-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MutuC+/hHCQzhI5JrNAb4Zt/XyYqJqr8Uhfok6vCJRqhlxznSQTuDy0JAIzbMVL9 6JRrlOGA6VKyAZCT3JB4ig== 0000940180-98-000279.txt : 19980317 0000940180-98-000279.hdr.sgml : 19980317 ACCESSION NUMBER: 0000940180-98-000279 CONFORMED SUBMISSION TYPE: SC 14D9 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19980313 SROS: NONE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ALUMAX INC CENTRAL INDEX KEY: 0000912600 STANDARD INDUSTRIAL CLASSIFICATION: PRIMARY PRODUCTION OF ALUMINUM [3334] IRS NUMBER: 132762395 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9 SEC ACT: SEC FILE NUMBER: 005-42697 FILM NUMBER: 98565617 BUSINESS ADDRESS: STREET 1: 3424 PEACHTREE RD NE STREET 2: STE 2100 CITY: ATLANTA STATE: GA ZIP: 30326 BUSINESS PHONE: 4048464600 MAIL ADDRESS: STREET 1: ALUMAX INC STREET 2: 3424 PEACHTREE RD NE STE 2100 CITY: ATLANTA STATE: GA ZIP: 30326 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: ALUMAX INC CENTRAL INDEX KEY: 0000912600 STANDARD INDUSTRIAL CLASSIFICATION: PRIMARY PRODUCTION OF ALUMINUM [3334] IRS NUMBER: 132762395 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9 BUSINESS ADDRESS: STREET 1: 3424 PEACHTREE RD NE STREET 2: STE 2100 CITY: ATLANTA STATE: GA ZIP: 30326 BUSINESS PHONE: 4048464600 MAIL ADDRESS: STREET 1: ALUMAX INC STREET 2: 3424 PEACHTREE RD NE STE 2100 CITY: ATLANTA STATE: GA ZIP: 30326 SC 14D9 1 SCHEDULE 14D-9 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- SCHEDULE 14D-9 SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934 ---------------- 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) ---------------- 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 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 1 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. 2 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 3 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 4 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 5 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; 6 (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.
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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.
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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, S-16 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 EX-99.1 2 OPINION OF BT WOLFENSOHN, DATED 3/8/1998 [LETTERHEAD OF BT WOLFENSOHN APPEARS HERE] March 8, 1998 Board of Directors Alumax Inc. 3424 Peachtree Road, N.E. Suite 2100 Atlanta, GA 30326 Dear Directors: BT Wolfensohn has acted as financial advisor to Alumax Inc. ("Alumax") in connection with the proposed merger of Alumax and Aluminum Company of America (the "Acquiror") pursuant to the Agreement and Plan of Merger, dated as of March 8, 1998 (the "Merger Agreement"), among Alumax, the Acquiror and AMX Acquisition Corp., a wholly owned subsidiary of the Acquiror ("Acquiror Sub"), which provides, among other things, for a tender offer (the "Offer") for a majority (on a fully-diluted basis) of the shares of the Common Stock, par value $0.01 per share, of Alumax ("Alumax Common Stock") at $50.00 of cash, followed by a merger (the "Merger"; together with the Offer, the "Transaction") of Alumax with and into Acquiror Sub, as a result of which each share of Alumax Common Stock (other than the Excluded Shares or Dissenting Shares (as defined in the Merger Agreement)) will be converted into the right to receive 0.6975 of a share of the Common Stock, par value $1.00 per share, of the Acquiror ("Acquiror Common Stock") or, if less than a majority of the Alumax Common Stock is acquired in the Offer, a fraction of a share of Acquiror Common Stock equal to the Adjusted Exchange Ratio (as defined in the Merger Agreement) plus the Cash Prorate Amount (as defined in the Merger Agreement). The terms and conditions of the Transaction are more fully set forth in the Merger Agreement. You have requested BT Wolfensohn's opinion, as investment bankers, as to the fairness, from a financial point of view, of the consideration to be received by the shareholders of Alumax pursuant to the Merger Agreement in the Offer and the Merger, taken together, to such shareholders. In connection with BT Wolfensohn's role as financial advisor to Alumax, and in arriving at its opinion, BT Wolfensohn has reviewed certain publicly available financial and other information concerning Alumax and the Acquiror and certain internal analyses and other information furnished to it by Alumax and the Acquiror and/or their respective advisors. BT Wolfensohn has also held discussions with members of the senior managements of Alumax and the Acquiror regarding the businesses and prospects of their respective companies and the joint prospects of a combined company. In addition, BT Wolfensohn has (i) reviewed the reported prices and trading activity for Alumax Common Stock and Acquiror Common Stock, (ii) compared certain Alumax Inc. March 8, 1998 Page 2 financial and stock market information for Alumax and the Acquiror with similar information for certain other companies whose securities are publicly traded, (iii) reviewed the financial terms of certain recent business combinations which it deemed comparable in whole or in part, (iv) reviewed the terms of the Merger Agreement, and (v) performed such other studies and analyses and considered such other factors as it deemed appropriate. BT Wolfensohn has not assumed responsibility for independent verification of, and has not independently verified, any information, whether publicly available or furnished to it, concerning Alumax or the Acquiror, including, without limitation, any financial information, forecasts or projections considered in connection with the rendering of its opinion. Accordingly, for purposes of its opinion, BT Wolfensohn has assumed and relied upon the accuracy and completeness of all such information and BT Wolfensohn has not conducted a physical inspection of any of the properties or assets, and has not prepared or obtained any independent evaluation or appraisal of any of the assets or liabilities, of Alumax or the Acquiror. With respect to the financial forecasts and projections, including the analyses and forecasts of certain cost savings, operating efficiencies, revenue effects and financial synergies expected by Alumax and the Acquiror ("Synergies"), made available to BT Wolfensohn and used in its analyses, BT Wolfensohn has assumed that they have been reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of Alumax or the Acquiror, as the case may be, as to the matters covered thereby. In rendering its opinion, BT Wolfensohn expresses no view as to the reasonableness of such forecasts and projections, including the Synergies, or the assumptions on which they are based. BT Wolfensohn's opinion is necessarily based upon economic, market and other conditions as in effect on, and the information made available to it as of, the date hereof. We undertake no obligation to update this opinion to reflect any developments occurring after the date hereof. We express no opinion as to the price or range of prices at which Acquiror Common Stock may trade subsequent to the consummation of the Merger. For purposes of rendering its opinion, BT Wolfensohn has assumed that, in all respects material to its analysis, the representations and warranties of Alumax, the Acquiror and Acquiror Sub contained in the Merger Agreement are true and correct, Alumax, the Acquiror and Acquiror Sub will each perform all of the covenants and agreements to be performed by it under the Merger Agreement and all conditions to the obligations of each of Alumax, the Acquiror and Acquiror Sub to consummate the Transaction will be satisfied without any waiver thereof. BT Wolfensohn has also assumed that all material governmental, regulatory or other approvals and consents required in connection with the consummation of the Transaction will be obtained and that in connection with obtaining any necessary governmental, regulatory or other approvals and consents, or any amendments, modifications or waivers to any agreements, instruments or orders to which either Alumax or the Acquiror is a party or is subject or by which it is bound, no limitations, restrictions or conditions will be imposed or amendments, modifications or waivers made that would have a material adverse effect on either Alumax or the Acquiror or materially reduce the contemplated benefits of the Transaction to Alumax or its stockholders. In addition, you have informed BT Wolfensohn, and accordingly for purposes of rendering its opinion BT Wolfensohn has assumed, that the Merger will be tax-free to each of Alumax, the Acquiror, the Acquiror's stockholders and, to the extent they receive Acquiror Common Stock instead of cash, Alumax's stockholders. Alumax Inc. March 8, 1998 Page 3 In connection with our engagement, we have not been authorized by Alumax or its Board of Directors to solicit, nor have we solicited, any alternative transactions to the Transaction. This opinion is addressed to, and for the use and benefit of, the Board of Directors of Alumax and is not a recommendation to the stockholders of Alumax to tender their shares in the Offer or to approve the Merger. This opinion is limited to the fairness, from a financial point of view, to Alumax of the consideration to be received in the Offer and the Merger, taken together, and BT Wolfensohn expresses no opinion as to the merits of the underlying decision by Alumax to engage in the Transaction. BT Wolfensohn is engaged in the merger and acquisition and client advisory business of Bankers Trust (together with its affiliates the "BT Group") and, for legal and regulatory purposes, is a division of BT Alex. Brown Incorporated, a registered broker-dealer and member of the New York Stock Exchange. BT Wolfensohn will be paid a fee for its services as financial advisor to Alumax in connection with the Transaction, a substantial portion of which is contingent upon consummation of the Transaction. BT Wolfensohn currently receives, and has received in prior years, an annual retainer from Alumax. It has also provided investment banking services to Alumax for which it has received compensation. In the ordinary course of business, members of the BT Group may actively trade in the securities and other instruments and obligations of Alumax and the Acquiror for their own accounts and for the accounts of their customers. Accordingly, the BT Group may at any time hold a long or short position in such securities, instruments and obligations. Based upon and subject to the foregoing, it is BT Wolfensohn's opinion as investment bankers that, as of the date hereof, the consideration to be received pursuant to the Merger Agreement by holders of Alumax Common Stock in the Offer and the Merger, taken together, is fair, from a financial point of view, to such stockholders. Very truly yours, /s/ BT Wolfensohn BT WOLFENSOHN EX-99.2 3 LETTER TO STOCKHOLDERS [LOGO OF ALUMAX INC.] Alumax Inc. ALLEN BORN 3424 Peachtree Road, Chairman and N.E. Chief Executive Officer Suite 2100 Atlanta, Georgia 30326 404/846-4601 FAX 404/846-4780 March 13, 1998 Dear Fellow Stockholder: I am pleased to inform you that on March 8, 1998, Alumax Inc. (the "Company") entered into an Agreement and Plan of Merger (the "Merger Agreement") with Aluminum Company of America, a Pennsylvania corporation (the "Parent"), and AMX Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of the Parent ("Purchaser"). Pursuant to the Merger Agreement, Purchaser is today commencing a tender offer (the "Offer") to purchase up to 27,000,000 shares of common stock, par value $0.01 per share, of the Company (the "Shares") at a price of $50.00 per Share, net to the seller in cash. The Merger Agreement also provides that following the purchase of Shares pursuant to the Offer, the Company will be merged with and into the Purchaser (the "Merger") and in the Merger each Share (other than Shares purchased in the Offer or otherwise owned by the Parent, the Purchaser, the Company, or any of their respective subsidiaries, and dissenting shares) will be converted into, and become exchangeable for, the right to receive: (i) 0.6975 (the "Exchange Ratio") of a share of common stock, par value $1.00 per share, of the Parent (the "Parent Common Stock") if the Purchaser purchases at least 27,000,000 Shares or such other number of Shares which represents an absolute majority of the outstanding Shares on a fully diluted basis (excluding those that are issuable with respect to employee or director stock options) on the expiration date of the Offer, or (ii) a combination of cash and a fraction of a share of Parent Common Stock if the Purchaser purchases fewer Shares than such absolute majority (the "Merger Consideration"). Because the market price of the shares of the Parent Common Stock will fluctuate and the Exchange Ratio will not be adjusted as a result of such price fluctuation, the value of a share of the Parent Common Stock multiplied by the Exchange Ratio at the time the Merger is consummated may be greater or less than the $50.00 in cash per Share payable pursuant to the Offer. ACCORDINGLY, THE VALUE OF THE MERGER CONSIDERATION MAY BE GREATER OR LESS THAN THE $50.00 PER SHARE TO BE RECEIVED BY HOLDERS OF SHARES THAT ARE PURCHASED PURSUANT TO THE OFFER. Based on the closing price of the Parent Common Stock on the New York Stock Exchange, Inc. on March 12, 1998, the value of the Parent Common Stock which would have been received in the Merger had it occurred on such date for each Share pursuant to the Exchange Ratio would have been $49.78 (assuming 27,000,000 Shares were purchased in the Offer). The Offer and the Merger are intended to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, as more fully discussed in the enclosed Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"). YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY (WITH ONE DIRECTOR ABSENT) APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER, TENDER THEIR SHARES PURSUANT TO THE OFFER AND ADOPT THE MERGER AGREEMENT. In recommending that the Company's stockholders accept the Offer, the Board of Directors of the Company is not recommending that the cash payment of $50.00 per Share is preferable to the payment of 0.6975 of a share of the Parent Common Stock. In choosing which form of consideration a stockholder of the Company prefers, and responding to the Offer accordingly, each of the Company's stockholders should make his or her own decision. In arriving at its recommendation, the Board of Directors of the Company gave careful consideration to a number of factors which are described in the enclosed Schedule 14D-9, including, among other things, the written opinion of BT Wolfensohn, the Company's financial advisor, dated March 8, 1998, to the effect that, as of such date and based upon and subject to certain matters set forth in such opinion, the consideration to be received pursuant to the Merger Agreement by holders of the Shares in the Offer and the Merger, taken together, is fair, from a financial point of view, to such stockholders. THE FULL TEXT OF THE WRITTEN OPINION OF BT WOLFENSOHN, DATED MARCH 8, 1998, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN IN CONNECTION WITH SUCH OPINION, IS ATTACHED AS ANNEX A TO THE SCHEDULE 14D-9. STOCKHOLDERS ARE URGED TO READ SUCH OPINION CAREFULLY IN ITS ENTIRETY. Additional information with respect to the transaction is contained in the enclosed Schedule 14D-9. Also enclosed is the Purchaser's Offer to Purchase and related materials, including a Letter of Transmittal to be used for tendering your Shares. These documents set forth the terms and conditions of the Offer and provide instructions as to how to tender your Shares. I urge you to read the enclosed materials and consider this information carefully. Sincerely, /S/ Allen Born Allen Born Chairman and Chief Executive Officer 2 EX-99.3 4 THE MERGER AGREEMENT EXECUTION COPY ================================================================================ AGREEMENT AND PLAN OF MERGER among ALUMINUM COMPANY OF AMERICA, AMX ACQUISITION CORP. and ALUMAX INC. Dated as of March 8, 1998 ================================================================================ AGREEMENT AND PLAN OF MERGER, dated as of March 8, 1998 (the "Agreement"), among ALUMINUM COMPANY OF AMERICA, a Pennsylvania corporation (the "Parent"), AMX ACQUISITION CORP., a Delaware corporation (the "Purchaser"), and ALUMAX INC., a Delaware corporation (the "Company"). WHEREAS, the Boards of Directors of the Parent, the Purchaser and the Company deem it advisable and in the best interests of their respective stockholders that the Parent acquire the Company upon the terms and subject to the conditions provided for in this Agreement; WHEREAS, in furtherance thereof it is proposed that the acquisition be accomplished by the Purchaser commencing a cash tender offer (as it may be amended from time to time as permitted by this Agreement, the "Offer") to acquire 27,000,000 shares of common stock, par value $0.01 per share, of the Company (the "Company Common Stock," and together with the rights issued pursuant to the Rights Agreement (as hereinafter defined) associated with such shares, the "Shares"), or such other number of Shares as represents an absolute majority of the excess of (i) all shares of Company Common Stock outstanding on the Expiration Date on a fully-diluted basis, minus (ii) the total number of Shares issuable upon exercise of all outstanding employee stock options, for $50.00 per Share (such amount or any greater amount per Share paid pursuant to the Offer being hereinafter referred to as the "Per Share Cash Amount"), subject to applicable withholding taxes, net to the seller in cash, to be followed by a merger of the Company with and into the Purchaser (the "Merger") pursuant to which outstanding shares of Company Common Stock will be converted into the right to receive shares of common stock, par value $1.00 per share, of the Parent (the "Parent Common Stock"), and cash under certain circumstances, in each case upon the terms and subject to the conditions set forth in this Agreement; WHEREAS, the Board of Directors of the Company has unanimously approved the making of the Offer and the Merger and resolved and agreed to recommend that holders of Shares tender their Shares pursuant to the Offer and approve and adopt this Agreement and the Merger; WHEREAS, for U.S. federal income tax purposes, it is intended that the Merger contemplated hereby qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and that this Agreement shall be, and is hereby, adopted as a plan of reorganization 1 for purposes of Section 368 of the Code; and WHEREAS, the Boards of Directors of the Parent (on its own behalf and as the sole stockholder of the Purchaser), the Purchaser and the Company have each approved this Agreement and the Merger in accordance with the General Corporation Law of the State of Delaware (the "DGCL") and upon the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, and intending to be legally bound hereby, the Parent, the Purchaser and the Company agree as follows: ARTICLE I Section 1.1 The Offer. --------- (a) Provided that this Agreement shall not have been terminated in accordance with Section 7.1 and none of the events set forth in Annex A hereto shall have occurred or be existing (and shall not have been waived by the Purchaser), the Purchaser shall commence the Offer as promptly as reasonably practicable after the date hereof, but in no event later than five business days after the public announcement of the execution of this Agreement. The Purchaser shall, on the terms of and subject to the prior satisfaction or waiver of the conditions of the Offer, accept for payment and pay for up to 27,000,000 Shares validly tendered and not withdrawn pursuant to the Offer (or such other number of Shares as represents an absolute majority of the excess of (i) all shares of Company Common Stock outstanding on the Expiration Date on a fully-diluted basis, minus (ii) the total number of Shares issuable upon exercise of all outstanding employee stock options, with 27,000,000 Shares or such other number being herein referred to as the "50% Share Number") as soon as practicable after the later of the satisfaction of the conditions of the Offer and the expiration of the Offer; provided, however, that no such payment shall be made until after the calculation of the applicable proration factor in the Offer. The obligation of the Purchaser to purchase and pay for shares tendered pursuant to the Offer shall be subject to the conditions set forth in Annex A hereto. The Company agrees that no Shares held by the Company or any of its Subsidiaries will be tendered to the Purchaser pursuant to the Offer. The Purchaser expressly reserves the right to waive any of such conditions, to increase 2 the price per Share payable in the Offer and to make any other changes in the terms and conditions of the Offer; provided, however, that no change may be made which decreases the price per Share payable in the Offer, reduces the number of Shares to be purchased in the Offer, changes the form of consideration to be paid in the Offer, modifies any of the conditions set forth in Annex A hereto in any manner adverse to the holders of Shares or, except as provided in the next two sentences, extends the Offer. Notwithstanding the foregoing, the Purchaser may, without the consent of the Company, (i) extend the Offer beyond the scheduled expiration date, which shall be 20 business days following the date of commencement of the Offer, if, at the scheduled expiration of the Offer, any of the conditions to the Purchaser's obligation to accept for payment and to pay for the Shares shall not be satisfied or waived, or (ii) extend the Offer for any period required by any rule, regulation or interpretation of the Securities and Exchange Commission (the "SEC") or the staff thereof applicable to the Offer. So long as this Agreement is in effect and the condition to the Offer set forth in clause (i) of the first paragraph of Annex A has not been satisfied or waived, the Purchaser shall extend the Offer from time to time for a period or successive periods not to exceed 10 business days each after the previously scheduled expiration date of the Offer. The Per Share Cash Amount shall, subject to applicable withholding of taxes, be net to the seller in cash, upon the terms and subject to the conditions of the Offer. (b) As promptly as practicable on the date of commencement of the Offer, the Purchaser shall file with the SEC a Tender Offer Statement on Schedule 14D-1 (together with all amendments and supplements thereto, the "Schedule 14D-1") with respect to the Offer. The Schedule 14D-1 shall contain or incorporate by reference an offer to purchase (the "Offer to Purchase") and forms of the related letter of transmittal and all other ancillary Offer documents (collectively, together with all amendments and supplements thereto, the "Offer Documents"). The Parent and the Purchaser shall cause the Offer Documents to be disseminated to the holders of the Shares as and to the extent required by applicable federal securities laws. The Parent and the Purchaser, on the one hand, and the Company, on the other hand, will promptly correct any information provided by it for use in the Offer Documents if and to the extent that it shall have become false or misleading in any material respect, and the Purchaser will cause the Offer Documents as so corrected to be filed with the SEC and to be disseminated to holders of the Shares, in each case as and to the extent required by applicable federal securities laws. The Company and its counsel shall be given a reasonable opportunity to review and comment upon the Schedule 14D-1 before it is filed with the SEC. 3 Section 1.2 Company Actions. --------------- (a) The Company hereby approves of and consents to the Offer and represents and warrants that the Company's Board of Directors, at a meeting duly called and held, has (i) unanimously (with one director absent) determined that the terms of the Offer and the Merger are fair to and in the best interests of the stockholders of the Company, (ii) approved this Agreement and approved the transactions contemplated hereby and thereby, including the Offer and the Merger and (iii) resolved to recommend that the stockholders of the Company accept the Offer, tender their Shares to the Purchaser thereunder and approve and adopt this Agreement and the Merger. The Company hereby consents to the inclusion in the Offer Documents of the recommendation of the Board described in the immediately preceding sentence. (b) As promptly as practicable on the date of commencement of the Offer, the Company shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (together with all amendments and supplements thereto, the "Schedule 14D-9") which shall contain the recommendation referred to in clause (iii) of Section 1.2(a) hereof. The Company further agrees to take all steps necessary to cause the Schedule 14D-9 to be disseminated to holders of the Shares as and to the extent required by applicable federal securities laws. The Company, on the one hand, and each of the Parent and the Purchaser, on the other hand, will promptly correct any information provided by it for use in the Schedule 14D-9 if and to the extent that it shall have become false or misleading in any material respect, and the Company will cause the Schedule 14D- 9 as so corrected to be filed with the SEC and to be disseminated to holders of the Shares, in each case as and to the extent required by applicable federal securities laws. The Parent and its counsel shall be given a reasonable opportunity to review and comment upon the Schedule 14D-9 before it is filed with the SEC. In addition, the Company agrees to provide the Parent, the Purchaser and their counsel with any comments, whether written or oral, that the Company or its counsel may receive from time to time from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt of such comments. (c) The Company shall promptly furnish the Purchaser with mailing labels containing the names and addresses of all record holders of Shares and with security position listings of Shares held in stock depositories, each as of a recent date, together with all other available listings and computer files containing names, 4 addresses and security position listings of record holders and beneficial owners of Shares. The Company shall furnish the Purchaser with such additional information, including, without limitation, updated listings and computer files of stockholders, mailing labels and security position listings, and such other assistance as the Parent, the Purchaser or their agents may reasonably request. Subject to the requirements of applicable law, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Offer or the Merger, the Parent and the Purchaser shall hold in confidence the information contained in such labels, listings and files, shall use such information solely in connection with the Offer and the Merger, and, if this Agreement is terminated in accordance with Section 7.1 or if the Offer is otherwise terminated, shall promptly deliver or cause to be delivered to the Company all copies of such information, labels, listings and files then in their possession or in the possession of their agents or representatives. Section 1.3 Directors of the Company. ------------------------ (a) Promptly upon the purchase of and payment for any Shares by the Purchaser or any of its affiliates pursuant to the Offer, the Parent shall be entitled to designate such number of directors, rounded up to the next whole number, on the Board of Directors of the Company as is equal to the product obtained by multiplying the total number of directors on such Board (giving effect to the directors designated by the Parent pursuant to this sentence) by the percentage that the number of Shares so accepted for payment bears to the total number of Shares then outstanding. In furtherance thereof, the Company shall, upon request of the Purchaser, promptly increase the size of its Board of Directors or exercise its best efforts to secure the resignations of such number of directors, or both, as is necessary to enable the Parent's designees to be so elected to the Company's Board and shall cause the Parent's designees to be so elected. At such time, the Company shall, if requested by the Parent, also cause directors designated by the Parent to constitute at least the same percentage (rounded up to the next whole number) as is on the Company's Board of Directors of (i) each committee of the Company's Board of Directors, (ii) each board of directors (or similar body) of each Significant Subsidiary (as hereinafter defined) of the Company, and (iii) each committee (or similar body) of each such board. Notwithstanding the foregoing, if Shares are purchased pursuant to the Offer, there shall be until the Effective Time at least one member of the Company's Board of Directors who is a director on the date hereof and is not an employee of the Company. 