EXHIBIT 99.1
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The executive officers of ASARCO and Cyprus Amax and the members of the
ASARCO and Cyprus Amax boards of directors have interests in the business
combination that are different from, or in addition to, the interests, of
stockholders generally. Several executive officers of ASARCO and Cyprus Amax,
including some officers who are also directors, have employment or severance
agreements and are or may become entitled to specific benefits under employee
benefit plans as a result of the business combination. Each of the employee-
directors of ASARCO and Cyprus Amax may be entitled to receive compensation if
the business combination is completed. The ASARCO and Cyprus Amax boards of
directors were aware of and discussed these potentially conflicting interests
when they approved the business combination.
62
Cyprus Amax Employment Arrangements
Change of control severance agreements are in effect between Cyprus Amax
and its eight executive officers, including Messrs. Ward, Malys, Clevenger,
Philip C. Wolf and John Taraba.
Under the change of control severance agreements, if, during the three-year
period following a change of control, the employment of a covered executive is
terminated by Cyprus Amax other than for cause or due to death or disability, or
employment is terminated by the covered executive for good reason (including a
termination for any reason during the 30-day period following the first
anniversary of a change of control, other than in the case of Mr. Taraba and two
of the three other executive officers), the covered executive will be entitled
to receive a cash severance payment consisting of the following amounts:
. a pro rata annual bonus through the date of termination, based on the
higher of (1) the target annual bonus for the year prior to the change
of control and (2) the annual bonus earned in the most recent fiscal
year following the change of control (the "highest annual bonus") and,
in the case of Mr. Taraba and two of the three other executive officers,
based on the highest target annual bonus for the year prior to the
change of control (the "target annual bonus"), plus
. three times (two times in the case of Mr. Taraba and two of the three
other executive officers) the sum of the covered executive's base salary
and the highest annual bonus (target annual bonus in the case of Mr.
Taraba and two of the three other executive officers).
The change of control severance agreements also provide for the payment of
any unpaid amounts due the executive under other benefit plans of Cyprus Amax
and any employment agreements between Cyprus Amax and the executive, but not for
duplicate benefits. If any amounts payable to the executives under the change
of
64
control severance agreements or otherwise would be subject to the excise tax
under section 4999 of the U.S. tax code, an additional payment will be made so
that after the payment of all income and excise taxes, the covered executive
will be in the same after-tax position as if no excise tax under section 4999
had been imposed. However, if the executive would not receive a net after-tax
benefit of at least $50,000 after making these additional payments, no
additional payments will be made on account of the excise tax, and, instead, the
payments otherwise due to the covered executive will be reduced as necessary to
prevent the application of the excise tax.
The transactions contemplated by the merger agreement will not constitute a
change of control within the meaning of the change of control severance
agreements. However, in connection with the business combination, the Cyprus
Amax Board took action to ensure that in the event a covered executive is not
employed by Asarco Cyprus, he will be entitled to receive the benefits as if his
employment was terminated other than for "cause" or was terminated by the
executive for "good reason" under the change of control severance agreements.
Assuming the Cyprus Amax merger occurs on September 30, 1999, if the employment
of Messrs. Ward, Malys, Clevenger, Wolf and Taraba were to be terminated
immediately following the effective time of the Cyprus Amax merger, the
estimated amounts of the cash severance payments (as described above) payable to
each of these executive officers would be $8.93 million; $2.06 million; $2.09
million; $1.55 million, and $820,000, respectively. Assuming the Cyprus Amax
merger occurs on September 30, 1999, if the employment of the three other
executive officers were to be terminated immediately following the effective
time of the Cyprus Amax merger, the estimated aggregate amount of the cash
severance payments (as described above) payable to these executive officers as a
group would be $2.60 million. As provided for in the merger agreement, Mr. Ward
will serve as the Chairman of the Board and Co-Chief Executive Officer of Asarco
Cyprus and Mr. Clevenger will serve as Executive Vice President and Chief
Operating Officer of Asarco Cyprus following the mergers. See "The Merger
Agreement--Asarco Cyprus Following the Mergers."
