e425
Filed by Inco Limited
Pursuant to Rule 425 under the Securities Act of 1933
Subject Company: Falconbridge Limited
Commission File No. 1-11284
Inco Limited Commission File No. 1-1143
This document is important and requires your immediate
attention. If you are in doubt as to how to respond to the Offer
described in this Directors Circular, you should consult
with your investment dealer, stockbroker, bank manager, lawyer
or other professional advisor.
FALCONBRIDGE LIMITED
DIRECTORS CIRCULAR
Recommending
Acceptance
of the offer by
Inco Limited
To purchase all of the
Outstanding Common Shares of
Falconbridge
Limited
For Cdn.$34.00 in cash per
Falconbridge Share
or
0.6713 of an Inco Share
and Cdn.$0.05 in cash per Falconbridge Share,
subject to the maximum
aggregate cash payment and maximum aggregate
share payment (and
corresponding proration) described herein.
THE BOARD OF DIRECTORS
OF FALCONBRIDGE UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
ACCEPT THE OFFER AND TENDER THEIR FALCONBRIDGE
SHARES TO THE OFFER.
October 24,
2005
Notice to Shareholders in the United States
The Offer is made for securities of a Canadian issuer, and
while the Offer is subject to Canadian disclosure requirements,
investors should be aware that these requirements are different
from those of the United States. The enforcement by investors of
civil liabilities under the United States federal securities
laws may be adversely affected by the fact that Falconbridge
Limited is located in Canada and that some or all of its
officers and directors are residents of a foreign country.
FORWARD-LOOKING STATEMENTS
This Directors Circular contains forward-looking
statements (as defined in applicable securities legislation,
including the United States Securities Exchange Act of 1934).
Often, but not always, forward-looking statements can be
identified by the use of words such as plans,
expects or does not expect, is
expected, budget, scheduled,
estimates, forecasts,
intends, anticipates or does not
anticipate, or believes, or variations of such
words and phrases or state that certain actions, events or
results may, could, would,
might or will be taken, occur or be
achieved. Forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the
actual results, performance or achievements of Falconbridge or
Inco to be materially different from any future results,
performance or achievements expressed or implied by the
forward-looking statements.
Examples of such statements include, but are not limited to:
factors relating to the Offer and the results expected to be
achieved from the successful completion of the Offer and the
combination of Inco and Falconbridge, including the operating
and other synergies and cost savings expected to be realized,
and the timing thereof; the increased market capitalization,
share price multiple and improved liquidity of Inco Shares; the
improved cash flow and earnings of Inco; statements regarding
plans, objectives and expectations with respect to existing and
future operations; statements regarding business and financial
prospects; statements regarding anticipated financial or
operating performance and cash flows; and the financial position
and international presence that permits Inco to compete against
global mining companies. Actual results and developments are
likely to differ, and may differ materially, from those
expressed or implied by the forward-looking statements contained
in this Directors Circular.
Such forward-looking statements are based on a number of
assumptions which may prove to be incorrect, including, but not
limited to, assumptions in connection with the combination of
Inco and Falconbridge or otherwise about: the ability of Inco to
successfully compete against global metals and mining and
exploration companies by creating through such a combination an
enterprise of increased scale; the amount of reduced costs based
on the achievement of operational efficiencies from
restructuring and integration planning being approximately
$350 million per annum in pre-tax operating and other
synergies and cost savings; the approvals or clearances required
to be obtained by Inco and Falconbridge from regulatory and
other agencies and bodies having been obtained in a timely
manner; the divestitures required by regulatory agencies being
acceptable and completed in a timely manner; the amount of
benefits and synergies and cost savings from the acquisition or
related divestitures being fully realized; metal prices and
exchange rates; there being limited costs, difficulties or
delays related to the integration of Falconbridges
operations with Inco and the timely completion of the steps
required to be taken for the eventual combination of the two
companies.
While Falconbridge anticipates that subsequent events and
developments may cause Falconbridges views to change,
Falconbridge specifically disclaims any obligation to update
these forward-looking statements. These forward-looking
statements should not be relied upon as representing
Falconbridges views as of any date subsequent to the date
of this Directors Circular. Although Falconbridge has
attempted to identify important factors that could cause actual
actions, events or results to differ materially from those
described in forward-looking statements, there may be other
factors that cause actions, events or results not to be as
anticipated, estimated or intended. There can be no assurance
that forward-looking statements will prove to be accurate, as
actual results and future events could differ materially from
those anticipated in such statements. Accordingly, readers
should not place undue reliance on forward-looking statements.
These factors are not intended to represent a complete list of
the factors that could affect the combination of Inco and
Falconbridge.
Additional factors are noted in Incos Take-Over Bid
Circular which this Directors Circular accompanies and in
any documents incorporated by reference into such Take-Over Bid
Circular. Falconbridge undertakes no obligation to update
forward-looking statements.
CURRENCY
All dollar references in the Directors Circular are in
United States dollars, unless otherwise indicated.
AVAILABILITY OF DISCLOSURE DOCUMENTS
Falconbridge is a reporting issuer or equivalent in all
provinces and territories of Canada and files its continuous
disclosure documents and other documents with the Canadian
provincial and territorial securities regulatory authorities and
with the SEC. Continuous disclosure documents are available at
www.sedar.com and at the SECs web site at
www.sec.gov.
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TABLE OF CONTENTS
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FORWARD-LOOKING STATEMENTS
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CURRENCY
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AVAILABILITY OF DISCLOSURE DOCUMENTS
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DIRECTORS CIRCULAR
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BACKGROUND TO THE OFFER
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RECOMMENDATION OF THE BOARD OF DIRECTORS
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REASONS FOR THE RECOMMENDATION
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FAIRNESS OPINION
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SUPPORT AGREEMENT
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SHARE CAPITAL OF FALCONBRIDGE
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OWNERSHIP OF SECURITIES BY DIRECTORS AND OFFICERS OF FALCONBRIDGE
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PRINCIPAL HOLDER OF SECURITIES OF FALCONBRIDGE
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INTENTIONS WITH RESPECT TO THE OFFER
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TRADING IN SECURITIES OF FALCONBRIDGE
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ISSUANCES OF SECURITIES OF FALCONBRIDGE
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OWNERSHIP OF SECURITIES OF INCO
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RELATIONSHIP BETWEEN INCO AND DIRECTORS AND SENIOR OFFICERS OF
FALCONBRIDGE
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ARRANGEMENTS BETWEEN FALCONBRIDGE AND ITS DIRECTORS AND SENIOR
OFFICERS
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INTEREST OF DIRECTORS AND OFFICERS IN MATERIAL CONTRACTS OF INCO
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MATERIAL CHANGES IN THE AFFAIRS OF FALCONBRIDGE
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OTHER TRANSACTIONS
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OTHER INFORMATION
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STATUTORY RIGHTS
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APPROVAL OF DIRECTORS CIRCULAR
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CONSENT OF CIBC WORLD MARKETS INC.
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CERTIFICATE
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SCHEDULE A OPINION OF CIBC WORLD MARKETS INC.
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ii
DIRECTORS CIRCULAR
This Directors Circular (the Directors
Circular) is issued by the board of directors (the
Board of Directors) of Falconbridge Limited
(Falconbridge) in connection with the offer (the
Offer) made by Inco Limited (Inco) to
the common shareholders (the Shareholders) of
Falconbridge to purchase all of the outstanding common shares in
the capital of Falconbridge (the Falconbridge
Shares). Under the Offer, each Shareholder may elect to
receive for each Falconbridge Share held (i) Cdn.$34.00 in
cash or (ii) 0.6713 common shares (the Inco
Shares) of Inco plus Cdn.$0.05 in cash, subject to
proration based upon the Maximum Cash Payment and the Maximum
Share Payment (each as defined below). Under the terms of the
Offer, the maximum amount of cash available to be paid by Inco
will be Cdn.$2,872,648,913 (Maximum Cash Payment)
and the maximum number of Inco Shares available for issuance
will be 200,702,404 Inco Shares (the Maximum Share
Payment), in each case taking into account the conversion
of Falconbridges outstanding convertible debt securities
and the exercise of outstanding share options. If all
Shareholders elected to receive cash for their Falconbridge
Shares or all Shareholders elected to receive Inco Shares for
their Falconbridge Shares on any take-up date, they would
receive Cdn.$7.50 in cash and 0.524 of an Inco Share per
Falconbridge Share as a result of a pro-ration between the
Maximum Cash Payment and the Maximum Share Payment on any
take-up date, subject to adjustments for fractional shares. The
terms and conditions of the Offer are set out in the
accompanying circular of Inco dated October 24, 2005 (the
Offering Circular).
The Offer was made pursuant to the terms of a support agreement
dated October 10, 2005 between Falconbridge and Inco (the
Support Agreement) and will be open for acceptance
until 8 p.m. (Toronto time) on December 23, 2005 (the
Expiry Time), unless extended or withdrawn.
BACKGROUND TO THE OFFER
In February of 2004, Brascan Corporation (Brascan),
the then owner of 41% of the common shares of Noranda Inc.
(Noranda, then 59% shareholder of the predecessor
Falconbridge Limited (Old Falconbridge) before its
amalgamation with Noranda) indicated to the Board of Directors
that Noranda no longer fit within the parameters of
Brascans stated business model. Given this indication, the
Board of Directors determined to review its strategic options.
The Noranda Board of Directors engaged in discussions with
several parties who had expressed interest in acquiring Noranda,
as well as others who were considered by the Noranda Board of
Directors to be potential strategic investors. Noranda
established a data room and made information available to
selected prospective acquirors who signed confidentiality
agreements. These included Xstrata plc (Xstrata) and
Inco.
On June 16, 2004, Noranda announced that it was conducting
a review of various means of maximizing shareholder value. Over
the course of June, July and August of 2004, Noranda and its
advisors negotiated with a number of parties respecting their
interest in acquiring Noranda, including Inco.
On September 24, 2004, Noranda announced that it had
entered into exclusive negotiations with China Minmetals
Corporation (Minmetals) concerning a preliminary
non-binding proposal from Minmetals to acquire 100% of the
shares of Noranda. On November 16, 2004, Noranda announced
that the period for exclusive discussions had expired, but that
discussions were continuing on a non-exclusive basis.
Subsequent to November 16, 2004, in addition to discussions
with other parties interested in acquiring Noranda, a special
committee of the Board of Directors reviewed a number of
alternative courses of action respecting a reorganization of
Noranda and Old Falconbridge. On March 8, 2005, Noranda
announced its intention to make an offer to purchase up to
63,377,140 of its common shares in exchange for 50,000,000
junior preferred shares (the Issuer Bid) and to make
an offer to purchase all of the common shares of Old
Falconbridge not then owned by it (the Take-over
Bid). The Take-over Bid and the Issuer Bid were made on
March 24, 2005.
On April 29, 2005, the Issuer Bid was successfully
completed and on May 6, 2005, the Take-over Bid was
successfully completed. On June 30, 2005, Old Falconbridge
and Noranda were amalgamated to form Falconbridge.
During the winter and spring of 2005, Falconbridge and Inco
engaged in discussions regarding deriving potential synergies
from operations outside of the context of a full merger. These
discussions led to the announcement on June 28, 2005 of the
entering into of a long term agreement between Inco and Noranda
under which Inco would sell all of its copper production from
its Ontario operations in anode form to Noranda for processing
at its Montreal copper
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refinery. Recognizing that there were many other opportunities
for similar transactions that would result in operational
efficiencies for both parties, discussions continued throughout
the summer of 2005.
On August 15, 2005, Brascan announced that it had sold
73,115,756 Falconbridge Shares to Xstrata at Cdn.$28.00 per
share. Brascan also announced that, as part of its arrangements
with Xstrata relating to such sale, it had been agreed that, if
Xstrata makes an offer or announces its intention to make an
offer to acquire a majority or more of the common shares of
Falconbridge within a certain period of time at a price per
share in excess of Cdn.$28.00, Xstrata would pay Brascan such
excess amount in respect of the shares sold by Brascan to
Xstrata.
On August 23, 2005, the Falconbridge Board of Directors met
to consider the implications to Falconbridge of the sale of the
Falconbridge Shares by Brascan to Xstrata. On August 24,
2005, members of senior management of Falconbridge met with
Mr. Mick Davis, CEO of Xstrata, to discern Xstratas
objectives in acquiring the Falconbridge Shares from Brascan and
Xstratas future intentions with respect to Falconbridge.
On August 25, 2005, the Falconbridge Board of Directors met
and received a presentation from Mr. Davis, which included
a discussion about, among other things, the possible combination
of Xstrata and Falconbridge.
At the August 25, 2005 meeting, following the presentation
from Mr. Davis, the Board of Directors formed an
independent committee (the Independent Committee)
comprised of all directors except Mr. Kerr,
Mr. Pannell, and those directors who were related to
Brascan. The Independent Committee authorized Mr. Pannell
to pursue negotiations with Xstrata with respect to their
request for Board representation in exchange for certain
concessions to be made by Xstrata, including a restriction on
Xstrata acquiring additional Falconbridge Shares other than
pursuant to an offer for all Falconbridge shares. It also
authorized Mr. Pannell to pursue meetings with major
investors and analysts and to consider other possible acquirers
of Falconbridge.