5 (b) The Company shall promptly take all actions required pursuant to Section 14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule 14f-1 promulgated thereunder in order to fulfill its obligations under Section 1.3(a), including mailing to stockholders together with the Schedule 14D-9 the information required by such Section 14(f) and Rule 14f-1 as is necessary to enable the Parent's designees to be elected to the Company's Board of Directors. The Parent and the Purchaser will supply the Company and be solely responsible for any information with respect to them and their nominees, officers, directors and affiliates required by such Section 14(f) and Rule 14f- 1. The provisions of this Section 1.3 are in addition to and shall not limit any rights which the Purchaser, the Parent or any of their affiliates may have as a holder or beneficial owner of Shares as a matter of law with respect to the election of directors or otherwise. (c) Following the election of the Parent's designees to the Company's Board of Directors pursuant to this Section 1.3, prior to the Effective Time (as hereinafter defined) (i) any amendment or termination of this Agreement by the Company, (ii) any extension or waiver by the Company of the time for the performance of any of the obligations or other acts of the Parent or the Purchaser, or (iii) any waiver of any of the Company's rights hereunder shall, in any such case, require the concurrence of a majority of the directors of the Company then in office who neither were designated by the Purchaser nor are employees of the Company (the "Independent Director Approval"). ARTICLE II The Merger ----------- Section 2.1 The Merger. Upon the terms and subject to the conditions ---------- set forth in this Agreement, and in accordance with the DGCL, the Company shall merge with and into the Purchaser (the "Merger"), and the separate corporate existence of the Company shall thereupon cease, and the Purchaser shall be the surviving corporation in the Merger (the "Surviving Corporation"). The Surviving Corporation shall possess all the rights, privileges, powers and franchises as well of a public as of a private nature and shall be subject to all of the restrictions, disabilities, duties, debts and obligations of the Company and the Purchaser, all as provided in the DGCL. 6 Section 2.2 Closing. The closing of the Merger (the "Closing") will ------- take place at 10:00 a.m. on a date to be specified by the parties (the "Closing Date"), which shall be no later than the second business day after satisfaction of the conditions set forth in Article VI, unless another time or date is agreed to in writing by the parties hereto. The Closing will be held at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York, unless another place is agreed to in writing by the parties hereto. Section 2.3 Effective Time. Subject to the provisions of this -------------- Agreement, on the Closing Date the parties shall file with the Secretary of State of the State of Delaware a certificate of merger (the "Certificate of Merger") executed in accordance with the relevant provisions of the DGCL and shall make all other filings or recordings required under the DGCL in order to effect the Merger. The Merger shall become effective upon the filing of the Certificate of Merger or at such other time as is specified in the Certificate of Merger (the time at which the Merger becomes fully effective being hereinafter referred to as the "Effective Time"). Section 2.4 Effects of the Merger. The Merger shall have the --------------------- effects set forth in Section 259 of the DGCL. Section 2.5 Certificate of Incorporation; By-laws. ------------------------------------- (a) At the Effective Time, the Certificate of Incorporation of the Purchaser, as in effect immediately prior to the Effective Time, shall be the Certificate of Incorporation of the Surviving Corporation; provided, however, that Article FIRST of the Certificate of Incorporation of the Surviving Corporation shall be amended to read in its entirety as follows: "FIRST: The name of the corporation is Alumax Inc." and, as so amended shall be the Certificate of Incorporation of the Surviving Corporation until thereafter amended as provided by the DGCL and such Certificate of Incorporation. (b) At the Effective Time, the By-laws of the Purchaser, as in effect immediately prior to the Effective Time, shall be the By-laws of the Surviving Corporation until thereafter amended as provided by the DGCL, the Certificate of Incorporation of the Surviving Corporation and such By-laws. Section 2.6 Directors; Officers of Surviving Corporation. -------------------------------------------- 7 (a) The directors of the Purchaser at the Effective Time shall be the directors of the Surviving Corporation until their respective successors are duly elected and qualified or their earlier death, resignation or removal in accordance with the Certificate of Incorporation and By-laws of the Surviving Corporation. (b) The officers of the Purchaser at the Effective Time shall be the officers of the Surviving Corporation until their respective successors are duly elected and qualified or their earlier death, resignation or removal in accordance with the Certificate of Incorporation and By-laws of the Surviving Corporation. Section 2.7 Conversion of Securities. At the Effective Time, by ------------------------ virtue of the Merger and without any action on the part of the holders of any securities of the Purchaser or the Company: (a) Each Share that is owned by the Parent, the Purchaser, any of their respective Subsidiaries, the Company or any Subsidiary of the Company shall automatically be cancelled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor. (b) Each issued and outstanding Share, other than Excluded Shares and Dissenting Shares, shall be converted into, and become exchangeable for the right to receive: (A) 0.6975 (the "Exchange Ratio") of a share of Parent Common Stock; provided that the Purchaser shall have purchased no fewer than the 50% Share Number of Shares in the Offer; or (B) that fraction of a share of Parent Common Stock equal to the Adjusted Exchange Ratio, plus an amount in cash equal to the Merger Cash Prorate Amount, if the Purchaser shall have purchased fewer than the 50% Number of Shares in the Offer. As used herein: (i) the term "Excluded Shares" shall mean that number of Shares owned by the Parent and its Subsidiaries immediately prior to the Effective Time (excluding Shares held by the Company and its Subsidiaries); (ii) the term "Adjusted Exchange Ratio" shall mean that quotient (rounded to the nearest cent) determined by dividing (1) the product of the 50% Share Number times 0.6975 by (2) the Final Outstanding Number; (iii) the term "Merger Cash Prorate Amount" shall mean that U.S. dollar cash amount (rounded to the nearest cent) equal to the 8 quotient determined by dividing (3) the product of the Per Share Cash Amount times the excess of (a) the 50% Share Number over (b) the Purchased Share Number by (4) the Final Outstanding Number; (iv) the term "Final Outstanding Number" shall mean that number of Shares equal to the total number of Shares outstanding immediately prior to the Effective Time minus the Excluded Shares; and (v) the term "Purchased Share Number" shall mean that number of Shares actually purchased by the Purchaser in the Offer. The per Share consideration referred to in clause (A) or clause (B) of this Section 2.7(b), as the case may be, is referred to herein as the "Merger Consideration." All such Shares, when so converted, shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and the certificates representing such Shares shall thereafter represent only the right to receive (i) Merger Consideration, (ii) certain dividends and other distributions in accordance with Section 2.8(g), and (iii) cash in lieu of fractional shares of Parent Common Stock in accordance with Section 2.8(h), without interest. (c) Each issued and outstanding share of common stock, par value $.01 per share, of the Purchaser shall be converted into one validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation. Section 2.8 Exchange of Certificates. ------------------------ (a) Exchange Agent. The Parent shall designate a bank or trust -------------- company reasonably acceptable to the Company to act as agent for the holders of the Shares (other than Excluded Shares) in connection with the Merger (the "Exchange Agent") to receive in trust from the Parent as of the Effective Time for the benefit of such holders (i) certificates ("Parent Certificates") representing the number of whole shares of Parent Common Stock and (ii) the aggregate amount of cash (if any) issuable pursuant to Section 2.7(b) in exchange for outstanding Shares (such shares of Parent Common Stock and cash (if any), together with any dividends or distributions with respect thereto with a record date after the Effective Time and any cash payable in lieu of any fractional shares of Parent Common Stock being hereinafter referred to as the "Exchange Fund"). (b) Exchange Procedures. As soon as reasonably practicable after the ------------------- Effective Time, the Exchange Agent shall mail to each holder of record, as of the Effective Time, of a certificate or certificates, which immediately prior to the Effective Time represented outstanding Shares (the "Certificates"), whose Shares were converted pursuant to Section 2.7(b) into the right to receive the 9 Merger Consideration, a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Exchange Agent and shall be in such form and have such other provisions as the Parent may reasonably specify) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration. Upon surrender of a Certificate for cancellation to the Exchange Agent or to such other agent or agents as may be appointed by the Parent, together with such letter of transmittal, properly completed and duly executed in accordance with the instructions thereto, the holder of such Certificate shall be entitled to receive in exchange therefor (i) a Parent Certificate representing that number of whole shares of Parent Common Stock which such holder has the right to receive pursuant to Section 2.7(b), (ii) any cash included in the Merger Consideration, (iii) certain dividends or other distributions in accordance with Section 2.8(g) and (iv) cash in lieu of any fractional share in accordance with Section 2.8(h) for each Share formerly represented by such Certificate, and the Certificate so surrendered shall forthwith be cancelled. No interest will be paid or accrued on the cash payable upon the surrender of the Certificates. If the issuance of the Merger Consideration is to be made to a Person (as hereinafter defined) other than the Person in whose name the surrendered Certificate is registered, it shall be a condition of exchange that the Certificate so surrendered shall be properly endorsed or shall be otherwise in proper form for transfer and that the Person requesting such exchange shall have paid all transfer and other Taxes (as hereinafter defined) required by reason of the issuance to a Person other than the registered holder of the Certificate surrendered or shall have established to the satisfaction of the Surviving Corporation that such Tax either has been paid or is not applicable. (c) Transfer Books; No Further Ownership Rights in the Shares. At the --------------------------------------------------------- Effective Time, the stock transfer books of the Company shall be closed, and thereafter there shall be no further registration of transfers of the Shares on the records of the Company. From and after the Effective Time, the holders of Certificates evidencing ownership of the Shares outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Shares, except as otherwise provided for herein or by applicable law. If, after the Effective Time, Certificates are presented to the Surviving Corporation for any reason, they shall be cancelled and exchanged as provided in this Article II. (d) Termination of Fund; No Liability. At any time following six ---------------------------------- months after the Effective Time, the Surviving Corporation shall be entitled to require the Exchange Agent to deliver to it any funds (including any interest received with respect thereto) which had been made available to the Paying Agent, and holders shall be entitled to look to the Surviving Corporation (subject to abandoned property, escheat or other similar laws) only as general creditors thereof with respect to the Merger Consideration payable upon due surrender of their Certificates, without any interest thereon. Notwithstanding the foregoing, neither the Surviving Corporation nor the Exchange Agent shall be liable to any holder of a Certificate for Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. (e) Lost, Stolen or Destroyed Certificates. In the event any -------------------------------------- Certificates for Shares shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate(s) to be lost, stolen or destroyed and, if required by the Parent, the posting by such Person of a bond in such sum as the Parent may reasonably direct as indemnity against any claim that may be made against it or the Surviving Corporation with respect to such Certificate(s), the Exchange Agent will issue the Merger Consideration pursuant to Section 2.8(b) deliverable in respect of the Shares represented by such lost, stolen or destroyed Certificates. (f) Withholding Taxes. The Parent and the Purchaser shall be entitled ----------------- to deduct and withhold, or cause the Exchange Agent to deduct and withhold from the Per Share Cash Amount or the Merger Consideration payable to a holder of Shares pursuant to the Offer or the Merger any stock transfer Taxes and such amounts as are required under the Code, or any applicable provision of state, local or foreign Tax law, as specified in the Offer Documents. To the extent that amounts are so withheld by the Parent or the Purchaser, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Shares in respect of which such deduction and withholding was made by the Parent or the Purchaser, in the circumstances described in the Offer Documents. (g) Dividends; Distributions. No dividends or other distributions ------------------------ with respect to Parent Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered Certificate with respect to the shares of Parent Common Stock represented thereby, and no cash payment in lieu of fractional shares shall be paid to any such holder pursuant to Section 2.8(h), and all such dividends, other distributions and cash in lieu of fractional shares of Parent Common Stock shall be paid by Parent to the Exchange Agent and shall be included in the Exchange Fund, in each case until the surrender 11 of such Certificate in accordance with this Article II. Subject to the effect of applicable escheat or similar laws, following surrender of any such Certificate there shall be paid to the holder of the Parent Certificate representing whole shares of Parent Common Stock issued in exchange therefor, without interest, (i) at the time of such surrender, the amount of dividends or other distributions with a record date after the Effective Time theretofore paid with respect to such whole shares of Parent Common Stock and the amount of any cash payable in lieu of a fractional share of Parent Common Stock to which such holder is entitled pursuant to Section 2.8(h) and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time but prior to such surrender and with a payment date subsequent to such surrender payable with respect to such whole shares of Parent Common Stock. The Parent shall make available to the Exchange Agent cash for these purposes. (h) No Fractional Shares. No Parent Certificates or scrip -------------------- representing fractional shares of Parent Common Stock shall be issued upon the surrender for exchange of Certificates, no dividend or distribution of Parent shall relate to such fractional share interests and such fractional share interests will not entitle the owner thereof to vote or to any rights of a stockholder of Parent. In lieu of any such fractional shares, each holder of a Certificate who would otherwise have been entitled to receive a fractional share interest in exchange for such Certificate pursuant to this Section shall receive from the Exchange Agent an amount in cash equal to the product obtained by multiplying (A) the fractional share interest to which such holder (after taking into account all Shares held at the Effective Time by such holder) would otherwise be entitled by (B) the closing price for a share of Parent Common Stock as reported on the New York Stock Exchange (the "NYSE") Composite Transactions Tape (as reported in The Wall Street Journal, or, if not reported thereby, any other authoritative source) on the Closing Date. (i) Investment of Exchange Fund. The Exchange Agent shall invest any --------------------------- cash included in the Exchange Fund, as directed by the Parent, on a daily basis. Any interest and other income resulting from such investments shall be paid to the Parent. Section 2.9 Appraisal Rights. Notwithstanding anything in this ---------------- Agreement to the contrary, if by reason of the composition of the Merger Consideration Section 262 of the DGCL affords appraisal rights in the Merger, then Shares (the "Dissenting Shares") that are issued and outstanding immediately prior to 12 the Effective Time and which are held by stockholders who did not vote in favor of the Merger and who comply with all of the relevant provisions of Section 262 of the DGCL (the "Dissenting Stockholders") shall not be converted into or be exchangeable for the right to receive the Merger Consideration, unless and until such holders shall have failed to perfect or shall have effectively withdrawn or lost their rights to appraisal under the DGCL. If any Dissenting Stockholder shall have failed to perfect or shall have effectively withdrawn or lost such right, such holder's Shares shall thereupon be converted into and become exchangeable for the right to receive, as of the Effective Time, the Merger Consideration without any interest thereon. The Company shall give the Parent (i) prompt notice of any written demands for appraisal of any Shares, attempted withdrawals of such demands and any other instruments served pursuant to the DGCL and received by the Company relating to stockholders' rights of appraisal, and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under the DGCL. Neither the Company nor the Surviving Corporation shall, except with the prior written consent of the Parent, voluntarily make any payment with respect to, or settle or offer to settle, any such demand for payment. If any Dissenting Stockholder shall fail to perfect or shall have effectively withdrawn or lost the right to dissent, the Shares held by such Dissenting Stockholder shall thereupon be treated as though such Shares had been converted into the right to receive the Merger Consideration pursuant to Section 2.7(b). Section 2.10 Adjustments to Prevent Dilution. In the event that the ------------------------------- Parent changes the number of shares of Parent Common Stock or securities convertible or exchangeable into or exercisable for shares of Parent Common Stock, issued and outstanding prior to the Effective Time as a result of a reclassification, stock split (including a reverse split), stock dividend or distribution, recapitalization, merger, subdivision, issuer tender or exchange offer, or other similar transaction, the Merger Consideration shall be equitably adjusted. ARTICLE III Representations and Warranties of the Company --------------------------------------------- Except as set forth on the schedule delivered by the Company to the Parent simultaneously and in connection with the execution and delivery of this Agreement (the "Company Disclosure Schedule") or disclosed in the Company SEC Reports, the Company represents and warrants to the Parent and the Purchaser as set forth below: 13 Section 3.1 Organization, Qualification, Etc . The Company is a -------------------------------- corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, has the corporate power and authority and all governmental approvals required for it to own its properties and assets and to carry on its business as it is now being conducted and is duly qualified to do business and is in good standing in each jurisdiction in which the ownership of its properties or the conduct of its business requires such qualification, except for jurisdictions in which the failure to be so organized, existing and in good standing or to have such power, authority and governmental approvals would not, individually or in the aggregate, have a Material Adverse Effect (as hereinafter defined) on the Company or delay consummation of the transactions contemplated by this Agreement or otherwise prevent the Company from performing its obligations hereunder. As used in this Agreement, any reference to any state of facts, event, change or effect having a "Material Adverse Effect" on or with respect to the Company or the Parent, as the case may be, means such state of facts, event, change or effect that has had, or would reasonably be expected to have, a material adverse effect on the business, results of operations, assets, liabilities or financial condition of the Company and its Subsidiaries, taken as a whole, or the Parent and its Subsidiaries, taken as a whole, as the case may be. The Company has delivered or made available to the Parent copies of the certificate of incorporation and by-laws or other similar organizational documents for the Company and each of its Significant Subsidiaries. Such certificates of incorporation and by-laws or other organizational documents are complete and correct and in full force and effect, and neither the Company nor any of its Significant Subsidiaries is in violation of any of the provisions of their respective certificates of incorporation, by-laws or similar organizational documents. Each of the Company's Significant Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization, has the corporate power and authority and all governmental approvals required for it to own its properties and assets and to carry on its business as it is now being conducted and is duly qualified to do business and is in good standing in each jurisdiction in which the ownership of its properties or the conduct of its business requires such qualification, except for jurisdictions in which the failure to be so organized, existing and in good standing or to have such power, authority and governmental approvals would not, individually or in the aggregate, have a Material Adverse Effect on the Company. All the outstanding shares of capital stock of, or other ownership interests in, the Company's Subsidiaries are duly authorized, validly issued, fully paid and non-assessable and are owned by the Company, directly or indirectly, free and clear of all liens, 14 claims, mortgages, encumbrances, pledges, security interests, equities or charges of any kind (each, a "Lien"). Other than the Subsidiaries, there are no other Persons in which the Company owns, of record or beneficially, any direct or indirect equity or similar interest or any right (contingent or otherwise) to acquire the same. Section 3.2 Capital Stock. The authorized capital stock of the ------------- Company consists of 200,000,000 shares of Company Common Stock and 50,000,000 shares of preferred stock, par value $1.00 per share ("Company Preferred Stock"). As of March 8, 1998, (i) 53,458,062 shares of Company Common Stock are issued and outstanding; (ii) 3,161,525 shares of Company Common Stock are subject to outstanding options issued and 319,610 shares of Company Common Stock are subject to other stock-based awards, including 113,580 awarded on March 5, 1998, pursuant to The Alumax Inc. 1993 Long Term Incentive Plan (the "1993 Plan"), and 4,784,929 shares of Company Common Stock are reserved for issuance under the 1993 Plan; (iii) 571,475 shares of Company Common Stock are subject to outstanding options, and an additional 190,564 shares are issuable if the holder retains the shares acquired for two years after the date of exercise, issued pursuant to The Alumax Inc. 1995 Employee Equity Ownership Plan (the "1995 Plan"), and 997,000 shares of Company Common Stock are reserved for issuance under the 1995 Plan; (iv) 80,000 shares of Company Common Stock are subject to outstanding options, 20,750 deferred shares of Company Common Stock and 730,301 shares of Company Common Stock are reserved for issuance under The Alumax Inc. Non-Employee Directors' Stock Compensation Plan and 74,148 shares are deferred and 192,009 shares of Company Common Stock are reserved for issuance under The Alumax Inc. Non-Employee Directors' Deferred Compensation Plan; (v) 794,624 shares of Company Common Stock are reserved for issuance under the Alumax Inc. Thrift Plan for Salaried Employees, Alumax Inc. Thrift Plan for Hourly Employees, and Alumax Inc. Thrift Plan for Collectively Bargained Employees; (vi) 695,567 shares of Company Common Stock are reserved for issuance pursuant to employee deferred compensation arrangements, of which 623,350 shares of Company Common Stock are subject to outstanding options and 26,603 shares of Company Common Stock are subject to deferred stock units; (vii) 112 shares of Company Common Stock are reserved for conversion of the Company's Series A Preferred Stock; (viii) 1,812,900 shares of Company Common Stock are issued and held in the treasury of the Company; and (ix) no shares of Company Preferred Stock are issued, outstanding or reserved for issuance. Section 3.2 of the Company Disclosure Schedule sets forth a complete and correct list of all holders of options to acquire 15 Shares, including such person's name, the number of options (vested, unvested and total) held by such person and the exercise price for each such option. All the outstanding Shares are and the exercise of outstanding options described in the second sentence of this Section 3.2 will be, when issued in accordance with the terms thereof, duly authorized, validly issued, fully paid and non- assessable. Except as set forth above, except for the Company's obligations under the Rights Agreement, dated as of February 22, 1996 (the "Rights Agreement"), between the Company and Chemical Mellon Shareholder Services, L.L.C., as rights agent, and except for the transactions contemplated by this Agreement, (1) there are no shares of capital stock of the Company authorized, issued or outstanding, (2) there are no authorized or outstanding options, warrants, calls, preemptive rights, subscriptions or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued capital stock of the Company or any of its Subsidiaries, obligating the Company or any of its Subsidiaries to issue, transfer or sell or cause to be issued, transferred or sold any shares of capital stock or other equity interest in the Company or any of its Subsidiaries or securities convertible into or exchangeable for such shares or equity interests, or obligating the Company or any of its Subsidiaries to grant, extend or enter into any such option, warrant, call, subscription or other right, agreement, arrangement or commitment, or (3) there are no outstanding contractual obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any Shares or other capital stock of the Company or any Subsidiary or to provide funds to make any investment (in the form of a loan, capital contribution or otherwise) in any Subsidiary or any other entity other than loans to Subsidiaries in the ordinary course of business. Section 3.3 Corporate Authority Relative to this Agreement; No -------------------------------------------------- Violation. - --------- (a) The Company has the corporate power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of the Company and, except for obtaining the Company Stockholder Approval (as hereinafter defined) as contemplated by Section 5.3 hereof and the filing of the Certificate of Merger, no other corporate proceedings on the part of the Company are necessary to authorize the consummation of the transactions contemplated hereby. The Board of Directors of the Company has taken all appropriate action so that neither the Parent nor the Purchaser will be an "interested stockholder" within 16 the meaning of Section 203 of the DGCL by virtue of the Parent, the Purchaser and the Company entering into this Agreement and consummating the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Company and, assuming this Agreement constitutes a valid and binding agreement of the Parent and the Purchaser, constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms. (b) Except for the filings, permits, authorizations, consents and approvals set forth in Section 3.3(b) of the Company Disclosure Schedule or as may be required under, and other applicable requirements of, the Securities Act of 1933, as amended (the "Securities Act"), the Exchange Act, the Hart-Scott- Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), state securities or blue sky laws, and the DGCL (the "Company Required Approvals"), none of the execution, delivery or performance of this Agreement by the Company, the consummation by the Company of the transactions contemplated hereby or compliance by the Company with any of the provisions hereof will (i) conflict with or result in any breach of any provision of the certificate of incorporation, by-laws or similar organizational documents of the Company or any of its Significant Subsidiaries, (ii) require any filing with, or permit, authorization, consent or approval of, any federal, regional, state or local court, arbitrator, tribunal, administrative agency or commission or other governmental or other regulatory authority or agency, whether U.S. or foreign (a "Governmental Entity"), (iii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, amendment, cancellation or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract, agreement or other instrument or obligation to which the Company or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound (the "Company Agreements"), or (iv) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Company, any of its Subsidiaries or any of their properties or assets, excluding from the foregoing clauses (ii), (iii) and (iv) such violations, breaches or defaults which would not, individually or in the aggregate, have a Material Adverse Effect on the Company or prevent or substantially delay the consummation of the transactions contemplated hereby. Section 3.3(b) of the Company Disclosure Schedule sets forth a list of all third party consents and approvals required to be obtained under the Company Agreements prior to the consummation of the transactions contemplated by this Agreement the failure of which to obtain would have, individually or in the aggregate, a Material Adverse Effect on the Company. 