EXHIBIT 99.8
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
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KENNETH STEINER, :
: Civil Action No. 17384
Plaintiff, :
:
-against- :
:
CYPRUS AMAX MINERALS CO., MILTON H. :
WARD, LINDA G. ALVARADO, GEORGE S. :
ANSELL, ALLEN BORN, WILLIAM C. :
BOUSQUETTE, THOMAS V. FALKIE, ANNE :
MAYNARD GRAY, ROCKWELL A. :
SCHNABEL, THEODORE M. SOLSO, JOHN :
HOYT STOOKEY, JAMES A. TODD, JR., :
BILLIE B. TURNER and ASARCO INC., :
:
Defendants. :
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COMPLAINT
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Plaintiff, by and through his attorneys, alleges upon information and
belief except as to himself and his own actions, which he alleges upon
knowledge, as follows:
SUMMARY OF ACTION
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1. This action arises from breaches of fiduciary duties in
connection with a merger agreement entered into by Cyprus Amax Minerals Co.
("Cyprus Amax") and Asarco Inc. ("Asarco") for grossly inadequate consideration
and in breach of defendants' fiduciary duties. Plaintiff alleges that he and
other public shareholders of Cyprus Amax common stock are entitled
to enjoin the proposed transaction or, alternatively, to recover damages in the
event that the transaction is consummated. Plaintiff brings this action on
behalf of the public holders of the outstanding common shares of Cyprus Amax for
injunctive and other relief in connection with an improperly negotiated and
structured merger conceived by defendants hereinafter described. One effect of
the negotiation and structure of the transaction is to deny shareholders
important information regarding the value of their shares of Cyprus Amax.
2. The result of defendants' actions is that the ASARCO and Cyprus
Amax merger provides no premium for the public shareholders in a transaction
which was unfairly negotiated and structured to avoid purposely any superior bid
for Cyprus Amax or the Cyprus Amax - Asarco combined entity.
THE PARTIES
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3. Plaintiff has been, at all times relevant to this action an owner
of CYPRUS AMAX common stock.
4. Defendant Cyprus Amax is a Delaware corporation with its
principal executive offices located at 9100 East Mineral Circle, Englewood, CO
80112. Cyprus Amax is a holding company with subsidiaries which explore for,
extract, process and market coal, copper, iron ore and gold. Cyprus Amax
currently has over 90 million shares of common stock outstanding held by
approximately 37,000 shareholders of record.
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5. Defendant Milton H. Ward is Chairman of the Board, President,
Chief Executive Officer and a director of Cyprus Amax. His recent compensation
according to the March 99 proxy exceeds $3 million.
6. The other individual defendants Linda G. Alvarado, George S.
Ansell, Allen Born, William C. Bousquette, Thomas V. Falkie, Anne Maynard Gray,
Rockwell A. Schnabel, Theodore M. Solso, John Hoyt Stookey, James A. Todd, Jr.,
and Billie B. Turner with defendant Ward constitute the entire board of
directors of Cyprus Amax.
7. The individual defendants, as directors of Cyprus Amax owe
fiduciary duties of good faith, loyalty, fair dealing, due care, and full
disclosure to plaintiff and the other members of the Class (as defined below).
8. Defendant Asarco is a New Jersey corporation with its principal
place of business at 180 Maiden Lane, New York, New York 10038-4925. Asarco
inter alia mines, smelts, refines and sells copper, silver, lead, zinc and gold
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ore molybdenum. Asarco has knowledge of the facts and circumstances described
below. Therefore, Asarco has knowingly participated in the breaches of
fiduciary duty described herein and is liable as an aider and abettor.
CLASS ACTION ALLEGATIONS
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9. Plaintiff brings this action pursuant to Rule 23 of the Rules of
this Court, on behalf of themselves and all other shareholders of Cyprus Amax as
of July 15, 1999 (except the defendants herein and any persons, firm, trust,
corporation, or other entity related to or
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affiliated with them and their successors in interest), who are or will be
threatened with injury arising from defendants' actions, as is more fully
described herein (the "Class").
10. This action is properly maintainable as a class action for the
following reasons:
a. The Class is so numerous that joinder of all members is
impracticable. There are approximately 37,000 record shareholders of CYPRUS AMAX
stock and many more beneficial owners who are members of the Class.
b. Members of the Class are scattered throughout the United
States and are so numerous that it is impracticable to bring them all before
this Court.
c. There are questions of law and fact that are common to the
Class and that predominate over questions affecting any individual class member.