During September, the Falconbridge Board of Directors received
regular updates from Mr. Pannell on discussions with major
investors and with Xstrata which declined to accept
Falconbridges suggested restrictions in exchange for Board
representation.
On September 9, 2005, Mr. Pannell and Mr. Scott
Hand, the Chairman and CEO of Inco, met to determine whether
Inco would be interested in pursuing a transaction involving
Falconbridge. Inco and Falconbridge entered into a
confidentiality and standstill agreement dated
September 13, 2005 and began exchanging confidential
information. During the balance of September, due diligence
teams from Falconbridge and Inco and their respective financial
and legal advisors met to review each companys respective
operations, assets, material contracts and financial condition
and to establish the extent of potential synergies between the
two companies if they were to merge.
On September 22, 2005, the Falconbridge Board of Directors
met. Messrs. Robert Harding, Bruce Flatt, George Myhal,
Jack Cockwell and David Kerr declared their interests as Brascan
officers or directors, withdrew from the meeting and did not
participate in any meetings of the Falconbridge Board of
Directors thereafter. At the September 22nd meeting, the
Falconbridge Board of Directors adopted a shareholder rights
plan, in order to enhance Falconbridges ability to obtain
the best value for its Shareholders and to prevent a person or
company from acquiring control of Falconbridge in a manner
detrimental to shareholders. In addition, Falconbridge announced
that it had retained CIBC World Markets Inc.
(CIBC World Markets) as its financial advisor
and McCarthy Tétrault LLP as its legal advisor.
On September 29, 2005, senior management of Falconbridge
updated the Falconbridge Board of Directors on the results of
the investor meetings, discussions with third parties and
negotiations with Inco. Mr. Pannell advised the
Falconbridge Board of Directors that he had agreed with
Mr. Hand of Inco that the two companies would work
exclusively with each other with the intention of reaching an
agreement upon a transaction by the end of the Canadian
Thanksgiving weekend. A further update was provided at a meeting
of the Falconbridge Board of Directors on October 6, 2005.
On the evening of October 7, 2005, Mr. Hand of Inco
met with Messrs. Pannell, Douglas and Regent of
Falconbridge and presented them with a proposed offer. The
Falconbridge Board of Directors met on the morning of
October 8, 2005 to consider the proposed offer. Senior
management made presentations on the status of negotiations and
the elements of the proposed offer. McCarthy Tétrault LLP
reviewed the proposed structure of the transaction, the nature
of the support agreement proposed to be entered into and the
fiduciary obligations of the directors. CIBC World Markets
reviewed the financial implications of the proposed transaction.
Mr. Pannell and senior management excused themselves from
the meeting and the Independent Committee considered separately
a number of issues and took legal advice from McCarthy
Tétrault LLP. Mr Pannell rejoined the meeting and the
Falconbridge Board of Directors
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instructed management to continue negotiations with a view to
improving certain of the terms of the proposed offer and
elements of the proposed support agreement.
On October 10, 2005, representatives of Inco met with
representatives of Falconbridge, proposed improved financial
terms from their original offer and advised that, subject to the
final approval of the Inco Board of Directors, Inco wished to
proceed with the Offer to acquire the Falconbridge Shares on the
basis of Cdn.$34.00 in cash per Falconbridge Share or 0.6713
Inco Shares plus Cdn.$0.05 in cash per Falconbridge Share, in
each case at the election of the Shareholders, subject to
limitations on the aggregate amount of cash and shares available
and subject to reaching agreement on the terms of a support
agreement. Assuming all Shareholders elected to receive cash for
their Falconbridge Shares or all Shareholders elected to receive
Inco Shares for their Falconbridge Shares, a Shareholder would
receive Cdn.$7.50 in cash and 0.524 of an Inco Share per
Falconbridge Share. Late in the afternoon of October 10,
2005, the Falconbridge Board of Directors met to receive the
report of management on the status of negotiations. The
Falconbridge Board of Directors, having received the
recommendation of management with respect to the Offer, legal
advice as to their fiduciary responsibilities in the context of
the Offer and the opinion of CIBC World Markets that the
consideration offered pursuant to the Offer was fair, from a
financial point of view, to the Falconbridge Shareholders,
authorized management to enter into the Support Agreement and
resolved to recommend to Shareholders acceptance of the Offer.
The Support Agreement was finalized late in the evening of
October 10, 2005 and was executed by Falconbridge and Inco.
The Offer was publicly announced by Falconbridge and Inco prior
to the open of the markets on October 11, 2005.
On October 14, 2005, Falconbridge announced that George
Myhal, Robert Harding, Jack Cockwell and Bruce Flatt, each an
officer of Brascan, had resigned from the Board of Directors.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Falconbridge has unanimously determined that the
Offer is fair to the Shareholders and is in the best interests
of Falconbridge and therefore recommends that Shareholders
ACCEPT the Offer and TENDER their Falconbridge
Shares to the Offer. See Reasons for the
Recommendation. References herein to the unanimous
determination, approval or recommendation of the Board of
Directors shall not include Directors who have declared a
conflict of interest and have not participated in any
consideration of the Offer.
Shareholders should consider the Offer carefully and come to
their own conclusions as to whether to accept or reject the
Offer. Shareholders who are in doubt as to how to respond to the
Offer should consult their own investment dealer, stockbroker,
bank manager, lawyer or other professional advisors.
Shareholders are advised that acceptance of the Offer may have
tax consequences and they should consult their own professional
tax advisors.
REASONS FOR THE RECOMMENDATION
The Board of Directors has carefully considered all aspects of
the Offer and has, among other things, received the benefit of
advice from its financial and legal advisors. The Board of
Directors has concluded that the Offer is fair to the
Shareholders and in the best interests of Falconbridge. In
reaching this conclusion, as well as its decision to recommend
that Shareholders accept the Offer, the Board of Directors
considered a number of factors, including the following:
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Creates the Worlds Leading Nickel Producer: The
combination of Inco and Falconbridge will result in the creation
of the worlds largest nickel producer and a significant
producer of copper. In addition, it will create a more
diversified base metals company with one of the best growth
pipelines in nickel and copper. |
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Financial Strength of Combined Company: The combined
company will be one of the most significant diversified mining
companies in the world and will have a strong balance sheet,
enhanced financial resources and financial flexibility. In
addition, it will have measurably increased scale to compete
internationally and to realize operating and capital raising
efficiencies, while reducing its exposure to any one project or
operation. |
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Significant Benefits Through Synergies: Falconbridge and
Inco expect that the combination of Inco and Falconbridge will
deliver tangible benefits through substantial synergies,
including estimated annual pre-tax savings of approximately
$350 million by the end of 2007. These synergies and cost
savings will come from realizing efficiencies in overlapping
operations, better use of mining and processing facilities in
Canada, improving procurement practices, building a common
information technology base, incorporating best |
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practices, and capital expenditure savings. The magnitude and
breadth of the resulting synergies are relatively unique in
major mining transactions and would not be available with any
party other than Inco. |
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Continued Ownership in Combined Company: Assuming
successful completion of the transaction, Shareholders will own
approximately 46% calculated on a fully diluted basis of the
combined company and will accordingly participate in the value
anticipated to be realized through the achievement of synergies
and the enhanced growth opportunities that will be available to
the combined company. |
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Attractive Offer: The Offer represents attractive value
for Shareholders and is at a premium relative to the recent
trading prices of the Falconbridge Shares. The Offer also
provides Shareholders with the option of cash or share
consideration, subject to limitations set out in the Offer. |
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Increased Capitalization and Liquidity: After giving
effect to the transaction, Inco will have a total enterprise
value of approximately $24 billion and will have a market
capitalization of approximately twice that of Falconbridge,
which will significantly increase liquidity for shareholders. |
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Combination of Management and Technical Expertise: The
combined company will benefit from the continued involvement of
two strong management teams and the combined technical and
operating expertise of each company. |
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Fairness Opinion: The fairness opinion dated
October 10, 2005 of CIBC World Markets to the effect that,
as of such date and subject to the assumptions set out therein,
consideration provided by the Offer is fair from a financial
point of view to the Shareholders. |
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Ability to Respond to Superior Proposals: Under the
Support Agreement, the Falconbridge Board of Directors remains
able to respond, in accordance with its fiduciary duties, to
unsolicited proposals that are more favourable from a financial
point of view than the Offer. The fees payable to Inco in
connection with a change in recommendation or termination of the
Support Agreement in connection with a superior proposal are
reasonable in the circumstances and not preclusive of other
proposals. |
FAIRNESS OPINION
On October 10, 2005, CIBC World Markets delivered its
verbal opinion, later confirmed in writing (the Fairness
Opinion), to the Board of Directors, stating that as of
October 10, 2005 and subject to the assumptions and
qualifications set out in the Fairness Opinion, the
consideration offered per Falconbridge Share of
(i) Cdn.$34.00 in cash or (ii) 0.6713 Inco Shares plus
Cdn.$0.05 in cash, in each case subject to proration between the
Maximum Cash Payment and the Maximum Share Payment, is fair,
from a financial point of view, to such Shareholders.
The full text of the Fairness Opinion, setting out the
assumptions made, matters considered and limitations and
qualifications on the review undertaken in connection with the
Fairness Opinion, is attached as Schedule A to
this Directors Circular. CIBC World Markets provided the
Fairness Opinion for the information and assistance of the Board
of Directors in connection with its consideration of the Offer
as of the date of the opinion. The Fairness Opinion is not a
recommendation as to whether or not Shareholders should tender
their Falconbridge Shares in connection with the Offer. As
described above, the Fairness Opinion was one of many factors
taken into consideration by the Board of Directors in making
their determination to unanimously approve the Offer and
recommend that Shareholders accept it.
Pursuant to the terms of its engagement letter with
Falconbridge, CIBC World Markets is to be paid a fee for its
services as financial advisor including a fee for the Fairness
Opinion and fees that are contingent on a change of control of
Falconbridge or certain other events. Falconbridge has also
agreed to indemnify CIBC World Markets against certain
liabilities.
Shareholders are urged to read the Fairness Opinion in its
entirety. See Schedule A to this
Directors Circular.
SUPPORT AGREEMENT
On October 10, 2005, Falconbridge and Inco entered into the
Support Agreement, which sets out the terms and conditions upon
which Inco agreed to make to the Offer. The Support Agreement
sets forth, among other things, the terms and conditions upon
which the Offer is to be made by Inco. The following is a
summary of the principal terms of the Support Agreement. This
summary is qualified in its entirety by the full text of the
Support Agreement filed by
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Falconbridge (i) with the Canadian securities regulatory
authorities and available at www.sedar.com and (ii) with
the SEC and available at www.sec.gov.
The Offer
Inco agreed to make the Offer on the terms and subject to the
conditions set forth in the Support Agreement.
Support for the Offer
Falconbridge has indicated that its Board of Directors, upon
consultation with its financial and legal advisors, has
determined that it would be advisable and in the best interests
of Falconbridge for the Board of Directors to support the Offer
and to recommend acceptance of the Offer to holders of
Falconbridge Shares, and accordingly, Falconbridge has agreed
(subject to the terms and conditions of the Support Agreement)
to co-operate with Inco and use its reasonable best efforts to
permit the Offer to be successful.
Board Representation
Falconbridge has agreed that, promptly upon the purchase by Inco
of such number of Falconbridge Shares which represents at least
a majority of the outstanding Falconbridge Shares, Inco will be
entitled to designate such number of members of the Falconbridge
Board of Directors, and any committees thereof, as is
proportionate to the percentage of the outstanding Falconbridge
Shares owned by Inco. Inco has agreed to use all reasonable
efforts to cause its board of directors to take such actions as
may be required in order that: (i) at such time, Scott M.
Hand will be Chairman and Chief Executive Officer of Inco;
(ii) as soon as practicable after the Effective Time, Derek
G. Pannell will be appointed President of Inco; and
(iii) four new directors, who will be directors of
Falconbridge at such time as they are to be nominated or
appointed, will be nominated for election or appointed to the
board of directors of Inco, to the extent possible without
calling a meeting of Inco shareholders between such time and
Incos next annual meeting of shareholders, or otherwise
through the nomination for election of such persons at the next
annual meeting of shareholders of Inco.
Representations and Warranties
The Support Agreement contains a number of customary
representations and warranties of Inco and Falconbridge relating
to, among other things: corporate status; capitalization; and
the corporate authorization and enforceability of, and board
approval of, the Support Agreement and the Offer. The
representations and warranties also address various matters
relating to the business, operations and properties of each of
the parties and their respective subsidiaries, including:
accuracy of financial statements; absence of undisclosed
liabilities; absence of any Material Adverse Effect (as defined
in the Support Agreement) and certain other changes or events
since the date of the last audited financial statements; absence
of defaults under instruments evidencing any indebtedness or
other contracts; absence of litigation or other actions which if
determined adversely would reasonably be expected to have a
Material Adverse Effect; intellectual property; employment and
labour matters; pension matters; tax matters; compliance with
laws, licenses and permits; insurance; environmental matters;
title to properties; preparation and disclosure of mineral
reserves and resource estimates; accuracy of reports required to
be filed with applicable securities regulatory authorities;
existence and maintenance of disclosure controls and procedures;
and maintenance of internal controls over financial reporting.