17 Section 3.4 Reports and Financial Statements. The Company has -------------------------------- previously furnished or otherwise made available to the Parent true and complete copies of: (a) the Company's Annual Reports on Form 10-K filed with the SEC for each of the years ended December 31, 1996 and 1997; (b) the Company's Quarterly Report on Form 10-Q filed with the SEC for the quarters ended March 31, 1997, June 30, 1997 and September 30, 1997; (c) each definitive proxy statement filed by the Company with the SEC since December 31, 1996; (d) each final prospectus filed by the Company with the SEC since December 31, 1996, except any final prospectus on Form S-8; and (e) all Current Reports on Form 8-K filed by the Company with the SEC since January 1, 1997. As of their respective dates, such reports, proxy statements and prospectuses (collectively with any amendments, supplements and exhibits thereto, the "Company SEC Reports") (i) complied as to form in all material respects with the applicable requirements of the Securities Act, the Exchange Act and the rules and regulations promulgated thereunder, and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. Except to the extent that information contained in any Company SEC Report was amended or was superseded by a later filed Company SEC Report, none of the Company SEC Reports contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. None of the Company's Subsidiaries is required to file any forms, reports or other documents with the SEC. The audited consolidated financial statements and unaudited consolidated interim financial statements included in the Company SEC Reports (including any related notes and schedules) fairly present the financial position of the Company and its consolidated Subsidiaries as of the 18 dates thereof and the results of operations and cash flows for the periods or as of the dates then ended (subject, in the case of the unaudited interim financial statements, to normal year-end adjustments), in each case in accordance with past practice and generally accepted accounting principles in the United States ("GAAP") consistently applied during the periods involved (except as otherwise disclosed in the notes thereto). Since January 1, 1996, the Company has timely filed all reports, registration statements and other filings required to be filed by it with the SEC under the rules and regulations of the SEC. Section 3.5 No Undisclosed Liabilities. Neither the Company nor any -------------------------- of its Subsidiaries has any liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, and there is no existing condition, situation or set of circumstances which could reasonably be expected to result in such a liability or obligation, except (a) liabilities or obligations reflected in the Company SEC Reports and (b) liabilities or obligations which would not, individually or in the aggregate, have a Material Adverse Effect on the Company. Section 3.6 No Violation of Law. The businesses of the Company and ------------------- its Subsidiaries are not being conducted in violation of any law, ordinance or regulation of any Governmental Entity (provided that no representation or warranty is made in this Section 3.6 with respect to Environmental Laws (as hereinafter defined)) except (a) as described in the Company SEC Reports filed prior to the date hereof and (b) for violations or possible violations which would not, individually or in the aggregate, have a Material Adverse Effect on the Company. Section 3.7 Environmental Matters. --------------------- (a) Each of the Company and its Subsidiaries has obtained all licenses, permits, authorizations, approvals and consents from Governmental Entities which are required under any applicable Environmental Law in respect of its business or operations ("Environmental Permits"), except for such failures to have Environmental Permits which, individually or in the aggregate, are not reasonably expected to have a Material Adverse Effect on the Company. Each of such Environmental Permits is in full force and effect, and each of the Company and its Subsidiaries is in compliance with the terms and conditions of all such Environmental Permits and with all applicable Environmental Laws, except for such exceptions as would not, individually or in the aggregate, have a Material Adverse Effect on the Company. 19 (b) There is no Environmental Claim (as hereinafter defined) pending, or to the best knowledge of the Company threatened, against the Company or any of its Subsidiaries, or to the best knowledge of the Company against any Person whose liability for such Environmental Claim the Company or any of its Subsidiaries has or may have retained or assumed either contractually or by operation of law, that would, individually or in the aggregate, have a Material Adverse Effect on the Company. (c) Except as set forth in Section 3.7(c) of the Company Disclosure Schedule, to the best knowledge of the Company, there are no past or present actions, activities, circumstances, conditions, events or incidents, including, without limitation, the release, threatened release or presence of any Hazardous Material (as hereinafter defined), that have resulted in any Environmental Claim against the Company or any of its Subsidiaries, or to the best knowledge of the Company against any Person whose liability for any Environmental Claim the Company or any of its Subsidiaries has or may have retained or assumed either contractually or by operation of law, except for such liabilities which would not, individually or in the aggregate, have a Material Adverse Effect on the Company. (d) To the best knowledge of the Company, no site or facility now or previously owned, operated or leased by the Company or any of its Subsidiaries is listed or proposed for listing on the National Priorities List promulgated pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, and the rules and regulations thereunder ("CERCLA"). (e) No Liens have arisen under or pursuant to any Environmental Law on any site or facility owned, operated or leased by the Company or any of its Subsidiaries, except for such Liens which would not, individually or in the aggregate, have a Material Adverse Effect on the Company, and no action of any Governmental Entity has been taken or, to the best knowledge of the Company, is in process which could subject any of such properties to such Liens except for any such action which would not, individually or in the aggregate, have a Material Adverse Effect on the Company. (f) As used in this Agreement: 20 (i) "Environmental Claim" means any claim, action, cause of action, investigation or notice (written or oral) by any Person alleging potential liability (including, without limitation, potential liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, or penalties) arising out of, based on or resulting from (a) the presence, or release or threatened release, of any Hazardous Materials at any location, whether or not owned or operated by the Company or any of its Subsidiaries or Parent or any of its Subsidiaries, as the case may be, or (b) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law. (ii) "Environmental Law" means any law or order of any Governmental Entity relating to the regulation or protection of human health or safety as it relates to Hazardous Materials or the environment or to emissions, discharges, releases or threatened releases of Hazardous Material, pollutants, contaminants, chemicals or industrial, toxic or hazardous substances or wastes into the environment. (iii) "Hazardous Materials" means (A) any petroleum or petroleum products, flammable materials, radioactive materials, friable asbestos, urea formaldehyde foam insulation and transformers or other equipment that contain dielectric fluid containing regulated levels of polychlorinated biphenyls; (B) any chemicals or other materials or substances which are become defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants" or words of similar import under any Environmental Law; and (C) any other chemical or other material or substance, exposure to which is prohibited, limited or regulated by any Governmental Entity under any Environmental Law. Section 3.8 Employee Benefit Plans; ERISA. ----------------------------- (a) Except as described in the Company SEC Reports or as would not have a Material Adverse Effect on the Company, (i) all Company Employee Benefit Plans (as hereinafter defined) are in compliance with all applicable requirements of law, including ERISA (as hereinafter defined) and the Code, and (ii) neither the Company nor any of its Subsidiaries nor any ERISA Affiliate (as hereinafter defined) has any liabilities or obligations with respect to any such 21 Company Employee Benefit Plans, whether accrued, contingent or otherwise, nor to the best knowledge of the Company, are any such liabilities or obligations expected to be incurred. Except as described in the Company SEC Reports or as set forth in Section 3.8(a) of the Company Disclosure Schedule, the execution of, and performance of the transactions contemplated in, this Agreement will not (either alone or upon the occurrence of any additional or subsequent events) constitute an event under any Company Employee Benefit Plan that will or may result in any payment or any continuation benefit under COBRA (whether of severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any employee. The only severance agreements or severance policies applicable to the Company or any of its Subsidiaries are the agreements and policies specifically described in Section 3.8(a) of the Company Disclosure Schedule. (b) With respect to each of its Plans (as hereinafter defined), the Company has heretofore delivered to the Parent complete and correct copies of each of the following documents, as applicable: (i) a copy of the Plan; (ii) a copy of the most recent annual report; (iii) a copy of the most recent actuarial report; (iv) a copy of the most recent Summary Plan Description and all material modifications; (v) a copy of the trust or other funding agreement; and (vi) the most recent determination letter received from the Internal Revenue Service (the "IRS") with respect to each Plan that is intended to be qualified under Section 401 of the Code and all notices of reportable events received following receipt of such letter. (c) Section 3.8(c) of the Company Disclosure Schedule sets forth a list of each employee of the Company (or any Subsidiary) who is a party to any agreement (whether written or oral) with respect to such person's employment by the Company or a Subsidiary, other than offer letters which do not have guaranteed periods of employment and statutory employment agreements under foreign laws, and which provide for annual compensation in excess of $100,000. The Company has provided to the Parent a complete and correct copy of each such written employment agreement and a complete and correct summary of each such oral agreement. (d) No liability under Title IV of ERISA has been incurred by the Company or any ERISA Affiliate within the past twelve years that has not been satisfied in full. To the best knowledge of the Company, no condition exists that presents a material risk to the Company, any of its Subsidiaries or any ERISA Affiliate of incurring a liability under such Title. The Pension Benefit Guaranty 22 Corporation established under ERISA ("PBGC") has not instituted proceedings to terminate any of the Plans, and no condition exists that presents a material risk that such proceedings will be instituted. With respect to each of the Plans that is subject to Title IV of ERISA, the present value of accrued benefits under such Plan, based upon the actuarial assumptions used for funding purposes in the most recent actuarial report prepared by such Plan's actuary with respect to such Plan, did not, as of its latest valuation date, exceed the then current value of the assets of such Plan allocable to such accrued benefits, and there have been no changes since such latest valuation date which would cause the present value of such accrued benefits to exceed the current value of such assets. None of the Plans or any trust established thereunder has incurred any "accumulated funding deficiency" (as defined in Section 302 of ERISA and Section 412 of the Code), whether or not waived, as of the last day of the most recent fiscal year of each of the Plans ended prior to the date of this Agreement. None of the Plans is a "multiemployer plan," as such term is defined in Section 3(37) of ERISA. Each of the Plans that is intended to be "qualified" within the meaning of Section 401(a) of the Code is so qualified and the trusts maintained thereunder are exempt from taxation under Section 501(a) of the Code. Except as set forth in Section 3.8(d) of the Company Disclosure Schedule, no Plan provides benefits, including without limitation death or medical benefits (whether or not insured), with respect to current or former employees after retirement or other termination of service (other than coverage mandated by applicable law or benefits, the full cost of which is borne by the current or former employee). There are no pending or threatened claims by or on behalf of any Plan, by any employee or beneficiary covered under any such Plan, or otherwise involving any such Plan (other than routine claims for benefits). (e) As used in this Agreement: (i) "Company Employee Benefit Plan" means any Plan entered into, established, maintained, sponsored, contributed to or required to be contributed to by the Company, any of its Subsidiaries or ERISA Affiliates for the benefit of the current or former employees or directors of the Company or any of its Subsidiaries and existing on the date of this Agreement or at any time subsequent thereto and on or prior to the Effective Time and, in the case of a Plan which is subject to the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations thereunder ("ERISA"), Section 412 of the Code or Title IV of ERISA, at any time during the twelve-year period preceding the date of this Agreement; 23 (ii) "Plan" means any employment, bonus, incentive compensation, deferred compensation, pension, profit sharing, retirement, stock purchase, stock option, stock ownership, stock appreciation rights, phantom stock, leave of absence, layoff, vacation, day or dependent care, legal services, cafeteria, life, health, medical, accident, disability, worker's compensation or other insurance, severance, separation, termination, change of control or other benefit plan, agreement, practice, policy, program or arrangement of any kind, whether written or oral, including, but not limited to any "employee benefit plan" within the meaning of Section 3(3) of ERISA; and (iii) "ERISA Affiliate" means, with respect to any Person, any Person in the same controlled group as such Person (within the meaning of Sections 414(b) and (c) of the Code). Section 3.9. Absence of Certain Changes or Events. Except as ------------------------------------ disclosed in the Company SEC Reports, (a) since December 31, 1997 the businesses of the Company and its Subsidiaries have been conducted in the ordinary course consistent with past practice, and (b) there has not been any event, occurrence, development or state of circumstances or facts that has had, individually or in the aggregate, a Material Adverse Effect on the Company. Section 3.10. Litigation. Except as disclosed in the Company SEC ---------- Reports, there are no actions, suits or proceedings pending (or, to the best knowledge of the Company, threatened) against or affecting the Company or its Subsidiaries, or any of their respective properties at law or in equity, by or before any Governmental Entity which, individually or in the aggregate, have a Material Adverse Effect on the Company or would prevent or substantially delay any of the transactions contemplated by this Agreement or otherwise prevent the Company from performing its obligations hereunder. Section 3.11. Schedule 14D-9; Offer Documents; Registration Statement ------------------------------------------------------- and Proxy Statement. Neither the Schedule 14D-9 nor any information supplied - ------------------- by the Company for inclusion in the Offer Documents shall, at the respective times the Schedule 14D-9, the Offer Documents or any amendments or supplements thereto are filed with the SEC or are first published, sent or given to stockholders of the Company, as the case may be, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or 24 necessary in order to make the statements made therein, in the light of the circumstances under which they are made, not misleading. The Proxy Statement (as hereinafter defined) will not, on the date the Proxy Statement (or any amendment or supplement thereto) is first mailed to stockholders of the Company, contain any untrue statement of a material fact, or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they are made, not misleading or shall, at the time of the Special Meeting (as hereinafter defined) or at the Effective Time, omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Special Meeting which shall have become false or misleading in any material respect. None of the information supplied by the Company for inclusion or incorporation by reference in the Registration Statement will, at the date it becomes effective and at the time of the Special Meeting (as hereinafter defined) contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Schedule 14D-9 and the Proxy Statement will, when filed by the Company with the SEC, comply as to form in all material respects with the applicable provisions of the Exchange Act and the rules and regulations thereunder. Notwithstanding the foregoing, the Company makes no representation or warranty with respect to the statements made in any of the foregoing documents based on and in conformity with information supplied by or on behalf of the Parent or the Purchaser specifically for inclusion therein. Section 3.12. Intellectual Property. --------------------- (a) The Company and its Subsidiaries own or have valid rights to use all items of Intellectual Property (as hereinafter defined) utilized in the conduct of the business of the Company and its Subsidiaries as presently conducted, free and clear of all Liens with such exceptions as would not have, individually or in the aggregate, a Material Adverse Effect on the Company. (b) To the best knowledge of the Company, (i) neither the Company nor any Subsidiary is in default (or with the giving of notice or lapse of time or both, would be in default) under any license to use such Intellectual Property, (ii) the Intellectual Property is not being infringed by any third party, (iii) neither the Company nor any Subsidiary is infringing any Intellectual Property of any third party with such exceptions as would not have, individually or in the 25 aggregate, a Material Adverse Effect on the Company and (iv) in the last three years neither the Company nor any Subsidiary has received any claim or notice of infringement by any third party. (c) As used in this Agreement, "Intellectual Property" means all of the following: (i) U.S. and foreign registered and unregistered trademarks and pending trademark applications, trade dress, service marks, logos, trade names, corporate names, assumed names, business names and logos and all registrations and applications to register the same (the "Trademarks"), (ii) issued U.S. and foreign patents and pending patent applications, invention disclosures, and any and all divisions, continuations, continuations-in-part, reissues, continuing patent applications, reexaminations, and extensions thereof, any counterparts claiming priority therefrom, utility models, patents of importation/confirmation, certificates of invention, certificates of registration and like statutory rights (the "Patents"), (iii) U.S. and foreign registered and unregistered copyrights (including, but not limited to, those in computer software and databases), rights of publicity and all registrations and applications to register the same (the "Copyrights"), (iv) all categories of trade secrets as defined in the Uniform Trade Secrets Act and under corresponding foreign statutory and common law, including, but not limited to, business, technical and know-how information, (v) all licenses and agreements pursuant to which the Company or any Subsidiary has acquired rights in or to any Trademarks, Patents, trade secrets, technology, know-how, Computer Software (as defined below), rights of publicity or Copyrights, or licenses and agreements pursuant to which the Company has licensed or transferred the right to use any of the foregoing ("Licenses"), and (vi) all computer software, data files, source and object codes, user interfaces, manuals and other specifications and documentation and all know-how relating thereto (collectively, "Computer Software"). Section 3.13. Tax Matters. ----------- (a) All federal, state, local and foreign Tax Returns (as hereinafter defined) required to be filed by or on behalf of the Company, each of its Subsidiaries, and each affiliated, combined, consolidated or unitary group of which the Company or any of its Subsidiaries (i) is a member (a "Current Company Group") or (ii) was a member during any years not closed with the IRS for U.S. federal income Tax purposes but is not currently a member, but only insofar as any such Tax Return relates to a taxable period or portion thereof ending on a date within the last six years during which the Company or such Subsidiary was a member of such affiliated, combined, consolidated or unitary group for purposes of 26 the relevant Tax (a "Past Company Group," and together with Current Company Groups, a "Company Affiliated Group") have been timely filed or requests for extensions have been timely filed and any such extension has been granted and has not expired, and all such filed Tax Returns are complete and accurate except to the extent any failure to file or any inaccuracies in filed Tax Returns would not, individually or in the aggregate, have a Material Adverse Effect on the Company (it being understood that the representations made in this Section 3.13, to the extent that they relate to Past Company Groups, are made to the best knowledge of the Company and only with respect to taxable periods or portions thereof ending on a date within the last six years during which the Company or any of its Subsidiaries was a member of such affiliated, combined, consolidated or unitary group for purposes of the relevant Tax). All Taxes due and owing by the Company, any Subsidiary of the Company or any Company Affiliated Group have been paid, or adequately reserved for, except to the extent any failure to pay or reserve would not, individually or in the aggregate, have a Material Adverse Effect on the Company. There is no audit, examination, deficiency, refund litigation, proposed adjustment or matter in controversy with respect to any Taxes due and owing by the Company, any Subsidiary of the Company or any Company Affiliated Group which if determined adversely would have a Material Adverse Effect on the Company. All assessments for Taxes due and owing by the Company, any Subsidiary of the Company or any Company Affiliated Group with respect to completed and settled examinations or concluded litigation have been paid. Section 3.13(a) of the Company Disclosure Schedule sets forth (i) the taxable years of the Company for which the statutes of limitations with respect to U.S. federal income Taxes have not expired and (ii) with respect to federal income Taxes for such years, those years for which examinations have been completed, those years for which examinations are presently being conducted, and those years for which examinations have not yet been initiated. Neither the Company nor any of its Subsidiaries has any liability under Treasury Regulation Section 1.1502-6 for U.S. federal income Taxes of any Person other than the Company and its Subsidiaries. The Company and each of its Subsidiaries have complied in all material respects with all rules and regulations relating to the withholding of Taxes, except to the extent any such failure to comply would not, individually or in the aggregate, have a Material Adverse Effect on the Company. (b) Neither the Company nor any Subsidiary of the Company has (i) entered into a closing agreement or other similar agreement with a taxing authority relating to Taxes of the Company or any Subsidiary of the Company with respect to a taxable period for which the statute of limitations is still open, or (ii) with 27 respect to U.S. federal income Taxes, granted any waiver of any statute of limitations with respect to, or any extension of a period for the assessment of, any income Tax, in either case, that is still outstanding. There are no Liens relating to Taxes upon the assets of the Company or any Subsidiary other than Liens relating to Taxes not yet due. Neither the Company nor any Subsidiary is a party to any agreement relating to allocating or sharing of Taxes which has not been disclosed in its Tax Returns. No consent under Section 341(f) of the Code has been filed with respect to the Company or any Subsidiary. (c) Any amount or other entitlement that could be received (whether in cash or property or the vesting of property) as a result of any of the transactions contemplated by this Agreement by any employee, officer or director of the Company or any of its affiliates who is a "disqualified individual" (as such term is defined in proposed Treasury Regulation Section 1.280G-1) under any Plan currently in effect would not be characterized as an "excess parachute payment" (as such term is defined in Section 280G(b)(1) of the Code). (d) For purposes of this Agreement: (i) "Taxes" means any and all federal, state, local, foreign or other taxes of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any taxing authority, including, without limitation, taxes or other charges on or with respect to income, franchises, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, social security, workers' compensation, unemployment compensation or net worth, and taxes or other charges in the nature of excise, withholding, ad valorem or value added, and (ii) "Tax Return" means any return, report or similar statement (including the attached schedules) required to be filed with respect to any Tax, including, without limitation, any information return, claim for refund, amended return or declaration of estimated Tax. Section 3.14. Opinion of Financial Advisor. The Board of Directors ---------------------------- of the Company has received the opinion of BT Wolfensohn, dated the date of this Agreement, substantially to the effect that each of the Per Share Cash Amount and the Merger Consideration, taken as a whole, to be received by the stockholders of the Company in the Offer and the Merger is fair to such holders from a financial point of view. Section 3.15. Required Vote of the Company Stockholders. The ----------------------------------------- affirmative vote of the holders of a majority of the outstanding shares of Company 28 Common Stock (the "Company Stockholder Approval") is the only vote of the holders of any class or series of the Company's capital stock which is necessary to approve this Agreement and the transactions contemplated hereby. Section 3.16. Employment Matters. Neither the Company nor any of ------------------- its Subsidiaries has experienced any work stoppages, strikes, collective labor grievances, other collective bargaining disputes or claims of unfair labor practices in the last five years which would, individually or in the aggregate, have a Material Adverse Effect on the Company. To the best knowledge of the Company, there is no organizational effort presently being made or threatened by or on behalf of any labor union with respect to employees of the Company or any of its Subsidiaries. ARTICLE IV Representations and Warranties of the Parent and the Purchaser -------------------------------------------------------------- Except as set forth on the schedule delivered by the Parent to the Company simultaneously and in connection with the execution of this Agreement (the "Parent Disclosure Schedule," and together with the Company Disclosure Schedule, the "Disclosure Schedule") or disclosed in the Parent SEC Reports, the Parent and the Purchaser represent and warrant to the Company as set forth below: Section 4.1. Organization, Qualification, Etc. Each of the Parent and -------------------------------- the Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority and all governmental approvals required for it to own its properties and assets and to carry on its business as it is now being conducted and is duly qualified to do business and is in good standing in each jurisdiction in which the ownership of its properties or the conduct of its business requires such qualification, except for jurisdictions in which the failure to be so organized, existing and in good standing or to have such power, authority and governmental approvals would not, individually