Distributions"),
and appoints the Exchange Agent the true and lawful agent and attorney-in-fact
of the undersigned with respect to such Cyprus Amax Shares (and any
Distributions), (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to (a) deliver such Cyprus Amax Share Certificates
(as defined herein) (and any Distributions) or transfer ownership of such Cyprus
Amax Shares (and any Distributions) on the account books maintained by a
Book-Entry Transfer Facility, together in either such case with all accompanying
evidences of transfer and authenticity, to or upon the order of Phelps Dodge,
(b) present such Cyprus Amax Shares (and any Distributions) for transfer on the
books of Cyprus Amax and (c) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Cyprus Amax Shares (and any
Distributions), all in accordance with the terms and the conditions of the
Offer.
THE UNDERSIGNED UNDERSTANDS THAT STOCKHOLDERS WILL BE REQUIRED TO TENDER
ONE CYPRUS AMAX RIGHT FOR EACH CYPRUS AMAX SHARE TENDERED IN ORDER TO EFFECT A
VALID TENDER OF CYPRUS AMAX SHARES. UNLESS THE CYPRUS AMAX DISTRIBUTION DATE (AS
DEFINED IN THE PROSPECTUS) OCCURS, A TENDER OF CYPRUS AMAX SHARES WILL
CONSTITUTE A TENDER OF THE ASSOCIATED CYPRUS AMAX RIGHTS. SEE INSTRUCTION 10.
<PAGE> 4
The undersigned hereby irrevocably appoints the designees of Phelps Dodge,
and each of them, the attorneys-in-fact and proxies of the undersigned, each
with full power of substitution, to vote in such manner as each such attorney
and proxy or any substitute thereof shall deem proper in the sole discretion of
such attorney-in-fact and proxy or such substitute, and otherwise act (including
pursuant to written consent) with respect to all of the Cyprus Amax Shares
tendered hereby (and any Distributions) which have been accepted by Phelps Dodge
prior to the time of such vote or action, which the undersigned is entitled to
vote at any meeting of shareholders (whether annual or special and whether or
not an adjourned meeting), of Cyprus Amax or otherwise. This proxy and power of
attorney is coupled with an interest in the Cyprus Amax Shares and is
irrevocable and is granted in consideration of, and is effective upon, the
acceptance of such Cyprus Amax Shares (and any Distributions) by Phelps Dodge in
accordance with the terms of the Offer. Such acceptance for exchange shall
revoke any other proxy granted by the undersigned at any time with respect to
such Cyprus Amax Shares (and any Distributions) and no subsequent proxies will
be given (or, if given, will not be deemed effective) with respect thereto by
the undersigned. The undersigned understands that, in order for Cyprus Amax
Shares to be deemed validly tendered immediately upon Phelps Dodge's acceptance
of such Cyprus Amax Shares (and any Distributions) for exchange, Phelps Dodge or
its designee must be able to exercise full voting rights with respect to such
Cyprus Amax Shares (and any Distributions).
The undersigned understands that each election is subject to certain terms,
conditions and limitations that have been set forth in the Prospectus.
The undersigned acknowledges that the Offer provides for proration if, as a
result of elections made by Cyprus Amax shareholders, either the fixed amount of
cash or aggregate number of Phelps Dodge Common Shares would otherwise be
exceeded. In such a case, the undersigned understands that the undersigned may
receive a combination of cash and Phelps Dodge Common Shares that differs from
the election(s) made in Box A.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Cyprus Amax
Shares (and any Distributions) tendered hereby and that when the same are
accepted for exchange by Phelps Dodge, Phelps Dodge will acquire good,
marketable and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances, and the same will not be subject to any
adverse claim. The undersigned will, upon request, execute and deliver any
additional documents deemed by the Exchange Agent or Phelps Dodge to be
necessary or desirable to complete the sale, assignment and transfer of the
Cyprus Amax Shares (and any Distributions) tendered hereby. In addition, the
undersigned shall promptly remit and transfer to the Exchange Agent for the
account of Phelps Dodge any and all Distributions in respect of the Cyprus Amax
Shares tendered hereby, accompanied by appropriate documentation of transfer.
All authority herein conferred or agreed to be conferred shall not be
affected by and shall survive the death or incapacity of the undersigned, and
any obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, successor and assigns of the undersigned. Subject to
the withdrawal rights set forth under "The Offer -- Withdrawal Rights" in the
Prospectus, the tender of Cyprus Amax Shares hereby made is irrevocable.
The undersigned understands that tenders of Cyprus Amax Shares pursuant to
any one of the procedures described under "The Offer -- Procedure for Tendering"
in the Prospectus and in the instructions hereto and acceptance of such Cyprus
Amax Shares will constitute a binding agreement between the undersigned and
Phelps Dodge upon the terms and subject to the conditions set forth in the
Offer.
Unless otherwise indicated herein under "Special Issuance Instructions,"
please issue the shares of Phelps Dodge Common Shares and/or a check for cash,
in the name of and/or return any certificates for Cyprus Amax Shares not
tendered or not accepted for exchange in the name(s) of the registered holder(s)
appearing under "Description of Cyprus Amax Shares Tendered." Similarly, unless
otherwise indicated above under "Special Delivery Instructions," please mail the
Phelps Dodge Common Shares and/or a check for cash, and cash in lieu of
fractional Phelps Dodge Common Shares and/or return any certificates for Cyprus
Amax Shares not tendered or not accepted for exchange (and accompanying
documents, as appropriate) to the address(es) of the registered holder(s)
appearing above under "Description of Cyprus Amax Shares Tendered." In the event
that both the Special Delivery Instructions and the Special Issuance
Instructions are completed, please issue the Phelps Dodge Common Shares and/or a
check for cash, and/or issue any certificates for Cyprus Amax Shares not so
tendered or accepted in the name of, and deliver said certificates and/or return
such certificates to, the person or persons so indicated. The undersigned
recognizes that Phelps Dodge has no obligation to transfer any Cyprus Amax
Shares from the name of the registered holder thereof if Phelps Dodge does not
accept any of the Cyprus Amax Shares so tendered.
<PAGE> 5
------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificate(s) for Cyprus Amax Shares not
tendered or not accepted and/or the Phelps Dodge Common Shares, cash, or a
combination of cash and Phelps Dodge Common Shares are to be issued in the
name of someone other than the undersigned.
Issue Phelps Dodge Common Shares, cash, or a combination of cash and
Phelps Dodge Common Shares and/or certificate(s) to:
Name
----------------------------------------------------
(PLEASE TYPE OR PRINT)
Address
--------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
------------------------------------------------------------
------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificate(s) for Cyprus Amax Shares not
tendered or not accepted and/or the Phelps Dodge Common Shares, cash, or a
combination of cash and Phelps Dodge Common Shares are to be sent to
someone other than the undersigned, or to the undersigned at an address
other than that shown above.
Mail Phelps Dodge Common Shares and/or certificate(s), cash, or a
combination of cash and Phelps Dodge Common Shares to:
Name
----------------------------------------------------
(PLEASE TYPE OR PRINT)
Address
--------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
------------------------------------------------------------
<PAGE> 6
IMPORTANT
SHAREHOLDERS SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S) OF STOCKHOLDER(S)
Dated:
- --------------------------- , 1999
(Must be signed by registered holder(s) exactly as name(s) appear(s) on stock
certificate(s) or on a security position listing or by person(s) authorized to
become registered holder(s) by certificate(s) and documents transmitted
herewith. If signature is by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, please set forth full title and see Instruction 5.)
Name(s):------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (Full Title)
----------------------------------------------------------------
Address:
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
-----------------------------------------------------
Tax Identification or Social Security No.:
- ---------------------------------------------------------------------------
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
FOR USE BY ELIGIBLE INSTITUTIONS ONLY,
PLACE MEDALLION GUARANTEE IN SPACE BELOW
Authorized Signature:
----------------------------------------------------------------
Name: --------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Address:
-------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Name of Firm:
---------------------------------------------------------------------
Area Code and Telephone Number:
-----------------------------------------------------
Dated:
- --------------------------- , 1999
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Election and Transmittal must be guaranteed by a
financial institution (including most banks, savings and loan associations and
brokerage houses) which is a participant in the Securities Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature Program or
the Stock Exchange Medallion Program (an "Eligible Institution"). Signatures on
this Letter of Election and Transmittal need not be guaranteed (i) if this
Letter of Election and Transmittal is signed by the registered holder(s) of the
Cyprus Amax Shares (which term, for purposes of this document, shall include any
participant in the Book-Entry Transfer Facility whose name appears on a security
position listing as the owner of Cyprus Amax Shares) tendered herewith and such
holder(s) have not completed the instruction entitled "Special Issuance
Instructions" on this Letter of Election and Transmittal or (ii) if such Cyprus
Amax Shares are tendered for the account of an Eligible Institution. See
Instruction 5.
2. DELIVERY OF LETTER OF ELECTION AND TRANSMITTAL AND CERTIFICATES OR
BOOK-ENTRY CONFIRMATIONS. This Letter of Election and Transmittal is to be used
either if certificates are to be forwarded herewith or, unless an Agent's
Message is utilized, if tenders are to be made pursuant to the procedures for
tender by book-entry transfer set forth in "The Offer -- Procedure for
Tendering" in the Prospectus. Certificates for all physically tendered Cyprus
Amax Shares ("Cyprus Amax Share Certificates"), or confirmation of any
book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer
Facility of Cyprus Amax Shares tendered by book-entry transfer ("Book-Entry
Confirmation"), as well as this Letter of Election and Transmittal or facsimile
thereof, properly completed and duly executed with any required signature
guarantees, and any other documents required by this Letter of Election and
Transmittal, must be received by the Exchange Agent at one of its addresses set
forth herein on or prior to the Expiration Date (as defined in the Prospectus).
Shareholders whose certificates are not immediately available or who cannot
deliver their certificates and all other required documents to the Exchange
Agent on or prior to the Expiration Date or who cannot complete the procedures
for book-entry transfer on a timely basis may nevertheless tender their Cyprus
Amax Shares by properly completing and duly executing a Notice of Guaranteed
Delivery pursuant to the guaranteed delivery procedures set forth under "The
Offer -- Procedure for Tendering" in the Prospectus. Pursuant to such
procedures: (i) such tender must be made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed Delivery
substantially in the form made available by Phelps Dodge must be received by the
Exchange Agent on or prior to the Expiration Date; and (iii) the Cyprus Amax
Share Certificates for all tendered Cyprus Amax Shares (or a Book-Entry
Confirmation), in proper form for transfer, together with a properly completed
and duly executed Letter of Election and Transmittal (or facsimile thereof) with
any required signature guarantees (or, in the case of a book-entry delivery, an
Agent's Message) and all other documents required by this Letter of Election and
Transmittal, must be received by the Exchange Agent within three New York Stock
Exchange, Inc. trading days after the date of execution of such Notice of
Guaranteed Delivery.
IF CYPRUS AMAX SHARE CERTIFICATES ARE FORWARDED SEPARATELY TO THE EXCHANGE
AGENT, A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF ELECTION AND TRANSMITTAL
MUST ACCOMPANY EACH SUCH DELIVERY.
THE METHOD OF DELIVERY OF CYPRUS AMAX SHARE CERTIFICATES AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY,
IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
No alternative, condition or contingent tenders will be accepted and no
fractional Cyprus Amax Shares will be accepted. All tendering shareholders, by
execution of this Letter of Election and Transmittal (or facsimile thereof),
waive any right to receive any notice of the acceptance of their Cyprus Amax
Shares for exchange.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Cyprus Amax Shares should be listed on
a separate schedule attached hereto.
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY
BOOK-ENTRY TRANSFER). If fewer than all the Cyprus Amax Shares evidenced by any
certificate submitted are to be tendered, fill in the number of Cyprus Amax
Shares which are to be tendered in the box entitled "Number of Cyprus Amax
Shares Tendered." In such cases, new certificate(s) for the remainder of the
Cyprus Amax Shares that were evidenced by your old certificate(s) will be sent
to you, unless otherwise provided in the appropriate box on this Letter of
Election and Transmittal, as soon as practicable after the Expiration Date. All
Cyprus Amax Shares represented by certificates delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated.
<PAGE> 8
5. SIGNATURES ON LETTER OF ELECTION AND TRANSMITTAL; STOCK POWERS AND
ENDORSEMENTS. If this Letter of Election and Transmittal is signed by the
registered holder(s) of the Cyprus Amax Shares tendered hereby, the signature(s)
must correspond with the name(s) as written on the face of the certificates
without alteration, enlargement or any change whatsoever.
If any of the Cyprus Amax Shares tendered hereby are owned of record by two
or more joint owners, all such owners must sign this Letter of Election and
Transmittal.
If any of the tendered Cyprus Amax Shares are registered in different names
on several certificates, it will be necessary to complete, sign and submit as
many separate Letters of Election and Transmittal as there are different
registrations of certificates.
If this Letter of Election and Transmittal or any certificates or stock
powers are signed by trustees, executors, administrators, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and proper evidence
satisfactory to Phelps Dodge of their authority so to act must be submitted.
If this Letter of Election and Transmittal is signed by the registered
holder(s) of the Cyprus Amax Shares listed and transmitted hereby, no
endorsements of certificates or separate stock powers are required unless Phelps
Dodge Common Share or certificates for Cyprus Amax Shares not tendered or
accepted are to be issued in the name of a person other than the registered
holder(s). Signatures on such certificates or stock powers must be guaranteed by
an Eligible Institution.
If this Letter of Election and Transmittal is signed by a person other than
the registered holder of the certificate(s) listed, the certificate(s) must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name or names of the registered holder or holders appear on the
certificate(s). Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
6. STOCK TRANSFER TAXES. Phelps Dodge will pay or cause to be paid any
stock transfer taxes with respect to the transfer and sale of Cyprus Amax Shares
to it or its order pursuant to the Offer. If, however, delivery of the
consideration in respect of the Offer is to be made to, or (in the circumstances
permitted hereby) if certificates for Cyprus Amax Shares not tendered or
accepted are to be registered in the name of, any person other than the
registered holder, or if tendered certificates are registered in the name of any
person other than the person(s) signing this Letter of Election and Transmittal,
the tendering holder must provide satisfactory evidence of the payment of any
applicable transfer taxes (whether imposed on the registered holder or such
person) payable on account of the transfer to such person prior to the delivery
of the consideration pursuant to the Offer. Except as provided in this
Instruction 6, it will not be necessary for transfer tax stamps to be affixed to
the certificates listed in this Letter of Election and Transmittal.
7. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If certificates for Phelps
Dodge Common Shares and/or a check for cash, and/or certificates for Cyprus Amax
Shares not tendered or not accepted for exchange are to be issued in the name of
a person other than the person(s) signing this Letter of Election and
Transmittal or if certificates for Phelps Dodge Common Shares and/or a check for
cash, and cash in lieu of fractional Phelps Dodge Common Shares and/or
certificates for Cyprus Amax Shares not tendered or not accepted for exchange
are to be mailed to someone other than the person(s) signing this Letter of
Election and Transmittal or to an address other than that shown above, the
appropriate boxes on this Letter of Election and Transmittal should be
completed. Shareholders tendering Cyprus Amax Shares by book-entry transfer may
request that Cyprus Amax Shares not accepted pursuant to the Offer be credited
to such account maintained at a Book-Entry Transfer Facility as such stockholder
may designate hereon. If no such instructions are given, such Cyprus Amax Shares
not accepted will be returned by crediting the account at the Book-Entry
Transfer Facility designated herein.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions or requests
for assistance may be directed to, or additional copies of the Prospectus, this
Letter of Election and Transmittal, the Notice of Guaranteed Delivery and other
exchange offer materials may be obtained from, the Information Agent or the
Dealer Manager at their respective addresses set forth below or from your
broker, dealer, commercial bank or trust company.
<PAGE> 9
9. SUBSTITUTE FORM W-9. Each tendering shareholder is required to provide
the Exchange Agent with a correct Taxpayer Identification Number ("TIN"),
generally the stockholder's social security or federal employer identification
number, on Substitute Form W-9 below. In addition, payments of cash in lieu of
fractional shares of Phelps Dodge Common Shares that are made to such
shareholder with respect to Cyprus Amax Shares accepted pursuant to the Offer
may be subject to backup withholding of 31%. The box in Part 3 of the form may
be checked if the tendering shareholder has not been issued a TIN and has
applied for a number or intends to apply for a number in the near future. If the
box in Part 3 is checked and the Exchange Agent is not provided with a TIN
within 60 days, the Exchange Agent must withhold 31% of all payments of cash
thereafter until a TIN is provided to the Exchange Agent. In addition, the
Exchange Agent may backup withhold during the 60 day period under certain
circumstances. The shareholder is required to give the Exchange Agent the social
security number or employer identification number of the record owner of the
Cyprus Amax Shares or of the last transferee appearing on the stock powers
attached to, or endorsed on, the Cyprus Amax Shares. If the Cyprus Amax Shares
are in more than one name or are not in the name of the actual owner, consult
the enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 for additional guidance on which number to report.
10. TENDER OF CYPRUS AMAX RIGHTS AFTER CYPRUS AMAX'S DISTRIBUTION
DATE. If the Cyprus Amax Distribution Date occurs and separate certificates
representing the Cyprus Amax Rights are distributed by Cyprus Amax or the Rights
Agent to holders of Cyprus Amax Shares prior to the time a holder's Cyprus Amax
Shares are tendered pursuant to the Offer, certificates representing a number of
Cyprus Amax Rights equal to the number of Cyprus Amax Shares tendered must be
delivered to the Exchange Agent, or, if available, a Book-Entry Confirmation
received by the Exchange Agent with respect thereto, in order for such Cyprus
Amax Shares to be validly tendered. If the Cyprus Amax Distribution Date occurs
and separate certificates representing the Cyprus Amax Rights are not
distributed prior to the time Cyprus Amax Shares are tendered pursuant to the
Offer, Cyprus Amax Rights may be tendered prior to a stockholder receiving the
certificates for Cyprus Amax Rights by use of the guaranteed delivery procedures
described under "The Offer -- Procedure for Tendering" in the Prospectus. If
Cyprus Amax Rights certificates are distributed but are not available to a
shareholder prior to the time Cyprus Amax Shares are tendered pursuant to the
Offer, a tender of Cyprus Amax Shares constitutes an agreement by the tendering
shareholder to deliver to the Exchange Agent pursuant to such guaranteed
delivery procedures, prior to the expiration of the period to be specified in
the Notice of Guaranteed Delivery and the related Letter of Election and
Transmittal for delivery of Cyprus Amax Rights certificates or a Book-Entry
Confirmation for Cyprus Amax Rights (the "Cyprus Amax Rights Delivery Period"),
Cyprus Amax Rights certificates representing a number of Cyprus Amax Rights
equal to the number of Cyprus Amax Shares tendered. Phelps Dodge reserves the
right to require that it receive such Cyprus Amax Rights certificates (or a
Book-Entry Confirmation with respect to such Cyprus Amax Rights) prior to
accepting Cyprus Amax Shares for exchange.
Nevertheless, Phelps Dodge will be entitled to accept for exchange Cyprus
Amax Shares tendered by a stockholder prior to receipt of the Cyprus Amax Rights
certificates required to be tendered with such Cyprus Amax Shares or a Book-
Entry Confirmation with respect to such Cyprus Amax Rights and either (i)
subject to complying with applicable rules and regulations of the Securities and
Exchange Commission, withhold payment for such Cyprus Amax Shares pending
receipt of the Cyprus Amax Rights certificates or a Book-Entry Confirmation for
such Cyprus Amax Rights or (ii) exchange Cyprus Amax Shares accepted for
exchange pending receipt of the Cyprus Amax Rights certificates or a Book-Entry
Confirmation for such Cyprus Amax Rights in reliance upon the guaranteed
delivery procedures. In addition, after expiration of the Cyprus Amax Rights
Delivery Period, Phelps Dodge may instead elect to reject as invalid a tender of
Cyprus Amax Shares with respect to which Cyprus Amax Rights certificates or a
Book-Entry Confirmation for an equal number of Cyprus Amax Rights have not been
received by the Exchange Agent. Any determination by Phelps Dodge to make
payment for Cyprus Amax Shares in reliance upon such guaranteed delivery
procedure or, after expiration of the Cyprus Amax Rights Delivery Period, to
reject a tender as invalid, shall be made, subject to applicable law, in the
sole and absolute discretion of Phelps Dodge.
11. LOST OR DESTROYED CERTIFICATES. If any Cyprus Amax Share
certificate(s) representing Cyprus Amax Shares has been lost or destroyed, the
holders should promptly notify Cyprus Amax's Transfer Agent. The holders will
then be instructed as to the procedure to be followed in order to replace the
Cyprus Amax Share certificates. This Letter of Election and Transmittal and
related documents cannot be processed until the procedures for replacing lost or
destroyed Cyprus Amax Share certificates have been followed.
12. REVOCATION OR CHANGE OF ELECTION. An election is irrevocable, except
that Cyprus Amax Shares tendered pursuant to the Offer may be withdrawn at any
time prior to the Expiration Date, and, unless previously accepted pursuant to
the Offer, may also be withdrawn at any time after November 2, 1999. After an
effective withdrawal you may change your election by submitting to the Exchange
Agent a completed replacement of this document and any other documents required
by the Offer for properly tendering Cyprus Amax Shares prior to the Expiration
Date.
<PAGE> 10
13. ELECTION PROCEDURES AND PRORATION. To properly complete Box A you
must indicate the number of your Cyprus Amax Shares for which you are electing
to receive cash, stock, for which you are not making any election and your name
and address must be set forth in the column under the heading "Name and Address
of Registered Holder(s)" and either (i) the number of each Cyprus Amax Share
certificate that you are surrendering with this document must be written in the
column under the heading "Certificate Number" or (ii) if you are using the
guarantee of delivery procedures, the number of shares represented by your stock
certificates to be delivered pursuant to such procedures must be written in the
column under the heading "Number of Shares Represented by Certificate."
If the elections by Cyprus Amax shareholders result in an oversubscription
of either the cash consideration or the stock consideration, the procedures for
proration set forth in the Prospectus will be followed by the Exchange Agent.
Accordingly, there can be no assurance that your election will result in your
receipt of your desired form or mix of consideration. However, in all events,
the desired form and mix of consideration you will receive will be closer to
your desired choice than if you had made no election. If the elections by Cyprus
Amax shareholders result in an oversubscription of either the cash consideration
or the stock consideration and you do not make any election, you will receive
whatever consideration is not oversubscribed.
