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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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ALUMAX INC.
(NAME OF SUBJECT COMPANY)
ALUMAX INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, $0.01 PAR VALUE
(TITLE OF CLASS OF SECURITIES)
022197107
(CUSIP NUMBER OF CLASS OF SECURITIES)
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HELEN M. FEENEY
ALUMAX INC. 3424 PEACHTREE ROAD, N.E., SUITE 2100
ATLANTA, GEORGIA 30326
TELEPHONE: (404) 846-4600
TELECOPIER: (404) 846-4533
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICE AND COMMUNICATIONS ON BEHALF OF
THE PERSON(S) FILING STATEMENT)
WITH COPIES TO:
JOHN EVANGELAKOS
SULLIVAN & CROMWELL
125 BROAD STREET
NEW YORK, NEW YORK 10004
TELEPHONE: (212) 558-4000
TELECOPIER: (212) 558-3588
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Alumax Inc., a Delaware corporation (the
"Company"). The address of the principal executive offices of the Company is
3424 Peachtree Road, N.E., Suite 2100, Atlanta, Georgia 30326. The title of
the class of securities to which this Statement relates is the common stock of
the Company, par value $0.01 per share (the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to the tender offer (the "Offer") by AMX Acquisition
Corp. (the "Purchaser"), a Delaware corporation and a wholly owned subsidiary
of Aluminum Company of America (the "Parent"), to purchase up to 27,000,000
Shares at a price of $50.00 per Share in cash (such amount or any greater
amount per Share paid pursuant to the Offer being hereinafter referred to as
the "Per Share Cash Amount"), net to the tendering stockholder, upon the terms
and subject to the conditions set forth in the Offer to Purchase, dated March
13, 1998 (the "Offer to Purchase"), and the related Letter of Transmittal,
each of which is being mailed to stockholders of the Company with this
Statement and is filed as an exhibit to the Tender Offer Statement on Schedule
14D-1 filed by Purchaser with the Securities and Exchange Commission (the
"Commission") on March 13, 1998 (the "Schedule 14D-1"). If more than
27,000,000 Shares are validly tendered prior to the expiration of the Offer
(the "Expiration Date") and not withdrawn, the Purchaser will accept for
payment (and thereby purchase) 27,000,000 Shares, on a pro rata basis, with
adjustments to avoid purchases of fractional Shares, based upon the number of
Shares validly tendered on or prior to the Expiration Date and not withdrawn
by each tendering stockholder. The 27,000,000 Shares to which the Offer
relates represents approximately 50% of the Shares expected to be issued and
outstanding at the Expiration Date.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of March 8, 1998 (the "Merger Agreement"), among the Company, the Parent
and the Purchaser. The Merger Agreement provides, among other things, that,
upon the terms and subject to the conditions set forth in the Merger
Agreement, following the purchase of Shares pursuant to the Offer, the Company
will be merged with and into the Purchaser (the "Merger"), which will be the
surviving corporation in the Merger.
At the effective time of the Merger (the "Effective Time"), each Share
(other than Shares purchased in the Offer or otherwise owned by the Parent or
any of its subsidiaries ("Excluded Shares"), owned by the Company or any of
its subsidiaries or owned by stockholders exercising appraisal rights pursuant
to the Delaware General Corporation Law ("Dissenting Shares") will be
converted into, and become exchangeable for, the right to receive (i) 0.6975
(the "Exchange Ratio") of a share of common stock, $1.00 par value per share,
of the Parent (the "Parent Common Stock"), if the Purchaser purchases at least
27,000,000 Shares or such other number of Shares which equals the 50% Share
Number (as hereinafter defined); or (ii) a combination of cash and a fraction
of a share of Parent Common Stock, if the Purchaser purchases fewer Shares
than the 50% Share Number. The per Share consideration determined pursuant to
clause (i) or (ii) of the previous sentence is hereinafter referred to as the
"Merger Consideration".
The "50% Share Number" equals that number of Shares which represents an
absolute majority of the excess of (x) the number of issued and outstanding
Shares on a fully diluted basis on the Expiration Date, minus (y) the total
number of Shares issuable upon the exercise of all outstanding employee and
director stock options. On the Expiration Date, if the Purchaser purchases all
Shares validly tendered and such number of Shares is less than 27,000,000,
then in the Merger each Share will be converted into the right to receive a
prorated amount of the cash remaining available from the Offer (the "Merger
Cash Prorate Amount") and a fraction of a share of Parent Common Stock (the
"Adjusted Exchange Ratio"), each determined as follows. The Merger Cash
Prorate Amount will equal the U.S. dollar cash amount (rounded up to the
nearest cent) determined by dividing (x) the product of the per Share cash
amount paid by the Purchaser pursuant to the Offer times the excess of the 50%
Share Number over the number of Shares purchased by the Purchaser in the Offer
by (y) the total number of Shares outstanding immediately prior to the
Effective Time minus the number of Shares owned by the Parent
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and its subsidiaries immediately prior to the Effective Time (the "Final
Outstanding Number"). The Adjusted Exchange Ratio will be determined by
dividing (x) the product of the 50% Share Number times .6975 by (y) the Final
Outstanding Number. For example, if 26,000,000 Shares were purchased by the
Purchaser in the Offer and at the Effective Time the 50% Share Number were
27,000,000 and the Final Outstanding Number were 28,000,000, then in the
Merger each Share (other than those owned by the Parent or its subsidiaries
and Dissenting Shares) would be converted into the right to receive $1.79 in
cash and .6726 of a share of the Parent Common Stock.
The Offer and the Merger are intended to qualify as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended. If they are so treated, for U.S. federal income tax purposes (i) no
gain or loss will be recognized by the Parent, the Purchaser or the Company
pursuant to the Offer or the Merger, (ii) a stockholder of the Company who
exchanges all of such stockholder's Shares solely for cash in the Offer (or
upon exercise of appraisal rights in connection with the Merger) will
recognize gain or loss in an amount equal to the difference between the cash
received and such stockholder's adjusted tax basis in the Shares surrendered
and (iii) a stockholder of the Company who does not exchange any Shares
pursuant to the Offer and who receives solely Parent Common Stock in exchange
for Shares in the Merger will not recognize any gain or loss and (iv) a
stockholder of the Company who receives a combination of cash and Parent
Common Stock in the Offer and the Merger or in the Merger only will not
recognize loss but will recognize gain, if any, on the Shares so exchanged to
the extent of any cash received. It is a condition to the respective
obligations of each of the Company and the Purchaser that such party receive
an opinion from its tax counsel to the effect that the Merger qualifies as a
reorganization. Stockholders are encouraged to review the description of the
tax consequences of the Offer and the Merger described in Section 5 of the
Offer to Purchase.
Because the market price of the shares of the Parent Common Stock will
fluctuate and the Exchange Ratio will not be adjusted as a result of such
price fluctuation, the value of a share of the Parent Common Stock multiplied
by the Exchange Ratio at the Effective Time may be greater or less than the
$50.00 in cash per Share payable pursuant to the Offer. ACCORDINGLY, THE VALUE
OF THE MERGER CONSIDERATION MAY BE GREATER OR LESS THAN THE $50.00 PER SHARE
TO BE RECEIVED BY HOLDERS OF SHARES THAT ARE PURCHASED PURSUANT TO THE OFFER.
Based on the closing price of the Parent Common Stock on the New York Stock
Exchange, Inc. (the "NYSE") on March 12, 1998, the value of the fraction of a
share of the Parent Common Stock which would have been received in the Merger
had it occurred on such date for each Share pursuant to the Exchange Ratio
would have been $49.78 (assuming 27,000,000 Shares were purchased in the
Offer).
Pursuant to the Merger Agreement, the Company has redeemed the preferred
stock purchase rights outstanding pursuant to the Rights Agreement, dated
February 22, 1996 (the "Rights Agreement"), between the Company and Chemical
Mellon Shareholder Services, L.L.C., as rights agent. Payment of the $.01 per
right redemption price will be made to stockholders of record as of March 18,
1998.
The consummation of the Merger is subject to the satisfaction or waiver of
certain conditions, including the approval and adoption of the Merger
Agreement and the transactions contemplated thereby by the affirmative vote of
the stockholders of the Company holding a majority of the outstanding Shares.
The Company has agreed to convene a special meeting of its stockholders as
promptly as practicable for such purpose. If such meeting is held subsequent
to the consummation of the Offer and if the Purchaser has acquired (pursuant
to the Offer or otherwise) a majority of the outstanding Shares, the Purchaser
will have sufficient voting power to adopt the Merger Agreement without the
vote of any other stockholder.
The Merger Agreement is summarized in Item 3(b) below. A copy of the Merger
Agreement has been filed as Exhibit 3 to this Statement and is incorporated
herein by reference.
As set forth in the Schedule 14D-1, the address of the principal executive
offices of the Parent and Purchaser is 425 Sixth Avenue, Pittsburgh,
Pennsylvania 15219.
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ITEM 3. IDENTITY AND BACKGROUND.
(a) The name of the Company, which is the person filing this Statement, and
the address of its principal executive offices are set forth in Item 1 above.
Unless the context otherwise requires, references in this Statement to the
Company refer to the Company and its subsidiaries, taken as a whole.
(b) Except as set forth in this Item 3(b), to the knowledge of the Company,
as of the date hereof, there are no material contracts, agreements or
understandings and actual or potential conflicts of interest between the
Company or its affiliates and (i) its executive officers, directors or
affiliates, or (ii) the Parent, Purchaser or their respective executive
officers, directors or affiliates.
Sales Agreement
The Company does not mine bauxite or refine alumina. Alcoa of Australia
Limited, a subsidiary of the Parent, has been the Company's principal supplier
of alumina for over 20 years and currently provides substantially all of the
alumina for the Company's reduction operations under a long-term contract
which, with renewal options, expires in increments between 2007 and 2018.
Pricing under the contract is determined in part on a cost basis and in part
on a market basis, providing the Company with protection against spot market
price extremes during periods of tight supply. In fiscal years 1997, 1996 and
1995, the Company made aggregate payments under such contract of $257.7
million, $255.4 million and $182.1 million, respectively. A copy of the
Restated Sales Agreement, dated as of January 1, 1986, as amended and
supplemented as of April 8, 1992 and April 9, 1992, by and between Alcoa of
Australia Limited and Alumax Inc., is filed as Exhibit 4 hereto and is
incorporated herein by reference; the foregoing description is qualified in
its entirety by reference to such exhibit.
Agreements with Executive Officers and Directors of the Company
The stockholders of the Company should be aware that certain members of the
Company's management and members of the Board have certain interests in the
Offer and the Merger that are in addition to the interests of stockholders of
the Company generally.
The Company has entered into certain employment agreements, termination of
employment and change in control arrangements with its executive officers,
directors and affiliates, as described in the Information Statement pursuant
to Section 14(f) of the Securities Exchange Act of 1934 and Rule 14f-1
thereunder (the "Information Statement"), which is attached to this Statement
as Schedule I and is incorporated herein by reference.
On March 5, 1998, in connection with the review by the Company of executive
compensation and employee benefits in the event of a Change in Control of the
Company and upon the recommendation of the Human Resources and Compensation
Committee of the Board, the Board approved certain actions described below
with respect to termination and change in control arrangements of the Company.
The Board approved the amendment of the Company's Executive Separation
Policy, which is applicable to all officers and other key executives of the
Company (19 employees), to (a) increase from 1.5 times to 3 times annual
compensation (including incentive award at target) the lump sum cash payment
payable in the event of termination of an employee's employment by the Company
without "cause" or by the employee for "good reason" within two years
following a Change in Control of the Company and (b) increase from 18 months
to three years the period following the Change in Control that the Company is
required to maintain certain benefits for such employees. The amendment
further provides that in the event that any such termination payments or
benefits (together with any payments under any other plans, policies or
arrangements) are subject to excise tax under Federal tax laws, the Company
will increase such termination payment to put each such executive in the same
after-tax position as he or she would have been if the excise tax had not been
imposed. A copy of the Executive Separation Policy (as amended and restated on
March 5, 1998) is filed as Exhibit 5 hereto and is incorporated herein by
reference, and the foregoing description is qualified in its entirety by
reference to such exhibit.
In addition, the Board adopted the Separation Policy for Corporate
Employees, which provides that in the event of termination of employment of
any regular salaried employee at the Company's headquarters and satellite
locations (currently 200) by the Company without "cause" or by the employee
for "good reason" within two
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years following a Change in Control of the Company, each such employee is
entitled to (a) a lump sum payment in cash equal to between 0.5 and 1.5 times
his or her annual compensation (including incentive award at target), (b) a
pro rata portion of certain incentive compensation awards, determined on the
assumption that all applicable targets have been met, and (c) the maintenance
of certain benefits for between six and 18 months after termination, in each
case based upon length of service with the Company. At the March 5, 1998
meeting, the Board also approved the payment to each director of an amount in
cash equal to three times the payments normally made to such director for
Board services during a year in the event of a Change in Control. In the cases
of two directors of the Company whose retirement was scheduled for a date less
than three years from the date of the meeting, the multiple used in
calculating the payments will be the number of years (including fractions)
between the date of the consummation of the Merger and the Director's normal
retirement date. A copy of the Separation Policy for Corporate Employees
adopted on March 5, 1998 is filed as Exhibit 6 hereto and is incorporated
herein by reference, and the foregoing description is qualified in its
entirety by reference to such exhibit.
For purposes of this Item 3(b), the term "Change in Control" includes the
purchase by the Purchaser of 20% or more of the Shares or the approval by the
stockholders of the Company of the Merger.
The Merger Agreement
The following summary of certain provisions of the Merger Agreement is
presented only as a summary and is qualified in its entirety by reference to
the Merger Agreement, a copy of which is filed as Exhibit 3 to this Statement
and is incorporated herein by reference.
The Offer
The Merger Agreement provides for the making of the Offer. Pursuant to the
Offer, if more than 27,000,000 Shares are validly tendered prior to the
Expiration Date and not withdrawn, the Purchaser has agreed to accept for
payment (and thereby purchase) 27,000,000 Shares, on a pro rata basis, with
adjustments to avoid purchases of fractional Shares, based upon the number of
Shares validly tendered on or prior to the Expiration Date and not withdrawn
by each tendering stockholder. In the event that proration of tendered Shares
is required, the Purchaser does not expect that it will be able to announce
the final results of such proration or pay for any Shares until at least five
NYSE trading days after the Expiration Date.
The obligation of the Purchaser to purchase and pay for Shares tendered
pursuant to the Offer is subject to the conditions set forth in Section 14 of
the Offer to Purchase. The Purchaser may waive any condition to the Offer,
increase the price per Share payable in the Offer and make certain other
changes to the Offer. However, pursuant to the Merger Agreement, the Purchaser
may not make any change that (i) decreases the price per Share payable in the
Offer, (ii) reduces the number of Shares to be purchased in the Offer, (iii)
changes the form of consideration to be paid in the Offer, (iv) modifies any
of the conditions described in Section 14 of the Offer to Purchase in any
manner adverse to the holders of Shares, or (v) except as provided in the
following two sentences, extends the Offer. Notwithstanding the foregoing, the
Purchaser may, without the consent of the Company, (i) extend the Offer beyond
the scheduled expiration date, which is 20 business days following the date of
commencement of the Offer, if, at the scheduled expiration of the Offer, any
of the conditions to the Purchaser's obligation to accept for payment and to
pay for the Shares shall not be satisfied or waived, or (ii) extend the Offer
for any period required by any rule, regulation or interpretation of the
Commission or the staff thereof applicable to the Offer. So long as the Merger
Agreement is in effect and the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), has not
expired or been terminated, the Purchaser has agreed to extend the Offer from
time to time for a period or successive periods, each not to exceed ten
business days after the previously scheduled expiration date of the Offer.
Pursuant to the Merger Agreement, the Purchaser is obligated to purchase up
to 27,000,000 Shares validly tendered and not withdrawn pursuant to the Offer
(or such other number of Shares as equals the 50% Share Number). In the event
that on the Expiration Date 27,000,000 Shares is less than the 50% Share
Number by more than 2% of the then outstanding Shares and the Offer is
scheduled to expire at any time earlier than the tenth business day following
the date the Purchaser's notice of acceptance for payment of Shares pursuant
to the
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Offer is first published, sent or given, pursuant to the Offer the Purchaser
will extend the Offer until the expiration of such ten business day period.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof and in accordance with the DGCL, the Company shall
merge with and into the Purchaser and the separate corporate existence of the
Company will thereupon cease, and the Purchaser will be the surviving
corporation in the Merger (the "Surviving Corporation"). At the Effective
Time, each Share, other than Excluded Shares, shall be converted into, and
become exchangeable for, the right to receive: (i) 0.6975 of a share of the
Parent Common Stock if the Purchaser purchases, pursuant to the Offer, at
least 27,000,000 Shares or such other number of Shares which equals the 50%
Share Number; or (ii) that fraction of a share of Parent Common Stock equal to
the Adjusted Exchange Ratio plus an amount in cash equal to the Merger Cash
Prorate Amount, if the Purchaser purchases, pursuant to the Offer, fewer
Shares than the 50% Share Number. At the Effective Time, each Share owned by
the Parent, the Purchaser, the Company or any of their respective subsidiaries
shall automatically be cancelled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor. The Merger Agreement
provides that if, prior to the Effective Time, the Parent effects a change in
the number of shares of Parent Common Stock or securities convertible or
exchangeable into or exercisable therefor, the Merger Consideration will be
equitably adjusted.
Charter Documents; Initial Directors and Officers. The Merger Agreement
provides that, at the Effective Time, the Certificate of Incorporation of the
Purchaser, as in effect immediately prior to the Effective Time, will be the
Certificate of Incorporation of the Surviving Corporation; provided, however,
that Article FIRST of the Certificate of Incorporation of the Surviving
Corporation will be amended in its entirety to read as follows: "FIRST: The
name of the corporation is Alumax Inc." The Merger Agreement also provides
that, at the Effective Time the By-laws of the Purchaser, as in effect
immediately prior to the Effective Time, will be the By-laws of the Surviving
Corporation. Pursuant to the Merger Agreement, the directors of the Purchaser
at the Effective Time will be the directors of the Surviving Corporation, and
the officers of the Purchaser at the Effective Time will be the officers of
the Surviving Corporation, in each case, until their respective successors are
duly elected and qualified or their earlier death, resignation or removal in
accordance with the Certificate of Incorporation and By-laws of the Surviving
Corporation.
Stockholders' Meeting. The Merger Agreement provides that as promptly as
practicable following the date of the Merger Agreement, the Company, acting
through the Board, will, in accordance with applicable law duly call, give
notice of, convene and hold a special meeting of the stockholders of the
Company for the purposes of considering and taking action upon the approval of
the Merger and the approval and adoption of the Merger Agreement.
Directors. The Merger Agreement provides that, promptly upon the purchase of
and payment for any Shares by the Purchaser or any of its affiliates pursuant
to the Offer, the Parent will be entitled to designate such number of
directors, rounded up to the next whole number, on the Board as is equal to
the product obtained by multiplying the total number of directors on such
Board (giving effect to the directors designated by the Parent pursuant to
this sentence) by the percentage that the number of Shares so accepted for
payment bears to the total number of Shares then outstanding. In furtherance
thereof, the Merger Agreement provides that the Company is obligated, upon
request of the Purchaser, to increase promptly the size of its Board or
exercise its best efforts to secure the resignations of such number of
directors, or both, as is necessary to enable the Parent's designees to be so
elected to the Board and will cause the Parent's designees to be so elected.
The Company has agreed that, at such time, the Company will, if requested by
the Parent, cause directors designated by the Parent to constitute at least
the same percentage (rounded up to the next whole number) as is on the Board
of (i) each committee of the Board, (ii) each board of directors (or similar
body) of each significant subsidiary of the Company, and (iii) each committee
(or similar body) of each such board. Notwithstanding the foregoing, if Shares
are purchased pursuant to the Offer, the Merger Agreement requires there be at
least one member of the Board who was a director on the date of the Merger
Agreement and is not an employee of the Company until the Effective Time.
Solicitation by the Company. The Merger Agreement provides that nothing
contained in the Merger Agreement prohibits the Board from furnishing
information to, or entering into discussions with, any Person that
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makes a bona fide Acquisition Proposal. The term "Acquisition Proposal" as
defined in the Merger Agreement means any tender or exchange offer involving
the capital stock of the Company or any of its subsidiaries, any proposal or
offer to acquire in any manner a substantial equity interest in, or a
substantial portion of the business or assets of, the Company or any of its
subsidiaries, any proposal or offer with respect to any merger, consolidation,
business combination, recapitalization, liquidation, dissolution or
restructuring of or involving the Company or any of its subsidiaries, or any
proposal or offer with respect to any other transaction similar to any of the
foregoing with respect to the Company or any of its subsidiaries, other than
the transactions contemplated by the Merger Agreement. Additionally, the
Merger Agreement provides that nothing contained in the Merger Agreement
prohibits the Company from taking and disclosing to its stockholders a
position contemplated by Rule 14e-2(a) promulgated under the Exchange Act or
from making any disclosure to the Company's stockholders if the Board
determines in good faith, after consultation with outside legal counsel, that
it is necessary to do so in order to avoid breaching its fiduciary duties
under applicable law; provided, however, that neither the Company nor the
Board nor any committee thereof may withdraw or modify, or propose publicly to
withdraw or modify, its position with respect to the Merger Agreement, the
Offer or the Merger, or approve or recommend, or propose publicly to approve
or recommend, an Acquisition Proposal, except if, and only to the extent that,
the Board, based on the advice of outside legal counsel, determines in good
faith that such Acquisition Proposal is a bona fide Acquisition Proposal made
by a third party to acquire, directly or indirectly, 20% or more of the
outstanding Shares on a fully diluted basis or all or substantially all the
assets of the Company and its subsidiaries and otherwise on terms and
conditions which the Board determines in good faith, after consultation with
and based upon the written opinion of its financial advisor, to be a superior
financial alternative to the stockholders of the Company than the Offer and
the Merger (a "Superior Proposal") and that such action is necessary for the
Board to avoid breaching its fiduciary duties to the Company's stockholders
under applicable law; and provided, further, that the Board is not required to
violate applicable laws.
Filings. The Merger Agreement provides that the Company will, as promptly as
practicable following the date of the Merger Agreement, prepare and file with
the Commission a preliminary proxy or information statement relating to the
Merger and the Merger Agreement and will cause a definitive proxy or
information statement, including any amendment or supplement thereto (the
"Proxy Statement") to be mailed to its stockholders at the earliest
practicable date after the Registration Statement (as hereinafter defined) is
declared effective by the Commission. In addition, the Merger Agreement
obligates the Company to use its reasonable best efforts to obtain the
necessary approvals of the Merger and the Merger Agreement by its
stockholders. The Company has agreed that unless the Merger Agreement has been
terminated in accordance with its terms it will include in the Proxy Statement
the recommendation of the Board that stockholders of the Company vote in favor
of the approval of the Merger and the approval and adoption of the Merger
Agreement; provided, however, that if the Board, based on the advice of
outside legal counsel, determines in good faith that there is an Acquisition
Proposal which is a Superior Proposal (as defined in "Termination" below) and
it is necessary for the Board to amend or withdraw its recommendation in order
to avoid breaching its fiduciary duties to the Company's stockholders under
applicable law, the Board may amend or withdraw its recommendation.
The Merger Agreement provides that the Parent shall as promptly as
practicable following the date of the Merger Agreement prepare and file with
the Commission a registration statement (the "Registration Statement"), in
which the Proxy Statement shall be included as a prospectus, and shall use its
reasonable best efforts to have the Registration Statement declared effective
by the Commission as promptly as practicable.
Conduct of Business Pending the Merger. Pursuant to the Merger Agreement,
the Company has agreed that, from and after the date of the Merger Agreement
and prior to the Effective Time or the date, if any, on which the Merger
Agreement is earlier terminated pursuant to the terms and conditions thereof,
and except as may be agreed in writing by the other parties to the Merger
Agreement or as may be expressly permitted pursuant to the Merger Agreement,
the Company:
(i) will, and will cause each of its subsidiaries to, conduct its
operations according to their ordinary and usual course of business in
substantially the same manner as conducted prior to the date of the Merger
Agreement;
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(ii) will use its reasonable best efforts, and cause each of its
subsidiaries to use its reasonable best efforts, to preserve intact its
business organization 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 the Company and its
subsidiaries;
(iii) will confer at such times as the Parent may reasonably request with
one or more representatives of the Parent to report material operational
matters and the general status of ongoing operations;
(iv) will notify the Parent 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
the Company. "Material Adverse Effect" is defined in the Merger Agreement
as any 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, assets, liabilities or financial condition of the
Company and its Subsidiaries, taken as a whole, or the Parent and its
Subsidiaries, taken as a whole, as the case may be.
(v) will not, and will not permit any of its subsidiaries that is not
wholly owned to, authorize or pay any dividends on or make any distribution
with respect to its outstanding shares of stock;
(vi) will not, and will not permit any of its subsidiaries to, except as
otherwise provided in the Merger Agreement, establish, enter into or amend
any employee benefit plan or increase the compensation payable or to become
payable or the benefits provided to its officers or employees, subject to
certain exceptions;
(vii) subject to certain exceptions will not, and will not 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 Merger), any
acquisition or disposition of an amount of assets or securities, in each
case in excess of $1 million, except (x) for the sale of goods and products
manufactured by the Company and held for sale in the ordinary course and
(y) certain expenditures not in excess of $150 million in the aggregate;
(viii) will not, and will not permit any of its subsidiaries to, propose
or adopt any amendments to its certificate of incorporation or by-laws (or
other similar organizational documents);
(ix) will not, and will not permit any of its subsidiaries to, issue or
authorize the issuance of, or agree to issue or sell any shares of capital
stock of any class (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise)
other than certain issuances expressly permitted by the Merger Agreement;
(x) will not, and will not permit any of its subsidiaries to, reclassify,
combine, split, purchase or redeem any shares of its capital stock or
purchase or redeem any rights, warrants or options to acquire any such
shares;
(xi) other than in the ordinary course of business consistent with past
practice, will not, and will not permit any of its subsidiaries to, (a)
incur, assume or prepay any indebtedness or any other material liabilities
or issue any debt securities, or (b) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person, other than guarantees
of obligations of wholly owned subsidiaries of the Company in the ordinary
course of business;
(xii) will not, and will not permit any of its subsidiaries to, (a) 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; (b) modify, amend or terminate any of its material
contracts or waive, release or assign any material rights (contract or
other); or (c) permit any insurance policy naming it as a beneficiary or a
loss payable payee to lapse, be
7
<PAGE>
cancelled for reasons within the Company's control or expire unless a new
policy with substantially identical coverage is in effect as of the date of
lapse, cancellation or expiration;
(xiii) will not, and will not permit any of its subsidiaries to, (a) make
any material tax election or settle or compromise any material tax
liability or (b) change any of the accounting methods used by it unless
required by GAAP; and
(xiv) will not, and will not permit any of its subsidiaries to, agree, in
writing or otherwise, to take any of the foregoing actions or knowingly
take any action which would (y) make any representation or warranty in the
Merger Agreement untrue or incorrect in any material respect or (z) result
in any of the conditions to the Offer or any of the conditions to the
Merger set forth in the Merger Agreement not being satisfied.
Directors' and Officers' Indemnification. The Merger Agreement provides that
from and after the Effective Time, the Parent will indemnify and hold harmless
each present and former director and officer of the Company and its
subsidiaries (the "Indemnified Parties"), against any costs or expenses
(including attorneys' fees), judgments, fines, losses, claims, damages or
liabilities incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative,
arising out of or pertaining to matters existing or occurring at or prior to
the Effective Time, to the fullest extent that the Company or such subsidiary
would have been permitted under applicable law and the Certificate of
Incorporation or By-laws of the Company or such subsidiary in effect on the
date of the Merger Agreement to indemnify such person (and the Parent shall
also advance expenses as incurred to the fullest extent permitted under
applicable law provided the Person to whom expenses are advanced provides an
undertaking to repay such advances if it is ultimately determined that such
Person is not entitled to indemnification).
Employee Stock Options. The Merger Agreement provides that simultaneously
with the Merger, (i) each outstanding option (the "Company Stock Options") to
purchase or acquire a Share under employee incentive or benefit plans,
programs or arrangements and non-employee director plans presently maintained
by the Company (the "Company Option Plans") as to which the cash election
option has expired without the option holder having elected to receive cash in
respect thereof, will be converted into an option to purchase the number of
shares of Parent Common Stock equal to the product of (x) the Exchange Ratio
multiplied by (y) the number of Shares which could have been issued prior to
the Effective Time upon the exercise of such option, at an exercise price per
share (rounded upward to the nearest cent) equal to the exercise price for
each Share subject to such option divided by the Exchange Ratio, and all
references in each such option to the Company will be deemed to refer to the
Parent, where appropriate, provided, however, that with respect to any option
which is an "incentive stock option," within the meaning of Section 422 of the
Code, such adjustments shall, if applicable, be modified in a manner so that
the adjustments are consistent with requirements of Section 424(a) of the
Code, and (ii) the Parent will assume the obligations of the Company under the
Company Option Plans. The Merger Agreement also provides that the other terms
of each such option, and the plans under which they were issued, will continue
to apply in accordance with their terms, including any provisions providing
for acceleration and that at or prior to the Effective Time, the Parent has
agreed to take all corporate action necessary to reserve for issuance a
sufficient number of shares of Parent Common Stock for delivery upon exercise
of Company Stock Options assumed by it in accordance with the Merger
Agreement. The Parent has agreed that, as soon as practicable after the
Effective Time, if necessary, it will file a registration statement on Form S-
8 (or any successor or other appropriate forms), or another appropriate form
with respect to the shares of Parent Common Stock subject to such Company
Stock Options, and will use its best efforts to maintain the effectiveness of
such registration statements (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as the former
Company Stock Options remain outstanding.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto including
representations by the Company as to the Company's corporate organization and
qualification, capital stock, corporate authority, filings with the Commission
and other governmental authorities, financial statements, litigation, employee
matters, employment benefit matters, intellectual property, tax matters,
environmental matters, compliance with law, the absence of certain changes or
events, opinion of financial advisor and undisclosed liabilities.
8
<PAGE>
Conditions to Consummation of the Merger. The Merger Agreement provides that
the respective obligations of each party to effect the Merger are subject to
the following conditions: (a) the Merger Agreement and the transactions
contemplated thereby will have been approved and adopted by the affirmative
vote of the holders of a majority of the outstanding Shares; (b) no statute,
rule, regulation, executive order, decree, ruling or injunction will have been
enacted, entered, promulgated or enforced by any Governmental Entity (as
defined in the Merger Agreement) which prohibits the consummation of the
Merger substantially on the terms contemplated in the Merger Agreement or has
the effect of making the acquisition of Shares by the Parent or the Purchaser
or any affiliate of either of them illegal; (c) the Parent or the Purchaser or
any affiliate of either of them have purchased Shares pursuant to the Offer,
except that this condition will not apply if the Parent, the Purchaser or such
affiliate has failed to purchase Shares pursuant to the Offer in breach of
their obligations under the Merger Agreement; (d) the applicable waiting
period under the HSR Act shall have expired or been terminated; (e) the shares
of Parent Common Stock to be issued in the Merger will have been approved for
listing on the NYSE, subject to official notice of issuance and (f) the
Registration Statement shall have become effective in accordance with the
provisions of the Securities Act of 1933, as amended. In addition, the Merger
Agreement provides (i) that the obligation of the Parent and the Purchaser to
effect the Merger shall be subject to the receipt by the Parent of an opinion
of Skadden, Arps, Slate, Meagher & Flom LLP, tax counsel to the Parent, dated
as of the Effective Time, to the effect that the Merger will qualify as a
reorganization within the meaning of Section 368(a) of the Code and that (ii)
that the obligation of the Company to effect the Merger shall be subject to
the receipt by the Company of an opinion of Sullivan & Cromwell, tax counsel
to the Company, dated as of the Effective Time, to the effect that the Merger
will qualify as a reorganization within the meaning of Section 368(a) of the
Code.
The Merger Agreement also provides that, in the event that the Purchaser
purchases a number of Shares in the Offer which is less than the 50% Share
Number, the respective obligations of the Parent and the Purchaser and the
Company to effect the Merger shall be subject to the fulfillment at or prior
to the Effective Time of the following conditions, unless waived in writing by
the party to which the condition applies or unless the approval of the
Company's stockholders to the Merger is obtained prior thereto, in which event
such conditions will thereupon be deemed fulfilled: (i) that the
representations and warranties of the other party or parties, as the case may
be, set forth in the Merger Agreement will be true and correct, ignoring for
this purpose any qualification as to materiality or Material Adverse Effect,
as if such representations or warranties were made as of the Effective Time,
except for such inaccuracies as, individually or in the aggregate, would not
have a Material Adverse Effect on such party or parties, (ii) that the other
party will have performed and complied in all material respects with all
agreements, obligations and conditions required by the Merger Agreement to be
performed and complied with by it on or prior to the closing date and (iii)
that such party or parties will have furnished a certificate of an officer to
evidence compliance with the conditions set forth in clauses (i) and (ii) of
this sentence.
Termination. The Merger Agreement may be terminated and the Merger and the
other transactions contemplated thereby may be abandoned at any time prior to
the Effective Time, notwithstanding any requisite approval by the stockholders
of the Company: (a) by mutual written consent of the Parent, the Purchaser and
the Company; (b) by either the Parent or the Company if (i) (1) the Offer has
expired without any Shares being purchased pursuant thereto, or (2) the Offer
has not been consummated on or before September 30, 1998 (the "Termination
Date"); provided, however, that such right to terminate the Merger Agreement
is not be available to any party whose failure to fulfill any obligation under
the Merger Agreement has been the cause of, or resulted in, the failure of the
Shares to have been purchased pursuant to the Offer; (ii) a statute, rule,
regulation or executive order has been enacted, entered or promulgated
prohibiting the consummation of the Offer or the Merger substantially on the
terms contemplated by the Merger Agreement; or (iii) an order, decree, ruling
or injunction has been entered permanently restraining, enjoining or otherwise
prohibiting the consummation of the Offer or the Merger substantially on the
terms contemplated by the Merger Agreement and such order, decree, ruling or
injunction has become final and non-appealable; provided further that the
Termination Date will be extended by one business day for each business day
which elapses from March 16, 1998, until the date upon which the applicable
filings under the HSR Act are made by the Company with the appropriate
governmental entity; (c) by the Parent, (i) if due to an occurrence or
circumstance, other than as a result of a breach by the
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<PAGE>
Parent or the Purchaser of its obligations hereunder, resulting in a failure
to satisfy any condition to the Offer set forth in Section 14 of the Offer to
Purchase, the Purchaser has (1) failed to commence the Offer within 30 days
following the date of the Merger Agreement, or (2) terminated the Offer
without having accepted any Shares for payment thereunder; or (ii) if either
the Parent or the Purchaser is entitled to terminate the Offer as a result of
the occurrence of any event set forth in paragraph (e) of the conditions to
the Offer set forth in Section 14 of the Offer to Purchase; (d) by the Company
upon approval of the Board, if due to an occurrence or circumstance, other
than as a result of a breach by the Company of its obligations under the
Merger Agreement, that would result in a failure to satisfy any of the
conditions to the Offer set forth in Section 14 of the Offer to Purchase, the
Purchaser terminates the Offer without having accepted any Shares for payment
thereunder; (e) by the Company, if the Company receives a Superior Proposal
and the Board, based on the advice of outside legal counsel, determines in
good faith that such action is necessary for the Board to avoid breaching its
fiduciary duties to the Company's stockholders under applicable law; or (f) by
the Parent or the Company, if after the Company convenes and holds the special
meeting of stockholders of the Company and certifies the vote with respect to
the Merger, the Company's stockholders have voted against adoption of the
Merger.
Fees and Expenses. The Merger Agreement provides that except as expressly
contemplated by the Merger Agreement, all costs and expenses incurred in
connection therewith and the transactions contemplated thereby shall be paid
by the party incurring such costs and expenses.
Amendment. At any time prior to the Effective Time, the Merger Agreement may
be amended or supplemented in any and all respects, whether before or after
the adoption of the Merger by the stockholders of the Company, by written
agreement of the parties thereto, by action taken by their respective Boards
of Directors (which, following the election of the Parent's designees upon
consummation of the Offer, in the case of the Company, will require the
concurrence of a majority of the directors of the Company then in office who
were neither designated by the Purchaser nor are employees of the Company),
with respect to any of the terms contained in the Merger Agreement; provided,
however that following such stockholder approval there shall be no amendment
or change to the provisions thereof which would reduce the amount or change
the type of consideration into which each Share shall be converted upon
consummation of the Merger without further approval by the stockholders of the
Company.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(A) RECOMMENDATION OF THE BOARD OF DIRECTORS.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY (WITH ONE DIRECTOR
ABSENT) APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST
INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS THAT THE
COMPANY'S STOCKHOLDERS ACCEPT THE OFFER, TENDER THEIR SHARES PURSUANT TO THE
OFFER AND ADOPT THE MERGER AGREEMENT.
In recommending that the Company's stockholders accept the Offer, the Board
is not recommending that the cash payment of $50.00 per Share is preferable to
the payment of 0.6975 of a share of the Parent Common Stock. In choosing which
form of consideration a stockholder of the Company prefers, and responding to
the Offer accordingly, each of the Company's stockholders should make his or
her own decision.