or in the aggregate, have a Material Adverse Effect on the Parent or delay consummation of the transactions contemplated by this Agreement or otherwise prevent the Parent or the Purchaser from performing its obligations hereunder. The Parent has delivered or made available to the Company copies of the articles of incorporation and by-laws for the Parent and the certificate of incorporation and by-laws for the Purchaser. Such organizational documents are complete and correct and in full force and effect, and neither the 29 Parent nor the Purchaser is in violation of any of the provisions of their respective certificates of incorporation or by-laws. Each of the Parent's Significant Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization, has the corporate power and authority and all governmental approvals required for it to own its properties and assets and to carry on its business as it is now being conducted and is duly qualified to do business and is in good standing in each jurisdiction in which the ownership of its properties or the conduct of its business requires such qualification, except for jurisdictions in which the failure to be so organized, existing and in good standing or to have such power, authority and governmental approvals would not, individually or in the aggregate, have a Material Adverse Effect on the Parent. Section 4.2. Capital Stock. The authorized capital stock of the ------------- Parent consists of 300,000,000 shares of Parent Common Stock, 557,740 shares of serial preferred stock, par value $100.00 per share ("Parent Serial Preferred Stock") and 10,000,000 shares of Class B serial preferred stock, par value $1.00 per share ("Parent Class B Serial Preferred Stock"). As of February 28, 1998, (i) 168,125,229 shares of Parent Common Stock were issued and outstanding; (ii) 14,050,000 shares of Parent Common Stock were subject to outstanding options issued pursuant to Parent's long term stock incentive plan (the "Long Term Incentive Plan"), and 19,300,152 shares of Parent Common Stock were reserved for issuance under the Long Term Incentive Plan; (iii) 4,097,532 shares of Parent Common Stock were reserved for issuance under the Parent's employees savings plans; (iv) 169,228 shares of Parent Common Stock were reserved for issuance under the Parent's incentive compensation plan; (v) 10,797,354 shares of Parent Common Stock were issued and held in the treasury of the Parent; (vi) 557,649 shares of Parent Serial Preferred Stock were issued and outstanding; and (vii) no shares of Parent Class B Serial Preferred Stock are issued and outstanding. All the outstanding shares of Parent Common Stock and Parent Serial Preferred Stock are, and all shares to be issued as part of the Merger Consideration will be, when issued in accordance with the terms hereof, duly authorized, validly issued, fully paid and non-assessable. Except as set forth above, and except for the transactions contemplated by this Agreement, (1) there are no shares of capital stock of the Parent authorized, issued or outstanding, (2) there are no authorized or outstanding options, warrants, calls, preemptive rights, subscriptions or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued capital stock of the Parent, obligating the Parent to issue, transfer or sell or cause to be issued, transferred or sold any shares of capital stock or other 30 equity interest in the Parent or securities convertible into or exchangeable for such shares or equity interests, or obligating the Parent to grant, extend or enter into any such option, warrant, call, subscription or other right, agreement, arrangement or commitment, (3) there are no outstanding contractual obligations of the Parent to repurchase, redeem or otherwise acquire any capital stock of the Parent. Section 4.3. Corporate Authority Relative to this Agreement; No -------------------------------------------------- Violation. - --------- (a) Each of the Parent and the Purchaser has the corporate power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Boards of Directors of the Parent and the Purchaser and by the Parent as the sole stockholder of the Purchaser, and other than the filing of the Certificate of Merger no other corporate proceedings on the part of the Parent or the Purchaser are necessary to authorize the consummation of the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Parent and the Purchaser and, assuming this Agreement constitutes a valid and binding agreement of the Company, constitutes a valid and binding agreement of each of the Parent and the Purchaser, enforceable against each of the Parent and the Purchaser in accordance with its terms. (b) Except for the filings, permits, authorizations, consents and approvals set forth in Section 4.3(b) of the Parent Disclosure Schedule or as may be required under, and other applicable requirements of, the NYSE, the Securities Act, the Exchange Act, the HSR Act, state securities or blue sky laws, and the DGCL (the "Parent Required Approvals"), none of the execution, delivery or performance of this Agreement by the Parent or the Purchaser, the consummation by the Parent or the Purchaser of the transactions contemplated hereby or compliance by the Parent or the Purchaser with any of the provisions hereof or thereof will (i) conflict with or result in any breach of any provision of the articles or by-laws of the Parent or the certificate of incorporation or by-laws of the Purchaser, (ii) require any filing with, or permit, authorization, consent or approval of, any Governmental Entity, (iii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, amendment, cancellation or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract, agreement or other instrument or obligation to which the 31 Parent, any of its Subsidiaries or the Purchaser is a party or by which either of them or any of their respective properties or assets may be bound (the "Parent and Purchaser Agreements") or (iv) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Parent, any of its Subsidiaries or any of their respective properties or assets, excluding from the foregoing clauses (ii), (iii) and (iv) such violations, breaches or defaults which would not, individually or in the aggregate have a Material Adverse Effect on the Parent or prevent or substantially delay the consummation of the transactions contemplated hereby. Section 4.3(b) of the Parent Disclosure Schedule sets forth a list of all third party consents and approvals required to be obtained under the Parent and Purchaser Agreements prior to the consummation of the transactions contemplated by this Agreement the failure of which to obtain would have, individually or in the aggregate, a Material Adverse Effect on the Parent. Section 4.4. Reports and Financial Statements. The Parent has -------------------------------- previously furnished or otherwise made available to the Company true and complete copies of: (a) the Parent's Annual Reports on Form 10-K filed with the SEC for each of the years ended December 31, 1996 and 1997; (b) the Parent's Quarterly Report on Form 10-Q filed with the SEC for the quarters ended March 31, 1997, June 30, 1997 and September 30, 1997; (c) each definitive proxy statement filed by the Parent with the SEC since December 31, 1996; (d) each final prospectus filed by the Parent with the SEC since December 31, 1996, except any final prospectus on Form S-8; and (e) all Current Reports on Form 8-K filed by the Parent with the SEC since January 1, 1997. As of their respective dates, such reports, proxy statements and prospectuses (collectively with any amendments, supplements and exhibits thereto, the "Parent SEC Reports") (i) complied as to form in all material respects with the applicable requirements of the Securities Act, the Exchange Act and the rules and regulations promulgated thereunder, and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or 32 necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. Except to the extent that information contained in any Parent SEC Report was amended or was superseded by a later filed Parent SEC Report, none of the Parent SEC Reports contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. None of the Parent's Subsidiaries is required to file any forms, reports or other documents with the SEC. The audited consolidated financial statements and unaudited consolidated interim financial statements included in the Parent SEC Reports (including any related notes and schedules) fairly present the financial position of the Parent and its consolidated Subsidiaries as of the dates thereof and the results of operations and cash flows for the periods or as of the dates then ended (subject, in the case of the unaudited interim financial statements, to normal year-end adjustments), in each case in accordance with past practice and GAAP consistently applied during the periods involved (except as otherwise disclosed in the notes thereto). Since January 1, 1996, the Parent has timely filed all reports, registration statements and other filings required to be filed by it with the SEC under the rules and regulations of the SEC. Section 4.5. No Undisclosed Liabilities. Neither the Parent nor any -------------------------- of its Subsidiaries has any liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, and there is no existing condition, situation or set of circumstances which could reasonably be expected to result in such a liability or obligation, except (a) liabilities or obligations reflected in the Parent SEC Reports and (b) liabilities or obligations which would not, individually or in the aggregate, have a Material Adverse Effect on the Parent. Section 4.6. No Violation of Law. The businesses of the Parent and ------------------- its Subsidiaries are not being conducted in violation of any law, ordinance or regulation of any Governmental Entity (provided that no representation or warranty is made in this Section 4.6 with respect to Environmental Laws) except (a) as described in the Parent SEC Reports filed prior to the date hereof and (b) for violations or possible violations which would not, individually or in the aggregate, have a Material Adverse Effect on the Parent. Section 4.7. Environmental Matters. --------------------- (a) Each of the Parent and its Subsidiaries has obtained all 33 Environmental Permits, except for such failures to have Environmental Permits which, individually or in the aggregate, are not reasonably expected to have a Material Adverse Effect on the Parent. Each of such Environmental Permits is in full force and effect, and each of the Parent and its Subsidiaries is in compliance with the terms and conditions of all such Environmental Permits and with all applicable Environmental Laws, except for such exceptions as would not, individually or in the aggregate, have a Material Adverse Effect on the Parent. (b) There is no Environmental Claim pending, or to the best knowledge of the Parent threatened, against the Parent or any of its Subsidiaries, or to the best knowledge of the Parent against any Person whose liability for such Environmental Claim the Parent or any of its Subsidiaries has or may have retained or assumed either contractually or by operation of law, that would, individually or in the aggregate, have a Material Adverse Effect on the Parent. (c) Except as set forth in Section 4.7(c) of the Parent Disclosure Schedule, to the best knowledge of the Parent, there are no past or present actions, activities, circumstances, conditions, events or incidents, including, without limitation, the release, threatened release or presence of any Hazardous Material, that have resulted in any Environmental Claim against the Parent or any of its Subsidiaries, or to the best knowledge of the Parent against any Person whose liability for any Environmental Claim the Parent or any of its Subsidiaries has or may have retained or assumed either contractually or by operation of law, except for such liabilities which would not, individually or in the aggregate, have a Material Adverse Effect on the Parent. (d) To the best knowledge of the Parent, no site or facility now or previously owned, operated or leased by the Parent or any of its Subsidiaries is listed or proposed for listing on the National Priorities List promulgated pursuant to CERCLA. (e) No Liens have arisen under or pursuant to any Environmental Law on any site or facility owned, operated or leased by the Parent or any of its Subsidiaries, except for such Liens which would not, individually or in the aggregate, have a Material Adverse Effect on the Parent, and no action of any Governmental Entity has been taken or, to the best knowledge of the Parent, is in process which could subject any of such properties to such Liens except for any such action which would not, individually or in the aggregate, have a Material Adverse Effect on the Parent. 34 Section 4.8. Employee Benefit Plans; ERISA. ----------------------------- (a) Except as described in the Parent SEC Reports or as would not have a Material Adverse Effect on the Parent, (i) all Parent Employee Benefit Plans (as hereinafter defined) are in compliance with all applicable requirements of law, including ERISA (as hereinafter defined) and the Code, and (ii) neither the Parent nor any of its Subsidiaries nor any ERISA Affiliate has any liabilities or obligations with respect to any such Parent Employee Benefit Plans, whether accrued, contingent or otherwise, nor to the best knowledge of the Parent, are any such liabilities or obligations expected to be incurred. Except as described in the Parent SEC Reports or as set forth in Section 4.8(a) of the Parent Disclosure Schedule, the execution of, and performance of the transactions contemplated in, this Agreement will not (either alone or upon the occurrence of any additional or subsequent events) constitute an event under any Parent Employee Benefit Plan that will or may result in any payment or any continuation benefit under COBRA (whether of severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any employee. The only severance policies applicable to the Parent or any of its Subsidiaries are the policies specifically described in Section 4.8(a) of the Parent Disclosure Schedule. (b) With respect to each of its Plans, the Parent has heretofore delivered or otherwise made available to the Company complete and correct copies of each of the following documents, as applicable: (i) a copy of the Plan; (ii) a copy of the most recent annual report; (iii) a copy of the most recent actuarial report; (iv) a copy of the most recent Summary Plan Description and all material modifications; (v) a copy of the trust or other funding agreement; and (vi) the most recent determination letter received from the IRS with respect to each Plan that is intended to be qualified under Section 401 of the Code and all notices of reportable events received following receipt of such letter. (c) No liability under Title IV of ERISA has been incurred by the Parent or any ERISA Affiliate within the past twelve years that has not been satisfied in full. To the best knowledge of the Parent, no condition exists that presents a material risk to the Parent, any of its Subsidiaries or any ERISA Affiliate of incurring a liability under such Title. The PBGC has not instituted proceedings to terminate any of the Plans, and no condition exists that presents a material risk that such proceedings will be instituted. Except as otherwise disclosed 35 in the documents delivered or otherwise made available pursuant to Section 4.8(b), with respect to each of the Plans that is subject to Title IV of ERISA, the present value of accrued benefits under such Plan, based upon the actuarial assumptions used for funding purposes in the most recent actuarial report prepared by such Plan's actuary with respect to such Plan, did not, as of its latest valuation date, exceed the then current value of the assets of such Plan allocable to such accrued benefits, and there have been no changes since such latest valuation date which would cause the present value of such accrued benefits to exceed the current value of such assets. None of the Plans or any trust established thereunder has incurred any "accumulated funding deficiency" (as defined in Section 302 of ERISA and Section 412 of the Code), whether or not waived, as of the last day of the most recent fiscal year of each of the Plans ended prior to the date of this Agreement. None of the Plans is a "multiemployer plan," as such term is defined in Section 3(37) of ERISA. Each of the Plans that is intended to be "qualified" within the meaning of Section 401(a) of the Code is so qualified and the trusts maintained thereunder are exempt from taxation under Section 501(a) of the Code. Except as set forth in Section 4.8(c) of the Parent Disclosure Schedule, no Plan provides benefits, including without limitation death or medical benefits (whether or not insured), with respect to current or former employees after retirement or other termination of service (other than coverage mandated by applicable law or benefits, the full cost of which is borne by the current or former employee). Except as set forth in Section 4.8(c) of the Parent Disclosure Schedule, there are no pending or threatened claims by or on behalf of any Plan, by any employee or beneficiary covered under any such Plan, or otherwise involving any such Plan (other than routine claims for benefits). (d) As used in this Agreement: "Parent Employee Benefit Plan" means any Plan entered into, established, maintained, sponsored, contributed to or required to be contributed to by the Parent, any of its Subsidiaries or ERISA Affiliates for the benefit of the current or former employees or directors of the Parent or any of its Subsidiaries and existing on the date of this Agreement or at any time subsequent thereto and on or prior to the Effective Time and, in the case of a Plan which is subject to ERISA, Section 412 of the Code or Title IV of ERISA, at any time during the twelve-year period preceding the date of this Agreement. Section 4.9. Absence of Certain Changes or Events. Except as ------------------------------------ disclosed in the Parent SEC Reports, (a) since December 31, 1997 the businesses of the Parent and its Subsidiaries have been conducted in the ordinary course 36 consistent with past practice, and (b) there has not been any event, occurrence, development or state of circumstances or facts that has had, or is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on the Parent. Section 4.10. Litigation. Except as disclosed in the Parent SEC ---------- Reports, there are no actions, suits or proceedings pending (or, to the best knowledge of the Parent, threatened) against or affecting the Parent or its Subsidiaries, or any of their respective properties at law or in equity, by or before any Governmental Entity which, individually or in the aggregate, have a Material Adverse Effect on the Parent or would prevent or substantially delay any of the transactions contemplated by this Agreement or otherwise prevent the Parent from performing its obligations hereunder. Section 4.11. Proxy Statement/Prospectus; Registration Statement. -------------------------------------------------- The Registration Statement and Form S-4 to be filed with the SEC by the Parent in connection with the issuance of the Parent Common Stock pursuant to the Merger, as amended or supplemented from time to time (as so amended and supplemented, the "Registration Statement"), and any other documents to be filed by the Parent with the SEC or any other Government Entity in connection with the Merger and the other transactions contemplated hereby will (in the case of the Registration Statement and any such other documents filed with the SEC under the Securities Act or the Exchange Act) comply as to form in all material respects with the requirements of the Exchange Act and the Securities Act, respectively, and will not, on the date of filing with the SEC or, in the case of the Registration Statement, at the time it becomes effective under the Securities Act, on the date the Proxy Statement is first mailed to stockholders of the Company, contain any untrue statement of a material fact, or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they are made, not misleading or shall, at the time of the Special Meeting or at the Effective Time, omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Special Meeting which shall have become false or misleading in any material respect. Notwithstanding the foregoing, neither the Parent nor the Purchaser makes any representation or warranty with respect to the statements made in any of the foregoing documents based on and in conformity with information supplied by or on behalf of the Company specifically for inclusion therein. Section 4.12. Intellectual Property. --------------------- 37 (a) The Parent and its Subsidiaries own or have valid rights to use all items of Intellectual Property utilized in the conduct of the business of the Parent and its Subsidiaries as presently conducted, free and clear of all Liens with such exceptions as would not have, individually or in the aggregate, a Material Adverse Effect on the Parent. (b) To the best knowledge of the Parent, (i) neither the Parent nor any Subsidiary is in default (or with the giving of notice or lapse of time or both, would be in default) under any license to use such Intellectual Property, (ii) the Intellectual Property is not being infringed by any third party, (iii) neither the Parent nor any Subsidiary is infringing any Intellectual Property of any third party with such exceptions as would not have, individually or in the aggregate, a Material Adverse Effect on the Parent, and (iv) within the last three years neither the Parent nor any Subsidiary has received any claim or notice of infringement by any third party except as would not, individually or in the aggregate, have a Material Adverse Effect on the Parent. Section 4.13. Tax Matters. ----------- (a) All federal, state, local and foreign Tax Returns required to be filed by or on behalf of the Parent, each of its Subsidiaries, and each affiliated, combined, consolidated or unitary group of which the Parent or any of its Subsidiaries (i) is a member (a "Current Parent Group") or (ii) was a member during any years not closed with the IRS for U.S. federal income Tax purposes but is not currently a member, but only insofar as any such Tax Return relates to a taxable period or portion thereof ending on a date within the last six years during which the Parent or such Subsidiary was a member of such affiliated, combined, consolidated or unitary group for purposes of the relevant Tax (a "Past Parent Group," and together with Current Parent Groups, a "Parent Affiliated Group") have been timely filed or requests for extensions have been timely filed and any such extension has been granted and has not expired, and all such filed Tax Returns are complete and accurate except to the extent any failure to file or any inaccuracies in filed Tax Returns would not, individually or in the aggregate, have a Material Adverse Effect on the Company (it being understood that the representations made in this Section 4.13, to the extent that they relate to Past Parent Groups, are made to the best knowledge of the Parent and only with respect to taxable periods or portions thereof ending on a date within the last six years during which the Parent or any of its Subsidiaries was a member of such affiliated, 38 combined, consolidated or unitary group for purposes of the relevant Tax). All Taxes due and owing by the Parent, any Subsidiary of the Parent or any Parent Affiliated Group have been paid, or adequately reserved for, except to the extent any failure to pay or reserve would not, individually or in the aggregate, have a Material Adverse Effect on the Parent. There is no audit, examination, deficiency, refund litigation, proposed adjustment or matter in controversy with respect to any Taxes due and owing by the Parent, any Subsidiary of the Parent or any Parent Affiliated Group which if determined adversely would have a Material Adverse Effect on the Parent. All assessments for Taxes due and owing by the Parent, any Subsidiary of the Parent or any Parent Affiliated Group with respect to completed and settled examinations or concluded litigation have been paid. Section 4.13(a) of the Parent Disclosure Schedule sets forth (i) the taxable years of the Parent for which the statutes of limitations with respect to U.S. federal income Taxes have not expired and (ii) with respect to federal income Taxes for such years, those years for which examinations have been completed, those years for which examinations are presently being conducted, and those years for which examinations have not yet been initiated. Neither the Parent nor any of its Subsidiaries has any liability under Treasury Regulation Section 1.1502-6 for U.S. federal income Taxes of any Person other than the Parent and its Subsidiaries. The Parent and each of its Subsidiaries have complied in all material respects with all rules and regulations relating to the withholding of Taxes, except to the extent any such failure to comply would not, individually or in the aggregate, have a Material Adverse Effect on the Parent. (b) Neither the Parent nor any Subsidiary of the Parent has (i) entered into a closing agreement or other similar agreement with a taxing authority relating to Taxes of the Parent or any Subsidiary of the Parent with respect to a taxable period for which the statute of limitations is still open, or (ii) with respect to U.S. federal income Taxes, granted any waiver of any statute of limitations with respect to, or any extension of a period for the assessment of, any income Tax, in either case, that is still outstanding. There are no Liens relating to Taxes upon the assets of the Parent or any Subsidiary of the Parent other than Liens relating to Taxes not yet due. Neither the Parent nor any Subsidiary of the Parent is a party to any agreement relating to allocating or sharing of Taxes which has not been disclosed in its Tax Returns. No consent under Section 341(f) of the Code has been filed with respect to the Parent or any Subsidiary of the Parent. Section 4.14. Opinion of Financial Advisor. The Board of Directors ---------------------------- of the Parent has received the opinion of Credit Suisse First Boston Corporation, dated the date of this Agreement, substantially to the effect that the 39 consideration to be offered by the Parent in the Offer and the Merger, taken together, is fair to the Parent from a financial point of view. Section 4.15. Employment Matters. Neither the Parent nor any of its ------------------ Subsidiaries has experienced any work stoppages, strikes, collective labor grievances, other collective bargaining disputes or claims of unfair labor practices in the last five years which would, individually or in the aggregate, have a Material Adverse Effect on the Parent. To the best knowledge of the Parent, there is no organizational effort presently being made or threatened by or on behalf of any labor union with respect to employees of the Parent or any of its Subsidiaries. Section 4.16. Ownership of Shares. As of the date hereof, neither ------------------- the Parent nor the Purchaser is an "interested stockholder" of the Company, as such term is defined in Section 203 of the DGCL. ARTICLE V Covenants and Agreements ------------------------- Section 5.1. Conduct of Business by the Company. The Company agrees ---------------------------------- that, from and after the date hereof and prior to the Effective Time or the date, if any, on which this Agreement is earlier terminated pursuant to Section 7.1 (the "Termination Date"), and except as may be agreed in writing by the other parties hereto or as may be expressly permitted pursuant to this Agreement, the Company: (i) shall, and shall cause each of its Subsidiaries to, conduct its operations according to their ordinary and usual course of business in substantially the same manner as heretofore conducted; (ii) shall use its reasonable best efforts, and cause each of its Subsidiaries to use its reasonable best efforts, to preserve intact its business organization and goodwill, keep available the services of its current officers and other key employees and preserve its relationships with those persons having business dealings with the Company and its Subsidiaries; (iii) shall confer at such times as the Parent may reasonably request with one or more representatives of the Parent to report material 40 operational matters and the general status of ongoing operations; (iv) shall notify the Parent of any emergency or other change in the normal course of its or its Subsidiaries' respective businesses or in the operation of its or its Subsidiaries' respective properties and of any complaints or hearings (or communications indicating that the same may be contemplated) of any Governmental Entity if such emergency, change, complaint, investigation or hearing would have a Material Adverse Effect on the Company; (v) shall not, and shall not permit any of its Subsidiaries that is not wholly owned to, authorize or pay any dividends on or make any distribution with respect to its outstanding shares of stock; (vi) shall not, and shall not permit any of its Subsidiaries to, except as otherwise provided in this Agreement, establish, enter into or amend any Plan or increase the compensation payable or to become payable or the benefits provided to its officers or employees, subject to such exceptions as are set forth in Section 5.1(vi) of the Company Disclosure Schedule; (vii) except as set forth in Section 5.1(vii) of the Company Disclosure Schedule, shall