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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
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
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
9
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.
10
(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
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
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
13
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
14
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
15
. 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)
Alcoa Alumax
1997....................... 12.2% 10.0%
1996....................... 10.8% 7.3%
1995....................... 12.7% 10.5%
. 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
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)
Alcoa Alumax
1997....................... 12.2% 10.0%
1996....................... 10.8% 7.3%
1995....................... 12.7% 10.5%
. 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
. 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
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
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
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
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION
------- -----------
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)).
- --------
* Included in Schedule 14D-9 mailed to stockholders.
22
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
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
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.
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT; MATERIAL
POSITIONS HELD DURING
THE PAST FIVE YEARS AND
NAME, AGE AND CURRENT BUSINESS ADDRESS BUSINESS ADDRESS THEREOF
-------------------------------------- ----------------------------
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.
S-2
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT; MATERIAL
POSITIONS HELD DURING
THE PAST FIVE YEARS AND
NAME, AGE AND CURRENT BUSINESS ADDRESS BUSINESS ADDRESS THEREOF
-------------------------------------- ----------------------------
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.
S-3
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:
NAME OF DIRECTOR AGE BUSINESS EXPERIENCE
---------------- --- -------------------
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.
S-4
NAME OF DIRECTOR AGE BUSINESS EXPERIENCE
---------------- --- -------------------
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.
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:
YEARS
NAME OFFICE AGE AS OFFICER
---- ------ --- ----------
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
S-5
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
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.
SHARES
AMOUNT AND NATURE ACQUIRABLE
OF BENEFICIAL WITHIN 60 PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP(A) DAYS(B) CLASS
- ------------------------ ----------------- ---------- ----------
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%
- --------
* 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
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:
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT OF
OF BENEFICIAL OWNER OWNERSHIP CLASS
- ------------------- ---------- ----------
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
- --------
(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
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
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
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
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)
- ----------------- ---- ------- --------- ------------ ------------ ---------- ------- ------------
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
- --------
(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
(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.
DISABILITY
THRIFT PLAN LIFE INSURANCE INSURANCE
NAME CONTRIBUTIONS RELATED BENEFITS PREMIUM
- ---- ------------- ---------------- ----------
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
- --------
(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 $500,000,
subject to periodic review. The agreement also provides for awards of
stock units, all of which have been granted. For additional information
concerning Mr. Johnston's employment agreement see "Executive Employment
and Separation Agreements".
(H) Mr. Linard joined the Company in 1996 and was elected a Vice President of
the Company in December of that year. In September 1997, he was elected
Senior Vice President and Group Executive of the Company.
(I) Mr. Greenberg joined the Company in 1996 and was elected a Vice President
of the Company in December of that year.
S-12
OPTION GRANTS IN THE LAST FISCAL YEAR
The following table sets forth certain information concerning non-qualified
stock options granted by the Company to Messrs. Johnston, Linard, Wolfe and
Greenberg under the Long Term Plan during the 1997 fiscal year. No stock
options were granted to Mr. Born during the 1997 fiscal year. The data in the
column shown below relating to the hypothetical grant date present value of
stock options granted in 1997 are presented pursuant to Commission rules and
are calculated under the modified Black-Scholes Model for pricing options. The
Company is not aware of any model or formula which will determine with
reasonable accuracy a present value for stock options based on future unknown
factors. The actual amount, if any, realized upon the exercise of stock
options will depend upon the market price of the Shares relative to the
exercise price per share of the stock option at the time the stock option is
exercised. There is no assurance that the hypothetical grant date present
values of the stock options reflected in this table actually will be realized.
OPTION GRANTS IN THE LAST FISCAL YEAR
NUMBER OF PERCENT OF
SECURITIES TOTAL
UNDERLYING OPTIONS EXERCISE GRANT DATE
GRANT OPTIONS GRANTED TO ALL PRICE EXPIRATION PRESENT VALUE
NAME DATE GRANTED(A) EMPLOYEES(B) ($/SH) DATE(C) ($)(D)
- ---- -------- ---------- -------------- -------- ---------- -------------
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
- --------
(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
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
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
---- ----------- ------------- ----------- -------------
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
- --------
(A) Based on a price of $34.25, the per share closing price of the Shares on
the New York Stock Exchange on December 31, 1997.
Performance-Based Restricted Stock Units Awarded in the Last Fiscal Year
The table below indicates the number and value of performance-based
restricted stock units (with dividend equivalents) awarded in the 1997 fiscal
year under the Long Term Plan to each of the persons named in the Summary
Compensation Table. Each unit is equivalent to one Share. Units ordinarily
vest after a ten-year service period. Accelerated vesting and payment of all
or a portion of the units may occur on completion of a three-year performance
period ending December 31, 1999, provided that certain performance goals
established by the Human Resources and Compensation Committee of the Board of
Directors for such period based on corporate cumulative net income are
achieved. To the extent these goals are not met and accelerated vesting does
not occur the units vest and will be paid out on completion of the ten-year
service period. The value attributable to units awarded in 1997 to each of the
persons named in the Summary Compensation Table is reflected in the
"Restricted Stock" column for 1997 of such Table.
LONG TERM INCENTIVE PLAN--AWARDS IN THE LAST FISCAL YEAR
NUMBER OF VALUE
RESTRICTED STOCK OF UNITS
NAME UNITS AWARDED AWARDED ($)(A)
---- ---------------- --------------
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
- --------
(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
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
ESTIMATED ANNUAL PENSION FOR
REPRESENTATIVE YEARS OF CREDITED SERVICE
-------------------------------------------------------------------------------
HIGHEST
THREE-YEAR
AVERAGE
COMPENSATION 5 10 15 20 25 30 35 40
- ------------ -------- -------- -------- -------- ---------- ---------- ---------- ----------
$ 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
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
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,
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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
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