The Offer is scheduled to expire at 12:00 midnight, New York City time, on
April 9, 1998, unless the Parent extends the period of time for which the
Offer is open. A copy of a letter to the Company's stockholders communicating
the Board's recommendation has been filed as Exhibit 2 to this Statement and
is incorporated herein by reference.
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<PAGE>
(B) BACKGROUND OF THE OFFER; REASONS FOR THE RECOMMENDATIONS.
Background.
In February 1996, Mr. Paul H. O'Neill, Chairman and Chief Executive Officer
of the Parent, called Mr. Allen Born, Chairman and Chief Executive Officer of
the Company, to offer the Parent's support and assistance in light of the
publicly announced unsolicited acquisition proposal made by Kaiser Aluminum
Corporation.Mr. Born told Mr. O'Neill that he appreciated the Parent's support
and would let the Parent know if assistance was necessary or appropriate.
During September 1996, Mr. O'Neill and Mr. Born had discussions concerning
the acquisition of the Company by the Parent. On October 6, 1996, Mr. O'Neill
proposed a merger transaction in which the Company's stockholders would
receive .66 of a share of Parent Common Stock which at that time represented a
per Share value of $39.88. Mr. Born informed Mr. O'Neill that the Company
would not consider the Parent's proposal as the value represented thereby was
less than that offered in the proposal made by Kaiser Aluminum Corporation
that previously had been rejected by the Board.
On December 9, 1996, Mr. O'Neill sent the following letter to Mr. Born:
December 9, 1996
Mr. Allen Born
Chairman and C.E.O.
Alumax Inc.
5655 Peachtree Parkway
Norcross, GA 30092-2812
Dear Al:
I am writing to you in an effort to rekindle our discussions of a
possible combination of Alumax and Alcoa. As you know, I believe that
this combination is so attractive that we should exhaust every
possibility to see whether it can be accomplished. As I have reflected
on our prior discussions, I believe market movements over the last
thirty days make a share-for-share combination even more compelling
today than it was last month. For these reasons, I would like once
again to outline our proposed transaction and its rationale for what I
hope will be favorable consideration by you and your Board of
Directors.
As we have discussed and, I believe agreed upon, the market has
established a trading range for the shares of our two companies at
about .53 Alumax share to 1 Alcoa share. We believe this ratio
furnishes a logical basis upon which to develop an appropriate exchange
ratio for the combination of the two companies. In light of this
historical ratio, our Board of Directors authorized me to pursue a
combination through a share exchange in which each Alumax share would
be exchanged for .66 of an Alcoa share. Based on the closing prices of
Alumax and Alcoa shares last Friday, this represented $41.50 of market
value for each Alumax share, or a premium of 32%. In addition, the
exchange ratio of .66 represents a 26% premium to the historical ratio
of .53.
I would like to point out two special features of the proposed
combination. First, your shareholders will receive Alcoa shares tax
free and will be able to defer recognizing gain on their Alumax
investment until they wish to sell the Alcoa shares they receive.
Second, since they will receive Alcoa common stock, your shareholders
will have the opportunity to participate in the upside potential of our
combined companies. Given the substantial overlap of our very large
institutional shareholders, I am confident that they will
enthusiastically support our combination on the basis we are proposing.
I also want to emphasize the importance of maintaining stability
among employees during a transitional period. It would be our desire to
have your employees harmoniously integrated into the
11
<PAGE>
Alcoa family. We have significant experience and have achieved
excellent success integrating acquired companies into our group, and we
have done so on a basis which new employees have found to be an
attractive and secure opportunity. We would expect to do the same for
Alumax employees.
We hope that you and your Board of Directors will view this proposal
as the Alcoa Board of Directors and I do--a unique opportunity for
Alumax shareholders to realize full value for their shares while
maintaining an enhanced investment in a stronger combined company with
superior growth potential. Please let me know if there is anything I
can do to help you with your deliberations.
Sincerely,
/s/
Paul H. O'Neill
cc: Members of the Board of Directors
Following receipt of the letter, the Board of Directors of the Company met
and determined that the proposal outlined in Mr. O'Neill's December 9, 1996
letter was inadequate. Thereafter, Mr. Born sent the following letter to the
Parent:
PERSONAL AND CONFIDENTIAL
December 16, 1996
Mr. Paul H. O'Neill
Chairman of the Board and
Chief Executive Officer
Aluminum Company of America
425 Sixth Avenue
Alcoa Building
Pittsburgh, Pennsylvania 15219-1850
Dear Paul:
The Alumax Board of Directors has unanimously determined that it is
not in the best interests of Alumax or our shareholders to pursue a
business combination at this time and that the financial terms
suggested by your proposal are wholly inadequate. None of the Alumax
directors is willing to permit Alumax to be sold for an inadequate
price at an inopportune time. The Board has full confidence that our
strategic plan will result in significant value to our shareholders and
believes that the current aluminum price has resulted in an
undervaluation of Alumax relative to other aluminum companies.
I trust that with this communication we can continue as before to be
friends and vigorous competitors.
Very truly yours,
/s/
Paul H. O'Neill
cc: Members of the Alumax Board of Directors
12
<PAGE>
In early January 1998, in a telephone conversation with Mr. Born, Mr.
O'Neill briefly mentioned their prior discussions, reaffirmed the Parent's
interest in a business combination with the Company and suggested they meet to
discuss the Parent's interest. Mr. Born told Mr. O'Neill that the Company's
position with respect to those discussions had not changed since December
1996. On January 14, 1998, Mr. Born and Mr. O'Neill met and Mr. O'Neill
discussed again the possibility of merging their two companies in a
transaction in which the Company's stockholders would receive .66 of a share
of Parent Common Stock. At that time, .66 of a share of Parent Common Stock
represented a per Share value of $43.68. Mr. Born and Mr. O'Neill could not
reach agreement at that value.
On Thursday, January 29, 1998, Mr. O'Neill telephoned Mr. Born and proposed
an acquisition transaction in which the Company's stockholders would receive
.66 of a share of Parent Common Stock for each outstanding Share. Mr. O'Neill
suggested that the two companies and their advisors proceed with the
mechanical steps required to complete a transaction. Mr. Born requested that
Mr. O'Neill memorialize the Parent's proposal in a letter which he could share
with his Board of Directors. Later that day, Mr. Born called Mr. O'Neill and
requested that the Parent's .66 share exchange proposal include collar
protection for the Company's stockholders. The following day, Mr. O'Neill
called Mr. Born to discuss Mr. Born's request and suggested that the simplest
method for dealing with Mr. Born's concern was to offer the Company's
stockholders $50 per Share in cash. Mr. Born arranged to receive the letter
containing the $50 cash proposal by facsimile transmission at his home early
Sunday morning.
On February 1, 1998, the following letter was faxed to Mr. Born:
February 1, 1998
Mr. Allen Born
Chairman and CEO
Alumax Inc.
3424 Peachtree, NE
Suite 2100
Atlanta, GA 30326
Via Fax: x-xxx/xxx-xxxx
Dear Al:
As you requested, I am writing to summarize the economic terms of our
proposal for a business combination of Alcoa and Alumax, which we have
discussed recently. I understand this will afford you a definitive
basis for seeking authorization from your Board of Directors to
proceed. In the meantime, let me thank you very much for taking the
time and trouble to meet with me on this subject two weeks ago and
again to return my telephone call Thursday afternoon in the midst of
your travels.
As I told you Thursday, I believe the conditions you outlined in our
meeting on January 14 for pursuing a transaction have now been
satisfied and we should proceed to sign and announce an agreement as
quickly as is possible. Accordingly, Alcoa is prepared to begin
documenting and implementing an acquisition of Alumax by Alcoa in which
the stockholders of Alumax would receive $50 in cash for each of their
shares. This purchase price represents a premium of more than 43% over
Friday's closing price for Alumax common shares. Promptly following
signature and announcement of the agreement Alcoa would commence a
tender offer for all outstanding common shares of Alumax. The tender
offer would be subject to customary conditions, including applicable
regulatory approvals and receipt of tenders of at least a majority of
the outstanding shares on a fully diluted basis.
As I mentioned in our conversation Friday morning, we are prepared to
dispatch our transaction team (including outside advisors) to New York
promptly in order to accommodate Board meetings as early as Tuesday and
an announcement before the opening of the market on Wednesday. We
expect that the acquisition agreement would be customary for a
transaction of this type and magnitude. We would expect that the
agreement would contain appropriate and customary fiduciary termination
and transaction "break-up" arrangements. Overall, we see no obstacle to
reaching agreement on the form
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<PAGE>
of the agreement promptly, which is, of course, a prerequisite for
moving ahead with the proposed transaction.
Maintaining stability among Alumax employees during the transitional
period is a very high priority for us. To that end, we would in general
expect to provide programs, plans and benefits which
in the aggregate should be comparable to what Alumax employees enjoy as
a group. We would hope to engender a spirit of enthusiastic
anticipation among your employees for an attractive and secure
opportunity with Alcoa.
I am confident your Board of Directors will view this proposal as
Alcoa's Board of Directors and I do--a unique opportunity for Alumax
stockholders to realize a substantial premium for their shares. As I
indicated to you on Friday, I would be happy to discuss or clarify any
aspect of this letter over the weekend, and I will plan to call you at
10 AM (EST) on Sunday morning February 1. I understand you can be
reached at x-xxx/xxx-xxxx. I look forward to talking to you.
Sincerely,
/s/
Paul H. O'Neill
At a meeting attended by each of the Company's directors on February 4, 1998
prior to the regularly scheduled Board meeting to be held the following day,
Mr. Born reviewed the proposal set forth in Mr. O'Neill's letter of February
1, 1998. After presentations from the Company's legal and financial advisors,
the directors discussed various financial, commercial and regulatory aspects
of the proposal among themselves and concluded that Mr. Born should advise Mr.
O'Neill that the Company was not interested in entertaining the Parent's
proposal at the specified price but would be willing to consider a higher
offer. This conclusion was affirmed at the meeting of the Board held on
February 5, 1998, following further discussion and consultation with
representatives of the Company's financial advisor. Later that day, Mr. Born
telephoned Mr. O'Neill and informed him that the Board declined to pursue the
Parent's proposal but would be prepared to discuss a business combination at a
higher price. In addition, Mr. Born offered to provide the Parent with non-
public evaluation material concerning the Company if the Parent would sign a
confidentiality agreement.
The following week Mr. Born telephoned Mr. O'Neill to determine whether the
Parent would be willing to enter into the confidentiality agreement and
commence an evaluation of the Company. In the meantime, Mr. O'Neill spoke by
telephone with two directors of the Company and expressed the Parent's very
strong interest in pursuing a transaction with the Company and indicated that,
if it would assist the Board with consideration of the Parent's proposal, the
Parent was prepared to permit the Company to shop the Parent's proposal and to
enter into a transaction with another acquiror at a price higher than the
price being offered by the Parent. Mr. O'Neill was also informed by one of the
directors that offering Parent Common Stock as consideration might be viewed
as a more attractive alternative by the Board than the Parent's cash proposal.
On Thursday, February 19, 1998, Mr. O'Neill and Mr. Richard B. Kelson,
Executive Vice President and Chief Financial Officer of the Parent, met with
Messrs. Born, Harold Brown and Paul W. MacAvoy, two of the Company's
directors, and Thomas G. Johnston, President and Chief Operating Officer of
the Company, to discuss generally the Parent's proposal. They discussed the
merits of a business combination, the value of such a combination to the
Parent and the appropriate level of consideration for such a transaction. The
Parent's representatives emphasized their view that at $50 per Share the
transaction was fully priced and that the Parent remained prepared to permit
the Company to shop the Company and to seek a transaction at a price higher
than $50 per Share. The Parent's representatives also indicated that the
Parent was prepared to offer half cash and half Parent Common Stock as the
consideration for the transaction. The Company's representatives informed the
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<PAGE>
Parent's representatives that they would reply to the proposal after
consulting with all of the Company's directors the next week.
On Wednesday, February 25, 1998, Mr. Born telephoned Mr. O'Neill to inform
him that the Board had rejected the Parent's proposal. That same day he also
sent the following letter to Mr. O'Neill:
February 25, 1998
Mr. Paul O'Neill
Chairman and CEO
Aluminum Company of America
ALCOA Building
425 Sixth Avenue
Pittsburgh, PA 15219-1850
Dear Paul:
As I have previously advised you, I have again reviewed with our
Board your unsolicited offer of $50 a share in cash or ALCOA stock for
each share of Alumax stock. We believe this offer is inadequate and
unacceptable.
Having said that, I reiterate to you our willingness to discuss a
transaction between our companies at a price significantly higher than
you proposed.
Sincerely,
/s/
Allen Born
Chairman and Chief Executive Officer
On Monday, March 2, 1998, Mr. O'Neill spoke by telephone in separate
conversations with two members of the Board and discussed the Company's
rejection of the Parent's proposal. Mr. O'Neill reiterated his strong belief
in the timeliness of a combination, the desirability of the proposed
transaction from the Company's stockholders' point of view and, in particular,
the desirability of offering those stockholders the chance to exchange a part
of their investment for Parent Common Stock. The directors indicated that they
believed the Parent's proposal should be discussed at the meeting of the
directors on Wednesday evening and the regularly scheduled Board meeting on
Thursday of that week and that a brief explanation of the desirability of the
transaction and the opportunity to invest in the Parent Common Stock might be
helpful.
In response to the directors' comments described above, on Wednesday, March
4, 1998, the Parent provided the following list of "talking points" to one of
the directors in anticipation of the Board meeting:
. Merger of Alumax with Alcoa
. Approximately 1/2 the outstanding Alumax shares
exchanged for $50 worth of Alcoa stock
. Remaining shares exchanged for $50 in cash
. Merger Agreement provides floor against which to seek
superior economics elsewhere
. No limit on post-signature shopping of Alumax
. The Agreement may be terminated with "fiduciary out"
. No requirement for breakup fee if company sold
elsewhere for more money
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<PAGE>
. Attractive premium
. $50--35.6% over yesterday's closing price
. Share portion--Exchange at 39.9% premium to historical
trading ratio for last 12 months
. Historical trading ratios--Alumax/Alcoa
. 3 years--.55
. 2 years--.51
. 1 year--.49
. 6 months--.48
. Alcoa's higher, more consistent margins (EBIT/Revenues)
<TABLE>
<S> <C> <C>
Alcoa Alumax
1997....................... 12.2% 10.0%
1996....................... 10.8% 7.3%
1995....................... 12.7% 10.5%
</TABLE>
. Annual dividend
. Alcoa current dividend $1.00 plus 30% of net income
over $3 per share--$1.50 per share in 1998
. Alumax currently pays no dividend
. Alcoa's premium price-to-earnings trading multiple
. 13.1 times vs. 11.7 times estimated 1998 net income
. 9.8 times vs. 8.3 times estimated 1999 net income
. Alcoa's greater trading liquidity
. Approximately 6.6 times the average daily dollar volume
of Alumax
. Alcoa's superior balance sheet strength
. Alumax--NR/BBB
. Alcoa--A1/A+
During the meeting of directors on the evening of March 4, the Company's
directors concluded that Mr. Born and certain other representatives of the
Company should meet with Mr. O'Neill to discuss and obtain clarification of
the Parent's proposal. Mr. O'Neill was called that evening and a meeting was
scheduled for the following afternoon. Mr. O'Neill was asked to be prepared to
present the Parent's proposal in writing at the meeting. At its regularly
scheduled Board meeting held on March 5, the Board again considered the
factors discussed the prior evening and formally authorized management to
pursue the proposal. That afternoon Messrs. O'Neill, Alain J. P. Belda,
President and Chief Operating Officer of the Parent, and Kelson met with
Messrs. Born, Johnston and Brown and presented the following letter to them:
March 5, 1998
The Board of Directors
Alumax Inc.
3424 Peachtree Road, NE
Atlanta, GA 30326
16
<PAGE>
Lady and Gentlemen:
This letter is to formalize the discussions we have been having
concerning a transaction between Alumax and Alcoa as requested. Alcoa
is prepared to proceed immediately with a merger transaction in which
approximately one-half the total number of outstanding Alumax shares
would be exchanged for $50 worth of Alcoa stock and the remaining
shares would be exchanged for $50 in cash. The merger agreement would
contain no limitation on your ability to shop the company and would
permit
termination on fiduciary grounds with no requirement to pay a break-up
fee if you were able to sell the company to someone else for more
money. We would expect to structure the transaction in two steps,
commencing with a cash tender offer and finishing with a merger in
which the remaining shares are converted into Alcoa stock. We assume
you would like to negotiate a reasonable collar and market test period
for the stock portion of the consideration, and we are prepared to do
that with you. The agreement would provide for a cash out of all
options. The transaction will be subject only to usual and customary
conditions.
In our discussions with your Chairman and certain other of your
members we have discussed a variety of considerations for Alumax
stockholders which would lead them to conclude that our proposal is one
they should accept, and, in particular, that the opportunity to convert
a portion of their investment in Alumax into an investment in a
combined Alcoa and Alumax is especially attractive. We hope you will
give special weight and attention to the following factors which
strongly favor an investment in Alcoa compared with an investment in
Alumax alone:
. Attractive premium
. $50--37.2% over yesterday's closing price
. Share portion--Exchange at 42.4% premium to one-year historical
trading ratio
. Historical trading ratios--Alumax/Alcoa
. 3 years--.55
. 2 years--.51
. 1 year--.49
. 6 months--.48
. Alcoa's higher, more consistent margins (EBIT/Revenues)
<TABLE>
<S> <C> <C>
Alcoa Alumax
1997....................... 12.2% 10.0%
1996....................... 10.8% 7.3%
1995....................... 12.7% 10.5%
</TABLE>
. Annual dividend
. Alcoa current dividend $1.00 plus 30% of net income over $3 per
share--$1.50 per share in 1998
. Alumax currently pays no dividend
. Alcoa's premium price-to-earnings trading multiple
. 12.8 times vs. 11.6 times estimated 1998 net income
. 9.6 times vs. 8.2 times estimated 1999 net income
. Alcoa's greater trading liquidity
. Approximately 6.6 times the average daily dollar volume of Alumax
17
<PAGE>
. Alcoa's superior balance sheet strength
. Alumax--NR/BBB
. Alcoa--A1/A+
Our transaction team is present and available in New York to take
steps necessary to permit a press release on Sunday and an announcement
before the opening on Monday.
Sincerely,
/s/
Paul H. O'Neill
BY HAND DELIVERY
In the course of the discussions of the proposal set forth in the March 5
letter, the Company representatives requested that there be a fixed exchange
ratio for the stock portion of the consideration based on the prior day's
closing market price of the Parent Common Stock so that the value of this
portion of the consideration payable in the transaction would fluctuate with
future changes in the market price of the Parent Common Stock. In the course
of the negotiations the Parent representatives agreed to a fixed exchange
ratio at .6975. The representatives also agreed in principle that subject to
Board approvals and to negotiation and execution of a satisfactory form of
merger agreement they were prepared to proceed with a transaction. Thursday
evening, the Parent's representatives delivered a draft acquisition agreement
to the Company's representatives. On Friday, March 6, the Company requested a
new letter revising certain provisions in the letter delivered on Thursday to
reflect the Exchange Ratio and to provide that all Company employee stock
options could be "rolled over" into options to acquire Parent Common Stock--
which the Parent delivered that afternoon. Negotiation of the definitive
acquisition agreement continued throughout Friday, Saturday and Sunday.
On Friday, March 6, the Parent's Board of Directors met and authorized
management to negotiate the final documentation for the transactions
contemplated by the Merger Agreement. That same day the Board convened for an
informational meeting and the directors agreed that the Company should proceed
to negotiate a definitive agreement incorporating the proposal set forth in
the Parent's March 6th letter.
On Saturday, March 7, the Board met and approved in principle the
transaction outlined in the revised letter delivered by the Parent on March 6,
subject to the completion of the negotiation of an acceptable definitive
acquisition agreement.
On Sunday, March 8, the Board met and approved the transactions contemplated
by the Merger Agreement. The Merger Agreement was thereafter executed and
delivered on March 8, 1998.
Reasons for the Recommendations.
In approving the Merger Agreement and the transactions contemplated thereby
and recommending that the Company's stockholders tender their Shares pursuant
to the Offer and adopt the Merger Agreement, the Board considered a number of
factors, including:
1. The familiarity of the Board with the financial condition, results of
operations, competitive position, business and prospects of the Company (as
reflected in the Company's historical and projected financial information),
current economic and market conditions and the nature of the industry in
which the Company operates, including the impact on financial condition and
operating results of fluctuations in the market price for aluminum.
18
<PAGE>
2. The historical market prices of, and recent trading activity in, the
Shares, particularly the fact that the $50.00 per Share in cash to be paid
in the Offer represents a premium of approximately 36.3% over the closing
price of the Shares on the last trading day prior to the public
announcement on March 9, 1998 of the Merger Agreement; and a premium of
approximately 10.5% over the highest price at which the Shares have traded
in the past year, which is the highest price at which the Shares had ever
traded previously.
3. The historical market prices of the Parent Common Stock and the
synergies that are likely to arise as a result of the integration of the
Company's business with that of the Parent and the fact that, to the extent
that the Company's stockholders receive the Parent Common Stock, the
Company's stockholders will be able to benefit as stockholders of the
Parent from the realization of any such synergies and, to the extent that
the Parent is strengthened by the Merger, the Company's employees,
customers and suppliers will be able to benefit.
4. The presentation of BT Wolfensohn at the March 8, 1998 meeting of the
Board of Directors and the written opinion of BT Wolfensohn ("BT
Wolfensohn"), the Company's financial advisor, dated March 8, 1998, to the
effect that, as of such date and based upon and subject to certain matters
in such opinion, the consideration to be received pursuant to the Merger
Agreement by the holders of the Shares in the Offer and the Merger, taken
together, is fair, from a financial point of view, to such stockholders.
THE FULL TEXT OF THE WRITTEN OPINION OF BT WOLFENSOHN, DATED MARCH 8, 1998,
WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS
ON THE REVIEW UNDERTAKEN IN CONNECTION WITH SUCH OPINION, IS ATTACHED AS
ANNEX A TO THIS SCHEDULE 14D-9. STOCKHOLDERS ARE URGED TO READ SUCH OPINION
CAREFULLY IN ITS ENTIRETY. The opinion of BT Wolfensohn was presented for
the information of the Board in connection with its consideration of the
Merger Agreement and is directed only to the fairness of the aggregate
consideration to be received by the holders of the Shares in the Offer and
the Merger. The opinion does not constitute a recommendation to any
stockholder as to whether to tender Shares in the Offer or how to vote with
respect to the Merger.
5. The other terms and conditions of the Offer, the Merger and the Merger
Agreement, including the fact that the terms of the Merger Agreement permit
the Board to furnish information to, and enter into discussions with, any
third party that makes a bona fide proposal or offer to acquire the Company
or engage in any other business combination or similar transaction
involving the Company subsequent to the execution of the Merger Agreement
and, if the Board determines in good faith that such a proposal or offer is
superior to the Parent's proposal and that, after consultation with outside
legal counsel, its fiduciary duties require it do so, to enter into such a
superior transaction with another party and terminate the Merger Agreement
without payment of a termination fee. For a more detailed description, see
the Merger Agreement--"Solicitation by the Company" in Item 3(b) of this
Statement.
6. The fact that the Offer is part of a transaction which is structured
to be tax free to the holders of the Company Common Stock to the extent
that they receive the Parent Common Stock in the Merger and that the
Company's obligation to consummate the Merger is conditioned upon receipt
by the Company of an opinion of counsel to the Company to the effect that
the Merger will qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended.
7. The likelihood that the Offer and the Merger will be consummated,
including the fact that the obligations of the Parent and the Purchaser to
consummate the Offer and the Merger are not conditioned upon obtaining any
financing.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to a letter agreement, dated February 4, 1998, between the Company
and BT Wolfensohn, the Company, as compensation for financial advisory
services rendered by BT Wolfensohn, agreed to pay BT Wolfensohn
(a) in the event that the Company (i) announced an agreement in principle
to consummate a transaction, through sale, merger, joint venture or
otherwise, whether effected in a single transaction or a series of related
transactions, in which 40% or more of the voting power of the Company or
all or a
19
<PAGE>
substantial portion of its business or assets are combined with or
transferred to another Company (a "Transaction"), or (ii) executed a
definitive agreement with Parent to consummate a Transaction, or (iii)
requested, and BT Wolfensohn delivered, an opinion on the fairness of the
terms of a possible Transaction, a fee equal to 20% of the fee described in
clause (b) below, payable upon such announcement or such execution or the
delivery of such opinion; and
(b) in the event that a Transaction is consummated, a fee, payable at
closing, equal to four-tenths of one percent of the Aggregate Consideration
payable to the Company or its security holders in any such Transaction;
provided that the fee payable pursuant to this clause (b) shall be reduced
by the amount of any fees previously paid pursuant to clause (a) above. For
purposes of the letter agreement, the term "Aggregate Consideration" means
the total amount of cash and the fair market value (on the date of closing)
of all other property paid or payable directly or indirectly to the Company
or any of its stockholders in connection with a Transaction (including (i)
amounts paid to holders of any warrants or convertible securities of the
Company, whether or not vested; and (ii) the fair market value of any
assets of the Company which are retained by or otherwise distributed to its
stockholders or affiliates in anticipation of or in connection with a
Transaction).
The Company has agreed to reimburse BT Wolfensohn for its reasonable out-of-
pocket expenses incurred in connection with rendering financial advisory
services, including fees and disbursement of its legal counsel. The Company
has also agreed to indemnify BT Wolfensohn and its affiliates and their
directors, officers, agents, employees and controlling persons for certain
costs, expenses and liabilities, including liabilities under the federal
securities laws.
Except as set forth above, neither the Company nor any person acting on its
behalf has or currently intends to employ, retain or compensate any person to
make solicitations or recommendations to the stockholders of the Company on
its behalf with respect to the Offer, except that such solicitations or
recommendations may be made by directors, officers or employees of the
Company, for which services no additional compensation will be paid.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) No transactions in the Shares have been effected during the past 60 days
by the Company or, to the best of the Company's knowledge, by any executive
officer, director, affiliate or subsidiary of the Company except that Jay
Linard, Senior Vice President of the Company, purchased 18,000 Shares on
January 12, 1998 at a purchase price of $32.06 per Share and 2,875 Shares on
March 6, 1998 at a purchase price of $37.75 per Share.
(b) As of the date of this Statement, to the Company's knowledge, none of
the Company's executive officers, directors or affiliates has made a decision
as to whether such person will tender such person's Shares pursuant to the
Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this Statement, the Company is not engaged in any
negotiation in response to the Offer which relates to or would result in (i)
an extraordinary transaction, such as a merger or reorganization involving the
Company or any subsidiary of the Company; (ii) a purchase, sale or transfer of
a material amount of assets by the Company or any subsidiary of the Company;
(iii) a tender offer for or other acquisition of securities by or of the
Company; or (iv) any material change in the present capitalization or dividend
policy of the Company.
(b) Except as described in Item 3(b) and Item 4 of this Statement which
Items are hereby incorporated by reference into this Item 7), there are no
transactions, board resolutions, agreements in principle or signed contracts
in response to the Offer which relate to or would result in one or more of the
matters referred to in paragraph (a) of this Item 7.
20
<PAGE>
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
Appraisal Rights
No appraisal rights are available to holders of Shares in connection with
the Offer. However, to the extent that fewer Shares than the 50% Share Number
is purchased pursuant to the Offer, a portion of the Merger Consideration will
be paid in cash and stockholders of the Company will have the opportunity to
perfect appraisal rights under Section 262 of the Delaware General Corporation
Law with respect to any Shares for which cash is to be paid pursuant to the
Merger.
Certain Litigation
Litigation. Following the March 9, 1998 announcement of the proposed
acquisition of the Company by the Parent and the Purchaser, five putative
class actions on behalf of stockholders of the Company were filed in the
Delaware Court of Chancery against the Company, the Company's directors and
the Parent. The plaintiffs in those actions allege, among other things, that
the director defendants have agreed to a buyout of the Company at an
inadequate price, that they have failed to provide the Company's stockholders
with all necessary information about the value of the Company, that they
failed to make an informed decision as no market check of the Company's value
was obtained and that the acquisition is structured to ensure that
stockholders will tender their shares and is coercive. Plaintiffs seek to
enjoin the acquisition or to rescind it in the event that it is consummated
and to cause the Company to implement a "full and fair" auction for the
Company. Plaintiffs seek compensatory damages in an unspecified amount, costs
and disbursements, including attorneys' fees, and such other relief as the
Court deems appropriate. Copies of the complaints filed in the five putative
class action lawsuits are filed as Exhibits 10-14 hereto and are incorporated
herein by reference, and the foregoing description is qualified in its
entirety by reference to such exhibit.
21
<PAGE>
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1. Opinion of BT Wolfensohn, dated March 8, 1998.*
2. Letter to Stockholders.*
3. The Merger Agreement, dated as of March 8, 1998, among Aluminum
Company of America, AMX Acquisition Corp. and Alumax Inc.
4. Restated Sales Agreement, dated as of January 1, 1986, as amended
and supplemented as of April 8, 1992 and April 9, 1992, by and
between Alcoa of Australia Limited and Alumax Inc. (Certain portions
of this agreement have been deleted and filed separately with the
Secretary of the Securities and Exchange Commission pursuant to a
request for confidential treatment.) (Incorporated by reference to
Exhibit 10.10 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1997 (File No. 1-12374)).
5. Executive Separation Policy (as amended and restated on March 5,
1998).
6. Separation Policy for Corporate Employees adopted on March 5, 1998.
7. Employment Agreement, as amended and restated as of December 5,
1996, between Alumax Inc. and C. Allen Born (incorporated by
reference to Exhibit 10.17 to the Company's Annual Report on Form
10-K for the year ended December 31, 1997 (File No. 1-12374)).
8. Employment Agreement, dated as of December 4, 1997, between Alumax
Inc. and Thomas G. Johnston (incorporated by reference to Exhibit
10.18 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 (File No. 1-12374)).
9. Agreement, dated as of November 15, 1993, as amended as of February
3, 1994, among Helen M. Feeney, Amax Inc. and Alumax Inc.
(incorporated by reference to Exhibit 10.19 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 (File No.
1-12374)).
10. Complaint filed in Giannone v. Alumax et al. Court of Chancery of
the State of Delaware in and for New Castle County, March 9, 1998
(incorporated by reference to Exhibit (g)(1) to the Schedule 14D-1
filed by Aluminum Company of America with the Securities and
Exchange Commission on March 13, 1998 (File No. 1-3610)).
11. Complaint filed in Kwalbrun v. Brown et al. Court of Chancery of the
State of Delaware in and for New Castle County, March 9, 1998
(incorporated by reference to Exhibit (g)(2) to the Schedule 14D-1
filed by Aluminum Company of America with the Securities and
Exchange Commission on March 13, 1998 (File No. 1-3610)).
12. Complaint filed in Roncini v. Alumax Inc. et al. Court of Chancery
of the State of Delaware in and for New Castle County, March 9, 1998
(incorporated by reference to Exhibit (g)(3) to the Schedule 14D-1
filed by Aluminum Company of America with the Securities and
Exchange Commission on March 13, 1998 (File No. 1-3610)).
13. Complaint filed in Levine v. Brown et al. Court of Chancery of the
State of Delaware in and for New Castle County, March 11, 1998
(incorporated by reference to Exhibit (g)(4) to the Schedule 14D-1
filed by Aluminum Company of America with the Securities and
Exchange Commission on March 13, 1998 (File No. 1-3610)).
14. Complaint filed in Kretschmar v. Alumax Inc. et al. Court of
Chancery of the State of Delaware in and for New Castle County,
March 12, 1998 (incorporated by reference to Exhibit (g)(5) to the
Schedule 14D-1 filed by Aluminum Company of America with the
Securities and Exchange Commission on March 13, 1998 (File No. 1-
3610)).
</TABLE>
- --------
* Included in Schedule 14D-9 mailed to stockholders.
22
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
accurate.
Alumax Inc.
/s/ Helen M. Feeney
By:__________________________________
Name:Helen M. Feeney
Title:Vice President and
Corporate Secretary
Dated: March 13, 1998
23
<PAGE>
SCHEDULE I
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE
SECURITIES EXCHANGE ACT OF 1934 AND
RULE 14F-1 THEREUNDER
GENERAL
This Information Statement is being mailed on or about March 13, 1998 as
part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of Alumax Inc. (the "Company"). Capitalized terms used
herein and not otherwise defined shall have the meaning set forth in the
Schedule 14D-9. You are receiving this Information Statement in connection
with the possible election of persons designated by the Parent (the "Parent
Designees") to the Company's Board of Directors (the "Board"). The Merger
Agreement requires the Company, following the Purchaser's purchase of Shares
pursuant to the Offer and upon request of Purchaser, to take certain action to
cause the Parent's Designees to be elected to the Company's Board. This
Information Statement is required by Section 14(f) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1 promulgated
thereunder. You are urged to read this Information Statement carefully. You
are not, however, required to take any action in connection with this
Information Statement.
The Offer commenced on March 13, 1998 and is scheduled to expire at 12:00
midnight New York City time, on April 9, 1998 unless extended upon the terms
set forth in the Offer to Purchase.
The information contained in this Information Statement concerning the
Parent and Purchaser has been furnished to the Company by the Parent. The
Company assumes no responsibility for the accuracy or completeness of such
information.
GENERAL INFORMATION REGARDING THE COMPANY
The Shares constitute the only class of voting securities of the Company
outstanding. Each Share has one vote. As of March 8, 1998, there were
53,458,062 Shares outstanding. The Board currently consists of ten members
with no vacancies. Each director holds office until such director's successor
is elected and qualified or until such director's earlier resignation or
removal.
DESIGNATION OF DIRECTORS
The Merger Agreement provides that, immediately upon the purchase of and
payment for any Shares by Purchaser or any of its affiliates pursuant to the
Offer, the Parent will be entitled to designate such number of directors,
rounded up to the next whole number, on the Company's Board as is equal to the
product of the total number of directors on the Board multiplied by the
percentage that the aggregate number of Shares so accepted for payment bears
to the total number of Shares then outstanding. The Company has agreed, upon
the request of the Parent, to increase promptly the size of the Board or
exercise its best efforts to secure the resignations of such number of
directors, or both, as is necessary to enable the Parent Designees to be
elected to the Board and shall cause the Parent Designees to be so elected.
The Company has also agreed upon request of the Parent to cause directors
designated by the Parent to constitute at least the same percentage as such
directors represent on the Board on (i) each committee of the Board, (ii) each
board of directors (or similar body) of each significant subsidiary of the
Company and (iii) each committee (or similar body) of each such board (rounded
up to the next whole number).
Notwithstanding the foregoing, the Merger Agreement provides that, following
the election of the Parent Designees in accordance with the foregoing and
prior to the Effective Time (as defined in the Merger Agreement),
S-1
<PAGE>
any amendment or termination of the Merger Agreement by the Company, any
extension or waiver by the Company of the time for the performance of any of
the obligations or other acts of the Parent or Purchaser or waiver of any of
the Company's rights thereunder, will require the concurrence of a majority of
those directors of the Company then in office who were neither designated by
Purchaser nor are employees of the Company.
It is expected that the Parent Designees will assume office promptly
following the purchase by the Purchaser of a majority of the outstanding
shares of Common Stock on a fully diluted basis pursuant to the terms of the
Offer, which purchase cannot be earlier than April 9, 1998, and that, upon
assuming office, the Parent Designees together with the continuing directors
of the Company will thereafter constitute the entire Board.
THE PARENT DESIGNEES
As of the date of this Information Statement, the Parent has not determined
who will be the Parent Designees. However, the Parent Designees will be
selected from among the following persons. Unless otherwise indicated, each
person identified below has been employed by the Parent for the last five
years, and each such person's business address is 425 Sixth Avenue,
Pittsburgh, Pennsylvania 15219-1850. All persons listed below are citizens of
the United States unless otherwise indicated.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT; MATERIAL
POSITIONS HELD DURING
THE PAST FIVE YEARS AND
NAME, AGE AND CURRENT BUSINESS ADDRESS BUSINESS ADDRESS THEREOF
-------------------------------------- ----------------------------
<C> <S>
GEORGE E. BERGERON.................. Mr. Bergeron was named President--Alcoa
Age: 56 Closure Systems International in 1982 and
was elected Vice President and General
Manager--Rigid Packaging Division in July
1990. He was appointed President--Rigid
Packaging Division in 1991. Mr. Bergeron
was elected Executive Vice President of
the Parent in January 1998 and is
responsible for corporate growth
initiatives.
PATRICIA L. HIGGINS................. Ms. Higgins joined the Parent in January
Age: 48 1997 and is responsible for the
integration and implementation of the
Parent's computer initiatives. She began
her career at American Telephone &
Telegraph Co. in 1977 and was Vice
President of International Sales
Operations in Network Systems before
joining Nynex Corporation in 1991 as
Group Vice President, Manhattan Market
Area. In 1995, Ms. Higgins moved to
Unisys Corporation where she was
President, Communications Market Sector
Group.
RICHARD B. KELSON..................- Mr. Kelson was appointed Assistant
Age: 51 Secretary and Managing General Attorney
of the Parent in 1984 and Assistant
General Counsel in 1989. He was elected
Senior Vice President--Environment,
Health and Safety of the Parent in 1991
and Executive Vice President and General
Counsel in May 1994. Mr. Kelson was named
to his current position in May 1997.
