As filed with the United States Securities and Exchange
Commission on November 5, 2001.
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Freeport-McMoRan Copper & Gold Inc.
FCX Investment Ltd.
(Exact name of registrant as specified in its charter)
Delaware 1615 Poydras Street 74-2480931
(State or other New Orleans, Louisiana 70112 (I.R.S. Employer
jurisdiction of (504) 582-4000 Identification Number)
incorporation or
organization)
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(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Richard C. Adkerson Copy to:
President and L. R. McMillan, II
Chief Financial Officer Jones, Walker, Waechter,
Freeport-McMoRan Copper & Gold Inc. Poitevent, Carrere & Denegre, L.L.P.
1615 Poydras Street 201 St. Charles Avenue, 51st Floor
New Orleans, Louisiana 70112 New Orleans, Louisiana 70112
(504) 582-4000 (504) 582-8188
(Name, address, including zip
code, and telephone number,
including area code, of
agent for service)
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Approximate date of commencement of proposed sale to the public:
From time to time after this registration statement becomes effective.
If the only securities being registered on this Form are
being offered pursuant to dividend or interest reinvestment
plans, please check the following box. []
If any of the securities being registered on this Form
are to be offered on a delayed or continuous basis pursuant
to Rule 415 under the Securities Act of 1933, other than
securities offered only in connection with dividend or
interest reinvestment plans, please check the following box.[x]
If this Form is filed to register additional securities
for an offering pursuant to Rule 462(b) under the Securities
Act, please check the following box and list the Securities
Act registration statement number of the earlier effective
registration statement for the same offering. []
If this Form is a post-effective amendment filed pursuant
to Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement
number of the earlier effective registration statement for
the same offering. []
If delivery of the prospectus is expected to be made
pursuant to Rule 434, please check the following box. []
CALCULATION OF REGISTRATION FEE
Proposed Proposed
maximum maximum
Title of each Amount offering aggregate
class of securities to be price per offering Amount of
to be registered registered unit price registration fee
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8 1/4% Convertible
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Senior Notes due 2006 $603,750,000(1) $ 998.75(2) $602,995,313(2) $150,750 Class A Common Stock(3) - (3) $ - (5) $ - (5) $ - (5) Class B Common Stock(4) - (4) $ - (5) $ - (5) $ - (5)
(1)Equals the aggregate principal amount of notes that were originally issued by the registrant on August 7, 2001.
(2)Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(c), based upon the average of the bid and asked price for the securities.
(3)The number of shares of class A common stock to be issued upon conversion of the convertible notes based on an initial conversion price of $14.30 per share is 42,220,280. In addition, the amount to be registered includes an indeterminate number of shares issuable upon conversion of the convertible notes, as such amount may be adjusted due to stock splits, stock dividends and anti-dilution provisions, and otherwise in accordance with the indenture.
(4)The number of shares of class B common stock to be issued upon conversion of the convertible notes based on an initial conversion price of $14.30 per share is 42,220,280. In addition, the amount to be registered includes an indeterminate number of shares issuable upon conversion of the convertible notes, as such amount may be adjusted due to stock splits, stock dividends and anti-dilution provisions, and otherwise in accordance with the indenture.
(5)No separate consideration will be received for the common stock issuable upon conversion of the notes; therefore, no registration fee is required pursuant to Rule 457(i).
The registrants hereby amend this registration statement on such date or dates as may be necessary to delay its effective date until the registrants shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and does not solicit an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Prospectus
Subject to completion, dated November 5, 2001
Freeport-McMoRan Copper & Gold Inc.
FCX Investment Ltd.
$603,750,000
8 1/4% Convertible Senior Notes due 2006
Freeport-McMoRan Copper & Gold Inc. Class A Common Stock Class B Common Stock
Freeport-McMoRan Copper & Gold Inc. and its wholly owned subsidiary, FCX Investment Ltd., issued the notes at an issue price of $1,000 per note in a private placement in August 2001. This prospectus may be used by selling securityholders to resell notes or shares of our common stock into which the notes are convertible.
Freeport-McMoRan Copper & Gold Inc. and FCX Investment Ltd. are jointly and severally liable for the obligations under the notes. Except with respect to descriptions of the notes, the terms "we," "us," "our" and "the company" refer only to Freeport-McMoRan Copper & Gold Inc.
The notes are convertible at the option of the holder at any time on or prior to maturity into, at the option of the holder, shares of class A or class B common stock of the company. The notes are convertible at a conversion price of $14.30 per share, which is equal to a conversion rate of 69.9301 shares of class A or class B common stock per $1,000 principal amount of notes, subject to adjustment. On November 1, 2001, the closing prices of our class A and class B common stock as reported on the New York Stock Exchange were $10.70 and $11.14 per share, respectively.
We will pay interest on the notes on January 31 and July 31 of each year, beginning January 31, 2002. The notes will mature on January 31, 2006. We may redeem some or all of the notes at any time after July 31, 2004 at the redemption prices described in this prospectus.
The notes are our unsecured (except as described below) and unsubordinated obligations and rank on a parity in right of payment with all our existing and future unsecured and unsubordinated indebtedness. In addition, the notes will effectively rank junior to our secured indebtedness and our subsidiaries' liabilities.
FCX Investment has pledged a portfolio of U.S. government securities as security for the first six scheduled interest payments on the notes.
Our class A and class B common stock are traded on the New York Stock Exchange under the symbols "FCXA" and "FCX," respectively.
Investing in the notes involves significant risks that are described in the "Risk Factors" section beginning on page 10 of this Prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is November 5, 2001.