IMPORTANT: THIS LETTER OF ELECTION AND TRANSMITTAL OR A FACSIMILE COPY
HEREOF (TOGETHER WITH CYPRUS AMAX SHARE CERTIFICATES OR CONFIRMATION OF BOOK-
ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR THE NOTICE OF GUARANTEED
DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION
DATE.
IMPORTANT TAX INFORMATION
Certain shareholders (including, among others, corporations and certain
foreign individuals) are not subject to backup withholding. In order for a
foreign individual to qualify as an exempt recipient, that stockholder must
submit a Form W-8 or successor form, signed under penalties of perjury,
attesting to that individual's exempt status. A Form W-8 can be obtained from
the Exchange Agent. See the enclosed Guidelines for Certificate of Taxpayer
Identification Number on Substitute Form W-9 for additional instructions.
Backup withholding is not an additional tax. Rather, the tax liability of
person subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the Internal Revenue Service.
<PAGE> 11
TO BE COMPLETED BY ALL TENDERING SHAREHOLDERS
(SEE INSTRUCTION 9)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
PAYER'S NAME: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
- ------------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT --------------------------
FORMW-9 AND CERTIFY BY SIGNING AND DATED BELOW. SOCIAL SECURITY NUMBER(S)
OR
------------------------------
EMPLOYER IDENTIFICATION NUMBER(S)
----------------------------------------------------------------------------------------------
DEPARTMENT OF
THE TREASURY PART 2 -- CERTIFICATION -- UNDER PENALTIES OF PERJURY, I PART 3
INTERNAL REVENUE CERTIFY THAT:
SERVICE AWAITING TIN [ ]
PAYER'S REQUEST FOR TAXPAYER (1) The number shown on this form is my correct Taxpayer
IDENTIFICATION Identification Number (or I am waiting for a number
NUMBER ("TIN") to be issued to me); and
(2) I am not subject to backup withholding either
because (i) I am exempt from backup withholding,
(ii) I have not been notified by the Internal Reve-
nue Service (the "IRS") that I am subject to backup
withholding as a result of a failure to report all
interest or dividends, or (iii) the IRS has noti-
fied me that I am no longer subject to backup
withholding.
- ------------------------------------------------------------------------------------------------------------------------------
Certificate Instructions -- You must cross out item (2) in Part 2 if you have been notified by the IRS that you are
currently subject to backup withholding because of under-reporting interest or dividends on your tax return. However, if
after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS
stating that you are no longer subject to backup withholding, do not cross out item (2).
- ------------------------------------------------------------------------------------------------------------------------------
SIGNATURE: -------------------------------------------------- DATE: --------------
NAME (PLEASE PRINT): ------------------------------------------------------------
ADDRESS: ------------------------------------------------------------------------
CITY, STATE AND ZIP CODE: -------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A PENALTY IMPOSED
BY THE INTERNAL INCOME SERVICE AND IN BACKUP WITHHOLDING OF 31% OF ANY
PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED
GUIDELINES FOR CERTIFICATIONS OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF SUBSTITUTE FORM W-9
<PAGE> 12
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer Identification Number
has not been issued to me, and either (i) I have mailed or delivered an
application to receive a Taxpayer Identification Number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (ii)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a Taxpayer Identification Number within 60 days, 31% of all
reportable payments made to me thereafter will be withheld until I provide a
Taxpayer Identification Number.
<TABLE>
<S> <C>
- ------------------------------------------------------------ ---------------------------------
Signature Date
Name (Please Print):
- ------------------------------------------------------------
</TABLE>
The Information Agent for this Offer is:
Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor
New York, New York 10022
Bankers and Brokers Call Collect
(212)-750-5833
All Others Call Toll Free
1-877-750-5838
The Dealer Manager for the Offer is:
MORGAN STANLEY & CO. INCORPORATED
1585 Broadway
New York, NY 10036
(212) 761-4000
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
CYPRUS AMAX MINERALS COMPANY
TO
PHELPS DODGE CORPORATION
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
As set forth under "The Offer -- Procedure for Tendering" in the
Prospectus, dated October 1, 1999 (the "Prospectus"), this form or one
substantially equivalent hereto must be used to accept the Offer (as defined
herein) if certificates for shares of common stock, no par value (each, a
"Cyprus Amax Share" and, collectively, the "Cyprus Amax Shares"), of Cyprus Amax
Minerals Company, a Delaware corporation ("Cyprus Amax"), including the
associated preferred share purchase rights (each, an "Cyprus Amax Right" and,
collectively, the "Cyprus Amax Rights") issued pursuant to the Cyprus Amax
Rights Agreement, dated as of February 28, 1999, as amended, between Cyprus Amax
and The Bank of New York, as Rights Agent, are not immediately available, if the
certificates and all other required documents cannot be delivered to the
Exchange Agent prior to the Expiration Date (as defined in the Prospectus), or
if the procedure for book-entry transfer cannot be completed on a timely basis.
Such form may be delivered by hand or transmitted by telegram, facsimile
transmission or mail to the Exchange Agent, and must include a guarantee by an
Eligible Institution (as defined in the Prospectus). See "The Offer -- Procedure
for Tendering" in the Prospectus.
The Exchange Agent for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
By Mail: By Hand: By Overnight Delivery:
Reorganization Department Reorganization Department Reorganization Department
PO Box 3301 120 Broadway, 13(th) Floor 85 Challenger Road
South Hackensack, NJ 07606 New York, NY 10271 Mail Stop-Reorg
Ridgefield Park, NJ 07660
</TABLE>
By Facsimile Transmission:
(for Eligible Institutions only)
Fax: (201) 296-4293
Confirm by Telephone:
(201) 296-4860
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Election and Transmittal is required to be guaranteed by an Eligible
Institution under the instructions thereto, such signature guarantee must appear
in the applicable space provided in the signature box on the Letter of Election
and Transmittal.
<PAGE> 2
LADIES AND GENTLEMEN:
The undersigned hereby tenders to CAV Corporation, a Delaware corporation
and a wholly owned subsidiary of Phelps Dodge Corporation, upon the terms and
subject to the conditions set forth in the Prospectus dated October 1, 1999 and
in the related Letter of Election and Transmittal (which together constitute the
"Offer"), receipt of which is hereby acknowledged, the number of Cyprus Amax
Shares shown below pursuant to the guaranteed delivery procedures set forth
under "The Offer -- Procedure for Tendering" in the Prospectus.
------------------------------------------------------------
Number of Cyprus Amax Shares:
------------------------------------------------------------
Number of Cyprus Amax Shares for which you are electing to receive cash:
------------------------------------------------------------
Number of Cyprus Amax Shares for which you are electing to receive Phelps
Dodge Common Shares:
------------------------------------------------------------
Number of Cyprus Amax Shares for which you are not making any election:
------------------------------------------------------------
Account Number:
----------------------------------------
Certificate No(s). (if available):
------------------------------------------------------------
------------------------------------------------------------
If Cyprus Amax Share(s) will be tendered by book-entry transfer:
------------------------------------------------------------
Name of Tendering Institution:
------------------------------------------------------------
Account
Number:
--------------------------------------------------
at The Depository Trust Company
Date:
------------------------------------------------------
- ------------------------------------------------------------
------------------------------------------------------------
Name(s) of Record Holder(s):
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
Address(es):
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
Area Code and Telephone Number(s):
------------------------------------------------------------
Signature(s):
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
- ------------------------------------------------------------
<PAGE> 3
THE GUARANTEE BELOW MUST BE COMPLETED
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a financial institution that is a participant in the
Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Program or the Stock Exchange Medallion Program, guarantees
(a) that the above-named person(s) "own(s)" the Cyprus Amax Shares tendered
hereby within the meaning of Rule 14e-4 under the Securities Exchange Act of
1934, as amended, (b) represents that such tender complies with Rule 14e-4 and
(c) guarantees to deliver to the Exchange Agent, at one of its addresses set
forth above, certificates representing the Cyprus Amax Shares tendered hereby,
in proper form for transfer, or confirmation of book-entry transfer of such
Cyprus Amax Shares into the Exchange Agent's accounts at The Depository Trust
Company, in each case with delivery of a properly completed and duly executed
Letter of Election and Transmittal (or a facsimile copy thereof), or an Agent's
Message (as defined in the Prospectus) in the case of book-entry transfer, and
any other documents required by the Letter of Election and Transmittal, within
three New York Stock Exchange, Inc. trading days of the date hereof.
<TABLE>
<S> <C>
Name of Firm:
--------------------------------------
---------------------------------------------
AUTHORIZED SIGNATURE
Address: Title:
- --------------------------------------------- ---------------------------------------------
Name:
- --------------------------------------------- ---------------------------------------------
Zip Code Please Print or Type
Area Code and
Telephone Number:
--------------------------------- Dated: --------- , 1999
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR CYPRUS AMAX SHARES WITH THIS NOTICE.
CYPRUS AMAX SHARE CERTIFICATES SHOULD BE SENT WITH YOUR
LETTER OF ELECTION AND TRANSMITTAL.
<PAGE> 1
MORGAN STANLEY & CO. INCORPORATED
1585 BROADWAY
NEW YORK, NEW YORK 10036
AMENDED OFFER TO EXCHANGE EACH OUTSTANDING SHARE OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
CYPRUS AMAX MINERALS COMPANY
FOR 0.3500 SHARES OF COMMON STOCK
OF
PHELPS DODGE CORPORATION
OR $20.54 NET TO SELLER IN CASH
SUBJECT, IN EACH CASE, TO THE ELECTION AND PRORATION PROCEDURES DESCRIBED IN THE
PROSPECTUS AND THE RELATED LETTER OF ELECTION AND TRANSMITTAL
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON OCTOBER 15, 1999, UNLESS THE OFFER IS EXTENDED. CYPRUS AMAX SHARES THAT
ARE TENDERED PURSUANT TO THE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE
EXPIRATION OF THE OFFER.
October 1, 1999
To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
We have been appointed by Phelps Dodge Corporation, a New York corporation
("Phelps Dodge"), to act as Dealer Manager in connection with Phelps Dodge's
offer to exchange 0.2203 shares of common stock, par value $6.25 per share, of
Phelps Dodge (the "Phelps Dodge Common Shares") plus $7.61176875 net to the
seller in cash for each outstanding share of common stock, no par value (each, a
"Cyprus Amax Share" and, collectively, the "Cyprus Amax Shares"), of Cyprus Amax
Minerals Company, a Delaware corporation ("Cyprus Amax"), on a fully prorated
basis, including the associated preferred share purchase rights (each, a "Cyprus
Amax Right" and, collectively, the "Cyprus Amax Rights") issued pursuant to the
Cyprus Amax Rights Agreement, dated as of February 28, 1999, as amended, between
Cyprus Amax and The Bank of New York, as Rights Agent, upon the terms and
subject to the conditions set forth in the Prospectus, dated October 1, 1999
(the "Prospectus"), and in the related Letter of Election and Transmittal (which
together constitute the "Offer"), enclosed herewith.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THE MINIMUM TENDER
CONDITION AND THE PHELPS DODGE STOCKHOLDER APPROVAL CONDITION (IN EACH CASE AS
DEFINED IN THE PROSPECTUS). A TENDER OF CYPRUS AMAX SHARES WILL CONSTITUTE A
TENDER OF THE ASSOCIATED CYPRUS AMAX RIGHTS. SEE "THE OFFER -- CONDITIONS OF THE
OFFER" IN THE PROSPECTUS.
Phelps Dodge expressly reserves the right (subject to our merger agreement
with Cyprus Amax) to (i) extend, amend or modify the terms of the Offer in any
manner and (ii) withdraw or terminate the Offer and not accept for exchange any
Cyprus Amax Shares if any of the conditions to the Offer are not satisfied.
Shareholders will be required to tender one Cyprus Amax Right for each
Cyprus Amax Share tendered, in order to effect a valid tender of Cyprus Amax
Shares. A tender of Cyprus Amax Shares will constitute a tender of the
associated Cyprus Amax Rights. See "The Offer -- Procedure for Tendering" in the
Prospectus.
For your information and for forwarding to your clients for whom you hold
Cyprus Amax Shares registered in your name or in the name of your nominee(s), or
who hold Cyprus Amax Shares registered in their own names, we are enclosing the
following documents:
1. Prospectus dated October 1, 1999;
2. Letter of Election and Transmittal (together with accompanying
Substitute Form W-9) to be used by holders of Cyprus Amax Shares in
accepting the Offer and tendering Cyprus Amax Shares;
<PAGE> 2
3. Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Cyprus Amax Shares are not immediately available, if time
will not permit all required documents to reach the Exchange Agent prior to
the Expiration Date (as defined in the Prospectus) or if the procedure for
book-entry transfer cannot be completed on a timely basis;
4. A letter that may be sent to your clients for whose accounts you
hold Cyprus Amax Shares registered in your name or in the name of your
nominee(s), with space provided for obtaining such clients' instructions
with regard to the Offer;
5. A Schedule 14D-9 Solicitation/Recommendation Statement; and
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
Phelps Dodge will not pay any fees or commissions to any broker or dealer
or any other person (other than the fees of the Dealer Manager and the
Information Agent as described in the Prospectus) in connection with the
solicitation of tenders of Cyprus Amax Shares and Cyprus Amax Rights pursuant to
the Offer. Phelps Dodge will, however, upon request, reimburse you for customary
mailing and handling expenses incurred by you in forwarding the enclosed
materials to your clients. Phelps Dodge will pay or cause to be paid any stock
transfer taxes with respect to the transfer and sale of Cyprus Amax Shares to it
or its order pursuant to the Offer, except as otherwise provided in Instruction
6 of the Letter of Election and Transmittal.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON OCTOBER 15, 1999, UNLESS THE OFFER IS EXTENDED.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Election and Transmittal (or facsimile thereof), with any
required signature guarantees, or an Agent's Message (as defined in the
Prospectus) in connection with a book-entry transfer, and any other required
documents, should be sent to the Exchange Agent, and certificates evidencing the
tendered Cyprus Amax Shares should be delivered or such Cyprus Amax Shares
should be tendered by book-entry transfer, all in accordance with the
instructions set forth in the Letter of Election and Transmittal and the
Prospectus. If holders of Cyprus Amax Shares wish to tender Cyprus Amax Shares,
but it is impracticable for them to forward their certificates or other required
documents prior to the Expiration Date, a tender may be effected by following
the guaranteed delivery procedures specified under "The Offer -- Procedure for
Tendering" in the Prospectus.
Any inquiries you may have with respect to the Offer should be addressed to
the Dealer Manager or the Information Agent at their respective addresses and
telephone numbers set forth on the back cover page of the Prospectus.
Additional copies of the enclosed materials may be obtained from the
Information Agent, Innisfree M&A Incorporated, by calling 1-877-750-5838 (Toll
Free).
Very truly yours,
Morgan Stanley & Co. Incorporated
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON AS AN AGENT OF PHELPS DODGE, THE DEALER MANAGER, THE
EXCHANGE AGENT OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF THE
FOREGOING, OR AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR USE
ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH
THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED
THEREIN.
<PAGE> 1
AMENDED OFFER TO EXCHANGE EACH OUTSTANDING SHARE OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
CYPRUS AMAX MINERALS COMPANY
FOR 0.3500 SHARES OF COMMON STOCK
OF
PHELPS DODGE CORPORATION
OR $20.54 NET TO THE SELLER IN CASH
SUBJECT, IN EACH CASE, TO THE ELECTION AND PRORATION PROCEDURES DESCRIBED IN THE
PROSPECTUS AND THE RELATED LETTER OF ELECTION AND TRANSMITTAL.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON OCTOBER 15, 1999, UNLESS THE OFFER IS EXTENDED.
CYPRUS AMAX SHARES WHICH ARE TENDERED PURSUANT TO THE OFFER MAY BE
WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION OF THE OFFER.
To Our Clients:
Enclosed for your consideration are the Prospectus dated October 1, 1999
(the "Prospectus") and the related Letter of Election and Transmittal (which
together constitute the "Offer") in connection with the Offer by Phelps Dodge
Corporation, a New York corporation ("Phelps Dodge"), to exchange 0.2203 shares
of common stock, par value $6.25 per share, of Phelps Dodge (the "Phelps Dodge
Common Shares") plus $7.61176875 net to the seller in cash for each outstanding
share of common stock, no par value (each, a "Cyprus Amax Share" and,
collectively, the "Cyprus Amax Shares") of Cyprus Amax Minerals Company, a
Delaware corporation ("Cyprus Amax"), on a fully prorated basis, including the
associated preferred share purchase rights (each a "Cyprus Amax Right" and,
collectively, the "Cyprus Amax Rights") issued pursuant to the Cyprus Amax
Rights Agreement, dated as of February 28, 1999, as amended, between Cyprus Amax
and The Bank of New York, as Rights Agent, upon the terms and subject to the
conditions set forth in the Offer.
Shareholders whose certificates evidencing Cyprus Amax Shares ("Cyprus Amax
Share Certificates") are not immediately available or who cannot deliver their
Cyprus Amax Share Certificates and all other documents required by the Letter of
Election and Transmittal to the Exchange Agent prior to the Expiration Date (as
defined in the Prospectus) or who cannot complete the procedure for delivery by
book-entry transfer to the Exchange Agent's account at a Book-Entry Transfer
Facility (as defined in "The Offer -- Exchange of Cyprus Amax Shares; Delivery
of Phelps Dodge Common Shares and Cash" in the Prospectus) on a timely basis and
who wish to tender their Cyprus Amax Shares must do so pursuant to the
guaranteed delivery procedure described in "The Offer -- Procedure for
Tendering" in the Prospectus. See Instruction 2 of the Letter of Election and
Transmittal. Delivery of documents to a Book-Entry Transfer Facility in
accordance with the Book-Entry Transfer Facility's procedures does not
constitute delivery to the Exchange Agent.
THIS MATERIAL IS BEING FORWARDED TO YOU AS THE BENEFICIAL OWNER OF CYPRUS
AMAX SHARES HELD BY US FOR YOUR ACCOUNT BUT NOT REGISTERED IN YOUR NAME. WE ARE
THE HOLDER OF RECORD OF CYPRUS AMAX SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER
OF SUCH CYPRUS AMAX SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND
PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF ELECTION AND TRANSMITTAL IS
FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER
CYPRUS AMAX SHARES HELD BY US FOR YOUR ACCOUNT.
Accordingly, we request instructions as to whether (a) you wish to have us
tender on your behalf any or all of the Cyprus Amax Shares held by us for your
account, upon the terms and subject to the conditions set forth in the Offer,
and
<PAGE> 2
(b) what election you would like us to make on your behalf in respect of my
tendered Cyprus Amax Shares held by us for your account.
Please note the following:
1. Phelps Dodge is offering to acquire each outstanding Cyprus Amax
Share in exchange for 0.2203 Phelps Dodge Common Shares plus $7.61176875
net to the seller in cash, on a fully prorated basis.
2. The Offer is being made for all of the outstanding Cyprus Amax
Shares.
3. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on October 15, 1999, unless the Offer is extended.
4. The Offer is conditioned upon, among other things, the Minimum
Tender Condition and the Phelps Dodge Stockholder Approval Condition (in
each case as defined in the Prospectus). See "The Offer -- Conditions of
the Offer" in the Prospectus.
5. Tendering shareholders will not be obligated to pay brokerage fees
or commissions or, except as set forth in Instruction 6 of the Letter of
Election and Transmittal, stock transfer taxes on the transfer of Cyprus
Amax Shares pursuant to the Offer.
The Offer is made solely by the Prospectus dated October 1, 1999 and the
related Letter of Election and Transmittal and any amendments or supplements
thereto and is being made to all holders of Cyprus Amax Shares. The Offer is not
being made to, nor will tenders be accepted from or on behalf of, holders of
Cyprus Amax Shares in any jurisdiction in which the making or acceptance thereof
would not be in compliance with the laws of such jurisdiction. However, Phelps
Dodge may, in its sole discretion, take such action as it may deem necessary to
make the Offer in any such jurisdiction and extend the Offer to holders of
Cyprus Amax Shares in such jurisdiction. In any jurisdiction where the
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on behalf of Phelps Dodge
by Morgan Stanley & Co. Incorporated, as Dealer Manager, or one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
If you wish to have us tender any or all of your Cyprus Amax Shares, please
so instruct us by completing, executing, detaching and returning to us the
instruction form contained in this letter. An envelope in which to return your
instructions to us is enclosed. If you authorize the tender of your Cyprus Amax
Shares, all such Cyprus Amax Shares will be tendered unless otherwise indicated
in such instruction form. PLEASE FORWARD YOUR INSTRUCTIONS TO US AS SOON AS
POSSIBLE TO ALLOW US AMPLE TIME TO TENDER CYPRUS AMAX SHARES ON YOUR BEHALF
PRIOR TO THE EXPIRATION OF THE OFFER.
2
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO THE AMENDED OFFER TO EXCHANGE EACH
OUTSTANDING SHARE OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
CYPRUS AMAX INCORPORATED
FOR 0.3500 SHARES OF COMMON STOCK
OF
PHELPS DODGE CORPORATION
OR $20.54 NET TO THE SELLER IN CASH
SUBJECT, IN EACH CASE, TO THE ELECTION AND PRORATION PROCEDURES DESCRIBED IN THE
PROSPECTUS AND THE RELATED LETTER OF ELECTION AND TRANSMITTAL
The undersigned acknowledge(s) receipt of your letter and the enclosed
Prospectus, dated October 1, 1999 (the "Prospectus"), and the related enclosed
Letter of Election and Transmittal (which together constitute the "Offer")
relating to the offer by Phelps Dodge Corporation, a New York corporation
("Phelps Dodge"), to exchange 0.2203 shares of common stock, par value $6.25 per
share, of Phelps Dodge plus $7.61176875 net to the seller in cash for each
outstanding share of common stock, no par value (each, a "Cyprus Amax Share"
and, collectively, the "Cyprus Amax Shares"), of Cyprus Amax Minerals Company, a
Delaware corporation ("Cyprus Amax"), on a fully prorated basis, including the
associated preferred share purchase rights (each, an "Cyprus Amax Right" and,
collectively, the "Cyprus Amax Rights").
You are instructed to tender to CAV Corporation, a Delaware corporation and
a wholly owned subsidiary of Phelps Dodge, the number of Cyprus Amax Shares
indicated below (or, if no number is indicated below, all Cyprus Amax Shares)
that are held by you for the account of the undersigned and to make the
following elections in respect of such Cyprus Amax Share, upon the terms and
subject to the conditions set forth in the Offer.