Employment agreements are also in effect between Cyprus Amax and each of
Messrs. Ward, Malys, Clevenger, Wolf and Taraba. Pursuant to Mr. Ward's
employment agreement, if his employment is terminated by Cyprus Amax other than
due to breach of covenant, or by Mr. Ward for good reason, he will be entitled
to receive a payment equal to his salary and bonus through December 31, 2000,
plus the actuarial equivalent of the retirement benefits under the Cyprus Amax
retirement plans calculated as if he had remained employed through December 31,
2000. Pursuant to the employment agreements with each of Messrs. Malys,
Clevenger, Wolf and Taraba, if the employment of the executive is terminated by
Cyprus Amax other than for cause, or by the executive for good reason, the
executive will be entitled to receive a payment equal to the accrued benefit
under the Cyprus Amax retirement plans calculated as if the executive had
remained employed until the date he would have first been eligible to receive an
immediately payable retirement benefit (but for no less than an 18-month
period). The factors and assumptions used to calculate these amounts vary over
time; however, based on reasonable factors and assumptions and assuming the
Cyprus Amax merger occurs on September 30, 1999, if the employment of Messrs.
Ward, Malys, Clevenger, Wolf and Taraba were to be terminated immediately
following the effective time of the Cyprus Amax merger, the estimated amounts of
the additional retirement benefits payable pursuant to the terms of the
employment agreements to each
of the executive officers is $3.92 million, $424,000, $1.14 million, $633,000,
and $585,000, respectively. In addition, the employment agreements provide that
the executives will be entitled to receive retiree welfare benefit coverage and
outplacement services. The payments under the employment agreements may not
duplicate any amounts payable under the change of control severance agreements.
As provided for in the merger agreement, Mr. Ward will serve as the Chairman of
the Board and Co-Chief Executive Officer of Asarco Cyprus and Mr. Clevenger will
serve as Executive Vice President and Chief Operating Officer of Asarco Cyprus
following the mergers. See "The Merger Agreement--Asarco Cyprus Following the
Mergers."
Other Cyprus Amax Plans
Cyprus Amax Supplemental Retirement Plans
Under the Cyprus Amax supplemental retirement plan, on a change of control
of Cyprus Amax, participants will be entitled to receive immediately, unless
otherwise elected by the participant, the actuarial
65
equivalent of a participant's vested accrued benefit under the plan. Under the
Cyprus Amax full retirement benefit plan, on a change of control of Cyprus Amax,
benefits under the plan will fully vest and participants will be entitled to
receive, unless otherwise elected by the participant, the actuarial equivalent
of the participant's benefit under the plan computed as of the date of the
change of control. The transactions provided for by the merger agreement will
constitute a change of control for purposes of the supplemental retirement plan
arid the full retirement plan.
Cyprus Amax Stock-Based Rights
Any option or stock appreciation right to acquire shares of Cyprus Amax
stock that is not exercised before the completion of the Cyprus Amax merger will
be converted into an option to purchase or right with respect to the number of
shares of Asarco Cyprus common stock equal to the number of shares of Cyprus
Amax common stock which Would have been obtained upon the exercise of the option
immediately prior to the time the Cyprus Amax merger becomes effective.
Under Cyprus Amax's stock-based plans, unvested stock options will become
fully vested and exercisable and all restrictions (including all performance
goals) on restricted stock awards will lapse or be considered to be earned in
full upon a change of control of Cyprus Amax. In addition, pursuant to one of
the Cyprus Amax stock-based plans, upon a change of control of Cyprus Amax, each
participant will be entitled to the immediate payment of the deferred cash
incentive award, to be used as a tax reimbursement, that was granted in
connection with restricted stock awarded under the plan. The transactions
provided for by the merger agreement will constitute a change of control under
the Cyprus Amax stock-based plans. Assuming that stockholder approval of the
Cyprus Amax merger occurs on September 30, 1999, in connection with such change
of control:
. the estimated number of shares of Cyprus Amax common stock underlying
awards of stock options held by Messrs. Ward, Malys, Clevenger, Wolf and
Taraba and the three other executive officers as a group that will vest
as a result of the Cyprus Amax merger is 1,241,667; 185,000; 187,500;
124,000; 73,000; and 191,000, respectively;
. the estimated number of shares of Cyprus Amax restricted stock held by
Messrs. Ward, Malys, Clevenger, Wolf and Taraba and the three other
executive officers as a group that will become free of restrictions as a
result of the Cyprus Amax merger is 350,000; 114,850; 104,460; 70,798;
49,900, and 109,223, respectively; and
. the estimated aggregate number of shares of Cyprus Amax common stock
underlying stock options held by nonemployee directors that will vest as
a result of the Cyprus Amax merger is 27,000.