Table of Contents
Page
Forward-Looking Statements 2
Summary 3
Selected Historical Consolidated Financial
and Operating Data 8
Risk Factors 10
Refinancing Transactions 16
Use of Proceeds 19
Dividend Policy 19
Ratio of Earnings to Fixed Charges 19
Description of the Notes 20
Certain United States Federal Income Tax Considerations 33
Description of Common Stock 36
Selling Securityholders 40
Plan of Distribution 44
Legal Matters 46
Experts 46
Where You Can Find Additional Information 47
_______________________
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You should rely only on the information contained or incorporated by reference in this prospectus. We have not, and the initial purchaser has not, authorized any person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, result of operations and prospects may have changed since that date. In addition, we are not, and the initial purchaser is not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted.
FORWARD-LOOKING STATEMENTS
This prospectus contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, both as amended. All statements other than statements of historical fact are "forward-looking statements" for purposes of federal and state securities laws, including statements about anticipated sales volumes, production volumes, ore grades, capital expenditures and debt costs; statements of the plans, strategies and objectives of management for future operations; statements regarding future economic conditions or performance; statements regarding exploration activities; statements about political uncertainties, dealings with regulatory authorities or dealings with indigenous people; statements of belief; and statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words "may," "will," "estimate," "intend," "continue," "believe," "expect," "plan" or "anticipate" and other similar words. Such forward-looking statements may be contained in the sections "Summary" and "Risk Factors," among other places.
Although we believe that the expectations expressed in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and are subject to inherent risks and uncertainties, such as those disclosed in this prospectus. All forward-looking statements contained or incorporated by reference in this prospectus are made as of the date of this prospectus. We do not intend, and we undertake no obligation, to update any forward-looking statement. Currently known risk factors include, but are not limited to, the factors described in this prospectus in the section "Risk Factors." We urge you to review carefully the section "Risk Factors" in this prospectus for a more complete discussion of the risks of an investment in the notes or the common stock into which the notes are convertible.
SUMMARY
The following summary is qualified by the more detailed information appearing elsewhere in this prospectus or incorporated by reference and may not contain all of the information that is important to you.
Company Overview
We are one of the world's largest copper and gold mining companies in terms of reserves and production. We believe we are one of the lowest cost copper producers in the world, after taking into account customary credits for related gold and silver production.
Our principal operating subsidiary is PT Freeport Indonesia, a limited liability company organized under the laws of the Republic of Indonesia and domesticated in Delaware. PT Freeport Indonesia explores for, develops, mines and processes ore containing copper, gold and silver. Its operations are located in the remote rugged highlands of the Sudirman Mountain Range in the province of Irian Jaya (Papua), Indonesia, which is located on the western half of the island of New Guinea. PT Freeport Indonesia markets its concentrates containing copper, gold and silver worldwide. During 2000, PT Freeport Indonesia's share of production and sales totaled 1.4 billion pounds of copper and 1.9 million ounces of gold. For 2001, PT Freeport Indonesia's share of production and sales is expected to approximate 1.4 billion pounds of copper and nearly 2.6 million ounces of gold. We have an 85.86 percent ownership interest in this subsidiary and the Government of Indonesia has a 9.36 percent interest. PT Nusamba Mineral Industri, an Indonesian company, has most of the remaining ownership interest in PT Freeport Indonesia.
PT Freeport Indonesia's operations are conducted pursuant to an agreement, called a Contract of Work, with the Government of Indonesia. The Contract of Work allows us to conduct extensive exploration, mining and production activities in a 24,700-acre area that we call Block A. In 1988 we discovered our largest mine, Grasberg, in Block A. Grasberg contains the largest single gold reserve and one of the largest copper reserves of any mine in the world. The Contract of Work also allows us to explore for minerals in a 0.5 million-acre area that we call Block B. At December 31, 2000, PT Freeport Indonesia's share of proved and probable reserves totaled 38.9 billion pounds of copper and 50.3 million ounces of gold, all of which are located in Block A.
PT Freeport Indonesia's Contract of Work governs our rights and obligations relating to taxes, exchange controls, royalties, repatriation and other matters. The Contract of Work provides a 35 percent corporate income tax rate for PT Freeport Indonesia and a withholding tax rate of 10 percent (based on the tax treaty between Indonesia and the United States) on dividends and interest paid to us by PT Freeport Indonesia. The Contract of Work also provides for royalties on the metals that PT Freeport Indonesia sells.
Another of our operating subsidiaries, PT Irja Eastern Minerals, which we refer to as Eastern Minerals, holds an additional Contract of Work in Irian Jaya (Papua) covering approximately 1.25 million acres and conducts exploration activities under this Contract of Work. We have a 94.9 percent ownership interest in Eastern Minerals.
In 1996, we established joint ventures with Rio Tinto plc, an international mining company with headquarters in London, England. One joint venture covers PT Freeport Indonesia's mining operations in Block A. This joint venture gives Rio Tinto, through 2021, a 40 percent interest in certain assets and in production above specified levels from operations in Block A and, after 2021, a 40 percent interest in all production in Block A. Under our joint venture arrangements, Rio Tinto also has a 40 percent interest in future development and exploration projects under PT Freeport Indonesia's Contract of Work and Eastern Minerals' Contract of Work. In addition, Rio Tinto has the option to participate in 40 percent of any of our other future exploration projects in Irian Jaya (Papua).
Under another joint venture agreement, we conduct exploration activities in an area covering approximately 0.5 million acres contiguous to PT Freeport Indonesia's Block B and one of Eastern Minerals' blocks. Rio Tinto has elected to participate in 40 percent of our interest and cost in the venture.
We also smelt and refine copper concentrates in Spain, and market the refined copper products, through our wholly owned subsidiary, Atlantic Copper, S.A. Atlantic Copper produced 639.1 million pounds of new copper anodes during 2000. In addition, PT Freeport Indonesia has a 25 percent interest in PT Smelting, an Indonesian company that operates a copper smelter and refinery in Gresik, Indonesia. PT Smelting produced 383.2 million pounds of new copper anodes during 2000.