Number of Cyprus Amax Shares to be Tendered:
- ------------------------------------------------------
Number of Cyprus Amax Shares for which
you are electing to receive cash:
Number of Cyprus Amax Shares for which
you are electing to receive Phelps Dodge Common Stock:
Number of Cyprus Amax Shares for which
you are not making any election:
Total number of Cyprus Amax Shares held by you:
Date:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGN HERE
Signature(s):
- --------------------------------------------------------------------------------
(Print Name(s)):
- --------------------------------------------------------------------------------
(Print Address(es)):
- --------------------------------------------------------------------------------
(Area Code and Telephone Number(s)):
- ---------------------------------------------------------------
(Taxpayer Identification or Social Security Number(s)):
- ----------------------------------------------
Unless otherwise indicated, it will be assumed that all of your Cyprus Amax
Shares held by us for your account are to be tendered and that you are not
making any election in respect of such Cyprus Amax Shares.
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER -- Social Security numbers have nine digits separated by two hyphens:
i.e., 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e., 00-0000000. The table below will help determine the
number to give the payer.
<TABLE>
<C> <S> <C>
- ------------------------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF --
- ------------------------------------------------------------
1. An individual's account The individual
2. TWO or more individuals (Joint The actual owner of
account) the account or, if
combined funds, any
one of the
individuals(1)
3. Husband and wife (joint account) The actual owner of
the account or, if
joint funds, either
person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. a. The usual revocable savings The grantor-
trust account (grantor is also trustee(1)
trustee)
b. So-called trust account that is The actual owner(1)
not a legal or valid trust
under state law
6. Sole proprietorship account The Owner(4)
- ------------------------------------------------------------
- ------------------------------------------------------------
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
- ------------------------------------------------------------
7. A valid trust, estate, or pension Legal entity (Do
trust not furnish the
identifying number
of the personal
representative or
trustee unless the
legal entity itself
is not designated
in the account
title.)(5)
8. Corporate The corporation
9. Partnership The partnership
10. Association, club, religious, The organization
charitable, or educational, or
other tax-exempt organization
11. A broker or registered nominee The broker or
nominee
12. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a state or
local government, school district,
or prison) that receives
agricultural program payments
- ------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the name of the owner.
(4) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, Form
W-7, Application for IRS Individual Taxpayer Identification Number or Form SS-4,
Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEE EXEMPT FROM BACKUP WITHHOLDING
Payees that may be exempt from backup withholding include the following:
- A corporation.
- A financial institution.
PAYEES THAT ARE EXEMPT FROM BACKUP WITHHOLDING INCLUDE THE FOLLOWING:
- An organization exempt from tax under Section 501(a) or an individual
retirement plan.
- --The United States or any agency or instrumentality thereof.
- A state, the District of Columbia, a possession of the United States or any
subdivision or instrumentality thereof.
- --A foreign government, a political subdivision of a foreign government or
any agency or instrumentality thereof.
- An international organization or any agency or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S., the
District of Columbia, or a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under Section 584(a).
- A trust exempt from tax under Section 664 or described in Section 4947.
- An entity registered at all times under the Investment Company Act of 1940.
- --A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident alien partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. NOTE: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt interest dividends under
section 852).
- Payments described in section 6049(b)(5) to non-resident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
JOINT FOREIGN PAYEES
Backup withholding applies unless:
1. Every joint payee provides the statement regarding foreign status; or
2. Anyone of the joint payees who has not established foreign status
supplies a TIN.
If anyone of the joint payees who has not established foreign status supplies
a TIN, that number is the TIN that must be used for purposes of backup
withholding and information reporting.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, ENTER YOUR CORRECT TAXPAYER
IDENTIFICATION NUMBER IN PART I, WRITE "EXEMPT" IN PART II AND SIGN AND DATE THE
FORM.
Certain payments other than interest, dividends and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041(a), 6045
and 6050A.
PRIVACY ACT NOTICE.--Section 6109 of the Internal Revenue Code requires most
recipients of dividend, interest or other payments to give taxpayer
identification numbers to payers who must report the payments to the IRS. The
IRS uses the numbers for identification purposes. Payers must be given the
numbers whether or not recipients are required to file tax returns. Payers must
generally withhold 31% of taxable interest, dividend and certain other payments
to a payee who does not furnish a taxpayer identification number to a payer.
Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE.
<PAGE> 1
AGREEMENT AND PLAN OF MERGER
among
PHELPS DODGE CORPORATION
CAV CORPORATION
and
CYPRUS AMAX MINERALS COMPANY
Dated as of September 30, 1999
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I
THE OFFER
Section 1.1 The Cyprus Offer..................................................2
Section 1.2 Cyprus Elections..................................................2
Section 1.3 Cyprus Action.....................................................4
Section 1.4 Parent Action.....................................................4
Section 1.5 Expiration or Termination of Offer................................5
ARTICLE II
THE CYPRUS MERGER; CLOSING
Section 2.1 The Cyprus Merger.................................................5
Section 2.2 The Closing.......................................................6
Section 2.3 Effective Time....................................................6
Section 2.4 Effects of the Cyprus Merger......................................6
Section 2.5 Directors and Officers............................................6
ARTICLE III
EFFECT OF THE CYPRUS MERGER ON THE STOCK OF
CYPRUS; EXCHANGE OF CERTIFICATES
Section 3.1 Effect on Cyprus Stock and SubC Stock.............................7
Section 3.2 Exchange of Certificates..........................................8
Section 3.3 Dissenting Shares................................................12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Organization, Qualification, Etc.................................13
i
<PAGE> 3
Section 4.2 Capital Stock...................................................14
Section 4.3 Corporate Authority Relative to This Agreement..................15
Section 4.4 Non-Contravention; Consents and Approvals.......................16
Section 4.5 Reports and Financial Statements................................17
Section 4.6 Environmental Matters...........................................18
Section 4.7 Employee Benefit Plans; ERISA...................................20
Section 4.8 Information Statement; Phelps Dodge Proxy Statement;
Registration Statement; Other Information.......................23
Section 4.9 Cyprus Rights Plan..............................................23
Section 4.10 Tax Matters.....................................................23
Section 4.11 Opinion of Financial Advisors...................................25
Section 4.12 Required Vote...................................................25
Section 4.13 Absence of Certain Changes......................................25
Section 4.14 No Undisclosed Material Liabilities.............................27
Section 4.15 Labor Relations.................................................27
Section 4.16 No Prior Activities.............................................27
ARTICLE V
COVENANTS AND AGREEMENTS
Section 5.1 Conduct of Business Pending the Effective Time..................27
Section 5.2 Investigation...................................................30
Section 5.3 Stockholder Approvals and Other Cooperation.....................31
Section 5.4 Affiliate Agreements............................................33
Section 5.5 Cyprus Employee Stock Options, Incentive and Benefit Plans......33
Section 5.6 Filings; Other Action...........................................35
Section 5.7 Further Assurances..............................................37
Section 5.8 Takeover Statute................................................37
Section 5.9 No Solicitation by Cyprus.......................................37
Section 5.10 Public Announcements............................................39
Section 5.11 Indemnification and Insurance...................................39
Section 5.12 Accountants' "Comfort" Letters..................................39
Section 5.13 Additional Reports..............................................39
Section 5.14 Disclosure Schedule Supplements.................................40
Section 5.15 Certain Litigation..............................................40
Section 5.16 Shareholder Litigation..........................................40
Section 5.17 Section 16(b)...................................................40
Section 5.18 Change of Control Agreements....................................41
ii
<PAGE> 4
ARTICLE VI
CONDITIONS TO THE CYPRUS MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect
the Cyprus Merger.............................................................41
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
Section 7.1 Termination......................................................42
Section 7.2 Termination by Parent............................................42
Section 7.3 Termination by Cyprus............................................43
Section 7.4 Effect of Termination............................................43
Section 7.5 Termination Fee..................................................43
Section 7.6 Amendment or Supplement..........................................44
Section 7.7 Extension of Time, Waiver, Etc...................................44
ARTICLE VIII
MISCELLANEOUS
Section 8.1 No Survival of Representations and Warranties....................45
Section 8.2 Expenses.........................................................45
Section 8.3 Counterparts; Effectiveness......................................45
Section 8.4 Governing Law....................................................45
Section 8.5 Notices..........................................................46
Section 8.6 Assignment; Binding Effect.......................................47
Section 8.7 Severability.....................................................47
Section 8.8 Enforcement of Agreement.........................................47
Section 8.9 Entire Agreement; No Third-Party Beneficiaries...................47
Section 8.10 Headings........................................................47
Section 8.11 Definitions.....................................................47
Section 8.12 Finders or Brokers..............................................48
Section 8.13 Cyprus Actions Following the Offer..............................48
iii
<PAGE> 5
LIST OF EXHIBITS
Exhibit A - Form of Cyprus Affiliate Letter
LIST OF ANNEXES
Annex A - Conditions to the Cyprus Offer
iv
<PAGE> 6
INDEX OF DEFINED TERMS
Defined Term Section
- ------------ -------
accumulated funding deficiency...........................................4.7(d)
affiliates.................................................................8.11
Aggregate Cyprus Merger Cash Consideration...............................3.1(b)
Aggregate Cyprus Merger Stock Consideration..............................3.1(b)
Agreement..............................................................Preamble
Antitrust Laws...........................................................5.6(b)
ASARCO...................................................................7.5(b)
ASARCO Merger Agreement..................................................7.5(b)
Certificates.............................................................3.1(b)
Closing.....................................................................2.2
Closing Date................................................................2.2
Code...................................................................Recitals
Combination............................................................Recitals
Common Shares Trust...................................................2(e)(iii)
Confidentiality Agreement................................................5.2(a)
Continuing Director.........................................................7.6
control....................................................................8.11
Current Representing Party Group........................................4.10(a)
Cyprus.................................................................Preamble
Cyprus Acquisition Agreement.............................................5.9(b)
Cyprus Amax Minerals Company.............................................2.4(b)
Cyprus Award.............................................................5.5(b)
Cyprus Board.............................................................1.3(a)
Cyprus Cash Consideration..............................................Recitals
Cyprus Cash Election Shares..............................................1.2(a)
Cyprus Cash Proration Factor.............................................1.2(b)
Cyprus Common Stock......................................................2.1(b)
Cyprus Disclosure Schedule...........................................Article IV
Cyprus Employees.........................................................5.5(e)
Cyprus Excess Shares.................................................3.2(e)(ii)
Cyprus Indemnified Parties..............................................5.11(a)
Cyprus Maximum Cash Consideration........................................1.2(b)
Cyprus Maximum Stock Consideration.......................................1.2(c)
Cyprus Merger............................................................2.1(a)
Cyprus Merger Cash Amount................................................3.1(b)
Cyprus Merger Stock Amount...............................................3.1(b)
Cyprus Non-Electing Proration Factor.....................................1.2(d)
Cyprus Non-Electing Shares...............................................1.2(a)
v
<PAGE> 7
Cyprus Notice............................................................5.9(a)
Cyprus Offer...........................................................Recitals
Cyprus Option Plans......................................................5.5(a)
Cyprus Policy...........................................................5.11(b)
Cyprus Preferred Stock...................................................3.1(c)
Cyprus SAR...............................................................5.5(a)
Cyprus Shareholder Approval.............................................4.12(b)
Cyprus Shareholder Meeting..........................................5.3(c)(iii)
Cyprus Stock Consideration.............................................Recitals
Cyprus Stock Election Shares.............................................1.2(a)
Cyprus Stock Options.....................................................5.5(a)
Cyprus Stock Proration Factor............................................1.2(c)
Cyprus Takeover Proposal.................................................5.9(a)
Cyprus Termination Fee......................................................7.5
DGCL.....................................................................2.1(a)
Dissenting Cyprus Shares.................................................3.3(a)
Effective Time..............................................................2.3
Employee Benefit Plan.................................................4.7(g)(i)
Encumbrance..............................................................4.1(c)
Environmental Claim...................................................4.6(d)(i)
Environmental Law....................................................4.6(d)(ii)
Environmental Permits....................................................4.6(a)
ERISA...............................................................4.7(g)(iii)
ERISA Affiliate......................................................4.7(g)(iv)
Exchange Act.............................................................1.3(b)
Exchange Agent...........................................................3.2(a)
Exchange Fund............................................................3.2(a)
Foreign Plan.........................................................4.7(g)(ii)
GAAP...................................................................Recitals
Governmental Entity......................................................4.4(a)
Hazardous Materials.................................................4.6(d)(iii)
HSR Act..................................................................5.6(b)
Information Statement.......................................................4.8
IRS......................................................................4.7(b)
Law......................................................................4.4(a)
Material Adverse Effect.................................................4.1(a)
Merger Consideration....................................................3.1(b)
Minimum Condition..........................................................1.1
Multiemployer Plan......................................................4.7(a)
NYSE................................................................3.2(e)(ii)
Offer Documents............................................................1.4
Parent................................................................Preamble
Parent Certificates.....................................................3.2(a)
vi
<PAGE> 8
Parent Common Stock....................................................Recitals
Parent Disclosure Schedule...........................................Article IV
Parent Shareholder Approval.............................................4.12(a)
Parent Shareholder Meeting...........................................5.3(c)(ii)
Past Representing Party Group...........................................4.10(a)
person.....................................................................8.11
Phelps Dodge Proxy Statement.........................................5.3(c)(ii)
Plan................................................................4.7(g)(iii)
Registration Statement................................................5.3(a)(i)
Representing Party...................................................Article IV
Representing Party Affiliated Group.....................................4.10(a)
Representing Party Agreements............................................4.4(a)
Representing Party's Disclosure Schedule.............................Article IV
Required Statutory Approvals.............................................4.4(b)
Required Third Party Consents............................................4.4(b)
Schedule 14D-1..............................................................1.4
Schedule 14D-9...........................................................1.3(b)
SEC......................................................................4.5(a)
SEC Reports.................................................................4.5
Securities Act..............................................................4.5
Share Issuance...........................................................4.3(a)
Significant Subsidiaries...................................................8.11
SubC...................................................................Preamble
Subsidiaries...............................................................8.11
Surviving Corporation....................................................2.1(a)
Tax Certificates......................................................5.3(a)(v)
Tax Return.................................................................4.10
Taxes......................................................................4.10
Termination Date............................................................5.1
vii
<PAGE> 9
THIS AGREEMENT AND PLAN OF MERGER, dated as of September 30, 1999 (this
"Agreement"), among PHELPS DODGE CORPORATION, a New York corporation ("Parent"),
CAV CORPORATION, a Delaware corporation ("SubC"), and CYPRUS AMAX MINERALS
COMPANY, a Delaware corporation ("Cyprus").
WHEREAS, Parent and Cyprus desire to combine their respective
businesses upon the terms and subject to the conditions in this Agreement (the
"Combination");
WHEREAS, (i) Parent is a corporation organized and existing under the
laws of the State of New York; and (ii) Cyprus is a corporation organized and
existing under the laws of the State of Delaware;
WHEREAS, Parent has formed SubC, a wholly owned subsidiary of Parent,
and all the outstanding capital stock of SubC is owned by Parent;
WHEREAS, the Board of Directors of each of Parent and Cyprus deem it
advisable and in the best interests of their shareholders to effect the
Combination by causing Cyprus to become a subsidiary of Parent pursuant to the
Cyprus Merger as provided for in this Agreement;
WHEREAS, in furtherance of the Combination, Parent has caused SubC to
commence an exchange offer, which Parent shall cause SubC to amend in accordance
with the terms of this Agreement (as so amended, the "Cyprus Offer"), to acquire
all of the issued and outstanding shares of Cyprus Common Stock (as hereinafter
defined), for either $20.54 per share, net to the seller in cash, without
interest (the "Cyprus Cash Consideration") or 0.3500 of a share of common stock
of Parent, par value $6.25 per share ("Parent Common Stock") (the "Cyprus Stock
Consideration"), subject to the election and proration provisions of this
Agreement and to the terms and conditions of this Agreement and the Cyprus
Offer;
WHEREAS, the parties desire to make certain representations,
warranties, covenants and agreements in connection with the Combination and also
to prescribe various conditions to the Combination;
WHEREAS, for U.S. federal income tax purposes, it is intended that the
Cyprus Merger will qualify as a transaction described in Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for financial accounting purposes, it is intended that the
transactions contemplated by this Agreement will be accounted for as a purchase
transaction in accordance with United States generally accepted accounting
principles ("GAAP");
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, and fully intending to be
legally bound hereby, the parties agree as follows:
<PAGE> 10
ARTICLE I
THE OFFER
Section 1.1 The Cyprus Offer. The obligation of Parent to accept for
payment and pay for Cyprus Common Stock tendered pursuant to the Cyprus Offer
shall be subject to the condition (the "Minimum Condition") that the Cyprus
Common Stock, when added to the Cyprus Common Stock already owned by Parent,
shall constitute at least a majority of the then outstanding Cyprus Common Stock
on a fully diluted basis (including, without limitation, all Cyprus Common Stock
issuable upon the conversion of any convertible securities or upon the exercise
of any options, warrants or rights) having been validly tendered and not
withdrawn prior to the expiration of the Cyprus Offer and also shall be subject
to the satisfaction of the other conditions set forth in Annex A hereto. Parent
expressly reserves the right to waive any such condition, to increase the price
per share of Cyprus Common Stock payable in the Cyprus Offer, and to make any
other changes in the terms and conditions of the Cyprus Offer; provided,
however, that, without the prior written consent of Cyprus, no change may be
made to the Minimum Condition or which decreases the price per share of Cyprus
Common Stock payable in the Cyprus Offer, which changes the form of
consideration payable in the Cyprus Offer, which reduces the maximum number of
shares of Cyprus Common Stock to be acquired in the Cyprus Offer, which imposes
conditions to the Cyprus Offer in addition to those set forth in Annex A hereto,
or which amends any other term of the Cyprus Offer in any manner adverse to the
holders of the Cyprus Common Stock. Without the prior written consent of Cyprus,
Parent will not waive the Minimum Condition if, as a result, SubC would acquire
less than a majority of the Cyprus Common Stock outstanding. The Cyprus Cash
Consideration shall, subject to applicable withholding of taxes, be net to the
seller in cash, upon the terms and subject to the conditions of the Cyprus
Offer. Subject to the terms and conditions of the Cyprus Offer, Parent shall
accept for payment and purchase, as soon as permitted under the terms of the
Cyprus Offer, and shall pay the Cyprus Cash Consideration and issue Parent
Common Stock in payment of the Cyprus Stock Consideration, as promptly as
practicable after expiration of the Cyprus Offer for, all shares of Cyprus
Common Stock validly tendered and not withdrawn.
Section 1.2 Cyprus Elections.
(a) Subject to Sections 1.2(b), (c) and (d) below, each holder of
Cyprus Common Stock shall be entitled, with respect to each share of Cyprus
Common Stock held by such holder, to elect to receive either the Cyprus Cash
Consideration or the Cyprus Stock Consideration. Cyprus shares that are validly
tendered and not withdrawn and (i) covered by elections to receive the Cyprus
Cash Consideration are referred to herein as "Cyprus Cash Election Shares", (ii)
covered by elections to receive the Cyprus Stock Consideration are referred to
herein as "Cyprus Stock Election Shares" and (iii) not covered by a valid
election to receive either the Cyprus Cash Consideration or the Cyprus Stock
Consideration are referred to herein as "Cyprus Non-Electing Shares".
2
<PAGE> 11
(b) Excess of Cash Elections. If the aggregate Cyprus Cash
Consideration elected in respect of all Cyprus Cash Election Shares exceeds
$7.61176875 multiplied by the total number of Cyprus shares outstanding
immediately prior to closing of the Offer (the "Cyprus Maximum Cash
Consideration"), the following will occur:
1. Each Cyprus Cash Election Share will be exchanged in the Offer for
(i) $20.54 multiplied by a fraction (the "Cyprus Cash Proration Factor"),
the numerator of which is the Cyprus Maximum Cash Consideration and the
denominator of which is the number of Cyprus Cash Election Shares multiplied
by $20.54, and (ii) a number of shares of Parent Common Stock equal to
0.3500 multiplied by 1 minus the Cyprus Cash Proration Factor.
2. Each Cyprus Stock Election Share and each Cyprus Non-Electing Share
will be exchanged for 0.3500 of a share of Parent Common Stock.
(c) Excess of Stock Elections. If the aggregate Cyprus Stock
Consideration elected in respect of all Cyprus Stock Election Shares exceeds
0.2203 multiplied by the total number of Cyprus shares outstanding immediately
prior to closing of the Offer (the "Cyprus Maximum Stock Consideration"), the
following will occur:
1. Each Cyprus Stock Election Share will be exchanged in the Offer for
(i) a number of shares of Parent Common Stock equal to 0.3500 multiplied by
a fraction (the "Cyprus Stock Proration Factor"), the numerator of which is
the Cyprus Maximum Stock Consideration and the denominator of which is the
number of Cyprus Stock Election Shares multiplied by 0.3500, and (ii) cash
in an amount equal to $20.54 multiplied by 1 minus the Cyprus Stock
Proration Factor.
2. Each Cyprus Cash Election Share and each Cyprus Non-Electing Share
will be exchanged for $20.54, without interest.
(d) No Excess of Cash or Stock Elections. In the event that neither
Section 1.2(b) or 1.2(c) above is applicable, the following will occur:
1. Each Cyprus Cash Election Share will be exchanged for $20.54 in cash
without interest.
2. Each Cyprus Stock Election Share will be exchanged for 0.3500 of a
share of Parent Common Stock.
3. Each Cyprus Non-Electing Share will be exchanged for (i) an amount
in cash without interest equal to $20.54 multiplied by a fraction (the
"Cyprus Non-Electing Proration Factor"), the numerator of which is the
difference between the Cyprus Cash Number (as hereinafter defined) less the
number of Cyprus Cash Election Shares and the
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denominator of which is the number of Cyprus Non-Electing Shares; and (ii) a
number of shares of Parent Common Stock equal to 0.3500 multiplied by 1
minus the Cyprus Non-Electing Proration Factor. For purposes of this
Section 1.2(d), the Cyprus Cash Number is determined by dividing the Cyprus
Maximum Cash Consideration by $20.54.
Section 1.3 Cyprus Action.