FRANK L. LEDERMAN................... Mr. Lederman was Senior Vice President
Age: 48 and Chief Technical Officer for Noranda,
Inc., a company he joined in 1988. Mr.
Lederman joined the Parent as a Vice
President in May 1995 and became Chief
Technical Officer in December 1995. In
his current position Mr. Lederman directs
operations of the Alcoa Technical Center.
</TABLE>
S-2
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT; MATERIAL
POSITIONS HELD DURING
THE PAST FIVE YEARS AND
NAME, AGE AND CURRENT BUSINESS ADDRESS BUSINESS ADDRESS THEREOF
-------------------------------------- ----------------------------
<C> <S>
G. JOHN PIZZEY...................... Mr. Pizzey joined Alcoa of Australia
Age: 52 Limited in 1970 and was appointed to the
board of Alcoa of Australia as Executive
Director--Victoria Operations and
Managing Director of Portland Smelter
Services in 1986. He was named
President--Bauxite and Alumina Division
of the Parent in 1994 and President--
Primary Metals Division of the Parent in
1995. Mr. Pizzey was elected a Vice
President of the Parent in 1996 and was
appointed President--Alcoa World Alumina
in November 1997. Mr. Pizzey is an
Australian citizen.
LAWRENCE R. PURTELL................. Mr. Purtell joined the Parent in November
Age: 50 1997. He had been Corporate Secretary and
Associate General Counsel of United
Technologies Corporation from 1989 to
1992 and Vice President and General
Counsel of Carrier Corporation from 1992
to 1993. Mr. Purtell was Senior Vice
President and General Counsel and
Corporate Secretary of McDermott
International, Inc. from 1993 to 1996. In
1996, he joined Koch Industries, Inc. as
Senior Vice President, General Counsel
and Corporate Secretary.
ROBERT F. SLAGLE.................... Mr. Slagle was elected Treasurer of the
Age: 57 Parent in 1982 and Vice President in
1984. In 1986, he was named Vice
President-Industrial Chemicals and, in
1987, was named Vice President-Industrial
Chemicals and U.S. Alumina Operations. Mr
Slagle was named Vice President--Raw
Materials, Alumina and Industrial
Chemicals in 1989, and Vice President of
the Parent and Managing Director--Alcoa
of Australia Limited in 1991. He was
named President--Alcoa World Alumina in
1996 and was elected to his current
position in November 1997.
RICHARD L. FISCHER.................. Mr. Fischer was elected Vice President
Age: 61 and General Counsel of the Parent in 1983
and became Senior Vice President in 1984.
He was given the additional
responsibility for Corporate Development
in 1986 and in 1991 was named to his
present position. In his current
assignment, Mr. Fischer is responsible
for Corporate Development and the
expansion and integration of the Parent's
international business activities.
</TABLE>
S-3
<PAGE>
CURRENT DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The names of the current directors, their ages, and certain other information
about them are set forth below:
<TABLE>
<CAPTION>
NAME OF DIRECTOR AGE BUSINESS EXPERIENCE
---------------- --- -------------------
<C> <C> <S>
L. Don Brown..................... 52 Mr. Brown has been Senior Vice Presi-
dent, Operations/ Technology of Coors
Brewing Company since August 1996. For
more than five years prior thereto, he
held various executive and senior oper-
ations position within the Kraft Foods
organization, most recently serving as
Senior Vice President, Manufacturing
and Engineering. Mr. Brown has been a
director of the Company since 1994.
James C. Huntington, Jr. ........ 70 Mr. Huntington has been an independent
businessman for more than five years.
He is also a director of Dravo Corpora-
tion and Westinghouse Air Brake Compa-
ny. Mr. Huntington has been a director
of the Company since 1993.
W. Loeber Landau................. 66 Mr. Landau has been a partner of Sulli-
van & Cromwell for more than five
years. Mr. Landau has been a director
of the Company since 1993.
Allen Born....................... 64 Mr. Born has been a Director of the
Company since 1985, Chairman since
April 1993 and Chairman and Chief Exec-
utive Officer since November 1993. He
was also Co-Chairman of Cyprus Amax
Minerals Company from November 1993 to
November 1995 and Vice Chairman of that
company from November 1995 to May 1996.
For more than five years prior to No-
vember 1993, he had been Chief Execu-
tive Officer of AMAX Inc. ("Amax"), the
Company's former parent, and also
served as Chairman of that company from
June 1988 to November 1993. Mr. Born is
also a director of Amax Gold Inc., AK
Steel Holding Corporation, Cyprus Amax
Minerals Company and Inmet Mining Cor-
poration.
Paul W. MacAvoy.................. 63 Mr. MacAvoy has been Williams Brothers
Professor of Management Studies at the
Yale School of Management since January
1991 and served as Dean of such insti-
tution from July 1992 to July 1994. Mr.
MacAvoy is also a director of Lafarge
Corporation. Mr. MacAvoy has been a di-
rector of the Company since 1993.
Anne Wexler...................... 68 Ms. Wexler has been Chairman and Chief
Executive Officer of The Wexler Group
for more than five years. She is also a
director of Comcast Corporation, the
Dreyfus Index Funds, the Dreyfus Mutual
Funds, NOVA Corporation, Wilshire Asset
Management, the New England Electric
System and Wilshire Target Funds, Inc.
Ms. Wexler has been a director of the
Company since 1994.
</TABLE>
S-4
<PAGE>
<TABLE>
<CAPTION>
NAME OF DIRECTOR AGE BUSINESS EXPERIENCE
---------------- --- -------------------
<C> <C> <S>
Harold Brown..................... 70 Mr. Brown has been Counselor to the
Center for Strategic and International
Studies since July 1992 and a partner
of Warburg, Pincus & Co. since May
1990. Mr. Brown is also a director of
Cummins Engine Company, Inc., Evergreen
Holdings, Inc., International Business
Machines Corporation, Mattel Inc., and
Philip Morris Companies Inc. Mr. Brown
has been a director of the Company
since 1993.
Peter J. Powers.................. 53 Mr. Powers has been Chairman of High
View Capital Corporation since Septem-
ber 1996. He was First Deputy Mayor of
New York City from January 1994 to Au-
gust 1996. Prior to January 1994, Mr.
Powers was engaged in the private prac-
tice of law. He is also a director of
Alliance Capital Technology Fund, the
Nile Growth Fund and Middle East Oppor-
tunity Fund. Mr. Powers has been a di-
rector of the Company since March 1998.
Pierre Des Marais II............. 63 Mr. Des Marais has been President and
Chief Executive Officer of Unimedia
Inc. for more than five years. He is
also a director of Hollinger Inc., Im-
perial Oil Limited, Oulmet-Cordon Bleu
In., Rothman's Inc., St. Lawrence Ce-
ment Inc. and Suzy Shier Limited. Mr.
Des Marais has been a director of the
Company since 1993.
J. Dennis Bonney................. 67 Mr. Bonney has been an independent
businessman since his retirement from
Chevron Corporation in December 1995.
For more than five years prior thereto,
he was a Vice Chairman of Chevron Cor-
poration. He is also a director of
United Meridian Corporation, Aeronovel
USA, Inc. and Chicago Bridge and Iron,
N.V. Mr. Bonney has been a director of
the Company since 1996.
</TABLE>
EXECUTIVE OFFICERS OF THE REGISTRANT
As of February 1, 1998, the names, offices with the Company, ages and years
of service as an officer of all Executive Officers of the Company were as
follows:
<TABLE>
<CAPTION>
YEARS
NAME OFFICE AGE AS OFFICER
---- ------ --- ----------
<C> <S> <C> <C>
Allen Born.................. Chairman and Chief Executive 64 4
Officer
Thomas G. Johnston.......... President and Chief Operating 55 --
Officer
Jay M. Linard............... Senior Vice President and Group 52 1
Executive
Robert P. Wolf.............. Senior Vice President and 54 8
General Counsel
Michael T. Vollkommer....... Vice President and Chief 39 4
Financial Officer
Christian A. Carrington..... Vice President, Strategic 47 --
Planning and Corporate
Development
Helen M. Feeney............. Vice President and Corporate 57 4
Secretary
Philip Gaetano.............. Vice President, Human Resources 38 --
and Administration
Eugene R. Greenberg......... Vice President 59 1
Kevin J. Krakora............ Vice President and Controller 42 --
Thomas L. Gleason........... Treasurer 46 1
</TABLE>
S-5
<PAGE>
There are no family relationships, by blood, marriage or adoption, between
the above officers. All officers are elected until the next annual meeting of
the Board or until their respective successors are chosen and qualified. There
is no arrangement or understanding between any of the above officers and any
other person pursuant to which he or she was selected as an officer.
The principal occupations and positions for the past five years of each of
the Executive Officers of the Company are as follows:
Mr. Born has been a director of the Company since 1985, Chairman since April
1993 and Chairman and Chief Executive Officer since November 1993. For more
than five years prior to November 1993, he had been Chief Executive Officer of
Amax and also served as Chairman of that company from June 1988 to November
1993. Mr. Born was also Co-Chairman of Cyprus Amax Minerals Company from
November 1993 to November 1995 and Vice Chairman of that company from November
1995 to May 1996.
Mr. Johnston was elected President and Chief Operating Officer of the
Company in December 1997, after having been an Executive Vice President since
March 1997. He joined the Company in December 1996 as head of the Company's
interests in the Pacific Rim. Prior thereto, he had been Chairman and Chief
Executive Officer of Aztec Mining Company Limited for more than five years.
Mr. Linard was elected a Senior Vice President of the Company in September
1997, after having been a Vice President since December 1996. He was
designated Group Executive for the Company's semi-fabricated businesses in
December 1997. Until January 1998 Mr. Linard also was President of Alumax
Extrusions, Inc., a wholly owned subsidiary of the Company and formerly named
Cressona Aluminum Company, for more than five years.
Mr. Wolf was elected Senior Vice President and General Counsel of the
Company in March 1997, after having been Vice President and General Counsel
for more than five years. He also served as Secretary of the Company from
November 1989 to November 1993.
Mr. Vollkommer was elected Vice President and Chief Financial Officer of the
Company in December 1997, after having been Vice President, Strategic Planning
and Corporate Development since June 1997. Prior thereto, he had been a Vice
President of the Company since December 1995 and Controller since February
1994. Prior to joining the Company in January 1994, Mr. Vollkommer served as
Director of Accounting at Amax.
Mr. Carrington was elected Vice President, Strategic Planning and Corporate
Development in January 1998. Prior thereto, he developed and managed the Latin
American corporate finance advisory practices at both Ernst & Young and
Coopers & Lybrand for more than five years.
Mrs. Feeney has been Vice President and Corporate Secretary of the Company
since November 1993. For more than five years prior thereto, she had been
Corporate Secretary of Amax.
Mr. Gaetano was elected Vice President, Human Resources and Administration
in January 1998. For more than five years prior thereto, he held various
executive and senior managerial positions in the human resources field at
Marcam Corporation, Fisher Scientific International, GE Capital Corporation
and Dun & Bradstreet Corporation.
Mr. Greenberg has been a Vice President of the Company since December 1996
and President of Alumax Materials Management, Inc., a wholly owned subsidiary
of the Company, since September 1996. Before joining the Company in February
1996, Mr. Greenberg was Vice President--Materials of Commonwealth Aluminum
Company from 1991.
Mr. Krakora was elected Vice President and Controller of the Company in June
1997, after having been Vice President, Finance of Kawneer Company, Inc., a
wholly owned subsidiary of the Company, from 1994. Prior thereto, he served
four years as the Director of Finance and later Vice President and Controller
for Liebert Customer Service and Support, a division of Emerson Electric Co.
S-6
<PAGE>
Mr. Thaure has been a Vice President of the Company for more than five years
and President of Alumax International Company and Alumax Technology
Corporation, each a wholly owned subsidiary of the Company, since February
1994. For more than five years prior thereto, he had been a Vice President of
Alumax Primary Aluminum Corporation, a wholly owned subsidiary of the Company.
Mr. Gleason has been Treasurer of the Company since November 1996. For more
than five years prior thereto, he held various executive and managerial
positions with Royal Bank of Canada, most recently serving as Vice President
of Corporate Banking for the Eastern region of the United States.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information concerning the beneficial
ownership of Shares held, as of January 31, 1998, by each current Director and
Executive Officer and by all Directors and Executive Officers as a group. No
Director or Executive Officer owns more than one percent of the outstanding
Shares, except for Mr. Born who owns beneficially approximately 1.8 percent of
the Shares outstanding. Unless indicated otherwise, all shares are held
directly, with each person having sole voting and dispositive power with
respect to the Shares owned beneficially by such person.
<TABLE>
<CAPTION>
SHARES
AMOUNT AND NATURE ACQUIRABLE
OF BENEFICIAL WITHIN 60 PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP(A) DAYS(B) CLASS
- ------------------------ ----------------- ---------- ----------
<S> <C> <C> <C>
Allen Born............................ 289,603(C) 655,436 1.8%
J. Dennis Bonney...................... 4,250(D) 3,333 *
Harold Brown.......................... 13,543(C)(D) 10,000 *
L. Don Brown.......................... 4,237(D) 10,000 *
Pierre Des Marais II.................. 9,188(D) 10,000 *
James C. Huntington, Jr............... 7,119(D) 10,000 *
W. Loeber Landau...................... 23,448(D) 10,000 *
Paul W. MacAvoy....................... 23,317(D) 10,000 *
Peter J. Powers....................... 0 0 *
Anne Wexler........................... 5,578(D) 10,000 *
Thomas G. Johnston.................... 19,837 0 *
Jay M. Linard......................... 32,827(C) 0 *
Robert P. Wolf........................ 10,503(C) 28,000 *
Eugene R. Greenberg................... 5,869 0 *
All Directors and Executive Officers
as a group, including those named
above (20 persons)................... 479,133 1,053,619 2.9%
</TABLE>
- --------
* Less than one percent of the Company Common Stock.
(A) Includes Shares allocated to the individual accounts of Executive Officers
under the Alumax Inc. Thrift Plan for Salaried Employees.
(B) Represents Shares that may be acquired within 60 days after January 31,
1998 through the exercise of stock options.
(C) Includes the following number of Shares held indirectly in trust form:
187,317 for Mr. Born; 106 for Mr. Harold Brown; 3,397 for Mr. Linard; and
242 for Mr. Wolf.
(D) Includes the following number of Shares held under the DCP and/or the
Stock Compensation Plan: none for Mr. Bonney; 13,437 for Mr. Harold Brown;
4,237 for Mr. L. Don Brown; 6,088 for Mr. Des Marais; 5,019 for
Mr. Huntington; 22,948 for Mr. Landau; 22,632 for Mr. MacAvoy; none for
Mr. Powers and 5,078 for Ms. Wexler.
S-7
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth as of December 31, 1997 (i) the name of each
person known by the Company, based upon filings made by such persons with the
Commission or information provided by such persons to the Company, to be the
beneficial owner of more than five percent of the outstanding Shares, (ii) the
total number of Shares beneficially owned by such person and (iii) the
percentage of the outstanding Shares so owned:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT OF
OF BENEFICIAL OWNER OWNERSHIP CLASS
- ------------------- ---------- ----------
<S> <C> <C>
FMR Corp. .............. 5,060,716(A)(B) 9.23%
82 Devonshire Street
Boston, MA 02109
Wellington Management 3,525,700(C) 6.43%
Company, LLP...........
75 State Street
Boston, MA 02109
The Capital Group 3,507,703(D) 6.40%
Companies, Inc. .......
333 South Hope Street
Los Angeles, CA 90071
Brandywine Asset 3,058,728(E) 5.59%
Management, Inc. ......
3 Christina Center,
Suite 1200
201 North Walnut Street
Wilmington, DE 19801
</TABLE>
- --------
(A) According to information filed by FMR Corp. ("FMR") with the Commission,
FMR, through its various subsidiaries, has sole voting power as to 391,499
Shares, shared voting power as to 6,700 Shares, sole dispositive power as
to 5,053,916 Shares and shared dispositive power as to 6,700 Shares of
Company Common Stock. Such amounts include certain shares beneficially
owned by Edward C. Johnson 3rd. See Footnote B.
(B) Edward C. Johnson 3rd ("E. Johnson") is Chairman of FMR and Abigail P.
Johnson ("A. Johnson") is a director of such entity. E. Johnson, A.
Johnson, various family members and certain trusts form a controlling
group with respect to FMR. See Footnote A. According to information filed
by E. Johnson and A. Johnson with the Commission, E. Johnson has sole
voting power as to 19,900 Shares, shared voting power as to 6,700 Shares,
sole dispositive power as to 5,053,916 Shares and shared dispositive power
as to 6,700 Shares. Such amounts included 26,700 Shares that are owned
directly by E. Johnson or are held in trusts either for the benefit of E.
Johnson or an E. Johnson family member. A. Johnson has sole dispositive
power with respect to 5,053,916 Shares.
(C) According to information filed by Wellington Management Company, LLP
("WMC") with the Commission, WMC, through its subsidiary, Wellington Trust
Company, N.A., has shared voting power as to 846,000 Shares and shared
dispositive power as to 3,525,700 Shares.
(D) According to information filed by The Capital Group Companies, Inc.
("Capital") with the Commission, Capital, through its various
subsidiaries, has sole voting power as to 1,702,230 Shares and sole
dispositive power as to 3,507,730 Shares.
(E) According to information filed by Brandywine Asset Management. Inc.
("Brandywine") with the SEC, Brandywine has sole voting power as to
2,696,431 Shares and sole dispositive power as to 2,696,431 Shares.
S-8
<PAGE>
DIRECTORS' MEETINGS, COMPENSATION AND COMMITTEES
During 1997 the Company's Board held eight meetings. Each Director attended
all meetings of the Board and all meetings of the Committees of the Board on
which such Director served.
For their services, non-employee Directors receive an annual retainer of
$20,000 and $1,000 per Board meeting attended. Non-employee Directors serving
on Board Committees are compensated at the rate of $600 per Committee meeting
attended, with Committee Chairmen receiving an additional $1,000 per meeting
attended.
Non-employee Directors are eligible to defer all or a portion of the
foregoing fees through participation in the Alumax Inc. Non-Employee
Directors' Deferred Compensation Plan (as amended on September 4, 1997) (the
"DCP"). Amounts deferred under the DCP are credited to a participant's account
in the form of Shares. Additional Shares are credited to such account as and
to the extent dividends are paid on the Shares. A distribution will be made to
participant upon termination of his or her directorship or, if he or she so
elects, on any January 1 occurring thereafter in a lump sum or in
installments. The DCP also contains a subplan that allowed certain Directors
to roll over to the DCP certain payments from a retirement plan and a deferred
compensation plan maintained by Amax. The DCP provides for accelerated cash
distributions in the event of a Change in Control (as defined therein) of the
Company. The Board of Directors may suspend or discontinue the DCP at any time
and may amend the DCP from time to time.
Under the Alumax Inc. Non-Employee Directors' Stock Compensation Plan (as
amended on October 3, 1996) (the "Stock Compensation Plan"), each Director who
is not an employee of the Company, its subsidiaries or affiliates is granted
an option to acquire 10,000 Shares on the first Thursday in December following
his or her election to the Board. The exercise price of the option is equal to
the fair market value of the shares at the time the option is granted. All
options granted vest at the rate of one-third per year and are exercisable for
a period of ten years following the date of grant. Payment of the option
exercise price may be made in cash, by delivery of Shares already owned by the
Director for at least six months or any combination of the foregoing. Special
vesting provisions apply in the case of certain terminations of services as a
non-employee Director. In addition, under current Stock Compensation Plan
provisions, each non-employee Director serving as such on February 1 of each
year is awarded 1,250 Shares. A non-employee Director is entitled to defer
receipt of any such Shares. All Shares so deferred are credited to a deferred
stock account maintained by the Company for the benefit of the participating
non-employee Director. A participant may elect to have his or her account
balance distributed as soon as reasonably practicable following cessation of
Board service or on January 1 over a specified number of years after the
participant ceases to be a member of the Board. Distributions under the Stock
Compensation Plan will be made in the form of whole Shares of Company Common
Stock, with a cash payment for any fractional share interest. The Board of
Directors may discontinue the Stock Compensation Plan at any time or may amend
it from time to time. Special vesting and cash-out provisions apply to options
and Shares granted under the Stock Compensation Plan in the event of a Change
in Control (as defined therein) of the Company.
The standing Committees of the Board include, among others, the Audit
Committee, the Human Resources and Compensation Committee and the Corporate
Governance and Nominating Committee.
The Audit Committee is comprised of Ms. Wexler (Chairman) and Messrs.
Bonney, L. Don Brown, Huntington and MacAvoy. The principal functions of this
Committee are to (i) recommend to the Board the independent public accounting
firm that will conduct the annual audit of the Company's accounts; (ii) review
the nature and scope of the audit; and (iii) review the financial organization
and accounting practices of the Company and qualifications and performance of
its internal auditors and its independent auditing firm. The Committee also
recommends to the Board policies concerning avoidance of employee conflicts of
interest and reviews the administration of such policies. The Audit Committee
met three times during 1997.
The Human Resources and Compensation Committee is comprised of Messrs.
MacAvoy (Chairman), Bonney, Harold Brown and Des Marais and Ms. Wexler. The
principal functions of this Committee are to (i) establish, implement and
monitor the Company's program for executive development, succession planning
and
S-9
<PAGE>
compensation of Executive Officers and certain other senior managerial
employees of the Company and (ii) perform various administrative tasks with
respect to certain employee benefit matters. In this regard, the Committee
administers the Alumax Inc. 1993 Long-Term Incentive Plan (as amended and
restated and as further amended on September 4, 1997) (the "Long Term Plan"),
the Alumax Inc. 1993 Annual Incentive Compensation Plan (as amended and
restated and as further amended on October 3, 1996) (the "Annual Plan") and
the Alumax Inc. Deferred Compensation Plan (as amended on October 3, 1996), as
such plans pertain to Executive Officers and certain other senior managerial
employees of the Company. During 1997, the Human Resources and Compensation
Committee met four times.
The Corporate Governance and Nominating Committee is comprised of Messrs.
Harold Brown (Chairman), L. Don Brown, Huntington, Landau and MacAvoy. The
principal functions of this Committee include, among other things, (i)
screening and recommending candidates for the Board; (ii) recommending to the
Board appointments to and the responsibilities of Board committees; (iii)
establishing procedures for evaluation of the performance of the Chief
Executive Officer by the non-employee Directors; and (iv) considering matters
of corporate and social responsibility and matters related to corporate public
affairs and to the Company's relations with its various stakeholders. The
Corporate Governance and Nominating Committee met twice in 1997.
CERTAIN TRANSACTIONS
W. Loeber Landau, a Director of the Company, is a Partner in the law firm of
Sullivan & Cromwell which, during 1997, rendered legal services to the Company
and its subsidiaries, including in connection with the Company's entry into
the Merger Agreement and the transactions contemplated thereby.
In connection with his relocation to the Atlanta area, the Company has
arranged bridge loan financing for Eugene R. Greenberg, a Vice President of
the Company, in the amount of $188,460 at an interest rate of 8.25 percent for
the period from January 1, 1997 to March 31, 1997 and 8.50 percent thereafter.
The entire amount of this loan remained outstanding at year-end 1997.
S-10
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
paid by the Company during each of the last three years to the Company's Chief
Executive Officer and the four other most highly compensated Executive
Officers of the Company, based on salary and bonus earned in respect of the
1997 fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION COMPENSATION
----------------- ------------------
SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER
SALARY BONUS COMPENSATION STOCK AWARDS OPTIONS PAYOUTS COMPENSATION
NAME AND POSITION YEAR (S) (S) (S)(A) (S)(B) (#)(C) (S)(D) (S)(E)
- ----------------- ---- ------- --------- ------------ ------------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Allen Born.............. 1997 875,000 1,312,500 129,686 660,625 0 687,563 97,397
Chairman and CEO(F) 1996 800,000 797,100 39,602 670,000 687,000 0 101,693
1995 750,000 504,900 0 563,750 65,000 0 84,914
Thomas G. Johnston...... 1997 329,001 480,000 213,301 669,647 44,400 0 53,742
President and COO(G)
Jay M. Linard........... 1997 248,669 217,000 0 108,531 21,000 0 42,869
Senior Vice President 1996 203,317 134,300 0 87,100 14,375 0 17,978
and Group Executive(H)
Robert P. Wolf.......... 1997 207,500 189,000 0 100,038 16,300 89,063 35,956
Senior Vice President 1996 176,400 105,600 0 67,000 11,500 0 19,060
and General Counsel 1995 168,000 62,400 0 60,500 8,000 0 18,670
Eugene R. Greenberg..... 1997 231,000 202,300 43,796 108,531 14,375 0 38,562
Vice President(I) 1996 190,949 156,500 31,037 87,100 29,375 0 17,559
</TABLE>
- --------
(A) "Other Annual Compensation" consists of perquisites and other personal
benefits paid by the Company on behalf of the following named Executive
Officers in 1997: total perquisites in the amount of $129,686 for Mr.
Born, including $51,774 for financial counseling and $44,909 for tax
gross-ups; total perquisites in the amount of $213,301 for Mr. Johnston,
including $83,369 for relocation expenses and $89,149 for tax gross-ups;
and total perquisites in the amount of $43,796 for Mr. Greenberg,
including $18,062 for relocation expenses and $15,747 for tax gross-ups.
The dollar value of perquisites and other personal benefits for Messrs.
Linard and Wolf were less than established reporting thresholds.
(B) Amounts for 1997, 1996 and 1995 represent the value attributable to
performance-based restricted stock units awarded under the Long Term Plan.
Each such unit is equivalent to one Share of Company Common Stock. The
units have been valued using the closing price of the Shares at the New
York Stock Exchange on the date of the award. At December 31, 1997, the
number and value of the units held by the Executive Officers shown in the
table above, using for valuation purposes the closing price of the Shares
on the New York Stock Exchange on such date, were as follows: Mr. Born--
58,000 units valued at $1,986,500; Mr. Johnston--19,650 units valued at
$673,013; Mr. Linard--5,475 units valued at $187,519; Mr. Wolf--6,850
units valued at $234,613; and Mr. Greenberg--5,475 units valued at
$187,519. Holders of restricted stock units have been granted dividend
equivalents which entitle them to receive dividends at the same time and
at the same rate as holders of Shares.
(C) The amounts shown in this column represent the number of non-qualified
stock options granted under the Long Term Plan, including the grant of
687,800 non-qualified stock options to Mr. Born in December 1996 pursuant
to his amended employment agreement. For additional information concerning
Mr. Born's employment agreement, see "Executive Employment and Separation
Agreements".
(D) The amounts shown in this column represent the amounts paid by the Company
to the named Executive Officers upon vesting of restricted stock awarded
under the Long Term Plan for the three-year performance period ended
December 31, 1996.
S-11
<PAGE>
(E) The amounts shown in this column for 1997 represent (i) Company matching
contributions on behalf of the named Executive Officers to the Alumax Inc.
Thrift Plan for Salaried Employees, as well as amounts credited to the
accounts of such Executive Officers under the Alumax Inc. Excess Benefit
Plan (the "Excess Plan") described below, (ii) the dollar value of the
benefit to the named Executive Officer of the interest-free use of Company
paid premiums (including a term insurance portion which is paid for by the
Company) from the current year to the earliest projected date the premiums
can be refunded to the Company for split dollar life insurance, and (iii)
disability insurance premiums paid by the Company on behalf of the named
Executive Officers. The table below sets forth this information in greater
detail.
<TABLE>
<CAPTION>
DISABILITY
THRIFT PLAN LIFE INSURANCE INSURANCE
NAME CONTRIBUTIONS RELATED BENEFITS PREMIUM
- ---- ------------- ---------------- ----------
<S> <C> <C> <C>
Allen Born............................ 39,375 43,345 14,677
Thomas G. Johnson..................... 13,125 33,390 7,227
Jay M. Linard......................... 11,257 26,751 4,861
Robert P. Wolf........................ 9,338 21,783 4,835
Eugene R. Greenberg................... 10,395 23,122 5,045
</TABLE>
- --------
(F) Mr. Born has an employment agreement with the Company which expires on
December 31, 1999 and which establishes his minimum annual base salary at
$800,000, subject to periodic review. The agreement also provides for
awards of stock options and stock units, all of which have been granted.
For additional information concerning Mr. Born's employment agreement, see
"Executive Employment and Separation Agreements".
(G) Mr. Johnston joined the Company in 1996 and was elected Executive Vice
President in March 1997. In December 1997, he was elected President and
Chief Operating Officer of the Company. At that time, Mr. Johnston entered
into an employment agreement with the Company which expires on December
31, 2002 and which establishes his minimum annual base salary at $500,000,
subject to periodic review. The agreement also provides for awards of
stock units, all of which have been granted. For additional information
concerning Mr. Johnston's employment agreement see "Executive Employment
and Separation Agreements".
(H) Mr. Linard joined the Company in 1996 and was elected a Vice President of
the Company in December of that year. In September 1997, he was elected
Senior Vice President and Group Executive of the Company.
(I) Mr. Greenberg joined the Company in 1996 and was elected a Vice President
of the Company in December of that year.
S-12
<PAGE>
OPTION GRANTS IN THE LAST FISCAL YEAR
The following table sets forth certain information concerning non-qualified
stock options granted by the Company to Messrs. Johnston, Linard, Wolfe and
Greenberg under the Long Term Plan during the 1997 fiscal year. No stock
options were granted to Mr. Born during the 1997 fiscal year. The data in the
column shown below relating to the hypothetical grant date present value of
stock options granted in 1997 are presented pursuant to Commission rules and
are calculated under the modified Black-Scholes Model for pricing options. The
Company is not aware of any model or formula which will determine with
reasonable accuracy a present value for stock options based on future unknown
factors. The actual amount, if any, realized upon the exercise of stock
options will depend upon the market price of the Shares relative to the
exercise price per share of the stock option at the time the stock option is
exercised. There is no assurance that the hypothetical grant date present
values of the stock options reflected in this table actually will be realized.
OPTION GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SECURITIES TOTAL
UNDERLYING OPTIONS EXERCISE GRANT DATE
GRANT OPTIONS GRANTED TO ALL PRICE EXPIRATION PRESENT VALUE
NAME DATE GRANTED(A) EMPLOYEES(B) ($/SH) DATE(C) ($)(D)
- ---- -------- ---------- -------------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Allen Born.............. -- -- -- -- -- --
Thomas G. Johnston...... 12/04/97 44,400 4.3% 32.5625 12/04/07 501,720
Jay M. Linard........... 12/04/97 21,000 2.0% 32.3625 12/04/07 237,300
Robert P. Wolf.......... 12/04/97 16,300 1.6% 32.5625 12/04/07 184,190
Eugene R. Greenberg..... 12/04/97 14,375 1.4% 32.5625 12/04/07 162,438
</TABLE>
- --------
(A) Options granted in 1997 are exercisable upon vesting two years after the
grant date.
(B) Based on 1,024,950 options granted in total during the 1997 fiscal year.
(C) Vested options are exercisable for ten years after the grant date, subject
to earlier termination in certain events related to termination of
employment.
(D) The hypothetical present values on the grant date are calculated under the
modified Black-Scholes Model, which is a mathematical formula used to
value options traded on stock exchanges. This formula considers a number
of factors in hypothesizing an option's present value. Factors used to
value the above options include the Share's expected volatility rate (26
percent); expected risk-free rate of return (5.78 percent); expected
dividend yield (0 percent); projected time of exercise (five years); and
projected risk of forfeiture over the vesting period (5 percent per year
or 10 percent in total).
S-13
<PAGE>
FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information concerning the number and
value of exercisable and unexercisable stock options granted under the Long
Term Plan at December 31, 1997 to each of the persons named in the Summary
Compensation Table. Data with respect to Mr. Born also includes options
awarded to him pursuant to his employment agreement. The value of exercisable
and unexercisable in-the-money stock options at December 31, 1997 shown below
is presented pursuant to Commission rules. The actual amount, if any, realized
upon exercise of stock options will depend upon the market price of Company
Common Stock relative to the per share exercise price of the stock option at
the time such option is exercised. There is no assurance that the values of
exercisable and unexercisable in-the-money stock options reflected in this
table will be realized.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING EXERCISABLE VALUE OF EXERCISABLE
AND UNEXERCISABLE STOCK AND UNEXERCISABLE IN-
OPTIONS AT FISCAL YEAR- THE-MONEY STOCK OPTIONS
END AT FISCAL YEAR-END(S)(A)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Allen Born................. 867,636 575,077 6,216,681 0
Thomas G. Johnston......... 0 50,400 0 87,675
Jay M. Linard.............. 0 35,375 0 65,984
Robert P. Wolf............. 28,000 27,800 160,500 51,944
Eugene R. Greenberg........ 0 43,750 0 54,805
</TABLE>
- --------
(A) Based on a price of $34.25, the per share closing price of the Shares on
the New York Stock Exchange on December 31, 1997.
Performance-Based Restricted Stock Units Awarded in the Last Fiscal Year
The table below indicates the number and value of performance-based
restricted stock units (with dividend equivalents) awarded in the 1997 fiscal
year under the Long Term Plan to each of the persons named in the Summary
Compensation Table. Each unit is equivalent to one Share. Units ordinarily
vest after a ten-year service period. Accelerated vesting and payment of all
or a portion of the units may occur on completion of a three-year performance
period ending December 31, 1999, provided that certain performance goals
established by the Human Resources and Compensation Committee of the Board of
Directors for such period based on corporate cumulative net income are
achieved. To the extent these goals are not met and accelerated vesting does
not occur the units vest and will be paid out on completion of the ten-year
service period. The value attributable to units awarded in 1997 to each of the
persons named in the Summary Compensation Table is reflected in the
"Restricted Stock" column for 1997 of such Table.
LONG TERM INCENTIVE PLAN--AWARDS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF VALUE
RESTRICTED STOCK OF UNITS
NAME UNITS AWARDED AWARDED ($)(A)
---- ---------------- --------------
<S> <C> <C>
Allen Born(B).................................. 17,500 660,625
Thomas G. Johnston(B).......................... 5,750 217,063
Jay M. Linard.................................. 2,875 108,531
Robert P. Wolf................................. 2,650 100,038
Eugene R. Greenberg............................ 2,875 108,531
</TABLE>
- --------
(A) Based on a price of $37.75, which represents the per share closing price
of Company Common Stock on the New York Stock Exchange on the date of
award.
(B) Does not include data pertaining to stock units awarded to Messrs. Born
and Johnston pursuant to their employment agreements. See "Executive
Employment and Separation Agreements".
S-14
<PAGE>
PENSION BENEFITS
The Pension Plan is a defined benefit retirement plan with pensions paid in
accordance with a formula based upon final pay and service. Participants
become entitled to accrued benefits under the Pension Plan after they complete
five years of continuous service. Accrued benefits are determined on the basis
of a participant's years of credited service, which includes all continuous
service prior to his or her normal retirement date. The basic benefit formula
provides an annual retirement allowance equal to 1 7/8 percent of the average
of the participant's three highest annual rates of compensation prevailing on
January 1 during any of the last ten years of credited services multiplied by
the number of years of credited service up to and including ten years, plus 1
3/4 percent of such average multiplied by the number of years of credited
service over ten years, less certain adjustments for Social Security benefits,
with a minimum benefit of $21 per month multiplied by the number of years of
credited service. In those cases where the amounts payable under the Pension
Plan exceed the annual pension limitations imposed by the Internal Revenue
Code of 1986, as amended (the "Code"), such excess will be paid from the
Excess Plan.
The table below shows the estimated annual retirement benefits, before any
applicable offset for Social Security benefits, that would be payable to
participants in the Pension Plan at normal retirement (age 65) on a straight
life annuity basis. Optional forms of benefit payments are available. Benefits
payable under the Pension Plan are also subject to reduction to the extent
that participants receive payments pursuant to certain Company (or Amax)
sponsored pension or retirement plans that have been suspended, discontinued
or otherwise terminated and in certain other circumstances. As noted above,
benefits under the Pension Plan are limited to the extent prescribed by the
Code, and any amounts in excess of such limitations will be paid pursuant to
the Excess Plan. Accordingly, the amounts shown in the table reflect the
aggregate of payments under both the Pension Plan and in the Excess Plan.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ESTIMATED ANNUAL PENSION FOR
REPRESENTATIVE YEARS OF CREDITED SERVICE
-------------------------------------------------------------------------------
HIGHEST
THREE-YEAR
AVERAGE
COMPENSATION 5 10 15 20 25 30 35 40
- ------------ -------- -------- -------- -------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 250,000 $ 23,438 $ 46,875 $ 68,750 $ 90,625 $ 112,500 $ 134,375 $ 156,250 $ 178,125
500,000 46,875 93,750 137,500 181,250 225,000 268,750 312,500 356,750
750,000 70,313 140,625 206,250 271,875 337,500 403,123 468,750 534,375
1,000,000 93,750 187,500 275,000 362,500 450,000 537,500 625,000 712,500
1,250,000 117,188 234,375 343,750 453,125 562,500 671,875 781,250 890,625
1,500,000 140,625 281,250 412,500 543,750 675,000 806,250 937,500 1,068,750
1,750,000 164,063 328,125 481,250 634,375 787,500 940,625 1,093,750 1,246,875
2,000,000 187,500 375,000 550,000 725,000 900,000 1,075,000 1,250,000 1,425,000
2,250,000 210,938 421,875 618,750 815,625 1,012,500 1,209,375 1,406,250 1,603,125
2,500,000 234,375 468,750 687,500 906,250 1,125,000 1,343,750 1,562,500 1,781,250
2,750,000 257,813 515,625 756,250 996,875 1,237,500 1,478,125 1,718,750 1,959,375
</TABLE>
At December 31, 1997, the years of credited service under the Pension Plan
for Messrs. Born, Johnston, Greenberg, Linard and Wolf were 31 years, 16
years, 6 years, 2 years and 8 years, respectively. For purposes of determining
benefits under the Pension Plan, covered compensation for each of these
individuals includes the amounts shown in the "Salary" and "Bonus" columns of
the Summary Compensation Table with certain minor adjustments.