Conduct of the Business of Falconbridge
In the Support Agreement, Falconbridge agreed that, prior to the
earlier of the time of the appointment or election to its board
of directors of persons designated by Inco who represent a
majority of the directors of Falconbridge and the termination of
the Support Agreement, Falconbridge will, and will cause each of
its subsidiaries to, conduct its business in the ordinary course
consistent with past practice and not to undertake certain types
of restricted activities unless Inco otherwise agrees in
writing. Falconbridge also agreed not to enter into any
transaction or perform any act which might interfere with or be
materially inconsistent with the successful completion of the
Offer or any Contemplated Transaction (as defined in the Support
Agreement) or which would render, or which reasonably may be
expected to render, inaccurate any of Falconbridges
representations and warranties in the Support Agreement.
Falconbridge also agreed to promptly notify Inco of (i) any
Material Adverse Change, on a consolidated basis, in the
operation of its businesses or in the operation of its
properties and of any material governmental or third party
complaints, investigations or hearings; and (ii) the
occurrence, or failure to occur, of any event or state of facts
which occurrence or failure would or would be likely to
(x) cause any of the representations or warranties of
Falconbridge
5
contained in the Support Agreement to be untrue or inaccurate;
or (y) result in the failure in any material respect of
Falconbridge to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied prior to the time
of the appointment or election to its board of directors of
persons designated by Inco who represent a majority of the
directors of Falconbridge.
Other Covenants
Each of Falconbridge and Inco has also agreed in the Support
Agreement to a number of mutual covenants, including to
co-operate and use their reasonable best efforts in good faith
to take, or cause to be taken, all reasonable actions reasonably
necessary to discharge their respective obligations under the
Support Agreement and the Offer, and to complete any of the
Contemplated Transactions, including their obligations under
applicable securities laws; and to make, within the time periods
and subject to the Support Agreement, all appropriate filings
and take all other actions necessary, proper or advisable, in
respect of all applicable competition, merger control,
antitrust, investment or other regulatory laws, including
(i) the HSR Act (as defined in the Support Agreement)
(ii) the European Commission and, if required or deemed by
Inco to be appropriate or advisable, any competition agencies
pursuant to the laws of any applicable EC member states
(iii) the Competition Act, and (iv) any other
governmental entity. Falconbridge also agreed, subject to the
conditions in the Support Agreement, to use its reasonable best
efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable to
consummate and make effective as promptly as practicable any
Contemplated Transaction, including the execution and delivery
of such documents as Inco may reasonably require, and use
reasonable best efforts to obtain all necessary waivers,
consents, rulings, orders and approvals, and to effect all
necessary registrations and filings, including, but not limited
to, filings under applicable laws and submissions of information
requested by governmental entities.
Covenants Regarding Non-Solicitation
The Support Agreement contains certain
non-solicitation provisions pursuant to which
Falconbridge has agreed that it will not, directly or indirectly:
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take any action of any kind which might, directly or indirectly,
interfere with the successful acquisition of Falconbridge Shares
pursuant to the Offer, including any action to solicit, assist,
initiate, encourage or otherwise facilitate any inquiries,
proposals or offers regarding any (i) merger, take-over
bid, amalgamation, plan of arrangement, business combination,
consolidation, recapitalization, liquidation or winding-up in
respect of Falconbridge or any subsidiary; (ii) any sale or
acquisition of 20% or more of the fair market value of the
assets of Falconbridge on a consolidated basis; (iii) any
sale or acquisition of 20% or more of Falconbridges shares
of any class or rights or interests therein or thereto;
(vi) any sale of any interest in any material joint
ventures or material mineral properties; (vii) any similar
business combination or transaction of or involving
Falconbridge, any subsidiary or material joint venture of
Falconbridge, other than with Inco; or (viii) any proposal
or offer to, or public announcement of an intention to do, any
of the foregoing from any person other than Inco (any such
proposal or offer being referred to as an acquisition
proposal); |
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engage in any discussions or negotiations regarding, or provide
any confidential information with respect to, any acquisition
proposal provided that, Falconbridge may advise any person
making an unsolicited acquisition proposal that such acquisition
proposal does not constitute a superior proposal when
Falconbridges Board of Directors has so determined; |
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withdraw, modify or qualify, or propose publicly to withdraw,
modify or qualify, in any manner adverse to Inco, the approval
or recommendation of Falconbridges Board of Directors or
any committee thereof of the Support Agreement or the Offer; |
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approve or recommend, or remain neutral with respect to, or
propose publicly to approve or recommend, or remain neutral with
respect to, any acquisition proposal; or |
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accept or enter into, or publicly propose to accept or enter
into, any letter of intent, agreement in principle, agreement,
arrangement or undertaking related to any acquisition proposal. |
The Support Agreement provides that, notwithstanding the
foregoing restrictions, the Board of Directors of Falconbridge
is permitted to (i) withdraw, modify or qualify (or propose
to withdraw, modify or qualify) in any manner adverse to Inco
the approval or recommendation of the Offer or (ii) engage
in discussions or negotiations with, or
6
provide information pursuant to the Support Agreement to, any
person in response to an acquisition proposal by any such
person, if and only to the extent that:
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it has received an unsolicited bona fide written acquisition
proposal from such person and such acquisition proposal
constitutes a superior proposal; |
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in the case of clause (i) above, Falconbridge shall have
complied with all other requirements relating to the acceptance,
approval or recommendation of an acquisition proposal (as
described below); |
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Falconbridges Board of Directors, after consultation with
outside legal counsel, determines in good faith that the failure
to take such action would be inconsistent with its fiduciary
duties under all applicable laws; |
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in the case of clause (ii) above, prior to providing any
information or data to such person in connection with such
acquisition proposal, Falconbridges Board of Directors
receives from such person an executed confidentiality agreement
which includes a standstill provision that restricts such person
from announcing an intention to acquire, or acquiring, any
securities or assets of Falconbridge without the approval of
Falconbridge for a period of not less than two years from the
date of such confidentiality agreement (and Falconbridge sends a
copy of any such confidentiality agreement to Inco promptly upon
its execution and that Inco is immediately provided with a list
of, or in the case of information that was not previously made
available to Inco, copies of, any information provided to such
person); and |
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in the case of clause (ii) above, prior to providing any
information or data to any such person or entering into
discussions or negotiations with any such person who has made an
acquisition proposal, Falconbridge has complied with the
requirements of the Support Agreement requiring notice to Inco
of an acquisition proposal. |
The Support Agreement defines a superior proposal as
an unsolicited bona fide acquisition proposal made by a third
party to Falconbridge in writing after the date of the Support
Agreement: (i) to purchase or otherwise acquire, directly
or indirectly, by means of a merger, take-over bid,
amalgamation, plan of arrangement, business combination,
consolidation, recapitalization, liquidation, winding-up or
similar transaction, all of the Falconbridge Shares and offering
or making available the same consideration in form and amount
per Falconbridge Share to be purchased or otherwise acquired;
(ii) that is reasonably capable of being completed without
undue delay, taking into account all legal, financial,
regulatory and other aspects of such proposal and the party
making such proposal; (iii) in respect of which any
required financing to complete such acquisition proposal has
been demonstrated to the satisfaction of the Board of Directors
of Falconbridge, acting in good faith (after receipt of advice
from its financial advisors and outside legal counsel), will be
obtained, (iv) which is not subject to a due diligence
and/or access condition which would allow access to the books,
records, personnel or properties of Falconbridge or any
subsidiary or their respective representatives beyond
5:00 p.m. (Eastern Standard Time) on the third day after
which access is afforded to the third party making the
acquisition proposal (provided, however, that the foregoing
shall not restrict the ability of such third party to continue
to review information provided to it by Falconbridge during such
three day period); (v) which is offered or made available
to all Shareholders in Canada and the United States;
(vi) in respect of which the Board of Directors of
Falconbridge determines in good faith (after receipt of advice
from its financial advisors with respect to (y) below and
outside legal counsel with respect to (x) below) that
(x) failure to recommend such acquisition proposal to
Shareholders would be inconsistent with its fiduciary duties and
(y) which would, taking into account all of the terms and
conditions of such acquisition proposal, if consummated in
accordance with its terms (but not assuming away any risk of
non-completion), result in a transaction more favourable to
Shareholders from a financial point of view than the Offer
(including any adjustment to the terms and conditions of the
Offer proposed by Inco pursuant to the Support Agreement, and
taking into account the long-term value and anticipated
synergies anticipated to be realized as a result of the
combination of Inco and Falconbridge); and (vii) that,
subject to compliance with the requirements of the Support
Agreement, the Board of Directors of Falconbridge has determined
to recommend to Shareholders.
From and after the date of the Support Agreement, Falconbridge
must promptly (and in any event within 24 hours after it
has received any proposal, inquiry, offer or request) notify
Inco, at first orally and then in writing, of any proposal,
inquiry, offer (or any amendment thereto) or request relating to
or constituting an acquisition proposal, any request for
discussions or negotiations, any request for representation on
the Board of Directors of Falconbridge or any request for
non-public information relating to Falconbridge or any
subsidiary or any material joint venture or material mineral
property of which Falconbridges directors, officers,
representatives or agents are or became aware, or any amendments
to the foregoing. Such notice shall include a description of the
terms and conditions of, and the identity of the person making,
any proposal, inquiry, offer (including any amendment thereto)
or request, and shall include copies
7
of any such proposal, inquiry, offer or request or any amendment
to any of the foregoing. Falconbridge must also provide such
other details of the proposal, inquiry, offer or request, or any
amendment to any of the foregoing, as Inco may reasonably
request. Falconbridge shall keep Inco promptly and fully
informed of the status, including any change to the material
terms, of any such proposal, inquiry, offer or request, or any
amendment to any of the foregoing, and will respond promptly to
all inquiries by Inco with respect thereto.
Falconbridge is not permitted to accept, approve or recommend,
nor enter into any agreement relating to, an acquisition
proposal (other than a confidentiality agreement contemplated by
the Support Agreement) unless:
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the acquisition proposal constitutes a superior proposal; |
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Falconbridge has complied with the non-solicitation restrictions
in the Support Agreement; |
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Falconbridge has provided Inco with notice in writing that there
is a superior proposal together with all documentation related
to and detailing the superior proposal (including a copy of the
confidentiality agreement between Falconbridge and the person
making the superior proposal if not previously delivered) at
least seven business days prior to the date on which the Board
of Directors of Falconbridge proposes to accept, approve,
recommend or to enter into any agreement relating to such
superior proposal; |
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seven business days shall have elapsed from the later of the
date Inco received notice of Falconbridges proposed
determination to accept, approve, recommend or to enter into any
agreement relating to such superior proposal, and the date Inco
received a copy of the written proposal in respect of the
acquisition proposal and, if Inco has proposed to amend the
terms of the Offer in accordance with the Support Agreement, the
Board of Directors of Falconbridge (after receiving advice from
its financial advisors and outside legal counsel) shall have
determined in good faith that the acquisition proposal is a
superior proposal compared to the proposed amendment to the
terms of the Offer by Inco; |
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Falconbridge concurrently terminates the Support Agreement in
accordance with its terms; and |
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Falconbridge has previously, or concurrently will have, paid to
Inco the Falconbridge termination payment as described below
under Agreements as to Damages. |
Pursuant to the Support Agreement, Falconbridge has agreed that,
during the seven business day period referred to above or such
longer period as Falconbridge may approve for such purpose, Inco
shall have the opportunity, but not the obligation, to propose
to amend the terms of the Offer. The Board of Directors of
Falconbridge must review any proposal by Inco to amend the terms
of the Offer in order to determine, in good faith in the
exercise of its fiduciary duties, whether Incos proposal
to amend the Offer would result in the acquisition proposal not
being a superior proposal compared to the proposed amendment to
the terms of the Offer.
The Board of Directors shall promptly reaffirm its
recommendation of the Offer by press release after: (a) any
acquisition proposal (which is determined not to be a superior
proposal) is publicly announced or made; or (b) the Board
of Directors of Falconbridge determines that a proposed
amendment to the terms of the Offer would result in the
acquisition proposal not being a superior proposal, and Inco has
so amended the terms of the Offer.
Shareholder Rights Plan
The Offer is a Permitted Bid as defined in the
Shareholder Rights Plan (Rights Plan) entered into
between Falconbridge and CIBC Mellon Trust Company as of
September 22, 2005. However, Falconbridge has agreed that
if the Offer ceases to qualify as a Permitted Bid, Falconbridge
will immediately defer the separation time of the Rights (as
defined in the Rights Plan) in respect of the Offer and to
continue to defer separation of the Rights with respect to the
Offer. Falconbridge further agrees that in such circumstances,
immediately prior to the Expiry Time (as defined in the Rights
Plan), it shall waive or suspend the operation of or otherwise
render the Rights Plan inoperative against the Offer.
Outstanding Options
Subject to the receipt of all necessary regulatory approvals,
and Incos consent, Falconbridge may make such amendments
to its stock option plan (the Stock Option
Plan), if any, as may be necessary, and take other
necessary steps to allow all persons holding options pursuant to
the Stock Option Plan to become holders of options to acquire
Inco Shares in connection with the assumption of the Stock
Option Plan by Inco. The options to acquire Inco Shares shall be
on the same terms and conditions as the currently outstanding
options to acquire Falconbridge Shares held by such persons,
including with respect to vesting schedules, expiry dates and
exercise prices, except that each option to
8
acquire one Falconbridge Share shall become an option to acquire
0.6723 of an Inco Share and have an exercise price per Inco
Share equal to the exercise price per Falconbridge Share of that
option immediately prior to the Expiry Time divided by 0.6723.