(a) Cyprus hereby approves of and consents to the Cyprus Offer and
represents that (i) the Cyprus Board of Directors (the "Cyprus Board"), at a
meeting duly called and held on September 30, 1999, has unanimously (A)
determined that this Agreement and the transactions contemplated hereby,
including each of the Cyprus Offer and the Cyprus Merger, are fair to and in the
best interests of the holders of Cyprus Common Stock, (B) approved and adopted
this Agreement and the transactions contemplated hereby and (C) recommended that
the stockholders of Cyprus accept the Cyprus Offer and approve and adopt this
Agreement and the transactions contemplated hereby, and (ii) Merrill Lynch & Co.
has delivered to the Cyprus Board an written opinion that the consideration to
be received by the holders of Cyprus Common Stock pursuant to each of the Cyprus
Offer and the Cyprus Merger is fair to the holders of Cyprus Common Stock from a
financial point of view. Cyprus hereby consents to the inclusion in the Offer
Documents of the recommendation of the Cyprus Board described in the immediately
preceding sentence. Cyprus has been advised by each of its directors and
executive officers that they intend either to tender all Cyprus Common Stock
beneficially owned by them to Parent pursuant to the Cyprus Offer or to vote
such Cyprus Common Stock in favor of the approval and adoption by the
stockholders of Cyprus of this Agreement and the transactions contemplated
hereby.
(b) As soon as reasonably practicable after the date hereof, Cyprus
shall file with the SEC an amendment to its Solicitation/Recommendation
Statement on Schedule 14D-9 (together with all amendments and supplements
thereto, the "Schedule 14D-9") containing, subject to the fiduciary duties of
the Cyprus Board under applicable law as advised in writing by independent
counsel, the recommendation of the Cyprus Board described in Section 1.3(a) and
shall disseminate the Schedule 14D-9 to the extent required by Rule 14d-9
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and any other applicable federal securities laws. Cyprus and Parent agree
to correct promptly any information provided by either of them for use in the
Schedule 14D-9 which shall have become false or misleading, and Cyprus further
agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected
to be filed with the SEC and disseminated to holders of Cyprus Common Stock, in
each case as and to the extent required by applicable federal securities laws.
Section 1.4 Parent Action. As soon as reasonably practicable after the
date hereof, Parent shall file with the SEC an amendment to its Tender Offer
Statement on Schedule 14D-1 (together with all amendments and supplements
thereto, the "Schedule 14D-1") with respect to the Cyprus Offer. The Schedule
14D-1 shall contain the terms and conditions of the Cyprus Offer in accordance
with the terms of this Agreement and shall contain or incorporate by
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reference an offer to purchase and the related letter of transmittal (the
Schedule 14D-1, such offer to purchase and related letter of transmittal,
together with all supplements and amendments thereto being referred to herein
collectively as the "Offer Documents"). As soon as reasonably practicable after
the date hereof, Parent shall disseminate the Schedule 14D-1 to the extent
required by Rule 14d-3 promulgated under the Exchange Act and any other
applicable federal securities laws. Parent and Cyprus agree to correct promptly
any information provided by either of them for use in the Schedule 14D-1 which
shall have become false or misleading, and Parent further agrees to take all
steps necessary to cause the Schedule 14D-1 as so corrected to be filed with the
SEC and disseminated to holders of Cyprus Common Stock, in each case as and to
the extent required by applicable federal securities laws.
Section 1.5 Expiration or Termination of Offer. Parent and SubC agree
that, without the prior written consent of Cyprus, SubC shall not terminate or
withdraw the Cyprus Offer or extend the expiration date of the Cyprus Offer
unless at the expiration date of the Cyprus Offer the conditions to the Cyprus
Offer described in Annex A hereto shall not have been satisfied or earlier
waived. If, at the expiration date of the Cyprus Offer, the conditions to the
Cyprus Offer described in Annex A hereto shall not have been satisfied or
earlier waived but there is a reasonable possibility that such conditions may be
satisfied prior to March 31, 2000, Parent shall extend the expiration date of
the Cyprus Offer for an additional period or periods of time, each of which
being no longer than five business days, until, the date such conditions are
satisfied or earlier waived and SubC becomes obligated to accept for payment and
pay for shares of Cyprus Common Stock tendered pursuant to the Cyprus Offer;
provided, however, that if the condition to the Cyprus Offer described in clause
(e) of Annex A hereto has not been satisfied at the expiration date and Parent
has given notice of the breach that has caused such condition not to be
satisfied, Parent and SubC shall have no further obligation to extend the
expiration date of the Cyrpus Offer if such breach has not been cured within 30
days of such notice.
ARTICLE II
THE CYPRUS MERGER; CLOSING
Section 2.1 The Cyprus Merger.
(a) Upon the terms and subject to the conditions set forth in this
Agreement and in accordance with the Delaware General Corporation Law (the
"DGCL"), SubC shall merge with Cyprus (the "Cyprus Merger") at the Effective
Time. SubC shall be the surviving corporation in the Cyprus Merger (the
"Surviving Corporation"). From and after the Effective Time, the identity and
separate existence of Cyprus shall cease.
(b) In connection with the Cyprus Merger, Parent shall reserve a
sufficient number of shares of Parent Common Stock, prior to the Cyprus Merger,
to permit the issuance of shares of Parent Common Stock (i) to the holders of
common stock, no par value per share, of
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Cyprus (the "Cyprus Common Stock") as of the Effective Time in accordance with
the terms of this Agreement and (ii) upon the exercise of Cyprus Stock Options
being assumed by Parent in accordance with Section 5.5 hereof.
Section 2.2 The Closing. The closing of the Cyprus Merger (the
"Closing") will take place at 10:00 a.m. local time on the day following the
last to occur of the Parent Shareholder Meeting and the Cyprus Shareholder
Meeting (the "Closing Date"), but shall in no event be later than the second
business day after satisfaction or waiver of the conditions set forth in Article
VI unless another time or date is agreed to by the parties hereto. The Closing
will be held at the offices of Shearman & Sterling, 599 Lexington Avenue, New
York, NY, unless another place is agreed to by the parties hereto.
Section 2.3 Effective Time. Subject to the provisions of this
Agreement, as soon as practicable on or after the Closing Date, SubC and Cyprus
shall file with the Secretary of State of the State of Delaware a certificate of
merger duly completed and executed in accordance with the relevant provisions of
the DGCL and shall make all other filings required under the DGCL to effect the
Cyprus Merger. The Cyprus Merger shall become effective at the actual time of
the filing of such certificate of merger or at such other later time as is
reasonably specified in the certificate of merger (the time at which the Cyprus
Merger becomes fully effective being hereinafter referred to as the "Effective
Time").
Section 2.4 Effects of the Cyprus Merger.
(a) DGCL. The Cyprus Merger shall have the effects set forth in Section
259 of the DGCL.
(b) Name of Surviving Corporation. The name of the Surviving
Corporation from and after the Effective Time shall be "Cyprus Amax Minerals
Company" until changed or amended in accordance with applicable Law.
(c) Charter Documents. At the Effective Time, the Certificate of
Incorporation and the Bylaws of SubC, as in effect immediately prior to the
Effective Time, shall be the Certificate of Incorporation and Bylaws,
respectively, of the Surviving Corporation.
Section 2.5 Directors and Officers. The directors of SubC at the
Effective Time shall be the directors of the Surviving Corporation until their
respective successors are duly elected and qualified, as the case may be. The
officers of SubC at the Effective Time shall be the officers of the Surviving
Corporation until their respective successors are duly appointed.
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ARTICLE III
EFFECT OF THE CYPRUS MERGER ON THE STOCK OF
CYPRUS; EXCHANGE OF CERTIFICATES
Section 3.1 Effect on Cyprus Stock and SubC Stock. As of the Effective
Time, by virtue of the Cyprus Merger and without any action on the part of SubC,
Cyprus or the holders of any securities of SubC or Cyprus:
(a) Cancellation of Treasury Stock. Each share of Cyprus Common Stock
that is owned directly by Parent, Cyprus or any of their respective
Subsidiaries (but not including any such shares owned by employees or
employee benefit or pension plans) shall automatically be cancelled and
retired and shall cease to exist, and no consideration shall be delivered in
exchange therefor.
(b) Conversion of Cyprus Common Stock. Subject to Section 3.2(e), each
issued and outstanding share of Cyprus Common Stock (other than shares to be
cancelled in accordance with Section 3.1(a)) shall be converted into the
Cyprus Stock Consideration, the Cyprus Cash Consideration or a combination
thereof, in each case determined pursuant to this Section 3.1(b) (such
consideration being referred to herein as the "Merger Consideration"). If
Section 1.2(b) is applicable to the Cyprus Offer, each outstanding share of
Cyprus Common Stock will be converted in the Cyprus Merger into the right to
receive the Cyprus Stock Consideration. If Section 1.2(c) is applicable to
the Cyprus Offer, each outstanding share of Cyprus Common Stock will be
converted in the Cyprus Merger into the right to receive the Cyprus Cash
Consideration. If neither Section 1.2(b) nor 1.2(c) is applicable, each
outstanding share of Cyprus Common Stock will be converted in the Cyprus
Merger into (i) an amount of cash equal to the Cyprus Merger Cash Amount (as
hereinafter defined), without interest, and (ii) a number of shares of
Parent Common stock equal to the Cyprus Merger Stock Amount (as hereinafter
defined). The Cyprus Merger Cash Amount and the Cyprus Merger Stock Amount
will be determined as follows:
1. The aggregate amount of Cyprus Cash Consideration actually paid
in the Cyprus Offer will be subtracted from the Total Cyprus Available
Cash (as hereinafter defined) to determine the amount of cash available
to be paid in the Cyprus Merger (the "Aggregate Cyprus Merger Cash
Consideration"). For purposes of this Section, Total Cyprus Available
Cash equals (i) the number of shares of Cyprus Common Stock exchanged
in the Cyprus Offer plus the number of shares of Cyprus Common Stock to
be converted in the Cyprus Merger, multiplied by (ii) $7.61176875.
2. The Aggregate Cyprus Merger Cash Consideration will be divided
by the number of shares of Cyprus Common Stock to be converted in the
Cyprus
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Merger, to determine the amount of cash consideration to be paid in
respect of each such share of Cyprus Common Stock in the Cyprus Merger
(the "Cyprus Merger Cash Amount").
3. The aggregate number of shares of Parent Common Stock actually
issued as Cyprus Stock Consideration in the Cyprus Offer will be
subtracted from the Total Cyprus Available Stock (as hereinafter
defined) to determine the number of shares of Parent Common Stock
available to be paid in the Cyprus Merger (the "Aggregate Cyprus Merger
Stock Consideration"). For purposes of this Section, Total Cyprus
Available Stock equals (i) the number of shares of Cyprus Common Stock
exchanged in the Cyprus Offer plus the number of shares of Cyprus
Common Stock to be converted in the Cyprus Merger, multiplied by (ii)
0.2203.
4. The Aggregate Cyprus Merger Stock Consideration will be divided
by the number of shares of Cyprus Common Stock to be converted in the
Cyprus Merger, to determine the number of shares of Parent Common Stock
to be issued in respect of each such share of Cyprus Common Stock in
the Cyprus Merger (the "Cyprus Merger Stock Amount").
As of the Effective Time, all such shares of Cyprus Common Stock shall
no longer be outstanding and shall automatically be cancelled and
retired and shall cease to exist, and each holder of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of Cyprus Common Stock (the "Certificates") shall
cease to have any rights with respect thereto, except the right to
receive (x) if the Merger Consideration includes Parent Common Stock,
(i) Parent Certificates, (ii) certain dividends and other distributions
in accordance with Section 3.2(c), and (iii) cash in lieu of fractional
shares of Parent Common Stock in accordance with Section 3.2(e),
without interest, and (y) if the Merger Consideration includes cash,
the appropriate cash amounts.
(c) Redemption of Cyprus Preferred Stock. Immediately prior to the
Effective Time, each issued and outstanding share of $4.00 Series A
Convertible Preferred Stock of Cyprus (the "Cyprus Preferred Stock")
shall be redeemed by Cyprus. Cyprus shall give the required notice of
redemption sufficient to allow for such redemption.
(d) Conversion of Common Stock of SubC. Each issued and
outstanding share of common stock, par value $.01 per share, of SubC
shall be converted into one fully paid and nonassessable share of
common stock of the Surviving Corporation.
Section 3.2 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Parent shall enter into
an agreement with such bank or trust company as may be designated by it and
reasonably satisfactory to Cyprus (the "Exchange Agent"), which shall provide
that Parent shall deposit with
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the Exchange Agent as of the Effective Time, for the benefit of the holders of
shares of Cyprus Common Stock, for exchange in accordance with this Article III,
through the Exchange Agent, cash and certificates ("Parent Certificates")
representing the number of whole shares of Parent Common Stock issuable or
payable pursuant to Section 3.1 in exchange for outstanding shares of Cyprus
Common Stock (such cash and shares of Parent Common Stock, together with any
dividends or distributions with respect to such Parent Common Stock with a
record date after the Effective Time, any Cyprus Excess Shares and any cash
(including cash proceeds from the sale of the Cyprus Excess Shares) payable in
lieu of any fractional shares of Parent Common Stock being hereinafter referred
to as the "Exchange Fund").
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
Certificate whose shares were converted into the Merger Consideration pursuant
to Section 3.1 (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the cash and/or Certificate
shall pass, only upon delivery of the Certificate to the Exchange Agent and
shall be in such form and have such other provisions as Parent may reasonably
specify), and (ii) instructions for use in effecting the surrender of the
Certificate in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such Certificate shall be entitled
to receive in exchange therefor, cash and/or a Parent Certificate representing
that number of whole shares of Parent Common Stock which such holder has the
right to receive pursuant to the provisions of this Article III, certain
dividends or other distributions in accordance with Section 3.2(c) and cash in
lieu of any fractional share in accordance with Section 3.2(e), and the
Certificate so surrendered shall forthwith be cancelled. In the event of a
transfer of ownership of Cyprus Common Stock not registered in the transfer
records of Cyprus, cash and/or a Parent Certificate representing the proper
number of shares of Parent Common Stock may be issued to a person other than the
person in whose name the Certificate so surrendered is registered if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer, and the person requesting such issuance shall pay all transfer or
other non-income Taxes required by reason of the issuance of shares of Parent
Common Stock and/or cash to a person other than the registered holder of such
Certificate or establish to the satisfaction of Parent that such Tax has been
paid or is not applicable. Until surrendered as contemplated by this Section
3.2, each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender of Cyprus Certificates,
cash and/or Parent Certificates representing the number of whole shares of
Parent Common Stock into which the shares of Cyprus Common Stock formerly
represented by such Certificate have been converted, certain dividends or other
distributions in accordance with Section 3.2(c) and cash in lieu of any
fractional share in accordance with Section 3.2(e). No interest will be paid or
will accrue on any cash payable to holders of Certificates pursuant to the
provisions of this Article III.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to Parent Common Stock with a record date after
the Effective Time
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shall be paid to the holder of any unsurrendered Certificate with respect to the
shares of Parent Common Stock represented thereby, and no cash payment in lieu
of fractional shares shall be paid to any such holder pursuant to Section
3.2(e), and all such dividends, other distributions and cash in lieu of
fractional shares of Parent Common Stock shall be paid by Parent to the Exchange
Agent and shall be included in the Exchange Fund, in each case until the
surrender of such Certificate in accordance with this Article III. Subject to
the effect of applicable escheat or similar Laws, following surrender of any
such Certificate there shall be paid to the holder of the Parent Certificate
representing whole shares of Parent Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of Parent Common Stock and the amount of any
cash payable in lieu of a fractional share of Parent Common Stock to which such
holder is entitled pursuant to Section 3.2(e), and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and with a payment date
subsequent to such surrender payable with respect to such whole shares of Parent
Common Stock.
(d) No Further Ownership Rights in Cyprus Common Stock. All cash and/or
shares of Parent Common Stock issued upon the surrender for exchange of
Certificates in accordance with the terms of this Article III (including any
cash paid pursuant to this Article III) shall be deemed to have been issued (and
paid) in full satisfaction of all rights pertaining to the shares of Cyprus
Common Stock theretofore represented by such Certificates, subject, however, to
the Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have been
authorized or made by Cyprus on such shares of Cyprus Common Stock which remain
unpaid at the Effective Time, and there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the shares
of Cyprus Common Stock which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the Surviving
Corporation or the Exchange Agent for any reason, they shall be cancelled and
exchanged as provided in this Article III, except as otherwise provided by Law.
(e) No Fractional Shares.
(i) No Parent Certificates or scrip representing fractional shares of
Parent Common Stock shall be issued upon the surrender for exchange of
Certificates, no dividend or distribution of Parent shall relate to such
fractional share interests, and such fractional share interests will not entitle
the owner thereof to vote or to any rights of a shareholder of Parent.
(ii) As promptly as practicable following the Effective Time, the
Exchange Agent will determine the excess of (A) the number of whole shares of
Parent Common Stock delivered to the Exchange Agent by Parent pursuant to
Section 3.2(a) for exchange pursuant to Section 3.1 for outstanding shares of
Cyprus Common Stock over (B) the aggregate number of whole shares of Parent
Common Stock to be distributed to holders of Cyprus Common Stock pursuant to
Section 3.2(b) (such excess being herein called the "Cyprus Excess Shares").
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Following the Effective Time, the Exchange Agent will, on behalf of former
shareholders of Cyprus, sell the Cyprus Excess Shares at then-prevailing prices
on the New York Stock Exchange, Inc. (the "NYSE"), all in the manner provided in
Section 3.2(e)(iii).
(iii) The sale of the Excess Shares by the Exchange Agent will be
executed on the NYSE through one or more member firms of the NYSE and will be
executed in round lots to the extent practicable. The Exchange Agent will use
reasonable efforts to complete the sale of the Excess Shares as promptly
following the Effective Time as, in the Exchange Agent's sole judgment, is
practicable consistent with obtaining the best execution of such sales in light
of prevailing market conditions. Until the net proceeds of such sale or sales
have been distributed to the holders of Cyprus Common Stock, the Exchange Agent
will hold such proceeds in trust for the holders of Cyprus Common Stock (the
"Common Shares Trust"). Parent will pay all commissions, transfer Taxes and
other out-of-pocket transaction costs, including the expenses and compensation
of the Exchange Agent incurred in connection with such sale of the Excess
Shares. The Exchange Agent will determine the portion of the Common Shares Trust
to which each holder of Cyprus Common Stock is entitled, if any, by multiplying
the amount of the aggregate net proceeds comprising the Common Shares Trust by a
fraction, the numerator of which is the amount of the fractional share interest
to which such holder of Cyprus Common Stock is entitled (after taking into
account all shares of Cyprus Common Stock held at the Effective Time by such
holder) and the denominator of which is the aggregate amount of fractional share
interests to which all holders of Cyprus Common Stock are entitled.
(iv) As soon as practicable after the determination of the amount of
cash, if any, to be paid to holders of Cyprus Common Stock with respect to any
fractional share interests, the Exchange Agent will make available such amounts
to such holders of Cyprus Common Stock subject to and in accordance with the
terms of Section 3.2(c).
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of the Certificates six months after
the Effective Time shall be delivered to Parent upon demand, and any holders of
the Certificates who have not theretofore complied with this Article III shall
thereafter look only to Parent for payment of their claim for Merger
Consideration, any cash in lieu of fractional shares of Parent Common Stock and
any dividends or distributions with respect to Parent Common Stock.
(g) No Liability. None of Parent, SubC, Cyprus or the Exchange Agent
shall be liable to any person in respect of any shares of Parent Common Stock
(or dividends or distributions with respect thereto) or cash from the Exchange
Fund in each case delivered to a public official pursuant to any applicable
abandoned property, escheat or similar Law. If any Certificate shall not have
been surrendered prior to seven years after the Effective Time (or immediately
prior to such earlier date on which any Merger Consideration, any cash payable
to the holder of such Certificate pursuant to this Article III or any dividends
or distributions payable to the holder of such Certificate would otherwise
escheat to or become the property of any governmental body or authority) any
such Merger Consideration or cash, dividends or
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distributions in respect of such Certificate shall, to the extent permitted by
applicable Law, become the property of the related Surviving Corporation, free
and clear of all claims or interest of any person previously entitled thereto.
(h) Lost Certificates. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate, the Merger Consideration and, if applicable, any cash in lieu of
fractional shares, and unpaid dividends and distributions on shares of Parent
Common Stock as may be deliverable in respect thereof pursuant to this
Agreement.
Section 3.3 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary,
shares of Cyprus Common Stock that are outstanding immediately prior to the
Effective Time and which are held by persons who shall have properly demanded in
writing appraisal for such shares of Cyprus Common Stock in accordance with
Section 262 of the DGCL (collectively, the "Dissenting Cyprus Shares") shall not
be converted into or represent the right to receive the Merger Consideration as
provided in Section 3.1(b). Such persons shall be entitled to receive payment of
the appraised value of such shares of Cyprus Common Stock held by them in
accordance with the provisions of Section 262 of the DGCL, except that all
Dissenting Cyprus Shares held by persons who shall have failed to perfect or who
effectively shall have withdrawn or lost their right to appraisal of such shares
under Section 262 shall thereupon be deemed to have been converted into, as of
the Effective Time, the Merger Consideration (subject to the proration
procedures set forth in Section 3.1(b)) upon surrender of the Certificate
therefor in the manner provided in Section 3.2.
(b) Cyprus shall give Parent (i) prompt notice of any demands for
appraisal received by Cyprus, withdrawals of such demands and any other
instruments served pursuant to the DGCL and received by Cyprus, and (ii) the
opportunity to participate in all negotiations and proceedings with respect to
demands for appraisal under the DGCL. Cyprus shall not, except with the prior
written consent of Parent, make any payment with respect to any demands for
appraisal or offer to settle or settle any such demands.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Except (i) as set forth in the disclosure schedule delivered by Parent
to Cyprus prior to the execution of this Agreement (the "Parent Disclosure
Schedule"), Parent hereby represents and warrants to Cyprus, and (ii) as set
forth in the disclosure schedule delivered by Cyprus to Parent prior to the
execution of this Agreement (the "Cyprus Disclosure Schedule"), Cyprus hereby
represents and warrants to Parent, in each case as set forth in this Article IV,
with the party making such representations and warranties being referred to as
the "Representing Party" and such Representing Party's Disclosure Schedule as
the "Representing Party's Disclosure Schedule." Notwithstanding the foregoing,
any representation or warranty which expressly refers to Parent or Cyprus is
being made solely by Parent or Cyprus, as the case may be.
Section 4.1 Organization, Qualification, Etc.