As required by the terms of their respective employment agreements, the
years of credited service under the Pension Plan shown above for Mr. Born
includes the period from September 15, 1981 through May 31, 1985 (when he was
not an employee of Amax) and for Mr. Johnston includes the period of his
employment with Amax or Aztec and the period April 1, 1994 through October 31,
1996 (when he was a consultant to the Company). Pursuant to an arrangement
with the Company, the years of credited service under the Pension Plan
indicated above for Mr. Greenberg include certain periods of service with a
prior employer.
S-15
<PAGE>
EXECUTIVE EMPLOYMENT AND SEPARATION AGREEMENTS
The Company has entered into certain employment agreements, termination of
employment and change in control agreements, as more fully described below.
EMPLOYMENT AGREEMENTS
Allen Born
The Employment Agreement with Mr. Born (the "Born Agreement"), which became
effective November 15, 1993 and which was amended and restated on December 5,
1996, provides for his employment through December 31, 1999, unless terminated
by either party. Among other things, in consideration of Mr. Born's waiver of
a $5.2 million cash payment for severance and pension credit due under a prior
employment agreement with Amax, the Born Agreement provides for the grant to
Mr. Born directly, and not pursuant to the Long Term Plan, of options to
purchase 532,712 Shares at a per share exercise price of $23.6115 and stock
units to be paid out in the form of 113,673 Shares valued at $23.6115 per
share. Such options and units vest over a five-year period beginning November
15, 1994 at the rate of 20 percent per year, but will vest earlier in the
event of, among other things, a Change in Control of the Company.
In consideration of Mr. Born's consent to extend his employment to December
31, 1999, his employment agreement which otherwise would have expired in
December 1996 was amended and restated on December 5, 1996. The Born Agreement
establishes Mr. Born's minimum annual base salary of $800,000 after January 1,
1997, subject to periodic review, and also provides for an additional grant of
options to purchase 697,800 Shares of Company Common Stock under the Long Term
Plan which are exercisable for a term of six years from date of grant at the
following times and prices: (i) 229,767 shares became exercisable on November
15, 1997, at a per share exercise price of $32,125 (the closing price of
Company Common Stock on the New York Stock Exchange on December 5, 1996); (ii)
229,267 shares become exercisable on November 15, 1998, at a per share price
of $36.125; and (iii) the remaining 229,266 shares become exercisable on
November 15, 1999, at a per share exercise price of $40.125. The additional
stock options will vest earlier in the event of, among other things, a Change
in Control of the Company.
The Born Agreement also provides for a supplemental pension benefit under
the Retirement Plan for Salaried Employees of the Company and its subsidiaries
(the "Pension Plan") and the Excess Plan equal to the difference between (a)
the actual benefits to be received under such plans and (b) the benefits he
would have received under such plans if the period from September 15, 1981
through May 31, 1985 (when he was not an employee of Amax) were included in
his years of credited service under these plans. To compensate Mr. Born for
deferring his retirement and the reduced pension benefits resulting from such
deferral, his agreement was amended to further provide that the Company will
pay Mr. Born the lump sum of $1,175,876 at the time of expiration of the
Period of Employment (as defined therein), in addition to, and without offset
of, the benefits otherwise payable to him. Such additional payment will be
made on a prorated basis in the event of, among other things, a Change in
Control of the Company.
The Born Agreement provides that Mr. Born will be paid termination
compensation if his employment is terminated by the Company due to, among
other reasons, a Change in Control of the Company. Such termination
compensation includes (i) a cash payment equal to his monthly compensation
based upon his then current annual salary plus his target award under the
Company's Annual Incentive Plan multiplied by the number of full and
fractional years remaining between the date of termination and December 31,
1999; (ii) a pro rata portion of his target award under the Company's Annual
Incentive Plan, determined on the assumption that all applicable performance
objectives have been met; (iii) vesting and payment in cash of the value of
all previously granted performance accelerated restricted stock awards under
the Company's Long Term Incentive Plan; (iv) maintenance of all insurance
plans in effect for Mr. Born until December 31, 1999, or until the
commencement of equivalent benefits from a new employer; (v) for a period
terminating on the earlier of three years after termination or the
commencement of equivalent benefits from a new employer, third-party
professional financial and tax advisory services; and (vi) for a period
terminating one year after the date of termination of employment,
S-16
<PAGE>
payment of benefits equivalent on an after-tax basis to the benefits Mr. Born
would have received under all employee benefit and executive compensation
plans (other than stock option and incentive plans) in which he was
participating immediately prior to termination, as if he had received credit
for age and service under such plans during such period following termination.
In the event that any such termination payment or benefits pursuant to the
Born Agreement (together with any payments under any other plans, policies or
arrangements) are subject to excise tax under Federal tax laws, the Company
will increase Mr. Born's termination payment to the extent necessary to
restore to the same after-tax position as he would have had if the excise tax
had not been imposed. A copy of the Born Agreement is filed as Exhibit 7 to
the Schedule 14 D-9 and is incorporated herein by reference, and the foregoing
description is qualified in its entirety by reference to such exhibit.
Thomas G. Johnston
The Employment Agreement with Mr. Johnston (the "Johnston Agreement"), which
became effective December 1, 1997, provides for his employment through
December 31, 2002, unless terminated by either party. Among other things, the
Johnston Agreement establishes Mr. Johnston's minimum annual base salary at
$500,000, subject to periodic review, and also provides for grants of
performance-based restricted stock units ("PARS"), subject to achievement of
Performance Objectives (as defined therein), under the Long Term Plan as
follows: (i) 7,400 units for the three-year Performance Period (as defined
therein) ending December 31, 1997; and (ii) 6,500 units for the three-year
Performance Period ending December 31, 1998. Each unit is equivalent to one
Share of Company Common Stock. The aforementioned PARS awards are subject to
all of the terms and conditions of the Long Term Plan, including accelerated
vesting and payment provisions if certain predetermined Performance Objectives
for a Performance Period are met. The Johnston Agreement further provides that
the PARS will vest earlier in the event of, among other things, a Change in
Control of the Company.
The Johnston Agreement also provides for a supplemental pension benefit
under the Pension Plan and the Excess Plan equal to the difference between (a)
the actual benefits to be received under such plans and (b) the benefits Mr.
Johnston would have received under such plans if the periods of employment
with Amax or Aztec Mining Company Limited ("Aztec") and the period April 1,
1994 through October 31, 1996 (when he served as a consultant to the Company)
were included in his years of credited service under these plans. Any pension
payments received by Mr. Johnston from Amax or Aztec will offset payments
received from the Company.
The Johnston Agreement further provides that Mr. Johnston will be paid
termination compensation if, among other reasons, there is a Change in Control
of the Company. Such termination compensation includes (i) a cash payment
equal to 36 months of his monthly compensation based upon Mr. Johnston's then
current annual salary plus his target award under the Company's Annual Plan;
(ii) a pro rata portion of certain previously granted incentive compensation
awards granted under the Company's Annual Plan, determined on the assumption
that all applicable performance objectives have been met; (iii) vesting of
PARS or other Performance Awards under the Company's Long Term Plan; (iv) for
a period terminating on the earlier of 12 months after termination or the
commencement of equivalent benefits from a new employer (a) third-party
professional financial and tax advisory services and (b) the maintenance of
all insurance plans then in effect for him; (v) for a period of 30 and 36
months, respectively, after the date of termination, payments of benefits
equivalent on an after-tax basis to the benefits Mr. Johnson would have
received under the employee benefit and executive compensation plans (other
than stock option and incentive plans) in which he was participating
immediately prior to termination. The Johnston Agreement further provides that
in the event that any such termination payment or benefits pursuant thereto
(together with any payments under any other plans, policies or arrangements)
are subject to excise tax under Federal tax laws, the Company will increase
Mr. Johnston's termination payment to put him in the same after-tax position
as he would have been if the excise tax had not been imposed. A copy of the
Johnston Agreement is filed as Exhibit 8 to the Schedule 14 D-9 and is
incorporated herein by reference, and the foregoing description is qualified
in its entirety by reference to such exhibit.
Helen M. Feeney
Pursuant to an agreement among the Company, Amax and Ms. Feeney (the "Award
Substitution Agreement"), which became effective November 15, 1993, Ms.
Feeney, a former Amax executive who was
S-17
<PAGE>
elected Vice President and Corporate Secretary of the Company at the time the
Company became an independent, public corporation, agreed to the cancellation
without payment of rights which she may have had under severance policies of
Amax. The Company made an award of options and units to Ms. Feeney similar to
those made under the Born Agreement. The award was made on terms substantially
similar to those described above relating to the Born Agreement and provide for
grants of options covering 39,250 Shares of Company Common Stock and stock
units for 8,374 Shares of Company Common Stock to Ms. Feeney. The options
granted to Ms. Feeney pursuant to the Award Substitution Agreement vest upon a
Change in Control. A copy of the Award Substitution Agreement is filed as
Exhibit 9 to the Schedule 14 D-9 and is incorporated herein by reference, and
the foregoing description is qualified in its entirety by reference to such
exhibit.
For purposes of this Information Statement, the term "Change in Control"
includes the purchase by the Purchaser of 20% or more of the Shares or the
approval of the stockholders of the Company of the Merger.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's Directors and Executive officers and the beneficial owners of
more than ten percent of the Company's Common Stock to file with the SEC
initial reports of ownership and reports of changes in ownership of Company
Common Stock and other equity securities of the Company. Because of the
complexity of the reporting rules, the Company has assumed responsibility for
preparing and filing all reports required to be filed under Section 16(a) by
the Directors and Executive Officers. The Company believes that during the last
fiscal year it complied with all Section 16(a) filing requirements applicable
to its Directors and Executive Officers.
S-18
<PAGE>
[LETTERHEAD OF BT WOLFENSOHN APPEARS HERE]
March 8, 1998
Board of Directors
Alumax Inc.
3424 Peachtree Road, N.E.
Suite 2100
Atlanta, GA 30326
Dear Directors:
BT Wolfensohn has acted as financial advisor to Alumax Inc. ("Alumax") in
connection with the proposed merger of Alumax and Aluminum Company of America
(the "Acquiror") pursuant to the Agreement and Plan of Merger, dated as of March
8, 1998 (the "Merger Agreement"), among Alumax, the Acquiror and AMX Acquisition
Corp., a wholly owned subsidiary of the Acquiror ("Acquiror Sub"), which
provides, among other things, for a tender offer (the "Offer") for a majority
(on a fully-diluted basis) of the shares of the Common Stock, par value $0.01
per share, of Alumax ("Alumax Common Stock") at $50.00 of cash, followed by a
merger (the "Merger"; together with the Offer, the "Transaction") of Alumax with
and into Acquiror Sub, as a result of which each share of Alumax Common Stock
(other than the Excluded Shares or Dissenting Shares (as defined in the Merger
Agreement)) will be converted into the right to receive 0.6975 of a share of the
Common Stock, par value $1.00 per share, of the Acquiror ("Acquiror Common
Stock") or, if less than a majority of the Alumax Common Stock is acquired in
the Offer, a fraction of a share of Acquiror Common Stock equal to the Adjusted
Exchange Ratio (as defined in the Merger Agreement) plus the Cash Prorate Amount
(as defined in the Merger Agreement). The terms and conditions of the
Transaction are more fully set forth in the Merger Agreement.
You have requested BT Wolfensohn's opinion, as investment bankers, as to the
fairness, from a financial point of view, of the consideration to be received by
the shareholders of Alumax pursuant to the Merger Agreement in the Offer and the
Merger, taken together, to such shareholders.
In connection with BT Wolfensohn's role as financial advisor to Alumax, and in
arriving at its opinion, BT Wolfensohn has reviewed certain publicly available
financial and other information concerning Alumax and the Acquiror and certain
internal analyses and other information furnished to it by Alumax and the
Acquiror and/or their respective advisors. BT Wolfensohn has also held
discussions with members of the senior managements of Alumax and the Acquiror
regarding the businesses and prospects of their respective companies and the
joint prospects of a combined company. In addition, BT Wolfensohn has (i)
reviewed the reported prices and trading activity for Alumax Common Stock and
Acquiror Common Stock, (ii) compared certain
<PAGE>
Alumax Inc.
March 8, 1998
Page 2
financial and stock market information for Alumax and the Acquiror with similar
information for certain other companies whose securities are publicly traded,
(iii) reviewed the financial terms of certain recent business combinations which
it deemed comparable in whole or in part, (iv) reviewed the terms of the Merger
Agreement, and (v) performed such other studies and analyses and considered such
other factors as it deemed appropriate.
BT Wolfensohn has not assumed responsibility for independent verification of,
and has not independently verified, any information, whether publicly available
or furnished to it, concerning Alumax or the Acquiror, including, without
limitation, any financial information, forecasts or projections considered in
connection with the rendering of its opinion. Accordingly, for purposes of its
opinion, BT Wolfensohn has assumed and relied upon the accuracy and completeness
of all such information and BT Wolfensohn has not conducted a physical
inspection of any of the properties or assets, and has not prepared or obtained
any independent evaluation or appraisal of any of the assets or liabilities, of
Alumax or the Acquiror. With respect to the financial forecasts and projections,
including the analyses and forecasts of certain cost savings, operating
efficiencies, revenue effects and financial synergies expected by Alumax and the
Acquiror ("Synergies"), made available to BT Wolfensohn and used in its
analyses, BT Wolfensohn has assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
management of Alumax or the Acquiror, as the case may be, as to the matters
covered thereby. In rendering its opinion, BT Wolfensohn expresses no view as to
the reasonableness of such forecasts and projections, including the Synergies,
or the assumptions on which they are based. BT Wolfensohn's opinion is
necessarily based upon economic, market and other conditions as in effect on,
and the information made available to it as of, the date hereof. We undertake
no obligation to update this opinion to reflect any developments occurring after
the date hereof. We express no opinion as to the price or range of prices at
which Acquiror Common Stock may trade subsequent to the consummation of the
Merger.
For purposes of rendering its opinion, BT Wolfensohn has assumed that, in all
respects material to its analysis, the representations and warranties of Alumax,
the Acquiror and Acquiror Sub contained in the Merger Agreement are true and
correct, Alumax, the Acquiror and Acquiror Sub will each perform all of the
covenants and agreements to be performed by it under the Merger Agreement and
all conditions to the obligations of each of Alumax, the Acquiror and Acquiror
Sub to consummate the Transaction will be satisfied without any waiver thereof.
BT Wolfensohn has also assumed that all material governmental, regulatory or
other approvals and consents required in connection with the consummation of the
Transaction will be obtained and that in connection with obtaining any necessary
governmental, regulatory or other approvals and consents, or any amendments,
modifications or waivers to any agreements, instruments or orders to which
either Alumax or the Acquiror is a party or is subject or by which it is bound,
no limitations, restrictions or conditions will be imposed or amendments,
modifications or waivers made that would have a material adverse effect on
either Alumax or the Acquiror or materially reduce the contemplated benefits of
the Transaction to Alumax or its stockholders. In addition, you have informed BT
Wolfensohn, and accordingly for purposes of rendering its opinion BT Wolfensohn
has assumed, that the Merger will be tax-free to each of Alumax, the Acquiror,
the Acquiror's stockholders and, to the extent they receive Acquiror Common
Stock instead of cash, Alumax's stockholders.
<PAGE>
Alumax Inc.
March 8, 1998
Page 3
In connection with our engagement, we have not been authorized by Alumax or its
Board of Directors to solicit, nor have we solicited, any alternative
transactions to the Transaction. This opinion is addressed to, and for the use
and benefit of, the Board of Directors of Alumax and is not a recommendation to
the stockholders of Alumax to tender their shares in the Offer or to approve the
Merger. This opinion is limited to the fairness, from a financial point of view,
to Alumax of the consideration to be received in the Offer and the Merger, taken
together, and BT Wolfensohn expresses no opinion as to the merits of the
underlying decision by Alumax to engage in the Transaction.
BT Wolfensohn is engaged in the merger and acquisition and client advisory
business of Bankers Trust (together with its affiliates the "BT Group") and,
for legal and regulatory purposes, is a division of BT Alex. Brown Incorporated,
a registered broker-dealer and member of the New York Stock Exchange. BT
Wolfensohn will be paid a fee for its services as financial advisor to Alumax in
connection with the Transaction, a substantial portion of which is contingent
upon consummation of the Transaction. BT Wolfensohn currently receives, and has
received in prior years, an annual retainer from Alumax. It has also provided
investment banking services to Alumax for which it has received compensation. In
the ordinary course of business, members of the BT Group may actively trade in
the securities and other instruments and obligations of Alumax and the Acquiror
for their own accounts and for the accounts of their customers. Accordingly, the
BT Group may at any time hold a long or short position in such securities,
instruments and obligations.
Based upon and subject to the foregoing, it is BT Wolfensohn's opinion as
investment bankers that, as of the date hereof, the consideration to be received
pursuant to the Merger Agreement by holders of Alumax Common Stock in the Offer
and the Merger, taken together, is fair, from a financial point of view, to such
stockholders.
Very truly yours,
/s/ BT Wolfensohn
BT WOLFENSOHN
<PAGE>
[LOGO OF ALUMAX INC.] Alumax Inc.
ALLEN BORN 3424 Peachtree Road,
Chairman and N.E.
Chief Executive Officer Suite 2100
Atlanta, Georgia
30326
404/846-4601
FAX 404/846-4780
March 13, 1998
Dear Fellow Stockholder:
I am pleased to inform you that on March 8, 1998, Alumax Inc. (the
"Company") entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Aluminum Company of America, a Pennsylvania corporation (the
"Parent"), and AMX Acquisition Corp., a Delaware corporation and a wholly
owned subsidiary of the Parent ("Purchaser"). Pursuant to the Merger
Agreement, Purchaser is today commencing a tender offer (the "Offer") to
purchase up to 27,000,000 shares of common stock, par value $0.01 per share,
of the Company (the "Shares") at a price of $50.00 per Share, net to the
seller in cash.
The Merger Agreement also provides that following the purchase of Shares
pursuant to the Offer, the Company will be merged with and into the Purchaser
(the "Merger") and in the Merger each Share (other than Shares purchased in
the Offer or otherwise owned by the Parent, the Purchaser, the Company, or any
of their respective subsidiaries, and dissenting shares) will be converted
into, and become exchangeable for, the right to receive: (i) 0.6975 (the
"Exchange Ratio") of a share of common stock, par value $1.00 per share, of
the Parent (the "Parent Common Stock") if the Purchaser purchases at least
27,000,000 Shares or such other number of Shares which represents an absolute
majority of the outstanding Shares on a fully diluted basis (excluding those
that are issuable with respect to employee or director stock options) on the
expiration date of the Offer, or (ii) a combination of cash and a fraction of
a share of Parent Common Stock if the Purchaser purchases fewer Shares than
such absolute majority (the "Merger Consideration").
Because the market price of the shares of the Parent Common Stock will
fluctuate and the Exchange Ratio will not be adjusted as a result of such
price fluctuation, the value of a share of the Parent Common Stock multiplied
by the Exchange Ratio at the time the Merger is consummated may be greater or
less than the $50.00 in cash per Share payable pursuant to the Offer.
ACCORDINGLY, THE VALUE OF THE MERGER CONSIDERATION MAY BE GREATER OR LESS THAN
THE $50.00 PER SHARE TO BE RECEIVED BY HOLDERS OF SHARES THAT ARE PURCHASED
PURSUANT TO THE OFFER. Based on the closing price of the Parent Common Stock
on the New York Stock Exchange, Inc. on March 12, 1998, the value of the
Parent Common Stock which would have been received in the Merger had it
occurred on such date for each Share pursuant to the Exchange Ratio would have
been $49.78 (assuming 27,000,000 Shares were purchased in the Offer).
The Offer and the Merger are intended to qualify as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended, as more fully discussed in the enclosed Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9").
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY (WITH ONE DIRECTOR ABSENT) APPROVED
THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, DETERMINED
THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST
INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS THAT
STOCKHOLDERS ACCEPT THE OFFER, TENDER THEIR SHARES PURSUANT TO THE OFFER AND
ADOPT THE MERGER AGREEMENT.
In recommending that the Company's stockholders accept the Offer, the Board
of Directors of the Company is not recommending that the cash payment of
$50.00 per Share is preferable to the payment of 0.6975 of a share of the
Parent Common Stock. In choosing which form of consideration a stockholder of
the Company prefers, and responding to the Offer accordingly, each of the
Company's stockholders should make his or her own decision. In arriving at its
recommendation, the Board of Directors of the Company gave careful
<PAGE>
consideration to a number of factors which are described in the enclosed
Schedule 14D-9, including, among other things, the written opinion of BT
Wolfensohn, the Company's financial advisor, dated March 8, 1998, to the
effect that, as of such date and based upon and subject to certain matters set
forth in such opinion, the consideration to be received pursuant to the Merger
Agreement by holders of the Shares in the Offer and the Merger, taken
together, is fair, from a financial point of view, to such stockholders. THE
FULL TEXT OF THE WRITTEN OPINION OF BT WOLFENSOHN, DATED MARCH 8, 1998, WHICH
SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN IN CONNECTION WITH SUCH OPINION, IS ATTACHED AS ANNEX A TO
THE SCHEDULE 14D-9. STOCKHOLDERS ARE URGED TO READ SUCH OPINION CAREFULLY IN
ITS ENTIRETY.
Additional information with respect to the transaction is contained in the
enclosed Schedule 14D-9. Also enclosed is the Purchaser's Offer to Purchase
and related materials, including a Letter of Transmittal to be used for
tendering your Shares. These documents set forth the terms and conditions of
the Offer and provide instructions as to how to tender your Shares. I urge you
to read the enclosed materials and consider this information carefully.
Sincerely,
/S/ Allen Born
Allen Born Chairman and Chief
Executive Officer
2
<PAGE>
EXECUTION COPY
================================================================================
AGREEMENT AND PLAN OF MERGER
among
ALUMINUM COMPANY OF AMERICA,
AMX ACQUISITION CORP.
and
ALUMAX INC.
Dated as of March 8, 1998
================================================================================
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of March 8, 1998 (the
"Agreement"), among ALUMINUM COMPANY OF AMERICA, a Pennsylvania corporation (the
"Parent"), AMX ACQUISITION CORP., a Delaware corporation (the "Purchaser"), and
ALUMAX INC., a Delaware corporation (the "Company").
WHEREAS, the Boards of Directors of the Parent, the Purchaser and the
Company deem it advisable and in the best interests of their respective
stockholders that the Parent acquire the Company upon the terms and subject to
the conditions provided for in this Agreement;
WHEREAS, in furtherance thereof it is proposed that the acquisition be
accomplished by the Purchaser commencing a cash tender offer (as it may be
amended from time to time as permitted by this Agreement, the "Offer") to
acquire 27,000,000 shares of common stock, par value $0.01 per share, of the
Company (the "Company Common Stock," and together with the rights issued
pursuant to the Rights Agreement (as hereinafter defined) associated with such
shares, the "Shares"), or such other number of Shares as represents an absolute
majority of the excess of (i) all shares of Company Common Stock outstanding on
the Expiration Date on a fully-diluted basis, minus (ii) the total number of
Shares issuable upon exercise of all outstanding employee stock options, for
$50.00 per Share (such amount or any greater amount per Share paid pursuant to
the Offer being hereinafter referred to as the "Per Share Cash Amount"), subject
to applicable withholding taxes, net to the seller in cash, to be followed by a
merger of the Company with and into the Purchaser (the "Merger") pursuant to
which outstanding shares of Company Common Stock will be converted into the
right to receive shares of common stock, par value $1.00 per share, of the
Parent (the "Parent Common Stock"), and cash under certain circumstances, in
each case upon the terms and subject to the conditions set forth in this
Agreement;
WHEREAS, the Board of Directors of the Company has unanimously
approved the making of the Offer and the Merger and resolved and agreed to
recommend that holders of Shares tender their Shares pursuant to the Offer and
approve and adopt this Agreement and the Merger;
WHEREAS, for U.S. federal income tax purposes, it is intended that the
Merger contemplated hereby qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and that this Agreement shall be, and is hereby, adopted as a plan of
reorganization
1
<PAGE>
for purposes of Section 368 of the Code; and
WHEREAS, the Boards of Directors of the Parent (on its own behalf and
as the sole stockholder of the Purchaser), the Purchaser and the Company have
each approved this Agreement and the Merger in accordance with the General
Corporation Law of the State of Delaware (the "DGCL") and upon the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, the Parent, the Purchaser and the Company agree as
follows:
ARTICLE I
Section 1.1 The Offer.
---------
(a) Provided that this Agreement shall not have been terminated in
accordance with Section 7.1 and none of the events set forth in Annex A hereto
shall have occurred or be existing (and shall not have been waived by the
Purchaser), the Purchaser shall commence the Offer as promptly as reasonably
practicable after the date hereof, but in no event later than five business days
after the public announcement of the execution of this Agreement. The Purchaser
shall, on the terms of and subject to the prior satisfaction or waiver of the
conditions of the Offer, accept for payment and pay for up to 27,000,000 Shares
validly tendered and not withdrawn pursuant to the Offer (or such other number
of Shares as represents an absolute majority of the excess of (i) all shares of
Company Common Stock outstanding on the Expiration Date on a fully-diluted
basis, minus (ii) the total number of Shares issuable upon exercise of all
outstanding employee stock options, with 27,000,000 Shares or such other number
being herein referred to as the "50% Share Number") as soon as practicable after
the later of the satisfaction of the conditions of the Offer and the expiration
of the Offer; provided, however, that no such payment shall be made until after
the calculation of the applicable proration factor in the Offer. The obligation
of the Purchaser to purchase and pay for shares tendered pursuant to the Offer
shall be subject to the conditions set forth in Annex A hereto. The Company
agrees that no Shares held by the Company or any of its Subsidiaries will be
tendered to the Purchaser pursuant to the Offer. The Purchaser expressly
reserves the right to waive any of such conditions, to increase
2
<PAGE>
the price per Share payable in the Offer and to make any other changes in the
terms and conditions of the Offer; provided, however, that no change may be made
which decreases the price per Share payable in the Offer, reduces the number of
Shares to be purchased in the Offer, changes the form of consideration to be
paid in the Offer, modifies any of the conditions set forth in Annex A hereto in
any manner adverse to the holders of Shares or, except as provided in the next
two sentences, extends the Offer. Notwithstanding the foregoing, the Purchaser
may, without the consent of the Company, (i) extend the Offer beyond the
scheduled expiration date, which shall be 20 business days following the date of
commencement of the Offer, if, at the scheduled expiration of the Offer, any of
the conditions to the Purchaser's obligation to accept for payment and to pay
for the Shares shall not be satisfied or waived, or (ii) extend the Offer for
any period required by any rule, regulation or interpretation of the Securities
and Exchange Commission (the "SEC") or the staff thereof applicable to the
Offer. So long as this Agreement is in effect and the condition to the Offer set
forth in clause (i) of the first paragraph of Annex A has not been satisfied or
waived, the Purchaser shall extend the Offer from time to time for a period or
successive periods not to exceed 10 business days each after the previously
scheduled expiration date of the Offer. The Per Share Cash Amount shall, subject
to applicable withholding of taxes, be net to the seller in cash, upon the terms
and subject to the conditions of the Offer.
(b) As promptly as practicable on the date of commencement of the
Offer, the Purchaser shall file with the SEC a Tender Offer Statement on
Schedule 14D-1 (together with all amendments and supplements thereto, the
"Schedule 14D-1") with respect to the Offer. The Schedule 14D-1 shall contain
or incorporate by reference an offer to purchase (the "Offer to Purchase") and
forms of the related letter of transmittal and all other ancillary Offer
documents (collectively, together with all amendments and supplements thereto,
the "Offer Documents"). The Parent and the Purchaser shall cause the Offer
Documents to be disseminated to the holders of the Shares as and to the extent
required by applicable federal securities laws. The Parent and the Purchaser,
on the one hand, and the Company, on the other hand, will promptly correct any
information provided by it for use in the Offer Documents if and to the extent
that it shall have become false or misleading in any material respect, and the
Purchaser will cause the Offer Documents as so corrected to be filed with the
SEC and to be disseminated to holders of the Shares, in each case as and to the
extent required by applicable federal securities laws. The Company and its
counsel shall be given a reasonable opportunity to review and comment upon the
Schedule 14D-1 before it is filed with the SEC.
3
<PAGE>
Section 1.2 Company Actions.
---------------
(a) The Company hereby approves of and consents to the Offer and
represents and warrants that the Company's Board of Directors, at a meeting duly
called and held, has (i) unanimously (with one director absent) determined that
the terms of the Offer and the Merger are fair to and in the best interests of
the stockholders of the Company, (ii) approved this Agreement and approved the
transactions contemplated hereby and thereby, including the Offer and the Merger
and (iii) resolved to recommend that the stockholders of the Company accept the
Offer, tender their Shares to the Purchaser thereunder and approve and adopt
this Agreement and the Merger. The Company hereby consents to the inclusion in
the Offer Documents of the recommendation of the Board described in the
immediately preceding sentence.
(b) As promptly as practicable on the date of commencement of the
Offer, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 (together with all amendments and supplements
thereto, the "Schedule 14D-9") which shall contain the recommendation referred
to in clause (iii) of Section 1.2(a) hereof. The Company further agrees to take
all steps necessary to cause the Schedule 14D-9 to be disseminated to holders of
the Shares as and to the extent required by applicable federal securities laws.
The Company, on the one hand, and each of the Parent and the Purchaser, on the
other hand, will promptly correct any information provided by it for use in the
Schedule 14D-9 if and to the extent that it shall have become false or
misleading in any material respect, and the Company will cause the Schedule 14D-
9 as so corrected to be filed with the SEC and to be disseminated to holders of
the Shares, in each case as and to the extent required by applicable federal
securities laws. The Parent and its counsel shall be given a reasonable
opportunity to review and comment upon the Schedule 14D-9 before it is filed
with the SEC. In addition, the Company agrees to provide the Parent, the
Purchaser and their counsel with any comments, whether written or oral, that the
Company or its counsel may receive from time to time from the SEC or its staff
with respect to the Schedule 14D-9 promptly after the receipt of such comments.
(c) The Company shall promptly furnish the Purchaser with mailing
labels containing the names and addresses of all record holders of Shares and
with security position listings of Shares held in stock depositories, each as of
a recent date, together with all other available listings and computer files
containing names,
4
<PAGE>
addresses and security position listings of record holders and beneficial owners
of Shares. The Company shall furnish the Purchaser with such additional
information, including, without limitation, updated listings and computer files
of stockholders, mailing labels and security position listings, and such other
assistance as the Parent, the Purchaser or their agents may reasonably request.
Subject to the requirements of applicable law, and except for such steps as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Offer or the Merger, the Parent and the Purchaser shall hold
in confidence the information contained in such labels, listings and files,
shall use such information solely in connection with the Offer and the Merger,
and, if this Agreement is terminated in accordance with Section 7.1 or if the
Offer is otherwise terminated, shall promptly deliver or cause to be delivered
to the Company all copies of such information, labels, listings and files then
in their possession or in the possession of their agents or representatives.
Section 1.3 Directors of the Company.
------------------------
(a) Promptly upon the purchase of and payment for any Shares by the
Purchaser or any of its affiliates pursuant to the Offer, the Parent shall be
entitled to designate such number of directors, rounded up to the next whole
number, on the Board of Directors of the Company as is equal to the product
obtained by multiplying the total number of directors on such Board (giving
effect to the directors designated by the Parent pursuant to this sentence) by
the percentage that the number of Shares so accepted for payment bears to the
total number of Shares then outstanding. In furtherance thereof, the Company
shall, upon request of the Purchaser, promptly increase the size of its Board of
Directors or exercise its best efforts to secure the resignations of such number
of directors, or both, as is necessary to enable the Parent's designees to be so
elected to the Company's Board and shall cause the Parent's designees to be so
elected. At such time, the Company shall, if requested by the Parent, also
cause directors designated by the Parent to constitute at least the same
percentage (rounded up to the next whole number) as is on the Company's Board of
Directors of (i) each committee of the Company's Board of Directors, (ii) each
board of directors (or similar body) of each Significant Subsidiary (as
hereinafter defined) of the Company, and (iii) each committee (or similar body)
of each such board. Notwithstanding the foregoing, if Shares are purchased
pursuant to the Offer, there shall be until the Effective Time at least one
member of the Company's Board of Directors who is a director on the date hereof
and is not an employee of the Company.
5
<PAGE>
(b) The Company shall promptly take all actions required pursuant to
Section 14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and Rule 14f-1 promulgated thereunder in order to fulfill its obligations
under Section 1.3(a), including mailing to stockholders together with the
Schedule 14D-9 the information required by such Section 14(f) and Rule 14f-1 as
is necessary to enable the Parent's designees to be elected to the Company's
Board of Directors. The Parent and the Purchaser will supply the Company and be
solely responsible for any information with respect to them and their nominees,
officers, directors and affiliates required by such Section 14(f) and Rule 14f-
1. The provisions of this Section 1.3 are in addition to and shall not limit
any rights which the Purchaser, the Parent or any of their affiliates may have
as a holder or beneficial owner of Shares as a matter of law with respect to the
election of directors or otherwise.
(c) Following the election of the Parent's designees to the Company's
Board of Directors pursuant to this Section 1.3, prior to the Effective Time (as
hereinafter defined) (i) any amendment or termination of this Agreement by the
Company, (ii) any extension or waiver by the Company of the time for the
performance of any of the obligations or other acts of the Parent or the
Purchaser, or (iii) any waiver of any of the Company's rights hereunder shall,
in any such case, require the concurrence of a majority of the directors of the
Company then in office who neither were designated by the Purchaser nor are
employees of the Company (the "Independent Director Approval").
ARTICLE II
The Merger
-----------
Section 2.1 The Merger. Upon the terms and subject to the conditions
----------
set forth in this Agreement, and in accordance with the DGCL, the Company shall
merge with and into the Purchaser (the "Merger"), and the separate corporate
existence of the Company shall thereupon cease, and the Purchaser shall be the
surviving corporation in the Merger (the "Surviving Corporation"). The Surviving
Corporation shall possess all the rights, privileges, powers and franchises as
well of a public as of a private nature and shall be subject to all of the
restrictions, disabilities, duties, debts and obligations of the Company and the
Purchaser, all as provided in the DGCL.
6
<PAGE>
Section 2.2 Closing. The closing of the Merger (the "Closing") will
-------
take place at 10:00 a.m. on a date to be specified by the parties (the "Closing
Date"), which shall be no later than the second business day after satisfaction
of the conditions set forth in Article VI, unless another time or date is agreed
to in writing by the parties hereto. The Closing will be held at the offices of
Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York,
unless another place is agreed to in writing by the parties hereto.
Section 2.3 Effective Time. Subject to the provisions of this
--------------
Agreement, on the Closing Date the parties shall file with the Secretary of
State of the State of Delaware a certificate of merger (the "Certificate of
Merger") executed in accordance with the relevant provisions of the DGCL and
shall make all other filings or recordings required under the DGCL in order to
effect the Merger. The Merger shall become effective upon the filing of the
Certificate of Merger or at such other time as is specified in the Certificate
of Merger (the time at which the Merger becomes fully effective being
hereinafter referred to as the "Effective Time").
Section 2.4 Effects of the Merger. The Merger shall have the
---------------------
effects set forth in Section 259 of the DGCL.
Section 2.5 Certificate of Incorporation; By-laws.
-------------------------------------
(a) At the Effective Time, the Certificate of Incorporation of the
Purchaser, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation; provided, however,
that Article FIRST of the Certificate of Incorporation of the Surviving
Corporation shall be amended to read in its entirety as follows: "FIRST: The
name of the corporation is Alumax Inc." and, as so amended shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by the DGCL and such Certificate of Incorporation.
(b) At the Effective Time, the By-laws of the Purchaser, as in effect
immediately prior to the Effective Time, shall be the By-laws of the Surviving
Corporation until thereafter amended as provided by the DGCL, the Certificate of
Incorporation of the Surviving Corporation and such By-laws.
Section 2.6 Directors; Officers of Surviving Corporation.
--------------------------------------------
7
<PAGE>
(a) The directors of the Purchaser at the Effective Time shall be the
directors of the Surviving Corporation until their respective successors are
duly elected and qualified or their earlier death, resignation or removal in
accordance with the Certificate of Incorporation and By-laws of the Surviving
Corporation.
(b) The officers of the Purchaser at the Effective Time shall be the
officers of the Surviving Corporation until their respective successors are duly
elected and qualified or their earlier death, resignation or removal in
accordance with the Certificate of Incorporation and By-laws of the Surviving
Corporation.