not, and shall not permit any of its Subsidiaries to, authorize, propose or announce an intention to authorize or propose, or enter into an agreement with respect to, any merger, consolidation or business combination (other than the Merger), any acquisition of a material amount of assets or securities, any disposition of a material amount of assets or securities, except (x) for the sale of goods and products manufactured by the Company and held for sale in the ordinary course (for purposes of this Section 5.1(vii) "material" shall mean any amount in excess of $1 million) and (y) as provided in the Profit and Capital Plan of 1998 previously provided to the Parent and not in excess of $150 million in the aggregate; (viii) shall not, and shall not permit any of its Subsidiaries to, propose or adopt any amendments to its certificate of incorporation or by-laws (or other similar organizational documents); (ix) shall not, and shall not permit any of its Subsidiaries to, issue or authorize the issuance of, or agree to issue or sell any shares of 41 capital stock of any class (whether through the issuance or granting of options, warrants, commitments, subscriptions, rights to purchase or otherwise), except for the issuance of (1) not more than 3,161,525 Shares upon the exercise of employee stock options granted under, and 319,610 Shares issuable pursuant to, the 1993 Plan referred to in clause (ii) of Section 3.2, (2) not more than 571,475 Shares upon the exercise of employee stock options granted under, and 190,564 Shares issuable pursuant to, the 1995 Plan referred to in clause (iii) of Section 3.2, (3) not more than 80,000 Shares upon the exercise of stock options granted under, and 20,750 Shares issuable pursuant to, The Alumax Inc. Non-Employee Directors' Stock Compensation Plan referred to in clause (iv) of Section 3.2, (4) not more than 74,148 Shares issuable pursuant to The Alumax Inc. Non-Employee Directors' Compensation Plan referred to in clause (iv) of Section 3.2, (5) not more than 623,350 Shares upon the exercise of options granted under, and 26,603 Shares issuable pursuant to, employee deferred compensation arrangements referred to in clause (vi) of Section 3.2, and (6) not more than 180,000 Shares issuable in connection with regularly scheduled matching contributions to the Alumax Inc. Thrift Plans referred to in clause (v) of Section 3.2; (x) shall not, and shall not permit any of its Subsidiaries to, reclassify, combine, split, purchase or redeem any shares of its capital stock or purchase or redeem any rights, warrants or options to acquire any such shares; (xi) other than in the ordinary course of business consistent with past practice, shall not, and shall not permit any of its Subsidiaries to, (a) incur, assume or prepay any indebtedness or any other material liabilities or issue any debt securities, or (b) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person, other than guarantees of obligations of wholly owned Subsidiaries of the Company in the ordinary course of business; (xii) shall not, and shall not permit any of its Subsidiaries to, (a) sell, lease, license, mortgage or otherwise encumber or subject to any Lien or otherwise dispose of any of its properties or assets (including securitizations), other than in the ordinary course of business consistent with past practice; (b) modify, amend or terminate any of its material contracts or waive, release or assign any material rights (contract or other); or (c) permit any insurance policy naming it as a beneficiary or a loss 42 payable payee to lapse, be cancelled for reasons within the Company's control or expire unless a new policy with substantially identical coverage is in effect as of the date of lapse, cancellation or expiration; (xiii) shall not, and shall not permit any of its Subsidiaries to, (a) make any material Tax election or settle or compromise any material Tax liability or (b) change any of the accounting methods used by it unless required by GAAP; and (xiv) shall not, and shall not permit any of its Subsidiaries to, agree, in writing or otherwise, to take any of the foregoing actions or knowingly take any action which would (y) make any representation or warranty in Article III hereof untrue or incorrect in any material respect or (z) result in any of the conditions to the Offer set forth in Annex A hereto or any of the conditions to the Merger set forth in Article VI hereof not being satisfied. Section 5.2. Access; Confidentiality. ----------------------- (a) Except for competitively sensitive information as to which access, use and treatment is covered by Section 5.2(c), the Company shall (and shall cause each of its Subsidiaries to) afford to the officers, employees, accountants, counsel and other authorized representatives of the Parent reasonable access on reasonable prior notice during normal business hours, throughout the period prior to the earlier of the Effective Time or the Termination Date, to all of its properties, offices, employees, contracts, commitments, books and records (including but not limited to Tax Returns) and any report, schedule or other document filed or received by it pursuant to the requirements of federal or state securities laws and shall (and shall cause each of its Subsidiaries to) furnish promptly to the Parent such additional financial and operating data and other information as to its and its Subsidiaries' respective businesses and properties as the Parent may from time to time reasonably request. The Parent and the Purchaser will make all reasonable efforts to minimize any disruption to the businesses of the Company and its Subsidiaries which may result from the requests for data and information hereunder. No investigation pursuant to this Section 5.2(a) shall affect any representation or warranty in this Agreement of any party hereto or any condition to the obligations of the parties hereto. (b) Except for competitively sensitive information as to which 43 access, use and treatment is covered by Section 5.2(c), the Parent shall (and shall cause each of its Subsidiaries to) afford to the officers, employees, accountants, counsel and other authorized representatives of the Company reasonable access on reasonable prior notice during normal business hours, throughout the period prior to the earlier of the Effective Time or the Termination Date, to all of its properties, offices, employees, contracts, commitments, books and records (including but not limited to Tax Returns) and any report, schedule or other document filed or received by it pursuant to the requirements of federal or state securities laws and shall (and shall cause each of its Subsidiaries to) furnish promptly to the Company such additional financial and operating data and other information as to its and its Subsidiaries' respective businesses and properties as the Company may from time to time reasonably request. The Company will make all reasonable efforts to minimize any disruption to the businesses of the Parent and its Subsidiaries which may result from the requests for data and information hereunder. No investigation pursuant to this Section 5.2(b) shall affect any representation or warranty in this Agreement of any party hereto or any condition to the obligations of the parties hereto. (c) As promptly as possible following the date hereof the parties intend to establish an appropriate protocol which shall remain in place until the expiration of the applicable waiting periods under the HSR Act pursuant to which each party may disclose to a limited number of representatives of the other party confidential information which is competitively sensitive in nature. (d) The Parent and the Company will not, and will cause their respective officers, employees, accountants, counsel and representatives not to, use any information obtained pursuant to this Section 5.2 for any purpose unrelated to the consummation of the transactions contemplated by this Agreement. Subject to the requirements of law, pending consummation of the transactions herein contemplated, each of the Parent and the Company will keep confidential, and will cause their respective officers, employees, accountants, counsel and representatives to keep confidential, all information and documents obtained pursuant to this Section 5.2 unless such information (i) was already known to it, (ii) becomes available to it from other sources not known by it to be bound by a confidentiality obligation, (iii) is independently acquired by it as a result of work carried out by any of its employees or representatives to whom no disclosure of such information has been made, (iv) is disclosed with the prior written approval of the other party or (v) is or becomes readily ascertainable from published information or trade sources. Upon any termination of this Agreement, each party will collect and 44 deliver to the other party all documents obtained by it or any of its officers, employees, accountants, counsel and representatives then in their possession and any copies thereof. Section 5.3. Special Meeting, Proxy Statement, Registration Statement. -------------------------------------------------------- (a) As promptly as practicable following the date of this Agreement, the Company, acting through its Board of Directors, shall, in accordance with applicable law duly call, give notice of, convene and hold a special meeting of its stockholders (the "Special Meeting") for the purposes of considering and taking action upon the approval of the Merger and the approval and adoption of this Agreement; (b) As promptly as practicable following the date of this Agreement, the Company shall: (i) prepare and file with the SEC a preliminary proxy or information statement relating to the Merger and this Agreement and (x) obtain and furnish the information required to be included by the SEC in the Proxy Statement (as hereinafter defined) and, after consultation with the Parent, respond promptly to any comments made by the SEC with respect to the preliminary proxy or information statement and cause a definitive proxy or information statement, including any amendment or supplement thereto (the "Proxy Statement") to be mailed to its stockholders at the earliest practicable date after the Registration Statement is declared effective by the SEC, provided that no amendment or supplement to the Proxy Statement will be made by the Company without consultation with Parent and its counsel and (y) use its reasonable best efforts to obtain the necessary approvals of the Merger and this Agreement by its stockholders; and (ii) unless this Agreement has been terminated in accordance with Article VII, include in the Proxy Statement the recommendation of the Board that stockholders of the Company vote in favor of the approval of the Merger and the approval and adoption of this Agreement; provided, however, that if the Board of Directors of the Company, based on the advice of outside legal counsel, determines in good faith that the amendment or withdrawal of its recommendation is necessary for the Board of Directors of the Company to avoid breaching its fiduciary 45 duties to the Company's stockholders under applicable law, then any such amendment or withdrawal shall not constitute a breach of this Agreement. (c) As promptly as practicable following the date of this Agreement, the Parent shall prepare and file with the SEC the Registration Statement, in which the Proxy Statement shall be included as a prospectus, and shall use its reasonable best efforts to have the Registration Statement declared effective by the SEC as promptly as practicable. The Parent shall obtain and furnish the information required to be included by the SEC in the Registration Statement and, after consultation with the Company, respond promptly to any comments made by the SEC with respect to the Registration Statement and cause the prospectus included therein, including any amendment or supplement thereto, to be mailed to the Company's stockholders at the earliest practicable date after the Registration Statement is declared effective by the SEC. The Parent shall also take any action required to be taken under state blue sky or other securities laws in connection with the issuance of Parent Common Stock in the Merger. (d) The Parent shall vote, or cause to be voted, all of the Shares then owned by it, the Purchaser or any of its other Subsidiaries in favor of the approval and adoption of this Agreement. Section 5.4. Reasonable Best Efforts; Further Assurances. ------------------------------------------- (a) Subject to the terms and conditions of this Agreement and applicable law, each of the parties shall act in good faith and use reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement as soon as practicable. Without limiting the foregoing, the parties shall (and shall cause their respective subsidiaries, and use reasonable best efforts to cause their respective affiliates, directors, officers, employees, agents, attorneys, accountants and representatives, to) consult and fully cooperate with and provide assistance to each other in (i) the preparation and filing with the SEC of the Offer Documents, the Schedule 14D-9, the preliminary Proxy Statement, the Proxy Statement and the Registration Statement and all necessary amendments or supplements thereto; (ii) obtain all necessary consents, approvals, waivers, licenses, permits, authorizations, registrations, qualifications or other permissions or actions by, and give all necessary notices to and make all necessary filings with and applications and submissions to, any Governmental Entity or other Person as soon as reasonably practicable after filing; and (iii) provide all such information concerning such 46 party, its Subsidiaries and its officers, directors, employees, partners and affiliates as may be necessary or reasonably requested in connection with any of the foregoing. Prior to making any application to or filing with a Governmental Entity or other entity in connection with this Agreement (other than filing under the HSR Act), each party shall provide the other party with drafts thereof and afford the other party a reasonable opportunity to comment on such drafts. (b) In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and directors of each of the parties to this Agreement shall use their reasonable best efforts to take all such action. (c) Notwithstanding the foregoing, neither the Parent nor the Purchaser shall be obligated to enter into any "hold-separate" agreement or other agreement with respect to the disposition of any assets or businesses of the Parent or any of its Subsidiaries or the Company or any of its Subsidiaries in order to obtain clearance from the Federal Trade Commission or the Antitrust Division of the Department of Justice or any state antitrust or competition authorities to proceed with the consummation of the transactions contemplated by this Agreement. (d) The Company, the Parent and the Purchaser each shall keep the other apprised of the status of matters relating to completion of the transactions contemplated hereby, including promptly furnishing the other with copies of notices or other communications received by the Parent, the Purchaser or the Company, as the case may be, or any of their respective Subsidiaries (other than in any such case with respect to Acquisition Proposals), from any third party and/or any Governmental Entity with respect to the transactions contemplated by this Agreement. (e) The Company, the Parent and the Purchaser shall each use their reasonable best efforts to reduce or eliminate any amounts specified in Section 3.14(c) of the Company Disclosure Schedule, it being understood that the foregoing shall not require the Company or any of its Subsidiaries to amend any Plan, terminate or retire any employee or to otherwise adversely affect the rights of any employee. Section 5.5. Employee Stock Options and Other Employee Benefits. -------------------------------------------------- 47 (a) Simultaneously with the Merger, (i) each outstanding option (the "Company Stock Options") to purchase or acquire a share of Company Common Stock under employee incentive or benefit plans, programs or arrangements and non- employee director plans presently maintained by the Company (the "Company Option Plans") shall be converted into an option to purchase the number of shares of Parent Common Stock equal to the product of (x) the Exchange Ratio multiplied by (y) the number of shares of Company Common Stock which could have been issued prior to the Effective Time upon the exercise of such option, at an exercise price per share (rounded upward to the nearest cent) equal to the exercise price for each share of Company Common Stock subject to such option divided by the Exchange Ratio, and all references in each such option to the Company shall be deemed to refer to the Parent, where appropriate, provided, however, that with respect to any Option which is an "incentive stock option", within the meaning of Section 422 of the Code, the adjustments provided in this Section shall, if applicable, be modified in a manner so that the adjustments are consistent with requirements of Section 424(a) of the Code, and (ii) the Parent shall assume the obligations of the Company under the Company Option Plans. The other terms of each such option, and the plans under which they were issued, shall continue to apply in accordance with their terms, including any provisions providing for acceleration. At or prior to the Effective Time, the Parent shall take all corporate action necessary to reserve for issuance a sufficient number of shares of Parent Common Stock for delivery upon exercise of Company Stock Options assumed by it in accordance with this Section. As soon as practicable after the Effective Time, if necessary, the Parent shall file a registration statement on Form S-8 (or any successor or other appropriate forms), or another appropriate form with respect to the Parent Common Stock subject to such Company Stock Options, and shall use its best efforts to maintain the effectiveness of such registration statements (and maintain the current status of the prospectus or prospectuses contained therein) for so long as the Company Stock Options remain outstanding. (b) For the period through and including December 31, 1999, the Parent shall, or shall cause the Surviving Corporation to, maintain employee benefit plans, programs and arrangements which are, in the aggregate, for the employees who were active full-time employees of the Company or any Subsidiary immediately prior to the Effective Time and continue to be active full-time employees of the Purchaser, the Surviving Corporation, any Subsidiary or any other affiliate of the Purchaser, no less favorable than those provided by the Company and any Subsidiary immediately prior to the Effective Time. From and 48 after the Effective Time, for purposes of determining eligibility, vesting and entitlement to vacation and severance and other benefits for employees actively employed full-time by the Company or any Subsidiary immediately prior to the Effective Time under any compensation, severance, welfare, pension, benefit, savings or other Plan of the Parent or any of its Subsidiaries in which active full-time employees of the Company and any Subsidiary become eligible to participate (whether pursuant to this Section 5.5(b) or otherwise), service with the Company or any Subsidiary (whether before or after the Effective Time) shall be credited as if such service had been rendered to the Parent or such Subsidiary. Parent will, and will cause the Surviving Corporation to, observe all employee benefit obligations to current and former employees under the Company Employee Benefit Plans existing as of the Effective Time and all employment or severance agreements, plans or policies of the Company and its Subsidiaries, copies of which have been made available to Parent pursuant to Section 3.8, in accordance with their terms. Section 5.6. Takeover Statute. If any "fair price," "moratorium," ---------------- "control share acquisition" or other form of anti-takeover statute or regulation shall become applicable to the transactions contemplated hereby, each of the Company, the Parent and the Purchaser and the members of their respective Boards of Directors shall grant such approvals and take such actions as are reasonably necessary so that the transactions contemplated hereby may be consummated as promptly as practicable on the terms contemplated hereby and otherwise act to eliminate or minimize the effects of such statute or regulation on the transactions contemplated hereby. Section 5.7. Solicitation by the Company. --------------------------- (a) Nothing contained in this Agreement shall prohibit the Board of Directors of the Company from furnishing information to, or entering into discussions with, any Person that makes a bona fide Acquisition Proposal. The term "Acquisition Proposal" as used herein means any tender or exchange offer involving the capital stock of the Company or any of its Subsidiaries, any proposal or offer to acquire in any manner a substantial equity interest in, or a substantial portion of the business or assets of, the Company or any of its Subsidiaries, any proposal or offer with respect to any merger, consolidation, business combination, recapitalization, liquidation, dissolution or restructuring of or involving the Company or any of its Subsidiaries, or any proposal or offer with respect to any other transaction similar to any of the foregoing with respect to the Company or 49 any of its Subsidiaries, other than the transactions contemplated by this Agreement. Except for the transactions contemplated by this Agreement, as of the date of this Agreement, neither the Company nor any of its officers, directors, employees, financial advisors, attorneys or other representatives, is engaged in, or is a party to, any discussions or negotiations, or is currently furnishing any information with respect to the Company, relating to, or which could be reasonably expected to lead to, an Acquisition Proposal. (b) Nothing contained in this Agreement shall prohibit the Company from taking and disclosing to its stockholders a position contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure to the Company's stockholders if the Board of Directors of the Company determined in good faith, after consultation with outside legal counsel, that it is necessary to do so in order to avoid breaching its fiduciary duties under applicable law; provided, however, that neither the Company nor its Board of Directors nor any committee thereof shall withdraw or modify, or propose publicly to withdraw or modify, its position with respect to this Agreement, the Offer or the Merger, or approve or recommend, or propose publicly to approve or recommend, an Acquisition Proposal, except if, and only to the extent that, the Board of Directors of the Company, based on the advice of outside legal counsel, determines in good faith that such Acquisition Proposal is a Superior Proposal (as hereinafter defined) and that such action is necessary for the Board of Directors of the Company to avoid breaching its fiduciary duties to the Company's stockholders under applicable law. Nothing herein shall require the Board of Directors of the Company to violate applicable laws. Section 5.8. Public Announcements. The Parent and the Company agree -------------------- that neither one of them will issue any press release or otherwise make any public statement or respond to any press inquiry with respect to this Agreement or the transactions contemplated hereby or thereby without the prior approval of the other party (which approval will not be unreasonably withheld), except as may be required by applicable law or the rules of the New York Stock Exchange, Inc. (the "NYSE"). Section 5.9. Indemnification and Insurance. ----------------------------- From and after the Effective Time, the Parent will indemnify and hold harmless each present and former director and officer of the Company and its subsidiaries (the "Indemnified Parties"), against any costs or expenses (including 50 attorneys' fees), judgments, fines, losses, claims, damages or liabilities (collectively, "Costs") incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to matters existing or occurring at or prior to the Effective Time, to the fullest extent that the Company or such subsidiary would have been permitted under applicable law and the Certificate of Incorporation or Bylaws of the Company or such subsidiary in effect on the date hereof to indemnify such person (and the Parent shall also advance expenses as incurred to the fullest extent permitted under applicable law provided the Person to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such Person is not entitled to indemnification). Section 5.10. Additional Reports and Information. ---------------------------------- (a) The Company shall furnish to the Parent copies of all reports of the type referred to in Section 3.4 which it files with the SEC on or after the date hereof, and the Company represents and warrants that as of the respective dates thereof, such reports will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The audited consolidated financial statements and the unaudited consolidated interim financial statements included in such reports (including any related notes and schedules) will fairly present the financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the results of operations and cash flows or other information included therein for the periods or as of the date then ended (subject, in the case of the interim financial statements, to normal, year-end adjustments and the absence of footnotes), in each case in accordance with past practice and GAAP consistently applied during the periods involved (except as otherwise disclosed in the notes thereto). (b) The Parent shall furnish to the Company copies of all reports of the type referred to in Section 4.4 which it files with the SEC on or after the date hereof, and the Parent represents and warrants that as of the respective dates thereof, such reports will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The audited consolidated financial statements and the unaudited consolidated interim financial statements included in such reports (including any related notes and schedules) will fairly present the financial position of the Parent 51 and its consolidated Subsidiaries as of the dates thereof and the results of operations and cash flows or other information included therein for the periods or as of the date then ended (subject, in the case of the interim financial statements, to normal, year-end adjustments and the absence of footnotes), in each case in accordance with past practice and GAAP consistently applied during the periods involved (except as otherwise disclosed in the notes thereto). Section 5.11. Affiliates. At the time the Proxy Statement is mailed ---------- to stockholders of the Company, the Company shall deliver to the Parent a list identifying, to the best of the Company's knowledge, all persons who are, at the time of the Company Stockholder Approval, deemed to be "affiliates" of the Company for purposes of Rule 145 under the Securities Act. The Company shall advise the Parent of any additions or deletions to or from such list from time to time thereafter. The Company shall use its reasonable best efforts to cause each such person to deliver to the Parent at least 30 days prior to the Closing Date a written agreement substantially in the form of Exhibit A to this Agreement. Section 5.12. NYSE Listing. The Parent shall use its best efforts to ------------ cause the shares of Parent Common Stock to be issued in the Merger to be approved for listing on the NYSE, subject to official notice of issuance, prior to the Closing Date. Section 5.13. Tax-Free Reorganization. The parties intend that the ----------------------- transactions contemplated hereby qualify as a reorganization under Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code; each party and its affiliates shall use all reasonable efforts to cause such transactions to so qualify; neither party nor any affiliate shall take any action that would cause such transactions not to qualify as a reorganization under such Sections; and the parties will take the position for all purposes that the transactions qualify as a reorganization under such Sections. Section 5.14. The Company Rights Plan. On the date of the ----------------------- commencement of the Offer, (i) the Company will take all necessary action to redeem all the preferred stock purchase rights outstanding under the Rights Agreement, and (ii) shall provide the Parent with prompt notice that such action has been taken. ARTICLE VI 52 Conditions to the Merger ------------------------ Section 6.1. Conditions to Each Party's Obligation to Effect the --------------------------------------------------- Merger. The respective obligations of each party to effect the Merger shall be - ------ subject to the fulfillment at or prior to the Effective Time of the following conditions: (a) The Company Stockholder Approval shall have been obtained. (b) No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or enforced by any Governmental Entity which prohibits the consummation of the Merger substantially on the terms contemplated hereby or has the effect of making the acquisition of Shares by the Parent or the Purchaser or any affiliate of either of them illegal. (c) The Parent or the Purchaser or any affiliate of either of them shall have purchased Shares pursuant to the Offer, except that this condition shall not apply if the Parent, the Purchaser or such affiliate shall have failed to purchase Shares pursuant to the