Falconbridge shall not accelerate or take any action to
facilitate acceleration (other than in accordance with the
vesting terms originally granted and other than pursuant to
commitments in respect of options in respect of no more than
3,171,754 Falconbridge Shares made prior to October 10,
2005) of the vesting of any outstanding options under the Stock
Option Plan; provided, however, if the employment of any
employee is terminated without cause within one year of the
Expiry Time, Falconbridge and/or Inco shall take such action as
may be necessary to vest any unvested options granted under the
Stock Option Plan to such employee and to permit the exercise of
such options for a period of not less than 30 days
following such termination. Falconbridge may take action to
facilitate the tender to the Offer of the Falconbridge Shares
underlying vested stock options and, in particular, may allow
the conditional exercise of any outstanding vested options.
Junior Preference Shares, Convertible Notes and Preference
Shares
If Inco acquires not less than 50.01% of the outstanding
Falconbridge Shares (on a fully-diluted basis) no later than
10 days after the Expiry Time, Falconbridge has agreed that
it will, at the request of Inco, promptly take all necessary
steps to redeem all of its outstanding Junior Preference Shares
(Series 1, 2 and 3) and any other class of preference
shares, or any outstanding convertible debentures.
Termination
The Support Agreement may be terminated at any time prior to the
Effective Time:
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(a) |
by mutual written consent of Inco and Falconbridge; |
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(b) |
by Falconbridge, if Inco does not mail the Offer by
11:59 p.m. (Toronto time) on the 20th business day
following execution of the Support Agreement (the Latest
Mailing Time), as such mailing time may be extended
pursuant to the terms of the Support Agreement; |
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(c) |
by Inco on or after the Latest Mailing Time, if any condition to
making the Offer for Incos benefit is not satisfied or
waived by such date; |
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(d) |
by Inco if the Minimum Tender Condition (as defined in the
Support Agreement) or any other condition of the Offer shall not
be satisfied or waived at the Expiry Time, as such Expiry Time
may be extended by Inco in its sole discretion, and Inco shall
not elect to waive such condition; |
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(e) |
by Inco or Falconbridge, if Inco does not make the Offer and
take up and pay for the Falconbridge Shares tendered to the
Offer by a date that is 10 months following the date of the
Support Agreement (the Outside Date), provided that
such right to terminate the Support Agreement shall not be
available to the party seeking to terminate if any action of
such party or its affiliates, or any failure of such party or
its affiliates to perform any of its obligations under the
Support Agreement required to be performed by it, shall have
resulted in a condition contained in the conditions set forth in
the Offer to Purchase not having been satisfied prior to the
Outside Date; |
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(f) |
by Inco, if: (i) any court of competent jurisdiction or
other governmental authority shall have issued an order, decree
or ruling enjoining or otherwise prohibiting any Contemplated
Transactions (unless such order, decree or ruling has been
withdrawn, reversed or otherwise made inapplicable); or
(ii) any litigation or other proceeding is pending or has
been threatened to be instituted by any Person or governmental
authority, which, in the good faith judgment of Inco, could
reasonably be expected to result in a decision, order, decree or
ruling which enjoins, prohibits, grants damages in a material
amount in respect of, or materially impairs the benefits of, any
Contemplated Transactions; |
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(g) |
by Falconbridge, if Inco is in default of any covenants or
obligations under the Support Agreement or if any representation
or warranty of Inco under the Support Agreement shall have been
at the date of the Support Agreement untrue or incorrect or
shall have become untrue or incorrect at any time prior to the
Expiry Time and such default or inaccuracy is not curable or, if
curable, is not cured by the earlier of such date which is
30 days from the date of notice of such breach and the
Expiry Time; |
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(h) |
by Inco, if Falconbridge is in default of any covenants or
obligations under the Support Agreement or if any representation
or warranty of Falconbridge under the Support Agreement shall
have been at the date of the Support Agreement untrue or
incorrect or shall have become untrue or incorrect at any time
prior to the |
9
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Expiry Time and such default or inaccuracy is not curable or, if
curable, is not cured by the earlier of such date which is
within 30 days from the date of notice of such breach and
the Expiry Time; |
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(i) |
by Inco, if: (i) the Board of Directors of Falconbridge or
any committee thereof fails to recommend or withdraws, modifies,
changes or qualifies its approval or recommendation of the
Support Agreement or the Offer in any manner adverse to Inco;
(ii) the Board of Directors of Falconbridge or any
committee thereof recommends or approves, or publicly proposes
to recommend or approve, an acquisition proposal; or
(iii) Falconbridge fails to take any action required under
the Support Agreement with respect to the Rights Plan to defer
the separation time of the Rights or to allow the timely
completion of any Contemplated Transaction; |
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(j) |
by Inco, if the Board of Directors of Falconbridge or any
committee thereof fails to publicly affirm its approval or
recommendation of the Offer within five calendar days of any
written request to do so from Inco; and |
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(k) |
by Falconbridge, if Falconbridge proposes to enter into a
definitive agreement with respect to a superior proposal in
compliance with the provisions of the Support Agreement,
provided that Falconbridge has previously or concurrently will
have paid to Inco the applicable termination fee and further
provided that Falconbridge has not breached any of its
covenants, agreements or obligations in the Support Agreement. |
Agreements as to Damages
Falconbridge must pay $320 million to Inco, if:
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the Support Agreement is terminated in the circumstances set out
in paragraphs (i), (j) or (k) under
Termination above, unless: (A) the termination
is under paragraph (i) or (j) and arises solely as a
result of a material adverse change in respect of Inco which has
occurred since the date hereof; (B) the Board of Directors
of Falconbridge has determined in good faith (after receipt of
advice from its legal and financial advisors) that: (x) a
material adverse change in Inco has occurred since the date of
the Support Agreement; and (y) the failure to change the
Boards recommendation, or refusal to reaffirm such
recommendation, would be inconsistent with its fiduciary duties;
and (C) Inco has filed, or the OSC has determined that it
should have filed, a material change report in accordance with
applicable securities laws in respect of such material adverse
change; |
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the Support Agreement is terminated pursuant to
paragraph (h) under Termination above as a
result of Falconbridge being in default of any of its covenants
or obligations contained in the non-solicitation and opportunity
to match provisions of the Support Agreement; or |
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(A) prior to the termination of the Support Agreement a
competing proposal is publicly announced or otherwise made; and
(B) during the period commencing on the date of the Support
Agreement and ending 12 months following the termination of
the Support Agreement (X) a competing proposal is
consummated, or (Y) the Board of Directors of Falconbridge
approves or recommends a competing proposal, or Falconbridge
enters into a definitive agreement with respect to a competing
proposal, and that competing proposal is subsequently
consummated at any time thereafter. |
Expense Reimbursement
Falconbridge must pay $30 million to Inco if the Support
Agreement is terminated in the circumstances set out in
paragraph (h) under Termination above. Inco
must pay $30 million to Falconbridge if the Support
Agreement is terminated in the circumstances set out in
paragraph (g) under Termination above.
Falconbridge must pay $107 million to Inco if the Offer is
not completed as a result of the Minimum Tender Condition not
having been satisfied in circumstances in which either the
clearances under the Competition Act, the HSR Act and the EC
Merger Regulation have been obtained, or such clearances have
not been obtained and Falconbridge has not complied with certain
of its covenants and obligations, unless: (A) the
non-satisfaction of the Minimum Tender Condition arises solely
as a result of a material adverse change in respect of Inco
which has occurred since the date of the Support Agreement;
(B) the Board of Directors of Falconbridge has determined
in good faith (after receipt of advice from its legal and
financial advisors) that: (x) a material adverse change in
Inco has occurred since the date hereof; and (y) the
failure to change the Boards recommendation, or refusal to
reaffirm such recommendation, would be inconsistent with its
fiduciary duties; and (C) Inco has filed, or the OSC has
determined that it should have filed, a material change report
in accordance with applicable securities laws in respect of such
material adverse change.
10
In addition, in circumstances in which the expense payment of
$107 million is payable as described above, if within
18 months of the termination of the Support Agreement
pursuant to paragraphs (d) under Termination
above, a competing proposal is consummated, then Falconbridge
shall, prior to or concurrently with the consummation of a
competing proposal, pay to Inco $320 million less
$107 million if such amount has previously been paid to
Inco.
The Support Agreement defines competing proposal as
(i) any merger, take-over bid, amalgamation, plan of
arrangement, business combination, consolidation, or similar
transaction in respect of Falconbridge; (ii) any purchase
or other acquisition by a person (other than Inco) of such
number of the Falconbridge Shares or any rights or interests
therein or thereto which together with such persons other
direct or indirect holdings of Falconbridge Shares and the
holdings of any other person or persons with whom such first
person may be acting jointly or in concert constitutes at least
50.01% of the outstanding Falconbridge Shares; (iii) any
similar business combination or transaction, of or involving
Falconbridge; or (iv) any proposal or offer to, or public
announcement of an intention to do, any of the foregoing from
any person other than Inco.
Officers and Directors Insurance
From and after the purchase by Inco of such number of
Falconbridge Shares as represents at least a majority of the
then outstanding Falconbridge Shares (being referred to as the
effective date), Inco agrees that for the period from the Expiry
Time until six years after the Expiry Time, Inco will cause
Falconbridge or any successor to Falconbridge to maintain
Falconbridges current directors and officers
insurance policy or a policy reasonably equivalent subject in
either case to terms and conditions no less advantageous to the
directors and officers of Falconbridge than those contained in
the policy in effect on the date hereof, for all present and
former directors and officers of Falconbridge and its
subsidiaries, covering claims made prior to or within six years
after the Expiry Time; provided that such insurance remains
available to Falconbridge or such successor on commercially
reasonable terms. Alternatively, Inco may purchase as an
extension to Falconbridges current insurance policies,
pre-paid non-cancellable run-off directors and
officers liability insurance providing such coverage for
such persons on terms comparable to those contained in
Falconbridges current insurance policies. From and after
the effective date, Inco shall, and shall cause Falconbridge (or
its successor) to, indemnify the current and former directors
and officers of Falconbridge and its subsidiaries to the fullest
extent to which Inco and Falconbridge are permitted to indemnify
such officers and directors under their respective charter,
by-laws, applicable law and contracts of indemnity.
SHARE CAPITAL OF FALCONBRIDGE
The authorized share capital of Falconbridge consists of an
unlimited number of Falconbridge Shares, an unlimited number of
Preferred Shares issuable in series, an unlimited number of
Junior Preferred Shares issuable in series and an unlimited
number of Participating Shares issuable in series. As of
October 10, 2005, 369,224,340 Falconbridge Shares,
3,246,057 Preferred Shares, Series F, 8,753,943 Preferred
Shares, Series G, 6,000,000 Preferred Shares,
Series H, 89,835 Preferred Shares, Series 1, 4,787,283
Preferred Shares, Series 2, 3,122,822 Preferred Shares,
Series 3, 11,999,899 Junior Preference Shares,
Series 1, 11,999,899 Junior Preference Shares,
Series 2 and 5,999,903 Junior Preference Shares,
Series 3 are issued and outstanding. In addition, as of
October 10, 2005, Cdn.$150 million principal amount of
convertible debentures due April 30, 2007 are issued and
outstanding (that are convertible into 5,444,646 Falconbridge
Shares) and options to acquire up to 8,350,869 additional
Falconbridge Shares that were granted pursuant to
Falconbridges employee stock option plans, of which
3,315,780 have vested and 5,035,089 are unvested, are issued and
outstanding.
11
OWNERSHIP OF SECURITIES
BY DIRECTORS AND OFFICERS OF FALCONBRIDGE
The following table sets out the names and positions with
Falconbridge of each director and senior officer of Falconbridge
and the number, designation and percentage of outstanding
securities of Falconbridge beneficially owned, directly or
indirectly, or over which control or direction is exercised by
each such person and, where known after reasonable enquiry, by
their respective associates, other than options to acquire
Falconbridge Shares.