Our principal executive offices are located at 1615 Poydras Street, New Orleans, Louisiana 70112 and our telephone number is (504) 582-4000.
FCX Investment Ltd.
FCX Investment Ltd. is a wholly owned finance subsidiary of the company incorporated as a Cayman Islands exempted limited liability company in June 2001. We established FCX Investment for the purpose of co-issuing the notes and purchasing and pledging U.S. government securities as security for the benefit of the holders of the notes. See "Description of the Notes." FCX Investment does not lease or own any material facilities or other property or engage in any other material operations. FCX Investment is restricted from issuing any capital stock to any person other than the company and its subsidiaries. FCX Investment's registered office is located at Harbour Centre, 4th Floor, George Town, Grand Cayman, Cayman Islands, British West Indies.
Refinancing Transactions
We have amended our existing bank credit facilities to extend the maturities and to provide a mechanism for financing any obligations we may have under the guarantee of a commercial bank loan to Nusamba. We believe that these transactions, together with our cash flows from operations, will enable us to fund our ongoing capital expenditures and meet our debt maturities over the next several years.
The following summarizes the terms of our amended credit facilities. For a more complete description, see "Refinancing Transactions," in this prospectus.
* aggregate commitments of $585.0 million, all of which will be available to PT Freeport Indonesia and $265.0 million of which will be available to the company;
* aggregate commitments will be $734.0 million if we are called on to perform under the Nusamba guarantee;
* required repayments from available cash and certain financing proceeds and, subject to certain availability requirements, reductions in commitments by those amounts;
* conversion to a term loan on December 31, 2003, except for a $150.0 million revolver available for working capital purposes; maturity on December 31, 2005;
* interest at LIBOR plus 4% with annual increases of 0.125%, subject to potential reductions if our credit ratings improve;
* ability to fund our 7.20% senior notes due 2026, which we expect to be required to repay in November 2003;
* limitations on the amount of preferred stock we may redeem and, if by August 2003 we have not extended the maturity of a specified amount of our redeemable preferred stock beyond 2005, then we will not thereafter be permitted to redeem or pay dividends on any of our preferred stock;
* financial covenants providing for maximum debt to EBITDA levels and required debt service coverage ratios; and
* prohibitions on our ability to repurchase and pay dividends on our common stock; limitations on investments, liens and capital expenditures to specified budgets; and a requirement to implement minimum hedging protection at certain copper prices.
The Offering
The following is a brief summary description of some of the terms of this offering. For a more complete description of the terms of the notes, see "Description of the Notes" and for a description of our common stock, see "Description
of Common Stock."
Notes and common
stock offered Selling securityholders
resale of $603,750,000 aggregate
principal amount of 8 1/4% Convertible
Senior Notes due January 31, 2006 or
shares of class A or class B common
stock issuable upon conversion of
the notes.
Maturity January 31, 2006
Interest 8 1/4% per annum on the principal
amount, payable semiannually on
January 31 and July 31, beginning on
January 31, 2002.
Conversion rights The notes are convertible, at the
option of the holder, at any time on
or prior to maturity into, at the
option of the holder, shares of
class A or class B common stock of
the company at a conversion price of
$14.30 per share, which is equal to
a conversion rate of approximately
69.9301 shares of class A or class B
common stock per $1,000 principal
amount of notes. The conversion rate
is subject to adjustment. See
"Description of the Notes -
Conversion Rights."
Security FCX Investment has purchased
and pledged to the trustee
under the indenture, as
security for the exclusive
benefit of the holders of the
notes, $139.8 million of U.S.
government securities, which
will be sufficient upon
receipt of scheduled
principal and interest
payments thereon, to provide
for the payment in full of
the first six scheduled
interest payments due on the
notes. See "Description of
the Notes - Security."
Ranking The notes are unsecured (except as
described above under "Security")
and unsubordinated obligations and
rank on a parity in right of payment
with all our existing and future
unsecured and unsubordinated
indebtedness. The indenture under
which the notes have been issued
does not prevent us or our
subsidiaries from incurring
additional indebtedness, which may
be secured by some or all of our
assets, or other obligations. As of
September 30, 2001, our secured
indebtedness was $140.6 million and
our unsecured and unsubordinated
indebtedness was $955.9 million. In
addition, we are structured as a
holding company and conduct
substantially all of our business
operations through our subsidiaries.
The notes are effectively
subordinated to all existing and
future indebtedness and other
liabilities and commitments of our
subsidiaries. As of September 30,
2001, our subsidiaries had aggregate
indebtedness of $1.6 billion.
Optional redemption We may redeem all or a portion of
the notes for cash at any time after
July 31, 2004 at the redemption
prices listed in this prospectus,
plus accrued and unpaid interest
(including liquidated damages, if
any) to, but excluding, the
redemption date. See "Description of
the Notes - Redemption of Notes at
Our Option."
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Change of control Upon a change of control event, each
holder of the notes may require us
to repurchase some or all of its
notes at a repurchase price equal to
100% of the principal amount of the
notes plus accrued and unpaid
interest. The repurchase price is
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payable:
* in cash; or
* at our option, subject to the satisfaction of certain conditions, in our class A or class B (at the option of the holder) common stock. The number of shares of common stock will equal the repurchase price divided by 95% of the average of the closing sale prices of the applicable common stock for the five consecutive trading days ending on and including the third day prior to the repurchase date.
See "Description of the Notes -
Change of Control Permits
Purchase of Notes at the Option
of the Holder."
Use of proceeds The selling securityholders will
receive all of the proceeds from the
sale of the notes and common stock
under this prospectus. We will not
receive any of the proceeds from the
sales by any selling securityholders
of notes or the underlying common
stock.
