Item 1.01 Entry into a Material Definitive Agreement.
On July 16, 2006, Inco Limited (Inco), together with Falconbridge Limited (Falconbridge) and
Phelps Dodge Corporation (Phelps Dodge), announced that they had entered into a number of
agreements, described below, relating to, among other things, (i) an increase in the consideration
under Incos outstanding offer (the Offer) to
acquire all of the outstanding common shares of Falconbridge and
(ii) an increase in the consideration payable to shareholders of Inco under the proposed statutory plan of arrangement involving Inco and Phelps Dodge to be effected under the Canada Business Corporations Act (the Arrangement).
On July 16, 2006, Inco further varied its Offer in order to, among other things, (a)
increase the consideration payable under the Offer for each Falconbridge common share by
Cdn.$1.00 per share from Cdn.$17.50 in cash and 0.55676 of an Inco Share to Cdn.$18.50 in
cash and 0.55676 of an Inco share, on a fully prorated basis, (b) reduce the Minimum Tender
Condition (as defined below) from 66⅔% to 50.01%, (c) extend the expiry time of the Offer
from midnight (Vancouver time) on July 24, 2006 to midnight (Vancouver time) on Thursday,
July 27, 2006, and (d) provide that the consideration under the Offer will not be reduced by
the amount of the special dividend declared by Falconbridge on July 16, 2006, of Cdn.$0.75
in cash per share payable to Falconbridge common shareholders of record on July 26, 2006,
with a payment date of August 10, 2006 (the Falconbridge Special Dividend).
The minimum tender condition under the Offer provides that there be validly deposited under
the Offer and not withdrawn at the expiry time of the Offer such number of Falconbridge
common shares which, together with any Falconbridge common shares directly or indirectly
owned by Inco, constitutes at least 50.01% (formerly 66⅔%) of the Falconbridge common shares
outstanding at the expiry time of the Offer (calculated on a fully-diluted basis) (the
Minimum Tender Condition).
Waiver and First Amendment to Combination Agreement between Inco and Phelps Dodge
On July 16, 2006, Inco and Phelps Dodge entered into a Waiver and First Amendment to Combination
Agreement (the Waiver and Amendment) for the purpose of waiving or amending certain provision of the combination agreement (as amended, the Combination Agreement) originally entered into by Inco
and Phelps Dodge on June 25, 2006.
The Waiver and Amendment provides that the consideration payable for each common share of Inco
under the proposed Arrangement will be increased by Cdn.$2.75 in
cash, from (i) Cdn.$17.50 in cash
and 0.672 of a Phelps Dodge common share to (ii) Cdn.$20.25 in cash and 0.672 of a Phelps Dodge common
share.
The Waiver
and Amendment removed Section 8.1(g) of the Combination Agreement, which had
provided that the respective obligations of Phelps Dodge and Inco to
effect the Arrangement were conditioned on either Inco having
completed a subsequent acquisition transaction and having acquired all
of the common shares of Falconbridge or the Support Agreement between
Inco and Falconbridge (described below) having been terminated in accordance with its terms. The Waiver and Amendment added a new condition
precedent to the Arrangement in favour of Phelps Dodge that provides that Inco shall have acquired
at least 50.01% of the Falconbridge common shares under the Offer and, if Inco shall have acquired at
least two-thirds of the common shares of Falconbridge, then Inco shall have completed a subsequent
acquisition transaction in order to acquire any remaining
Falconbridge common shares, or that the Support Agreement (as defined below) shall have been terminated in accordance with its
terms without Inco having acquired any Falconbridge common shares under the Offer.
Inco and Phelps Dodge also agreed that, in the event that Inco
acquires at least 50.01% but less than two-thirds of the Falconbridge common shares, Phelps Dodge
may, with the prior consent of Inco (which consent Inco may not unreasonably withhold), postpone
the special meeting of Phelps Dodges shareholders, which meeting is to be called to consider the
amendment to Phelps Dodges restated certificate of incorporation and the issuance of Phelps Dodge common
shares pursuant to the terms of the Arrangement, until Inco has acquired at least two-thirds of the
Falconbridge common shares.
The Waiver and Amendment amended Section 9.3(b)(vi) of the Combination Agreement to provide that
Inco will be required to pay Phelps Dodge a termination payment of $925 million in certain
circumstances (increased from $475 million) from and after the date that Inco has acquired at least
50.01% of the Falconbridge common shares. The Combination Agreement had previously provided that
such increase was payable from and after the date that Inco had acquired at least two-thirds of
the Falconbridge common shares.
The Waiver and Amendment also amended Section 5.1 of the Combination Agreement to provide that Inco
may make market purchases of up to 5% of the Falconbridge common shares outstanding on the date of
the original Offer in accordance with applicable securities laws and Section 12 of the original
Offer.
Pursuant
to the Waiver and Amendment, Phelps Dodge consented to, among other
things, the
Cdn.$1.00 increase in the cash consideration offered to Falconbridge shareholders for each Falconbridge common
share under the Offer, assuming full proration, the reduction of the Minimum
Tender Condition under the Offer from 66⅔% to 50.01%, and to Inco entering into the Sixth Amendment (as defined
below), including to provide for the Falconbridge Special Dividend.
Sixth Amendment to Support Agreement between Inco and Falconbridge
On July 16, 2006, Inco entered into a sixth amending agreement (the ''Sixth Amendment) with
Falconbridge to amend the support agreement (as amended, the Support Agreement) originally
entered into by Inco and Falconbridge on October 10, 2005, as subsequently amended on January 12,
2006, February 20, 2006, March 21, 2006, May 13, 2006 and June 25, 2006, respectively.