(a) The Representing Party is a corporation duly organized, validly
existing and in good standing (or other equivalent status) under the laws of the
jurisdiction of its incorporation and has the corporate power and authority to
own, operate and lease all of its properties and assets and to carry on its
business as it is now being conducted or presently proposed to be conducted and
is duly qualified to do business and is in good standing (or other equivalent
status) in each jurisdiction in which the ownership, operation or leasing of its
properties or assets or the conduct of its business requires such qualification,
except for jurisdictions in which the failure to be so qualified or in good
standing (or other equivalent status) would not, individually or in the
aggregate, have a Material Adverse Effect on the Representing Party and its
Subsidiaries, taken as a whole. As used in this Agreement, any reference to any
state of facts, event, change or effect having a "Material Adverse Effect" on or
with respect to a Representing Party, means such state of facts, event, change
or effect that has had or would reasonably be expected to have a material
adverse effect on the business, results of operations or financial condition of
the Representing Party and its Subsidiaries, taken as a whole; provided,
however, that any adverse effect that copper prices have had or may have on the
business, results of operations or financial condition of the Representing Party
and its Subsidiaries, taken as a whole, shall not be deemed a Material Adverse
Effect for purposes of this Agreement. The copies of each Representing Party's
Certificate of Incorporation and Bylaws which have been delivered to the other
Representing Party are complete and correct and in full force and effect.
(b) Each of the Representing Party's Significant Subsidiaries is a
corporation duly organized, validly existing and in good standing (or other
equivalent status) under the laws of its jurisdiction of incorporation or
organization, has the power and authority to own, operate and lease its
properties and to carry on its business as it is now being conducted or
presently proposed to be conducted, and is duly qualified to do business and is
in good standing (or equivalent status) in each jurisdiction in which the
ownership, operation or leasing of its
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properties or assets or the conduct of its business requires such qualification,
except for jurisdictions in which the failure to be so qualified or in good
standing (or other equivalent status) would not, individually or in the
aggregate, have a Material Adverse Effect on the Representing Party. Each
Representing Party has made available to the other Representing Party complete
and correct copies of the certificate of incorporation, bylaws or other similar
governing documents which are in full force and effect for each of such
Representing Party's Significant Subsidiaries that are not directly or
indirectly wholly owned.
(c) All the outstanding shares of capital stock of, or other ownership
interests in, the Representing Party's Subsidiaries are validly issued, fully
paid and non-assessable and are owned of record and beneficially by such
Representing Party, directly or indirectly, free and clear of all Encumbrances.
As used in this Agreement, the term "Encumbrance" means any mortgage, pledge,
lien, charge, encumbrance, defect, security interest, claim, option or
restriction of any kind. There are no (i) securities of the Representing Party
or any of its Subsidiaries convertible into or exchangeable or exercisable for
shares of capital stock or other voting securities or ownership interests in any
of the Representing Party's Subsidiaries, (ii) warrants, calls, options or other
rights to acquire from the Representing Party or any of its Subsidiaries, or any
obligations of the Representing Party or any of its Subsidiaries to issue, any
capital stock, voting securities or other ownership interests in, or any
securities convertible into or exchangeable or exercisable for, any capital
stock, voting securities or ownership interests in any of the Representing
Party's Subsidiaries, or (iii) obligations of the Representing Party or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any outstanding
securities of the Representing Party's Subsidiaries or to issue, deliver or
sell, or cause to be issued, delivered or sold, any such securities.
(d) Except for the Representing Party's Subsidiaries, as set forth in
Section 4.1(d) of the Representing Party's Disclosure Schedule or the
Representing Party's (or any of its Subsidiaries') SEC Reports, and in respect
of minerals exploration or development agreements in the ordinary course of
business, the Representing Party (excluding employee pension or benefit plans)
does not own any securities of, or have any debt or equity investment in, or
loans outstanding to, any corporation, partnership, joint venture, limited
liability company or other entity. The Representing Party is not subject to any
contractual obligation under which it may be required to advance or contribute
capital to any entity, except in respect of minerals exploration or development
agreements in the ordinary course of business.
Section 4.2 Capital Stock.
(a) Section 4.2(a) of the Representing Party's Disclosure Schedule sets
forth as of September 28, 1999:
(i) the number of authorized shares of each class or series of capital
stock of the Representing Party;
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(ii) the number of shares of each class or series of capital stock of
the Representing Party which are issued and outstanding;
(iii) the number of shares of each class or series of capital stock
which are held in the treasury of such Representing Party;
(iv) the number of shares of each class or series of capital stock of
the Representing Party which are reserved for issuance, indicating each
specific reservation; and
(v) the number of shares of each class or series of capital stock of
such Representing Party which are subject to employee stock options or other
rights to purchase or receive capital stock granted under such Representing
Party's stock option or other stock based employee or non-employee director
benefit plans, indicating the name of the plan, the date of grant, the
number of shares and the exercise price thereof.
(b) All of the issued and outstanding shares of capital stock of the
Representing Party have been validly issued and are fully paid and
nonassessable. Except as set forth in Section 4.2(a) of the Representing Party's
Disclosure Schedule, there are no authorized, issued, reserved for issuance or
outstanding (i) shares of capital stock or voting securities of the Representing
Party, (ii) securities convertible into or exchangeable for shares of capital
stock or voting securities of the Representing Party, (iii) warrants, calls,
options or other rights to acquire from the Representing Party or any of its
Subsidiaries, or any obligation of the Representing Party or any of its
Subsidiaries to issue, any shares of capital stock or voting securities or
securities convertible into or exchangeable or exercisable for capital stock or
voting securities of the Representing Party, and (iv) there are no outstanding
obligations of the Representing Party to repurchase, redeem or otherwise acquire
any such securities or to issue, deliver or sell, or cause to be issued,
delivered or sold, any such securities.
Section 4.3 Corporate Authority Relative to This Agreement.
(a) Parent has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the Board of
Directors of Parent, and, except for the approval of the issuance of the Parent
Common Stock in the Cyprus Merger (the "Share Issuance") by its shareholders, no
other corporate proceedings on the part of Parent are necessary to authorize the
consummation of the transactions contemplated hereby. The Board of Directors of
Parent has determined that the transactions contemplated by this Agreement are
in the best interest of Parent and its shareholders and recommends to such
shareholders that they approve the Share Issuance. This Agreement has been duly
and validly executed and delivered by Parent and, assuming this Agreement
constitutes a valid and binding agreement of the other parties hereto, this
Agreement constitutes a valid and binding agreement of Parent, enforceable
against Parent in accordance
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with its terms (except insofar as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally, or by principles governing the availability of
equitable remedies).
(b) Parent has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the Board of
Directors of Parent, and, except for the Share Issuance by its shareholders, no
other corporate proceedings on the part of Parent are necessary to authorize the
consummation of the transactions contemplated hereby. The Board of Directors of
Parent has determined that the transactions contemplated by this Agreement are
in the best interest of Parent and its shareholders and recommends to such
shareholders that they approve the Share Issuance. This Agreement has been duly
and validly executed and delivered by Parent and, assuming this Agreement
constitutes a valid and binding agreement of the other parties hereto, this
Agreement constitutes a valid and binding agreement of Parent, enforceable
against Parent in accordance with its terms (except insofar as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally, or by principles
governing the availability of equitable remedies).
(c) Cyprus has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the Cyprus Board
and, except for the approval of this Agreement by its shareholders, no other
corporate proceedings on the part of Cyprus are necessary to authorize the
consummation of the transactions contemplated hereby. The Cyprus Board has taken
all appropriate action so that neither Parent nor SubC will be an "interested
stockholder" within, the meaning of (i) Section 203 of the DGCL or (ii) the
Certificate of Incorporation of Cyprus by virtue of Parent and SubC entering
into this Agreement and consummating the transactions contemplated hereby. The
Cyprus Board has determined that the transactions contemplated by this Agreement
are in the best interest of Cyprus and its shareholders and to recommend to such
shareholders that they approve this Agreement. This Agreement has been duly and
validly executed and delivered by Cyprus and, assuming this Agreement
constitutes a valid and binding agreement of the other parties hereto, this
Agreement constitutes a valid and binding agreement of Cyprus, enforceable
against Cyprus in accordance with its terms (except insofar as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally or by principles governing
the availability of equitable remedies).
Section 4.4 Non-Contravention; Consents and Approvals.
(a) None of the execution, delivery or performance of this Agreement by
the Representing Party or the consummation by such Representing Party of the
transactions contemplated hereby will (i) violate the certificate of
incorporation or the bylaws or other similar
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governing documents of the Representing Party or any of its Subsidiaries, (ii)
except for the Required Third Party Consents, result in the violation or breach
of or constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation, vesting, payment,
exercise, acceleration, suspension or revocation) under any of the provisions of
any note, bond, mortgage, deed of trust, security interest, indenture, license,
contract, agreement, plan or other instrument or obligation to which the
Representing Party or any of its Subsidiaries is a party or by which any of them
or any of their properties or assets may be bound (the "Representing Party
Agreements"), (iii) except for the Required Statutory Approvals, violate any
order, writ, injunction, decree, judgment, permit, license, statute, law,
ordinance, policy, rule or regulation ("Law") of any court, tribunal or
administrative, governmental or regulatory body, agency, commission, division,
department, public body or other authority, whether federal, state, local or
foreign (individually, a "Governmental Entity") applicable to the Representing
Party or any of its Subsidiaries or any of their respective property or assets,
or (iv) result in the creation or imposition of any Encumbrance on any asset of
the Representing Party or any of its Subsidiaries, except in the case of clauses
(ii), (iii) and (iv) for violations, breaches, defaults, terminations,
cancellations, accelerations or creations which would not in the aggregate have
a Material Adverse Effect on the Representing Party and its Subsidiaries, taken
as a whole, or prevent or delay the consummation of the transactions
contemplated hereby.
(b) Section 4.4(b)(i) of the Representing Party's Disclosure Schedule
sets forth a list of all third party consents and approvals required to be
obtained under the Representing Party Agreements prior to the consummation of
the transactions contemplated by this Agreement the failure of which to obtain
would have, individually or in the aggregate, a Material Adverse Effect on the
Representing Party and its Subsidiaries, taken as a whole (the "Required Third
Party Consents"). Section 4.4(b)(ii) of the Representing Party's Disclosure
Schedule sets forth a list of all notices to, filings and registrations with,
and permits, authorizations, consents and approvals of, Governmental Entities
required to be made or obtained from Governmental Entities prior to the
consummation of the transactions contemplated by this Agreement the failure of
which to obtain would have, individually or in the aggregate, a Material Adverse
Effect on the Representing Party and its Subsidiaries, taken as a whole (the
"Required Statutory Approvals").
Section 4.5 Reports and Financial Statements. The Representing Party
has previously furnished or made available to the other Representing Party
complete and correct copies of:
(a) such Representing Party's (and any of its Subsidiaries') Annual
Reports on Form 10-K filed with the Securities and Exchange Commission (the
"SEC") for each of the years ended December 31, 1996 through 1998;
(b) such Representing Party's (and any of its Subsidiaries') Quarterly
Reports on Form 10-Q filed with the SEC for the each of the fiscal quarters
ended following such Representing Party's last fiscal year-end;
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(c) each definitive proxy statement filed by such Representing Party or
any of its Subsidiaries with the SEC since March 1, 1996;
(d) each final prospectus filed by such Representing Party with the SEC
since December 31, 1995; and
(e) all Current Reports on Form 8-K filed by such Representing Party
with the SEC since January 1, 1998.
As of their respective dates, such reports, proxy statements and
prospectuses (collectively, with any amendments, supplements and exhibits
thereto, the "SEC Reports") (i) complied as to form in all material respects
with the applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), the Exchange Act and the rules and regulations promulgated
thereunder, and (ii) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. Except to the extent that information contained in any SEC
Report of the Representing Party has been revised or superseded by an SEC Report
subsequently filed by the Representing Party, none of the Representing Party's
SEC Reports contains any untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
unaudited consolidated interim financial statements included in the Representing
Party's SEC Reports (including any related notes and schedules) fairly present
the financial position of the Representing Party and its consolidated
Subsidiaries as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end adjustments), in each case in accordance with past practice
and GAAP consistently applied during the periods involved (except as otherwise
disclosed in the notes thereto). Since January 1, 1998, the Representing Party
has timely filed all reports, registration statements and other filings required
to be filed by it with the SEC under the rules and regulations of the SEC.
Section 4.6 Environmental Matters.
(a) Except for Environmental Claims disclosed in or referred to in
Section 4.6(b) of the Disclosure Schedule, as of the date of this Agreement,
each of the Representing Party and its Subsidiaries has obtained all licenses,
permits, authorizations, approvals and consents from Governmental Entities which
are required under any applicable Environmental Law in respect of its business,
properties, assets and operations ("Environmental Permits"), except (i) for such
permits as to which due and proper application is pending, and (ii) for such
failures to have Environmental Permits which, individually or in the aggregate,
are not reasonably expected to have a Material Adverse Effect on the
Representing Party and its Subsidiaries, taken as a whole. Each of such
Environmental Permits is in full force and effect, and each of the Representing
Party and its Subsidiaries is in compliance with the terms and
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conditions of all such Environmental Permits and with all applicable
Environmental Laws, except for such exceptions as would not, individually or in
the aggregate, have a Material Adverse Effect on the Representing Party and its
Subsidiaries, taken as a whole.
(b) Except for Environmental Claims disclosed in or referred to in
Section 4.6(b) of the Disclosure Schedule, as of the date of this Agreement,
there is no Environmental Claim filed, pending, or to the best knowledge of the
Representing Party threatened or in process, against the Representing Party or
any of its Subsidiaries or any person whose liability for such Environmental
Claim the Representing Party or any of its Subsidiaries has or may have retained
or assumed either contractually or by operation of Law, that would, individually
or in the aggregate, have a Material Adverse Effect on the Representing Party
and its Subsidiaries, taken as a whole.
(c) Except as disclosed or referred to in Section 4.6(c) of the
Disclosure Schedule, no Encumbrances have arisen under or pursuant to any
Environmental Law on any property, site or facility owned, operated or leased by
the Representing Party or any of its Subsidiaries, except for such Encumbrances
which would not, individually or in the aggregate, have a Material Adverse
Effect on the Representing Party and its Subsidiaries, taken as a whole, and no
action of any Governmental Entity has been taken or, to the best knowledge of
the Company, is threatened or in process which could subject any of such
properties to such Encumbrances, except for such action which would not,
individually or in the aggregate, have a Material Adverse Effect on the
Representing Party and its Subsidiaries, taken as a whole.
(d) As used in this Agreement:
(i) "Environmental Claim" means any claim, action, cause of action,
order, investigation or notice (written or oral) by any person alleging
potential or actual liability (including, without limitation, potential or
actual liability for investigation, evaluation, cleanup, removal actions,
remedial actions, response actions, natural resources damages, property
damages, personal injuries or penalties) arising out of, based on or
resulting from any Environmental Law, including any claim under CERCLA, and
shall include any request for information under CERCLA or any comparable
state or local Law.
(ii) "Environmental Law" means any Law relating to (a) the environment
or pollution, environmental matters, the protection of the environment, or
the protection of human health and safety from environmental concerns, (b)
actual or threatened emissions, discharges, or releases of pollutants,
contaminants, chemicals or solid, industrial, toxic or hazardous substances,
wastes or constituents into the environment, and (c) the presence,
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials.
(iii) "Hazardous Materials" mean (a) any petroleum or petroleum
products and radioactive materials, (b) any chemicals, constituents,
materials, or substances defined or
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included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous substances," "toxic substances"
and related materials, as such materials are defined in any Environmental
Law, and (c) any other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any Governmental Entity.
Section 4.7 Employee Benefit Plans; ERISA.
(a) Except as set forth in the Representing Party's SEC Reports or as
would not have a Material Adverse Effect on the Representing Party and its
Subsidiaries, taken as a whole, (i) all Employee Benefit Plans (other than any
Employee Benefit Plan that is a "multiemployer plan" within the meaning of
Section 3(37) of ERISA (a "Multiemployer Plan")) of the Representing Party are
in material compliance with all applicable requirements of Law, including ERISA
and the Code, and (ii) neither the Representing Party nor any of its
Subsidiaries nor any ERISA Affiliate has any liabilities or obligations with
respect to any such Employee Benefit Plans, whether accrued, contingent or
otherwise, that are not otherwise reflected on the Representing Party's
financial statements, nor to the best knowledge of the Representing Party, are
any such liabilities or obligations expected to be incurred. Except as described
in the Representing Party's (or any of its Subsidiaries') SEC Reports or as set
forth in Section 4.7(a) of the Representing Party's Disclosure Schedule, the
execution and delivery of, and performance of the transactions contemplated by
this Agreement will not (either alone or upon the occurrence of any additional
or subsequent events) constitute an event under any Employee Benefit Plan of the
Representing Party that will or may result in acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any employee. The only severance agreements or
severance policies applicable to the Representing Party or any of its
Subsidiaries are the agreements and policies specifically described in Section
4.7(a) of the Representing Party's Disclosure Schedule.
(b) With respect to each of its Plans, the Representing Party has
heretofore made available to the other Representing Party complete and correct
copies of each of the following documents, as applicable: (i) a copy of the Plan
and any amendments thereto; (ii) a copy of the most recent annual report; (iii)
a copy of the most recent actuarial report; (iv) a copy of the most recent
Summary Plan Description and all material modifications; (v) a copy of the trust
or other funding agreement and any amendments thereto; and (vi) the most recent
determination letter received from the Internal Revenue Service (the "IRS") with
respect to each Plan that is intended to be qualified under Section 401 of the
Code and all notices of reportable events received following receipt of such
letter. Each Representing Party will deliver to the other Representing Party a
copy of each Foreign Plan within thirty days following the date hereof.
(c) Section 4.7(c) of the Representing Party's Disclosure Schedule sets
forth a list of each employee of the Representing Party (or any Subsidiary) who
is a party to any agreement (whether written or oral) with respect to such
person's employment by the Representing Party or a Subsidiary, other than offer
letters which do not have guaranteed periods
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of employment and statutory employment agreements under foreign Laws, and which
provide for annual compensation in excess of $100,000. The Representing Party
has made available to the other Representing Party a complete and correct copy
of each such written employment agreement, a complete and correct summary of
each such oral agreement.
(d) No liability under Title IV of ERISA has been incurred by the
Representing Party or any ERISA Affiliate within the past six years that has not
been satisfied in full. To the best knowledge of the Representing Party, no
condition exists that presents a material risk to the Representing Party, any of
its Subsidiaries or any ERISA Affiliate of incurring a liability under such
Title that is reasonably likely to have a Material Adverse Effect on the
Representing Party. The Pension Benefit Guaranty Corporation has not instituted
proceedings to terminate any of the Employee Benefit Plans, and, to the
knowledge of the Representing Party, no condition exists that presents a
material risk that such proceedings will be instituted. Except as would not have
a Material Adverse Effect on the Representing Party, with respect to each of the
Employee Benefit Plans that is subject to Title IV of ERISA, the present value
of accrued benefits under such Employee Benefit Plan, based upon the actuarial
assumptions used for funding purposes in the most recent actuarial report
prepared by such Employee Benefit Plan's actuary with respect to such Employee
Benefit Plan, did not, as of its latest valuation date, exceed the then current
value of the assets of such Employee Benefit Plan allocable to such accrued
benefits, and there have been no changes since such latest valuation date which
would cause the present value of such accrued benefits to exceed the current
value of such assets. None of the Employee Benefit Plans or any trust
established thereunder has incurred any "accumulated funding deficiency" (as
defined in Section 302 of ERISA and Section 412 of the Code), whether or not
waived, as of the last day of the most recent fiscal year of each of the
Employee Benefit Plans ended prior to the date of this Agreement. None of the
Employee Benefit Plans is a Multiemployer Plan. To the knowledge of the
Representing Party each of the Employee Benefit Plans that is intended to be
"qualified" within the meaning of Section 401(a) of the Code is so qualified and
the trusts maintained thereunder are exempt from taxation under Section 501(a)
of the Code. No Employee Benefit Plan provides benefits, including without
limitation death or medical benefits (whether or not insured), with respect to
current or former employees after retirement or other termination of service
(other than coverage mandated by applicable Law or benefits, the full cost of
which is borne by the current or former employee). There are no material pending
or threatened claims by or on behalf of any Employee Benefit Plan, by any
employee or beneficiary covered under any such Employee Benefit Plan, or
otherwise involving any such Employee Benefit Plan (other than routine claims
for benefits). No prohibited transaction has occurred with respect to any
Employee Benefit Plan that would result, directly or indirectly, in the
imposition of an excise Tax or other liability under the Code or ERISA, except
for such a Tax or other liability that would not have a Material Adverse Effect.
Except as would not have a Material Adverse Effect on the Representing Party,
with respect to each Foreign Plan: (i) all amounts required to be reserved on
account of each Foreign Plan have been so reserved in accordance with reasonable
accounting practices prevailing in the country where such Foreign Plan is
established, and (ii) each Foreign Plan required to be registered with a
Governmental Entity has been registered, has been maintained in good standing
with the
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appropriate Governmental Entities, and has been maintained and operated in
accordance with its terms and applicable Law.
(e) No director or officer or other employee of such Representing Party
will become entitled to any termination, retirement, severance or similar
payment, benefit or enhanced or accelerated benefit (including any acceleration
of vesting or lapse of restrictions, repurchase rights or obligations with
respect to any employee stock option or other benefit under any stock option
plan or incentive or compensation plan or arrangement) as a result of the
transactions contemplated by this Agreement (either standing alone or in
conjunction with any additional or subsequent events).
(f) Any amount or other entitlement that could be received (whether in
cash or property or the vesting of property) as a result of any of the
transactions contemplated by this Agreement by any employee, officer or director
of the Representing Party or any of its affiliates who is a "disqualified
individual" (as such term is defined in proposed Treasury Regulation Section
1.280G-1) under any employee benefit plan or other compensation arrangement
currently in effect would not be characterized as an "excess parachute payment"
or a "parachute payment" (as such terms are defined in Section 280G(b)(1) of the
Code).
(g) As used in this Agreement:
(i) "Employee Benefit Plan" means any material Plan entered into,
established, maintained, sponsored, contributed to or required to be
contributed to by the Representing Party, any of its Subsidiaries or ERISA
Affiliates for the benefit of the current or former employees or directors
of the Representing Party or any of its Subsidiaries and existing on the
date of this Agreement or at any time subsequent thereto and on or prior to
the Effective Time;
(ii) "Foreign Plan" shall refer to each material plan, program or
contract that is subject to or governed by the Laws of any jurisdiction
other than the United States, and which would have been treated as an
Employee Benefit Plan had it been a United States plan, program or contract;
(iii) "Plan" means any employment, bonus, incentive compensation,
deferred compensation, pension, profit sharing, retirement, stock purchase:
stock option, stock ownership, stock appreciation rights, phantom stock,
leave of absence, layoff, vacation, day or dependent care, legal services,
cafeteria, life, health, medical, accident, disability, worker's
compensation or other insurance, severance, separation, termination, change
of control or other benefit plan, agreement, practice policy, program or
arrangement of any kind, whether written or oral, other than a Foreign Plan,
including, but not limited to any "employee benefit plan" within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations thereunder ("ERISA"); and
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(iv) "ERISA Affiliate" means, with respect to any Representing Party,
any entity, trade or business that is a member of the same controlled group
as such Representing Party (within the meaning of Sections 414(b), (c), (m)
or (o) of the Code).