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Number and Class of | |
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Percentage of | |
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Shares Owned or Over | |
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Outstanding | |
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Which Control or | |
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Falconbridge | |
Name |
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Position Held |
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Direction is Exercised | |
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Shares | |
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| |
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Alex G. Balogh
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Director |
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17,045 |
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* |
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André Bérard
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Director |
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1,250 |
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* |
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A. L. Flood
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Director |
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4,297 |
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* |
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Norman R. Gish
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Director |
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1,000 |
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* |
|
V. Maureen Kempston Darkes
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Director |
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200 |
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* |
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G. Edmund King
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Director |
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1,800 |
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* |
|
Neville W. Kirchmann
|
|
Director |
|
|
2,470 |
|
|
|
* |
|
James W. McCutcheon
|
|
Director |
|
|
1,000 |
|
|
|
* |
|
Mary A. Mogford
|
|
Director |
|
|
1,770 |
|
|
|
* |
|
David H. Race
|
|
Director |
|
|
1,770 |
|
|
|
* |
|
James D. Wallace
|
|
Director |
|
|
17,700 |
|
|
|
* |
|
Derek G. Pannell
|
|
Director, Chief Executive Officer |
|
|
28,213 |
|
|
|
* |
|
David W. Kerr
|
|
Director, Chairman of the Board |
|
|
266,985 |
|
|
|
* |
|
Aaron W. Regent
|
|
President |
|
|
|
|
|
|
|
|
Steven J. Douglas
|
|
Executive Vice-President and Chief Financial Officer |
|
|
|
|
|
|
|
|
Peter G.J. Kukielski
|
|
Chief Operating Officer |
|
|
23,694 |
|
|
|
* |
|
William H. Brooks
|
|
President, Aluminum Business Unit |
|
|
|
|
|
|
|
|
Claude Ferron
|
|
President, Canadian Copper and |
|
|
200 |
|
|
|
* |
|
|
|
Recycling |
|
|
|
|
|
|
|
|
Joseph Laezza
|
|
President, Nickel |
|
|
31 |
|
|
|
* |
|
Fernando E. Porcile
|
|
President, Copper |
|
|
|
|
|
|
* |
|
Robert H. Sippel
|
|
President, Zinc |
|
|
2,538 |
|
|
|
* |
|
Brian E. Barr
|
|
Senior Vice-President, Special Projects |
|
|
|
|
|
|
|
|
Ian W. Pearce
|
|
Senior Vice-President, Projects and Engineering |
|
|
1,400 |
|
|
|
* |
|
Katherine A. Rethy
|
|
Senior Vice-President, Information |
|
|
6,924 |
|
|
|
* |
|
|
|
Systems, Procurement, Logistics, Enterprise Risk Management and
Facilities |
|
|
|
|
|
|
|
|
Martin G.R. Schady
|
|
Senior Vice-President, Business |
|
|
987 |
|
|
|
* |
|
|
|
Development |
|
|
|
|
|
|
|
|
Paul W. A. Severin
|
|
Senior Vice-President, Exploration |
|
|
3,870 |
|
|
|
* |
|
Jeffery A. Snow
|
|
Senior Vice-President and |
|
|
336 |
|
|
|
* |
|
|
|
General Counsel |
|
|
|
|
|
|
|
|
Michael J. Agnew
|
|
Vice-President, Technology |
|
|
3,958 |
|
|
|
* |
|
Michael R. Boone
|
|
Vice-President, Finance and Controller |
|
|
318 |
|
|
|
* |
|
Denis Couture
|
|
Vice-President, Investor Relations, |
|
|
5,604 |
|
|
|
* |
|
|
|
Communications and Public Affairs |
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number and Class of | |
|
Percentage of | |
|
|
|
|
Shares Owned or Over | |
|
Outstanding | |
|
|
|
|
Which Control or | |
|
Falconbridge | |
Name |
|
Position Held |
|
Direction is Exercised | |
|
Shares | |
|
|
|
|
| |
|
| |
Dominique Dionne
|
|
Vice-President, Public Affairs |
|
|
100 |
|
|
|
* |
|
John M. Doyle
|
|
Vice-President, Taxation |
|
|
488 |
|
|
|
* |
|
Michael R. Frilegh
|
|
Vice-President, Treasurer |
|
|
196 |
|
|
|
* |
|
André Joron
|
|
Vice-President, Human Resources |
|
|
142 |
|
|
|
* |
|
Edward H. Laks
|
|
Vice-President, Performance/Six Sigma |
|
|
3,853 |
|
|
|
* |
|
Robert G. Telewiak
|
|
Vice-President, Environment, |
|
|
2,249 |
|
|
|
* |
|
|
|
Health & Safety |
|
|
|
|
|
|
|
|
Stephen K. Young
|
|
Corporate Secretary |
|
|
151 |
|
|
|
* |
|
* Means less than 1%.
The Following directors and officers of Falconbridge hold
options pursuant to Falconbridges Stock Option plans to
purchase the Falconbridge Shares indicated beside his or her
name:
|
|
|
|
|
|
|
Outstanding Options to Purchase | |
|
|
Falconbridge Shares | |
Name |
|
(Exercisable/ Unexercisable) | |
|
|
| |
Alex G. Balogh
|
|
|
11,000/0 |
|
André Bérard
|
|
|
5,000/0 |
|
A.L. Flood
|
|
|
5,000/0 |
|
Norman R. Gish
|
|
|
5,000/0 |
|
V. Maureen Kempston Darkes
|
|
|
5,000/0 |
|
James W. McCutcheon
|
|
|
5,000/0 |
|
Derek G. Pannell
|
|
|
445,350/241,500 |
|
David W. Kerr
|
|
|
591,400/162,400 |
|
Aaron W. Regent
|
|
|
263,946/253,277 |
|
Steven J. Douglas
|
|
|
39,000/200,000 |
|
Peter G.J. Kukielski
|
|
|
21,746/165,002 |
|
Claude Ferron
|
|
|
28,392/131,396 |
|
Joseph Laezza
|
|
|
0/125,953 |
|
Fernando E. Porcile
|
|
|
33,956/106,764 |
|
Robert H. Sippel
|
|
|
77,500/79,900 |
|
Brian E. Barr
|
|
|
20,200/64,800 |
|
Ian W. Pearce
|
|
|
22,606/93,499 |
|
Katherine A. Rethy
|
|
|
5,332/85,202 |
|
Martin G.R. Schady
|
|
|
108,736/100,606 |
|
Paul W.A. Severin
|
|
|
9,000/94,348 |
|
Jeffrey A. Snow
|
|
|
0/90,291 |
|
Michael J. Agnew
|
|
|
61,882/65,534 |
|
Michael R. Boone
|
|
|
1,300/15,600 |
|
Denis Couture
|
|
|
81,508/65,651 |
|
John M. Doyle
|
|
|
0/56,598 |
|
Michael R. Frilegh
|
|
|
0/43,450 |
|
André Joron
|
|
|
3,800/69,901 |
|
Edward H. Laks
|
|
|
19,610/55,345 |
|
Robert G. Telewiak
|
|
|
1,800/68,147 |
|
Stephen K. Young
|
|
|
0/16,460 |
|
13
The following directors and officers of Falconbridge hold
Deferred Share Units pursuant to Falconbridges Management
Deferred Share Unit Plan:
|
|
|
|
|
|
|
Deferred | |
Name |
|
Share Units | |
|
|
| |
Alex G. Balogh
|
|
|
3,973 |
|
André Bérard
|
|
|
15,684 |
|
A.L. Flood
|
|
|
16,705 |
|
Norman R. Gish
|
|
|
5,284 |
|
V. Maureen Kempston Darkes
|
|
|
13,654 |
|
G. Edmund King
|
|
|
4,239 |
|
Neville W. Kirchmann
|
|
|
8,037 |
|
James W. McCutcheon
|
|
|
4,370 |
|
Mary A. Mogford
|
|
|
6,715 |
|
David H. Race
|
|
|
4,670 |
|
James D. Wallace
|
|
|
10,878 |
|
David W. Kerr
|
|
|
18,991 |
|
Aaron W. Regent
|
|
|
46,297 |
|
Peter G.J. Kukielski
|
|
|
12,298 |
|
Martin G.R. Schady
|
|
|
15,922 |
|
PRINCIPAL HOLDER OF SECURITIES OF FALCONBRIDGE
To the knowledge of the directors and senior officers of
Falconbridge, after reasonable enquiry, as at October 20,
2005, with the exception of 1184760 Alberta Ltd., a wholly-owned
subsidiary of Xstrata plc, no person owned, directly or
indirectly, or exercised control or direction over 10% or more
of any class of securities of Falconbridge and no person acting
jointly or in concert with Falconbridge owned any securities of
Falconbridge. According to insider trading reports filed with
the Canadian securities regulator authorities, as at
October 21, 2005, 1184760 Alberta Ltd. holds 73,665,996
Falconbridge Shares.
INTENTIONS WITH RESPECT TO THE OFFER
Each of the directors and senior officers of Falconbridge has
indicated that he or she intends to deposit his or her
Falconbridge Shares under the Offer and accept the Offer,
subject to the terms of the Support Agreement. To the knowledge
of the directors and senior officers of Falconbridge, after
reasonable enquiry, each of their associates who owns
Falconbridge Shares has indicated an intention to accept the
Offer.
TRADING IN SECURITIES OF FALCONBRIDGE
Except as set out below and except for normal course purchases
under Falconbridges Employee Share Savings Plan, during
the six months preceding the date hereof, none of Falconbridge,
the directors or senior officers of Falconbridge or, to the
knowledge of the directors and senior officers of Falconbridge,
after reasonable enquiry, any associate of such persons, any
person holding or exercising control or direction over 10% or
more of the Falconbridge Shares or any person acting jointly or
in concert with Falconbridge, has traded any Falconbridge
Shares. Option exercises are noted with an asterisk.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of | |
|
Price per | |
|
|
|
|
Falconbridge Shares | |
|
Falconbridge Share | |
Name |
|
Date of Trade | |
|
Acquired (+)/Sold (-) | |
|
(Cdn.$) | |
|
|
| |
|
| |
|
| |
Alex G. Balogh
|
|
|
Aug 9/05 |
|
|
|
+10,000 |
* |
|
$ |
16.01 |
|
|
|
|
Aug 9/05 |
|
|
|
+72,500 |
* |
|
$ |
19.19 |
|
|
|
|
Aug 9/05 |
|
|
|
-72,500 |
|
|
$ |
27.08 |