Trading The notes sold pursuant to this
prospectus will no longer be
eligible for trading on the PORTAL
Market. Our class A and class B
common stock are traded on the New
York Stock Exchange under the
symbols "FCXA" and "FCX,"
respectively.
Risk Factors See "Risk Factors" and the other
information in this prospectus for a
discussion of factors you should
carefully consider before deciding
to invest in the notes.
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SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table sets forth our selected historical consolidated financial data as of and for the nine months ended September 30, 2001 and 2000, which have been derived from our unaudited consolidated financial statements, and as of and for each of the five fiscal years ended December 31, 2000, which have been derived from our audited consolidated financial statements. EBITDA and the operating data presented in the following table are unaudited. The results of operations for the nine months ended September 30, 2001 are not necessarily indicative of the results for the full year. This data should be read in conjunction with our full financial statements and notes thereto, and management's discussion and analysis of financial condition and results of operations incorporated by reference into this prospectus.
Nine Months Ended
September 30,
----------------------
2001 2000
---------- ----------
(Financial Data in Thousands,
Except Per Share Amounts)
Financial Data
Revenues $1,426,584 $1,338,777
Operating
income 449,856 273,291(a)
Net income
(loss)
applicable to
common stock 78,579 (18,564)(a)
Basic net
income (loss)
per common
share .55 (.12)(a)
Diluted net
income (loss)
per common share .54 (.12)(a)
Dividends paid
per common share - -
Basic average
shares
outstanding 143,944 156,597
Diluted average
shares
outstanding 144,907 156,597
At End of Period:
Property, plant
and equipment,
net 3,206,402 3,261,301
Total assets 4,035,684 3,981,173
Total debt 2,069,802 2,271,959
Redeemable
preferred stock 462,504 475,005
Stockholders'
equity 109,035 14,144
Other Financial Data:
Interest
expense, net 129,945 153,287
EBITDA(f) 599,280 423,712
Cash flow from
operating
activities(g) 475,117 304,921
Capital
expenditures 118,782 132,044
Cash flow
provided by
(used in)
financing
activities (196,239) (173,610)
PT Freeport
Indonesia
Operating
Data, Net of
Rio Tinto's
Interest
Copper
Production
(000s of
recoverable
pounds) 1,077,200 958,300
Sales (000s
of recoverable
pounds) 1,073,800 950,400
Average
realized price
(per pound) $.70 $.83
Net cash
production
cost cents 2.6 29.8
per pound
Gold
Production
(recoverable
ounces) 2,156,200 1,191,500
Sales
(recoverable
ounces) 2,144,600 1,197,400
Average
realized price
(per ounce) $268.70 $281.02
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Years Ended December 31,
-------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
(Financial Data in Thousands,
Except Per Share Amounts)
Financial Data
Revenues $1,868,610 $1,887,328 $1,757,132 $2,000,904 $1,905,036
Operating
income 478,700(a) 568,242(b) 577,947(c) 657,738(d) 637,309(e)
Net income
(loss)
applicable to
common stock 39,500(a) 100,787(b) 118,317(c) 208,541(d) 174,680(e)
Basic net
income (loss)
per common
share .26(a) .62(b) .67(c) 1.06(d) .90(e)
Diluted net
income (loss)
per common share .26(a) .61(b) .67(c) 1.06(d) .89(e)
Dividends paid
per common share - - .20 .90 .90
Basic average
shares
outstanding 153,997 163,613 175,353 196,392 194,910
Diluted average
shares
outstanding 154,519 164,567 175,354 197,653 196,682
At End of Period:
Property, plant
and equipment,
net 3,248,710 3,381,465 3,504,221 3,558,736 3,106,042
Total assets 3,950,741 4,082,916 4,192,634 4,152,209 3,865,534
Total debt 2,190,025 2,148,259 2,456,793 2,388,982 1,562,916
Redeemable
preferred stock 475,005 487,507 500,007 500,007 500,007
Stockholders'
equity 37,931 196,880 103,416 278,892 675,379
Other Financial Data:
Interest
expense, net 205,346 194,069 205,588 151,720 117,291
EBITDA(f) 687,975 783,722 771,878 805,431 713,117
Cash flow from
operating
activities(g) 516,020 568,784 478,827 513,552 600,524
Capital
expenditures 176,676 160,822 292,083 584,912 492,238
Cash flow
provided by
(used in)
financing
activities (333,536) (407,937) (194,803) 50,906 (101,586)
PT Freeport Indonesia
Operating Data, Net of
Rio Tinto's Interest
Copper
Production
(000s of
recoverable
pounds) 1,388,100 1,428,100 1,427,300 1,166,500 1,118,800
Sales (000s
of recoverable
pounds) 1,393,700 1,441,000 1,419,500 1,188,600 1,097,000
Average
realized price
(per pound) $.82 $.75 $.73 $.94(h) $1.02(h)
Net cash
production
cost cents 23.0 9.2 11.0 22.0 16.3
per pound)
Gold
Production
(recoverable
ounces) 1,899,500 2,379,100 2,227,700 1,798,300 1,695,200
Sales
(recoverable
ounces) 1,921,400 2,423,900 2,190,300 1,888,100 1,698,900
Average
realized price
(per ounce) $276.06 $276.53 $290.57 $346.14(i) $390.96(i)
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Nine Months Ended
September 30,
----------------------
2001 2000
---------- ----------
(Financial Data in Thousands,
Except Per Share Amounts)
PT Freeport
Indonesia, 100%
Operating Data
Ore milled
(metric tons
per day) 238,100 223,900
Average ore
grade
Copper(percent) 1.04 .99
Gold (grams
per metric ton) 1.53 .92
Gold (ounce
per metric ton) .049 .030
Recovery rates
(percent)
Copper 87.1 87.1
Gold 89.0 83.7
Copper (000s of
recoverable
pounds)
Production 1,237,200 1,112,600
Sales 1,233,600 1,103,900
Gold
(recoverable
ounces)
Production 2,816,200 1,470,800
Sales 2,798,700 1,476,100
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Years Ended December 31,
-------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
(Financial Data in Thousands,
Except Per Share Amounts)
PT Freeport
Indonesia, 100%
Operating Data
Ore milled
(metric tons
per day) 223,500 220,700 196,400 128,600 127,400
Average ore
grade
Copper(percent) 1.07 1.12 1.30 1.37 1.35
Gold (grams
per metric ton) 1.10 1.37 1.49 1.51 1.52
Gold (ounce
per metric ton) .035 .044 .048 .049 .049
Recovery rates
(percent)
Copper 88.2 84.6 86.9 85.4 83.8
Gold 84.3 83.7 85.3 81.4 77.1
Copper (000s of
recoverable
pounds)
Production 1,636,700 1,630,700 1,721,300 1,166,500 1,118,800
Sales 1,643,500 1,647,800 1,706,700 1,188,600 1,097,000
Gold
(recoverable
ounces)
Production 2,362,600 2,993,100 2,839,700 1,798,300 1,695,200
Sales 2,387,300 3,047,100 2,774,700 1,888,100 1,698,900
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(a) Includes net charges totaling $12.4 million ($8.0 million to net income or $0.05 per share) consisting of $6.0 million for contribution commitments to support small business development programs within Irian Jaya (Papua) and $7.9 million for personnel severance costs, partly offset by a $1.5 million gain for the reversal of stock appreciation rights and related costs caused by the decline in our common stock price.