Section 2.7 Conversion of Securities. At the Effective Time, by
------------------------
virtue of the Merger and without any action on the part of the holders of any
securities of the Purchaser or the Company:
(a) Each Share that is owned by the Parent, the Purchaser, any of
their respective Subsidiaries, the Company or any Subsidiary of the Company
shall automatically be cancelled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(b) Each issued and outstanding Share, other than Excluded Shares and
Dissenting Shares, shall be converted into, and become exchangeable for the
right to receive:
(A) 0.6975 (the "Exchange Ratio") of a share of Parent Common
Stock; provided that the Purchaser shall have purchased no fewer than the
50% Share Number of Shares in the Offer; or
(B) that fraction of a share of Parent Common Stock equal to the
Adjusted Exchange Ratio, plus an amount in cash equal to the Merger Cash
Prorate Amount, if the Purchaser shall have purchased fewer than the 50%
Number of Shares in the Offer.
As used herein: (i) the term "Excluded Shares" shall mean that number of Shares
owned by the Parent and its Subsidiaries immediately prior to the Effective Time
(excluding Shares held by the Company and its Subsidiaries); (ii) the term
"Adjusted Exchange Ratio" shall mean that quotient (rounded to the nearest cent)
determined by dividing (1) the product of the 50% Share Number times 0.6975 by
(2) the Final Outstanding Number; (iii) the term "Merger Cash Prorate Amount"
shall mean that U.S. dollar cash amount (rounded to the nearest cent) equal to
the
8
<PAGE>
quotient determined by dividing (3) the product of the Per Share Cash Amount
times the excess of (a) the 50% Share Number over (b) the Purchased Share Number
by (4) the Final Outstanding Number; (iv) the term "Final Outstanding Number"
shall mean that number of Shares equal to the total number of Shares outstanding
immediately prior to the Effective Time minus the Excluded Shares; and (v) the
term "Purchased Share Number" shall mean that number of Shares actually
purchased by the Purchaser in the Offer. The per Share consideration referred to
in clause (A) or clause (B) of this Section 2.7(b), as the case may be, is
referred to herein as the "Merger Consideration." All such Shares, when so
converted, shall no longer be outstanding and shall automatically be cancelled
and retired and shall cease to exist, and the certificates representing such
Shares shall thereafter represent only the right to receive (i) Merger
Consideration, (ii) certain dividends and other distributions in accordance with
Section 2.8(g), and (iii) cash in lieu of fractional shares of Parent Common
Stock in accordance with Section 2.8(h), without interest.
(c) Each issued and outstanding share of common stock, par value $.01
per share, of the Purchaser shall be converted into one validly issued, fully
paid and nonassessable share of common stock of the Surviving Corporation.
Section 2.8 Exchange of Certificates.
------------------------
(a) Exchange Agent. The Parent shall designate a bank or trust
--------------
company reasonably acceptable to the Company to act as agent for the holders of
the Shares (other than Excluded Shares) in connection with the Merger (the
"Exchange Agent") to receive in trust from the Parent as of the Effective Time
for the benefit of such holders (i) certificates ("Parent Certificates")
representing the number of whole shares of Parent Common Stock and (ii) the
aggregate amount of cash (if any) issuable pursuant to Section 2.7(b) in
exchange for outstanding Shares (such shares of Parent Common Stock and cash (if
any), together with any dividends or distributions with respect thereto with a
record date after the Effective Time and any cash 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, as of
the Effective Time, of a certificate or certificates, which immediately prior to
the Effective Time represented outstanding Shares (the "Certificates"), whose
Shares were converted pursuant to Section 2.7(b) into the right to receive the
9
<PAGE>
Merger Consideration, a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as the Parent may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by the Parent, together with such letter of
transmittal, properly completed and duly executed in accordance with the
instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor (i) a Parent Certificate representing that number
of whole shares of Parent Common Stock which such holder has the right to
receive pursuant to Section 2.7(b), (ii) any cash included in the Merger
Consideration, (iii) certain dividends or other distributions in accordance
with Section 2.8(g) and (iv) cash in lieu of any fractional share in accordance
with Section 2.8(h) for each Share formerly represented by such Certificate, and
the Certificate so surrendered shall forthwith be cancelled. No interest will
be paid or accrued on the cash payable upon the surrender of the Certificates.
If the issuance of the Merger Consideration is to be made to a Person (as
hereinafter defined) other than the Person in whose name the surrendered
Certificate is registered, it shall be a condition of exchange that the
Certificate so surrendered shall be properly endorsed or shall be otherwise in
proper form for transfer and that the Person requesting such exchange shall have
paid all transfer and other Taxes (as hereinafter defined) required by reason of
the issuance to a Person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such Tax either has been paid or is not applicable.
(c) Transfer Books; No Further Ownership Rights in the Shares. At the
---------------------------------------------------------
Effective Time, the stock transfer books of the Company shall be closed, and
thereafter there shall be no further registration of transfers of the Shares on
the records of the Company. From and after the Effective Time, the holders of
Certificates evidencing ownership of the Shares outstanding immediately prior to
the Effective Time shall cease to have any rights with respect to such Shares,
except as otherwise provided for herein or by applicable law. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be cancelled and exchanged as provided in this Article II.
(d) Termination of Fund; No Liability. At any time following six
----------------------------------
months after the Effective Time, the Surviving Corporation shall be entitled to
<PAGE>
require the Exchange Agent to deliver to it any funds (including any interest
received with respect thereto) which had been made available to the Paying
Agent, and holders shall be entitled to look to the Surviving Corporation
(subject to abandoned property, escheat or other similar laws) only as general
creditors thereof with respect to the Merger Consideration payable upon due
surrender of their Certificates, without any interest thereon. Notwithstanding
the foregoing, neither the Surviving Corporation nor the Exchange Agent shall be
liable to any holder of a Certificate for Merger Consideration delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
(e) Lost, Stolen or Destroyed Certificates. In the event any
--------------------------------------
Certificates for Shares shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the Person claiming such Certificate(s)
to be lost, stolen or destroyed and, if required by the Parent, the posting by
such Person of a bond in such sum as the Parent may reasonably direct as
indemnity against any claim that may be made against it or the Surviving
Corporation with respect to such Certificate(s), the Exchange Agent will issue
the Merger Consideration pursuant to Section 2.8(b) deliverable in respect of
the Shares represented by such lost, stolen or destroyed Certificates.
(f) Withholding Taxes. The Parent and the Purchaser shall be entitled
-----------------
to deduct and withhold, or cause the Exchange Agent to deduct and withhold from
the Per Share Cash Amount or the Merger Consideration payable to a holder of
Shares pursuant to the Offer or the Merger any stock transfer Taxes and such
amounts as are required under the Code, or any applicable provision of state,
local or foreign Tax law, as specified in the Offer Documents. To the extent
that amounts are so withheld by the Parent or the Purchaser, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of the Shares in respect of which such deduction and withholding
was made by the Parent or the Purchaser, in the circumstances described in the
Offer Documents.
(g) Dividends; Distributions. No dividends or other distributions
------------------------
with respect to Parent Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered 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
2.8(h), 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
11
<PAGE>
of such Certificate in accordance with this Article II. 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 2.8(h) 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.
The Parent shall make available to the Exchange Agent cash for these purposes.
(h) No Fractional Shares. 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
stockholder of Parent. In lieu of any such fractional shares, each holder of a
Certificate who would otherwise have been entitled to receive a fractional share
interest in exchange for such Certificate pursuant to this Section shall receive
from the Exchange Agent an amount in cash equal to the product obtained by
multiplying (A) the fractional share interest to which such holder (after taking
into account all Shares held at the Effective Time by such holder) would
otherwise be entitled by (B) the closing price for a share of Parent Common
Stock as reported on the New York Stock Exchange (the "NYSE") Composite
Transactions Tape (as reported in The Wall Street Journal, or, if not reported
thereby, any other authoritative source) on the Closing Date.
(i) Investment of Exchange Fund. The Exchange Agent shall invest any
---------------------------
cash included in the Exchange Fund, as directed by the Parent, on a daily basis.
Any interest and other income resulting from such investments shall be paid to
the Parent.
Section 2.9 Appraisal Rights. Notwithstanding anything in this
----------------
Agreement to the contrary, if by reason of the composition of the Merger
Consideration Section 262 of the DGCL affords appraisal rights in the Merger,
then Shares (the "Dissenting Shares") that are issued and outstanding
immediately prior to
12
<PAGE>
the Effective Time and which are held by stockholders who did not vote in favor
of the Merger and who comply with all of the relevant provisions of Section 262
of the DGCL (the "Dissenting Stockholders") shall not be converted into or be
exchangeable for the right to receive the Merger Consideration, unless and until
such holders shall have failed to perfect or shall have effectively withdrawn or
lost their rights to appraisal under the DGCL. If any Dissenting Stockholder
shall have failed to perfect or shall have effectively withdrawn or lost such
right, such holder's Shares shall thereupon be converted into and become
exchangeable for the right to receive, as of the Effective Time, the Merger
Consideration without any interest thereon. The Company shall give the Parent
(i) prompt notice of any written demands for appraisal of any Shares, attempted
withdrawals of such demands and any other instruments served pursuant to the
DGCL and received by the Company relating to stockholders' rights of appraisal,
and (ii) the opportunity to direct all negotiations and proceedings with respect
to demands for appraisal under the DGCL. Neither the Company nor the Surviving
Corporation shall, except with the prior written consent of the Parent,
voluntarily make any payment with respect to, or settle or offer to settle, any
such demand for payment. If any Dissenting Stockholder shall fail to perfect or
shall have effectively withdrawn or lost the right to dissent, the Shares held
by such Dissenting Stockholder shall thereupon be treated as though such Shares
had been converted into the right to receive the Merger Consideration pursuant
to Section 2.7(b).
Section 2.10 Adjustments to Prevent Dilution. In the event that the
-------------------------------
Parent changes the number of shares of Parent Common Stock or securities
convertible or exchangeable into or exercisable for shares of Parent Common
Stock, issued and outstanding prior to the Effective Time as a result of a
reclassification, stock split (including a reverse split), stock dividend or
distribution, recapitalization, merger, subdivision, issuer tender or exchange
offer, or other similar transaction, the Merger Consideration shall be equitably
adjusted.
ARTICLE III
Representations and Warranties of the Company
---------------------------------------------
Except as set forth on the schedule delivered by the Company to the
Parent simultaneously and in connection with the execution and delivery of this
Agreement (the "Company Disclosure Schedule") or disclosed in the Company SEC
Reports, the Company represents and warrants to the Parent and the Purchaser as
set forth below:
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<PAGE>
Section 3.1 Organization, Qualification, Etc . The Company is a
--------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, has the corporate power and authority and all
governmental approvals required for it to own its properties and assets and to
carry on its business as it is now being conducted and is duly qualified to do
business and is in good standing in each jurisdiction in which the ownership of
its properties or the conduct of its business requires such qualification,
except for jurisdictions in which the failure to be so organized, existing and
in good standing or to have such power, authority and governmental approvals
would not, individually or in the aggregate, have a Material Adverse Effect (as
hereinafter defined) on the Company or delay consummation of the transactions
contemplated by this Agreement or otherwise prevent the Company from performing
its obligations hereunder. 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 the Company or the Parent, as the case may be, 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,
assets, liabilities or financial condition of the Company and its Subsidiaries,
taken as a whole, or the Parent and its Subsidiaries, taken as a whole, as the
case may be. The Company has delivered or made available to the Parent copies
of the certificate of incorporation and by-laws or other similar organizational
documents for the Company and each of its Significant Subsidiaries. Such
certificates of incorporation and by-laws or other organizational documents are
complete and correct and in full force and effect, and neither the Company nor
any of its Significant Subsidiaries is in violation of any of the provisions of
their respective certificates of incorporation, by-laws or similar
organizational documents. Each of the Company's Significant Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation or organization, has the corporate power
and authority and all governmental approvals required for it to own its
properties and assets and to carry on its business as it is now being conducted
and is duly qualified to do business and is in good standing in each
jurisdiction in which the ownership of its properties or the conduct of its
business requires such qualification, except for jurisdictions in which the
failure to be so organized, existing and in good standing or to have such power,
authority and governmental approvals would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. All the outstanding
shares of capital stock of, or other ownership interests in, the Company's
Subsidiaries are duly authorized, validly issued, fully paid and non-assessable
and are owned by the Company, directly or indirectly, free and clear of all
liens,
14
<PAGE>
claims, mortgages, encumbrances, pledges, security interests, equities or
charges of any kind (each, a "Lien"). Other than the Subsidiaries, there are no
other Persons in which the Company owns, of record or beneficially, any direct
or indirect equity or similar interest or any right (contingent or otherwise) to
acquire the same.
Section 3.2 Capital Stock. The authorized capital stock of the
-------------
Company consists of 200,000,000 shares of Company Common Stock and 50,000,000
shares of preferred stock, par value $1.00 per share ("Company Preferred
Stock"). As of March 8, 1998, (i) 53,458,062 shares of Company Common Stock are
issued and outstanding; (ii) 3,161,525 shares of Company Common Stock are
subject to outstanding options issued and 319,610 shares of Company Common Stock
are subject to other stock-based awards, including 113,580 awarded on March 5,
1998, pursuant to The Alumax Inc. 1993 Long Term Incentive Plan (the "1993
Plan"), and 4,784,929 shares of Company Common Stock are reserved for issuance
under the 1993 Plan; (iii) 571,475 shares of Company Common Stock are subject to
outstanding options, and an additional 190,564 shares are issuable if the holder
retains the shares acquired for two years after the date of exercise, issued
pursuant to The Alumax Inc. 1995 Employee Equity Ownership Plan (the "1995
Plan"), and 997,000 shares of Company Common Stock are reserved for issuance
under the 1995 Plan; (iv) 80,000 shares of Company Common Stock are subject to
outstanding options, 20,750 deferred shares of Company Common Stock and 730,301
shares of Company Common Stock are reserved for issuance under The Alumax Inc.
Non-Employee Directors' Stock Compensation Plan and 74,148 shares are deferred
and 192,009 shares of Company Common Stock are reserved for issuance under The
Alumax Inc. Non-Employee Directors' Deferred Compensation Plan; (v) 794,624
shares of Company Common Stock are reserved for issuance under the Alumax Inc.
Thrift Plan for Salaried Employees, Alumax Inc. Thrift Plan for Hourly
Employees, and Alumax Inc. Thrift Plan for Collectively Bargained Employees;
(vi) 695,567 shares of Company Common Stock are reserved for issuance pursuant
to employee deferred compensation arrangements, of which 623,350 shares of
Company Common Stock are subject to outstanding options and 26,603 shares of
Company Common Stock are subject to deferred stock units; (vii) 112 shares of
Company Common Stock are reserved for conversion of the Company's Series A
Preferred Stock; (viii) 1,812,900 shares of Company Common Stock are issued and
held in the treasury of the Company; and (ix) no shares of Company Preferred
Stock are issued, outstanding or reserved for issuance. Section 3.2 of the
Company Disclosure Schedule sets forth a complete and correct list of all
holders of options to acquire
15
<PAGE>
Shares, including such person's name, the number of options (vested, unvested
and total) held by such person and the exercise price for each such option. All
the outstanding Shares are and the exercise of outstanding options described in
the second sentence of this Section 3.2 will be, when issued in accordance with
the terms thereof, duly authorized, validly issued, fully paid and non-
assessable. Except as set forth above, except for the Company's obligations
under the Rights Agreement, dated as of February 22, 1996 (the "Rights
Agreement"), between the Company and Chemical Mellon Shareholder Services,
L.L.C., as rights agent, and except for the transactions contemplated by this
Agreement, (1) there are no shares of capital stock of the Company authorized,
issued or outstanding, (2) there are no authorized or outstanding options,
warrants, calls, preemptive rights, subscriptions or other rights, agreements,
arrangements or commitments of any character relating to the issued or unissued
capital stock of the Company or any of its Subsidiaries, obligating the Company
or any of its Subsidiaries to issue, transfer or sell or cause to be issued,
transferred or sold any shares of capital stock or other equity interest in the
Company or any of its Subsidiaries or securities convertible into or
exchangeable for such shares or equity interests, or obligating the Company or
any of its Subsidiaries to grant, extend or enter into any such option, warrant,
call, subscription or other right, agreement, arrangement or commitment, or (3)
there are no outstanding contractual obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any Shares or other
capital stock of the Company or any Subsidiary or to provide funds to make any
investment (in the form of a loan, capital contribution or otherwise) in any
Subsidiary or any other entity other than loans to Subsidiaries in the ordinary
course of business.
Section 3.3 Corporate Authority Relative to this Agreement; No
--------------------------------------------------
Violation.
- ---------
(a) The Company has the corporate power and authority to enter into
this Agreement and to carry out its obligations hereunder. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by the Board of Directors of the
Company and, except for obtaining the Company Stockholder Approval (as
hereinafter defined) as contemplated by Section 5.3 hereof and the filing of the
Certificate of Merger, no other corporate proceedings on the part of the Company
are necessary to authorize the consummation of the transactions contemplated
hereby. The Board of Directors of the Company has taken all appropriate action
so that neither the Parent nor the Purchaser will be an "interested stockholder"
within
16
<PAGE>
the meaning of Section 203 of the DGCL by virtue of the Parent, the Purchaser
and the Company entering into this Agreement and consummating the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by the Company and, assuming this Agreement constitutes a valid and
binding agreement of the Parent and the Purchaser, constitutes a valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms.
(b) Except for the filings, permits, authorizations, consents and
approvals set forth in Section 3.3(b) of the Company Disclosure Schedule or as
may be required under, and other applicable requirements of, the Securities Act
of 1933, as amended (the "Securities Act"), the Exchange Act, the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), state
securities or blue sky laws, and the DGCL (the "Company Required Approvals"),
none of the execution, delivery or performance of this Agreement by the Company,
the consummation by the Company of the transactions contemplated hereby or
compliance by the Company with any of the provisions hereof will (i) conflict
with or result in any breach of any provision of the certificate of
incorporation, by-laws or similar organizational documents of the Company or any
of its Significant Subsidiaries, (ii) require any filing with, or permit,
authorization, consent or approval of, any federal, regional, state or local
court, arbitrator, tribunal, administrative agency or commission or other
governmental or other regulatory authority or agency, whether U.S. or foreign (a
"Governmental Entity"), (iii) result in a 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, amendment, cancellation or acceleration) under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to which
the Company 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 "Company Agreements"), or (iv)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company, any of its Subsidiaries or any of their properties or
assets, excluding from the foregoing clauses (ii), (iii) and (iv) such
violations, breaches or defaults which would not, individually or in the
aggregate, have a Material Adverse Effect on the Company or prevent or
substantially delay the consummation of the transactions contemplated hereby.
Section 3.3(b) of the Company Disclosure Schedule sets forth a list of all third
party consents and approvals required to be obtained under the Company
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 Company.
17
<PAGE>
Section 3.4 Reports and Financial Statements. The Company has
--------------------------------
previously furnished or otherwise made available to the Parent true and complete
copies of:
(a) the Company's Annual Reports on Form 10-K filed with the SEC for
each of the years ended December 31, 1996 and 1997;
(b) the Company's Quarterly Report on Form 10-Q filed with the SEC
for the quarters ended March 31, 1997, June 30, 1997 and September 30, 1997;
(c) each definitive proxy statement filed by the Company with the SEC
since December 31, 1996;
(d) each final prospectus filed by the Company with the SEC since
December 31, 1996, except any final prospectus on Form S-8; and
(e) all Current Reports on Form 8-K filed by the Company with the SEC
since January 1, 1997.
As of their respective dates, such reports, proxy statements and
prospectuses (collectively with any amendments, supplements and exhibits
thereto, the "Company SEC Reports") (i) complied as to form in all material
respects with the applicable requirements of 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
the light of the circumstances under which they were made, not misleading.
Except to the extent that information contained in any Company SEC Report was
amended or was superseded by a later filed Company SEC Report, none of the
Company 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 the light of the circumstances under which they
were made, not misleading. None of the Company's Subsidiaries is required to
file any forms, reports or other documents with the SEC. The audited
consolidated financial statements and unaudited consolidated interim financial
statements included in the Company SEC Reports (including any related notes and
schedules) fairly present the financial position of the Company and its
consolidated Subsidiaries as of the
18
<PAGE>
dates thereof and the results of operations and cash flows for the periods or as
of the dates then ended (subject, in the case of the unaudited interim financial
statements, to normal year-end adjustments), in each case in accordance with
past practice and generally accepted accounting principles in the United States
("GAAP") consistently applied during the periods involved (except as otherwise
disclosed in the notes thereto). Since January 1, 1996, the Company 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 3.5 No Undisclosed Liabilities. Neither the Company nor any
--------------------------
of its Subsidiaries has any liabilities or obligations of any nature, whether or
not accrued, contingent or otherwise, and there is no existing condition,
situation or set of circumstances which could reasonably be expected to result
in such a liability or obligation, except (a) liabilities or obligations
reflected in the Company SEC Reports and (b) liabilities or obligations which
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company.
Section 3.6 No Violation of Law. The businesses of the Company and
-------------------
its Subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity (provided that no representation or
warranty is made in this Section 3.6 with respect to Environmental Laws (as
hereinafter defined)) except (a) as described in the Company SEC Reports filed
prior to the date hereof and (b) for violations or possible violations which
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company.
Section 3.7 Environmental Matters.
---------------------
(a) Each of the Company 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 or operations ("Environmental Permits"), except 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 Company. Each of
such Environmental Permits is in full force and effect, and each of the Company
and its Subsidiaries is in compliance with the terms and conditions of all such
Environmental Permits and with all applicable Environmental Laws, except for
such exceptions as would not, individually or in the aggregate, have a Material
Adverse Effect on the Company.
19
<PAGE>
(b) There is no Environmental Claim (as hereinafter defined) pending,
or to the best knowledge of the Company threatened, against the Company or any
of its Subsidiaries, or to the best knowledge of the Company against any Person
whose liability for such Environmental Claim the Company 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 Company.
(c) Except as set forth in Section 3.7(c) of the Company Disclosure
Schedule, to the best knowledge of the Company, there are no past or present
actions, activities, circumstances, conditions, events or incidents, including,
without limitation, the release, threatened release or presence of any Hazardous
Material (as hereinafter defined), that have resulted in any Environmental Claim
against the Company or any of its Subsidiaries, or to the best knowledge of the
Company against any Person whose liability for any Environmental Claim the
Company or any of its Subsidiaries has or may have retained or assumed either
contractually or by operation of law, except for such liabilities which would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company.
(d) To the best knowledge of the Company, no site or facility now or
previously owned, operated or leased by the Company or any of its Subsidiaries
is listed or proposed for listing on the National Priorities List promulgated
pursuant to the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, and the rules and regulations thereunder ("CERCLA").
(e) No Liens have arisen under or pursuant to any Environmental Law on
any site or facility owned, operated or leased by the Company or any of its
Subsidiaries, except for such Liens which would not, individually or in the
aggregate, have a Material Adverse Effect on the Company, and no action of any
Governmental Entity has been taken or, to the best knowledge of the Company, is
in process which could subject any of such properties to such Liens except for
any such action which would not, individually or in the aggregate, have a
Material Adverse Effect on the Company.
(f) As used in this Agreement:
20
<PAGE>
(i) "Environmental Claim" means any claim, action, cause of
action, investigation or notice (written or oral) by any Person alleging
potential liability (including, without limitation, potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries, or penalties)
arising out of, based on or resulting from (a) the presence, or release or
threatened release, of any Hazardous Materials at any location, whether or
not owned or operated by the Company or any of its Subsidiaries or Parent
or any of its Subsidiaries, as the case may be, or (b) circumstances
forming the basis of any violation, or alleged violation, of any
Environmental Law.
(ii) "Environmental Law" means any law or order of any
Governmental Entity relating to the regulation or protection of human
health or safety as it relates to Hazardous Materials or the environment or
to emissions, discharges, releases or threatened releases of Hazardous
Material, pollutants, contaminants, chemicals or industrial, toxic or
hazardous substances or wastes into the environment.
(iii) "Hazardous Materials" means (A) any petroleum or petroleum
products, flammable materials, radioactive materials, friable asbestos,
urea formaldehyde foam insulation and transformers or other equipment that
contain dielectric fluid containing regulated levels of polychlorinated
biphenyls; (B) any chemicals or other materials or substances which are
become defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants" or
words of similar import under any Environmental Law; and (C) any other
chemical or other material or substance, exposure to which is prohibited,
limited or regulated by any Governmental Entity under any Environmental
Law.
Section 3.8 Employee Benefit Plans; ERISA.
-----------------------------
(a) Except as described in the Company SEC Reports or as would not
have a Material Adverse Effect on the Company, (i) all Company Employee Benefit
Plans (as hereinafter defined) are in compliance with all applicable
requirements of law, including ERISA (as hereinafter defined) and the Code, and
(ii) neither the Company nor any of its Subsidiaries nor any ERISA Affiliate (as
hereinafter defined) has any liabilities or obligations with respect to any such
21
<PAGE>
Company Employee Benefit Plans, whether accrued, contingent or otherwise, nor to
the best knowledge of the Company, are any such liabilities or obligations
expected to be incurred. Except as described in the Company SEC Reports or as
set forth in Section 3.8(a) of the Company Disclosure Schedule, the execution
of, and performance of the transactions contemplated in, this Agreement will
not (either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any Company Employee Benefit Plan that will or may
result in any payment or any continuation benefit under COBRA (whether of
severance pay or otherwise), 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 Company or any of its Subsidiaries are the agreements and policies
specifically described in Section 3.8(a) of the Company Disclosure Schedule.
(b) With respect to each of its Plans (as hereinafter defined), the
Company has heretofore delivered to the Parent complete and correct copies of
each of the following documents, as applicable: (i) a copy of the Plan; (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 (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.
(c) Section 3.8(c) of the Company Disclosure Schedule sets forth a
list of each employee of the Company (or any Subsidiary) who is a party to any
agreement (whether written or oral) with respect to such person's employment by
the Company or a Subsidiary, other than offer letters which do not have
guaranteed periods of employment and statutory employment agreements under
foreign laws, and which provide for annual compensation in excess of $100,000.
The Company has provided to the Parent a complete and correct copy of each such
written employment agreement and a complete and correct summary of each such
oral agreement.
(d) No liability under Title IV of ERISA has been incurred by the
Company or any ERISA Affiliate within the past twelve years that has not been
satisfied in full. To the best knowledge of the Company, no condition exists
that presents a material risk to the Company, any of its Subsidiaries or any
ERISA Affiliate of incurring a liability under such Title. The Pension Benefit
Guaranty
22
<PAGE>
Corporation established under ERISA ("PBGC") has not instituted proceedings to
terminate any of the Plans, and no condition exists that presents a material
risk that such proceedings will be instituted. With respect to each of the Plans
that is subject to Title IV of ERISA, the present value of accrued benefits
under such Plan, based upon the actuarial assumptions used for funding purposes
in the most recent actuarial report prepared by such Plan's actuary with respect
to such Plan, did not, as of its latest valuation date, exceed the then current
value of the assets of such 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 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 Plans ended prior to the date of this Agreement. None
of the Plans is a "multiemployer plan," as such term is defined in Section 3(37)
of ERISA. Each of the Plans that is intended to be "qualified" within the
meaning of Section 401(a) of the Code is so qualified and the trusts maintained
thereunder are exempt from taxation under Section 501(a) of the Code. Except as
set forth in Section 3.8(d) of the Company Disclosure Schedule, no 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 pending or threatened claims by or on behalf of any Plan, by any
employee or beneficiary covered under any such Plan, or otherwise involving any
such Plan (other than routine claims for benefits).
(e) As used in this Agreement:
(i) "Company Employee Benefit Plan" means any Plan entered into,
established, maintained, sponsored, contributed to or required to be
contributed to by the Company, any of its Subsidiaries or ERISA Affiliates
for the benefit of the current or former employees or directors of the
Company 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 and, in the case of a Plan which is subject to the Employee
Retirement Income Security Act of 1974, as amended, and the rules and
regulations thereunder ("ERISA"), Section 412 of the Code or Title IV of
ERISA, at any time during the twelve-year period preceding the date of this
Agreement;
23
<PAGE>
(ii) "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, including, but not
limited to any "employee benefit plan" within the meaning of Section 3(3)
of ERISA; and
(iii) "ERISA Affiliate" means, with respect to any Person, any
Person in the same controlled group as such Person (within the meaning of
Sections 414(b) and (c) of the Code).
Section 3.9. Absence of Certain Changes or Events. Except as
------------------------------------
disclosed in the Company SEC Reports, (a) since December 31, 1997 the businesses
of the Company and its Subsidiaries have been conducted in the ordinary course
consistent with past practice, and (b) there has not been any event, occurrence,
development or state of circumstances or facts that has had, individually or in
the aggregate, a Material Adverse Effect on the Company.
Section 3.10. Litigation. Except as disclosed in the Company SEC
----------
Reports, there are no actions, suits or proceedings pending (or, to the best
knowledge of the Company, threatened) against or affecting the Company or its
Subsidiaries, or any of their respective properties at law or in equity, by or
before any Governmental Entity which, individually or in the aggregate, have a
Material Adverse Effect on the Company or would prevent or substantially delay
any of the transactions contemplated by this Agreement or otherwise prevent the
Company from performing its obligations hereunder.
Section 3.11. Schedule 14D-9; Offer Documents; Registration Statement
-------------------------------------------------------
and Proxy Statement. Neither the Schedule 14D-9 nor any information supplied
- -------------------
by the Company for inclusion in the Offer Documents shall, at the respective
times the Schedule 14D-9, the Offer Documents or any amendments or supplements
thereto are filed with the SEC or are first published, sent or given to
stockholders of the Company, as the case may be, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or
24
<PAGE>
necessary in order to make the statements made therein, in the light of the
circumstances under which they are made, not misleading. The Proxy Statement
(as hereinafter defined) will not, on the date the Proxy Statement (or any
amendment or supplement thereto) is first mailed to stockholders of the Company,
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
made therein, in the light of the circumstances under which they are made, not
misleading or shall, at the time of the Special Meeting (as hereinafter defined)
or at the Effective Time, omit to state any material fact necessary to correct
any statement in any earlier communication with respect to the solicitation of
proxies for the Special Meeting which shall have become false or misleading in
any material respect. None of the information supplied by the Company for
inclusion or incorporation by reference in the Registration Statement will, at
the date it becomes effective and at the time of the Special Meeting (as
hereinafter defined) 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 are
made, not misleading. The Schedule 14D-9 and the Proxy Statement will, when
filed by the Company with the SEC, comply as to form in all material respects
with the applicable provisions of the Exchange Act and the rules and regulations
thereunder. Notwithstanding the foregoing, the Company makes no representation
or warranty with respect to the statements made in any of the foregoing
documents based on and in conformity with information supplied by or on behalf
of the Parent or the Purchaser specifically for inclusion therein.
Section 3.12. Intellectual Property.
---------------------
(a) The Company and its Subsidiaries own or have valid rights to use
all items of Intellectual Property (as hereinafter defined) utilized in the
conduct of the business of the Company and its Subsidiaries as presently
conducted, free and clear of all Liens with such exceptions as would not have,
individually or in the aggregate, a Material Adverse Effect on the Company.
(b) To the best knowledge of the Company, (i) neither the Company nor
any Subsidiary is in default (or with the giving of notice or lapse of time or
both, would be in default) under any license to use such Intellectual Property,
(ii) the Intellectual Property is not being infringed by any third party, (iii)
neither the Company nor any Subsidiary is infringing any Intellectual Property
of any third party with such exceptions as would not have, individually or in
the
25
<PAGE>
aggregate, a Material Adverse Effect on the Company and (iv) in the last
three years neither the Company nor any Subsidiary has received any claim or
notice of infringement by any third party.
(c) As used in this Agreement, "Intellectual Property" means all of
the following: (i) U.S. and foreign registered and unregistered trademarks and
pending trademark applications, trade dress, service marks, logos, trade names,
corporate names, assumed names, business names and logos and all registrations
and applications to register the same (the "Trademarks"), (ii) issued U.S. and
foreign patents and pending patent applications, invention disclosures, and any
and all divisions, continuations, continuations-in-part, reissues, continuing
patent applications, reexaminations, and extensions thereof, any counterparts
claiming priority therefrom, utility models, patents of
importation/confirmation, certificates of invention, certificates of
registration and like statutory rights (the "Patents"), (iii) U.S. and foreign
registered and unregistered copyrights (including, but not limited to, those in
computer software and databases), rights of publicity and all registrations and
applications to register the same (the "Copyrights"), (iv) all categories of
trade secrets as defined in the Uniform Trade Secrets Act and under
corresponding foreign statutory and common law, including, but not limited to,
business, technical and know-how information, (v) all licenses and agreements
pursuant to which the Company or any Subsidiary has acquired rights in or to any
Trademarks, Patents, trade secrets, technology, know-how, Computer Software (as
defined below), rights of publicity or Copyrights, or licenses and agreements
pursuant to which the Company has licensed or transferred the right to use any
of the foregoing ("Licenses"), and (vi) all computer software, data files,
source and object codes, user interfaces, manuals and other specifications and
documentation and all know-how relating thereto (collectively, "Computer
Software").
Section 3.13. Tax Matters.
-----------
(a) All federal, state, local and foreign Tax Returns (as hereinafter
defined) required to be filed by or on behalf of the Company, each of its
Subsidiaries, and each affiliated, combined, consolidated or unitary group of
which the Company or any of its Subsidiaries (i) is a member (a "Current Company
Group") or (ii) was a member during any years not closed with the IRS for U.S.
federal income Tax purposes but is not currently a member, but only insofar as
any such Tax Return relates to a taxable period or portion thereof ending on a
date within the last six years during which the Company or such Subsidiary was a
member of such affiliated, combined, consolidated or unitary group for purposes
of
26
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the relevant Tax (a "Past Company Group," and together with Current Company
Groups, a "Company Affiliated Group") have been timely filed or requests for
extensions have been timely filed and any such extension has been granted and
has not expired, and all such filed Tax Returns 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 the
Company (it being understood that the representations made in this Section 3.13,
to the extent that they relate to Past Company Groups, are made to the best
knowledge of the Company and only with respect to taxable periods or portions
thereof ending on a date within the last six years during which the Company or
any of its Subsidiaries was a member of such affiliated, combined, consolidated
or unitary group for purposes of the relevant Tax). All Taxes due and owing by
the Company, any Subsidiary of the Company or any Company 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 Company. There is no audit, examination, deficiency, refund
litigation, proposed adjustment or matter in controversy with respect to any
Taxes due and owing by the Company, any Subsidiary of the Company or any Company
Affiliated Group which if determined adversely would have a Material Adverse
Effect on the Company. All assessments for Taxes due and owing by the Company,
any Subsidiary of the Company or any Company Affiliated Group with respect to
completed and settled examinations or concluded litigation have been paid.
Section 3.13(a) of the Company Disclosure Schedule sets forth (i) the taxable
years of the Company for which the statutes of limitations with respect to U.S.
federal income Taxes have not expired and (ii) with respect to federal income
Taxes for such years, 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. Neither the Company
nor any of its Subsidiaries has any liability under Treasury Regulation Section
1.1502-6 for U.S. federal income Taxes of any Person other than the Company and
its Subsidiaries. The Company 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 Company.
(b) Neither the Company nor any Subsidiary of the Company has (i)
entered into a closing agreement or other similar agreement with a taxing
authority relating to Taxes of the Company or any Subsidiary of the Company with
respect to a taxable period for which the statute of limitations is still open,
or (ii) with
27
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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 income Tax, in either case, that is still outstanding. There are no Liens
relating to Taxes upon the assets of the Company or any Subsidiary other than
Liens relating to Taxes not yet due. Neither the Company nor any Subsidiary is a
party to any agreement relating to allocating or sharing of Taxes which has not
been disclosed in its Tax Returns. No consent under Section 341(f) of the Code
has been filed with respect to the Company or any Subsidiary.
(c) 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 Company 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
Plan currently in effect would not be characterized as an "excess parachute
payment" (as such term is defined in Section 280G(b)(1) of the Code).
(d) For purposes of this Agreement: (i) "Taxes" means any and all
federal, state, local, foreign or other taxes of any kind (together with any and
all interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any taxing authority, including, without limitation,
taxes or other charges on or with respect to income, franchises, windfall or
other profits, gross receipts, property, sales, use, 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 3.14. Opinion of Financial Advisor. The Board of Directors
----------------------------
of the Company has received the opinion of BT Wolfensohn, dated the date of this
Agreement, substantially to the effect that each of the Per Share Cash Amount
and the Merger Consideration, taken as a whole, to be received by the
stockholders of the Company in the Offer and the Merger is fair to such holders
from a financial point of view.
Section 3.15. Required Vote of the Company Stockholders. The
-----------------------------------------
affirmative vote of the holders of a majority of the outstanding shares of
Company
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Common Stock (the "Company Stockholder Approval") is the only vote of the
holders of any class or series of the Company's capital stock which is necessary
to approve this Agreement and the transactions contemplated hereby.
Section 3.16. Employment Matters. Neither the Company nor any of
-------------------
its Subsidiaries has experienced any work stoppages, strikes, collective labor
grievances, other collective bargaining disputes or claims of unfair labor
practices in the last five years which would, individually or in the aggregate,
have a Material Adverse Effect on the Company. To the best knowledge of the
Company, there is no organizational effort presently being made or threatened by
or on behalf of any labor union with respect to employees of the Company or any
of its Subsidiaries.