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of | |
|
Price per | |
|
|
|
|
Falconbridge Shares | |
|
Falconbridge Share | |
Name |
|
Date of Trade | |
|
Acquired (+)/Sold (-) | |
|
(Cdn.$) | |
|
|
| |
|
| |
|
| |
Derek G. Pannell
|
|
|
June 3 /05 |
|
|
|
-26,000 |
|
|
$ |
21.63 |
|
|
|
|
June 20/05 |
|
|
|
-26,000 |
|
|
$ |
22.20 |
|
|
|
|
Aug 16/05 |
|
|
|
-115,000 |
|
|
$ |
29.30 |
|
William H. Brooks
|
|
|
Aug 8/05 |
|
|
|
-21,920 |
|
|
$ |
26.90 |
|
|
|
|
Aug 10/05 |
|
|
|
-35,550 |
|
|
$ |
27.90 |
|
|
|
|
Sept 8/ 05 |
|
|
|
-35,680 |
|
|
$ |
29.02 |
|
|
|
|
Sept 20/05 |
|
|
|
-44,000 |
|
|
$ |
29.75 |
|
Joseph Laezza
|
|
|
Aug 9/05 |
|
|
|
-2,000 |
|
|
$ |
26.42 |
|
|
|
|
Aug 15/05 |
|
|
|
-11,866 |
|
|
$ |
29.00 |
|
|
|
|
Sept 7/05 |
|
|
|
-350 |
|
|
$ |
28.35 |
|
Robert H. Sippel
|
|
|
Aug 2/05 |
|
|
|
-100 |
|
|
$ |
25.81 |
|
|
|
|
Aug 2/05 |
|
|
|
-1,200 |
|
|
$ |
25.80 |
|
|
|
|
Aug 2/05 |
|
|
|
-300 |
|
|
$ |
25.76 |
|
|
|
|
Aug 2/05 |
|
|
|
-1,500 |
|
|
$ |
25.75 |
|
|
|
|
Aug 2/05 |
|
|
|
-8,200 |
|
|
$ |
25.73 |
|
|
|
|
Aug 2/05 |
|
|
|
-100 |
|
|
$ |
25.71 |
|
|
|
|
Aug 2/05 |
|
|
|
-3,300 |
|
|
$ |
25.70 |
|
|
|
|
Aug 2/05 |
|
|
|
-5,300 |
|
|
$ |
25.65 |
|
|
|
|
Aug 5/05 |
|
|
|
-500 |
|
|
$ |
25.47 |
|
|
|
|
Aug 5/05 |
|
|
|
-200 |
|
|
$ |
25.46 |
|
|
|
|
Aug 5/05 |
|
|
|
-1,100 |
|
|
$ |
25.45 |
|
|
|
|
Aug 5/05 |
|
|
|
-200 |
|
|
$ |
25.43 |
|
|
|
|
Sept 7/05 |
|
|
|
-18,000 |
|
|
$ |
28.35 |
|
Katherine A. Rethy
|
|
|
June 28/05 |
|
|
|
-49,950 |
|
|
$ |
21.60 |
|
|
|
|
Aug 3/05 |
|
|
|
-15,712 |
|
|
$ |
26.61 |
|
|
|
|
Aug 8/05 |
|
|
|
-41,100 |
|
|
$ |
25.95 |
|
Martin G.R. Schady
|
|
|
June 17/05 |
|
|
|
+6,400 |
* |
|
$ |
16.65 |
|
|
|
|
June 17/05 |
|
|
|
-300 |
|
|
$ |
39.77 |
|
|
|
|
June 17/05 |
|
|
|
-2,400 |
|
|
$ |
39.76 |
|
|
|
|
June 17/05 |
|
|
|
-1,000 |
|
|
$ |
39.63 |
|
|
|
|
June 17/05 |
|
|
|
-400 |
|
|
$ |
39.61 |
|
|
|
|
June 17/05 |
|
|
|
-400 |
|
|
$ |
39.51 |
|
|
|
|
June 17/05 |
|
|
|
-1,900 |
|
|
$ |
39.42 |
|
Paul W.A. Severin
|
|
|
Oct 13/05 |
|
|
|
+466 |
|
|
$ |
25.24 |
|
Jeffery A. Snow
|
|
|
May 2/05 |
|
|
|
-1,081 |
|
|
$ |
41.35 |
|
|
|
|
June 17/05 |
|
|
|
+6,000 |
* |
|
$ |
13.82 |
|
|
|
|
June 17/05 |
|
|
|
+6,500 |
* |
|
$ |
19.16 |
|
|
|
|
June 17/05 |
|
|
|
-12,500 |
|
|
$ |
22.60 |
|
|
|
|
Sept 8/05 |
|
|
|
+5,500 |
* |
|
$ |
23.26 |
|
|
|
|
Sept 8/05 |
|
|
|
+2,500 |
* |
|
$ |
20.87 |
|
|
|
|
Sept 8/05 |
|
|
|
-5,500 |
|
|
$ |
26.95 |
|
|
|
|
Sept 8/05 |
|
|
|
-2,500 |
|
|
$ |
26.92 |
|
Michael R. Boone
|
|
|
June 17/05 |
|
|
|
+900 |
* |
|
$ |
15.55 |
|
|
|
|
June 17/05 |
|
|
|
-900 |
|
|
$ |
26.38 |
|
|
|
|
Aug 4/05 |
|
|
|
+2,500 |
* |
|
$ |
17.88 |
|
|
|
|
Aug 4/05 |
|
|
|
-2,500 |
|
|
$ |
26.38 |
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of | |
|
Price per | |
|
|
|
|
Falconbridge Shares | |
|
Falconbridge Share | |
Name |
|
Date of Trade | |
|
Acquired (+)/Sold (-) | |
|
(Cdn.$) | |
|
|
| |
|
| |
|
| |
John M. Doyle
|
|
|
Aug 2/05 |
|
|
|
+1,416 |
* |
|
$ |
11.38 |
|
|
|
|
Aug 2/05 |
|
|
|
+2,301 |
* |
|
$ |
9.00 |
|
|
|
|
Aug 2/05 |
|
|
|
+3,363 |
* |
|
$ |
9.37 |
|
|
|
|
Aug 2/05 |
|
|
|
+3,363 |
* |
|
$ |
9.41 |
|
|
|
|
Aug 2/05 |
|
|
|
+1,947 |
* |
|
$ |
17.29 |
|
|
|
|
Aug 2/05 |
|
|
|
+2,000 |
* |
|
$ |
13.82 |
|
|
|
|
Aug 2/05 |
|
|
|
+1,700 |
* |
|
$ |
20.37 |
|
|
|
|
Aug 2/05 |
|
|
|
-900 |
|
|
$ |
25.65 |
|
|
|
|
Aug 2/05 |
|
|
|
-870 |
|
|
$ |
25.56 |
|
|
|
|
Aug 2/05 |
|
|
|
-2,000 |
|
|
$ |
25.73 |
|
|
|
|
Aug 2/05 |
|
|
|
-1,700 |
|
|
$ |
25.64 |
|
|
|
|
Aug 2/05 |
|
|
|
-1,416 |
|
|
$ |
25.63 |
|
|
|
|
Aug 2/05 |
|
|
|
-2,301 |
|
|
$ |
25.60 |
|
|
|
|
Aug 2/05 |
|
|
|
-1,200 |
|
|
$ |
25.55 |
|
|
|
|
Aug 2/05 |
|
|
|
-300 |
|
|
$ |
25.54 |
|
|
|
|
Aug 2/05 |
|
|
|
-3,263 |
|
|
$ |
25.51 |
|
|
|
|
Aug 2/05 |
|
|
|
-1,400 |
|
|
$ |
25.56 |
|
|
|
|
Aug 2/05 |
|
|
|
-563 |
|
|
$ |
25.50 |
|
|
|
|
Aug 2/05 |
|
|
|
-1,947 |
|
|
$ |
25.52 |
|
|
|
|
Oct 17/05 |
|
|
|
+102 |
|
|
$ |
30.63 |
|
Michael R. Frilegh
|
|
|
Aug 16/05 |
|
|
|
+7,800 |
* |
|
$ |
13.82 |
|
|
|
|
Aug 16/05 |
|
|
|
+15,750 |
* |
|
$ |
15.05 |
|
|
|
|
Aug 16/05 |
|
|
|
+8,600 |
* |
|
$ |
15.55 |
|
|
|
|
Aug 16/05 |
|
|
|
+17,200 |
* |
|
$ |
16.32 |
|
|
|
|
Aug 16/05 |
|
|
|
-15,596 |
|
|
$ |
29.05 |
|
|
|
|
Aug 16/05 |
|
|
|
-2,200 |
|
|
$ |
29.09 |
|
|
|
|
Aug 16/05 |
|
|
|
-900 |
|
|
$ |
29.08 |
|
|
|
|
Aug 16/05 |
|
|
|
-7,350 |
|
|
$ |
29.06 |
|
|
|
|
Aug 16/05 |
|
|
|
-100 |
|
|
$ |
29.04 |
|
|
|
|
Aug 16/05 |
|
|
|
-1,900 |
|
|
$ |
29.03 |
|
|
|
|
Aug 16/05 |
|
|
|
-10,800 |
|
|
$ |
29.01 |
|
|
|
|
Aug 16/05 |
|
|
|
-10,900 |
|
|
$ |
29.00 |
|
|
|
|
Aug 18/05 |
|
|
|
+10,000 |
* |
|
$ |
17.88 |
|
|
|
|
Aug 18/05 |
|
|
|
+6,500 |
* |
|
$ |
19.16 |
|
|
|
|
Aug 18/05 |
|
|
|
+5,500 |
* |
|
$ |
23.26 |
|
|
|
|
Aug 18/05 |
|
|
|
+3,400 |
* |
|
$ |
20.37 |
|
|
|
|
Aug 18/05 |
|
|
|
-800 |
|
|
$ |
28.22 |
|
|
|
|
Aug 18/05 |
|
|
|
-400 |
|
|
$ |
28.21 |
|
|
|
|
Aug 18/05 |
|
|
|
-8,800 |
|
|
$ |
28.20 |
|
|
|
|
Aug 18/05 |
|
|
|
-14,800 |
|
|
$ |
28.15 |
|
|
|
|
Aug 18/05 |
|
|
|
-400 |
|
|
$ |
28.17 |
|
|
|
|
Aug 18/05 |
|
|
|
-200 |
|
|
$ |
28.16 |
|
André Joron
|
|
|
June 17/05 |
|
|
|
+400 |
* |
|
$ |
22.57 |
|
|
|
|
June 17/05 |
|
|
|
+1,600 |
* |
|
$ |
22.56 |
|
|
|
|
June 17/05 |
|
|
|
+6,000 |
* |
|
$ |
22.55 |
|
|
|
|
Sept 1/05 |
|
|
|
-286 |
|
|
$ |
28.14 |
|
Stephen K. Young
|
|
|
Aug 10/05 |
|
|
|
-1,585 |
|
|
$ |
27.15 |
|
16
ISSUANCES OF SECURITIES OF FALCONBRIDGE
No Falconbridge Shares (or securities convertible into
Falconbridge Shares) have been issued to the directors of
Falconbridge during the two years preceding the date of the
Offer except upon exercise of options and except as set out
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of | |
|
Price Per | |
Name |
|
Date | |
|
Nature of Transaction | |
|
Securities | |
|
Share (Cdn.$) | |
|
|
| |
|
| |
|
| |
|
| |
Derek G. Pannell
|
|
|
Feb 10/04 |
|
|
|
Option Grant |
|
|
|
70,000 |
|
|
|
20.37 |
|
|
|
|
Feb 3/05 |
|
|
|
Option Grant |
|
|
|
67,500 |
|
|
|
21.66 |
|
David W. Kerr
|
|
|
Feb 10/04 |
|
|
|
Option Grant |
|
|
|
53,000 |
|
|
|
20.37 |
|
|
|
|
Feb 3/05 |
|
|
|
Option Grant |
|
|
|
49,000 |
|
|
|
21.66 |
|
Aaron W. Regent
|
|
|
Feb 4/04 |
|
|
|
Option Grant |
|
|
|
61,950 |
|
|
|
17.29 |
|
|
|
|
Feb 1/05 |
|
|
|
Option Grant |
|
|
|
64,605 |
|
|
|
24.51 |
|
|
|
|
Aug 15/05 |
|
|
|
Option Grant |
|
|
|
32,026 |
|
|
|
26.91 |
|
Steven J. Douglas
|
|
|
Dec 11/03 |
|
|
|
Option Grant |
|
|
|
150,000 |
|
|
|
18.00 |
|
|
|
|
Feb 10/04 |
|
|
|
Option Grant |
|
|
|
45,000 |
|
|
|
20.37 |
|
|
|
|
Feb 3/05 |
|
|
|
Option Grant |
|
|
|
44,000 |
|
|
|
21.66 |
|
Peter G.J. Kukielski
|
|
|
Feb 4/04 |
|
|
|
Option Grant |
|
|
|
24,780 |
|
|
|
17.29 |
|
|
|
|
Feb 10/04 |
|
|
|
Option Grant |
|
|
|
22,000 |
|
|
|
20.37 |
|
|
|
|
Feb 1/05 |
|
|
|
Option Grant |
|
|
|
30,090 |
|
|
|
24.51 |
|
|
|
|
Jul 29/05 |
|
|
|
Option Grant |
|
|
|
120,000 |
|
|
|
24.79 |
|
|
|
|
Aug 15/05 |
|
|
|
Option Grant |
|
|
|
14,916 |
|
|
|
26.91 |
|
William H. Brooks
|
|
|
Feb 10/04 |
|
|
|
Option Grant |
|
|
|
28,000 |
|
|
|
20.37 |
|
|
|
|
Feb 3/05 |
|
|
|
Option Grant |
|
|
|
31,000 |
|
|
|
21.66 |
|
Claude Ferron
|
|
|
Feb 10/04 |
|
|
|
Option Grant |
|
|
|
18,000 |
|
|
|
20.37 |
|
|
|
|
Oct 22/04 |
|
|
|
Option Grant |
|
|
|
8,850 |
|
|
|
18.08 |
|
|
|
|
Oct 27/04 |
|
|
|
Option Grant |
|
|
|
5,000 |
|
|
|
21.48 |
|
|
|
|
Feb 1/05 |
|
|
|
Option Grant |
|
|
|
35,400 |
|
|
|
24.51 |
|
|
|
|
Feb 3/05 |
|
|
|
Option Grant |
|
|
|
30,000 |
|
|
|
21.66 |
|
|
|
|
Aug 15/05 |
|
|
|
Option Grant |
|
|
|
17,548 |
|
|
|
26.91 |
|
Joseph Laezza
|
|
|
Feb 4/04 |
|
|
|
Option Grant |
|
|
|
31,860 |
|
|
|
17.29 |
|
|
|
|
Feb 1/05 |
|
|
|
Option Grant |
|
|
|
38,055 |
|
|
|
24.51 |
|
|
|
|
Aug 15/05 |
|
|
|
Option Grant |
|
|
|
18,865 |
|
|
|
26.91 |
|
Fernando E. Porcile
|
|
|
Feb 4/04 |
|
|
|
Option Grant |
|
|
|
15,930 |
|
|
|
17.29 |
|
|
|
|
Feb 10/04 |
|
|
|
Option Grant |
|
|
|
14,000 |
|
|
|
20.37 |
|
|
|
|
Feb 1/05 |
|
|
|
Option Grant |
|
|
|
22,125 |
|
|
|
24.51 |
|
|
|
|
Feb 3/05 |
|
|
|
Option Grant |
|
|
|
18,000 |
|
|
|
21.66 |
|
|
|
|
Aug 15/05 |
|
|
|
Option Grant |
|
|
|
10,969 |
|
|
|
26.91 |
|
Robert H. Sippel
|
|
|
Feb 10/04 |
|
|
|
Option Grant |
|
|
|
28,000 |
|
|
|
20.37 |
|
|
|
|
Feb 3/05 |
|
|
|
Option Grant |
|
|
|
31,000 |
|
|
|
21.66 |
|
Brian E. Barr
|
|
|
Feb 10/04 |
|
|
|
Option Grant |
|
|
|
27,000 |
|
|
|
20.37 |
|
|
|
|
Feb 3/05 |
|
|
|
Option Grant |
|
|
|
26,000 |
|
|
|
21.66 |
|
Ian W. Pearce
|
|
|
Feb 4/04 |
|
|
|
Option Grant |
|
|
|
15,930 |
|
|
|
17.29 |
|
|
|
|
Feb 10/04 |
|
|
|
Option Grant |
|
|
|
14,000 |
|
|
|
20.37 |
|
|
|
|
Feb 1/05 |
|
|
|
Option Grant |
|
|
|
19,470 |
|
|
|
24.51 |
|
|
|
|
Feb 3/05 |
|
|
|
Option Grant |
|
|
|
15,500 |
|
|
|
21.66 |
|
|
|
|
Aug 15/05 |
|
|
|
Option Grant |
|
|
|
9,652 |
|
|
|
26.91 |
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of | |
|
Price Per | |
Name |
|
Date | |
|
Nature of Transaction | |
|
Securities | |
|
Share (Cdn.$) | |
|
|
| |
|
| |
|
| |
|
| |
Katherine A. Rethy
|
|
|
Feb 4/04 |
|
|
|
Option Grant |
|
|
|
14,160 |
|
|
|
17.29 |
|
|
|
|
Feb 10/04 |
|
|
|
Option Grant |
|
|
|
12,500 |
|
|
|
20.37 |
|
|
|
|
Feb 1/05 |
|
|
|
Option Grant |
|
|
|
15,045 |
|
|
|
24.51 |
|
|
|
|
Feb 3/05 |
|
|
|
Option Grant |
|
|
|
12,000 |
|
|
|
21.66 |
|
|
|
|
Aug 15/05 |
|
|
|
Option Grant |
|
|
|