(b) Includes charges totaling $8.8 million ($5.7 million to net income or $0.03 per share) consisting of $3.6 million for an early retirement program, $1.4 million for costs of stock appreciation rights caused by the increase in our common stock price and $3.8 million for certain nonrecurring costs.
(c) Includes net charges totaling $9.1 million ($4.4 million to net income or $0.03 per share) associated with the sale of corporate aircraft.
(d) Includes a $25.3 million gain ($12.3 million to net income or $0.06 per share) for the reversal of stock appreciation rights and related costs caused by the decline in our common stock price.
(e) Includes charges totaling $17.4 million ($8.0 million to net income or $0.04 per share) consisting of $12.7 million for costs of stock appreciation rights caused by the increase in our common stock price, $3.0 million for costs related to a civil disturbance and $1.7 million for an early retirement program.
(f) EBITDA represents earnings before interest expense, income taxes, depreciation and amortization. EBITDA does not represent and should not be considered as an alternative to net income or cash flow from operations as determined by generally accepted accounting principles, and EBITDA does not necessarily indicate whether cash flow will be sufficient for cash requirements. EBITDA may not necessarily be comparable to similarly titled measures reported by other companies as it is not calculated identically by all companies.
(g) Cash flow from operating activities represents net income before non-cash charges including depreciation and amortization, deferred income taxes, minority interests' share of net income, equity losses in PT Smelting and other non-cash costs. Changes in working capital also impact cash flow from operating activities.
(h) Amounts were $0.90 in 1997 and $0.97 in 1996 before hedging adjustments.
(i) Amounts were $326.08 in 1997 and $382.62 in 1996 before hedging adjustments.
RISK FACTORS
An investment in any security involves risks. Accordingly, before purchasing any securities offered by this prospectus, you should carefully consider the following factors, as well as the other information about us and our business that is contained or incorporated by reference in this prospectus and in any accompanying prospectus supplement. This prospectus includes, and any accompanying prospectus supplement may include, "forward-looking statements" within the meaning of the federal securities laws. Forward-looking statements are all statements other than statements of historical facts, such as statements regarding anticipated production volumes, sales volumes, ore grades, commodity prices, reserve estimates, capital expenditures, environmental reclamation and closure costs, political, economic and social conditions in our areas of operations, and exploration efforts and results. We caution you that these statements are not guarantees of future performance, and our actual results may differ materially from those projected, anticipated or assumed in the forward-looking statements. Important factors that can cause our actual results to differ materially from those anticipated in the forward-looking statements include the following:
Risks Related to Our Business
The terrorist attacks in the United States on September 11, 2001, as well as the United States-led response and the potential for future terrorist acts, have created economic and political uncertainties that could have a material adverse effect on our business and the prices of our securities.
The terrorist attacks that took place in the United States on September 11, 2001, as well as the United States-led response to those attacks and the potential for future terrorist acts, have caused uncertainty in the world's financial and insurance markets and may significantly increase political, economic and social instability in the geographic areas in which we operate, including the Republic of Indonesia where our primary operating assets are located. Although limited, there have been anti-American demonstrations in certain sections of Indonesia reportedly led by radical Islamic activists. Radical activists have also threatened to attack foreign assets and have called for the expulsion of United States and British citizens. While no such demonstrations have occurred in Irian Jaya (Papua) and no terrorist attacks have occurred in Indonesia, it is possible that further acts of terrorism may be directed against the United States domestically or abroad, and such acts of terrorism could be directed against companies such as ours. The attacks and the resulting economic and political uncertainties, including the potential for further terrorist acts, may cause the premiums charged for our insurance coverages to increase and may cause some coverages to be unavailable altogether. These developments may materially and adversely affect our business and profitability and the prices of our securities in ways we cannot predict at this time.
Because our primary operating assets are located in the Republic of Indonesia, our business can be adversely affected by Indonesian political, economic and social events.
Maintaining a good working relationship with the Indonesian government is important to us because all of our mining operations are located in Indonesia and are conducted pursuant to Contracts of Work with the Indonesian government. PT Freeport Indonesia's and Eastern Minerals' Contracts of Work were entered into under Indonesia's 1967 Foreign Capital Investment Law, which provides guarantees of remittance rights and protection against nationalization. These contracts also specifically provide that the Indonesian government will not nationalize or expropriate PT Freeport Indonesia's or Eastern Minerals' mining operations and that disputes with the Indonesian government must be submitted to international arbitration.