ARTICLE IV
Representations and Warranties of the Parent and the Purchaser
--------------------------------------------------------------
Except as set forth on the schedule delivered by the Parent to the
Company simultaneously and in connection with the execution of this Agreement
(the "Parent Disclosure Schedule," and together with the Company Disclosure
Schedule, the "Disclosure Schedule") or disclosed in the Parent SEC Reports, the
Parent and the Purchaser represent and warrant to the Company as set forth
below:
Section 4.1. Organization, Qualification, Etc. Each of the Parent and
--------------------------------
the Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has the
corporate power and authority and all governmental approvals required for it to
own its properties and assets and to carry on its business as it is now being
conducted and is duly qualified to do business and is in good standing in each
jurisdiction in which the ownership of its properties or the conduct of its
business requires such qualification, except for jurisdictions in which the
failure to be so organized, existing and in good standing or to have such power,
authority and governmental approvals would not, individually or in the
aggregate, have a Material Adverse Effect on the Parent or delay consummation of
the transactions contemplated by this Agreement or otherwise prevent the Parent
or the Purchaser from performing its obligations hereunder. The Parent has
delivered or made available to the Company copies of the articles of
incorporation and by-laws for the Parent and the certificate of incorporation
and by-laws for the Purchaser. Such organizational documents are complete and
correct and in full force and effect, and neither the
29
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Parent nor the Purchaser is in violation of any of the provisions of their
respective certificates of incorporation or by-laws. Each of the Parent's
Significant Subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation or
organization, has the corporate power and authority and all governmental
approvals required for it to own its properties and assets and to carry on its
business as it is now being conducted and is duly qualified to do business and
is in good standing in each jurisdiction in which the ownership of its
properties or the conduct of its business requires such qualification, except
for jurisdictions in which the failure to be so organized, existing and in good
standing or to have such power, authority and governmental approvals would not,
individually or in the aggregate, have a Material Adverse Effect on the Parent.
Section 4.2. Capital Stock. The authorized capital stock of the
-------------
Parent consists of 300,000,000 shares of Parent Common Stock, 557,740 shares of
serial preferred stock, par value $100.00 per share ("Parent Serial Preferred
Stock") and 10,000,000 shares of Class B serial preferred stock, par value $1.00
per share ("Parent Class B Serial Preferred Stock"). As of February 28, 1998,
(i) 168,125,229 shares of Parent Common Stock were issued and outstanding; (ii)
14,050,000 shares of Parent Common Stock were subject to outstanding options
issued pursuant to Parent's long term stock incentive plan (the "Long Term
Incentive Plan"), and 19,300,152 shares of Parent Common Stock were reserved for
issuance under the Long Term Incentive Plan; (iii) 4,097,532 shares of Parent
Common Stock were reserved for issuance under the Parent's employees savings
plans; (iv) 169,228 shares of Parent Common Stock were reserved for issuance
under the Parent's incentive compensation plan; (v) 10,797,354 shares of Parent
Common Stock were issued and held in the treasury of the Parent; (vi) 557,649
shares of Parent Serial Preferred Stock were issued and outstanding; and (vii)
no shares of Parent Class B Serial Preferred Stock are issued and outstanding.
All the outstanding shares of Parent Common Stock and Parent Serial Preferred
Stock are, and all shares to be issued as part of the Merger Consideration will
be, when issued in accordance with the terms hereof, duly authorized, validly
issued, fully paid and non-assessable. Except as set forth above, and except for
the transactions contemplated by this Agreement, (1) there are no shares of
capital stock of the Parent authorized, issued or outstanding, (2) there are no
authorized or outstanding options, warrants, calls, preemptive rights,
subscriptions or other rights, agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock of the Parent,
obligating the Parent to issue, transfer or sell or cause to be issued,
transferred or sold any shares of capital stock or other
30
<PAGE>
equity interest in the Parent or securities convertible into or exchangeable for
such shares or equity interests, or obligating the Parent to grant, extend or
enter into any such option, warrant, call, subscription or other right,
agreement, arrangement or commitment, (3) there are no outstanding contractual
obligations of the Parent to repurchase, redeem or otherwise acquire any capital
stock of the Parent.
Section 4.3. Corporate Authority Relative to this Agreement; No
--------------------------------------------------
Violation.
- ---------
(a) Each of the Parent and the Purchaser has the corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
the Boards of Directors of the Parent and the Purchaser and by the Parent as the
sole stockholder of the Purchaser, and other than the filing of the Certificate
of Merger no other corporate proceedings on the part of the Parent or the
Purchaser are necessary to authorize the consummation of the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by the Parent and the Purchaser and, assuming this Agreement
constitutes a valid and binding agreement of the Company, constitutes a valid
and binding agreement of each of the Parent and the Purchaser, enforceable
against each of the Parent and the Purchaser in accordance with its terms.
(b) Except for the filings, permits, authorizations, consents and
approvals set forth in Section 4.3(b) of the Parent Disclosure Schedule or as
may be required under, and other applicable requirements of, the NYSE, the
Securities Act, the Exchange Act, the HSR Act, state securities or blue sky
laws, and the DGCL (the "Parent Required Approvals"), none of the execution,
delivery or performance of this Agreement by the Parent or the Purchaser, the
consummation by the Parent or the Purchaser of the transactions contemplated
hereby or compliance by the Parent or the Purchaser with any of the provisions
hereof or thereof will (i) conflict with or result in any breach of any
provision of the articles or by-laws of the Parent or the certificate of
incorporation or by-laws of the Purchaser, (ii) require any filing with, or
permit, authorization, consent or approval of, any Governmental Entity, (iii)
result in a 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,
amendment, cancellation or acceleration) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which the
31
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Parent, any of its Subsidiaries or the Purchaser is a party or by which either
of them or any of their respective properties or assets may be bound (the
"Parent and Purchaser Agreements") or (iv) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Parent, any of its
Subsidiaries or any of their respective properties or assets, excluding from the
foregoing clauses (ii), (iii) and (iv) such violations, breaches or defaults
which would not, individually or in the aggregate have a Material Adverse Effect
on the Parent or prevent or substantially delay the consummation of the
transactions contemplated hereby. Section 4.3(b) of the Parent Disclosure
Schedule sets forth a list of all third party consents and approvals required to
be obtained under the Parent and Purchaser 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 Parent.
Section 4.4. Reports and Financial Statements. The Parent has
--------------------------------
previously furnished or otherwise made available to the Company true and
complete copies of:
(a) the Parent's Annual Reports on Form 10-K filed with the SEC for
each of the years ended December 31, 1996 and 1997;
(b) the Parent's Quarterly Report on Form 10-Q filed with the SEC for
the quarters ended March 31, 1997, June 30, 1997 and September 30, 1997;
(c) each definitive proxy statement filed by the Parent with the SEC
since December 31, 1996;
(d) each final prospectus filed by the Parent with the SEC since
December 31, 1996, except any final prospectus on Form S-8; and
(e) all Current Reports on Form 8-K filed by the Parent with the SEC
since January 1, 1997.
As of their respective dates, such reports, proxy statements and
prospectuses (collectively with any amendments, supplements and exhibits
thereto, the "Parent SEC Reports") (i) complied as to form in all material
respects with the applicable requirements of 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
32
<PAGE>
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. Except to the extent that
information contained in any Parent SEC Report was amended or was superseded by
a later filed Parent SEC Report, none of the Parent 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
the light of the circumstances under which they were made, not misleading. None
of the Parent's Subsidiaries is required to file any forms, reports or other
documents with the SEC. The audited consolidated financial statements and
unaudited consolidated interim financial statements included in the Parent SEC
Reports (including any related notes and schedules) fairly present the financial
position of the Parent and its consolidated Subsidiaries as of the dates thereof
and the results of operations and cash flows for the periods or as of the dates
then ended (subject, in the case of the unaudited interim financial 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, 1996, the Parent 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 4.5. No Undisclosed Liabilities. Neither the Parent nor any
--------------------------
of its Subsidiaries has any liabilities or obligations of any nature, whether or
not accrued, contingent or otherwise, and there is no existing condition,
situation or set of circumstances which could reasonably be expected to result
in such a liability or obligation, except (a) liabilities or obligations
reflected in the Parent SEC Reports and (b) liabilities or obligations which
would not, individually or in the aggregate, have a Material Adverse Effect on
the Parent.
Section 4.6. No Violation of Law. The businesses of the Parent and
-------------------
its Subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity (provided that no representation or
warranty is made in this Section 4.6 with respect to Environmental Laws) except
(a) as described in the Parent SEC Reports filed prior to the date hereof and
(b) for violations or possible violations which would not, individually or in
the aggregate, have a Material Adverse Effect on the Parent.
Section 4.7. Environmental Matters.
---------------------
(a) Each of the Parent and its Subsidiaries has obtained all
33
<PAGE>
Environmental Permits, except 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 Parent. Each of such Environmental Permits is in
full force and effect, and each of the Parent and its Subsidiaries is in
compliance with the terms and conditions of all such Environmental Permits and
with all applicable Environmental Laws, except for such exceptions as would not,
individually or in the aggregate, have a Material Adverse Effect on the Parent.
(b) There is no Environmental Claim pending, or to the best knowledge
of the Parent threatened, against the Parent or any of its Subsidiaries, or to
the best knowledge of the Parent against any Person whose liability for such
Environmental Claim the Parent 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 Parent.
(c) Except as set forth in Section 4.7(c) of the Parent Disclosure
Schedule, to the best knowledge of the Parent, there are no past or present
actions, activities, circumstances, conditions, events or incidents, including,
without limitation, the release, threatened release or presence of any Hazardous
Material, that have resulted in any Environmental Claim against the Parent or
any of its Subsidiaries, or to the best knowledge of the Parent against any
Person whose liability for any Environmental Claim the Parent or any of its
Subsidiaries has or may have retained or assumed either contractually or by
operation of law, except for such liabilities which would not, individually or
in the aggregate, have a Material Adverse Effect on the Parent.
(d) To the best knowledge of the Parent, no site or facility now or
previously owned, operated or leased by the Parent or any of its Subsidiaries is
listed or proposed for listing on the National Priorities List promulgated
pursuant to CERCLA.
(e) No Liens have arisen under or pursuant to any Environmental Law on
any site or facility owned, operated or leased by the Parent or any of its
Subsidiaries, except for such Liens which would not, individually or in the
aggregate, have a Material Adverse Effect on the Parent, and no action of any
Governmental Entity has been taken or, to the best knowledge of the Parent, is
in process which could subject any of such properties to such Liens except for
any such action which would not, individually or in the aggregate, have a
Material Adverse Effect on the Parent.
34
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Section 4.8. Employee Benefit Plans; ERISA.
-----------------------------
(a) Except as described in the Parent SEC Reports or as would not
have a Material Adverse Effect on the Parent, (i) all Parent Employee Benefit
Plans (as hereinafter defined) are in compliance with all applicable
requirements of law, including ERISA (as hereinafter defined) and the Code, and
(ii) neither the Parent nor any of its Subsidiaries nor any ERISA Affiliate has
any liabilities or obligations with respect to any such Parent Employee Benefit
Plans, whether accrued, contingent or otherwise, nor to the best knowledge of
the Parent, are any such liabilities or obligations expected to be incurred.
Except as described in the Parent SEC Reports or as set forth in Section 4.8(a)
of the Parent Disclosure Schedule, the execution of, and performance of the
transactions contemplated in, this Agreement will not (either alone or upon the
occurrence of any additional or subsequent events) constitute an event under any
Parent Employee Benefit Plan that will or may result in any payment or any
continuation benefit under COBRA (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any employee. The only
severance policies applicable to the Parent or any of its Subsidiaries are the
policies specifically described in Section 4.8(a) of the Parent Disclosure
Schedule.
(b) With respect to each of its Plans, the Parent has heretofore
delivered or otherwise made available to the Company complete and correct copies
of each of the following documents, as applicable: (i) a copy of the Plan; (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 (vi) the most recent determination letter received from 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.
(c) No liability under Title IV of ERISA has been incurred by the
Parent or any ERISA Affiliate within the past twelve years that has not been
satisfied in full. To the best knowledge of the Parent, no condition exists
that presents a material risk to the Parent, any of its Subsidiaries or any
ERISA Affiliate of incurring a liability under such Title. The PBGC has not
instituted proceedings to terminate any of the Plans, and no condition exists
that presents a material risk that such proceedings will be instituted. Except
as otherwise disclosed
35
<PAGE>
in the documents delivered or otherwise made available pursuant to Section
4.8(b), with respect to each of the Plans that is subject to Title IV of ERISA,
the present value of accrued benefits under such Plan, based upon the actuarial
assumptions used for funding purposes in the most recent actuarial report
prepared by such Plan's actuary with respect to such Plan, did not, as of its
latest valuation date, exceed the then current value of the assets of such 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 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 Plans
ended prior to the date of this Agreement. None of the Plans is a "multiemployer
plan," as such term is defined in Section 3(37) of ERISA. Each of the Plans that
is intended to be "qualified" within the meaning of Section 401(a) of the Code
is so qualified and the trusts maintained thereunder are exempt from taxation
under Section 501(a) of the Code. Except as set forth in Section 4.8(c) of the
Parent Disclosure Schedule, no 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). Except as set forth in
Section 4.8(c) of the Parent Disclosure Schedule, there are no pending or
threatened claims by or on behalf of any Plan, by any employee or beneficiary
covered under any such Plan, or otherwise involving any such Plan (other than
routine claims for benefits).
(d) As used in this Agreement: "Parent Employee Benefit Plan" means
any Plan entered into, established, maintained, sponsored, contributed to or
required to be contributed to by the Parent, any of its Subsidiaries or ERISA
Affiliates for the benefit of the current or former employees or directors of
the Parent 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 and, in
the case of a Plan which is subject to ERISA, Section 412 of the Code or Title
IV of ERISA, at any time during the twelve-year period preceding the date of
this Agreement.
Section 4.9. Absence of Certain Changes or Events. Except as
------------------------------------
disclosed in the Parent SEC Reports, (a) since December 31, 1997 the businesses
of the Parent and its Subsidiaries have been conducted in the ordinary course
36
<PAGE>
consistent with past practice, and (b) there has not been any event, occurrence,
development or state of circumstances or facts that has had, or is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
the Parent.
Section 4.10. Litigation. Except as disclosed in the Parent SEC
----------
Reports, there are no actions, suits or proceedings pending (or, to the best
knowledge of the Parent, threatened) against or affecting the Parent or its
Subsidiaries, or any of their respective properties at law or in equity, by or
before any Governmental Entity which, individually or in the aggregate, have a
Material Adverse Effect on the Parent or would prevent or substantially delay
any of the transactions contemplated by this Agreement or otherwise prevent the
Parent from performing its obligations hereunder.
Section 4.11. Proxy Statement/Prospectus; Registration Statement.
--------------------------------------------------
The Registration Statement and Form S-4 to be filed with the SEC by the Parent
in connection with the issuance of the Parent Common Stock pursuant to the
Merger, as amended or supplemented from time to time (as so amended and
supplemented, the "Registration Statement"), and any other documents to be filed
by the Parent with the SEC or any other Government Entity in connection with the
Merger and the other transactions contemplated hereby will (in the case of the
Registration Statement and any such other documents filed with the SEC under the
Securities Act or the Exchange Act) comply as to form in all material respects
with the requirements of the Exchange Act and the Securities Act, respectively,
and will not, on the date of filing with the SEC or, in the case of the
Registration Statement, at the time it becomes effective under the Securities
Act, on the date the Proxy Statement is first mailed to stockholders of the
Company, 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 made therein, in the light of the circumstances under which they are
made, not misleading or shall, at the time of the Special Meeting or at the
Effective Time, omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Special Meeting which shall have become false or misleading in
any material respect. Notwithstanding the foregoing, neither the Parent nor the
Purchaser makes any representation or warranty with respect to the statements
made in any of the foregoing documents based on and in conformity with
information supplied by or on behalf of the Company specifically for inclusion
therein.
Section 4.12. Intellectual Property.
---------------------
37
<PAGE>
(a) The Parent and its Subsidiaries own or have valid rights to use
all items of Intellectual Property utilized in the conduct of the business of
the Parent and its Subsidiaries as presently conducted, free and clear of all
Liens with such exceptions as would not have, individually or in the aggregate,
a Material Adverse Effect on the Parent.
(b) To the best knowledge of the Parent, (i) neither the Parent nor
any Subsidiary is in default (or with the giving of notice or lapse of time or
both, would be in default) under any license to use such Intellectual Property,
(ii) the Intellectual Property is not being infringed by any third party, (iii)
neither the Parent nor any Subsidiary is infringing any Intellectual Property of
any third party with such exceptions as would not have, individually or in the
aggregate, a Material Adverse Effect on the Parent, and (iv) within the last
three years neither the Parent nor any Subsidiary has received any claim or
notice of infringement by any third party except as would not, individually or
in the aggregate, have a Material Adverse Effect on the Parent.
Section 4.13. Tax Matters.
-----------
(a) All federal, state, local and foreign Tax Returns required to be
filed by or on behalf of the Parent, each of its Subsidiaries, and each
affiliated, combined, consolidated or unitary group of which the Parent or any
of its Subsidiaries (i) is a member (a "Current Parent Group") or (ii) was a
member during any years not closed with the IRS for U.S. federal income Tax
purposes but is not currently a member, but only insofar as any such Tax Return
relates to a taxable period or portion thereof ending on a date within the last
six years during which the Parent or such Subsidiary was a member of such
affiliated, combined, consolidated or unitary group for purposes of the
relevant Tax (a "Past Parent Group," and together with Current Parent Groups, a
"Parent Affiliated Group") have been timely filed or requests for extensions
have been timely filed and any such extension has been granted and has not
expired, and all such filed Tax Returns 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 the Company
(it being understood that the representations made in this Section 4.13, to the
extent that they relate to Past Parent Groups, are made to the best knowledge of
the Parent and only with respect to taxable periods or portions thereof ending
on a date within the last six years during which the Parent or any of its
Subsidiaries was a member of such affiliated,
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combined, consolidated or unitary group for purposes of the relevant Tax). All
Taxes due and owing by the Parent, any Subsidiary of the Parent or any Parent
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 Parent. There is no audit,
examination, deficiency, refund litigation, proposed adjustment or matter in
controversy with respect to any Taxes due and owing by the Parent, any
Subsidiary of the Parent or any Parent Affiliated Group which if determined
adversely would have a Material Adverse Effect on the Parent. All assessments
for Taxes due and owing by the Parent, any Subsidiary of the Parent or any
Parent Affiliated Group with respect to completed and settled examinations or
concluded litigation have been paid. Section 4.13(a) of the Parent Disclosure
Schedule sets forth (i) the taxable years of the Parent for which the statutes
of limitations with respect to U.S. federal income Taxes have not expired and
(ii) with respect to federal income Taxes for such years, 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. Neither the Parent nor any of its Subsidiaries has any liability
under Treasury Regulation Section 1.1502-6 for U.S. federal income Taxes of any
Person other than the Parent and its Subsidiaries. The Parent 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 Parent.
(b) Neither the Parent nor any Subsidiary of the Parent has (i)
entered into a closing agreement or other similar agreement with a taxing
authority relating to Taxes of the Parent or any Subsidiary of the Parent 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 income Tax, in either case, that is still outstanding. There
are no Liens relating to Taxes upon the assets of the Parent or any Subsidiary
of the Parent other than Liens relating to Taxes not yet due. Neither the
Parent nor any Subsidiary of the Parent is a party to any agreement relating to
allocating or sharing of Taxes which has not been disclosed in its Tax Returns.
No consent under Section 341(f) of the Code has been filed with respect to the
Parent or any Subsidiary of the Parent.
Section 4.14. Opinion of Financial Advisor. The Board of Directors
----------------------------
of the Parent has received the opinion of Credit Suisse First Boston
Corporation, dated the date of this Agreement, substantially to the effect that
the
39
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consideration to be offered by the Parent in the Offer and the Merger, taken
together, is fair to the Parent from a financial point of view.
Section 4.15. Employment Matters. Neither the Parent nor any of its
------------------
Subsidiaries has experienced any work stoppages, strikes, collective labor
grievances, other collective bargaining disputes or claims of unfair labor
practices in the last five years which would, individually or in the aggregate,
have a Material Adverse Effect on the Parent. To the best knowledge of the
Parent, there is no organizational effort presently being made or threatened by
or on behalf of any labor union with respect to employees of the Parent or any
of its Subsidiaries.
Section 4.16. Ownership of Shares. As of the date hereof, neither
-------------------
the Parent nor the Purchaser is an "interested stockholder" of the Company, as
such term is defined in Section 203 of the DGCL.
ARTICLE V
Covenants and Agreements
-------------------------
Section 5.1. Conduct of Business by the Company. The Company agrees
----------------------------------
that, 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 expressly permitted pursuant to this
Agreement, the Company:
(i) 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;
(ii) shall use its reasonable best efforts, and cause each of
its Subsidiaries to use its reasonable best efforts, to preserve intact its
business organization 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 the Company and its
Subsidiaries;
(iii) shall confer at such times as the Parent may reasonably
request with one or more representatives of the Parent to report material
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operational matters and the general status of ongoing operations;
(iv) shall notify the Parent 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
the Company;
(v) shall not, and shall not permit any of its Subsidiaries
that is not wholly owned to, authorize or pay any dividends on or make any
distribution with respect to its outstanding shares of stock;
(vi) shall not, and shall not permit any of its Subsidiaries
to, except as otherwise provided in this Agreement, establish, enter into
or amend any Plan or increase the compensation payable or to become payable
or the benefits provided to its officers or employees, subject to such
exceptions as are set forth in Section 5.1(vi) of the Company Disclosure
Schedule;
(vii) except as set forth in Section 5.1(vii) of the Company
Disclosure Schedule, shall not, and shall not 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 Merger), any
acquisition of a material amount of assets or securities, any disposition
of a material amount of assets or securities, except (x) for the sale of
goods and products manufactured by the Company and held for sale in the
ordinary course (for purposes of this Section 5.1(vii) "material" shall
mean any amount in excess of $1 million) and (y) as provided in the Profit
and Capital Plan of 1998 previously provided to the Parent and not in
excess of $150 million in the aggregate;
(viii) shall not, and shall not permit any of its Subsidiaries
to, propose or adopt any amendments to its certificate of incorporation or
by-laws (or other similar organizational documents);
(ix) shall not, and shall not permit any of its Subsidiaries
to, issue or authorize the issuance of, or agree to issue or sell any
shares of
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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 (1) not more than 3,161,525 Shares
upon the exercise of employee stock options granted under, and 319,610
Shares issuable pursuant to, the 1993 Plan referred to in clause (ii) of
Section 3.2, (2) not more than 571,475 Shares upon the exercise of employee
stock options granted under, and 190,564 Shares issuable pursuant to, the
1995 Plan referred to in clause (iii) of Section 3.2, (3) not more than
80,000 Shares upon the exercise of stock options granted under, and 20,750
Shares issuable pursuant to, The Alumax Inc. Non-Employee Directors' Stock
Compensation Plan referred to in clause (iv) of Section 3.2, (4) not more
than 74,148 Shares issuable pursuant to The Alumax Inc. Non-Employee
Directors' Compensation Plan referred to in clause (iv) of Section 3.2, (5)
not more than 623,350 Shares upon the exercise of options granted under,
and 26,603 Shares issuable pursuant to, employee deferred compensation
arrangements referred to in clause (vi) of Section 3.2, and (6) not more
than 180,000 Shares issuable in connection with regularly scheduled
matching contributions to the Alumax Inc. Thrift Plans referred to in
clause (v) of Section 3.2;
(x) shall not, and shall not permit any of its Subsidiaries
to, reclassify, combine, split, purchase or redeem any shares of its
capital stock or purchase or redeem any rights, warrants or options to
acquire any such shares;
(xi) other than in the ordinary course of business consistent
with past practice, shall not, and shall not permit any of its Subsidiaries
to, (a) incur, assume or prepay any indebtedness or any other material
liabilities or issue any debt securities, or (b) assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently
or otherwise) for the obligations of any other person, other than
guarantees of obligations of wholly owned Subsidiaries of the Company in
the ordinary course of business;
(xii) shall not, and shall not permit any of its Subsidiaries
to, (a) 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; (b) modify, amend or terminate any of its material
contracts or waive, release or assign any material rights (contract or
other); or (c) permit any insurance policy naming it as a beneficiary or a
loss
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payable payee to lapse, be cancelled for reasons within the Company's
control or expire unless a new policy with substantially identical coverage
is in effect as of the date of lapse, cancellation or expiration;
(xiii) shall not, and shall not permit any of its Subsidiaries
to, (a) make any material Tax election or settle or compromise any material
Tax liability or (b) change any of the accounting methods used by it unless
required by GAAP; and
(xiv) shall not, and shall not permit any of its Subsidiaries
to, agree, in writing or otherwise, to take any of the foregoing actions or
knowingly take any action which would (y) make any representation or
warranty in Article III hereof untrue or incorrect in any material respect
or (z) result in any of the conditions to the Offer set forth in Annex A
hereto or any of the conditions to the Merger set forth in Article VI
hereof not being satisfied.
Section 5.2. Access; Confidentiality.
-----------------------
(a) Except for competitively sensitive information as to which
access, use and treatment is covered by Section 5.2(c), the Company shall (and
shall cause each of its Subsidiaries to) afford to the officers, employees,
accountants, counsel and other authorized representatives of the Parent
reasonable 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 all of its properties, offices, employees, contracts,
commitments, books and records (including but not limited to Tax Returns) and
any report, schedule or other document filed or received by it pursuant to the
requirements of federal or state securities laws and shall (and shall cause each
of its Subsidiaries to) furnish promptly to the Parent such additional financial
and operating data and other information as to its and its Subsidiaries'
respective businesses and properties as the Parent may from time to time
reasonably request. The Parent and the Purchaser will make all reasonable
efforts to minimize any disruption to the businesses of the Company and its
Subsidiaries which may result from the requests for data and information
hereunder. No investigation pursuant to this Section 5.2(a) shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
(b) Except for competitively sensitive information as to which
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access, use and treatment is covered by Section 5.2(c), the Parent shall (and
shall cause each of its Subsidiaries to) afford to the officers, employees,
accountants, counsel and other authorized representatives of the Company
reasonable 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 all of its properties, offices, employees, contracts,
commitments, books and records (including but not limited to Tax Returns) and
any report, schedule or other document filed or received by it pursuant to the
requirements of federal or state securities laws and shall (and shall cause each
of its Subsidiaries to) furnish promptly to the Company such additional
financial and operating data and other information as to its and its
Subsidiaries' respective businesses and properties as the Company may from time
to time reasonably request. The Company will make all reasonable efforts to
minimize any disruption to the businesses of the Parent and its Subsidiaries
which may result from the requests for data and information hereunder. No
investigation pursuant to this Section 5.2(b) shall affect any representation or
warranty in this Agreement of any party hereto or any condition to the
obligations of the parties hereto.
(c) As promptly as possible following the date hereof the parties
intend to establish an appropriate protocol which shall remain in place until
the expiration of the applicable waiting periods under the HSR Act pursuant to
which each party may disclose to a limited number of representatives of the
other party confidential information which is competitively sensitive in nature.
(d) The Parent and the Company will not, and will cause their
respective officers, employees, accountants, counsel and representatives not to,
use any information obtained pursuant to this Section 5.2 for any purpose
unrelated to the consummation of the transactions contemplated by this
Agreement. Subject to the requirements of law, pending consummation of the
transactions herein contemplated, each of the Parent and the Company will keep
confidential, and will cause their respective officers, employees, accountants,
counsel and representatives to keep confidential, all information and documents
obtained pursuant to this Section 5.2 unless such information (i) was already
known to it, (ii) becomes available to it from other sources not known by it to
be bound by a confidentiality obligation, (iii) is independently acquired by it
as a result of work carried out by any of its employees or representatives to
whom no disclosure of such information has been made, (iv) is disclosed with the
prior written approval of the other party or (v) is or becomes readily
ascertainable from published information or trade sources. Upon any termination
of this Agreement, each party will collect and
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deliver to the other party all documents obtained by it or any of its officers,
employees, accountants, counsel and representatives then in their possession and
any copies thereof.
Section 5.3. Special Meeting, Proxy Statement, Registration Statement.
--------------------------------------------------------
(a) As promptly as practicable following the date of this Agreement, the
Company, acting through its Board of Directors, shall, in accordance with
applicable law duly call, give notice of, convene and hold a special meeting of
its stockholders (the "Special Meeting") for the purposes of considering and
taking action upon the approval of the Merger and the approval and adoption of
this Agreement;
(b) As promptly as practicable following the date of this Agreement, the
Company shall:
(i) prepare and file with the SEC a preliminary proxy or information
statement relating to the Merger and this Agreement and (x) obtain and
furnish the information required to be included by the SEC in the Proxy
Statement (as hereinafter defined) and, after consultation with the Parent,
respond promptly to any comments made by the SEC with respect to the
preliminary proxy or information statement and cause a definitive proxy or
information statement, including any amendment or supplement thereto (the
"Proxy Statement") to be mailed to its stockholders at the earliest
practicable date after the Registration Statement is declared effective by
the SEC, provided that no amendment or supplement to the Proxy Statement
will be made by the Company without consultation with Parent and its
counsel and (y) use its reasonable best efforts to obtain the necessary
approvals of the Merger and this Agreement by its stockholders; and
(ii) unless this Agreement has been terminated in accordance with
Article VII, include in the Proxy Statement the recommendation of the Board
that stockholders of the Company vote in favor of the approval of the
Merger and the approval and adoption of this Agreement; provided, however,
that if the Board of Directors of the Company, based on the advice of
outside legal counsel, determines in good faith that the amendment or
withdrawal of its recommendation is necessary for the Board of Directors of
the Company to avoid breaching its fiduciary
45
<PAGE>
duties to the Company's stockholders under applicable law, then any such
amendment or withdrawal shall not constitute a breach of this Agreement.
(c) As promptly as practicable following the date of this Agreement,
the Parent shall prepare and file with the SEC the Registration Statement, in
which the Proxy Statement shall be included as a prospectus, and shall use its
reasonable best efforts to have the Registration Statement declared effective by
the SEC as promptly as practicable. The Parent shall obtain and furnish the
information required to be included by the SEC in the Registration Statement
and, after consultation with the Company, respond promptly to any comments made
by the SEC with respect to the Registration Statement and cause the prospectus
included therein, including any amendment or supplement thereto, to be mailed to
the Company's stockholders at the earliest practicable date after the
Registration Statement is declared effective by the SEC. The Parent shall also
take any action required to be taken under state blue sky or other securities
laws in connection with the issuance of Parent Common Stock in the Merger.
(d) The Parent shall vote, or cause to be voted, all of the Shares
then owned by it, the Purchaser or any of its other Subsidiaries in favor of the
approval and adoption of this Agreement.
Section 5.4. Reasonable Best Efforts; Further Assurances.
-------------------------------------------
(a) Subject to the terms and conditions of this Agreement and
applicable law, each of the parties shall act in good faith and use reasonable
best efforts to take, or cause to be taken, all actions, and to do, or cause to
be done, all things necessary, proper or advisable to consummate and make
effective the transactions contemplated by this Agreement as soon as
practicable. Without limiting the foregoing, the parties shall (and shall cause
their respective subsidiaries, and use reasonable best efforts to cause their
respective affiliates, directors, officers, employees, agents, attorneys,
accountants and representatives, to) consult and fully cooperate with and
provide assistance to each other in (i) the preparation and filing with the SEC
of the Offer Documents, the Schedule 14D-9, the preliminary Proxy Statement, the
Proxy Statement and the Registration Statement and all necessary amendments or
supplements thereto; (ii) obtain all necessary consents, approvals, waivers,
licenses, permits, authorizations, registrations, qualifications or other
permissions or actions by, and give all necessary notices to and make all
necessary filings with and applications and submissions to, any Governmental
Entity or other Person as soon as reasonably practicable after filing; and (iii)
provide all such information concerning such
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party, its Subsidiaries and its officers, directors, employees, partners and
affiliates as may be necessary or reasonably requested in connection with any of
the foregoing. Prior to making any application to or filing with a Governmental
Entity or other entity in connection with this Agreement (other than filing
under the HSR Act), each party shall provide the other party with drafts thereof
and afford the other party a reasonable opportunity to comment on such drafts.
(b) 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 use their
reasonable best efforts to take all such action.
(c) Notwithstanding the foregoing, neither the Parent nor the
Purchaser shall be obligated to enter into any "hold-separate" agreement or
other agreement with respect to the disposition of any assets or businesses of
the Parent or any of its Subsidiaries or the Company or any of its Subsidiaries
in order to obtain clearance from the Federal Trade Commission or the Antitrust
Division of the Department of Justice or any state antitrust or competition
authorities to proceed with the consummation of the transactions contemplated by
this Agreement.
(d) The Company, the Parent and the Purchaser each shall keep the
other apprised of the status of matters relating to completion of the
transactions contemplated hereby, including promptly furnishing the other with
copies of notices or other communications received by the Parent, the Purchaser
or the Company, as the case may be, or any of their respective Subsidiaries
(other than in any such case with respect to Acquisition Proposals), from any
third party and/or any Governmental Entity with respect to the transactions
contemplated by this Agreement.
(e) The Company, the Parent and the Purchaser shall each use their
reasonable best efforts to reduce or eliminate any amounts specified in Section
3.14(c) of the Company Disclosure Schedule, it being understood that the
foregoing shall not require the Company or any of its Subsidiaries to amend any
Plan, terminate or retire any employee or to otherwise adversely affect the
rights of any employee.
Section 5.5. Employee Stock Options and Other Employee Benefits.
--------------------------------------------------
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(a) Simultaneously with the Merger, (i) each outstanding option (the
"Company Stock Options") to purchase or acquire a share of Company Common Stock
under employee incentive or benefit plans, programs or arrangements and non-
employee director plans presently maintained by the Company (the "Company Option
Plans") shall be converted into an option to purchase the number of shares of
Parent Common Stock equal to the product of (x) the Exchange Ratio multiplied by
(y) the number of shares of Company Common Stock which could have been issued
prior to the Effective Time upon the exercise of such option, at an exercise
price per share (rounded upward to the nearest cent) equal to the exercise price
for each share of Company Common Stock subject to such option divided by the
Exchange Ratio, and all references in each such option to the Company shall be
deemed to refer to the Parent, where appropriate, provided, however, that with
respect to any Option which is an "incentive stock option", within the meaning
of Section 422 of the Code, the adjustments provided in this Section shall, if
applicable, be modified in a manner so that the adjustments are consistent with
requirements of Section 424(a) of the Code, and (ii) the Parent shall assume the
obligations of the Company under the Company Option Plans. The other terms of
each such option, and the plans under which they were issued, shall continue to
apply in accordance with their terms, including any provisions providing for
acceleration. At or prior to the Effective Time, the 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 Company Stock Options
assumed by it in accordance with this Section. As soon as practicable after the
Effective Time, if necessary, the Parent shall file a registration statement on
Form S-8 (or any successor or other appropriate forms), or another appropriate
form with respect to the Parent Common Stock subject to such Company Stock
Options, and shall use its best efforts to maintain the effectiveness of such
registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as the Company Stock Options remain
outstanding.
(b) For the period through and including December 31, 1999, the Parent
shall, or shall cause the Surviving Corporation to, maintain employee benefit
plans, programs and arrangements which are, in the aggregate, for the employees
who were active full-time employees of the Company or any Subsidiary immediately
prior to the Effective Time and continue to be active full-time employees of the
Purchaser, the Surviving Corporation, any Subsidiary or any other affiliate of
the Purchaser, no less favorable than those provided by the Company and any
Subsidiary immediately prior to the Effective Time. From and
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after the Effective Time, for purposes of determining eligibility, vesting and
entitlement to vacation and severance and other benefits for employees actively
employed full-time by the Company or any Subsidiary immediately prior to the
Effective Time under any compensation, severance, welfare, pension, benefit,
savings or other Plan of the Parent or any of its Subsidiaries in which active
full-time employees of the Company and any Subsidiary become eligible to
participate (whether pursuant to this Section 5.5(b) or otherwise), service with
the Company or any Subsidiary (whether before or after the Effective Time) shall
be credited as if such service had been rendered to the Parent or such
Subsidiary. Parent will, and will cause the Surviving Corporation to, observe
all employee benefit obligations to current and former employees under the
Company Employee Benefit Plans existing as of the Effective Time and all
employment or severance agreements, plans or policies of the Company and its
Subsidiaries, copies of which have been made available to Parent pursuant to
Section 3.8, in accordance with their terms.
Section 5.6. Takeover Statute. If any "fair price," "moratorium,"
----------------
"control share acquisition" or other form of anti-takeover statute or regulation
shall become applicable to the transactions contemplated hereby, each of the
Company, the Parent and the Purchaser and the members of their respective Boards
of Directors shall grant such approvals and take such actions as are reasonably
necessary so that the transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise act to
eliminate or minimize the effects of such statute or regulation on the
transactions contemplated hereby.
Section 5.7. Solicitation by the Company.
---------------------------
(a) Nothing contained in this Agreement shall prohibit the Board of
Directors of the Company from furnishing information to, or entering into
discussions with, any Person that makes a bona fide Acquisition Proposal. The
term "Acquisition Proposal" as used herein means any tender or exchange offer
involving the capital stock of the Company or any of its Subsidiaries, any
proposal or offer to acquire in any manner a substantial equity interest in, or
a substantial portion of the business or assets of, the Company or any of its
Subsidiaries, any proposal or offer with respect to any merger, consolidation,
business combination, recapitalization, liquidation, dissolution or
restructuring of or involving the Company or any of its Subsidiaries, or any
proposal or offer with respect to any other transaction similar to any of the
foregoing with respect to the Company or
49
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any of its Subsidiaries, other than the transactions contemplated by this
Agreement. Except for the transactions contemplated by this Agreement, as of the
date of this Agreement, neither the Company nor any of its officers, directors,
employees, financial advisors, attorneys or other representatives, is engaged
in, or is a party to, any discussions or negotiations, or is currently
furnishing any information with respect to the Company, relating to, or which
could be reasonably expected to lead to, an Acquisition Proposal.