The common questions include, inter alia, the following:
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(1) Whether the transaction as negotiated and structured
denies shareholders information (particularly with respect to the value of their
shares) necessary to make an informed decision whether to sell their shares;
(2) Whether defendants have violated their fiduciary duties
by contracting away their obligations to fully inform themselves regarding the
value of Cyprus Amax;
(3) Whether the individual defendants, as directors of
Cyprus Amax have fulfilled, and are capable of fulfilling, their fiduciary
duties to plaintiff and the other
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members of the Class, including their duties of entire fairness, loyalty, due
care, and full disclosure;
(4) Whether Asarco has aided and abetted the individual
defendants' breaches of fiduciary duties; and
(5) Whether plaintiff and the other members of the Class
would be irreparably damaged were defendants not enjoined from the conduct
described herein.
d. The claims of plaintiff is typical of the claims of the
other members of the class in that all members of the Class will be damaged by
defendants' actions.
e. Plaintiff is committed to prosecuting this action and has
retained competent counsel experienced in litigation of this nature. Plaintiff
is adequate representatives of the Class.
f. A class action is superior to any other method available for
the fair and efficient adjudication of this controversy since it would be
impractical and undesirable for each of the members of the Class, who has
suffered or will suffer damages, to bring separate actions in various parts of
the country.
g. The prosecution of separate actions by individual members of
the Class would create a risk of inconsistent or varying adjudications with
respect to individual members of the Class which would establish incompatible
standards of conduct for the party opposing the Class.
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11. At all relevant times the shares of CYPRUS AMAX were publicly
traded on the New York Stock Exchange.
THE CHALLENGED COURSE OF CONDUCT
--------------------------------
12. On July 15, 1999 Cyprus Amax and Asarco announced an agreement
unanimously approved by the Boards of both companies, for the combination of the
two companies in a merger of equals transaction.
13. Under the terms of the transaction, Cyprus Amax shareholders will
receive 0.765 shares of Asarco Cyprus common stock for each share of Cyprus Amax
common stock they own and Asarco shareholders will receive one (1) share of
Asarco Cyprus common stock for each share of Asarco common stock they own (the
"Transaction").
14. Although Cyprus Amax and Asarco entered into a merger agreement
on or about July 15, 1999, they waited until August 20th to file their merger
agreement and only then disclosed that the record date for the shareholders to
vote at the September 30th shareholder meeting would be Wednesday, August 25,
1999. While the Company apparently obtained a waiver from the New York Stock
Exchange and disclosed the record date to the New York Stock Exchange earlier,
it did not make its announcement public regarding the record date until Friday,
August 20th. Not coincidentally, Cyprus Amax and Asarco also announced on
August 20th that Phelps Dodge Corporation ("Phelps Dodge") had made bids for
both companies or a combined Cyprus Asarco company. The defendants' tactics are
clear: Only those shareholders who own shares of record by August 25th can vote
at the shareholder meeting. As Phelps Dodge observed,
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since trades on August 20 will settle after August 25, such record date
effectively precludes any significant trading in the market on an informed basis
before the determination of shareholders eligible to vote. As the Chairman of
Phelps Dodge aptly noted, the various tactics by defendants amount to
"shareholder squeeze play".
15. Given defendants' unilateral announcement on August 20th
regarding Phelps Dodge's previous bid, on August 20, 1999 Phelps Dodge went
public with a sweetened offer for both companies. On August 20, Phelps Dodge
offered a three-way merger that would result in $265 million in annual cost
savings, including streamlining copper operations in the Southwest and combining
the administrative functions in the U.S., Chile and Peru, plus lower
depreciation. Phelps Dodge proposing to Cyprus Amax a business combination of
Phelps Dodge and Cyprus Amax pursuant to which all outstanding common stock of
Cyprus Amax would be exchange for Phelps Dodge common stock in an exchange ratio
of 0.3135 Phelps Dodge common shares for each Cyprus Amax common share. Phelps
Dodge has also proposed a business combination pursuant to which all of the
outstanding common stock of Asarco would be exchange for Phelps Dodge common
stock at an exchange ratio of 0.4098 Phelps Dodge common shares for each Asarco
common share. Based on share prices for the three companies' common shares
before trading was halted on Friday, August 20th, the ratios implied a premium
of approximately 30% for Asarco and a premium of approxi mately 29% for Cyprus
Amax, while preserving the relative economics of the exchange ratio under the
proposed combination of Cyprus Amax and Asarco. Moreover, the proposed
transaction would be tax free to the
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shareholders. Phelps Dodge also made it clear to both Cyprus Amax and Asarco
that although it preferred a transaction involving all three companies, they
were prepared to enter into a negotiated business combination with either Asarco
or Cyprus Amax regardless of whether the other company was willing to proceed on
a negotiated basis.