Certain government officials and others in Indonesia have called into question the validity of contracts entered into by the Government of Indonesia prior to October 1999, including PT Freeport Indonesia's Contract of Work, which was signed in December 1991. Consistent with the public position expressed by then President Abdurrahman Wahid, current President Megawati Sukarnoputri and several cabinet members have publicly stated that the Government of Indonesia will honor previously existing contracts and that they have no intention of revoking or unilaterally amending such contracts. In July 2001, Indonesia's highest political institution, the People's Consultative Assembly, elected then Vice President Megawati Sukarnoputri as the new President. The international community, including the United States, has
expressed support for the newly elected
President. In late September 2001, President Megawati
Sukarnoputri visited the United States for nine days and met
with U. S. President George W. Bush and other U. S.
Government officials.
We cannot assure you that the validity of, or our compliance with the terms of, the Contract of Work will not be challenged for political or other reasons. We intend to pursue all actions to protect our rights under the Contract of Work, which provides for international arbitration in the case of certain disputes. Notwithstanding the international arbitration provision, if a dispute arises under the Contract of Work we face the risk of having to submit to the jurisdiction of a foreign court or having to enforce the judgment of a foreign court or arbitration panel against Indonesia within its own territory.
The Contract of Work can be terminated by the Government of Indonesia if PT Freeport Indonesia does not perform its contractual obligations, which include the payment of royalties and taxes to the government and the satisfaction of certain mining, environmental, safety and health standards. Indonesian government officials have periodically raised questions regarding PT Freeport Indonesia's compliance with Indonesian environmental laws and regulations and the terms of the Contract of Work. In order to address these questions, the Government of Indonesia formed a fact-finding team in 2000 that reviewed PT Freeport Indonesia's compliance with all aspects of its Contract of Work. We cooperated fully with the fact-finding team as it performed this review and we supported this initiative as a means for the Government of Indonesia to verify PT Freeport Indonesia's compliance with its Contract of Work, including its environmental requirements. It is uncertain if or when the Indonesian government will release its report on its investigation. Although we believe that we are in material compliance with all provisions of PT Freeport Indonesia's Contract of Work, we cannot assure you that the Indonesian government's report, if and when released, will be consistent with our belief, or that our compliance with the terms of the Contract of Work will not be challenged for political or other reasons.
Indonesia continues to face political and economic uncertainties, including separatist movements and civil and religious strife in a number of provinces. In particular, social, economic and political instability in the province of Irian Jaya (Papua), where our mining operations are located, could have a material adverse impact on us if it results in damage to our property or interruption of our activities. For example, we have temporarily suspended our field exploration activities outside of Block A due to security issues and regulatory issues involving a possible conflict between our mining and exploration rights under our Contract of Work and the requirements of certain recently enacted Indonesian forestry laws. In August 1998, we suspended operations for three days at our Grasberg mine in response to a wildcat work stoppage (not authorized by the workers' union) by a group of workers, a majority of whom were employees of our contractors. The workers, who voluntarily returned to work, cited employment issues as the reasons for their work stoppage. The actions of the workers were peaceful, there was no personal injury or property damage, and our concentrate shipments were not interrupted. In March 1996, local people engaged in acts of vandalism that caused approximately $3.0 million of damages to our property and caused us to close the Grasberg mine and mill for three days as a precautionary measure, although our concentrate shipments were not interrupted.
A segment of the local population is opposing Indonesian rule over Irian Jaya (Papua), and several separatist groups have sought political independence for the province. New regional autonomy laws became effective January 1, 2001, and there is a transition period to allow the provinces to prepare for the assumption and administration of these new responsibilities. The manner in which new autonomy laws will be implemented and the degree of political and economic autonomy that is being provided to individual provinces, including Irian Jaya (Papua), is uncertain and is a current issue in Indonesian politics.
In Irian Jaya (Papua), there have been sporadic attacks on civilians by separatists and sporadic but highly publicized conflicts between separatists and the Indonesian military. On September 29, 2001, a group of separatists set fire to facilities and took over an airfield in Ilaga, Irian Jaya (Papua). The separatists occupied the airfield for three days, after which Indonesian security forces successfully reclaimed the airfield. Our mining operations continued to operate normally and were not affected by the incidents in Ilaga, which is approximately 50 miles northeast of our mining operations and separated by a rugged, 14,000-foot mountain range through which there are no roads.
No recent incidents have been reported in PT Freeport Indonesia's area of operations, where the local community leaders continue to support peaceful solutions to the complex issue of regional autonomy, although no assurances can be given that the area will remain peaceful. We have a board-approved policy statement on social and human rights, and we have comprehensive and extensive social, cultural and community development programs, to which we have committed significant financial and managerial resources. These policies and programs are designed to address the impact of our operations on the local villages and people and to provide assistance for the development of the local people. While we believe these efforts should serve to avoid damage to and disruptions of our mining operations, our operations could be damaged or disrupted by social, economic and political forces beyond our control.
In addition to the specific risks described above, we are also subject to the usual risks associated with conducting business in a foreign country. These risks include the risk of war, revolution, civil unrest, expropriation, forced modification of existing contracts, changes in the country's laws or policies, including laws or policies relating to taxation, royalties, imports, exports and currency, and the risk of having to submit to the jurisdiction of a foreign court or having to enforce the judgment of a foreign court or arbitration panel against a sovereign nation within its own territory.
We have guaranteed an obligation of an Indonesian entity, and have lent funds to the entity, and the entity may not be able to pay its debts.