(b) Nothing contained in this Agreement shall prohibit the Company
from taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to the
Company's stockholders if the Board of Directors of the Company determined in
good faith, after consultation with outside legal counsel, that it is necessary
to do so in order to avoid breaching its fiduciary duties under applicable law;
provided, however, that neither the Company nor its Board of Directors nor any
committee thereof shall withdraw or modify, or propose publicly to withdraw or
modify, its position with respect to this Agreement, the Offer or the Merger, or
approve or recommend, or propose publicly to approve or recommend, an
Acquisition Proposal, except if, and only to the extent that, the Board of
Directors of the Company, based on the advice of outside legal counsel,
determines in good faith that such Acquisition Proposal is a Superior Proposal
(as hereinafter defined) and that such action is necessary for the Board of
Directors of the Company to avoid breaching its fiduciary duties to the
Company's stockholders under applicable law. Nothing herein shall require the
Board of Directors of the Company to violate applicable laws.
Section 5.8. Public Announcements. The Parent and the Company agree
--------------------
that neither one of them will issue any press release or otherwise make any
public statement or respond to any press inquiry with respect to this Agreement
or the transactions contemplated hereby or thereby without the prior approval of
the other party (which approval will not be unreasonably withheld), except as
may be required by applicable law or the rules of the New York Stock Exchange,
Inc. (the "NYSE").
Section 5.9. Indemnification and Insurance.
-----------------------------
From and after the Effective Time, the Parent will indemnify and hold
harmless each present and former director and officer of the Company and its
subsidiaries (the "Indemnified Parties"), against any costs or expenses
(including
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attorneys' fees), judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters existing or occurring at
or prior to the Effective Time, to the fullest extent that the Company or such
subsidiary would have been permitted under applicable law and the Certificate of
Incorporation or Bylaws of the Company or such subsidiary in effect on the date
hereof to indemnify such person (and the Parent shall also advance expenses as
incurred to the fullest extent permitted under applicable law provided the
Person to whom expenses are advanced provides an undertaking to repay such
advances if it is ultimately determined that such Person is not entitled to
indemnification).
Section 5.10. Additional Reports and Information.
----------------------------------
(a) The Company shall furnish to the Parent copies of all reports of
the type referred to in Section 3.4 which it files with the SEC on or after the
date hereof, and the Company 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 statements therein, in light of the circumstances under which they
were made, not misleading. The audited consolidated financial statements and
the unaudited consolidated interim financial statements included in such reports
(including any related notes and schedules) will fairly present the financial
position of the Company and its consolidated Subsidiaries as of the dates
thereof and the results of operations and cash flows or other information
included therein for the periods or as of the date then ended (subject, in the
case of the interim financial statements, to normal, year-end adjustments and
the absence of footnotes), in each case in accordance with past practice and
GAAP consistently applied during the periods involved (except as otherwise
disclosed in the notes thereto).
(b) The Parent shall furnish to the Company copies of all reports of
the type referred to in Section 4.4 which it files with the SEC on or after the
date hereof, and the Parent 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 statements therein, in light of the circumstances under which they
were made, not misleading. The audited consolidated financial statements and
the unaudited consolidated interim financial statements included in such reports
(including any related notes and schedules) will fairly present the financial
position of the Parent
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and its consolidated Subsidiaries as of the dates thereof and the results of
operations and cash flows or other information included therein for the periods
or as of the date then ended (subject, in the case of the interim financial
statements, to normal, year-end adjustments and the absence of footnotes), 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 5.11. Affiliates. At the time the Proxy Statement is mailed
----------
to stockholders of the Company, the Company shall deliver to the Parent a list
identifying, to the best of the Company's knowledge, all persons who are, at the
time of the Company Stockholder Approval, deemed to be "affiliates" of the
Company for purposes of Rule 145 under the Securities Act. The Company shall
advise the Parent of any additions or deletions to or from such list from time
to time thereafter. The Company shall use its reasonable best efforts to cause
each such person to deliver to the Parent at least 30 days prior to the Closing
Date a written agreement substantially in the form of Exhibit A to this
Agreement.
Section 5.12. NYSE Listing. The Parent shall use its best efforts to
------------
cause the shares of Parent Common Stock to be issued in the Merger to be
approved for listing on the NYSE, subject to official notice of issuance, prior
to the Closing Date.
Section 5.13. Tax-Free Reorganization. The parties intend that the
-----------------------
transactions contemplated hereby qualify as a reorganization under Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code; each party and its affiliates shall
use all reasonable efforts to cause such transactions to so qualify; neither
party nor any affiliate shall take any action that would cause such transactions
not to qualify as a reorganization under such Sections; and the parties will
take the position for all purposes that the transactions qualify as a
reorganization under such Sections.
Section 5.14. The Company Rights Plan. On the date of the
-----------------------
commencement of the Offer, (i) the Company will take all necessary action to
redeem all the preferred stock purchase rights outstanding under the Rights
Agreement, and (ii) shall provide the Parent with prompt notice that such action
has been taken.
ARTICLE VI
52
<PAGE>
Conditions to the Merger
------------------------
Section 6.1. Conditions to Each Party's Obligation to Effect the
---------------------------------------------------
Merger. The respective obligations of each party to effect the Merger shall be
- ------
subject to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) The Company Stockholder Approval shall have been obtained.
(b) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
Governmental Entity which prohibits the consummation of the Merger substantially
on the terms contemplated hereby or has the effect of making the acquisition of
Shares by the Parent or the Purchaser or any affiliate of either of them
illegal.
(c) The Parent or the Purchaser or any affiliate of either of them
shall have purchased Shares pursuant to the Offer, except that this condition
shall not apply if the Parent, the Purchaser or such affiliate shall have failed
to purchase Shares pursuant to the Offer in breach of their obligations under
this Agreement.
(d) The applicable waiting period under the HSR Act shall have expired
or been terminated.
(e) The shares of Parent Common Stock to be issued in the Merger shall
have been approved for listing on the NYSE, subject to official notice of
issuance.
(f) The Registration Statement shall have become effective in
accordance with the provisions of the Securities Act.
Section 6.2. Conditions to Obligation of the Parent and the Purchaser
--------------------------------------------------------
to Effect the Merger. The obligation of the Parent and the Purchaser to effect
- --------------------
the Merger shall be subject to the satisfaction at or prior to the Effective
Time of the following additional condition, unless waived in writing by the
Parent:
(a) Tax Opinion. The Parent shall have received an opinion of
-----------
Skadden, Arps, Slate, Meagher & Flom LLP, tax counsel to the Parent, dated as of
the Effective Time, to the effect that the Merger will qualify as a
reorganization within the meaning of Section 368(a) of the Code. The issuance
of such opinion
53
<PAGE>
shall be conditioned upon the receipt by such tax counsel of customary
representation letters from each of the Parent, the Purchaser and the Company,
in each case, in form and substance reasonably satisfactory to such tax counsel.
Each such representation letter shall be dated on or before the date of such
opinion and shall not have been withdrawn or modified in any material respect.
Section 6.3. Conditions to Obligation of the Company to Effect the
-----------------------------------------------------
Merger. The obligation of the Company to effect the Merger shall be subject to
- ------
the satisfaction at or prior to the Effective Time of the following additional
condition, unless waived in writing by the Company:
(a) Tax Opinion. The Company shall have received an opinion of
-----------
Sullivan & Cromwell, tax counsel to the Company, dated as of the Effective Time,
to the effect that the Merger will qualify as a reorganization within the
meaning of Section 368(a) of the Code. The issuance of such opinion shall be
conditioned upon the receipt by such tax counsel of customary representation
letters from each of the Parent, the Purchaser and the Company, in each case, in
form and substance reasonably satisfactory to such tax counsel. Each such
representation letter shall be dated on or before the date of such opinion and
shall not have been withdrawn or modified in any material respect.
Section 6.4. Additional Conditions to the Obligations of the Parent
------------------------------------------------------
and the Purchaser to Effect the Merger. In the event that the Purchaser
- --------------------------------------
purchases a number of Shares in the Offer which is less than the 50% Share
Number, the obligation of the Parent and the Purchaser to effect the Merger
shall be subject to the fulfillment at or prior to the Effective Time of the
following conditions, unless waived in writing by the Parent or unless the
Company Stockholder Approval is obtained prior thereto, in which event such
conditions shall thereupon be deemed fulfilled:
(a) The representations and warranties of the Company set forth in
this Agreement shall be true and correct, ignoring for this purpose any
qualification as to materiality or Material Adverse Effect, as if such
representations or warranties were made as of the Effective Time, except for
such inaccuracies as, individually or in the aggregate, would not have a
Material Adverse Effect on the Company.
(b) The Company shall have performed and complied in all material
respects with all agreements, obligations and conditions required by this
54
<PAGE>
Agreement to be performed and complied with by it on or prior to the Closing
Date.
(c) The Company shall have furnished a certificate of an officer to
evidence compliance with the conditions set forth in Sections 6.4(a) and (b) of
this Agreement.
Section 6.5. Additional Conditions to the Obligations of the Company
--------------------------------------------------------
to Effect the Merger. In the event that the Purchaser purchases a number of
- --------------------
Shares in the Offer which is less than the 50% Share Number, the obligation of
the Company to effect the Merger shall be subject to the fulfillment at or prior
to the Effective Time of the following conditions, unless waived in writing by
the Company or unless the Company Stockholder Approval is obtained prior
thereto, in which event such conditions shall thereupon be deemed fulfilled:
(a) The representations and warranties of the Parent and the Purchaser
set forth in this Agreement shall be true and correct, ignoring for this purpose
any qualification as to materiality or Material Adverse Effect, as if such
representations or warranties were made as of the Effective Time, except for
such inaccuracies as, individually or in the aggregate, would not have a
Material Adverse Effect on the Parent.
(b) The Parent and the Purchaser shall have performed and complied in
all material respects with all agreements, obligations and conditions required
by this Agreement to be performed and complied with by them on or prior to the
Closing Date.
(c) The Parent and the Purchaser shall have furnished a certificate of
their respective officers to evidence compliance with the conditions set forth
in Section 6.5(a) and (b) of this Agreement.
ARTICLE VII
Termination
-----------
Section 7.1. Termination. This Agreement may be terminated and the
-----------
other transactions contemplated herein abandoned at any time prior to the
Effective Time, whether before or after obtaining the Company Stockholder
55
<PAGE>
Approval:
(a) by the mutual written consent of the Company, the Parent and the
Purchaser;
(b) by either the Parent or the Company if (i) (1) the Offer shall
have expired without any Shares being purchased pursuant thereto, or (2) the
Offer has not been consummated on or before September 30, 1998 (the "Termination
Date"); provided, however, that the right to terminate this Agreement pursuant
to this Section 7.1(b)(i) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or resulted
in, the failure of the Shares to have been purchased pursuant to the Offer; (ii)
a statute, rule, regulation or executive order shall have been enacted, entered
or promulgated prohibiting the consummation of the Offer or the Merger
substantially on the terms contemplated hereby; or (iii) an order, decree,
ruling or injunction shall have been entered permanently restraining, enjoining
or otherwise prohibiting the consummation of the Offer or the Merger
substantially on the terms contemplated hereby and such order, decree, ruling or
injunction shall have become final and non-appealable; provided further that the
Termination Date shall be extended by one business day for each business day
which elapses from March 16, 1998, until the date upon which the applicable
filings under the HSR Act are made by the Company with the appropriate
Governmental Entity;
(c) by the Parent, (i) if due to an occurrence or circumstance, other
than as a result of a breach by the Parent or the Purchaser of its obligations
hereunder, resulting in a failure to satisfy any condition set forth in Annex A
hereto, the Purchaser shall have (1) failed to commence the Offer within 30 days
following the date of this Agreement, or (2) terminated the Offer without having
accepted any Shares for payment thereunder; or (ii) if either the Parent or the
Purchaser is entitled to terminate the Offer as a result of the occurrence of
any event set forth in paragraph (e) of Annex A hereto;
(d) by the Company, upon approval of its Board of Directors, if due
to an occurrence or circumstance, other than as a result of a breach by the
Company of its obligations hereunder, that would result in a failure to satisfy
any of the conditions set forth in Annex A hereto, the Purchaser shall have
terminated the Offer without having accepted any Shares for payment thereunder;
(e) by the Company, if the Company receives a Superior
56
<PAGE>
Proposal and the Board of Directors of the Company, based on the advice of
outside legal counsel, determines in good faith that such action is necessary
for the Board of Directors to avoid breaching its fiduciary duties to the
Company's stockholders under applicable law. The term "Superior Proposal" as
used herein means any bona fide Acquisition Proposal made by a third party to
acquire, directly or indirectly, 20% or more of the outstanding Shares on a
fully diluted basis or all or substantially all the assets of the Company and
its Subsidiaries and otherwise on terms and conditions which the Board of
Directors of the Company determines in good faith, after consultation with and
based upon the written opinion of its financial advisor, to be a superior
financial alternative to the stockholders of the Company than the Offer and the
Merger; or
(f) by the Parent or the Company, if after the Company convenes and
holds the special Meeting and certifies the vote with respect to the Merger the
Company's stockholders have voted against granting the Company Stockholder
Approval.
Section 7.2. Effect of Termination. In the event of termination of
---------------------
this Agreement pursuant to Section 7.1, written notice thereof shall forthwith
be given to the other party or parties specifying the provision hereof pursuant
to which such termination is made, and this Agreement shall terminate and be of
no further force and effect (except for the provisions of Sections 5.2 and 8.2),
and there shall be no other liability on the part of the Parent, the Purchaser
or the Company except liability arising out of a breach of this Agreement. In
the event of termination of this Agreement pursuant to Section 7.1 prior to the
expiration of the Offer, the Parent and the Purchaser will promptly terminate
the Offer upon such termination of this Agreement.
ARTICLE VIII
Miscellaneous
-------------
Section 8.1. No Survival of Representations and Warranties. None of
---------------------------------------------
the representations or warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time.
Section 8.2. Expenses. Except as expressly contemplated by this
--------
Agreement, all costs and expenses incurred in connection with this Agreement and
57
<PAGE>
the transactions contemplated hereby shall be paid by the party incurring such
costs and expenses.
Section 8.3. Counterparts; Effectiveness. This Agreement may be
---------------------------
executed in two or more separate counterparts, each of which shall be deemed to
be an original but all of which shall constitute one and the same agreement.
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by each of the other parties hereto.
Section 8.4. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware, without regard
to the principles of conflicts of laws thereof.
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 the Parent or the Purchaser:
Aluminum Company of America
425 Sixth Avenue
Pittsburgh, Pennsylvania 15219
Attention: Lawrence R. Purtell, Esq.
Executive Vice President and
General Counsel
Telecopy: (412) 553-3113
copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: J. Michael Schell, Esq.
Telecopy: (212) 735-2000
To the Company:
58
<PAGE>
Alumax Inc.
3424 Peachtree Road, N.E.
Suite 2100
Atlanta, Georgia 30326
Attention: Robert P. Wolf, Esq.
Senior Vice President
and General Counsel
Telecopy: (404) 846-4769
copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: John Evangelakos, Esq.
Telecopy: (212) 558-3588
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, except that the Purchaser may
assign, in its sole discretion, all or any of its rights and interests hereunder
to the Parent or to any direct or indirect wholly owned Subsidiary of the Parent
and in the event of any such assignment, the Parent hereby unconditionally
guarantees the performance by the assignee of all obligations assigned
thereunder in accordance with the terms of this Agreement. 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 permitted
assigns. Any assignment not permitted under this Section 8.6 shall be null and
void.
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
------------------------
59
<PAGE>
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 constitute the entire agreement, and supersede all other prior
agreements and understandings, both written and oral, among the parties, or any
of them, with respect to the subject matter hereof and thereof and except for
the provisions of Section 5.9 hereof, is not intended to and shall not confer
upon any Person other than the parties hereto any rights or remedies hereunder.
Section 8.10. Headings. Headings of the Articles and Sections of
--------
this Agreement are for convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
Section 8.11. Definitions. References in this Agreement to (a)
-----------
"Subsidiaries" of the Company or the Parent 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 the Company or the Parent
or in which the Company or the Parent has the right to elect a majority of the
members of the board of directors or other similar governing body; (b)
"Significant Subsidiaries" shall mean Subsidiaries which constitute "significant
subsidiaries" under Rule 405 promulgated by the SEC under the Securities Act;
(c) (except as otherwise specifically defined) "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; and (d) "Person"
shall mean an individual, a corporation, a partnership, an association, a trust
or any other entity or organization, including, without limitation, a
Governmental Entity. As used in the definition of "affiliates," "control"
(including, with its correlative meanings, "controlled by" and "under common
control with") shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of management or policies of a Person, whether
through the ownership of securities or partnership of other ownership interests,
by contract or otherwise.
Section 8.12. Finders or Brokers. Except for BT Wolfensohn
------------------
60
<PAGE>
with respect to the Company, a copy of whose engagement agreement has been or
will be provided to the Parent, and Credit Suisse First Boston Corporation with
respect to the Parent, neither the Company nor the Parent 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 Offer and the Merger.
Section 8.13. Amendment or Supplement. At any time prior to the
-----------------------
Effective Time, this Agreement may be amended or supplemented in any and all
respects, whether before or after the Company Stockholder Approval, by written
agreement of the parties hereto, by action taken by their respective Boards of
Directors (which in the case of the Company shall include the Independent
Director Approval contemplated in Section 1.3(c)), with respect to any of the
terms contained in this Agreement; provided, however that following the Company
Stockholder Approval there shall be no amendment or change to the provisions
hereof which would reduce the amount or change the type of consideration into
which each Share shall be converted upon consummation of the Merger without
further approval by the stockholders of the Company.
Section 8.14. Extension of Time, Waiver, Etc. At any time prior to
------------------------------
the Effective Time, any party may (a) extend the time for the performance of any
of the obligations or acts of any other party hereto; (b) waive any inaccuracies
in the representations and warranties of any other party hereto contained herein
or in any document delivered pursuant hereto; or (c) subject to the proviso of
Section 8.13 waive compliance with any of the agreements or conditions of any
other party hereto contained herein; provided, however, in the case of the
Company following the acceptance of Shares for payment in the Merger, the
Independent Director Approval contemplated in Section 1.3(c) is obtained.
Notwithstanding the foregoing no failure or delay by the Company, the Parent or
the Purchaser 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.
61
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first above written.
ALUMINUM COMPANY OF AMERICA
By: /s/ Paul H. O'Neill
---------------------------------------------
Name: Paul H. O'Neill
Title: Chairman and Chief Executive Officer
AMX ACQUISITION CORP.
By: /s/ Richard B. Kelson
---------------------------------------------
Name: Richard B. Kelson
Title: Vice President and Treasurer
ALUMAX INC.
By: /s/ Allen Born
---------------------------------------------
Name: Allen Born
Title: Chairman and Chief Executive Officer
<PAGE>
ANNEX A
-------
Conditions to the Offer
-----------------------
Notwithstanding any other provision of the Offer and subject to the
terms of this Agreement, the Purchaser shall not be required to accept for
payment any Shares tendered pursuant to the Offer, and may terminate the Offer
and may postpone the acceptance for payment of and payment for Shares tendered,
if (i) any applicable waiting period under the HSR Act shall not have expired or
been terminated prior to the expiration of the Offer, or (ii) immediately prior
to the acceptance for payment of Shares, any of the following conditions shall
be reasonably determined by the Parent to be existing:
(a) there shall have been entered, enforced, promulgated or issued by
any court or governmental, administrative or regulatory authority or agency
of competent jurisdiction, domestic or foreign, any judgment, order,
injunction or decree, (i) which makes illegal or prohibits or makes
materially more costly the making of the Offer, the acceptance for payment
of, or payment for, any Shares by the Parent, the Purchaser or any other
affiliate of the Parent, or the consummation of any other transaction
contemplated by this Agreement, or imposes material damages in connection
with any transaction contemplated by this Agreement; (ii) which prohibits
the ownership or operation by the Company or any of its Subsidiaries or, as
a result of the transactions contemplated by this Agreement, the Parent and
its Subsidiaries, of all or any material portion of the business or assets
of the Company, the Parent or any of their Subsidiaries as a whole, or
compels the Company, the Parent or any of their Subsidiaries to dispose of
or hold separate all or any material portion of the business or assets of
the Company, the Parent or any of their Subsidiaries as a whole; (iii)
which imposes or confirms limitations on the ability of the Parent, the
Purchaser or any other affiliate of the Parent to exercise effectively full
rights of ownership of any Shares, including, without limitation, the right
to vote any Shares acquired by the Purchaser pursuant to the Offer or
otherwise on all matters properly presented to the Company's stockholders,
including, without limitation, the approval and adoption of this Agreement
and the transactions contemplated by this
A-1
<PAGE>
Agreement; (iv) requires divestiture by the Parent, the Purchaser or any
other affiliate of the Parent of any Shares; or (v) which otherwise would
have a Material Adverse Effect on the Company or, as a result of the
transactions contemplated by this Agreement, the Parent and its
Subsidiaries;
(b) there shall have been any action taken, or any statute, rule,
regulation, legislation or interpretation enacted, entered, enforced,
promulgated, amended, issued or deemed applicable to (i) the Company or any
Subsidiary of the Company or, as a result of the transactions contemplated
by this Agreement, the Parent or any Subsidiary or affiliate of the Parent,
or (ii) any transaction contemplated by this Agreement, by any legislative
body, court, government or governmental, administrative or regulatory
authority or agency, domestic or foreign, other than the routine
application of the waiting period provisions of the HSR Act to the Offer or
the Merger, which is reasonably likely to result, directly or indirectly,
in any of the consequences referred to in clauses (i) through (v) of
paragraph (a) above;
(c) there shall have occurred and be continuing, (i) any general
suspension of, or limitation on prices for, trading in securities on the
NYSE other than a shortening of trading hours or any coordinated trading
halt triggered solely as a result of a specified increase or decrease in a
market index, (ii) a declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States, (iii) the
commencement of a war, material armed hostilities or any other material
international or national calamity involving the United States, or (iv) in
the case of any of the foregoing existing at the time of the commencement
of the Offer, a material acceleration or worsening thereof;
(d) the representations or warranties of the Company set forth in the
Agreement shall not be true and correct, ignoring for this purpose any
qualification as to materiality or Material Adverse Effect, as if such
representations or warranties were made as of such time on or after the
date of this Agreement, except where the failure to be so true and correct,
individually and in the aggregate would not have a Material Adverse Effect;
(e) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with
A-2
<PAGE>
by it under the Agreement;
(f) the Agreement shall have been terminated in accordance with its
terms; or
(g) the Purchaser and the Company shall have agreed that the
Purchaser shall terminate the Offer or postpone the acceptance for payment
of or payment for Shares thereunder;
which, in the reasonable good faith judgment of the Purchaser in any such case,
and regardless of the circumstances (including any action or inaction by the
Parent or any of its affiliates) giving rise to any such condition, makes it
inadvisable to proceed with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of the Purchaser and
the Parent and may be asserted by the Purchaser or the Parent regardless of the
circumstances giving rise to any such condition or may be waived by the
Purchaser or the Parent in whole or in part at any time and from time to time in
their sole discretion. The failure by the Parent or the Purchaser at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right; the waiver of any such right with respect to particular facts and other
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances; and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
A-3
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE I
The Offer
Section 1.1. The Offer.......................................................2
Section 1.2. Company Actions.................................................4
Section 1.3. Directors of the Company........................................5
ARTICLE II
The Merger
Section 2.1. The Merger......................................................6
Section 2.2. Closing.........................................................7
Section 2.3. Effective Time..................................................7
Section 2.4. Effects of the Merger...........................................7
Section 2.5. Certificate of Incorporation; By-laws...........................7
Section 2.6. Directors; Officers of Surviving Corporation....................8
Section 2.7. Conversion of Securities........................................8
Section 2.8. Exchange of Certificates........................................9
Section 2.9. Appraisal Rights...............................................12
Section 2.10. Adjustment to Prevent Dilution.................................13
ARTICLE III
Representations and Warranties of the Company
Section 3.1. Organization, Qualification, Etc..............................14
Section 3.2. Capital Stock.................................................15
Section 3.3. Corporate Authority Relative to this Agreement; No Violation..16
Section 3.4. Reports and Financial Statements..............................17
Section 3.5. No Undisclosed Liabilities....................................19
Section 3.6. No Violation of Law...........................................19
Section 3.7. Environmental Matters.........................................19
Section 3.8. Employee Benefit Plans; ERISA.................................21
Section 3.9. Absence of Certain Changes or Events..........................24
Section 3.10. Litigation....................................................24
Section 3.11. Schedule 14D-9; Offer Documents; Registration Statement and
i
<PAGE>
Proxy Statement............................................24
Section 3.12. Intellectual Property..........................................25
Section 3.13. Tax Matters....................................................26
Section 3.14. Opinion of Financial Advisor...................................28
Section 3.15. Required Vote of the Company Stockholders......................28
Section 3.16. Employment Matters.............................................28
ARTICLE IV
Representations and Warranties of the Parent and the Purchaser
Section 4.1. Organization, Qualification, Etc...............................29
Section 4.2. Capital Stock..................................................30
Section 4.3. Corporate Authority Relative to this Agreement; No Violation...30
Section 4.4. Reports and Financial Statements...............................32
Section 4.5. No Undisclosed Liabilities.....................................33
Section 4.6. No Violation of Law............................................33
Section 4.7. Environmental Matters..........................................33
Section 4.8. Employee Benefit Plans; ERISA..................................34
Section 4.9. Absence of Certain Changes or Events...........................36
Section 4.10. Litigation.....................................................36
Section 4.11. Proxy Statement/Prospectus; Registration Statement.............36
Section 4.12. Intellectual Property..........................................37
Section 4.13. Tax Matters....................................................38
Section 4.14. Opinion of Financial Advisor...................................39
Section 4.15. Employment Matters.............................................39
Section 4.16. Ownership of Shares............................................39
ARTICLE V
Covenants and Agreements
Section 5.1. Conduct of Business by the Company.............................40
Section 5.2. Access; Confidentiality........................................43
Section 5.3. Special Meeting, Proxy Statement, Registration Statement......44
Section 5.4. Best Efforts; Further Assurances...............................46
Section 5.5. Employee Stock Options and Other Employee Benefits.............47
Section 5.6. Takeover Statute...............................................48
Section 5.7. Solicitation by the Company....................................49
Section 5.8. Public Announcements...........................................49
ii
<PAGE>
Section 5.9. Indemnification and Insurance...............................49
Section 5.10. Additional Reports and Information...........................50
Section 5.11. Affiliates...................................................51
Section 5.12. NYSE Listing.................................................51
Section 5.13. Tax-Free Reorganization......................................51
Section 5.14. The Company Rights Plan......................................52
ARTICLE VI
Conditions to the Merger
Section 6.1. Conditions to Each Party's Obligation to Effect the Merger....52
Section 6.2. Conditions to Obligation of the Parent and the Purchaser
to Effect the Merger.....................................53
Section 6.3. Conditions to Obligation of the Company to Effect
the Merger...............................................53
Section 6.4. Additional Conditions to the Obligations of the Parent
and the Purchaser to Effect the Merger....................53
Section 6.5. Additional Conditions to the Obligations of the Company
to Effect the Merger.....................................54
ARTICLE VII
Termination
Section 7.1. Termination...................................................55
Section 7.2. Effect of Termination.........................................56
ARTICLE VIII
Miscellaneous
Section 8.1. No Survival of Representations and Warranties.................57
Section 8.2. Expenses......................................................57
Section 8.3. Counterparts; Effectiveness...................................57
Section 8.4. Governing Law.................................................57
Section 8.5 Notices.......................................................57
Section 8.6. Assignment; Binding Effect....................................58
Section 8.7. Severability..................................................59
Section 8.8. Enforcement of Agreement......................................59
iii
<PAGE>
Section 8.9. Entire Agreement; No Third-Party Beneficiaries...............59
Section 8.10. Headings.....................................................59
Section 8.11. Definitions..................................................59
Section 8.12. Finders or Brokers...........................................60
Section 8.13. Amendment or Supplement......................................60
Section 8.14. Extension of Time, Waiver, Etc...............................60
Annex A -- Conditions to the Offer
Exhibit A -- Form of Affiliate Letter for Affiliates of Alumax Inc.
iv
<PAGE>
EXHIBIT A
FORM OF
AFFILIATE LETTER FOR AFFILIATES OF ALUMAX INC.
Aluminum Company of America
425 Sixth Avenue
Pittsburgh, Pennsylvania 15219
Alumax Inc.
3424 Peachtree Road, NE
Atlanta, Georgia 30326
AMX Acquisition Corp.
425 Sixth Avenue
Pittsburgh, Pennsylvania 15219
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of Alumax, Inc., a Delaware corporation (the "Company"), as
the term "affiliate" is (i) defined for purposes of paragraphs (c) and (d) of
Rule 145 of the rules and regulation (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Act"). Pursuant to the terms of the Agreement and
Plan of Merger, dated as of March 8, 1998 (the "Merger Agreement"), among
Aluminum Company of America, a Pennsylvania corporation (the "Parent"), AMX
Acquisition Corp., a Delaware corporation (the "Purchaser") and the Company
pursuant to which the Company will be merged with and into the Purchaser with
the Purchaser continuing as the surviving corporation (the "Merger").
Capitalized terms used in this letter without definition shall have the meanings
assigned to them in the Merger Agreement.
As a result of the Merger, I may receive shares of common stock, par
value $1.00 per share, of the Parent (the "Parent Common Stock"). I would
receive such Parent Common Stock in exchange for shares (or upon exercise of
options for
<PAGE>
shares) owned by me of common stock, par value $.01 per share, of
the Company (the "Company Common Stock").
1. I hereby represent, warrant and covenant to the Parent, the Purchaser and
the Company that in the event I receive any shares of Parent Common Stock as a
result of the Merger:
A. I shall not make any offer, sale, pledge, transfer or other
disposition of the shares of Parent Common Stock in violation of the Act or the
Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable limitations
upon my ability to sell, transfer or otherwise dispose of the shares of Parent
Common Stock, to the extent I felt necessary, with my counsel or counsel for the
Company.
C. I have been advised that the issuance of the shares of Parent Common
Stock to me pursuant to the Merger has been registered with the Commission under
the Act on a Registration Statement on Form S-4. However, I have also been
advised that, because at the time the Merger is submitted for a vote of the
stockholders of the Company (a) I may be deemed to be an affiliate of the
Company and (b) the distribution by me of the shares of Parent Common Stock has
not been registered under the Act, I may not sell, transfer or otherwise dispose
of the shares of Parent Common Stock issued to me in the Merger unless (i) such
sale, transfer or other disposition is made in conformity with the volume and
other limitations of Rule 145 promulgated by the Commission under the Act, (ii)
such sale, transfer or other disposition has been registered under the Act or
(iii) in the opinion of counsel reasonably acceptable to the Parent, or a "no
action" letter obtained by the undersigned from the staff of the Commission such
sale, transfer or other disposition is otherwise exempt from registration under
the Act.
D. I understand that the Parent is under no obligation to register the
sale, transfer or other disposition of the Parent Common Stock by me or on my
behalf under the Act or except as provided in paragraph 2(A) below, to take any
other action necessary in order to make compliance with an exemption from such
registration available.
E. I also understand that stop transfer instructions will be given to the
Companys' transfer agent with respect to the shares of Company Common Stock
2
<PAGE>
currently held and to Parent's transfer agent with respect to the shares of
Parent Common Stock issued to me in the Merger, and there will be placed on the
certificates for such shares of Parent Common Stock, a legend stating in
substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE
SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED [ ], 1998 BETWEEN THE
REGISTERED HOLDER HEREOF, ALUMINUM COMPANY OF AMERICA, ALUMAX INC., AND AMX
ACQUISITION CORP., A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICES OF ALUMINUM COMPANY OF AMERICA."
F. I also understand that unless a sale or transfer is made in conformity
with the provisions of Rule 145, or pursuant to a registration statement, Parent
reserves the right to put the following legend on the certificates issued to my
transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER
THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN ACQUIRED BY THE
HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND
MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF
1933."
G. Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of the Company as described in the first paragraph
of this letter, nor as a waiver of any rights I may have to object to any claim
that I am such an affiliate on or after the date of this letter.
3
<PAGE>
2. By Parent's acceptance of this letter, Parent hereby agrees with me as
follows:
A. For so long as and to the extent necessary to permit me to sell the
shares of Parent Common Stock pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Act, Parent shall (a) use its reasonable best
efforts to (i) file, on a timely basis, all reports and data required to be
filed with the Commission by it pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended, and (ii) furnish to me upon request a written
statement as to whether Parent has complied with such reporting requirements
during the 12 months preceding any proposed sale of the shares of Parent Common
Stock by me under Rule 145, and (b) otherwise use its reasonable efforts to
permit such sales pursuant to Rule 145 and Rule 144.
B. It is understood and agreed that certificates with the legends set
forth in paragraphs E and F above will be substituted by delivery of
certificates without such legend if (i) one year shall have elapsed from the
date the undersigned acquired the Parent Common Stock received in the Merger and
the provisions of Rule 145(d)(2) are then available to the undersigned, (ii) two
years shall have elapsed from the date the undersigned acquired the shares of
Parent Common Stock received in the Merger and the provisions of Rule 145(s)(3)
are then applicable to the undersigned, or (iii) Parent received either an
opinion of counsel, which opinion and counsel shall be reasonably satisfactory
to the Parent, or a "no-action" letter obtained by the undersigned from the
staff of the Commission, to the effect that the restrictions imposed by Rule 144
and Rule 145 under the Act no longer apply to the undersigned.
Very truly yours,
____________________________________
Name:
4
<PAGE>
Agreed and accepted this day of
,1998, by
ALUMINUM COMPANY OF AMERICA
By: ________________________________
Name:
Title:
ALUMAX INC.
By: ________________________________
Name:
Title:
AMX ACQUISITION CORP.
By: ________________________________
Name:
Title:
5
<PAGE>
Exhibit 4
ALUMAX INC.
- --------------------------------------------------------------------------------
Executive Separation Policy
- --------------------------------------------------------------------------------
As Amended and Restated 3/5/98
<PAGE>
ALUMAX INC.
EXECUTIVE SEPARATION POLICY
1. Purpose. The purpose of the Alumax Inc. Executive Separation Policy (the
"Policy") is to provide certain severance payments and benefits to designated
corporate officers, designated Executive Group members and other key executives
(each, an "Employee") in the event of termination of employment (other than by
reason of retirement, death or disability of the Employee) (i) within two years
after a Change in Control (as hereinafter defined) if the termination is by the
Company other than for Cause (as hereinafter defined) or by the Employee for
Good Reason (as hereinafter defined) or (ii) by the Company other than for Cause
(as hereinafter defined). This Policy shall not affect the right of the Company
to terminate an Employee's employment with or without Cause.
2. Definitions. The following definitions are applicable for purposes of
this Policy:
(a) "Annual Compensation" means the sum of (i) the Employee's annual
salary with the Company (before reduction pursuant to any deferred
compensation plan or agreement with the Company) immediately prior to the
date of termination of employment or, if greater, immediately prior to the
date of the Change of Control and (ii) the Employee's total annual
incentive award for the year of termination, assuming employment for the
full calendar year and that all applicable targets have been met, under the
Alumax Inc. 1993 Annual Incentive Plan, as the same may be modified,
replaced or added to by the Company from time to time.
(b) "Beneficial Owner" is defined in Section 8 of the Company's 1993
Long Term Incentive Plan.
(c) "Beneficiary" is defined in Section 2 of the Company's 1993 Long
Term Incentive Plan.
(d) "Cause" means (i) the willful and continued failure by the Employee
to perform substantially his duties with the Company (other than any such
failure resulting from the Employee's incapacity due to physical or mental
illness) after a written demand for substantial performance is delivered to
the Employee by the Chairman of the Board of Directors or the President of
the Company which specifically identifies the manner in which the Employee
has not substantially performed his duties, (ii) the willful engagement by
the Employee in conduct which is not authorized by the Board of Directors
of the Company or
<PAGE>
within the normal course of the Employee's business decisions and is known
by the Employee to be materially detrimental to the best interests of the
Company or any of its subsidiaries, or (iii) the willful engagement by the
Employee in illegal conduct or any act of serious dishonesty which
adversely affects, or, in the reason able estimation of the Board of
Directors of the Company, could in the future adversely affect, the value,
reliability or performance of the Employee to the Company in a material
manner. Any act, or failure to act, based upon authority given pursuant to
a resolution duly adopted by the Board of Directors of the Company or
based upon the advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by the Employee in good faith
and in the best interests of the Company. Notwithstanding the foregoing, an
Employee shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to the Employee a copy of the
resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board of Directors after
reasonable notice to the Employee and an opportunity for him, together with
his counsel, to be heard before the Board of Directors, finding that, in
the good faith opinion of the Board of Directors, the Employee was guilty
of the conduct set forth above in (i), (ii) or (iii) of this subparagraph
and specifying the particulars thereof in detail.
(e) "Change in Control" means as defined in Section 8 of the Company's
1993 Long Term Incentive Plan.
(f) "Company" means Alumax Inc., a Delaware corporation, or any
successor corporation.