7,459 |
|
|
|
26.91 |
|
Martin G.R. Schady
|
|
|
Feb 4/04 |
|
|
|
Option Grant |
|
|
|
15,930 |
|
|
|
17.29 |
|
|
|
|
Feb 10/04 |
|
|
|
Option Grant |
|
|
|
14,000 |
|
|
|
20.37 |
|
|
|
|
Feb 1/05 |
|
|
|
Option Grant |
|
|
|
17,700 |
|
|
|
24.51 |
|
|
|
|
Feb 3/05 |
|
|
|
Option Grant |
|
|
|
15,000 |
|
|
|
21.66 |
|
|
|
|
Aug 15/05 |
|
|
|
Option Grant |
|
|
|
8,774 |
|
|
|
26.91 |
|
Paul W.A. Severin
|
|
|
Feb 4/04 |
|
|
|
Option Grant |
|
|
|
15,045 |
|
|
|
17.29 |
|
|
|
|
Feb 10/04 |
|
|
|
Option Grant |
|
|
|
13,000 |
|
|
|
20.37 |
|
|
|
|
Feb 1/05 |
|
|
|
Option Grant |
|
|
|
15,930 |
|
|
|
24.51 |
|
|
|
|
Feb 3/05 |
|
|
|
Option Grant |
|
|
|
13,000 |
|
|
|
21.66 |
|
|
|
|
Aug 15/05 |
|
|
|
Option Grant |
|
|
|
7,898 |
|
|
|
26.91 |
|
Jeffery A. Snow
|
|
|
Feb 4/04 |
|
|
|
Option Grant |
|
|
|
14,160 |
|
|
|
17.29 |
|
|
|
|
Feb 10/04 |
|
|
|
Option Grant |
|
|
|
12,500 |
|
|
|
20.37 |
|
|
|
|
Feb 1/05 |
|
|
|
Option Grant |
|
|
|
15,045 |
|
|
|
24.51 |
|
|
|
|
Feb 3/05 |
|
|
|
Option Grant |
|
|
|
12,500 |
|
|
|
21.66 |
|
|
|
|
Aug 15/05 |
|
|
|
Option Grant |
|
|
|
7,459 |
|
|
|
26.91 |
|
Michael J. Agnew
|
|
|
Feb 4/04 |
|
|
|
Option Grant |
|
|
|
14,160 |
|
|
|
17.29 |
|
|
|
|
Feb 10/04 |
|
|
|
Option Grant |
|
|
|
12,500 |
|
|
|
20.37 |
|
|
|
|
Feb 1/05 |
|
|
|
Option Grant |
|
|
|
15,045 |
|
|
|
24.51 |
|
|
|
|
Feb 3/05 |
|
|
|
Option Grant |
|
|
|
12,000 |
|
|
|
21.66 |
|
|
|
|
Aug 15/05 |
|
|
|
Option Grant |
|
|
|
7,459 |
|
|
|
26.91 |
|
Michael R. Boone
|
|
|
Feb 10/04 |
|
|
|
Option Grant |
|
|
|
6,500 |
|
|
|
20.37 |
|
|
|
|
Feb 3/05 |
|
|
|
Option Grant |
|
|
|
9,500 |
|
|
|
21.66 |
|
Denis Couture
|
|
|
Feb 4/04 |
|
|
|
Option Grant |
|
|
|
10,620 |
|
|
|
17.29 |
|
|
|
|
Feb 10/04 |
|
|
|
Option Grant |
|
|
|
9,000 |
|
|
|
20.37 |
|
|
|
|
Feb 1/05 |
|
|
|
Option Grant |
|
|
|
11,505 |
|
|
|
24.51 |
|
|
|
|
Feb 3/05 |
|
|
|
Option Grant |
|
|
|
9,000 |
|
|
|
21.66 |
|
|
|
|
Aug 15/05 |
|
|
|
Option Grant |
|
|
|
5,703 |
|
|
|
26.91 |
|
John M. Doyle
|
|
|
Feb 4/04 |
|
|
|
Option Grant |
|
|
|
9,735 |
|
|
|
17.29 |
|
|
|
|
Feb 10/04 |
|
|
|
Option Grant |
|
|
|
8,000 |
|
|
|
20.37 |
|
|
|
|
Feb 1/05 |
|
|
|
Option Grant |
|
|
|
9,735 |
|
|
|
24.51 |
|
|
|
|
Feb 3/05 |
|
|
|
Option Grant |
|
|
|
8,000 |
|
|
|
21.66 |
|
|
|
|
Aug 15/05 |
|
|
|
Option Grant |
|
|
|
4,827 |
|
|
|
26.91 |
|
Michael R. Frilegh
|
|
|
Feb 10/04 |
|
|
|
Option Grant |
|
|
|
17,000 |
|
|
|
20.37 |
|
|
|
|
Feb 3/05 |
|
|
|
Option Grant |
|
|
|
16,000 |
|
|
|
21.66 |
|
André Joron
|
|
|
Feb 4/04 |
|
|
|
Option Grant |
|
|
|
10,620 |
|
|
|
17.29 |
|
|
|
|
Feb 10/04 |
|
|
|
Option Grant |
|
|
|
9,000 |
|
|
|
20.37 |
|
|
|
|
Feb 1/05 |
|
|
|
Option Grant |
|
|
|
11,505 |
|
|
|
24.51 |
|
|
|
|
Feb 3/05 |
|
|
|
Option Grant |
|
|
|
9,000 |
|
|
|
21.66 |
|
|
|
|
Aug 15/05 |
|
|
|
Option Grant |
|
|
|
5,703 |
|
|
|
26.91 |
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of | |
|
Price Per | |
Name |
|
Date | |
|
Nature of Transaction | |
|
Securities | |
|
Share (Cdn.$) | |
|
|
| |
|
| |
|
| |
|
| |
Edward H. Laks
|
|
|
Feb 4/04 |
|
|
|
Option Grant |
|
|
|
9,735 |
|
|
|
17.29 |
|
|
|
|
Feb 10/04 |
|
|
|
Option Grant |
|
|
|
8,500 |
|
|
|
20.37 |
|
|
|
|
Feb 1/05 |
|
|
|
Option Grant |
|
|
|
9,735 |
|
|
|
24.51 |
|
|
|
|
Feb 3/05 |
|
|
|
Option Grant |
|
|
|
8,000 |
|
|
|
21.66 |
|
|
|
|
Aug 15/05 |
|
|
|
Option Grant |
|
|
|
4,827 |
|
|
|
26.91 |
|
Robert G. Telewiak
|
|
|
Feb 4/04 |
|
|
|
Option Grant |
|
|
|
10,620 |
|
|
|
17.29 |
|
|
|
|
Feb 10/04 |
|
|
|
Option Grant |
|
|
|
9,000 |
|
|
|
20.37 |
|
|
|
|
Feb 1/05 |
|
|
|
Option Grant |
|
|
|
11,505 |
|
|
|
24.51 |
|
|
|
|
Feb 3/05 |
|
|
|
Option Grant |
|
|
|
9,000 |
|
|
|
21.66 |
|
|
|
|
Aug 15/05 |
|
|
|
Option Grant |
|
|
|
5,703 |
|
|
|
26.91 |
|
Stephen K. Young
|
|
|
Feb 4/04 |
|
|
|
Option Grant |
|
|
|
4,425 |
|
|
|
17.29 |
|
|
|
|
Feb 10/04 |
|
|
|
Option Grant |
|
|
|
3,500 |
|
|
|
20.37 |
|
|
|
|
Feb 1/05 |
|
|
|
Option Grant |
|
|
|
4,425 |
|
|
|
24.51 |
|
|
|
|
Feb 3/05 |
|
|
|
Option Grant |
|
|
|
3,500 |
|
|
|
21.66 |
|
|
|
|
Aug 15/05 |
|
|
|
Option Grant |
|
|
|
2,195 |
|
|
|
26.91 |
|
OWNERSHIP OF SECURITIES OF INCO
None of Falconbridge or the directors or senior officers of
Falconbridge or, to their knowledge after reasonable enquiry,
any of their respective associates, or any person acting jointly
or in concert with Falconbridge, owns, directly or indirectly,
or exercises control or direction over, any securities of Inco.
RELATIONSHIP BETWEEN INCO AND DIRECTORS AND
SENIOR OFFICERS OF FALCONBRIDGE
Other than as provided in the Support Agreement or as described
below, no other contract or arrangement or agreement has been
made, or is proposed to be made, between Inco and any of the
directors or senior officers of Falconbridge relating to any
matter, including arrangements or agreements with respect to
compensation for loss of office or as to their remaining in or
retiring from office.
On October 11, 2005, Inco and Falconbridge announced that,
in addition to the appointment of Derek Pannell as President,
Inco intended to name Aaron Regent as Executive Vice-President,
Strategy and Corporate Development and Steve Douglas, Executive
Vice-President and Chief Financial Officer and that Peter
Kukielski would be responsible for copper and other metals
(other than nickel) operations.
None of the directors or senior officers of Falconbridge is a
director or senior officer of the Inco or any of its
subsidiaries.
ARRANGEMENTS BETWEEN FALCONBRIDGE AND
ITS DIRECTORS AND SENIOR OFFICERS
On September 14, 2005, Falconbridge entered into Employee
Retention Agreements with a number of employees including the
following executives: Derek Pannell, Aaron Regent, Steve
Douglas, Martin Schady, Peter Kukielski, William Brooks, Claude
Ferron, Joseph Laezza, Fernando Emilio Porcile, Robert Sippel,
Brian Barr, Ian Pearce, Katherine Rethy, Paul Severin, Jeffery
Snow, Michael Agnew, Michael Boone, Denis Couture, Dominique
Dionne, John Doyle, Michael Frilegh, André Joron, Edward
Laks, Robert Telewiak and Stephen Young.
The agreements with each of Messrs. Pannell, Regent,
Douglas, Schady and Kukielski provide that in the event that the
executive is terminated without just cause (which term includes
the failure by Falconbridge to obtain the assumption of the
agreement by a purchaser upon a change of control) or in the
event such executive resigns as a result of being constructively
dismissed, a payment will be made equal to three times the
aggregate of such executives
19
annual base salary and 100% of such executives individual
target bonus (60% of such executives annual base salary
for the year in which termination of employment actually occurs)
and payment of a pro-rated bonus for the year in which the
terminated occurs. As well, Falconbridge will continue benefits,
to the extent it may do so legally and in compliance with the
benefits plans in existence at the time, at a level
substantially equivalent to those provided while the executive
was employed for a period of 36 months. Where this is not
possible, Falconbridge will reimburse the senior officer for all
reasonable expenses incurred to replace such benefits, as well
as reimburse him, to a maximum of Cdn.$20,000, for legal,
financial, outplacement or other professional services incurred
in connection with the cessation of his employment. The
agreements also provide that in the event of a change of control
any unvested entitlements to Falconbridge Shares under the
Falconbridge Limited Share Purchase Plan and credit in the
Management Deferred Share Unit Plan held by those executives
will vest immediately and any unvested stock options vest
immediately and remain exercisable for 36 months. In
addition, the above-named executives are entitled to retention
bonuses in the aggregate amount of approximately
Cdn.$4 million payable on August 15, 2006, except that
such bonuses become payable immediately in the event of a change
of control.
The agreements with the balance of the executives provides for
various guaranteed severance arrangements, retention bonuses,
accelerated option vesting and/or enhanced contributions to
employee share savings plans that are payable upon a change of
control.
Except as described above, no other arrangement or agreement has
been made or is currently proposed to be made between
Falconbridge and any of its directors or senior officers as to
any payment or other benefit to be made or given by way of
compensation for loss of office or as to their remaining in or
retiring from office if the Offer is successful.
INTEREST OF DIRECTORS AND OFFICERS
IN MATERIAL CONTRACTS OF INCO
None of the directors and senior officers of Falconbridge and,
to the knowledge of such directors and senior officers after
reasonable enquiry, none of their associates has any interest in
any material contract to which Inco is a party.
MATERIAL CHANGES IN THE AFFAIRS OF FALCONBRIDGE
Except as publicly disclosed or as otherwise described or
referred to in this Directors Circular, the directors and
senior officers of Falconbridge are not aware of any information
that indicates any material change in the affairs, activities,
financial position or prospects of Falconbridge since
August 8, 2005, being the date of the last published
unaudited interim consolidated financial statements of
Falconbridge.