Section 4.8 Information Statement; Phelps Dodge Proxy Statement;
Registration Statement; Other Information. None of the information with respect
to the Representing Party or its Subsidiaries to be included in the Schedule
14D-9, the Schedule 14D-1, the Information Statement, the Phelps Dodge Proxy
Statement or the Registration Statement will, in the case of the Information
Statement, the Schedule 14D-9, the Schedule 14D-1 or any amendments thereof or
supplements thereto, at the time that such document is mailed, in the case of
the Information Statement and the Phelps Dodge Proxy Statement, at the time of
the Parent Shareholder Meeting and the Cyprus Shareholder Meeting, respectively,
or, in the case of the Registration Statement, at the time it becomes effective,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation is made by the Representing Party with
respect to information supplied in writing by the other Representing Party or
any of its affiliates specifically for inclusion in the Information Statement.
The Information Statement will comply as to form in all material respects with
the provisions of the Exchange Act and the rules and regulations promulgated
thereunder. The letters to shareholders, notices of meeting, proxy statement and
forms of proxies to be distributed to stockholders in connection with the Cyprus
Merger and any schedules required to be filed with the SEC in connection
therewith are collectively referred to herein as the "Information Statement."
Section 4.9 Cyprus Rights Plan. Cyprus represents and warrants that the
Cyprus Board has taken all necessary action to render the Rights Agreement
between Cyprus and The Bank of New York, dated as of February 28, 1999,
inapplicable to the transactions contemplated by this Agreement.
Section 4.10 Tax Matters.
(a) All federal, state, local and foreign Tax Returns required to be
filed by or on behalf of the Representing Party, each of its Subsidiaries, and
each affiliated, combined, consolidated or unitary group of which the
Representing Party or any of its Subsidiaries (i) is a member (a "Current
Representing Party Group") or (ii) was a member during six years prior to the
date hereof but is not currently a member, but only insofar as any such Tax
Return relates to a taxable period ending on a date within the last six years (a
"Past Representing Party Group," together with Current Representing Party
Groups, a "Representing Party Affiliated Group") have been timely filed, and all
such Tax Returns filed are complete and accurate except to the extent any
failure to file or any inaccuracies in filed Tax Returns would not, individually
or in the aggregate, have a Material Adverse Effect on such Representing Party
(it being understood that the representations made in this Section, to the
extent that they relate to Past Representing Party Groups, are made to the
knowledge of the Representing Party). All Taxes due and owing by the
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Representing Party, any Subsidiary of the Representing Party or any Representing
Party Affiliated Group have been paid, or adequately reserved for, except to the
extent any failure to pay or reserve would not, individually or in the
aggregate, have a Material Adverse Effect on the Representing Party. There is no
audit examination, deficiency, refund litigation, proposed adjustment or matter
in controversy with respect to any Taxes due and owing by the Representing
Party, any Subsidiary of the Representing Party or any Representing Party
Affiliated Group which would, individually or in the aggregate, have a Material
Adverse Effect on the Representing Party; provided that in no event shall the
existence of a proposed adjustment or matter in controversy with respect to
Taxes be deemed to have or contribute to a Material Adverse Effect for any
purpose under this Agreement to the extent that such proposed adjustment or
matter in controversy has been specifically reserved for or paid as of the date
of this Agreement. All assessments for Taxes due and owing by the Representing
Party, any Subsidiary of the Representing Party or any Representing Party
Affiliated Group with respect to completed and settled examinations or concluded
litigation have been paid. As soon as practicable after the public announcement
of the execution of the Agreement, the Representing Party will provide the other
party with written schedules of (i) the taxable years of the Representing Party
for which the statutes of limitations with respect to federal income Taxes have
not expired, and (ii) with respect to federal income Taxes, those years for
which examinations have been completed, those years for which examinations are
presently being conducted, and those years for which examinations have not yet
been initiated. The Representing Party and each of its Subsidiaries have
complied in all material respects with all rules and regulations relating to the
withholding of Taxes, except to the extent any such failure to comply would not,
individually or in the aggregate, have a Material Adverse Effect on the
Representing Party.
(b) Neither the Representing Party nor any of its Subsidiaries has (i)
entered into a closing agreement or similar agreement with a taxing authority
relating to Taxes of the Representing Party or any of its Subsidiaries with
respect to a taxable period for which the statute of limitations is still open,
or (ii) with respect to U.S. federal income Taxes, granted any waiver of any
statute of limitations with respect to, or any extension of a period for the
assessment of, any such income Tax, in either case, that is still outstanding.
There are no Liens relating to Taxes upon the assets of the Representing Party
other than Liens relating to Taxes not yet due, except as would not have a
Material Adverse Effect on the Representing Party. Neither the Representing
Party nor any of its Subsidiaries is a party to any agreement relating to the
allocating or sharing of Taxes, other than an agreement with each other.
(c) Neither the Representing Party nor any of its Subsidiaries knows of
any fact or has taken any action that could reasonably be expected to prevent
the Cyprus Offer together with the Cyprus Merger from constituting a
reorganization under Section 368(a) of the Code.
For purposes of this Agreement: (i) "Taxes" means any and all federal,
state, local, foreign or other taxes of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any taxing authority,
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including, without limitation, taxes or other charges on or with respect to
income, franchise, windfall or other profits, gross receipts, property, sales,
use, severance, capital stock, payroll, employment, social security, workers'
compensation, unemployment compensation, or net worth, and taxes or other
charges in the nature of excise, withholding, ad valorem or value added, and
(ii) "Tax Return" means any return, report or similar statement (including the
attached schedules) required to be filed with respect to any Tax, including,
without limitation, any information return, claim for refund, amended return or
declaration of estimated Tax.
Section 4.11 Opinion of Financial Advisors. The Cyprus Board has
received the opinion of Merrill Lynch & Co., dated the date of this Agreement,
substantially to the effect that, as of such date, the consideration to be
received by the holders of Cyprus Common Stock in the Cyprus Offer and the
Cyprus Merger is fair to the holders of Cyprus Common Stock from a financial
point of view.
Section 4.12 Required Vote.
(a) The affirmative vote of the holders of shares of Parent Common
Stock representing a majority of the shares voting at the Parent Shareholders
Meeting provided that at least 50% of the Parent Common Stock entitled to vote
thereon at the Parent Shareholders Meeting (the "Parent Shareholder Approval")
is required to approve the Cyprus Offer, the Cyprus Merger and the Share
Issuance. No other vote of the shareholders of Parent is required by Law, the
Certificate of Incorporation or the Bylaws of Parent or otherwise in order for
Parent to consummate the Cyprus Offer, the Cyprus Merger and the transactions
contemplated hereby.
(b) The affirmative vote of the holders of shares of Cyprus Common
Stock representing a majority of all shares entitled to vote at the Cyprus
Shareholder Meeting (the "Cyprus Shareholder Approval") is required to approve
this Agreement. No other vote of the shareholders of Cyprus is required by Law,
the Certificate of Incorporation or the Bylaws of Cyprus or otherwise in order
for Cyprus to consummate the Cyprus Merger and the transactions contemplated
hereby.
Section 4.13 Absence of Certain Changes. Since December 31, 1998, and,
other than with respect to clause (a) below, prior to the date hereof, except as
set forth in the Representing Party's (or any of its Subsidiaries') SEC Reports
filed prior to the date hereof, the Representing Party and its Subsidiaries have
conducted their respective businesses in the ordinary course, consistent with
past practice and there has not been:
(a) any event, occurrence or development (including the discovery of
new or additional information concerning an existing environmental
condition) which, individually or in the aggregate, would have a Material
Adverse Effect on the Representing Party;
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(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Representing
Party (other than regular quarterly cash dividends payable by the
Representing Party in respect of shares of its capital stock consistent with
past practice) or any repurchase, redemption or other acquisition by the
Representing Party or any of its Subsidiaries of any outstanding shares of
its capital stock (except (x) as required by the terms of any employee or
stock option plan or compensation plan or arrangement, (y) in accordance
with any dividend reinvestment plan as in effect as of the date of this
Agreement in the ordinary course of operation of such plan consistent with
past practice, and/or (z) as otherwise permitted by Section 5.1);
(c) any amendment of any material term of any outstanding security of
the Representing Party or any of its Subsidiaries;
(d) any transaction or commitment made, or any contract, agreement or
settlement entered into, by (or judgment, order or decree affecting) the
Representing Party or any of its Subsidiaries relating to its assets or
business (including the acquisition or disposition of any material amount of
assets) or any relinquishment by the Representing Party or any of its
Subsidiaries of any contract or other right, in either case, material to the
Representing Party and its Subsidiaries taken as a whole, other than
transactions, commitments, contracts, agreements or settlements (including,
without limitation, settlements of litigation and tax proceedings) in the
ordinary course of business consistent with past practice and those
contemplated by this Agreement;
(e) any change prior to the date hereof in any method of accounting or
accounting practice by the Representing Party or any of its Subsidiaries,
except for any such change which is not material or which is required by
reason of a concurrent change in GAAP;
(f) any (i) grant of any severance or termination pay to (or amendment
to any such existing arrangement with) any director, officer or employee of
the Representing Party or any of its Subsidiaries, (ii) entering into of any
employment, deferred compensation, supplemental retirement or other similar
agreement (or any amendment to any such existing agreement) with any
director, officer or employee of the Representing Party or any of its
Subsidiaries, (iii) increase in, or accelerated vesting and/or payment of,
benefits under any existing severance or termination pay policies or
employment agreements or (iv) increase in or enhancement of any rights or
features related to compensation, bonus or other benefits payable to
directors, officers or employees of the Representing Party or any of its
Subsidiaries, in each case, other than in the ordinary course of business
consistent with past practice or as permitted by this Agreement; or
(g) any material Tax election made or changed, any material audit
settled or any material amended Tax Returns filed.
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Section 4.14 No Undisclosed Material Liabilities. There are no
liabilities of the Representing Party or any Subsidiary of the Representing
Party of any kind whatsoever, whether accrued, contingent, absolute, determined
or determinable, other than:
(a) liabilities which, individually or in the aggregate, would not have
a Material Adverse Effect on the Representing Party;
(b) liabilities disclosed in the SEC Reports of the Representing Party;
and
(c) liabilities under or arising as a result of this Agreement.
Section 4.15 Labor Relations. As of the date of this Agreement: (i)
Section 4.15 of the Representing Party's Disclosure Schedule sets forth a
complete list of each collective bargaining agreement to which the Representing
Party or any of its Subsidiaries is a party, (ii) no labor organization or group
of employees of the Representing Party (or any of its Subsidiaries) has made a
pending demand for recognition or certification, and there are no representation
or certification proceedings or petitions seeking a representation proceeding
presently pending or, to the knowledge of the Representing Party, threatened to
be brought or filed, with the National Labor Relations Board or any other labor
relations tribunal or authority, and (iii) there are no organizing activities,
strikes, work stoppages, slowdowns, lockouts, material arbitrations or material
grievances, or other material labor disputes pending or, to the knowledge of the
Representing Party, threatened against or involving the Representing Party or
any of its Subsidiaries.
Section 4.16 No Prior Activities. SubC was formed for the purpose of
effecting a business combination transaction with Cyprus, has no Subsidiaries
and has not undertaken any business or other activities other than in connection
with pursuing such business combination and entering into this Agreement and
engaging in the transactions contemplated hereby.
ARTICLE V
COVENANTS AND AGREEMENTS
Section 5.1 Conduct of Business Pending the Effective Time. From and
after the date hereof and prior to the Effective Time or the date, if any, on
which this Agreement is earlier terminated pursuant to Section 7.1 (the
"Termination Date"), and except as may be agreed in writing by the other parties
hereto, or as may be provided for or permitted pursuant to this Agreement or as
disclosed on the Cyprus Disclosure Schedule:
(a) each of the parties shall, and shall cause each of its Subsidiaries
to, conduct its operations according to their ordinary and usual course of
business in substantially the same manner as heretofore conducted;
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(b) each of the parties shall use its reasonable best efforts, and
cause each of its Subsidiaries to use its reasonable best efforts, to
preserve intact its business organizations and goodwill, keep available the
services of its current officers and other key employees and preserve its
relationships with those persons having business dealings with it (including
its relationships with customers, suppliers, employees and business
partners);
(c) each of the parties shall confer at such times as any of the other
parties may reasonably request with one or more representatives of such
requesting party to report material operational matters and the general
status of ongoing operations (to the extent such requesting party reasonably
requires such information);
(d) each of the parties shall notify the other parties of any emergency
or other change in the normal course of its or its Subsidiaries' respective
businesses or in the operation of its or its Subsidiaries, respective
properties and of any complaints or hearings (or communications indicating
that the same may be contemplated) of any Governmental Entity if such
emergency, change, complaint, investigation or hearing would have a Material
Adverse Effect on such party;
(e) none of the parties shall, and none of the parties shall permit any
of its Subsidiaries to, (i) declare, set aside, authorize or pay any
dividends on or make any distribution with respect to its outstanding shares
of stock, except in the case of Parent for regular quarterly cash dividends
on the outstanding shares of Parent Common Stock, in the case of Cyprus for
regular quarterly cash dividends on the outstanding shares of Cyprus Common
Stock and Cyprus Preferred Stock; or (ii) split, combine or reclassify any
of its shares of capital stock;
(f) none of the parties shall, and none of the parties shall permit any
of its Subsidiaries to, except (i) in the ordinary course of business
consistent with past practice, (ii) as otherwise provided in this Agreement
or (iii) as required by applicable Law, adopt or amend any Employee Benefit
Plan;
(g) none of the parties shall, and none of the parties shall permit any
of its Subsidiaries to, authorize, propose or announce an intention to
authorize or propose, or enter into an agreement with respect to, any
merger, consolidation or business combination (other than the Cyprus
Merger), any acquisition of a material amount of assets or securities, any
disposition of a material amount of assets or securities (except as set
forth in Section 5.1(g) of the Cyprus Disclosure Schedule) or any release or
relinquishment of any material contract rights, in each case not in the
ordinary course of business;
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(h) none of the parties shall, and none of the parties shall permit its
Subsidiaries to, propose or adopt any amendments to its certificate of
incorporation or by-laws or other similar governing documents;
(i) none of the parties shall, and none of the parties shall permit any
of its Subsidiaries to, issue or authorize the issuance of, or agree to
issue or sell any shares of their capital stock of any class (whether
through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise), except for the issuance of
shares of Parent Common Stock by Parent and Cyprus Common Stock by Cyprus
upon the exercise of stock options or other rights to acquire such party's
capital stock, in each case which securities, options and rights are
outstanding as of the date of this Agreement (or as set forth on Section
4.7(a) of the Cyprus Disclosure Schedule) and such issuance is made in
accordance with the terms of such securities, options and rights in effect
on the date of this Agreement;
(j) none of the parties shall, and none of the parties shall permit any
of its Subsidiaries to, except in the ordinary course of business in
connection with employee incentive and benefit plans, programs or
arrangements in existence on the date hereof, purchase or redeem any shares
of its stock or any rights, warrants or options to acquire any such shares;
(k) none of the parties shall, and none of the parties shall permit any
of its Subsidiaries to, incur, assume or prepay any indebtedness or any
other material liabilities, other than indebtedness between such party and a
wholly owned Subsidiary or between wholly owned Subsidiaries, provided, in
either such case, such wholly owned Subsidiaries remain wholly owned
Subsidiaries, and other than in the ordinary course of business consistent
with past practice;
(l) none of the parties shall, and none of the parties shall permit any
of its Subsidiaries to, sell, lease, license, mortgage or otherwise encumber
or subject to any Lien or otherwise dispose of any of its properties or
assets (including securitizations), other than in the ordinary course of
business consistent with past practice and other than the consummation of
contracts of sale executed and delivered prior to the date hereof;
(m) none of the parties shall, and none of the parties shall permit any
of its Subsidiaries to, take any action that would reasonably be expected to
cause the Cyprus Merger not to constitute transactions described in Section
368(a) of the Code;
(n) none of the parties shall, and none of the parties shall permit any
of its Subsidiaries to, make any material Tax election or settle or
compromise any material Tax liability, other than in the ordinary course of
business consistent with past practice and except that Cyprus may make one
or more Section 338(h)(10) elections (and
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corresponding state and local elections) relating to the sale of the Cypress
Amax Coal Company and its Subsidiaries; and
(o) none of the parties shall, and none of the parties shall permit any
of its Subsidiaries to, agree, in writing or otherwise, to take any of the
foregoing actions or take any action which would (i) make any representation
or warranty made by such party in Article IV hereof untrue or incorrect or
(ii) result in any of the conditions to the Cyprus Merger set forth in
Article VI not being satisfied.
Section 5.2 Investigation.
(a) Each of Cyprus on the one hand and Parent on the other hand shall
(and shall cause its respective Subsidiaries to) afford to the other and the
other's officers, employees, accountants, counsel and other authorized
representatives full and complete access on reasonable prior notice during
normal business hours, throughout the period prior to the earlier of the
Effective Time or the Termination Date, to its and its Subsidiaries' properties,
contracts, commitments, books, and records (including but not limited to Tax
Returns) and any report, schedule or other document filed or received by it or
any of its Subsidiaries pursuant to the requirements of federal or state
securities laws or filed with or sent to the SEC, the Department of Justice, the
Federal Trade Commission or any other Governmental Entity and shall use their
reasonable best efforts to cause their respective representatives and
Subsidiaries to furnish promptly to one another such additional financial and
operating data and other information as to its and its Subsidiaries' respective
businesses and properties as the other or its duly authorized representatives
may from time to time reasonably request; provided that nothing herein shall
require any of Parent or Cyprus or any of their respective Subsidiaries to
disclose any information to the other that would cause significant competitive
harm to such disclosing party or its affiliates if the transactions contemplated
by this Agreement are not consummated. Cyprus hereby agrees that it will treat
any such information in accordance with the Confidentiality Agreement, dated as
of May 18, 1999 between Cyprus and ASARCO Incorporated (the "Confidentiality
Agreement"). Notwithstanding any provision of this Agreement to the contrary, no
party shall be obligated to make any disclosure in violation of applicable laws
or regulations.
(b) Each of Parent and Cyprus will not, and will cause its officers,
employees, accountants, counsel and representatives not to, use any information
obtained pursuant to this Section 5.2 for any purpose unrelated to the
consummation of the transactions contemplated by this Agreement. Pending
consummation of the transactions herein contemplated, each of Parent and Cyprus
will keep confidential, and will cause its officers, employees, accountants,
counsel and representatives to keep confidential, all information and documents
obtained pursuant to this Section 5.2 unless such information (i) was already
known to it, (ii) becomes available to it from other sources not known by it to
be bound by a confidentiality obligation, (iii) is independently acquired by it
as a result of work carried out by any of its employees or representatives to
whom no disclosure of such information has been made, or (iv) is disclosed with
the prior written approval of the other party. Upon any termination of this
Agreement, each of Parent and Cyprus
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will, upon request by the other party, collect and deliver to the other party
all documents obtained by it or any of its officers, employees, accountants,
counsel and representatives then in their possession and any copies thereof.
Each of Parent and Cyprus and their respective representatives shall not contact
any distributors, suppliers, employees or customers of the other party in
connection with or in discussion of the transactions contemplated hereby without
the other party's prior consent.
Section 5.3 Stockholder Approvals and Other Cooperation.
(a) If required by law, as soon as practicable following consummation
of the Offer, Parent and Cyprus shall together, or pursuant to any reasonable
allocation of responsibility between them:
(i) prepare and file confidentially with the SEC as soon as is
reasonably practicable the Information Statement in preliminary form and
promptly cause Parent to amend as necessary the registration statement on
Form S-4 under the Securities Act (Registration No. 333-86063), which was
declared effective by the SEC on September 2, 1999, with respect to the
Parent Common Stock issuable in the Cyprus Merger (collectively, the
"Registration Statement"), and shall use their reasonable best efforts to
have the Information Statement cleared by the SEC under the Exchange Act;
(ii) as soon as is reasonably practicable, take all such action as may
be required under state blue sky or securities laws in connection with the
issuance of shares of Parent Common Stock in the Cyprus Merger and as
contemplated by this Agreement;
(iii) promptly prepare and file with the NYSE and such other stock
exchanges as shall be agreed upon listing applications covering the shares
of Parent Common Stock issuable in the Cyprus Merger, upon exercise of
Cyprus stock options, warrants, conversion rights or other rights or vesting
or payment of other Cyprus equity-based awards and use its reasonable best
efforts to obtain, prior to the Effective Time, approval for the listing of
such Parent Common Stock, subject only to official notice of issuance;
(iv) cooperate with one another in order to lift any injunctions or
remove any other impediment to the consummation of the transactions
contemplated herein; and
(v) cooperate with one another in obtaining (i) an opinion of Shearman
& Sterling, special counsel to Parent, dated as of the date of the Effective
Time, to the effect that the Cyprus Offer together with the Cyprus Merger
will qualify as a reorganization under Section 368(a) of the Code, and (ii)
an opinion of Wachtell, Lipton, Rosen & Katz, special counsel to Cyprus,
dated as of the date of the Effective Time, to the effect that the Cyprus
Offer together with the Cyprus Merger will qualify as a reorganization under
Section 368(a) of the Code. In connection therewith, each of Cyprus and
Parent shall deliver to Shearman & Sterling and Wachtell, Lipton, Rosen &
Katz customary
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representation letters in substantially the form previously reviewed by such
counsel (the representation letters referred to in this sentence are,
collectively, the "Tax Certificates").
(b) Subject to the limitations contained in Section 5.2, Parent on the
one hand and Cyprus on the other hand shall each furnish to the other and to the
other's counsel all such information as may be required in order to effect the
foregoing actions and each represents and warrants to the other that no
information furnished by it in connection with such actions or otherwise in
connection with the consummation of the transactions contemplated by this
Agreement will contain any untrue statement of a material fact or omit to state
a material fact required to be stated in order to make any information so
furnished, in light of the circumstances under which it is so furnished, not
misleading.
(c) (i) Cyprus shall cause the Information Statement to be mailed to
Cyprus's shareholders, in each case as promptly as practicable after the
Registration Statement (and any post-effective amendments thereto) is declared
effective under the Securities Act.