Offer in breach of their obligations under this Agreement. (d) The applicable waiting period under the HSR Act shall have expired or been terminated. (e) The shares of Parent Common Stock to be issued in the Merger shall have been approved for listing on the NYSE, subject to official notice of issuance. (f) The Registration Statement shall have become effective in accordance with the provisions of the Securities Act. Section 6.2. Conditions to Obligation of the Parent and the Purchaser -------------------------------------------------------- to Effect the Merger. The obligation of the Parent and the Purchaser to effect - -------------------- the Merger shall be subject to the satisfaction at or prior to the Effective Time of the following additional condition, unless waived in writing by the Parent: (a) Tax Opinion. The Parent shall have received an opinion of ----------- Skadden, Arps, Slate, Meagher & Flom LLP, tax counsel to the Parent, dated as of the Effective Time, to the effect that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. The issuance of such opinion 53 shall be conditioned upon the receipt by such tax counsel of customary representation letters from each of the Parent, the Purchaser and the Company, in each case, in form and substance reasonably satisfactory to such tax counsel. Each such representation letter shall be dated on or before the date of such opinion and shall not have been withdrawn or modified in any material respect. Section 6.3. Conditions to Obligation of the Company to Effect the ----------------------------------------------------- Merger. The obligation of the Company to effect the Merger shall be subject to - ------ the satisfaction at or prior to the Effective Time of the following additional condition, unless waived in writing by the Company: (a) Tax Opinion. The Company shall have received an opinion of ----------- Sullivan & Cromwell, tax counsel to the Company, dated as of the Effective Time, to the effect that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. The issuance of such opinion shall be conditioned upon the receipt by such tax counsel of customary representation letters from each of the Parent, the Purchaser and the Company, in each case, in form and substance reasonably satisfactory to such tax counsel. Each such representation letter shall be dated on or before the date of such opinion and shall not have been withdrawn or modified in any material respect. Section 6.4. Additional Conditions to the Obligations of the Parent ------------------------------------------------------ and the Purchaser to Effect the Merger. In the event that the Purchaser - -------------------------------------- purchases a number of Shares in the Offer which is less than the 50% Share Number, the obligation of the Parent and the Purchaser to effect the Merger shall be subject to the fulfillment at or prior to the Effective Time of the following conditions, unless waived in writing by the Parent or unless the Company Stockholder Approval is obtained prior thereto, in which event such conditions shall thereupon be deemed fulfilled: (a) The representations and warranties of the Company set forth in this Agreement shall be true and correct, ignoring for this purpose any qualification as to materiality or Material Adverse Effect, as if such representations or warranties were made as of the Effective Time, except for such inaccuracies as, individually or in the aggregate, would not have a Material Adverse Effect on the Company. (b) The Company shall have performed and complied in all material respects with all agreements, obligations and conditions required by this 54 Agreement to be performed and complied with by it on or prior to the Closing Date. (c) The Company shall have furnished a certificate of an officer to evidence compliance with the conditions set forth in Sections 6.4(a) and (b) of this Agreement. Section 6.5. Additional Conditions to the Obligations of the Company -------------------------------------------------------- to Effect the Merger. In the event that the Purchaser purchases a number of - -------------------- Shares in the Offer which is less than the 50% Share Number, the obligation of the Company to effect the Merger shall be subject to the fulfillment at or prior to the Effective Time of the following conditions, unless waived in writing by the Company or unless the Company Stockholder Approval is obtained prior thereto, in which event such conditions shall thereupon be deemed fulfilled: (a) The representations and warranties of the Parent and the Purchaser set forth in this Agreement shall be true and correct, ignoring for this purpose any qualification as to materiality or Material Adverse Effect, as if such representations or warranties were made as of the Effective Time, except for such inaccuracies as, individually or in the aggregate, would not have a Material Adverse Effect on the Parent. (b) The Parent and the Purchaser shall have performed and complied in all material respects with all agreements, obligations and conditions required by this Agreement to be performed and complied with by them on or prior to the Closing Date. (c) The Parent and the Purchaser shall have furnished a certificate of their respective officers to evidence compliance with the conditions set forth in Section 6.5(a) and (b) of this Agreement. ARTICLE VII Termination ----------- Section 7.1. Termination. This Agreement may be terminated and the ----------- other transactions contemplated herein abandoned at any time prior to the Effective Time, whether before or after obtaining the Company Stockholder 55 Approval: (a) by the mutual written consent of the Company, the Parent and the Purchaser; (b) by either the Parent or the Company if (i) (1) the Offer shall have expired without any Shares being purchased pursuant thereto, or (2) the Offer has not been consummated on or before September 30, 1998 (the "Termination Date"); provided, however, that the right to terminate this Agreement pursuant to this Section 7.1(b)(i) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Shares to have been purchased pursuant to the Offer; (ii) a statute, rule, regulation or executive order shall have been enacted, entered or promulgated prohibiting the consummation of the Offer or the Merger substantially on the terms contemplated hereby; or (iii) an order, decree, ruling or injunction shall have been entered permanently restraining, enjoining or otherwise prohibiting the consummation of the Offer or the Merger substantially on the terms contemplated hereby and such order, decree, ruling or injunction shall have become final and non-appealable; provided further that the Termination Date shall be extended by one business day for each business day which elapses from March 16, 1998, until the date upon which the applicable filings under the HSR Act are made by the Company with the appropriate Governmental Entity; (c) by the Parent, (i) if due to an occurrence or circumstance, other than as a result of a breach by the Parent or the Purchaser of its obligations hereunder, resulting in a failure to satisfy any condition set forth in Annex A hereto, the Purchaser shall have (1) failed to commence the Offer within 30 days following the date of this Agreement, or (2) terminated the Offer without having accepted any Shares for payment thereunder; or (ii) if either the Parent or the Purchaser is entitled to terminate the Offer as a result of the occurrence of any event set forth in paragraph (e) of Annex A hereto; (d) by the Company, upon approval of its Board of Directors, if due to an occurrence or circumstance, other than as a result of a breach by the Company of its obligations hereunder, that would result in a failure to satisfy any of the conditions set forth in Annex A hereto, the Purchaser shall have terminated the Offer without having accepted any Shares for payment thereunder; (e) by the Company, if the Company receives a Superior 56 Proposal and the Board of Directors of the Company, based on the advice of outside legal counsel, determines in good faith that such action is necessary for the Board of Directors to avoid breaching its fiduciary duties to the Company's stockholders under applicable law. The term "Superior Proposal" as used herein means any bona fide Acquisition Proposal made by a third party to acquire, directly or indirectly, 20% or more of the outstanding Shares on a fully diluted basis or all or substantially all the assets of the Company and its Subsidiaries and otherwise on terms and conditions which the Board of Directors of the Company determines in good faith, after consultation with and based upon the written opinion of its financial advisor, to be a superior financial alternative to the stockholders of the Company than the Offer and the Merger; or (f) by the Parent or the Company, if after the Company convenes and holds the special Meeting and certifies the vote with respect to the Merger the Company's stockholders have voted against granting the Company Stockholder Approval. Section 7.2. Effect of Termination. In the event of termination of --------------------- this Agreement pursuant to Section 7.1, written notice thereof shall forthwith be given to the other party or parties specifying the provision hereof pursuant to which such termination is made, and this Agreement shall terminate and be of no further force and effect (except for the provisions of Sections 5.2 and 8.2), and there shall be no other liability on the part of the Parent, the Purchaser or the Company except liability arising out of a breach of this Agreement. In the event of termination of this Agreement pursuant to Section 7.1 prior to the expiration of the Offer, the Parent and the Purchaser will promptly terminate the Offer upon such termination of this Agreement. ARTICLE VIII Miscellaneous ------------- Section 8.1. No Survival of Representations and Warranties. None of --------------------------------------------- the representations or warranties in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time. Section 8.2. Expenses. Except as expressly contemplated by this -------- Agreement, all costs and expenses incurred in connection with this Agreement and 57 the transactions contemplated hereby shall be paid by the party incurring such costs and expenses. Section 8.3. Counterparts; Effectiveness. This Agreement may be --------------------------- executed in two or more separate counterparts, each of which shall be deemed to be an original but all of which shall constitute one and the same agreement. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by each of the other parties hereto. Section 8.4. Governing Law. This Agreement shall be governed by and ------------- construed in accordance with the laws of the State of Delaware, without regard to the principles of conflicts of laws thereof. Section 8.5. Notices. All notices and other communications hereunder ------- shall be in writing (including telecopy or similar writing) and shall be effective (a) if given by telecopy, when such telecopy is transmitted to the telecopy number specified in this Section 8.5 and the appropriate telecopy confirmation is received or (b) if given by any other means, when delivered at the address specified in this Section 8.5: To the Parent or the Purchaser: Aluminum Company of America 425 Sixth Avenue Pittsburgh, Pennsylvania 15219 Attention: Lawrence R. Purtell, Esq. Executive Vice President and General Counsel Telecopy: (412) 553-3113 copy to: Skadden, Arps, Slate, Meagher & Flom LLP 919 Third Avenue New York, New York 10022 Attention: J. Michael Schell, Esq. Telecopy: (212) 735-2000 To the Company: 58 Alumax Inc. 3424 Peachtree Road, N.E. Suite 2100 Atlanta, Georgia 30326 Attention: Robert P. Wolf, Esq. Senior Vice President and General Counsel Telecopy: (404) 846-4769 copy to: Sullivan & Cromwell 125 Broad Street New York, New York 10004 Attention: John Evangelakos, Esq. Telecopy: (212) 558-3588 Section 8.6. Assignment; Binding Effect. Neither this Agreement nor -------------------------- any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties, except that the Purchaser may assign, in its sole discretion, all or any of its rights and interests hereunder to the Parent or to any direct or indirect wholly owned Subsidiary of the Parent and in the event of any such assignment, the Parent hereby unconditionally guarantees the performance by the assignee of all obligations assigned thereunder in accordance with the terms of this Agreement. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Any assignment not permitted under this Section 8.6 shall be null and void. Section 8.7. Severability. Any term or provision of this Agreement ------------ which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, such provision shall be interpreted to be only so broad as is enforceable. Section 8.8. Enforcement of Agreement. The parties hereto ------------------------ 59 agree that money damages or other remedy at law would not be sufficient or adequate remedy for any breach or violation of, or a default under, this Agreement by them and that in addition to all other remedies available to them, each of them shall be entitled to the fullest extent permitted by law to an injunction restraining such breach, violation or default or threatened breach, violation or default and to any other equitable relief, including, without limitation, specific performance, without bond or other security being required. Section 8.9. Entire Agreement; No Third-Party Beneficiaries. This ---------------------------------------------- Agreement constitute the entire agreement, and supersede all other prior agreements and understandings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof and thereof and except for the provisions of Section 5.9 hereof, is not intended to and shall not confer upon any Person other than the parties hereto any rights or remedies hereunder. Section 8.10. Headings. Headings of the Articles and Sections of -------- this Agreement are for convenience of the parties only, and shall be given no substantive or interpretive effect whatsoever. Section 8.11. Definitions. References in this Agreement to (a) ----------- "Subsidiaries" of the Company or the Parent shall mean any corporation or other form of legal entity of which more than 50% of the outstanding voting securities are on the date hereof directly or indirectly owned by the Company or the Parent or in which the Company or the Parent has the right to elect a majority of the members of the board of directors or other similar governing body; (b) "Significant Subsidiaries" shall mean Subsidiaries which constitute "significant subsidiaries" under Rule 405 promulgated by the SEC under the Securities Act; (c) (except as otherwise specifically defined) "affiliates" shall mean, as to any Person, any other Person which, directly or indirectly, controls, or is controlled by, or is under common control with, such Person; and (d) "Person" shall mean an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including, without limitation, a Governmental Entity. As used in the definition of "affiliates," "control" (including, with its correlative meanings, "controlled by" and "under common control with") shall mean the possession, directly or indirectly, of the power to direct or cause the direction of management or policies of a Person, whether through the ownership of securities or partnership of other ownership interests, by contract or otherwise. Section 8.12. Finders or Brokers. Except for BT Wolfensohn ------------------ 60 with respect to the Company, a copy of whose engagement agreement has been or will be provided to the Parent, and Credit Suisse First Boston Corporation with respect to the Parent, neither the Company nor the Parent nor any of their respective Subsidiaries has employed any investment banker, broker, finder or intermediary in connection with the transactions contemplated hereby who might be entitled to any fee or any commission in connection with or upon consummation of the Offer and the Merger. Section 8.13. Amendment or Supplement. At any time prior to the ----------------------- Effective Time, this Agreement may be amended or supplemented in any and all respects, whether before or after the Company Stockholder Approval, by written agreement of the parties hereto, by action taken by their respective Boards of Directors (which in the case of the Company shall include the Independent Director Approval contemplated in Section 1.3(c)), with respect to any of the terms contained in this Agreement; provided, however that following the Company Stockholder Approval there shall be no amendment or change to the provisions hereof which would reduce the amount or change the type of consideration into which each Share shall be converted upon consummation of the Merger without further approval by the stockholders of the Company. Section 8.14. Extension of Time, Waiver, Etc. At any time prior to ------------------------------ the Effective Time, any party may (a) extend the time for the performance of any of the obligations or acts of any other party hereto; (b) waive any inaccuracies in the representations and warranties of any other party hereto contained herein or in any document delivered pursuant hereto; or (c) subject to the proviso of Section 8.13 waive compliance with any of the agreements or conditions of any other party hereto contained herein; provided, however, in the case of the Company following the acceptance of Shares for payment in the Merger, the Independent Director Approval contemplated in Section 1.3(c) is obtained. Notwithstanding the foregoing no failure or delay by the Company, the Parent or the Purchaser in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right hereunder. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. 61 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first above written. ALUMINUM COMPANY OF AMERICA By: /s/ Paul H. O'Neill --------------------------------------------- Name: Paul H. O'Neill Title: Chairman and Chief Executive Officer AMX ACQUISITION CORP. By: /s/ Richard B. Kelson --------------------------------------------- Name: Richard B. Kelson Title: Vice President and Treasurer ALUMAX INC. By: /s/ Allen Born --------------------------------------------- Name: Allen Born Title: Chairman and Chief Executive Officer ANNEX A ------- Conditions to the Offer ----------------------- Notwithstanding any other provision of the Offer and subject to the terms of this Agreement, the Purchaser shall not be required to accept for payment any Shares tendered pursuant to the Offer, and may terminate the Offer and may postpone the acceptance for payment of and payment for Shares tendered, if (i) any applicable waiting period under the HSR Act shall not have expired or been terminated prior to the expiration of the Offer, or (ii) immediately prior to the acceptance for payment of Shares, any of the following conditions shall be reasonably determined by the Parent to be existing: (a) there shall have been entered, enforced, promulgated or issued by any court or governmental, administrative or regulatory authority or agency of competent jurisdiction, domestic or foreign, any judgment, order, injunction or decree, (i) which makes illegal or prohibits or makes materially more costly the making of the Offer, the acceptance for payment of, or payment for, any Shares by the Parent, the Purchaser or any other affiliate of the Parent, or the consummation of any other transaction contemplated by this Agreement, or imposes material damages in connection with any transaction contemplated by this Agreement; (ii) which prohibits the ownership or operation by the Company or any of its Subsidiaries or, as a result of the transactions contemplated by this Agreement, the Parent and its Subsidiaries, of all or any material portion of the business or assets of the Company, the Parent or any of their Subsidiaries as a whole, or compels the Company, the Parent or any of their Subsidiaries to dispose of or hold separate all or any material portion of the business or assets of the Company, the Parent or any of their Subsidiaries as a whole; (iii) which imposes or confirms limitations on the ability of the Parent, the Purchaser or any other affiliate of the Parent to exercise effectively full rights of ownership of any Shares, including, without limitation, the right to vote any Shares acquired by the Purchaser pursuant to the Offer or otherwise on all matters properly presented to the Company's stockholders, including, without limitation, the approval and adoption of this Agreement and the transactions contemplated by this A-1 Agreement; (iv) requires divestiture by the Parent, the Purchaser or any other affiliate of the Parent of any Shares; or (v) which otherwise would have a Material Adverse Effect on the Company or, as a result of the transactions contemplated by this Agreement, the Parent and its Subsidiaries; (b) there shall have been any action taken, or any statute, rule, regulation, legislation or interpretation enacted, entered, enforced, promulgated, amended, issued or deemed applicable to (i) the Company or any Subsidiary of the Company or, as a result of the transactions contemplated by this Agreement, the Parent or any Subsidiary or affiliate of the Parent, or (ii) any transaction contemplated by this Agreement, by any legislative body, court, government or governmental, administrative or regulatory authority or agency, domestic or foreign, other than the routine application of the waiting period provisions of the HSR Act to the Offer or the Merger, which is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above; (c) there shall have occurred and be continuing, (i) any general suspension of, or limitation on prices for, trading in securities on the NYSE other than a shortening of trading hours or any coordinated trading halt triggered solely as a result of a specified increase or decrease in a market index, (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, (iii) the commencement of a war, material armed hostilities or any other material international or national calamity involving the United States, or (iv) in the case of any of the foregoing existing at the time of the commencement of the Offer, a material acceleration or worsening thereof; (d) the representations or warranties of the Company set forth in the Agreement shall not be true and correct, ignoring for this purpose any qualification as to materiality or Material Adverse Effect, as if such representations or warranties were made as of such time on or after the date of this Agreement, except where the failure to be so true and correct, individually and in the aggregate would not have a Material Adverse Effect; (e) the Company shall have failed to perform in any material respect any obligation or to comply in any material respect with any agreement or covenant of the Company to be performed or complied with A-2 by it under the Agreement; (f) the Agreement shall have been terminated in accordance with its terms; or (g) the Purchaser and the Company shall have agreed that the Purchaser shall terminate the Offer or postpone the acceptance for payment of or payment for Shares thereunder; which, in the reasonable good faith judgment of the Purchaser in any such case, and regardless of the circumstances (including any action or inaction by the Parent or any of its affiliates) giving rise to any such condition, makes it inadvisable to proceed with such acceptance for payment or payment. The foregoing conditions are for the sole benefit of the Purchaser and the Parent and may be asserted by the Purchaser or the Parent regardless of the circumstances giving rise to any such condition or may be waived by the Purchaser or the Parent in whole or in part at any time and from time to time in their sole discretion. The failure by the Parent or the Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right; the waiver of any such right with respect to particular facts and other circumstances shall not be deemed a waiver with respect to any other facts and circumstances; and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. A-3 TABLE OF CONTENTS ----------------- ARTICLE I The Offer Section 1.1. The Offer.......................................................2 Section 1.2. Company Actions.................................................4 Section 1.3. Directors of the Company........................................5 ARTICLE II The Merger Section 2.1. The Merger......................................................6 Section 2.2. Closing.........................................................7 Section 2.3. Effective Time..................................................7 Section 2.4. Effects of the Merger...........................................7 Section 2.5. Certificate of Incorporation; By-laws...........................7 Section 2.6. Directors; Officers of Surviving Corporation....................8 Section 2.7. Conversion of Securities........................................8 Section 2.8. Exchange of Certificates........................................9 Section 2.9. Appraisal Rights...............................................12 Section 2.10. Adjustment to Prevent Dilution.................................13 ARTICLE III Representations and Warranties of the Company Section 3.1. Organization, Qualification, Etc..............................14 Section 3.2. Capital Stock.................................................15 Section 3.3. Corporate Authority Relative to this Agreement; No Violation..16 Section 3.4. Reports and Financial Statements..............................17 Section 3.5. No Undisclosed Liabilities....................................19 Section 3.6. No Violation of Law...........................................19 Section 3.7. Environmental Matters.........................................19 Section 3.8. Employee Benefit Plans; ERISA.................................21 Section 3.9. Absence of Certain Changes or Events..........................24 Section 3.10. Litigation....................................................24 Section 3.11. Schedule 14D-9; Offer Documents; Registration Statement and i Proxy Statement............................................24 Section 3.12. Intellectual Property..........................................25 Section 3.13. Tax Matters....................................................26 Section 3.14. Opinion of Financial Advisor...................................28 Section 3.15. Required Vote of the Company Stockholders......................28 Section 3.16. Employment Matters.............................................28 ARTICLE IV Representations and Warranties of the Parent and the Purchaser Section 4.1. Organization, Qualification, Etc...............................29 Section 4.2. Capital Stock..................................................30 Section 4.3. Corporate Authority Relative to this Agreement; No Violation...30 Section 4.4. Reports and Financial Statements...............................32 Section 4.5. No Undisclosed Liabilities.....................................33 Section 4.6. No Violation of Law............................................33 Section 4.7. Environmental Matters..........................................33 Section 4.8. Employee Benefit Plans; ERISA..................................34 Section 4.9. Absence of Certain Changes or Events...........................36 Section 4.10. Litigation.....................................................36 Section 4.11. Proxy Statement/Prospectus; Registration Statement.............36 Section 4.12. Intellectual Property..........................................37 Section 4.13. Tax Matters....................................................38 Section 4.14. Opinion of Financial Advisor...................................39 Section 4.15. Employment Matters.............................................39 Section 4.16. Ownership of Shares............................................39 ARTICLE V Covenants and Agreements Section 5.1. Conduct of Business by the Company.............................40 Section 5.2. Access; Confidentiality........................................43 Section 5.3. Special Meeting, Proxy Statement, Registration Statement......44 Section 5.4. Best Efforts; Further Assurances...............................46 Section 5.5. Employee Stock Options and Other Employee Benefits.............47 Section 5.6. Takeover Statute...............................................48 Section 5.7. Solicitation by the Company....................................49 Section 5.8. Public Announcements...........................................49 ii Section 5.9. Indemnification and Insurance...............................49 Section 5.10. Additional Reports and Information...........................50 Section 5.11. Affiliates...................................................51 Section 5.12. NYSE Listing.................................................51 Section 5.13. Tax-Free Reorganization......................................51 Section 5.14. The Company Rights Plan......................................52 ARTICLE VI Conditions to the Merger Section 6.1. Conditions to Each Party's Obligation to Effect the Merger....52 Section 6.2. Conditions to Obligation of the Parent and the Purchaser to Effect the Merger.....................................53 Section 6.3. Conditions to Obligation of the Company to Effect the Merger...............................................53 Section 6.4. Additional Conditions to the Obligations of the Parent and the Purchaser to Effect the Merger....................53 Section 6.5. Additional Conditions to the Obligations of the Company to Effect the Merger.....................................54 ARTICLE VII Termination Section 7.1. Termination...................................................55 Section 7.2. Effect of Termination.........................................56 ARTICLE VIII Miscellaneous Section 8.1. No Survival of Representations and Warranties.................57 Section 8.2. Expenses......................................................57 Section 8.3. Counterparts; Effectiveness...................................57 Section 8.4. Governing Law.................................................57 Section 8.5 Notices.......................................................57 Section 8.6. Assignment; Binding Effect....................................58 Section 8.7. Severability..................................................59 Section 8.8. Enforcement of Agreement......................................59 iii Section 8.9. Entire Agreement; No Third-Party Beneficiaries...............59 Section 8.10. Headings.....................................................59 Section 8.11. Definitions..................................................59 Section 8.12. Finders or Brokers...........................................60 Section 8.13. Amendment or Supplement......................................60 Section 8.14. Extension of Time, Waiver, Etc...............................60 Annex A -- Conditions to the Offer Exhibit A -- Form of Affiliate Letter for Affiliates of Alumax Inc. iv EXHIBIT A FORM OF AFFILIATE LETTER FOR AFFILIATES OF ALUMAX INC. Aluminum Company of America 425 Sixth Avenue Pittsburgh, Pennsylvania 15219 Alumax Inc. 3424 Peachtree Road, NE Atlanta, Georgia 30326 AMX Acquisition Corp. 425 Sixth Avenue Pittsburgh, Pennsylvania 15219 Ladies and Gentlemen: I have been advised that as of the date of this letter I may be deemed to be an "affiliate" of Alumax, Inc., a Delaware corporation (the "Company"), as the term "affiliate" is (i) defined for purposes of paragraphs (c) and (d) of Rule 145 of the rules and regulation (the "Rules and Regulations") of the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"). Pursuant to the terms of the Agreement and Plan of Merger, dated as of March 8, 1998 (the "Merger Agreement"), among Aluminum Company of America, a Pennsylvania corporation (the "Parent"), AMX Acquisition Corp., a Delaware corporation (the "Purchaser") and the Company pursuant to which the Company will be merged with and into the Purchaser with the Purchaser continuing as the surviving corporation (the "Merger"). Capitalized terms used in this letter without definition shall have the meanings assigned to them in the Merger Agreement. As a result of the Merger, I may receive shares of common stock, par value $1.00 per share, of the Parent (the "Parent Common Stock"). I would receive such Parent Common Stock in exchange for shares (or upon exercise of options for shares) owned by me of common stock, par value $.01 per share, of the Company (the "Company Common Stock"). 