Indemnification and Insurance
The merger agreement requires Asarco Cyprus to provide officers and
directors of ASARCO and Cyprus Amax with liability insurance arrangements that
are at least comparable to
those in effect at the time the merger agreement was signed for a period of
three years following the business combination. Asarco Cyprus will not be
required to expend in my one year more than 150% of the annual premiums
currently paid by ASARCO or Cyprus Amax, as the case may be. If the annual
premiums of such insurance coverage exceed the 150%, limit, Asarco Cyprus only
will be obligated to obtain a policy with the greatest coverage available for a
cost not exceeding the limit. Asarco Cyprus is entitled to meet these
obligations by covering the relevant persons under its own insurance policies.
The merger agreement also requires Asarco Cyprus to indemnify officers and
directors of ASARCO and Cyprus Amax to the fullest extent permitted by
applicable law, and to the same extent that they were indemnified while working
on behalf of Cyprus Amax or ASARCO, for a period of six years following the
business combination. See "The Merger Agreement--Indemnification, Directors'
and Officers' Insurance."
66
Stock Options and Other Stock-Based Awards
At the time the mergers become effective, each outstanding option and
related stock appreciation right (SAR), if any, will be converted into an option
(together with an SAR, if applicable) to acquire:
. in the case of an option to purchase ASARCO common stock, the number of
shares of Asarco Cyprus common stock equal to the number of shares of
ASARCO common stock which could have been obtained upon the exercise of
the option immediately prior to the time the mergers become effective,
and
. in the case of an option to purchase Cyprus Amax common stock, the
number of shares of Asarco Cyprus common stock equal to the number of
shares of Cyprus Amax common stock which could have been obtained upon
the exercise of the option immediately prior to the time the mergers
become effective multiplied by 0.765.
In the case of an option to purchase ASARCO common stock, the exercise
price per share of Asarco Cyprus common stock will not be adjusted at the time
the mergers become effective. In the case of an option to purchase Cyprus Amax
common stock, the exercise price per share of Asarco Cyprus common stock will be
adjusted to equal the exercise price for such option as in effect immediately
prior to the time the mergers
72
become effective divided by 0.765. Asarco Cyprus will assume the obligations of
Cyprus Amax and ASARCO with respect to such options. Asarco Cyprus will assume
the obligations of ASARCO and Cyprus Amax under their respective option plans
and, except as described above, the terms of such options (and SARs) shall
continue to apply in accordance with the terms of the plans and agreements under
which they were issued, including any provisions for acceleration.
Following the completion of the business combination, Asarco Cyprus will
reserve for issuance and delivery a sufficient number of shares of Asarco Cyprus
common stock upon the exercise of any ASARCO stock options or Cyprus Amax stock
options.
Simultaneously with each of the mergers, each outstanding award (including
restricted stock, performance units, share units and performance shares) under
any employee incentive or benefit plan or arrangement and non-employee director
plan presently maintained by either of us will be converted into a similar
instrument of Asarco Cyprus, with appropriate adjustments to preserve the
inherent value of the awards with no detrimental effects on the holders. The
other terms of each award will continue to apply, including any provisions
providing for acceleration. With respect to any restricted stock awards as to
which the restrictions will have lapsed on or prior to the time the mergers
become effective, shares of such previously restricted stock will be converted
in accordance with the conversion provisions applicable to other shares of
common stock.
Benefits Matters
It is the intention of the parties that for a period of one year following
the completion of the business combination, Asarco Cyprus will maintain the
employee benefit plans of ASARCO and Cyprus Amax generally in accordance with
their terms in effect at the completion of the business combination. In
addition, following the completion of the business combination, Asarco Cyprus
will guarantee the performance of certain existing employment agreements and
benefit plans of each of ASARCO and Cyprus Amax.
Asarco Cyprus has also agreed that it will
. waive any limitations regarding pre-existing conditions and eligibility
waiting periods under any welfare or employee benefit plan maintained by
ASARCO or Cyprus Amax following the completion of the business
combination;
. provide employees of ASARCO and Cyprus Amax with credit for any co-
payments and deductibles paid in the calendar year prior to the
completion of the business combination; and
. generally, treat all service by employees of ASARCO and Cyprus Amax
prior to the completion of the business combination its service with
Asarco Cyprus under all compensation and benefit plans and policies of
ASARCO and Cyprus Amax.
Indemnification; Directors' and Officers' Insurance
Asarco Cyprus has agreed that all exculpation and indemnification
provisions now existing in favor of the current or former directors or officers
of each of Cyprus Amax or ASARCO as provided in their respective charter or by-
laws or in ,my agreement will survive the business combination. Asarco Cyprus
has agreed that, for six years from the time the business combination becomes
effective, it will indemnify such indemnified parties to the same extent as they
were entitled while working on behalf of either Cyprus Amax or ASARCO.