(ii) Parent shall hold a meeting of its stockholders (the "Parent
Shareholder Meeting") as provided in the Phelps Dodge Proxy Statement dated
September 13, 1999 as supplemented by the Proxy Statement Supplement dated
September 22, 1999 (as the same may be further amended or supplemented, the
"Phelps Dodge Proxy Statement") for the purpose of obtaining the Parent
Shareholder Approval. Parent shall, through its Board of Directors, recommend to
its shareholders the approval of the Share Issuance and the other transactions
contemplated hereby unless the Board of Directors of Parent determines in good
faith, after consultation with outside counsel, that to do so would be
inconsistent with its obligations under applicable Law.
(iii) Cyprus shall, as soon as practicable following the date of this
Agreement, duly call, give notice of, convene and hold a meeting of its
stockholders (the "Cyprus Shareholder Meeting") for the purpose of obtaining the
Cyprus Shareholder Approval. Cyprus shall, subject to Section 5.9(b), through
the Cyprus Board, recommend to its shareholders the adoption of this Agreement,
the Cyprus Merger and the other transactions contemplated hereby.
(iv) Each of Parent and Cyprus will use their best efforts to hold the
Parent Shareholder Meeting and the Cyprus Shareholder Meeting as soon as
practicable after the date hereof.
(v) Parent shall vote, or cause to be voted, all of the Cyprus Common
Stock then owned by it or any of its Subsidiaries or over which it has direct or
indirect voting authority in favor of the approval of the Cyprus Merger and of
the approval and adoption of this Agreement.
(d) Promptly upon the purchase by SubC of shares of Cyprus Common Stock
pursuant to the Cyprus Offer, and from time to time thereafter, Parent shall be
entitled to
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designate up to such number of directors, rounded up to the next whole number,
on the Cyprus Board as shall give Parent representation on the Cyprus Board
equal to the product of the total number of directors on the Cyprus Board
(giving effect to the directors elected pursuant to this sentence) multiplied by
the percentage that the aggregate number of such shares beneficially owned by
Parent and affiliates of Parent following such purchase bears to the total
number of such shares then outstanding, and Cyprus shall, at such time, promptly
take all actions necessary to cause Parent's designees to be elected as
directors, including increasing the size of the Cyprus Board or securing the
resignations of incumbent directors or both. At such times, Cyprus shall use its
best efforts to cause persons designated by Parent to constitute the same
percentage as persons designated by Parent shall constitute of such Board of
each committee of such Board, in each case only to the extent permitted by
applicable law. Notwithstanding the foregoing, until the earlier of (i) the time
Parent acquires a majority of the then outstanding shares on a fully diluted
basis and (ii) the Effective Time, Cyprus shall use its best efforts to ensure
that all the members of the Cyprus Board and each committee of the Cyprus Board
as of the date hereof who are not employees of Cyprus shall remain members of
the Cyprus Board and of such committees. Cyprus shall promptly take all actions
required pursuant to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder in order to fulfill its obligations under this Section
5.3(d) and shall include in its Schedule 14D-9 such information with respect to
Cyprus and its officers and directors as is required under Section 14(f) and
Rule 14f-1 to fulfill such obligations. Parent shall supply to Cyprus and be
solely responsible for any information with respect to it and its nominees,
officers, directors and affiliates required by such Section 14(f) and Rule
14f-1. Following the election of designees of Parent pursuant to this Section
5.3(d), prior to the Effective Time, any amendment of this Agreement or the
Certificate of Incorporation or By-laws of Cyprus, any termination of this
Agreement by Cyprus or any extension by Cyprus of the time for the performance
of any of the obligations or other acts of Parent or waiver of any of Cyprus'
rights hereunder shall require the concurrence of a majority of the directors of
Cyprus then in office who are neither (i) designees of Parent nor (ii) employees
of Cyprus.
Section 5.4 Affiliate Agreements. Cyprus shall, as soon as practicable,
deliver to Parent a list (reasonably satisfactory to counsel for Parent),
setting forth the names and addresses of all persons who will be, at the time of
the Cyprus Shareholder Meeting, in Cyprus' reasonable judgment, "affiliates" of
Cyprus for purposes of Rule 145 under the Securities Act. Cyprus shall furnish
such information and documents as Parent may reasonably request for the purpose
of reviewing such list. Cyprus shall use its reasonable best efforts to cause
each person who is identified as an "affiliate" in the list furnished pursuant
to this Section to execute a written agreement on or prior to the mailing of the
Information Statement, in substantially the form of Exhibit A hereto.
Section 5.5 Cyprus Employee Stock Options, Incentive and Benefit Plans.
(a) Simultaneously with the Cyprus Merger, (i) each outstanding option
("Cyprus Stock Options") and related stock appreciation right ("Cyprus SAR"), if
any, to purchase or acquire a share of Cyprus Common Stock under employee
incentive or benefit plans,
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programs or arrangements and non-employee director plans presently maintained by
Cyprus ("Cyprus Option Plans") shall be converted into an option (together with
a related stock appreciation right of Parent, if applicable) to purchase the
number of shares of Parent Common Stock equal to the Cyprus Stock Consideration
times the number of shares of Cyprus Common Stock which could have been obtained
prior to the Effective Time upon the exercise of each such option, at an
exercise price per share equal to the exercise price for each such share of
Cyprus Common Stock subject to an option (and related Cyprus SAR, if any) under
the Cyprus Option Plans divided by the Cyprus Stock Consideration, and all
references to Cyprus in each such option (and related Cyprus SAR, if any) shall
be deemed to refer to Parent, where appropriate, and (ii) Parent shall assume
the obligations of Cyprus under the Cyprus Option Plans. The other terms of each
such Cyprus Stock Option and Cyprus SAR, and the plans under which they were
issued, shall continue to apply in accordance with their terms, including any
provisions providing for acceleration of vesting or payment.
(b) Simultaneously with the Cyprus Merger, each outstanding award
including restricted stock, performance units, share units and performance
shares ("Cyprus Award") under any employee incentive or benefit plans, programs
or arrangements and non-employee director plans presently maintained by Cyprus
which provide for grants of equity-based awards shall be amended or converted
into a similar instrument of Parent, in each case with such adjustments to the
terms of such Cyprus Awards as are appropriate to preserve the value inherent in
such Cyprus Awards with no detrimental effects on the holders thereof. The other
terms of each Cyprus Award, and the plans or agreements under which they were
issued, shall continue to apply in accordance with their terms, including any
provisions providing for acceleration. With respect to any restricted stock
awards as to which the restrictions shall have lapsed on or prior to the
Effective Time in accordance with the terms of the applicable plans or award
agreements, shares of such previously restricted stock shall be converted in
accordance with the provisions of Section 3.1(b).
(c) Prior to the Effective Time, Cyprus shall amend each of its
employee incentive or benefit plans, programs and arrangements and non-employee
director plans, to the extent necessary and appropriate, to reflect the
transactions contemplated by this Agreement, including, but not limited to the
conversion of shares of Cyprus Common Stock held or to be awarded or paid
pursuant to such benefit plans, programs or arrangements into shares of Parent
Common Stock, on a basis consistent with the transactions contemplated by this
Agreement and, to the extent not inconsistent with the transactions contemplated
by this Agreement, the terms of such plans, programs and arrangements. At or
prior to the Effective Time, Parent shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Parent Common Stock for
delivery upon exercise of the Cyprus Stock Options. As soon as practicable after
the Effective Time, Parent shall file a registration statement on Form S-3 or
Form S-8, as the case may be (or any successor or other appropriate forms), with
respect to the Parent Common Stock subject to such Cyprus Stock Options, and
shall maintain the effectiveness of such registration statement and the current
status of the prospectus or prospectuses contained therein, for so long as such
Cyprus Stock Options remain outstanding.
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(d) Parent and its Subsidiaries and affiliates agree to honor in
accordance with their terms the Cyprus Employee Benefit Plans, including,
without limitation, any rights or benefits arising thereunder as a result of the
transactions contemplated by this Agreement (either alone or in combination with
any other event). It is the intention of the parties hereto that, for a period
of one year from the Effective Time, Parent and its Subsidiaries continue to
maintain the Cyprus Employee Benefit Plans, in each case in accordance with
their terms as in effect at the Effective Time, with only such amendments as are
required by applicable law or permitted by the terms thereof as in effect at the
Effective Time, and which do not adversely affect the rights of participants (or
their beneficiaries) thereunder.
(e) Parent shall take, and shall cause the Surviving Corporation and
its Subsidiaries and all other affiliates of Parent to take, the following
actions: (i) waive any limitations regarding pre-existing conditions and
eligibility waiting periods under any welfare or other employee benefit plan
maintained by any of them for the benefit of employees of Cyprus or any of its
Subsidiaries immediately prior to the Effective Time (the "Cyprus Employees") or
in which Cyprus Employees participate after the Effective Time, (ii) provide
each Cyprus Employee with credit for any co-payments and deductibles paid prior
to the Effective Time for the calendar year in which the Effective Time occurs,
in satisfying any applicable deductible or out-of-pocket requirements under any
welfare plans that such employees are eligible to participate in after the
Effective Time, and (iii) for all purposes (other than for purposes of benefit
accruals under any defined benefit pension plan) under all compensation and
benefit plans and policies applicable to Cyprus Employees, treat all service by
Cyprus Employees with Cyprus or any of its Subsidiaries or affiliates before the
Effective Time as service with Parent and its Subsidiaries and affiliates.
(f) As of the Effective Time, Parent shall guarantee the performance of
the employment contracts and Cyprus Employee Benefit Plans in accordance with
their respective terms and the terms of this Agreement. Notwithstanding anything
contained herein or in any employment contract or Cyprus Employee Benefit Plan
to the contrary, Parent acknowledges and agrees that, for purposes of all
employment contracts and Cyprus Employee Benefit Plans, the transactions
contemplated by this Agreement are, or will be deemed to be, a "change of
control."
Section 5.6 Filings; Other Action.
(a) Subject to the terms and conditions herein provided, Parent and
Cyprus shall (i) promptly make all filings necessary in connection with their
respective Required Statutory Approvals, (ii) use reasonable best efforts to
cooperate with one another in (x) determining whether any filings are required
to be made with, or consents, permits, authorizations or approvals are required
to be obtained from, any third party or other governmental or regulatory bodies
or authorities of federal, state, local and this and such required to be foreign
jurisdictions in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby thereby and (y)
timely making all such filings and timely seeking all consents, permits,
authorizations or approvals, including such party's Required Third Party
Consents. The parties shall cooperate with one another in
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connection with the making of all such filings, including providing copies of
all such documents to the non-filing or non-submitting party and its advisors
prior to filing or otherwise submitting.
(b) (i) Without limiting the generality of the undertakings of Parent
and Cyprus pursuant to Section 5.6(a), Parent agrees to obtain the expiration or
termination of the applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and applicable
foreign statutes, rules, regulations, orders, decrees, administrative and
judicial doctrines and other laws that are designed or intended to prohibit,
restrict or regulate actions having the purpose or effect of monopolization,
restraint of trade or limitation of competition (collectively, "Antitrust
Laws"), which obligation shall be unconditional and shall be not be qualified by
best efforts (regardless of whether fulfillment of such obligation would have a
Material Adverse Effect on Parent or Cyprus). The existence of the condition set
forth in Section 6.1(a) shall not limit or diminish Parent's obligations
pursuant to the foregoing sentence or relieve Parent of any liability or damages
that may result from its breach of its obligations under this Section 5.7(b)(i)
(nor limit the obligations of Cyprus pursuant to the following sentence or
relieve them of any liability or damages that may result from their breach of
obligations under this Section 5.7(b)(i)). In connection with the foregoing,
Cyprus will cooperate with and assist Parent, and, with respect to matters that
are within its power or control will use its best efforts to promptly (i) take,
or cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable Antitrust Laws and regulations
to consummate the transactions contemplated by this Agreement as soon as
practicable, including, without limitation, preparing and filing as promptly as
practicable all documentation to effect all necessary filings, notices,
petitions, statements, registrations, submissions of information, applications
and other documents, and (ii) obtain and maintain all approvals, consents,
registrations, permits, authorizations and other confirmations required to be
obtained from any third party that are necessary, proper or advisable to
consummate the Cyprus Merger and the other transactions contemplated by this
Agreement. At Parent's request, Cyprus will commit to and implement any
divestiture, hold separate or similar transaction or action with respect to any
asset or business of Cyprus, which commitment and implementation may, at Cyprus'
option, be conditioned upon and effective as of the Closing Date. Subject to
applicable laws relating to the exchange of information, Parent and Cyprus shall
have the right to review in advance, and to the extent practicable each will
consult one another on, all the information relating to their respective
Subsidiaries, that appears in any filing made with, or written materials
submitted to, any third party and/or any Governmental Entity in connection with
the Cyprus Merger and the other transactions contemplated by this Agreement.
(ii) In furtherance and not in limitation of the foregoing, and to the
extent that any such action has not heretofore been taken or completed, each of
Parent and Cyprus agrees to (i) make an appropriate filing of a Notification and
Report Form pursuant to the HSR Act with respect to the transactions
contemplated hereby as promptly as practicable and in any event within ten
business days of the date hereof, (ii) supply as promptly as practicable any
additional information and documentary material that may be requested pursuant
to the HSR Act and (iii) complete the review process under the HSR Act to permit
the consummation of the Cyprus
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Merger including, but not limited to, causing the expiration of termination of
the applicable waiting periods under the HSR Act as soon as practicable.
Section 5.7 Further Assurances. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of each of the parties to this
Agreement shall take all such necessary action.
Section 5.8 Takeover Statute. If any "fair price," "moratorium,"
"control share acquisition" or other form of antitakeover statute or regulation
shall become applicable to the transactions contemplated hereby, Cyprus and the
Cyprus Board shall grant such approvals and take such actions as are reasonably
necessary so that the transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise act to
eliminate or minimize the effects of such statute or regulation on the
transactions contemplated hereby.
Section 5.9 No Solicitation by Cyprus.
(a) Cyprus shall not, nor shall it permit any of its Subsidiaries to,
authorize or permit any of its directors, officers or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its Subsidiaries to, directly or
indirectly through another person, (i) solicit, initiate or encourage (including
by way of furnishing information), or take any other action designed to
facilitate, any inquiries or the making of any proposal which constitutes any
Cyprus Takeover Proposal (or reasonably could be expected to lead to a Cyprus
Takeover Proposal) or (ii) participate in any discussions or negotiations
regarding any Cyprus Takeover Proposal; provided, however, that if the Cyprus
Board determines in good faith, after consultation with its outside counsel and
its financial advisor, that such Cyprus Takeover Proposal is reasonably capable
of being completed, taking into account all legal, financial, regulatory and
other aspects of the proposal and would, if consummated, result in a transaction
more favorable to Cyprus' shareholders than the transaction contemplated by this
Agreement, Cyprus may, in response to a Cyprus Takeover Proposal which was not
solicited by it or which did not otherwise result from a breach of this Section
5.9(a), and subject to providing prior written notice of its decision to take
such action to Parent (the "Cyprus Notice") (x) furnish information with respect
to Cyprus and its subsidiaries to any person making a Cyprus Takeover Proposal
pursuant to a customary confidentiality agreement (as determined by Cyprus after
consultation with its outside counsel) and (y) participate in discussions or
negotiations regarding such Cyprus Takeover Proposal. For purposes of this
Agreement, "Cyprus Takeover Proposal" means any inquiry, proposal or offer (or
any improvement, restatement, amendment, renewal or reiteration thereof) from
any person relating to any direct or indirect acquisition or purchase of a
business or shares of any class of equity securities of Cyprus or any of its
Subsidiaries, any tender offer or exchange offer that if consummated would
result in any person beneficially owning any class of equity securities of
Cyprus or any of its Subsidiaries, or any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving Cyprus or any of its Subsidiaries, other than the transactions
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contemplated by this Agreement (including the items listed on Section 5.1(g) of
the Cyprus Disclosure Schedule).
(b) Except as expressly permitted by this Section 5.9, neither the
Cyprus Board nor any committee thereof shall (i) withdraw or modify, or propose
publicly to withdraw or modify, in a manner adverse to Parent, the
recommendation by such Board or such committee of the Cyprus Merger or this
Agreement, (ii) approve or recommend, or propose publicly to approve or
recommend, any Cyprus Takeover Proposal or (iii) cause Cyprus to enter into any
letter of intent, agreement in principle, acquisition agreement or other similar
agreement (each, a "Cyprus Acquisition Agreement") related to any Cyprus
Takeover Proposal. Notwithstanding the foregoing, in the event that the Cyprus
Board receives a Cyprus Takeover Proposal and the Cyprus Board determines in
good faith, after consultation with its outside counsel and its financial
advisor, that such Cyprus Takeover Proposal is reasonably capable of being
completed, taking into account all legal, financial, regulatory and other
aspects of the proposal and would, if consummated, result in a transaction more
favorable to Cyprus' shareholders than the transaction contemplated by this
Agreement, the Cyprus Board may (x) take any of the actions described in clauses
(i), (ii) or (iii) above or (y) terminate this Agreement (and concurrently with
or after such termination, if it so chooses, cause Cyprus to enter into any
Cyprus Acquisition Agreement with respect to any Cyprus Takeover Proposal) but
only after the fifth business day following Parent's receipt of written notice
advising Parent that the Cyprus Board is prepared to accept a Cyprus Takeover
Proposal, specifying the material terms and conditions of such Cyprus Takeover
Proposal and identifying the person making such Cyprus Takeover Proposal.
(c) In addition to the obligations of Cyprus set forth in paragraphs
(a) and (b) of this Section 5.9, Cyprus shall immediately advise Parent orally
and in writing of any request for information or of any Cyprus Takeover
Proposal, including the material terms and conditions of such request or Cyprus
Takeover Proposal and the identity of the person making such request or Cyprus
Takeover Proposal. Cyprus will keep Parent reasonably informed of the status and
details (including amendments or proposed amendments) of any such request or
Cyprus Takeover Proposal.
(d) Nothing contained in this Section 5.9 shall prohibit Cyprus from
taking and disclosing to its shareholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to
Cyprus' shareholders if, in the good faith judgment of the Cyprus Board, after
consultation with outside counsel, failure so to disclose would be inconsistent
with its obligations under applicable Law. At the meeting of the Cyprus Board at
which this Agreement was considered, authorized and approved, held September 30,
1999, the Cyprus Board unanimously declared it advisable that Cyprus's
shareholders adopt and approve this Agreement. Notwithstanding any subsequent
determination by the Cyprus Board to change such recommendation, this Agreement
shall be submitted to the shareholders of Cyprus at the Cyprus Shareholder
Meeting for the purpose of obtaining the Cyprus Shareholder Approval and nothing
contained herein shall be deemed to relieve Cyprus of such obligation.
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Section 5.10 Public Announcements. Parent on the one hand and Cyprus on
the other hand will consult with and provide each other the reasonable
opportunity to review and comment upon any press release prior to the issuance
of any press release relating to this Agreement or the transactions contemplated
herein and shall not issue any such press release prior to such consultation
except as may be required by Law or by obligations pursuant to any listing
agreement with any national securities exchange.
Section 5.11 Indemnification and Insurance.
(a) Parent agrees that all rights to exculpation and indemnification
for acts or omissions occurring prior to the Effective Time now existing in
favor of the current or former directors or officers (the "Cyprus Indemnified
Parties") of Cyprus as provided in its charter or by-laws or in any agreement
shall survive the Cyprus Merger and shall continue in full force and effect in
accordance with their terms. For six years from the Effective Time, Parent shall
indemnify the Cyprus Indemnified Parties to the same extent as such Cyprus
Indemnified Parties are entitled to indemnification pursuant to the preceding
sentence.
(b) For three years from the Effective Time, Parent shall maintain in
effect Cyprus' current directors' and officers' liability insurance policy (the
"Cyprus Policy") covering those persons who are currently covered by the Cyprus
Policy (a copy of which has been heretofore delivered to Parent); provided,
however, that in no event shall Parent be required to expend in any one year an
amount in excess of 150% of the annual premiums currently paid by Cyprus for
such insurance, and provided further that if the annual premiums of such
insurance coverage exceed such amount, Parent shall be obligated to obtain a
policy with the greatest coverage available for a cost not exceeding such
amount; and provided further that Parent may meet its obligations under this
paragraph by covering the above people under Parent's insurance policy or
policies on the terms described above.
Section 5.12 Accountants' "Comfort" Letters. Parent on the one hand and
Cyprus on the other hand will each use reasonable best efforts to cause to be
delivered to the other two letters from their respective independent
accountants, one dated a date within two business days before the date of the
Registration Statement (as amended in accordance with Section 5.3(a)(i)) and one
dated a date within two business days before the Effective Time, in form and
substance reasonably satisfactory to the recipient and customary in scope for
comfort letters delivered by independent accountants in connection with
registration statements similar to the Registration Statement.
Section 5.13 Additional Reports. Parent on the one hand and Cyprus on
the other hand shall each furnish to the other copies of any reports of the type
referred to in Section 4.5 which it files with the SEC on or after the date
hereof, and each of Parent and Cyprus, as the case may be, represents and
warrants that as of the respective dates thereof, such reports will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statement therein, in
light of the circumstances under
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which they were made, not misleading. Any unaudited consolidated interim
financial statements included in such reports (including any related notes and
schedules) will fairly present the financial position of Parent and its
consolidated Subsidiaries or Cyprus and its consolidated Subsidiaries, as the
case may be, as of the dates thereof and the results of operations and changes
in financial position or other information included therein for the periods or
as of the date then ended (subject, where appropriate, to normal year-end
adjustments), in each case in accordance with past practice and GAAP
consistently applied during the periods involved (except as otherwise disclosed
in the notes thereto).
Section 5.14 Disclosure Schedule Supplements. From time to time after
the date of this Agreement and prior to the Effective Time, Parent will promptly
supplement or amend the Parent Disclosure Schedule with respect to any matter
hereafter arising which, if existing or occurring at or prior to the date of
this Agreement, would have been required to be set forth or described in the
Parent Disclosure Schedule or which is necessary to correct any information in a
schedule or in any representation and warranty of Parent which has been rendered
inaccurate thereby. From time to time after the date of this Agreement and prior
to the Effective Time, Cyprus will promptly supplement or amend the Cyprus
Disclosure Schedule with respect to any matter hereafter arising which, if
existing or occurring at or prior to the date of this Agreement, would have been
required to be set forth or described in the Cyprus Disclosure Schedule or which
is necessary to correct any information in a schedule or in any representation
and warranty of Cyprus which has been rendered inaccurate thereby, other than
Section 5.1(g) thereof which Cyprus shall have no authority to amend. For
purposes of determining the accuracy of the representations and warranties of
Parent and Cyprus contained in this Agreement in order to determine the
fulfillment of the conditions set forth in Article VI, the Parent Disclosure
Schedule and the Cyprus Disclosure Schedule shall be deemed to include only that
information contained therein on the date of this Agreement and shall be deemed
to exclude any information contained in any subsequent supplement or amendment
thereto.