In 1997 we guaranteed a $253.4 million loan from a commercial bank to PT Nusamba Mineral Industri. Nusamba used the loan proceeds plus $61.6 million of cash, for a total of $315.0 million, to purchase stock in PT Indocopper Investama, a company whose only significant asset is 9.36 percent of PT Freeport Indonesia's stock. Nusamba owns approximately 51 percent of PT Indocopper Investama's stock and we own approximately 49 percent. The loan is secured by a pledge of the PT Indocopper Investama stock owned by Nusamba and is due in March 2002. It is uncertain whether Nusamba will pay its bank debt at maturity. If we are required to perform under our guarantee of Nusamba's debt, our amended bank credit facilities provide us a mechanism to finance our guarantee obligation. We also agreed to lend Nusamba any amounts necessary to cover shortfalls between the interest payments on the loan and dividends received by Nusamba on the PT Indocopper Investama stock. At September 30, 2001, we had loaned Nusamba $65.3 million, also due in March 2002, for this purpose.
The PT Indocopper Investama stock is the only significant asset of Nusamba. The estimated fair market value of the stock, based on the current value of our common stock, is currently significantly below the $318.7 million aggregate principal amount of the commercial bank loan and our loans to Nusamba. If Nusamba does not pay the commercial bank loan when due, and we are obligated to pay the loan, we will seek to recover the PT Indocopper Investama stock as provided by the financing documents, which are governed by Indonesian law.
Servicing our debt will require a significant amount of cash, and our ability to generate sufficient cash depends on many factors, some of which are beyond our control.
Our ability to make payments on and to refinance our debt depends on our ability to generate sufficient cash flow. This, to a significant extent, is subject to commodity prices and general economic, financial, regulatory, political and other factors that are beyond our control. In addition, our ability to borrow funds in the future to service our debt will depend on our meeting the financial covenants in our amended bank credit facilities and other debt agreements we may have in the future. Future borrowings may not be available to us under our amended bank credit facilities or otherwise in amounts sufficient to enable us to pay our debt or to fund other liquidity needs. As a result, we may need to refinance all or a portion of our debt on or before maturity. Any inability to generate sufficient cash flow or refinance our debt on favorable terms could have a material adverse effect on our financial condition.
Political and economic conditions in Indonesia have had a negative effect on our credit ratings. The major credit rating agencies have had a policy of limiting the credit ratings of companies with operations limited to a particular country to the credit rating for the sovereign debt of that country. The current sovereign credit ratings of Indonesia are B3 by Moody's Investors Service and CCC+ by Standard & Poor's. Accordingly, our credit ratings
are currently B3 by
Moody's Investors Service and CCC+ by Standard & Poor's.
Our current credit ratings have an impact on the availability and cost of capital to us. As a result, in connection with our amended bank credit facilities, we have agreed to apply our future cash flows, after servicing scheduled debt payments and funding capital expenditures, to reducing amounts owed to the banks. Funding major new expansion projects would require new sources of capital, and the availability and cost of capital for projects in Indonesia is uncertain because of global financial markets' assessment of Indonesia's political and economic conditions.
Covenants in our amended credit facilities impose restrictions on us.
Our amended bank credit facilities prohibit the repurchase of, and payment of dividends on, our common stock and limit, among other things, our ability to redeem and pay dividends on our preferred stock in certain circumstances; make investments; engage in transactions with affiliates; and create liens on our assets. Further, our amended bank credit facilities require us to maintain specified financial ratios and satisfy financial condition tests. Events beyond our control, including changes in general economic and business conditions, may affect our ability to satisfy these covenants, which could result in a default under our amended bank credit facilities. If an event of default under our amended credit facilities occurs, the banks could elect to declare all amounts outstanding thereunder, together with accrued interest, to be immediately due and payable. An event of default under our amended bank credit facilities may also give rise to an event of default under our existing and future debt agreements.
Our mining operations create difficult and costly environmental challenges, and future changes in environmental laws, or unanticipated environmental impacts from our operations, could require us to incur increased costs.
Mining operations on the scale of our operations in Irian Jaya (Papua) involve significant environmental challenges. Our primary challenge is to dispose of the large amount of crushed and ground rock material, called tailings, that results from the process by which we physically separate the copper, gold and silver from the ore that we mine. Under our tailings management plan, the river system near our mine transports the tailings to the lowlands where deposits of the tailings and natural sediments are controlled through a levee system for future revegetation and reclamation. This plan has been approved by the Government of Indonesia.
Another of our major environmental challenges is managing overburden, which is the rock that must be moved aside in order to reach the ore in the mining process. In the presence of air, water and naturally occurring bacteria, some overburden can cause acid rock drainage, or acidic water containing dissolved metals which, if not properly managed, can have a negative impact on the environment. Our overburden management plan, which has been approved by the Government of Indonesia, is designed to minimize these impacts, although we cannot assure that it will do so.
Our environmental management programs, which include independent external environmental audits, are designed to manage and minimize the impact on the environment. We have expended significant financial and managerial resources to comply with Indonesian environmental regulations and the environmental permitting and approval requirements. Notwithstanding our permitting and approvals, certain Indonesian governmental officials have from time to time raised issues with respect to our tailings management plan and overburden management plan, including a suggestion that a pipeline system rather than our current system be implemented for tailings disposal. Our ongoing assessment of tailings management has identified significant unresolved technical, environmental and economic issues associated with a pipeline system.
We believe that we are in material compliance with our environmental permits and approvals. We anticipate that we will continue to spend significant financial and managerial resources on environmental compliance. In addition, changes in Indonesian environmental laws or unanticipated environmental impacts from our operations could require us to incur significant additional costs.
The volume and grade of the reserves we recover and our rates of production may be more or less than anticipated.