(g) "Compensation Rate" means the result obtained by dividing the
Employee's Annual Compensation by 12.
(h) "Designated Participant" means (i) any corporate officer, (ii) any
Executive Group member, or (iii) any key executive of the Company or its
subsidiaries, who, in each case shall have been designated in writing by
the Chairman of the Board of the Company as eligible for severance payments
and benefits under this Policy; provided, however, that in no event shall a
Designated Participant be entitled to receive severance payments and
benefits under the Policy to the extent such severance payments and
benefits duplicate benefits actually received under an effective employment
agreement or any other separation policy, compensation or employee benefit
plan of the Company or its subsidiaries.
(i) "Executive Group" means as defined in Section 2 of the Company's
1983 Long Term Incentive Plan.
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<PAGE>
(j) "Excess Benefit Plan" means the Alumax Inc. 1993 Excess Benefit
Plan as amended on August 3, 1995 and as the same may be modified, replaced
or added to by the Company from time to time.
(k) "Good Reason" means:
(i) a reduction by the Company in the Employee's base salary as in
effect immediately prior to the Change in Control;
(ii) the failure by the Company to continue in effect any Plan (as
hereinafter defined) in which the Employee was participating at the time of
the Change in Control, unless such Plan (x) is replaced by a successor Plan
providing to Employee substantially similar compensation and benefits
(which replacement Plan shall continue to be subject to this provision) or
(y) terminates as a result of the normal expiration of such Plan in
accordance with its terms, as in effect immediately prior to the Change in
Control; or the taking of any other action, or the failure to act, by the
Company which would materially adversely affect the Employee's continued
participation in any of such Plans as compared to the terms of such
participation on the date of the Change in Control, including by materially
reducing the Employee's benefits in the future under any such Plans; or
(iii) the failure by the Company to provide and credit the Employee
with the number of paid vacation days to which he or she is entitled in
accordance with the Company's normal vacation policy as such policy was in
effect immediately prior to the Change in Control;
(iv) effecting a change in the position of the Employee which does
not represent a position commensurate in level, authority and
responsibilities with or a promotion from Employee's position with the
Company or any of its subsidiaries immediately prior to the date of the
Change in Control, or assigning the Employee responsibilities which are
materially inconsistent with such prior position; or
(v) the Company's requiring the Employee to be based anywhere more
than 45 miles from the location of Employee's office or the location of the
Company's executive offices immediately prior to the Change in Control,
except that the Company may require Employee to be based more than 45 miles
from such location if the relocation is to a principal executive office of
the Company or principal office of a major division or subsidiary of the
Company, provided that the Employee is reimbursed, on an after-tax basis,
for all reasonable expenses incurred and losses experienced in respect of
such relocation in accordance with Company's relocation policy prior to the
date of the Change in
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<PAGE>
Control, and except for required travel on the Company's business to an
extent substantially consistent with the business travel obligations which
the Employee undertook on behalf of the Company prior to the Change in
Control;
in each case after notice in writing from the Employee to the Company and a
period of 30 days after such notice during which the Company fails to
correct such conduct.
(l) "Plan" means any compensation plan of the Company such as an
incentive, stock option or restricted stock plan or any employee benefit
plan of the Company such as a pension, profit sharing, medical, dental or
life insurance plan.
(m) "Retirement Plan" means the 1993 Retirement Plan for Salaried
Employees of Alumax Inc. and its subsidiaries as amended and restated
through September 4, 1997 and as the same may be modified, replaced or
added to by the Company from time to time.
(n) "Years of Service" means the number of years (including partial
credit for partial years) that the Employee has been employed by the
Company and any of its subsidiaries and predecessors including AMAX Inc.
3. Eligibility. Each Designated Participant who was employed by the
Company or one of its subsidiaries immediately prior to termination shall be
eligible for the severance payments and benefits provided by Section 4 hereof.
4. Severance Payments and Benefits.
(a) An Employee who is eligible for termination payments and
benefits under this Policy pursuant to Section 3 shall be entitled to the
following upon termination of employment within two years following a
Change in Control (other than by reason of retirement, death or disability
entitling the Employee to long-term disability benefits under the Company's
long-term disability policy), if such termination is by the Company other
than for Cause or by the Employee for Good Reason:
(i) such Employee's annual salary otherwise payable through the
date of termination of employment, together with salary, incentive compen-
sation or benefits which have been earned or become payable as of the date
of termination but which have not yet been paid to the Employee;
(ii) a prorated portion of the award to the Employee for the
year of termination, assuming all applicable targets had been met, under
the
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<PAGE>
Alumax Inc. 1993 Annual Incentive Plan, as the same may be modified,
replaced or added to by the Company from time to time, with such award
prorated based on the number of days during the year of termination which
precede the Employee's termination;
(iii) a lump-sum severance payment equal to the product of the
Employee's Annual Compensation, multiplied by 3;
(iv) for a period of 36 months after the date of termination of
employment, benefits equivalent on an after-tax basis to the additional
benefits the Employee would have received under the Plans (excluding
incentive compensation, stock option and performance share plans) in which
the Employee was participating immediately prior to termination, as if the
Employee had received credit under such Plans for service and age with the
Company during such period following the Employee's termination, with such
benefits payable by the Company at the same times and in the same manner as
such benefits would have been received by the Employee under such Plans;
and
(v) for a period terminating on the earlier of 36 months follow-
ing the date of termination of employment and the commencement of
equivalent benefits from a new employer, maintenance in effect for the
continued benefit of the Employee and his or her dependents of:
(A) all insured and self-insured medical and dental benefit
plans of the Company in which the Employee was participating immediately
prior to termination, provided that the Employee's continued participation
is possible under the general terms and conditions of such plans (and any
applicable funding media) and the Employee continues to pay an amount equal
to the Employee's regular contribution for such participation; and
(B) the group life insurance and group disability insurance
policies of the Company then in effect for Employee;
provided, however, that if the Company so elects, or if such continued
participation is not possible under the general terms and conditions of
such plans or under such policies, the Company, in lieu of the foregoing,
shall arrange to have issued for the benefit of the Employee and the
Employee's dependents individual policies of insurance providing benefits
substantially similar (on an after-tax basis) to those described in this
paragraph (v), or, if such insurance is not available at a reasonable cost
to the Company, shall otherwise provide the Employee and the Employee's
dependents equivalent benefits (on an after-tax basis); provided further
that, in no event shall the Employee be required to pay
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<PAGE>
any premiums or other charges in an amount greater than that which the
Employee would have paid in order to participate in the Company's plans and
policies.
(b) An Employee who is eligible for severance payments and benefits
under this Policy pursuant to Section 3 shall be entitled to the following
upon termination of employment at any time prior to a Change in Control, if
such termination is by the Company or its subsidiaries other than for Cause
(but not if such termination is for retirement, death or disability
entitling the Employee to long-term disability benefits under the Company's
long-term disability policy, or by the Employee for any reason;
(i) the amount determined in accordance with clause (i) of
paragraph (a) of Section 4;
(ii) the amount determined in accordance with clause (ii) of
paragraph (a) of Section 4;
(iii) severance payments, at the date annual salary payments
would otherwise have been made, equal to the Employee's Compensation Rate
multiplied by the Employee's Years of Service; provided, however, that in
no event shall the amount payable to an Employee pursuant to this clause
(iii) be less than 0.5 times the Employee's Annual Compensation or greater
than 1.0 times the Employee's Annual Compensation with respect to
Designated Participants transferred from AMAX Inc., and 1.5 times the
Employee's Annual Compensation with respect to all other Designated
Participants; and
(iv) for a period terminating on the earlier of (a) the
expiration of a number of months and partial months following the date of
termination equal to the Employee's Years of Service, but in no event less
than six or more than 18, and (b) the commencement of equivalent benefits
from a new employer, maintenance in effect for the continued benefit of
the Employee and his or her dependents of:
(A) all insured and self-insured medical and dental benefit
plans of the Company in which the Employee was participating immediately
prior to termination, provided that the Employee's continued participation
is possible under the general terms and conditions of such plans (and any
applicable funding media) and the Employee continues to pay an amount equal
to the Employee's regular contribution for such participation; and
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<PAGE>
(B) the group life insurance and group disability insurance
policies of the Company then in effect for Employee;
provided, however, that if the Company so elects, or if such continued
participation is not possible under the general terms and conditions of
such plans or under such policies, the Company, in lieu of the foregoing,
shall arrange to have issued for the benefit of the Employee and the
Employee's dependents individual policies of insurance providing benefits
substantially similar (on an after-tax basis) to those described in this
paragraph (iv), or, if such insurance is not available at a reasonable cost
to the Company, shall otherwise provide to the Employee and the Employee's
dependents equivalent benefits (on a after-tax basis); provided, further
that, in no event shall the Employee be required to pay any premiums or
other charges in an amount greater than that which the Employee would have
paid in order to participate in the Company's plans and policies if still
employed during such period.
(c) All payments required by clauses (i), (ii) and (iii) of
paragraph (a) of this Section 4 and by clauses (i) and (ii) of paragraph
(b) of this Section 4 shall be paid not later than the fifteenth (15th) day
following the date of termination of employment.
(d) In the event of the death of an Employee, all payments hereunder
due to such Employee shall be paid to his or her Beneficiary.
(e) Notwithstanding anything in this Policy to the contrary, an
Employee shall not be entitled to any payments or benefits under Section
4(b) of this Policy, unless the Human Resources and Compensation Committee
of Board of Directors of the Company in its sole discretion provides
otherwise, in the event termination of employment results from the sale or
spin-off of a subsidiary, the sale of a division, other business unit or
facility in which the Employee was employed immediately prior to such sale,
and the Employee has been offered employment with the purchaser of such
subsidiary, division, other business unit or facility on substantially the
same terms and conditions under which the Employee worked prior to the
sale. Such terms and conditions must include an agreement or plan binding
on such purchaser or spun-off entity or business, providing that upon any
termination of employment with the purchaser of the kinds described in
Section 4(b) hereof within two years following such sale, the purchaser
shall:
(i) pay to such Employee an amount equal to the severance
payments that such Employee would have received under Section 4(b)(iii)
hereof if termination of employment had resulted in amounts being owed
thereunder at the time of such sale; and
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<PAGE>
(ii) pay or provide for the Employee or his or her dependents
the benefits described in Section 4(b)(iv) hereof for a period beginning
upon the Employee's termination of employment with the purchaser or
spun-off entity or business and terminating on the earlier of (a) the
expiration of a number of months and partial months following the date of
termination of employment with the purchaser equal to the Employee's Years
of Service to the date of such sale, but in no event less than six or more
than 18, and (b) the commencement of equivalent benefits from a new
employer following termination of employment with the purchaser or spun-off
entity or business.
(f) Notwithstanding anything in this Policy to the contrary, a
transfer of employment from the Company to a subsidiary or vice versa shall
not be considered a termination of employment for purposes of this Policy.
(g) Benefits paid to an Employee from the Excess Benefit Plan shall
include an amount equivalent to the additional benefit the Employee would
have received under The Retirement Plan if, for purposes of that Plan, the
definition of compensation included amounts for any payments made pursuant
to Section 4 of this Policy and if, for purposes of the Retirement Plan,
there was no limitation on the amount of compensation that could be taken
into account.
5. Excise Tax Gross-up. In the event that an Employee becomes entitled to
one or more payments (with a "payment" including, without limitation, the
vesting of an option or other non-cash benefit or property, whether pursuant to
the terms of this Agreement or any other Plan (the "Total Payments"), which are
or become subject to the tax imposed by Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code"), (or any similar tax that may hereafter be
imposed) (the "Excise Tax"), the Company shall pay to the Employee at the time
specified below an additional amount (the "Gross-up Payment") (which shall
include, without limitation, reimbursement for any penalties and interest that
may accrue in respect of such Excise Tax) such that the net amount retained by
the Employee, after reduction for any Excise Tax (including any penalties or
interest thereon) on the Total Payments and any federal, state and local income
or employment tax and Excise Tax on the Gross-up Payment provided for by this
Section 5, but before reduction for any federal, state or local income or
employment tax on the Total Payments, shall be equal to the product of any
deductions disallowed for federal, state or local income tax purposes because of
the inclusion of the Gross-up Payment in Employee's adjusted gross income
multiplied by the highest applicable marginal rate of federal, state or local
income taxation, respectively, for the calendar year in which the Gross-up
Payment is to be made.
For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amount of such Excise Tax,
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<PAGE>
(i) the Total Payments shall be treated as "parachute
payments" within the meaning of Section 280G(b)(2) of the Code, and all
"excess parachute payments" within the meaning of Section 280G(b)(1) of the
Code shall be treated as subject to the Excise Tax, unless, and except to
the extent that, in the written opinion of independent compensation
consultants or auditors of nationally recognized standing selected by the
Company and reasonably acceptable to the Employee ("Independent Auditors"),
the Total Payments (in whole or in part) do not constitute parachute
payments, or such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered within the meaning
of Section 280G(b)(4) of the code in excess of the base amount within the
meaning of Section 280G(b)(3) of the Code or are otherwise not subject to
the Excise Tax,
(ii) the amount of the Total Payments which shall be treated as
subject to the Excise Tax shall be equal to the lesser of (A) the total
amount of the Total Payments or (B) the amount of excess parachute payments
within the meaning of Section 280G(b)(1) of the Code (after applying clause
(i) above), and
(iii) the value of any non-cash benefits or any deferred payment
or benefit shall be determined by the Company's Independent Auditors
appointed pursuant to clause (a) above in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-up Payment, the
Employee shall be deemed (A) to pay federal income taxes at the highest marginal
rate of federal income taxation for the calendar year in which the Gross-up
Payment is to be made; (B) to pay any applicable state and local income taxes at
the highest marginal rate of taxation for the calendar in which the Gross-up
Payment is to be made, net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and local taxes if paid in
such year (determined without regard to limitations on deductions based upon the
amount of the Employee's adjusted gross income); and (C) to have otherwise
allowable deductions for federal, state and local income tax purposes at least
equal to those disallowed because of the inclusion of the Gross-up Payment in
the Employee's adjusted gross income. In the event that the Excise Tax is
subsequently determined to be less than the amount taken into account hereunder
at the time the Gross-up Payment is made, the Employee shall repay to the
Company at the time that the amount of such reduction in Excise Tax is finally
determined (but, if previously paid to the taxing authorities, not prior to the
time the amount of such reduction is refunded to the Employee or otherwise
realized as a benefit by the Employee) the portion of the Gross-up Payment that
would not have been paid if such Excise Tax had been applied in initially
calculating the Gross-up Payment, plus interest on the amount of such repayment
at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the
Excise
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<PAGE>
Tax is determined to exceed the amount taken into account hereunder at the time
the Gross-up Payment is made (including by reason of any payment the existence
or amount of which cannot be determined at the time of the Gross-up Payment),
the Company shall make an additional Gross-up Payment in respect of such excess
(plus any interest and penalties payable with respect to such excess) at the
time that the amount of such excess is finally determined.
The Gross-up Payment provided for above shall be paid on the thirtieth
day (or such earlier date as the Excise Tax becomes due and payable to the
taxing authorities) after it has been determined that the Total Payments (or any
portion thereof) are subject to the Excise Tax; provided, however, that if the
amount of such Gross-up Payment or portion thereof cannot be finally determined
on or before such day, the Company shall pay to the Employee on such day an
estimate, as determined by the Company's Independent Auditors appointed pursuant
to clause (i) above, of the minimum amount of such payments and shall pay the
remainder of such payments (together with interest at the rate provided in
Section 127(b)(2)(B) of the Code), as soon as the amount thereof can be
determined. In the event that the amount of the estimated payments exceeds the
amount subsequently determined to have been due, such excess shall constitute a
loan by the Company to the Employee, payable on the fifth day after demand by
the Company (together with interest at the rate provided in Section
1274(b)(2)(B) of the code). If more than one Gross-up Payment is made, the
amount of each Gross-up Payment shall be computed as not to duplicate any prior
Gross-up Payment. The Company shall have the right to control all proceedings
with the Internal Revenue Service that may arise in connection with the
determination and assessment of the Excise Tax and, at its sole option, the
Company may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with any taxing authority in respect of such Excise Tax
(including any interest or penalties thereon); provided, however, that the
Company's control over any such proceedings shall be limited to issues with
respect to which a Gross-up Payment would be payable hereunder and the Employee
shall be entitled to settle or contest any other issue raised by the Internal
Revenue Service or any other taxing authority. The Employee shall cooperate with
the Company in any proceedings relating to the determination and assessment of
the Excise Tax and shall not take any position or action that would materially
increase the amount of any Gross-up Payment hereunder.
6. Withholding. The Company shall have the right to deduct from all
payments hereunder any taxes required by law to be withheld therefrom.
7. No Right To Employment. Nothing in this Policy shall be construed as
giving any person the right to be retained in the employment of the Company or
any subsidiary, nor shall it affect the right of the Company or any subsidiary
to dismiss an Employee without any liability except as provided in this Policy.
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<PAGE>
8. Legal Fees. The Company shall pay all legal fees and related expenses
incurred by an Employee in seeking to obtain or enforce any payment, benefit or
right provided by this Policy; provided; however, that the Employee shall be
required to repay any such amounts to the Company to the extent that an
arbitrator or a court of competent jurisdiction issues a final, unappealable
order setting forth a determination that the position taken by the Employee was
frivolous or advanced in bad faith.
9. Amendment and Termination. The Board of Directors of the Company may
amend or terminate this Policy at any time prior to a Change in Control. This
Policy may not be amended or terminated at any time after a Change in Control in
any manner adverse to an Employee without the prior consent of such Employee.
10. Governing Law; Arbitration. The validity, construction, and effect of
this Policy and any rules and regulations relating to this Policy shall be
determined in accordance with Delaware General Corporation Law, to the extent
applicable, other laws (including those governing contracts) of the State of
Delaware, without giving effect to principles of conflicts of laws, and
applicable federal law. If any provision hereof shall be held by a court of
competent jurisdiction to be invalid and unenforceable, the remaining
provisions hall continue to be fully effective. Any dispute or controversy
arising under or in connection with this Policy shall be settled exclusively by
arbitration in Atlanta, Georgia by three arbitrators in accordance with the
rules of the American Arbitration Association in effect at the time of
submission to arbitration. Judgment may be entered on the arbitrators' award in
any court having jurisdiction. For purposes of settling any dispute or
controversy arising hereunder or for the purpose of entering any judgment upon
an award rendered by the arbitrators, the Company and the Employee hereby
consent to the jurisdiction of any or all of the following courts: (i) the
United States District Court for the Northern District of Georgia, (ii) any of
the courts of the State of Georgia, or (iii) any other court having
jurisdiction. The Company and the Employee hereby waive, to the fullest extent
permitted by applicable law, any objection which it may now or hereafter have to
such jurisdiction and any defense of inconvenient forum. The Company and the
Employee hereby agree that a judgment upon an award rendered by the arbitrators
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.
11. Nonassignability. Compensation and benefits under the Policy may not be
assigned by the Employee. The terms and conditions of this Policy shall be
binding on the successors and assigns of the Company.
12. No Duty to Mitigate. No employee shall be required to mitigate, by
seeking employment or otherwise, the amount of any payment that the Company
becomes obligated to make under this Policy, and, except as expressly provided
in this Policy, amounts or other benefits to be paid or provided to an Employee
pursuant to this
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<PAGE>
Policy shall not be reduced by reason of the Employee's obtaining other
employment or receiving similar payments or benefits from another employer.
13. Duplicate Payments or Benefits.
(a) Except to the extent that the terms of this Policy confer compensa-
tion or benefits that are more favorable to Employee than are available
under any other employee (including executive) benefit of executive
compensation plan of the company in which Employee is a participant,
Employee's rights under any such employee (including executive) benefit
plan or executive compensation plan shall be determined in accordance with
the terms of such plan (as it may be modified or added to by the Company
from time to time).
(b) This Policy constitutes the entire understanding between the
Company and Employee relating to employment of Employee by the Company and
its subsidiaries and supersedes and cancels all prior agreements and
understandings with respect to the subject matter of this Policy. Employee
shall not be entitled to any payment or benefit under this Policy which
duplicates a payment or benefit received or receivable by Employee under
such prior agreements and understandings or under any employee (including
executive) benefit plan or executive compensation plan of the Company.
14. Effective Date. This Policy is effective as of November 15, 1993.
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<PAGE>
Exhibit 5
ALUMAX INC.
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SEPARATION POLICY FOR CORPORATE EMPLOYEES
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03/05/98
<PAGE>
ALUMAX INC.
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SEPARATION POLICY FOR CORPORATE EMPLOYEES
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Page
----
1. Purpose...................................................................1
2. Definitions...............................................................1
3. Eligibility...............................................................4
4. Severance Payments and Benefits...........................................4
5. Withholding...............................................................7
6. No Right to Employment....................................................7
7. Legal Fees................................................................7
8. Amendment and Termination.................................................7
9. Governing Law; Arbitration................................................7
10. Nonassignability..........................................................8
11. Administration and Claims.................................................8
12. No Duty to Mitigate.......................................................8
13. Duplicate Payments or Benefits............................................8
14. Effective Date............................................................9
<PAGE>
ALUMAX INC.
SEPARATION POLICY FOR CORPORATE EMPLOYEES
1. Purpose. The purpose of the Alumax Inc. Separation Policy for
Corporate Employees (the "Policy") is to provide certain severance payments and
benefits to designated Corporate Employees (each, an "Employee") in the event of
termination of employment (other than by reason of retirement, death or
disability of the Employee) (i) within two years after a Change in Control (as
hereinafter defined) if the termination is by the Company other than for Cause
(as hereinafter defined) or by the Employee for Good Reason (as hereinafter
defined) or (ii) by the Company other than for Cause (as hereinafter defined).
This Policy shall not affect the right of the Company to terminate an Employee's
employment with or without Cause.
2. Definitions. The following definitions are applicable for purposes
of this Policy:
(a) "Annual Compensation" means the sum of (i) the Employee's annual
salary with the Company (before reduction pursuant to any deferred
compensation plan or agreement with the Company) immediately prior to
the date of termination of employment or, if greater, immediately prior
to the date of the Change in Control and (ii) the Employee's total
annual incentive award for the year of termination, assuming employment
for the full calendar year and that all applicable targets have been
met, under the Alumax Inc. 1993 Annual Incentive Plan, as the same may
be modified, replaced or added to by the Company from time to time.
(b) "Beneficial Owner" is defined in Section 8 of the Company's 1993
Long Term Incentive Plan.
(c) "Beneficiary" is defined in Section 2 of the Company's 1993 Long
Term Incentive Plan.
(d) "Cause" means (i) the willful and continued failure by the
Employee to perform substantially his duties with the Company (other
than any such failure resulting from the Employee's incapacity due to
physical or mental illness) after a written demand for substantial
performance is delivered to the Employee by the Chairman and Chief
Executive Officer or the President of the Company which specifically
identifies the manner in which the Employee has not substantially
performed his duties, (ii) the willful engagement by the Employee in
conduct which is not authorized by the Board of Directors of the
Company or within the normal course of the Employee's business
decisions and is known by
<PAGE>
the Employee to be materially detrimental to the best interests of the
Company or any of its subsidiaries, or (iii) the willful engagement by
the Employee in illegal conduct or any act of serious dishonesty which
adversely affects, or, in the reasonable estimation of the Chairman and
Chief Executive Officer or the President of the Company, could in the
future adversely affect, the value, reliability or performance of the
Employee to the Company in a material manner. Any act, or failure to
act, based upon authority given pursuant to a resolution duly adopted
by the Board of Directors of the Company or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or
omitted to be done, by the Employee in good faith and in the best
interests of the Company.
(e) "Change in Control" means as defined in Section 8 of the
Company's 1993 Long Term Incentive Plan.
(f) "Company" means Alumax Inc., a Delaware corporation, or any
successor corporation.
(g) "Compensation Rate" means the result obtained by dividing the
Employee's Annual Compensation by 52.
(h) "Corporate Employee" means all regular, salaried exempt and non-
exempt personnel (i) of the Company at the Company's headquarters,
other than Corporate Officers; (ii) of Alumax Technical Services Inc.
at Golden, Colorado; (iii) of Alumax International, Inc. at Golden,
Colorado; (iv) of Alumax Asia Pacific Pty Limited in Sydney, Australia;
(v) of Alumax de Mexico S.A. de C.V. in Col. Napoles, Mexico; (vi) of
Alumax International Co. in Beijing, China and (vii) of Alumax
Materials Management, Inc. at Norcross, Georgia; Cressona, and
Lancaster, Pennsylvania; Goose Creek, South Carolina, Texarkana, Texas
and West Chicago, Illinois.
(i) "Corporate Officers" means any officers or designated key
executives of the Company who upon termination will otherwise receive
severance payments and benefits under an effective employment agreement
with the Company or under the Alumax Inc. Executive Separation Policy.
(j) "Designated Participant" means any Corporate Employee.
(k) "Good Reason" means:
(i) a reduction by the Company in the Employee's base salary as
in effect immediately prior to the Change in Control;
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<PAGE>
(ii) the failure by the Company to continue in effect any Plan
(as hereinafter defined) in which the Employee was participating at the
time of the Change in Control, unless such Plan (x) is replaced by a
successor Plan providing to Employee substantially similar compensation
and benefits (which replacement Plan shall continue to be subject to
this provision) or (y) terminates as a result of the normal expiration
of such Plan in accordance with its terms, as in effect immediately
prior to the Change in Control; or by the taking of any other action,
or the failure to act, by the Company which would materially adversely
affect the Employee's continued participation in any of such Plans as
compared to the terms of such participation on the date of the Change
in Control, including by materially reducing the Employee's benefits in
the future under any such Plans; or
(iii) the failure by the Company to provide and credit the
Employee with the number of paid vacation days to which he or she is
entitled in accordance with the Company's normal vacation policy as
such policy was in effect immediately prior to the Change in Control;
(iv) effecting a change in the position of the Employee which
does not represent a position commensurate in level, authority and
responsibilities with or a promotion from Employee's position with the
Company or any of its subsidiaries immediately prior to the date of the
Change in Control, or assigning the Employee responsibilities which are
materially inconsistent with such prior position; or
(v) the Company's requiring the Employee to be based anywhere
more than 45 miles from the location of Employee's office or the
location of the Company's executive offices immediately prior to the
Change in Control, except that the Company may require Employee to be
based more than 45 miles from such location if the relocation is to a
principal executive office of the Company or principal office of a
major division or subsidiary of the Company, provided that the Employee
is reimbursed, on an after-tax basis, for all reasonable expenses
incurred and losses experienced in respect of such relocation in
accordance with Company's relocation policy prior to the date of the
Change in Control, and except for required travel on the Company's
business to an extent substantially consistent with the business travel
obligations which the Employee undertook on behalf of the Company prior
to the Change in Control;
in each case after notice in writing from the Employee to the Company
and a period of 30 days after such notice during which the Company
fails to correct such conduct.
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<PAGE>
(l) "Named Subsidiary" means Alumax Technical Services, Inc.; Alumax
International, Inc.; Alumax Asia Pacific Pty Limited; Alumax de Mexico
S.A. de C.V.; Alumax International Co. and Alumax Materials Management,
Inc.
(m) "Plan" means any compensation plan of the Company such as an
incentive, stock option or restricted stock plan or any employee
benefit plan of the Company such as a pension, profit sharing, medical,
dental or life insurance plan.
(n) "Salary" means the Employee's base annual salary with the
Company or a Named Subsidiary (before reduction pursuant to any
deferred compensation plan or agreement with the Company or a Named
Subsidiary) as in effect immediately prior to the date of termination
of employment or, if greater, immediately prior to the date of the
Change in Control.
(o) "Salary Rate" means the result obtained by dividing the
Employee's salary by 52.
(p) "Years of Service" means the number of years (including partial
credit for partial years) that the Employee has been employed by the
Company and any of its subsidiaries and predecessors including AMAX
Inc.
3. Eligibility. Each Corporate Employee who was employed by the Company
or a Named Subsidiary immediately prior to termination shall be
eligible for the severance payments and benefits provided by Section 4
hereof.
4. Severance Payments and Benefits.
(a) A Corporate Employee who is eligible for termination payments
and benefits under this Policy pursuant to Section 3 shall be entitled
to the following upon termination of employment within two years
following a Change in Control (other than by reason of retirement,
death or disability entitling the Employee to long-term disability
benefits under the Company's long-term disability policy), if such
termination is by the Company other than for Cause or by the Employee
for Good Reason:
(i) such Employee's annual salary otherwise payable through the
date of termination of employment, together with salary, incentive
compensation and benefits which have been earned or become payable as
of the date of termination but which have not yet been paid to the
Employee;
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<PAGE>
(ii) a prorated portion of the award to the Employee for the
year of termination, assuming all applicable targets had been met,
under the Alumax Inc. 1993 Annual Incentive Plan, as the same may be
modified, replaced or added to by the Company from time to time, with
such award prorated based on the number of days during the year of
termination which precede the Employee's termination;
(iii) a lump-sum severance payment equal to the sum of (A) four
times the Employee's Compensation Rate multiplied by the Employee's
Years of Service, plus (B) the Employee's Compensation Rate multiplied
by a fraction the numerator of which is Employee's Annual Compensation
and the denominator of which is 10,000; provided, however, that in no
event shall the amount payable to an Employee pursuant to this clause
(iii) be less than .5 times the Employee's Annual Compensation or
greater than 1.5 times the Employee's Annual Compensation; and
(iv) continued coverage, for a period of months equal to the
lump-sum determined under clause (iii) above divided by Employee's
Annual Compensation and multiplied by 12 from the date of termination
of employment, under the Company's medical, dental, disability and life
insurance plans in which such Employee participated immediately prior
to the date of termination of employment, on the same basis as in
effect immediately prior to the date of termination of employment
(including required employee contributions, if any). Such coverage may
be discontinued by the Company in the event that the Employee becomes
reemployed and the new employer of the Employee has a comparable
insurance program. The comparability of the new employer's program to
that of the Company is to be determined by the Company on a
category-by-category basis with respect to life, medical, dental and
disability coverage.
(b) An Employee who is eligible for severance payments and benefits
under this Policy pursuant to Section 3 shall be entitled to the
following upon termination of employment at any time prior to a Change
in Control, if such termination is by the Company or a Named Subsidiary
other than for Cause (but not if such termination is for any other
reason, including retirement, death or disability entitling the
Employee to long-term disability benefits under the Company's long-term
disability policy, or by the Employee for any reason or by the Company
for Cause):
(i) the amount determined in accordance with clause (i) of
paragraph (a) of Section 4;
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<PAGE>
(ii) the amount determined in accordance with clause (ii) of
paragraph (a) of Section 4;
(iii) severance payments, at the dates annual salary payments
would otherwise have been made, equal to the sum of (A) two times the
Employee's Compensation Rate multiplied by the Employee's Years of
Service plus (B) the Employee's Salary Rate multiplied by a fraction,
the numerator of which is the Employee's Salary and the denominator of
which is $10,000; provided, however, that in no event shall the amount
payable to an Employee pursuant to this clause (iii) be less than 0.25
times the Employee's Annual Compensation or greater than 1.5 times the
Employee's Salary; and
(iv) continued benefit coverage for a period of six months
from the date of termination of employment, to the extent specified in
clause (iv) of paragraph (a) of Section 4.
(c) All payments required by clauses (i), (ii) and (iii) of
paragraph (a) of this Section 4 and by clauses (i) and (ii) of
paragraph (b) of this Section 4 shall be paid not later than the
fifteenth (15th) day following the date of termination of employment.
(d) In the event of the death of an Employee, all payments hereunder
due to such Employee shall be paid to his or her Beneficiary.
(e) Notwithstanding anything in this Policy to the contrary, an
Employee shall not be entitled to any payments or benefits under
Section 4(b) of this Policy, unless the Human Resources and
Compensation Committee of Board of Directors of the Company in its sole
discretion provides otherwise, in the event termination of employment
results from the sale or spin-off of a subsidiary, the sale of a
division, other business unit or facility in which the Employee was
employed immediately prior to such sale, and the Employee has been
offered employment with the purchaser of such subsidiary, division,
other business unit or facility on substantially the same terms and
conditions under which the Employee worked prior to the sale. Such
terms and conditions must include an agreement or plan binding on such
purchaser or spun-off entity or business, providing that upon any
termination of employment with the purchaser of the kinds described in
Section 4(b) hereof within two years following such sale, the purchaser
shall:
(i) pay to such Employee an amount equal to the severance
payments that such Employee would have received under Section 4(b)(iii)
hereof if termination of employment had resulted in amounts being owed
thereunder at the time of such sale; and
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<PAGE>
(ii) pay or provide for the Employee and his or her dependents
the benefits described in Section 4(b)(iv) hereof for a period
beginning upon the Employee's termination of employment with the
purchaser or spun-off entity or business and terminating on the earlier
of (a) the expiration of a number of months and partial months
following the date of termination of employment with the purchaser
equal to the Employee's Years of Service to the date of such sale, but
in no event less than six or more than 18, and (b) the commencement of
equivalent benefits from a new employer following termination of
employment with the purchaser or spun-off entity or business.
(f) Notwithstanding anything in this Policy to the contrary, a
transfer of employment from the Company to a subsidiary or vice versa
shall not be considered a termination of employment for purposes of
this Policy.
5. Withholding. The Company shall have the right to deduct from all
payments hereunder any taxes required by law to be withheld therefrom.
6. No Right to Employment. Nothing in this Policy shall be construed as
giving any person the right to be retained in the employment of the Company or
any subsidiary, nor shall it affect the right of the Company or any subsidiary
to dismiss an Employee without any liability except as provided in this Policy.
7. Legal Fees. The Company shall reimburse all legal fees and related
expenses incurred by an Employee in seeking to obtain or enforce any payment,
benefit or right provided by this Policy; provided, however, that the Employee
shall not be reimbursed for any such amounts to the extent that an arbitrator or
a court of competent jurisdiction issues a final, unappealable order setting
forth a determination that the position taken by the Employee was frivolous or
advanced in bad faith.
8. Amendment and Termination. The Board of Directors of the Company may
amend or terminate this Policy at any time prior to a Change in Control. This
Policy may not be amended or terminated at any time after a Change in Control in
any manner adverse to an Employee without the prior consent of such Employee.
9. Governing Law; Arbitration. The validity, construction, and effect
of this Policy and any rules and regulations relating to this Policy shall be
determined in accordance with Delaware General Corporation Law, to the extent
applicable, other laws (including those governing contracts) of the State of
Delaware, without giving effect to principles of conflicts of laws, and
applicable federal law. If any provision hereof shall be held by a court of
competent jurisdiction to be invalid and unenforceable, the remaining provisions
shall continue to be fully effective. Any dispute or controversy arising under
or in connection with this Policy shall be settled exclusively by arbitration in
Atlanta, Georgia by three arbitrators in accordance with the rules of the
American
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<PAGE>
Arbitration Association in effect at the time of submission to arbitration.
Judgment may be entered on the arbitrators' award in any court having
jurisdiction. For purposes of settling any dispute or controversy arising
hereunder or for the purpose of entering any judgment upon an award rendered by
the arbitrators, the Company and the Employee hereby consent to the jurisdiction
of any or all of the following courts: (i) the United States District Court for
the Northern District of Georgia, (ii) any of the courts of the State of
Georgia, or (iii) any other court having jurisdiction. The Company and the
Employee hereby waive, to the fullest extent permitted by applicable law, any
objection which it may now or hereafter have to such jurisdiction and any
defense of inconvenient forum. The Company and the Employee hereby agree that a
judgment upon an award rendered by the arbitrators may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
10. Nonassignability. Compensation and benefits under the Policy may
not be assigned by the Employee. The terms and conditions of this Policy shall
be binding on the successors and assigns of the Company.
11. Administration and Claims. This Policy shall be administered by
Philip Gaetano. The administrator shall provide adequate written notice to any
employee whose claim for benefits hereunder has been denied, setting forth
specific reasons for such denial, written in a manner calculated to be
understood by such Employee, and afford such Employee a full and fair review of
the decision denying the claim, in accordance with the applicable requirements
(if any) of the Employee Retirement Income Security Act of 1974, as amended.
12. No Duty to Mitigate. No Employee shall be required to mitigate, by
seeking employment or otherwise, the amount of any payment that the Company
becomes obligated to make under this Policy, and, except as expressly provided
in this Policy, amounts or other benefits to be paid or provided to an Employee
pursuant to this Policy shall not be reduced by reason of the Employee's
obtaining other employment or receiving similar payments or benefits from
another employer.
13. Duplicate Payments or Benefits.
(a) Except to the extent that the terms of this Policy confer
compensation or benefits that are more favorable to Employee than are
available under any other employee (including executive) benefit or
compensation plan of the Company in which Employee is a participant
relating to severance, Employee's rights under any such employee
(including executive) benefit plan or compensation plan shall be
determined in accordance with the terms of such plan (as it may be
modified or added to by the Company from time to time).
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<PAGE>
(b) This Policy constitutes the entire understanding between the
Company and Employee relating to employment of Employee by the Company
and its subsidiaries and supersedes and cancels all prior agreements
and understandings with respect to the subject matter of this Policy.
Employee shall not be entitled to any payment or benefit under this
Policy which duplicates a payment or benefit received or receivable by
Employee under such prior agreements and understandings or under any
employee (including executive) benefit plan or executive compensation
plan or policy of the Company.
14. Effective Date. This Policy is effective as of March 5, 1998.
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