Section 5.15 Certain Litigation. Each of the parties shall prior to or
at the Effective Time cease, terminate and dismiss, with prejudice, any and all
actions, proceedings or lawsuits initiated, commenced or filed by such party
against the other party in connection with (i) the Combination and (ii) Parent's
exchange offers dated as of September 3, 1999, as amended, for Cyprus and each
of the parties shall use its reasonable best efforts to cause any and all
actions, proceedings or lawsuits initiated, commenced or filed by third parties
in connection with the transactions in the above (i) and (ii) to cease,
terminate or be dismissed, with prejudice.
Section 5.16 Shareholder Litigation. Each of Parent on the one hand and
Cyprus on the other hand shall give the other the reasonable opportunity to
participate in the defense of any shareholder litigation against Parent or
Cyprus, as applicable, and its directors relating to the transactions
contemplated by this Agreement.
Section 5.17 Section 16(b). Parent and Cyprus shall take all steps
reasonably necessary to cause the transactions contemplated hereby and any other
dispositions of equity
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securities of Cyprus (including derivative securities) or acquisitions of Parent
equity securities (including derivative securities) in connection with this
Agreement by each individual who is a director or officer of Cyprus to be exempt
under Rule 16b-3 under the Exchange Act.
Section 5.18 Change of Control Agreements. Cyprus has change of control
employment agreements with the 16 people listed in Section 5.18(a) of the Cyprus
Disclosure Schedule which provide certain benefits upon a termination of
employment for "good reason" or other than for "cause" following the Effective
Time. Parent shall take all appropriate steps necessary to, and will, give
reasonable advance notice prior to the Effective Time of its intention to offer
employment (including the proposed terms thereof), or not to offer employment,
to each of the aforementioned 16 people and will make such offers in the former
case, all sufficiently in advance of the Effective Time to afford such offerees
reasonable time prior to the Effective Time to decide whether or not to accept
the employment offered prior to the Effective Time. Cyprus has previously made
written disclosure to ASARCO for each of such 16 people and for all such people
in the aggregate of the total estimated amount payable to such people for all
obligations owed to them by Cyprus under all contractual and plan arrangements
with such people assuming that the employment of each such person was terminated
effective as of December 31, 1999 (except that retirement and supplemental
retirement benefits are calculated as of January 1, 1999).
ARTICLE VI
CONDITIONS TO THE CYPRUS MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect the Cyprus
Merger. The respective obligations of Parent and Cyprus to effect the Cyprus
Merger shall be subject to the fulfillment at or prior to the Effective Time of
the following conditions:
(a) The Parent Shareholder Approval and the Cyprus Shareholder Approval
necessary to consummate the transactions contemplated by this Agreement
shall have been obtained, all in accordance with applicable Law.
(b) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
court or other tribunal or governmental body or authority which prohibits or
makes illegal the consummation of the Cyprus Merger substantially on the
terms contemplated hereby. In the event any order, decree or injunction
shall have been issued, each party shall use its reasonable efforts to
remove any such order, decree or injunction.
(c) SubC shall have accepted for exchange all shares of Cyprus Common
Stock validly tendered and not withdrawn pursuant to the Cyprus Offer;
provided, however, that this condition shall not be applicable to the
obligations of SubC if, in
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breach of this Agreement, SubC fails to accept for exchange and exchange any
such shares validly tendered and not withdrawn pursuant to such Offer.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
Section 7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by mutual consent of the Boards of Directors of Parent and Cyprus;
(b) by either Parent or Cyprus if, without fault of such terminating
party, the purchase of Cyprus Common Stock pursuant to the Cyprus Offer
shall not have occurred on or before March 31, 2000, which date may be
extended by mutual written consent of the parties hereto;
(c) by Parent or Cyprus if the Cyprus Offer expires or is terminated or
withdrawn pursuant to its terms without any Cyprus Common Stock being
purchased thereunder; or
(d) by either Parent or Cyprus if any court of competent jurisdiction
or other governmental body shall have issued an order (other than a
temporary restraining order), decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the purchase of Cyprus
Common Stock pursuant to the Cyprus Offer or the Cyprus Merger, and such
order, decree, ruling or other action shall have become final and
nonappealable; provided that the party seeking to terminate this Agreement
shall have used its reasonable best efforts, subject to Section 5.7, to
remove or lift such order, decree or ruling; or any statute, rule,
regulation, order, injunction or decree shall have been enacted, entered,
promulgated or enforced by any court, administrative agency or commission or
other governmental authority or instrumentality which prohibits or makes
illegal the consummation of the Cyprus Offer or the Cyprus Merger and which,
in the case of any such order, injunction or decree, shall have become final
and nonappealable; or there shall have been a failure to obtain any required
consent or approval under foreign laws or regulations which would prohibit
the consummation of the Cyprus Offer or the Cyprus Merger or would have a
material adverse effect on Parent or on Cyprus.
Section 7.2 Termination by Parent. This Agreement may be terminated and
the Cyprus Offer and the Cyprus Merger may be abandoned by action of the Board
of Directors of Parent, at any time prior to the purchase of Cyprus Common Stock
pursuant to the Cyprus Offer, if (a) the Cyprus Board shall withdraw, modify or
change its recommendation or approval in respect of this Agreement or the Cyprus
Offer in a manner adverse to Parent, (b) the Cyprus
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Board shall have recommended any proposal other than by Parent in respect of a
Cyprus Takeover Proposal, (c) a Cyprus Takeover Proposal other than by Parent
shall be publicly disclosed and at the scheduled expiration of the Cyprus Offer
the Minimum Tender Condition shall not have been satisfied, or (d) the condition
to the Cyprus Offer described in clause (e) of Annex A hereto shall not have
been satisfied within 30 days of notice that such condition has not been
satisfied.
Section 7.3 Termination by Cyprus. This Agreement may be terminated and
the Cyprus Merger may be abandoned by action of the Cyprus Board, at any time
prior to the acceptance for payment of shares under the Cyprus Offer, (a) if
there shall be a material breach of any of Parent's representations, warranties
or covenants hereunder, which breach shall not be cured within ten days of
notice thereof, or (b) provided Cyprus is not in breach of any obligation under
this Agreement, to allow Cyprus to enter into an agreement in respect of a
Cyprus Takeover Proposal which the Cyprus Board determines is reasonably capable
of being completed, taking into account all legal, financial, regulatory and
other aspects of the proposal and would, if consummated, result in a transaction
more favorable to Cyprus' shareholders than the transaction contemplated by this
Agreement (provided that such termination pursuant to this clause (b) shall not
be effective unless and until Cyprus shall have paid to Parent the fee described
in Section 7.5 hereof and shall have complied with Section 5.9(c) and the notice
provisions of Section 5.9(b)).
Section 7.4 Effect of Termination. In the event of termination of this
Agreement pursuant to Section 7.1, all rights and obligations under this
Agreement as between Parent and Cyprus shall terminate (except for the
provisions of Sections 5.2, 7.5 and 8.2), and there shall be no other liability
on the part of Parent on the one hand or Cyprus on the other hand to the other
except liability arising out of a willful and material breach of this Agreement.
Section 7.5 Termination Fee. (a) In the event that (i) after the date
hereof and prior to the Cyprus Shareholder Meeting a Cyprus Takeover Proposal
shall have been made known to Cyprus or any of its Subsidiaries or shall have
been made directly to its shareholders generally or any person shall have
publicly announced an intention (whether or not conditional) to make a Cyprus
Takeover Proposal and thereafter this Agreement is terminated by either Parent
or Cyprus pursuant to Section 7.1(b) or (ii) this Agreement is terminated by
Cyprus pursuant to Section 7.3(b), then Cyprus shall promptly pay Parent a fee
equal to $45 million (the "Cyprus Termination Fee"), payable by wire transfer of
same day funds; provided, however, that no Cyprus Termination Fee shall be
payable to Parent pursuant to this paragraph unless and until within 18 months
of such termination Cyprus or any of its Subsidiaries enters into any Cyprus
Acquisition Agreement or consummates any Cyprus Takeover Proposal (for the
purposes of the foregoing proviso the terms "Cyprus Acquisition Agreement" and
"Cyprus Takeover Proposal" shall have the meanings assigned to such terms in
Section 5.9 (except that the reference to the "acquisition or purchase of a
business or shares of any class of equity securities of Cyprus or any of its
Subsidiaries" in the definition of "Cyprus Takeover Proposal" in Section 5.9
shall be deemed to be a reference to the "acquisition or purchase of a business
that constitutes 20% or
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more of the net revenues, net income or the assets of Cyprus and its
Subsidiaries, taken as a whole, or 20% of any class of equity securities of
Cyprus or any of its Subsidiaries," but such reference shall not include either
of the items set forth in Section 5.1(g) of the Cyprus Disclosure Schedule)) in
which event the Termination Fee shall be payable upon the first to occur of such
events. Cyprus acknowledges that the agreements contained in this Section 7.5(a)
are an integral part of the transactions contemplated by this Agreement, and
that, without these agreements, Parent would not enter into this Agreement;
accordingly, if Cyprus fails promptly to pay the Cyprus Termination Fee, and, in
order to obtain such payment, Parent commences a suit which results in a
judgment against Cyprus for the Cyprus Termination Fee, Cyprus shall pay to
Parent its costs and expenses (including attorneys' fees and expenses) in
connection with such suit, together with interest on the amount of the Cyprus
Termination Fee at the prime rate of Citibank N.A. in effect on the date such
payment was required to be made.
(b) In the event of termination of this Agreement pursuant to Section
7.1(b) unless Cyprus is at fault in respect thereof, Section 7.1(c), Section
7.1(d) or Section 7.3(a), Parent shall reimburse Cyprus for any termination fee
that it has paid to ASARCO Incorporated ("ASARCO") under Section 7.3 of the
Agreement and Plan of Merger, dated as of July 15, 1999, among Asarco Cyprus
Incorporated, ACO Acquisition Corp., CAM Acquisition Corp., ASARCO Incorporated
and Cyprus Amax Minerals Company (the "ASARCO Merger Agreement") or under
paragraph 3 of Amendment No. 1, dated September 27, 1999, to the ASARCO Merger
Agreement; provided, however, that Parent shall have no obligation to reimburse
Cyprus for any termination fee paid to ASARCO in the event that this Agreement
is terminated as a result of the failure of the condition to the Cyprus Offer
set forth in paragraph (e) of Annex A hereto.
Section 7.6 Amendment or Supplement. At any time before or after
approval of the matters presented in connection with the Combination by the
shareholders of Cyprus and prior to the Effective Time, this Agreement may be
amended or supplemented in writing by Parent and Cyprus with respect to any of
the terms contained in this Agreement; provided, however, that, following the
purchase of Cyprus Common Stock pursuant to the Cyprus Offer, this Agreement
shall not be amended or supplemented unless any such amendment or supplement is
approved by the vote of the majority of Continuing Directors of Cyprus; and
provided further that following approval by the shareholders of Parent and
Cyprus there shall be no amendment or change to the provisions hereof with
respect to the Merger Consideration as provided herein nor any amendment or
change not permitted under applicable Law, without further approval by the
shareholders of Cyprus. For purposes of this Agreement, "Continuing Director"
shall mean a director who either was a member of the Cyprus Board prior to the
time that Parent exercised its rights under Section 5.3(d) or who subsequently
became a director of Cyprus and whose election, or nomination for election by
the stockholders of Cyprus, was approved by a vote of at least three-quarters of
the Continuing Directors then on the Cyprus Board.
Section 7.7 Extension of Time, Waiver, Etc. At any time prior to the
Effective Time, Parent on the one hand and Cyprus, as the case may be, on the
other hand, may:
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(a) extend the time for the performance of any of the obligations or
acts of the other party;
(b) waive any inaccuracies in the representations and warranties of the
other party contained herein or in any document delivered pursuant hereto;
or
(c) subject to the proviso of Section 7.6, waive compliance with any of
the agreements or conditions of the other party contained herein.
Notwithstanding the foregoing, no failure or delay by any party in
exercising any right hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right hereunder. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 No Survival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Cyprus Merger.
Section 8.2 Expenses. Whether or not the Cyprus Merger is consummated,
all costs and expenses incurred in connection with the Cyprus Merger, this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses, except that (i) the filing fee in connection with any
HSR Act filing or any other Required Statutory Approval, (ii) the commissions
and other out-of-pocket transaction costs, including the expenses and
compensation of the Exchange Agent, incurred in connection with the sale of
Excess Shares, and (iii) all transfer Taxes, shall be shared equally by Parent
and Cyprus.
Section 8.3 Counterparts; Effectiveness. This Agreement may be executed
in two or more consecutive counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument, and shall become effective when one or more counterparts have been
signed by each of the parties and delivered (by telecopy or otherwise) to the
other parties.
Section 8.4 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the principles of conflicts of laws thereof, except to the extent the
provisions of this Agreement are expressly governed by or derive their authority
from the DGCL.
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Section 8.5 Notices. All notices and other communications hereunder
shall be in writing (including telecopy or similar writing) and shall be
effective (a) if given by telecopy, when such telecopy is transmitted to the
telecopy number specified in this Section 8.5 and the appropriate telecopy
confirmation is received or (b) if given by any other means, when delivered at
the address specified in this Section 8.5:
To Parent or SubC:
Phelps Dodge Corporation
2600 North Central Avenue
Phoenix, Arizona 85004-3014
copies to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: David W. Heleniak
Telecopy: (212) 848-7179
and
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Michael W. Blair
Telecopy: (212) 909-6836
To Cyprus:
Cyprus Amax Minerals Company
9100 East Mineral Circle
Englewood, Colorado 80112
Attention: Philip C. Wolf, Esq.
Telecopy: (303) 643-5049
copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Elliott V. Stein
Telecopy: (212) 403-2000
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Section 8.6 Assignment; Binding Effect. Neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto (whether by operation of Law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns.
Section 8.7 Severability. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, such provision shall be interpreted to be only so
broad as is enforceable.
Section 8.8 Enforcement of Agreement. The parties hereto agree that
money damages or other remedy at law would not be sufficient or adequate remedy
for any breach or violation of, or a default under, this Agreement by them and
that in addition to all other remedies available to them, each of them shall be
entitled to the fullest extent permitted by Law to an injunction restraining
such breach, violation or default or threatened breach, violation or default and
to any other equitable relief, including, without limitation, specific
performance, without bond or other security being required.
Section 8.9 Entire Agreement; No Third-Party Beneficiaries. This
Agreement and the Confidentiality Agreement constitute the entire agreement, and
supersede all other prior agreements and understandings, both written and oral,
between the parties, or any of them, with respect to the subject matter hereof
and thereof and, except for the provisions of Section 5.5(f) (with respect only
to those individuals listed in Section 5.18(a) of the Cyprus Disclosure
Schedule) and Section 5.11 hereof, is not intended to and shall not confer upon
any person other than the parties hereto any rights or remedies hereunder;
provided that if the Cyprus Merger has not been consummated before the 120th day
following the acceptance for payment of shares under the Cyprus Offer, as of
such 120th day, each of the shareholders of Cyprus (other than Parent and SubC)
shall have the right to enforce the obligations of Parent and SubC to consummate
the Cyprus Merger and the shareholders' right to receive the Merger
Consideration.
Section 8.10 Headings. Headings of the Articles and Sections of this
Agreement are for convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
Section 8.11 Definitions. References in this Agreement to
"Subsidiaries" of any person shall mean any corporation or other form of legal
entity of which more than 50% of the outstanding voting securities are on the
date hereof directly or indirectly owned by such person. References in this
Agreement to "Significant Subsidiaries" shall mean Subsidiaries which constitute
"significant subsidiaries" under Rule 405 promulgated by the SEC under the
Securities Act. References in this Agreement (except as specifically otherwise
defined) to "affiliates" shall mean, as to any person, any other person which,
directly or indirectly, controls, or is controlled by, or is under common
control with, such person. As used in this definition, "control"
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(including, with its correlative meanings, "controlled by" and "under common
control with") shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of management or policies of a person, whether
through the ownership of securities or partnership of other ownership interests,
by contract or otherwise. References in the Agreement to "person" shall mean an
individual, a corporation, a partnership, an association, a trust or any other
entity or organization, including, without limitation, a governmental body or
authority. Notwithstanding the foregoing, Parent shall not be deemed to be an
"affiliate" or a "Subsidiary" of Cyprus.
Section 8.12 Finders or Brokers. Except for Merrill Lynch & Co. with
respect to Cyprus, a copy of whose engagement agreement has been or will be
provided to Parent, neither Cyprus nor any of their respective Subsidiaries has
employed any investment banker, broker, finder or intermediary in connection
with the transactions contemplated hereby who might be entitled to any fee or
any commission in connection with or upon consummation of the Cyprus Merger.
Section 8.13 Cyprus Actions Following the Offer. Following the purchase
of Cyprus Common Stock pursuant to the Cyprus Offer, no action may be taken by
Cyprus under this Agreement (including, without limitation, termination pursuant
to Section 7.1 and any waiver and any extension under Section 7.7) unless any
such action is approved by the vote of the majority of the Continuing Directors
of Cyprus.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
PHELPS DODGE CORPORATION
By:
------------------------------------
Name:
Title:
CAV CORPORATION
By:
------------------------------------
Name:
Title:
CYPRUS AMAX MINERALS COMPANY
By:
------------------------------------
Name:
Title:
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ANNEX A
Conditions to the Cyprus Offer
Notwithstanding any other provision of our Offer, we shall not be
required to accept for exchange or exchange any Cyprus Amax Common Stock, may
postpone the acceptance for exchange of or exchange for tendered Cyprus Amax
Common Stock, and may, in our sole discretion, terminate or amend the Offer as
to any Cyprus Amax Common Stock not then exchanged (a) if at the expiration
date, any of the Minimum Tender Condition or the Phelps Dodge Stockholder
Approval Condition (each as defined in the Prospectus dated September 22, 1999
relating to the Offer by Phelps Dodge for shares of Cyprus Amax Common Stock)
has not been satisfied or (b) if on or after the date of the prospectus and at
or prior to the expiration date, any of our other conditions are not satisfied.
The conditions are as follows:
(a) The shares of our common stock which shall be issued to Cyprus
Amax stockholders in the Offer and the Phelps Dodge/Cyprus Amax merger
have been authorized for listing on the NYSE, subject to official
notice of issuance;
(b) Registration Statement No. 333-86061 and any post-effective
amendments thereto shall be effective under the Securities Act, and no
stop order suspending the effectiveness of the Registration Statement
shall have been issued nor shall there have been proceedings for that
purpose initiated or threatened by the SEC and we shall have received
all necessary state securities law or "blue sky" authorizations;
(c) No temporary restraining order, preliminary or permanent
injunction or other order or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Offer or any of the other
transactions contemplated by the Prospectus dated September 22, 1999
(the "Prospectus") shall be in effect; no statute, rule, regulation,
order, injunction or decree shall have been enacted, entered,
promulgated or enforced by any court, administrative agency or
commission or other governmental authority or instrumentality which
prohibits, or makes illegal the consummation of our Offer; nor shall
there have been a failure to obtain any required consent or approval
under foreign laws or regulations which would prohibit the consummation
of the Offer or would have a material adverse effect on Parent or on
Cyprus Amax;
(d) There shall not have been after the date of this Agreement any
(i) amendment of the Code, (ii) amendment or adoption of final or
temporary Treasury Regulations under the Code, (iii) Internal Revenue
Service revenue ruling, revenue procedures, technical advice memorandum
or notices, or (iv) final decision of a court of competent
jurisdiction, in each case that would be
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inconsistent with the Cyprus Merger qualifying as a reorganization
under Section 368(a) of the Code; and
(e) The representations and warranties of Cyprus in this Agreement
shall be true and correct (without giving effect to any qualification
as to "materiality" or "Material Adverse Effect" set forth therein) as
of the date of the Prospectus and as of the expiration date as though
made on and as of the date of the Prospectus and the expiration date
except where the failure of such representations and warranties to be
so true and correct would not reasonably be expected to have,
individually or in the aggregate a Material Adverse Effect (as defined
therein) on Cyprus; and Cyprus shall have performed or complied in all
material respects with all the material agreements and covenants
required by this Agreement.
The foregoing conditions are solely for our benefit and we may assert
them regardless of the circumstances giving rise to any such conditions
(including any action or inaction by us). We may waive these conditions in whole
or in part (other than the Phelps Dodge Stockholder Approval Condition and the
condition relating to effectiveness of the Registration Statement). The
determination as to whether any condition has been satisfied shall be deemed a
continuing right which may be asserted at any time and from time to time.
Notwithstanding the fact that we reserve the right to assert the failure of a
condition following acceptance for exchange but prior to exchange in order to
delay exchange or cancel its obligation to exchange properly tendered Cyprus
Amax Common Stock, we will either promptly exchange such Cyprus Common Stock or
promptly return such Cyprus Common Stock.
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<PAGE> 1
EXHIBIT(d)(3)
October 1, 1999
Phelps Dodge Corporation
2600 North Central Avenue
Phoenix, AZ 85004-3014
Offer to Exchange Common Stock of Phelps Dodge Corporation
for Common Stock of Cyprus Amax Minerals
Company
Ladies and Gentlemen:
You have requested our opinion as to certain United States federal income
tax consequences of your offer to exchange shares of your common stock for
shares of common stock of Cyprus Amax Minerals Company, a Delaware corporation,
and of the merger of CAV Corporation, a Delaware subsidiary wholly owned by you,
with Cyprus Amax Minerals Company. We hereby confirm our opinion as set forth
under the heading "Material U.S. Federal Income Tax Considerations" in the
Prospectus dated October 1, 1999.
We hereby consent to the reference to us under the heading "Material U.S.
Federal Income Tax Considerations" in the Prospectus and to the filing of this
opinion as an exhibit to the related Registration Statement on Form S-4 filed
with the Securities and Exchange Commission. In giving this consent, we do not
hereby admit that we are within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, or the rules and
regulations of the Securities and Exchange Commission promulgated thereunder.
Very truly yours,
SHEARMAN & STERLING
PHB/PMM