Asarco Cyprus has also agreed that, for three years from the time the
business combination becomes effective, it will maintain in effect ASARCO's and
Cyprus Amax's current directors' and officers' liability insurance policies for
those persons who are currently covered by the policies. However, Asarco Cyprus
will not be required to expend in any one year more than 150% of the annual
premiums currently paid by ASARCO or Cyprus Amax, as the case may be. If the
annual premiums of such insurance coverage exceed the 150% limit, Asarco Cyprus
only will be obligated to obtain a policy with the greatest coverage available
for a cost not exceeding the limit. Asarco Cyprus is entitled to meet its
obligations under this paragraph by covering the relevant persons under its own
insurance policies.
73
DIRECTORS AND MANAGEMENT FOLLOWING THE BUSINESS COMBINATION
Directors
The merger agreement provides that, immediately following the completion of
the business combination, the Asarco Cyprus Board of Directors will have 16
members divided into three classes with each class serving a staggered three
year term (other than two of the initial three classes which will serve one and
two years, respectively). Two classes of directors will consist of five
directors each and one class of directors will consist of six directors. Eight
members will be designated by ASARCO and eight members will be designated by
Cyprus Amax. ASARCO and Cyprus Amax will select their designees from the
current members of the board of directors of ASARCO and Cyprus Amax,
respectively. If an individual selected consents to serve as a director of
Asarco Cyprus, he or she will be elected as a director of Asarco Cyprus.
Messrs. Ward, McAllister, Clevenger and Morano will serve as directors of
Asarco Cyprus, and Mr. Ward will serve as Chairman of the Board. ASARCO and
Cyprus Amax have not yet selected the other directors who will serve on the
Asarco Cyprus Board.
Committees of the Board of Directors
Under the Asarco Cyprus by-laws, membership on each of the committees of
the Asarco Cyprus board initially will consist of an equal number of the
directors designated by ASARCO and Cyprus Amax. Committee structure and
membership will be determined by the Asarco Cyprus Board of Directors at or
shortly after the completion of the business combination.
Compensation of Directors
Directors who are employees of Asarco Cyprus will not receive any
compensation for service on the Asarco Cyprus board. The specific terms of the
compensation to be paid to non-employee directors of Asarco Cyprus have not yet
been determined.
Management
The merger agreement provides that from the time the mergers become
effective, Mr. Ward, Chairman, President and Chief Executive Officer of Cyprus
Amax, and Mr. McAllister, President and Chief Executive Officer of ASARCO, will
share responsibility for the management of Asarco Cyprus, as Chairman of the
Board and Co-Chief Executive Officer, and President and Co-Chief Executive
Officer, respectively. At the next annual meeting of Asarco Cyprus expected to
be held in April 2000, Mr. McAllister will become the sole Chief Executive
Officer and President of Asarco Cyprus. Following the first annual meeting of
Asarco Cyprus expected to be held in April 2000, and until December 31, 2000,
Mr. Ward will continue to participate actively in managing the consolidation of
the operations of ASARCO and Cyprus, realizing the synergies expected to be
derived from the mergers and exploring growth opportunities for Asarco Cyprus.
Mr. McAllister will become Chairman, President and Chief Executive Officer of
Asarco Cyprus following Mr. Ward's retirement on December 31, 2000. In
addition, Mr. Clevenger will be Executive Vice President and Chief Operating
Officer of Asarco Cyprus, and Mr. Morano will be
Executive Vice President and Chief Financial Officer of Asarco Cyprus, following
the completion of the mergers. Both Messrs. Clevenger and Morano will also be
directors of Asarco Cyprus. The remaining key executive officers of Asarco
Cyprus will be jointly designated by Messrs. McAllister and Ward, with the
advice and consent of the Asarco Cyprus Board of Directors. Any changes to the
above arrangements between the effective time of the mergers and the annual
meeting of Asarco Cyprus stockholders in 2002 will require the affirmative vote
of 75% of the Asarco Cyprus Board of Directors.
79
Interests of Certain Persons in the Merger
As stated in the joint August 25, 1999 press release, Asarco Cyprus will
not enter into change of control agreements that may become operative during the
90 days following completion of the business combination. The rights and
benefits under the existing arrangements with the employees (including the
executive officers, as described in the joint proxy statement and prospectus in
"Interests of Certain Persons in the Merger") of each of Cyprus Amax and ASARCO,
however, will remain in full force and effect and will be unaffected during the
90 days following completion of the business combination, as will any rights
under arrangements entered into with such employees in substitution for any
existing arrangements.
13