1. I hereby represent, warrant and covenant to the Parent, the Purchaser and the Company that in the event I receive any shares of Parent Common Stock as a result of the Merger: A. I shall not make any offer, sale, pledge, transfer or other disposition of the shares of Parent Common Stock in violation of the Act or the Rules and Regulations. B. I have carefully read this letter and the Merger Agreement and discussed the requirements of such documents and other applicable limitations upon my ability to sell, transfer or otherwise dispose of the shares of Parent Common Stock, to the extent I felt necessary, with my counsel or counsel for the Company. C. I have been advised that the issuance of the shares of Parent Common Stock to me pursuant to the Merger has been registered with the Commission under the Act on a Registration Statement on Form S-4. However, I have also been advised that, because at the time the Merger is submitted for a vote of the stockholders of the Company (a) I may be deemed to be an affiliate of the Company and (b) the distribution by me of the shares of Parent Common Stock has not been registered under the Act, I may not sell, transfer or otherwise dispose of the shares of Parent Common Stock issued to me in the Merger unless (i) such sale, transfer or other disposition is made in conformity with the volume and other limitations of Rule 145 promulgated by the Commission under the Act, (ii) such sale, transfer or other disposition has been registered under the Act or (iii) in the opinion of counsel reasonably acceptable to the Parent, or a "no action" letter obtained by the undersigned from the staff of the Commission such sale, transfer or other disposition is otherwise exempt from registration under the Act. D. I understand that the Parent is under no obligation to register the sale, transfer or other disposition of the Parent Common Stock by me or on my behalf under the Act or except as provided in paragraph 2(A) below, to take any other action necessary in order to make compliance with an exemption from such registration available. E. I also understand that stop transfer instructions will be given to the Companys' transfer agent with respect to the shares of Company Common Stock 2 currently held and to Parent's transfer agent with respect to the shares of Parent Common Stock issued to me in the Merger, and there will be placed on the certificates for such shares of Parent Common Stock, a legend stating in substance: "THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED [ ], 1998 BETWEEN THE REGISTERED HOLDER HEREOF, ALUMINUM COMPANY OF AMERICA, ALUMAX INC., AND AMX ACQUISITION CORP., A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF ALUMINUM COMPANY OF AMERICA." F. I also understand that unless a sale or transfer is made in conformity with the provisions of Rule 145, or pursuant to a registration statement, Parent reserves the right to put the following legend on the certificates issued to my transferee: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933." G. Execution of this letter should not be considered an admission on my part that I am an "affiliate" of the Company as described in the first paragraph of this letter, nor as a waiver of any rights I may have to object to any claim that I am such an affiliate on or after the date of this letter. 3 2. By Parent's acceptance of this letter, Parent hereby agrees with me as follows: A. For so long as and to the extent necessary to permit me to sell the shares of Parent Common Stock pursuant to Rule 145 and, to the extent applicable, Rule 144 under the Act, Parent shall (a) use its reasonable best efforts to (i) file, on a timely basis, all reports and data required to be filed with the Commission by it pursuant to Section 13 of the Securities Exchange Act of 1934, as amended, and (ii) furnish to me upon request a written statement as to whether Parent has complied with such reporting requirements during the 12 months preceding any proposed sale of the shares of Parent Common Stock by me under Rule 145, and (b) otherwise use its reasonable efforts to permit such sales pursuant to Rule 145 and Rule 144. B. It is understood and agreed that certificates with the legends set forth in paragraphs E and F above will be substituted by delivery of certificates without such legend if (i) one year shall have elapsed from the date the undersigned acquired the Parent Common Stock received in the Merger and the provisions of Rule 145(d)(2) are then available to the undersigned, (ii) two years shall have elapsed from the date the undersigned acquired the shares of Parent Common Stock received in the Merger and the provisions of Rule 145(s)(3) are then applicable to the undersigned, or (iii) Parent received either an opinion of counsel, which opinion and counsel shall be reasonably satisfactory to the Parent, or a "no-action" letter obtained by the undersigned from the staff of the Commission, to the effect that the restrictions imposed by Rule 144 and Rule 145 under the Act no longer apply to the undersigned. Very truly yours, ____________________________________ Name: 4 Agreed and accepted this day of ,1998, by ALUMINUM COMPANY OF AMERICA By: ________________________________ Name: Title: ALUMAX INC. By: ________________________________ Name: Title: AMX ACQUISITION CORP. By: ________________________________ Name: Title: 5 EX-99.5 5 EXECUTIVE SEPARATION POLICY Exhibit 4 ALUMAX INC. - -------------------------------------------------------------------------------- Executive Separation Policy - -------------------------------------------------------------------------------- As Amended and Restated 3/5/98 ALUMAX INC. EXECUTIVE SEPARATION POLICY 1. Purpose. The purpose of the Alumax Inc. Executive Separation Policy (the "Policy") is to provide certain severance payments and benefits to designated corporate officers, designated Executive Group members and other key executives (each, an "Employee") in the event of termination of employment (other than by reason of retirement, death or disability of the Employee) (i) within two years after a Change in Control (as hereinafter defined) if the termination is by the Company other than for Cause (as hereinafter defined) or by the Employee for Good Reason (as hereinafter defined) or (ii) by the Company other than for Cause (as hereinafter defined). This Policy shall not affect the right of the Company to terminate an Employee's employment with or without Cause. 2. Definitions. The following definitions are applicable for purposes of this Policy: (a) "Annual Compensation" means the sum of (i) the Employee's annual salary with the Company (before reduction pursuant to any deferred compensation plan or agreement with the Company) immediately prior to the date of termination of employment or, if greater, immediately prior to the date of the Change of Control and (ii) the Employee's total annual incentive award for the year of termination, assuming employment for the full calendar year and that all applicable targets have been met, under the Alumax Inc. 1993 Annual Incentive Plan, as the same may be modified, replaced or added to by the Company from time to time. (b) "Beneficial Owner" is defined in Section 8 of the Company's 1993 Long Term Incentive Plan. (c) "Beneficiary" is defined in Section 2 of the Company's 1993 Long Term Incentive Plan. (d) "Cause" means (i) the willful and continued failure by the Employee to perform substantially his duties with the Company (other than any such failure resulting from the Employee's incapacity due to physical or mental illness) after a written demand for substantial performance is delivered to the Employee by the Chairman of the Board of Directors or the President of the Company which specifically identifies the manner in which the Employee has not substantially performed his duties, (ii) the willful engagement by the Employee in conduct which is not authorized by the Board of Directors of the Company or within the normal course of the Employee's business decisions and is known by the Employee to be materially detrimental to the best interests of the Company or any of its subsidiaries, or (iii) the willful engagement by the Employee in illegal conduct or any act of serious dishonesty which adversely affects, or, in the reason able estimation of the Board of Directors of the Company, could in the future adversely affect, the value, reliability or performance of the Employee to the Company in a material manner. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board of Directors of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Employee in good faith and in the best interests of the Company. Notwithstanding the foregoing, an Employee shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to the Employee a copy of the resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board of Directors after reasonable notice to the Employee and an opportunity for him, together with his counsel, to be heard before the Board of Directors, finding that, in the good faith opinion of the Board of Directors, the Employee was guilty of the conduct set forth above in (i), (ii) or (iii) of this subparagraph and specifying the particulars thereof in detail. (e) "Change in Control" means as defined in Section 8 of the Company's 1993 Long Term Incentive Plan. (f) "Company" means Alumax Inc., a Delaware corporation, or any successor corporation. (g) "Compensation Rate" means the result obtained by dividing the Employee's Annual Compensation by 12. (h) "Designated Participant" means (i) any corporate officer, (ii) any Executive Group member, or (iii) any key executive of the Company or its subsidiaries, who, in each case shall have been designated in writing by the Chairman of the Board of the Company as eligible for severance payments and benefits under this Policy; provided, however, that in no event shall a Designated Participant be entitled to receive severance payments and benefits under the Policy to the extent such severance payments and benefits duplicate benefits actually received under an effective employment agreement or any other separation policy, compensation or employee benefit plan of the Company or its subsidiaries. (i) "Executive Group" means as defined in Section 2 of the Company's 1983 Long Term Incentive Plan. -2- (j) "Excess Benefit Plan" means the Alumax Inc. 1993 Excess Benefit Plan as amended on August 3, 1995 and as the same may be modified, replaced or added to by the Company from time to time. (k) "Good Reason" means: (i) a reduction by the Company in the Employee's base salary as in effect immediately prior to the Change in Control; (ii) the failure by the Company to continue in effect any Plan (as hereinafter defined) in which the Employee was participating at the time of the Change in Control, unless such Plan (x) is replaced by a successor Plan providing to Employee substantially similar compensation and benefits (which replacement Plan shall continue to be subject to this provision) or (y) terminates as a result of the normal expiration of such Plan in accordance with its terms, as in effect immediately prior to the Change in Control; or the taking of any other action, or the failure to act, by the Company which would materially adversely affect the Employee's continued participation in any of such Plans as compared to the terms of such participation on the date of the Change in Control, including by materially reducing the Employee's benefits in the future under any such Plans; or (iii) the failure by the Company to provide and credit the Employee with the number of paid vacation days to which he or she is entitled in accordance with the Company's normal vacation policy as such policy was in effect immediately prior to the Change in Control; (iv) effecting a change in the position of the Employee which does not represent a position commensurate in level, authority and responsibilities with or a promotion from Employee's position with the Company or any of its subsidiaries immediately prior to the date of the Change in Control, or assigning the Employee responsibilities which are materially inconsistent with such prior position; or (v) the Company's requiring the Employee to be based anywhere more than 45 miles from the location of Employee's office or the location of the Company's executive offices immediately prior to the Change in Control, except that the Company may require Employee to be based more than 45 miles from such location if the relocation is to a principal executive office of the Company or principal office of a major division or subsidiary of the Company, provided that the Employee is reimbursed, on an after-tax basis, for all reasonable expenses incurred and losses experienced in respect of such relocation in accordance with Company's relocation policy prior to the date of the Change in -3- Control, and except for required travel on the Company's business to an extent substantially consistent with the business travel obligations which the Employee undertook on behalf of the Company prior to the Change in Control; in each case after notice in writing from the Employee to the Company and a period of 30 days after such notice during which the Company fails to correct such conduct. (l) "Plan" means any compensation plan of the Company such as an incentive, stock option or restricted stock plan or any employee benefit plan of the Company such as a pension, profit sharing, medical, dental or life insurance plan. (m) "Retirement Plan" means the 1993 Retirement Plan for Salaried Employees of Alumax Inc. and its subsidiaries as amended and restated through September 4, 1997 and as the same may be modified, replaced or added to by the Company from time to time. (n) "Years of Service" means the number of years (including partial credit for partial years) that the Employee has been employed by the Company and any of its subsidiaries and predecessors including AMAX Inc. 3. Eligibility. Each Designated Participant who was employed by the Company or one of its subsidiaries immediately prior to termination shall be eligible for the severance payments and benefits provided by Section 4 hereof. 4. Severance Payments and Benefits. (a) An Employee who is eligible for termination payments and benefits under this Policy pursuant to Section 3 shall be entitled to the following upon termination of employment within two years following a Change in Control (other than by reason of retirement, death or disability entitling the Employee to long-term disability benefits under the Company's long-term disability policy), if such termination is by the Company other than for Cause or by the Employee for Good Reason: (i) such Employee's annual salary otherwise payable through the date of termination of employment, together with salary, incentive compen- sation or benefits which have been earned or become payable as of the date of termination but which have not yet been paid to the Employee; (ii) a prorated portion of the award to the Employee for the year of termination, assuming all applicable targets had been met, under the -4- Alumax Inc. 1993 Annual Incentive Plan, as the same may be modified, replaced or added to by the Company from time to time, with such award prorated based on the number of days during the year of termination which precede the Employee's termination; (iii) a lump-sum severance payment equal to the product of the Employee's Annual Compensation, multiplied by 3; (iv) for a period of 36 months after the date of termination of employment, benefits equivalent on an after-tax basis to the additional benefits the Employee would have received under the Plans (excluding incentive compensation, stock option and performance share plans) in which the Employee was participating immediately prior to termination, as if the Employee had received credit under such Plans for service and age with the Company during such period following the Employee's termination, with such benefits payable by the Company at the same times and in the same manner as such benefits would have been received by the Employee under such Plans; and (v) for a period terminating on the earlier of 36 months follow- ing the date of termination of employment and the commencement of equivalent benefits from a new employer, maintenance in effect for the continued benefit of the Employee and his or her dependents of: (A) all insured and self-insured medical and dental benefit plans of the Company in which the Employee was participating immediately prior to termination, provided that the Employee's continued participation is possible under the general terms and conditions of such plans (and any applicable funding media) and the Employee continues to pay an amount equal to the Employee's regular contribution for such participation; and (B) the group life insurance and group disability insurance policies of the Company then in effect for Employee; provided, however, that if the Company so elects, or if such continued participation is not possible under the general terms and conditions of such plans or under such policies, the Company, in lieu of the foregoing, shall arrange to have issued for the benefit of the Employee and the Employee's dependents individual policies of insurance providing benefits substantially similar (on an after-tax basis) to those described in this paragraph (v), or, if such insurance is not available at a reasonable cost to the Company, shall otherwise provide the Employee and the Employee's dependents equivalent benefits (on an after-tax basis); provided further that, in no event shall the Employee be required to pay -5- any premiums or other charges in an amount greater than that which the Employee would have paid in order to participate in the Company's plans and policies. (b) An Employee who is eligible for severance payments and benefits under this Policy pursuant to Section 3 shall be entitled to the following upon termination of employment at any time prior to a Change in Control, if such termination is by the Company or its subsidiaries other than for Cause (but not if such termination is for retirement, death or disability entitling the Employee to long-term disability benefits under the Company's long-term disability policy, or by the Employee for any reason; (i) the amount determined in accordance with clause (i) of paragraph (a) of Section 4; (ii) the amount determined in accordance with clause (ii) of paragraph (a) of Section 4; (iii) severance payments, at the date annual salary payments would otherwise have been made, equal to the Employee's Compensation Rate multiplied by the Employee's Years of Service; provided, however, that in no event shall the amount payable to an Employee pursuant to this clause (iii) be less than 0.5 times the Employee's Annual Compensation or greater than 1.0 times the Employee's Annual Compensation with respect to Designated Participants transferred from AMAX Inc., and 1.5 times the Employee's Annual Compensation with respect to all other Designated Participants; and (iv) for a period terminating on the earlier of (a) the expiration of a number of months and partial months following the date of termination equal to the Employee's Years of Service, but in no event less than six or more than 18, and (b) the commencement of equivalent benefits from a new employer, maintenance in effect for the continued benefit of the Employee and his or her dependents of: (A) all insured and self-insured medical and dental benefit plans of the Company in which the Employee was participating immediately prior to termination, provided that the Employee's continued participation is possible under the general terms and conditions of such plans (and any applicable funding media) and the Employee continues to pay an amount equal to the Employee's regular contribution for such participation; and -6- (B) the group life insurance and group disability insurance policies of the Company then in effect for Employee; provided, however, that if the Company so elects, or if such continued participation is not possible under the general terms and conditions of such plans or under such policies, the Company, in lieu of the foregoing, shall arrange to have issued for the benefit of the Employee and the Employee's dependents individual policies of insurance providing benefits substantially similar (on an after-tax basis) to those described in this paragraph (iv), or, if such insurance is not available at a reasonable cost to the Company, shall otherwise provide to the Employee and the Employee's dependents equivalent benefits (on a after-tax basis); provided, further that, in no event shall the Employee be required to pay any premiums or other charges in an amount greater than that which the Employee would have paid in order to participate in the Company's plans and policies if still employed during such period. (c) All payments required by clauses (i), (ii) and (iii) of paragraph (a) of this Section 4 and by clauses (i) and (ii) of paragraph (b) of this Section 4 shall be paid not later than the fifteenth (15th) day following the date of termination of employment. (d) In the event of the death of an Employee, all payments hereunder due to such Employee shall be paid to his or her Beneficiary. (e) Notwithstanding anything in this Policy to the contrary, an Employee shall not be entitled to any payments or benefits under Section 4(b) of this Policy, unless the Human Resources and Compensation Committee of Board of Directors of the Company in its sole discretion provides otherwise, in the event termination of employment results from the sale or spin-off of a subsidiary, the sale of a division, other business unit or facility in which the Employee was employed immediately prior to such sale, and the Employee has been offered employment with the purchaser of such subsidiary, division, other business unit or facility on substantially the same terms and conditions under which the Employee worked prior to the sale. Such terms and conditions must include an agreement or plan binding on such purchaser or spun-off entity or business, providing that upon any termination of employment with the purchaser of the kinds described in Section 4(b) hereof within two years following such sale, the purchaser shall: (i) pay to such Employee an amount equal to the severance payments that such Employee would have received under Section 4(b)(iii) hereof if termination of employment had resulted in amounts being owed thereunder at the time of such sale; and -7- (ii) pay or provide for the Employee or his or her dependents the benefits described in Section 4(b)(iv) hereof for a period beginning upon the Employee's termination of employment with the purchaser or spun-off entity or business and terminating on the earlier of (a) the expiration of a number of months and partial months following the date of termination of employment with the purchaser equal to the Employee's Years of Service to the date of such sale, but in no event less than six or more than 18, and (b) the commencement of equivalent benefits from a new employer following termination of employment with the purchaser or spun-off entity or business. (f) Notwithstanding anything in this Policy to the contrary, a transfer of employment from the Company to a subsidiary or vice versa shall not be considered a termination of employment for purposes of this Policy. (g) Benefits paid to an Employee from the Excess Benefit Plan shall include an amount equivalent to the additional benefit the Employee would have received under The Retirement Plan if, for purposes of that Plan, the definition of compensation included amounts for any payments made pursuant to Section 4 of this Policy and if, for purposes of the Retirement Plan, there was no limitation on the amount of compensation that could be taken into account. 5. Excise Tax Gross-up. In the event that an Employee becomes entitled to one or more payments (with a "payment" including, without limitation, the vesting of an option or other non-cash benefit or property, whether pursuant to the terms of this Agreement or any other Plan (the "Total Payments"), which are or become subject to the tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), (or any similar tax that may hereafter be imposed) (the "Excise Tax"), the Company shall pay to the Employee at the time specified below an additional amount (the "Gross-up Payment") (which shall include, without limitation, reimbursement for any penalties and interest that may accrue in respect of such Excise Tax) such that the net amount retained by the Employee, after reduction for any Excise Tax (including any penalties or interest thereon) on the Total Payments and any federal, state and local income or employment tax and Excise Tax on the Gross-up Payment provided for by this Section 5, but before reduction for any federal, state or local income or employment tax on the Total Payments, shall be equal to the product of any deductions disallowed for federal, state or local income tax purposes because of the inclusion of the Gross-up Payment in Employee's adjusted gross income multiplied by the highest applicable marginal rate of federal, state or local income taxation, respectively, for the calendar year in which the Gross-up Payment is to be made. For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of such Excise Tax, -8- (i) the Total Payments shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless, and except to the extent that, in the written opinion of independent compensation consultants or auditors of nationally recognized standing selected by the Company and reasonably acceptable to the Employee ("Independent Auditors"), the Total Payments (in whole or in part) do not constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code or are otherwise not subject to the Excise Tax, (ii) the amount of the Total Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of (A) the total amount of the Total Payments or (B) the amount of excess parachute payments within the meaning of Section 280G(b)(1) of the Code (after applying clause (i) above), and (iii) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Company's Independent Auditors appointed pursuant to clause (a) above in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-up Payment, the Employee shall be deemed (A) to pay federal income taxes at the highest marginal rate of federal income taxation for the calendar year in which the Gross-up Payment is to be made; (B) to pay any applicable state and local income taxes at the highest marginal rate of taxation for the calendar in which the Gross-up Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes if paid in such year (determined without regard to limitations on deductions based upon the amount of the Employee's adjusted gross income); and (C) to have otherwise allowable deductions for federal, state and local income tax purposes at least equal to those disallowed because of the inclusion of the Gross-up Payment in the Employee's adjusted gross income. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time the Gross-up Payment is made, the Employee shall repay to the Company at the time that the amount of such reduction in Excise Tax is finally determined (but, if previously paid to the taxing authorities, not prior to the time the amount of such reduction is refunded to the Employee or otherwise realized as a benefit by the Employee) the portion of the Gross-up Payment that would not have been paid if such Excise Tax had been applied in initially calculating the Gross-up Payment, plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise -9- Tax is determined to exceed the amount taken into account hereunder at the time the Gross-up Payment is made (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-up Payment), the Company shall make an additional Gross-up Payment in respect of such excess (plus any interest and penalties payable with respect to such excess) at the time that the amount of such excess is finally determined. The Gross-up Payment provided for above shall be paid on the thirtieth day (or such earlier date as the Excise Tax becomes due and payable to the taxing authorities) after it has been determined that the Total Payments (or any portion thereof) are subject to the Excise Tax; provided, however, that if the amount of such Gross-up Payment or portion thereof cannot be finally determined on or before such day, the Company shall pay to the Employee on such day an estimate, as determined by the Company's Independent Auditors appointed pursuant to clause (i) above, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in Section 127(b)(2)(B) of the Code), as soon as the amount thereof can be determined. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Employee, payable on the fifth day after demand by the Company (together with interest at the rate provided in Section 1274(b)(2)(B) of the code). If more than one Gross-up Payment is made, the amount of each Gross-up Payment shall be computed as not to duplicate any prior Gross-up Payment. The Company shall have the right to control all proceedings with the Internal Revenue Service that may arise in connection with the determination and assessment of the Excise Tax and, at its sole option, the Company may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with any taxing authority in respect of such Excise Tax (including any interest or penalties thereon); provided, however, that the Company's control over any such proceedings shall be limited to issues with respect to which a Gross-up Payment would be payable hereunder and the Employee shall be entitled to settle or contest any other issue raised by the Internal Revenue Service or any other taxing authority. The Employee shall cooperate with the Company in any proceedings relating to the determination and assessment of the Excise Tax and shall not take any position or action that would materially increase the amount of any Gross-up Payment hereunder. 6. Withholding. The Company shall have the right to deduct from all payments hereunder any taxes required by law to be withheld therefrom. 7. No Right To Employment. Nothing in this Policy shall be construed as giving any person the right to be retained in the employment of the Company or any subsidiary, nor shall it affect the right of the Company or any subsidiary to dismiss an Employee without any liability except as provided in this Policy. -10- 8. Legal Fees. The Company shall pay all legal fees and related expenses incurred by an Employee in seeking to obtain or enforce any payment, benefit or right provided by this Policy; provided; however, that the Employee shall be required to repay any such amounts to the Company to the extent that an arbitrator or a court of competent jurisdiction issues a final, unappealable order setting forth a determination that the position taken by the Employee was frivolous or advanced in bad faith. 9. Amendment and Termination. The Board of Directors of the Company may amend or terminate this Policy at any time prior to a Change in Control. This Policy may not be amended or terminated at any time after a Change in Control in any manner adverse to an Employee without the prior consent of such Employee. 10. Governing Law; Arbitration. The validity, construction, and effect of this Policy and any rules and regulations relating to this Policy shall be determined in accordance with Delaware General Corporation Law, to the extent applicable, other laws (including those governing contracts) of the State of Delaware, without giving effect to principles of conflicts of laws, and applicable federal law. If any provision hereof shall be held by a court of competent jurisdiction to be invalid and unenforceable, the remaining provisions hall continue to be fully effective. Any dispute or controversy arising under or in connection with this Policy shall be settled exclusively by arbitration in Atlanta, Georgia by three arbitrators in accordance with the rules of the American Arbitration Association in effect at the time of submission to arbitration. Judgment may be entered on the arbitrators' award in any court having jurisdiction. For purposes of settling any dispute or controversy arising hereunder or for the purpose of entering any judgment upon an award rendered by the arbitrators, the Company and the Employee hereby consent to the jurisdiction of any or all of the following courts: (i) the United States District Court for the Northern District of Georgia, (ii) any of the courts of the State of Georgia, or (iii) any other court having jurisdiction. The Company and the Employee hereby waive, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to such jurisdiction and any defense of inconvenient forum. The Company and the Employee hereby agree that a judgment upon an award rendered by the arbitrators may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. 11. Nonassignability. Compensation and benefits under the Policy may not be assigned by the Employee. The terms and conditions of this Policy shall be binding on the successors and assigns of the Company. 12. No Duty to Mitigate. No employee shall be required to mitigate, by seeking employment or otherwise, the amount of any payment that the Company becomes obligated to make under this Policy, and, except as expressly provided in this Policy, amounts or other benefits to be paid or provided to an Employee pursuant to this -11- Policy shall not be reduced by reason of the Employee's obtaining other employment or receiving similar payments or benefits from another employer. 13. Duplicate Payments or Benefits. (a) Except to the extent that the terms of this Policy confer compensa- tion or benefits that are more favorable to Employee than are available under any other employee (including executive) benefit of executive compensation plan of the company in which Employee is a participant, Employee's rights under any such employee (including executive) benefit plan or executive compensation plan shall be determined in accordance with the terms of such plan (as it may be modified or added to by the Company from time to time). (b) This Policy constitutes the entire understanding between the Company and Employee relating to employment of Employee by the Company and its subsidiaries and supersedes and cancels all prior agreements and understandings with respect to the subject matter of this Policy. Employee shall not be entitled to any payment or benefit under this Policy which duplicates a payment or benefit received or receivable by Employee under such prior agreements and understandings or under any employee (including executive) benefit plan or executive compensation plan of the Company. 14. Effective Date. This Policy is effective as of November 15, 1993. -12- EX-99.6 6 SEPARATION POLICY FOR CORPORATE EMPLOYEES Exhibit 5 ALUMAX INC. - -------------------------------------------------------------------------------- SEPARATION POLICY FOR CORPORATE EMPLOYEES - -------------------------------------------------------------------------------- 03/05/98 ALUMAX INC. - -------------------------------------------------------------------------------- SEPARATION POLICY FOR CORPORATE EMPLOYEES - -------------------------------------------------------------------------------- Page ---- 1. Purpose...................................................................1 2. Definitions...............................................................1 3. Eligibility...............................................................4 4. Severance Payments and Benefits...........................................4 5. Withholding...............................................................7 6. No Right to Employment....................................................7 7. Legal Fees................................................................7 8. Amendment and Termination.................................................7 9. Governing Law; Arbitration................................................7 10. Nonassignability..........................................................8 11. Administration and Claims.................................................8 12. No Duty to Mitigate.......................................................8 13. Duplicate Payments or Benefits............................................8 14. Effective Date............................................................9 ALUMAX INC. SEPARATION POLICY FOR CORPORATE EMPLOYEES 1. Purpose. The purpose of the Alumax Inc. Separation Policy for Corporate Employees (the "Policy") is to provide certain severance payments and benefits to designated Corporate Employees (each, an "Employee") in the event of termination of employment (other than by reason of retirement, death or disability of the Employee) (i) within two years after a Change in Control (as hereinafter defined) if the termination is by the Company other than for Cause (as hereinafter defined) or by the Employee for Good Reason (as hereinafter defined) or (ii) by the Company other than for Cause (as hereinafter defined). This Policy shall not affect the right of the Company to terminate an Employee's employment with or without Cause. 2. Definitions. The following definitions are applicable for purposes of this Policy: (a) "Annual Compensation" means the sum of (i) the Employee's annual salary with the Company (before reduction pursuant to any deferred compensation plan or agreement with the Company) immediately prior to the date of termination of employment or, if greater, immediately prior to the date of the Change in Control and (ii) the Employee's total annual incentive award for the year of termination, assuming employment for the full calendar year and that all applicable targets have been met, under the Alumax Inc. 1993 Annual Incentive Plan, as the same may be modified, replaced or added to by the Company from time to time. (b) "Beneficial Owner" is defined in Section 8 of the Company's 1993 Long Term Incentive Plan. (c) "Beneficiary" is defined in Section 2 of the Company's 1993 Long Term Incentive Plan. (d) "Cause" means (i) the willful and continued failure by the Employee to perform substantially his duties with the Company (other than any such failure resulting from the Employee's incapacity due to physical or mental illness) after a written demand for substantial performance is delivered to the Employee by the Chairman and Chief Executive Officer or the President of the Company which specifically identifies the manner in which the Employee has not substantially performed his duties, (ii) the willful engagement by the Employee in conduct which is not authorized by the Board of Directors of the Company or within the normal course of the Employee's business decisions and is known by the Employee to be materially detrimental to the best interests of the Company or any of its subsidiaries, or (iii) the willful engagement by the Employee in illegal conduct or any act of serious dishonesty which adversely affects, or, in the reasonable estimation of the Chairman and Chief Executive Officer or the President of the Company, could in the future adversely affect, the value, reliability or performance of the Employee to the Company in a material manner. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board of Directors of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Employee in good faith and in the best interests of the Company. (e) "Change in Control" means as defined in Section 8 of the Company's 1993 Long Term Incentive Plan. (f) "Company" means Alumax Inc., a Delaware corporation, or any successor corporation. (g) "Compensation Rate" means the result obtained by dividing the Employee's Annual Compensation by 52. (h) "Corporate Employee" means all regular, salaried exempt and non- exempt personnel (i) of the Company at the Company's headquarters, other than Corporate Officers; (ii) of Alumax Technical Services Inc. at Golden, Colorado; (iii) of Alumax International, Inc. at Golden, Colorado; (iv) of Alumax Asia Pacific Pty Limited in Sydney, Australia; (v) of Alumax de Mexico S.A. de C.V. in Col. Napoles, Mexico; (vi) of Alumax International Co. in Beijing, China and (vii) of Alumax Materials Management, Inc. at Norcross, Georgia; Cressona, and Lancaster, Pennsylvania; Goose Creek, South Carolina, Texarkana, Texas and West Chicago, Illinois. (i) "Corporate Officers" means any officers or designated key executives of the Company who upon termination will otherwise receive severance payments and benefits under an effective employment agreement with the Company or under the Alumax Inc. Executive Separation Policy. (j) "Designated Participant" means any Corporate Employee. (k) "Good Reason" means: (i) a reduction by the Company in the Employee's base salary as in effect immediately prior to the Change in Control; -2- (ii) the failure by the Company to continue in effect any Plan (as hereinafter defined) in which the Employee was participating at the time of the Change in Control, unless such Plan (x) is replaced by a successor Plan providing to Employee substantially similar compensation and benefits (which replacement Plan shall continue to be subject to this provision) or (y) terminates as a result of the normal expiration of such Plan in accordance with its terms, as in effect immediately prior to the Change in Control; or by the taking of any other action, or the failure to act, by the Company which would materially adversely affect the Employee's continued participation in any of such Plans as compared to the terms of such participation on the date of the Change in Control, including by materially reducing the Employee's benefits in the future under any such Plans; or (iii) the failure by the Company to provide and credit the Employee with the number of paid vacation days to which he or she is entitled in accordance with the Company's normal vacation policy as such policy was in effect immediately prior to the Change in Control; (iv) effecting a change in the position of the Employee which does not represent a position commensurate in level, authority and responsibilities with or a promotion from Employee's position with the Company or any of its subsidiaries immediately prior to the date of the Change in Control, or assigning the Employee responsibilities which are materially inconsistent with such prior position; or (v) the Company's requiring the Employee to be based anywhere more than 45 miles from the location of Employee's office or the location of the Company's executive offices immediately prior to the Change in Control, except that the Company may require Employee to be based more than 45 miles from such location if the relocation is to a principal executive office of the Company or principal office of a major division or subsidiary of the Company, provided that the Employee is reimbursed, on an after-tax basis, for all reasonable expenses incurred and losses experienced in respect of such relocation in accordance with Company's relocation policy prior to the date of the Change in Control, and except for required travel on the Company's business to an extent substantially consistent with the business travel obligations which the Employee undertook on behalf of the Company prior to the Change in Control; in each case after notice in writing from the Employee to the Company and a period of 30 days after such notice during which the Company fails to correct such conduct. -3- (l) "Named Subsidiary" means Alumax Technical Services, Inc.; Alumax International, Inc.; Alumax Asia Pacific Pty Limited; Alumax de Mexico S.A. de C.V.; Alumax International Co. and Alumax Materials Management, Inc. (m) "Plan" means any compensation plan of the Company such as an incentive, stock option or restricted stock plan or any employee benefit plan of the Company such as a pension, profit sharing, medical, dental or life insurance plan. (n) "Salary" means the Employee's base annual salary with the Company or a Named Subsidiary (before reduction pursuant to any deferred compensation plan or agreement with the Company or a Named Subsidiary) as in effect immediately prior to the date of termination of employment or, if greater, immediately prior to the date of the Change in Control. (o) "Salary Rate" means the result obtained by dividing the Employee's salary by 52. (p) "Years of Service" means the number of years (including partial credit for partial years) that the Employee has been employed by the Company and any of its subsidiaries and predecessors including AMAX Inc. 3. Eligibility. Each Corporate Employee who was employed by the Company or a Named Subsidiary immediately prior to termination shall be eligible for the severance payments and benefits provided by Section 4 hereof. 4. Severance Payments and Benefits. (a) A Corporate Employee who is eligible for termination payments and benefits under this Policy pursuant to Section 3 shall be entitled to the following upon termination of employment within two years following a Change in Control (other than by reason of retirement, death or disability entitling the Employee to long-term disability benefits under the Company's long-term disability policy), if such termination is by the Company other than for Cause or by the Employee for Good Reason: (i) such Employee's annual salary otherwise payable through the date of termination of employment, together with salary, incentive compensation and benefits which have been earned or become payable as of the date of termination but which have not yet been paid to the Employee; -4- (ii) a prorated portion of the award to the Employee for the year of termination, assuming all applicable targets had been met, under the Alumax Inc. 1993 Annual Incentive Plan, as the same may be modified, replaced or added to by the Company from time to time, with such award prorated based on the number of days during the year of termination which precede the Employee's termination; (iii) a lump-sum severance payment equal to the sum of (A) four times the Employee's Compensation Rate multiplied by the Employee's Years of Service, plus (B) the Employee's Compensation Rate multiplied by a fraction the numerator of which is Employee's Annual Compensation and the denominator of which is 10,000; provided, however, that in no event shall the amount payable to an Employee pursuant to this clause (iii) be less than .5 times the Employee's Annual Compensation or greater than 1.5 times the Employee's Annual Compensation; and (iv) continued coverage, for a period of months equal to the lump-sum determined under clause (iii) above divided by Employee's Annual Compensation and multiplied by 12 from the date of termination of employment, under the Company's medical, dental, disability and life insurance plans in which such Employee participated immediately prior to the date of termination of employment, on the same basis as in effect immediately prior to the date of termination of employment (including required employee contributions, if any). Such coverage may be discontinued by the Company in the event that the Employee becomes reemployed and the new employer of the Employee has a comparable insurance program. The comparability of the new employer's program to that of the Company is to be determined by the Company on a category-by-category basis with respect to life, medical, dental and disability coverage. (b) An Employee who is eligible for severance payments and benefits under this Policy pursuant to Section 3 shall be entitled to the following upon termination of employment at any time prior to a Change in Control, if such termination is by the Company or a Named Subsidiary other than for Cause (but not if such termination is for any other reason, including retirement, death or disability entitling the Employee to long-term disability benefits under the Company's long-term disability policy, or by the Employee for any reason or by the Company for Cause): (i) the amount determined in accordance with clause (i) of paragraph (a) of Section 4; -5- (ii) the amount determined in accordance with clause (ii) of paragraph (a) of Section 4; (iii) severance payments, at the dates annual salary payments would otherwise have been made, equal to the sum of (A) two times the Employee's Compensation Rate multiplied by the Employee's Years of Service plus (B) the Employee's Salary Rate multiplied by a fraction, the numerator of which is the Employee's Salary and the denominator of which is $10,000; provided, however, that in no event shall the amount payable to an Employee pursuant to this clause (iii) be less than 0.25 times the Employee's Annual Compensation or greater than 1.5 times the Employee's Salary; and (iv) continued benefit coverage for a period of six months from the date of termination of employment, to the extent specified in clause (iv) of paragraph (a) of Section 4. (c) All payments required by clauses (i), (ii) and (iii) of paragraph (a) of this Section 4 and by clauses (i) and (ii) of paragraph (b) of this Section 4 shall be paid not later than the fifteenth (15th) day following the date of termination of employment. (d) In the event of the death of an Employee, all payments hereunder due to such Employee shall be paid to his or her Beneficiary. (e) Notwithstanding anything in this Policy to the contrary, an Employee shall not be entitled to any payments or benefits under Section 4(b) of this Policy, unless the Human Resources and Compensation Committee of Board of Directors of the Company in its sole discretion provides otherwise, in the event termination of employment results from the sale or spin-off of a subsidiary, the sale of a division, other business unit or facility in which the Employee was employed immediately prior to such sale, and the Employee has been offered employment with the purchaser of such subsidiary, division, other business unit or facility on substantially the same terms and conditions under which the Employee worked prior to the sale. Such terms and conditions must include an agreement or plan binding on such purchaser or spun-off entity or business, providing that upon any termination of employment with the purchaser of the kinds described in Section 4(b) hereof within two years following such sale, the purchaser shall: (i) pay to such Employee an amount equal to the severance payments that such Employee would have received under Section 4(b)(iii) hereof if termination of employment had resulted in amounts being owed thereunder at the time of such sale; and -6- (ii) pay or provide for the Employee and his or her dependents the benefits described in Section 4(b)(iv) hereof for a period beginning upon the Employee's termination of employment with the purchaser or spun-off entity or business and terminating on the earlier of (a) the expiration of a number of months and partial months following the date of termination of employment with the purchaser equal to the Employee's Years of Service to the date of such sale, but in no event less than six or more than 18, and (b) the commencement of equivalent benefits from a new employer following termination of employment with the purchaser or spun-off entity or business. (f) Notwithstanding anything in this Policy to the contrary, a transfer of employment from the Company to a subsidiary or vice versa shall not be considered a termination of employment for purposes of this Policy. 5. Withholding. The Company shall have the right to deduct from all payments hereunder any taxes required by law to be withheld therefrom. 6. No Right to Employment. Nothing in this Policy shall be construed as giving any person the right to be retained in the employment of the Company or any subsidiary, nor shall it affect the right of the Company or any subsidiary to dismiss an Employee without any liability except as provided in this Policy. 7. Legal Fees. The Company shall reimburse all legal fees and related expenses incurred by an Employee in seeking to obtain or enforce any payment, benefit or right provided by this Policy; provided, however, that the Employee shall not be reimbursed for any such amounts to the extent that an arbitrator or a court of competent jurisdiction issues a final, unappealable order setting forth a determination that the position taken by the Employee was frivolous or advanced in bad faith. 8. Amendment and Termination. The Board of Directors of the Company may amend or terminate this Policy at any time prior to a Change in Control. This Policy may not be amended or terminated at any time after a Change in Control in any manner adverse to an Employee without the prior consent of such Employee. 9. Governing Law; Arbitration. The validity, construction, and effect of this Policy and any rules and regulations relating to this Policy shall be determined in accordance with Delaware General Corporation Law, to the extent applicable, other laws (including those governing contracts) of the State of Delaware, without giving effect to principles of conflicts of laws, and applicable federal law. If any provision hereof shall be held by a court of competent jurisdiction to be invalid and unenforceable, the remaining provisions shall continue to be fully effective. Any dispute or controversy arising under or in connection with this Policy shall be settled exclusively by arbitration in Atlanta, Georgia by three arbitrators in accordance with the rules of the American -7- Arbitration Association in effect at the time of submission to arbitration. Judgment may be entered on the arbitrators' award in any court having jurisdiction. For purposes of settling any dispute or controversy arising hereunder or for the purpose of entering any judgment upon an award rendered by the arbitrators, the Company and the Employee hereby consent to the jurisdiction of any or all of the following courts: (i) the United States District Court for the Northern District of Georgia, (ii) any of the courts of the State of Georgia, or (iii) any other court having jurisdiction. The Company and the Employee hereby waive, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to such jurisdiction and any defense of inconvenient forum. The Company and the Employee hereby agree that a judgment upon an award rendered by the arbitrators may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. 10. Nonassignability. Compensation and benefits under the Policy may not be assigned by the Employee. The terms and conditions of this Policy shall be binding on the successors and assigns of the Company. 11. Administration and Claims. This Policy shall be administered by Philip Gaetano. The administrator shall provide adequate written notice to any employee whose claim for benefits hereunder has been denied, setting forth specific reasons for such denial, written in a manner calculated to be understood by such Employee, and afford such Employee a full and fair review of the decision denying the claim, in accordance with the applicable requirements (if any) of the Employee Retirement Income Security Act of 1974, as amended. 12. No Duty to Mitigate. No Employee shall be required to mitigate, by seeking employment or otherwise, the amount of any payment that the Company becomes obligated to make under this Policy, and, except as expressly provided in this Policy, amounts or other benefits to be paid or provided to an Employee pursuant to this Policy shall not be reduced by reason of the Employee's obtaining other employment or receiving similar payments or benefits from another employer. 13. Duplicate Payments or Benefits. (a) Except to the extent that the terms of this Policy confer compensation or benefits that are more favorable to Employee than are available under any other employee (including executive) benefit or compensation plan of the Company in which Employee is a participant relating to severance, Employee's rights under any such employee (including executive) benefit plan or compensation plan shall be determined in accordance with the terms of such plan (as it may be modified or added to by the Company from time to time). -8- (b) This Policy constitutes the entire understanding between the Company and Employee relating to employment of Employee by the Company and its subsidiaries and supersedes and cancels all prior agreements and understandings with respect to the subject matter of this Policy. Employee shall not be entitled to any payment or benefit under this Policy which duplicates a payment or benefit received or receivable by Employee under such prior agreements and understandings or under any employee (including executive) benefit plan or executive compensation plan or policy of the Company. 14. Effective Date. This Policy is effective as of March 5, 1998. -9- -----END PRIVACY-ENHANCED MESSAGE-----