16. The public announcement of the August 20th bid by Phelps Dodge
was precipitated in part by Asarco's and Cyprus' refusal to even meet and
discuss the proposal notwithstanding several overtures by Phelps Dodge and to
reject out of hand any proposal in favor of the no-premium merger proposal
improperly negotiated in July between Cyprus Amax and Asarco.
17. In violation of their fiduciary duties the individual defendants
negotiated a merger agreement which strictly prohibits any solicitation or
indeed discussion of bids or potential bids, and does not therefore provide for
a bona fide fiduciary out. Therefore, while the Board of Cyprus Amax could
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withdraw its recommendation to the shareholders that they vote in favor of the
Transaction, the Board has by contract prohibited and denied itself access to
the very information it would need to challenge that recommendation and cause
the Board to withdraw that recommenda tion. In other words, Cyprus Amax
directors have contracted away their fiduciary responsibility and obligations to
explore in good faith all information which would shed light upon the value of
the shares of Cyprus Amax and have further breached their duties by failing to
provide the shareholders with this needed and material information.
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18. The individual defendants were and are under a continuing duty to
fully inform themselves before taking action, or agreeing to refrain from taking
action, to elicit, promote, consider and evaluate reasonable and bona fide
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offers for Cyprus Amax, to assure that a "level playing field" exists when more
than one bidder for the Company emerges, and not to favor one bidder over
another, unless it is designed to assure and is reasonably related to achieving
the best transaction for the Cyprus Amax shareholders. The individual
defendants breached their fiduciary duty by, among other matters, failing to
fully inform themselves about available alternatives to the Transaction,
including a transaction with Phelps Dodge, and without fully informing
themselves about the value of Cyprus Amax.
19. If the breaches of fiduciary duty described herein are permitted
to continue, the Cyprus Amax shareholders will forever lose the opportunity to
have the value of their Company arrived at through competitive bidding on a
level playing field and the opportunity to consider any other bidders which may
come forward.
20. By reason of the foregoing acts, practices and course of conduct
of defendants, plaintiff and the other members of the Class have been and will
be damaged because they will not receive their fair proportion of the value of
Cyprus Amax's assets and business, which far exceeds (and could very well be
negotiated to an even higher level) the Transaction consideration, in the unfair
Transaction at issue, have been and will be prevented from making an informed
decision whether to approve the Transaction, and will wrongfully impede
consideration of any other third party offer for greater consideration,
including the Phelps Dodge offer.
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21. Unless enjoined by this Court, defendants will continue to breach
their fiduciary duties owed to plaintiff and the Class and will consummate the
Transaction to the irreparable harm of plaintiff and the Class.
22. Plaintiff and the other members of the Class have no adequate
remedy at law.
23. WHEREFORE, plaintiff demands judgment as follows:
a. Declaring this to be a proper class action and naming
plaintiff as Class representative and his attorneys as Class counsel;
b. Ordering defendants to carry out their fiduciary duties to
plaintiff and the other members of the Class, including those of duty of care,
loyalty, full disclosure, and entire fairness;
c. Granting preliminary and permanent injunctive relief against
the consummation of the Transaction as described herein;
d. Ordering the individual defendants to explore alternatives
and to negotiate in good faith with all interested persons, including but not
limited to Phelps Dodge.
e. In the event the Transaction is consummated, rescinding the
Transaction and awarding rescissory damages;
f. Ordering defendants, jointly and severally, to pay to
plaintiff and to other members of the Class all damages suffered and to be
suffered by them as the result of the acts alleged herein;
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g. Ordering defendants, jointly and severally, to account to
plaintiff and the Class for all profits realized and to be realized by them as a
result of the actions complained of and, pending such accounting, to hold such
profits in a constructive trust for the benefit of plaintiff and other members
of the Class;
h. Awarding plaintiff the costs and disbursements of the action
including allowances for plaintiff's reasonable attorneys and experts fees; and
i. Granting such other and further relief as may be just and
proper in the premises.
Dated: August 23, 1999 CHIMICLES & TIKELLIS LLP
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Pamela S. Tikellis
James C. Strum
One Rodney Square
P.O. Box 1035
Wilmington, Delaware 19899
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OF COUNSEL:
WOLF, HALDENSTEIN, ADLER, FREEMAN
& HERZ, LLP
270 Madison Avenue
New York, NY 10016
(212) 545-4600
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