Under the
terms of the Sixth Amendment, Inco agreed to increase the maximum
cash consideration offered to Falconbridge
common shareholders pursuant to the Offer to Cdn.$7,080,125,473, or
Cdn.$1.00 per Falconbridge common share on a prorated basis. As a
result, Falconbridge common shareholders will be entitled to elect to
receive either (a) Cdn.$60.20 in cash for each Falconbridge
common share held, or (b) 0.80312 of an Inco common share plus
Cdn.$0.05 in cash per Falconbridge common share held, subject,
in each case, to proration based upon the maximum amount of cash
available and the maximum number of Inco common shares issuable under
the Offer. Assuming all Falconbridge common shareholders tendered to the Cash Alternative (as defined
in the Offer) or all Falconbridge common shareholders tendered to the Share Alternative (as
defined in the Offer), each Falconbridge common shareholder would be entitled to receive
Cdn.$18.50 in cash and 0.55676 of an Inco common share for each Falconbridge common share
tendered, subject to adjustment for fractional shares.
Under the terms of the Sixth Amendment, Falconbridge acknowledged the reduction of the Minimum
Tender Condition under the Offer from 66⅔% to 50.01%, with the result that the Offer is subject to the condition
that there have been validly deposited under the Offer and not withdrawn at the expiry time of
the Offer such number of Falconbridge common shares which, together with any Falconbridge common
shares directly or indirectly owned by Inco, constitutes at least 50.01% of the Falconbridge common shares outstanding at the
expiry time of the Offer (calculated on a fully-diluted basis).
Also under the terms of the Sixth Amendment, Inco consented to the declaration and payment of the Falconbridge
Special Dividend and agreed that Falconbridge would be permitted to
reduce the exercise price of any option outstanding on July 16,
2006 under its stock option plans that are exercised after
July 16, 2006 by the amount of the Falconbridge Special Dividend
in respect of each Falconbridge common share for which any such
option is exercised. Inco also agreed to amend the Offer to provide that the
per share consideration under the Offer will not be reduced by the payment of the Falconbridge Special
Dividend (which would otherwise have occurred pursuant to the terms of the Offer).
The foregoing descriptions of the
Waiver and Amendment and the Sixth Amendment do not purport to be complete and are qualified
in their entirety by reference to the Waiver and Amendment and the Sixth Amendment, which are
filed as Exhibits 2.12.2 hereto and are incorporated into this report by reference.
Important Legal Information
This Form 8-K may be deemed to be solicitation material in respect of Incos proposed combination
with Falconbridge. Inco filed with the U.S. Securities and Exchange Commission (the SEC), on
October 24, 2005 and July 14, 2006, registration statements on Form F-8, which include Incos offer
and take-over bid circular, and has filed amendments thereto, which include the notices of
extension and variation, and will file further amendments thereto as required, in connection with
the proposed combination with Falconbridge. The offer and take-over bid circular and the notices
of variation and extension have been sent to shareholders of Falconbridge Limited. Inco has also
filed, and will file (if required), other documents with the SEC in connection with the proposed
combination. Falconbridge has filed a Schedule 14D-9F in connection with Incos offer and has
filed, and will file (if required), other documents regarding the proposed combination, in each
case with the SEC.
INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENTS AND ANY OTHER RELEVANT
DOCUMENTS FILED OR THAT WILL BE FILED WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION.
INVESTORS AND SECURITYHOLDERS ARE URGED TO READ INCOS SOLICITATION/RECOMMENDATION STATEMENT ON
SCHEDULE 14D-9 THAT INCO FILED WITH THE SEC ON MAY 31, 2006, AND ANY AMENDMENTS INCO MAY FILE
THERETO, AS IT CONTAINS, AND SUCH AMENDMENTS, IF ANY, WILL CONTAIN, IMPORTANT INFORMATION REGARDING
TECK COMINCOS PROPOSED COMBINATION WITH INCO.
This Form 8-K is not a solicitation of a proxy from any security holder of Inco or Phelps Dodge in
respect of Incos proposed combination with Phelps Dodge. Inco intends to file a Management
Information Circular regarding the proposed combination with the securities commissions or
equivalent regulatory authorities in Canada and to provide the Management Information Circular to
Inco shareholders and Phelps Dodge has filed a preliminary Proxy Statement on Schedule 14A
regarding the proposed combination with the SEC. WE URGE INVESTORS TO CAREFULLY READ THE
MANAGEMENT INFORMATION CIRCULAR, AND ANY AMENDMENTS INCO MAY FILE THERETO, WHEN IT BECOMES
AVAILABLE BECAUSE IT, AND ANY SUCH AMENDMENTS, IF ANY, WILL CONTAIN IMPORTANT INFORMATION ABOUT
INCO, PHELPS DODGE AND THE PROPOSED COMBINATION. WE URGE INVESTORS TO CAREFULLY READ THE PROXY
STATEMENT, AND ANY AMENDMENTS PHELPS DODGE MAY FILE THERETO, BECAUSE IT AND SUCH AMENDMENTS, IF
ANY, WILL CONTAIN IMPORTANT INFORMATION ABOUT INCO, PHELPS DODGE AND INCOS PROPOSED COMBINATION
WITH PHELPS DODGE.
Inco, Phelps Dodge and their executive officers and directors may be deemed to be participants in
the solicitation of proxies from Inco and Phelps Dodge security holders in favor of Incos