OTHER TRANSACTIONS
There is no transaction, Board resolution, agreement in
principle or signed contract of Falconbridge, other than as
described or referred to in the Offering Circular or this
Directors Circular, which has occurred in response to the
Offer. Other than as described or referred to in the Offering
Circular or this Directors Circular, no negotiations are
underway in response to the Offer which relate to or would
result in (i) an extraordinary transaction such as a merger
or reorganization involving Falconbridge or a subsidiary;
(ii) the purchase, sale or transfer of a material amount of
assets by Falconbridge or a subsidiary; (iii) an issuer bid
or other acquisition of securities by Falconbridge; or
(iv) any material change in the capitalization or dividend
policy of Falconbridge.
OTHER INFORMATION
Except as otherwise described or referred to in the Offering
Circular, this Directors Circular, or otherwise publicly
disclosed, no other information is known to the directors or
senior officers of the Corporation that would reasonably be
expected to affect the decision of the Shareholders to accept or
reject the Offer.
20
STATUTORY RIGHTS
Securities legislation in certain of the provinces and
territories of Canada provide security holders of Falconbridge
with, in addition to any other rights they may have at law,
rights of rescission or to damages, or both, if there is a
misrepresentation in a circular or notice that is required to be
delivered to such security holders. However, such rights must be
exercised within prescribed time limits. Security holders should
refer to the applicable provisions of the securities legislation
of their province or territory for particulars of those rights
or consult with a lawyer.
APPROVAL OF DIRECTORS CIRCULAR
The content of this Directors Circular has been approved
and the delivery thereof has been authorized by the Board of
Directors.
21
CONSENT OF CIBC WORLD MARKETS INC.
We hereby consent to the references to the opinion dated
October 10, 2005 of our firm in the Chairmans letter
attached to the circular of the Board of Directors of
Falconbridge dated October 10, 2005 (the
Circular) and under the captions
Background to the Offer, Recommendation of the
Board of Directors, Reasons for the
Recommendation, Fairness Opinion and
Support Agreement and to the inclusion of the
foregoing opinion in the Circular. In providing such consent we
do not intend that any person other than the Board of Directors
rely upon such opinion.
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Dated: October 24, 2005 |
(Signed) CIBC World Markets Inc. |
CERTIFICATE
Dated: October 24, 2005
The foregoing contains no untrue statement of a material fact
and does not omit to state a material fact that is required to
be stated or that is necessary to make a statement not
misleading in the light of the circumstances in which it was
made. The foregoing does not contain any misrepresentation
likely to affect the value or market price of the Shares subject
to the Offer.
On behalf of the Board of Directors:
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(Signed) David H. Race
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(Signed) Neville W.
Kirchmann
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Director
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Director |
22
SCHEDULE A
OPINION OF CIBC WORLD MARKETS INC.
October 10, 2005
The Board of Directors
Falconbridge Limited
Suite 200, BCE Place
181 Bay Street
Toronto, Ontario
M5J 2T3
To the Board of Directors:
CIBC World Markets Inc. (CIBC World Markets,
we or us) understands that Falconbridge
Limited (Falconbridge or the Company) is
proposing to enter into a support agreement dated the date
hereof (the Support Agreement) with Inco Limited
(Inco) pursuant to which Inco will make an offer to
acquire all of the outstanding common shares of Falconbridge
(the Falconbridge common shares) by way of a
take-over bid (the Take-over Bid). We also
understand that, pursuant to the Take-over Bid, each holder of
Falconbridge common shares will be offered, in consideration for
each Falconbridge common share: (i) Cdn. $34.00 in cash; or
(ii) 0.6713 of a common share of Inco (Inco common
shares) and Cdn. $0.05 in cash, at the election of the
holder thereof, but subject to an aggregate maximum of
Cdn.$2,872,648,913 in cash and an aggregate maximum of
200,702,404 Inco common shares. As a result of pro-ration
between the aggregate amount of cash available and the aggregate
amount of shares available, the consideration per Falconbridge
common share offered pursuant to the Take-over Bid is 0.524 Inco
common shares plus Cdn$7.50 cash (the Consideration).
We understand that Incos obligation to take up and pay for
any Falconbridge common shares tendered in acceptance of the
Take-over Bid will be subject to certain conditions as set out
in the Support Agreement, including that holders of not less
than two-thirds of the outstanding Falconbridge common shares
shall have tendered their Falconbridge common shares in
acceptance of the Take-over Bid at or before the expiry time of
the Take-over Bid. We also understand that all of the terms and
conditions of the Support Agreement and of the Take-over Bid
will be described in Incos take-over bid circular.
Engagement of CIBC World Markets
By letter agreement dated September 6, 2005, (the
Engagement Agreement), the Company retained CIBC
World Markets to act as its financial advisor in connection with
any proposal or offer, whether solicited or unsolicited,
involving a potential merger, acquisition or change in effective
control of the Company during the term of the Engagement
Agreement, whether any such transaction would be effected by way
of a take-over bid, amalgamation, plan of arrangement,
acquisition, sale of all or substantially all of the assets of
the Company or otherwise. Pursuant to the Engagement Agreement,
the Company has requested that we prepare and deliver to the
Board of Directors our written opinion (the Opinion)
as to the fairness, from a financial point of view, of the
Consideration offered to holders of the Falconbridge common
shares pursuant to the Take-over Bid.
CIBC World Markets will be paid a fee for rendering the Opinion.
In addition, we will be paid a fee that is contingent on the
successful completion of the Take-over Bid and in certain other
circumstances. The Company has also agreed to indemnify CIBC
World Markets in respect of certain liabilities that might arise
out of our engagement.
A-1
Credentials of CIBC World Markets
CIBC World Markets is one of Canadas largest investment
banking firms with operations in all facets of corporate and
government finance, mergers and acquisitions, equity and fixed
income sales and trading and investment research. The Opinion
expressed herein is the opinion of CIBC World Markets and the
form and content herein have been approved for release by a
committee of our managing directors and internal counsel, each
of whom is experienced in merger, acquisition, divestiture and
valuation matters.
Scope of Review
In connection with rendering our Opinion, we have reviewed and
relied upon, among other things, the following:
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i) |
the Support Agreement; |
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ii) |
the audited financial statements, annual reports and annual
information forms of Falconbridges predecessor companies,
Noranda Inc. (Noranda) and Falconbridge Limited
(Old Falconbridge), for the fiscal years ended
December 31, 2002, 2003 and 2004; |
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iii) |
the interim report and comparative unaudited financial
statements of Noranda and Old Falconbridge for the quarter ended
March 31, 2005 and of Falconbridge for the quarter ended
June 30, 2005; |
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iv) |
the take-over bid circular of Noranda dated March 24, 2005,
concerning its offer to purchase Old Falconbridge; |
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v) |
the directors circular of Old Falconbridge dated
March 24, 2005, relating to Norandas offer to
purchase Old Falconbridge; |
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vi) |
the issuer bid circular of Noranda dated March 24, 2005,
relating to its offer to exchange certain outstanding common
shares for junior preference shares; |
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vii) |
the joint management information circular of Noranda and Old
Falconbridge dated June 2, 2005 relating to the
amalgamation of Noranda and Old Falconbridge; |
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viii) |
certain internal financial, operational, corporate and other
information concerning Falconbridge that was prepared or
provided by the management of the Company, including internal
operating and financial projections prepared by
Falconbridges management; |
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ix) |
the audited financial statements, annual reports and annual
information forms of Inco for the fiscal years ended
December 31, 2002, 2003 and 2004; |
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x) |
the interim report and comparative unaudited financial
statements of Inco for the quarters ended March 31, 2005
and June 30, 2005; |
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xi) |
certain internal financial, operational, corporate and other
information concerning Inco that was prepared or provided by the
management of Inco, including internal operating and financial
projections prepared by Incos management; |
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xii) |
information provided to Falconbridge by Mercer Human Resource
Consulting LLC regarding Incos pension and non-pension
benefits plans; |
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xiii) |
the legal due diligence investigation of Inco conducted by
counsel to Falconbridge; |
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xiv) |
trading statistics and selected financial information of
Falconbridge, Inco and other selected public base metals and
diversified mining companies considered by us to be relevant; |
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xv) |
various reports published by equity research analysts, industry
sources and credit rating agencies regarding Falconbridge and
Inco, the base metals and diversified mining industry and other
public companies, to the extent deemed relevant by us; |
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xvi) |
certificates addressed to us, dated as of the date hereof, from
senior officers of Falconbridge and Inco as to the completeness
and accuracy of the respective information provided to us by
them; and |
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xvii) |
such other information, analyses, investigations, and
discussions as we considered necessary or appropriate in the
circumstances. |
In addition, we have participated in discussions with members of
the senior management of Falconbridge and Inco regarding their
past and current business operations, financial conditions and
future prospects, including estimated synergies and cost
savings, after giving effect to completion of the Take-over Bid.
We have also participated in discussions with Incos
financial advisors and the external counsel to Falconbridge and
Inco concerning the Take-over Bid, the Support Agreement and
related matters.
Assumptions and Limitations
Our Opinion is subject to the assumptions, explanations and
limitations set forth below.
We have not been asked to prepare and have not prepared a formal
valuation or appraisal of any of the assets or securities of the
Company, Inco or any of their respective affiliates (including
Inco after giving effect to the completion of the Take-over Bid)
and our Opinion should not be construed as such.
With your permission, we have relied upon, and have assumed the
completeness, accuracy and fair presentation of all financial
and other information, data, advice, opinions and
representations obtained by us from public sources, or provided
to us by the Company, Inco or their respective affiliates or
advisors or otherwise obtained by us pursuant to our engagement,
and our Opinion is conditional upon such completeness, accuracy
and fair presentation. We have not been requested to or
attempted to verify independently the accuracy, completeness or
fairness of presentation of any such information, data, advice,
opinions and representations. Accordingly, with your permission,
we have assumed the accuracy and fair presentation of, and
relied upon, the Companys and Incos audited
financial statements and the reports of the auditors thereon.
With respect to operating and financial forecasts and budgets
provided to us concerning Falconbridge and Inco and relied upon
in our analysis, we have assumed (subject to the exercise of our
professional judgment) that they have been reasonably prepared
on bases reflecting the most reasonable assumptions, estimates
and judgements of management of the Company and Inco, having
regard to the Companys and Incos respective plans,
financial condition and prospects.
We have also assumed that all of the representations and
warranties contained in the Support Agreement are correct as of
the date hereof, that the Take-over Bid will be completed
substantially in accordance with the requirements of the Support
Agreement and all applicable laws, that the Take-over Bid
Circular will disclose all material facts relating to the
Take-over Bid and the Inco common shares and that the
Falconbridge directors circular will satisfy all
applicable legal requirements.
The Company has represented to us, in a certificate of two
senior officers of the Company dated as at the date hereof,
among other things, that the information, data and other
materials provided to us by or on behalf of the Company,
including the written information and discussions concerning
Falconbridge referred to above under the heading Scope of
Review (collectively, the Falconbridge
Information), are complete and correct at the date the
Falconbridge Information was provided to us and that, since the
date of the Falconbridge Information, there has been no material
change, financial or otherwise, in the financial condition,
assets, liabilities (contingent or otherwise), business,
operations or prospects of the Company or any of its
subsidiaries and no material change has occurred in the
Falconbridge Information or any part thereof which would have or
which would reasonably be expected to have a material effect on
the Opinion.
Inco has represented to us, in a certificate of two senior
officers of Inco dated as at the date hereof, among other
things, that the information, data and other materials provided
to us by or on behalf of Inco, including the written information
and discussions concerning Inco referred to above under the
heading Scope of Review (collectively, the
Inco Information), are complete and correct at the
date the Inco Information was provided to us and that, since the
date of the Inco Information, there has been no material change,
financial or otherwise, in the financial condition, assets,
liabilities (contingent or otherwise), business, operations or
prospects of Inco or any of its subsidiaries and no
A-3
material change has occurred in the Inco Information or any part
thereof which would have or which would reasonably be expected
to have a material effect on the Opinion.
Our Opinion is rendered on the basis of securities markets,
economic and general business and financial conditions
prevailing as at the date hereof and the conditions and
prospects, financial and otherwise, of the Company and Inco as
they are reflected in the Falconbridge Information and the Inco
Information and as they were represented to us in our
discussions with management of the Company, Inco and their
respective affiliates and advisors. In our analyses and in
connection with the preparation of our Opinion, we made numerous
assumptions with respect to industry performance, general
business, capital markets and economic conditions and other
matters, many of which are beyond the control of any party
involved in the Take-over Bid.
The Opinion has been provided to the Board of Directors for
their exclusive use only in considering the Take-over Bid and
may not be relied upon by any other person, or for any other
purpose or published without the prior written consent of CIBC
World Markets. Our Opinion is not to be construed as a
recommendation to any holder of Falconbridge common shares to
tender to the Take-over Bid or as an opinion as to the prices at
which the Inco common shares will trade after completion of the
Take-over Bid.
The Opinion is given as of the date hereof and, although we
reserve the right to change or withdraw the Opinion if we learn
that any of the information that we relied upon in preparing the
Opinion was inaccurate, incomplete or misleading in any material
respect, we disclaim any obligation to change or withdraw the
Opinion, to advise any person of any change that may come to our
attention or to update the Opinion after today.
Opinion
Based upon and subject to the foregoing and such other matters
as we considered relevant, it is our opinion, as of the date
hereof, that the Consideration offered pursuant to the Take-over
Bid is fair, from a financial point of view, to the holders of
Falconbridge common shares.
Yours very truly,
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