Our reserve amounts are determined in accordance with established mining industry practices and standards, but are estimates only. Our mines may not conform to standard geological expectations. Because ore bodies do not contain uniform grades of minerals, our metal recovery rates will vary from time to time, which will result in variations in the volumes of minerals that we can sell from period to period. Some of our reserves may become unprofitable to develop if there are unfavorable long-term market price fluctuations in copper and gold, or if there are significant increases in our operating and capital costs. In addition, our exploration programs may not result in the discovery of additional mineral deposits that we can mine profitably.
Our net income can vary significantly with fluctuations in the market prices of copper and gold.
Our revenues are derived primarily from the sale of copper concentrates, which also contain significant amounts of gold, and from the sale of copper cathodes, copper wire rod and copper wire. Most of our copper concentrates are sold under long-term contracts, but the selling price is based on world metal prices at or near the time of shipment and delivery. World metal prices for copper and gold historically have fluctuated widely and are affected by numerous factors beyond our control. Any material decrease in market prices of copper or gold would have a material adverse impact on our results of operations and financial condition.
In addition to the usual risks encountered in the mining industry, we face additional risks because our operations are located an difficult terrain in a very remote area of the world.
Our mining operations are located in steeply mountainous terrain in a very remote area in Indonesia. These conditions have required us to overcome special engineering difficulties and to develop extensive infrastructure facilities. In addition, the area receives considerable rainfall, which has led to periodic floods and mud slides. The mine site is also in an active seismic area and has experienced earth tremors from time to time. In addition to these special risks, we are also subject to the usual risks associated with the mining industry, such as the risk of encountering unexpected geological conditions that may result in cave-ins and flooding of mine areas. We have insurance involving amounts and types of coverage we believe are appropriate for our activities, but our insurance may not be sufficient to cover an unexpected natural or operating disaster.
Movements in foreign currency exchange rates or interest rates could have a negative effect on our operating results.
All of our revenues are denominated in U.S. dollars. However, some of our costs and some of our asset and liability accounts are denominated in Indonesian rupiah, Australian dollars or Spanish pesetas/euros. Generally, our results are adversely affected when the U.S. dollar weakens against these foreign currencies and positively affected when the U.S. dollar strengthens against these foreign currencies.
From time to time we have in the past and may in the future implement currency hedges intended to reduce our exposure to changes in foreign currency exchange rates. However, our hedging strategies may not be successful, and any of our unhedged foreign exchange payment requirements will continue to be subject to market fluctuations.
In addition, our amended bank credit facilities are based on fluctuating interest rates. Accordingly, an increase in interest rates could have an adverse impact on our results of operations and financial condition.
Because we are primarily a holding company, our ability to pay our debts depends upon the ability of our subsidiaries to pay us dividends and to advance us funds. In addition, our ability to participate in any distribution of our subsidiaries' assets is generally subject to the prior claims of the subsidiaries' creditors.
Because we conduct business primarily through PT Freeport Indonesia, our major subsidiary, and other subsidiaries, our ability to pay our debts depends upon the earnings and cash flow of PT Freeport Indonesia and our other subsidiaries and their ability to pay us dividends and to advance us funds. Contractual and legal restrictions applicable to our subsidiaries could also limit our ability to obtain cash from them. Our rights to participate in any
distribution of our subsidiaries' assets upon their liquidation, reorganization or insolvency would generally be subject to the prior claims of the subsidiaries' creditors, including trade creditors and preferred stockholders, if any.
Risks Related to the Notes
Our stock price has been and may continue to be volatile.
The trading price of our common stock has been and may continue to be subject to large fluctuations and, therefore, the trading price of the notes may fluctuate significantly, which may result in losses to investors. Our stock price may increase or decrease in response to a number of events and factors, including:
* current events affecting the political, economic and social situation in Indonesia;
* trends in our industry and the markets in which we operate;
* changes in the market price of the commodities we sell;
* changes in financial estimates and recommendations by securities analysts;
* acquisitions and financings;
* quarterly variations in operating results;
* the operating and stock price performance of other companies that investors may deem comparable; and
* purchases or sales of blocks of our common stock.
Part of this volatility, however, is attributable to the current state of the stock market, in which wide price swings are common. This volatility may adversely affect the prices of our common stock and the notes regardless of our operating performance.
An active trading market for the notes may not develop.
Upon their original issuance, the notes became eligible for trading on The PORTAL Market. The notes sold pursuant to this prospectus, however, will no longer be eligible for trading on The PORTAL Market. Although we intend to apply for listing on the New York Stock Exchange of the notes sold pursuant to this prospectus, we cannot assure you that an active trading market for the notes will develop or be sustained. If an active market for the notes fails to develop or be sustained, the notes could trade at prices that may be lower than the initial offering price of the notes. Whether or not the notes will trade at lower prices depends on many factors, including:
* prevailing interest rates and the markets for similar securities;
* the market price of our common stock;
* general economic conditions; and
* our financial condition, historic financial performance and future prospects.
Any Rating of the Notes May Cause Their Trading Price to Fall.
If the ratings agencies rate the notes, they may assign a lower rating than expected by investors. Rating agencies also may lower ratings on the notes in the future. If the rating agencies assign a lower than expected rating or reduce their ratings in the future, the trading price of the notes would decline.
REFINANCING TRANSACTIONS
We have amended our existing credit facilities to extend the maturities and to provide a mechanism for financing any obligations we may have under our guarantee of the commercial bank loan to Nusamba. We believe that our amended credit facilities together with our cash flows from operations will enable us to fund our ongoing capital expenditures and meet our debt maturities over the next several years. In addition to the amended credit facilities and note issuance of the notes (collectively the "refinancing transactions"), we intend to refinance or restructure our series I gold-denominated preferred stock to extend its mandatory redemption date.
Previous Credit Facilities and Maturities
Our previously existing bank credit facilities provided total availability of $1.0 billion, subject to a borrowing base that was redetermined annually. The facilities were scheduled to mature in December 2002. The outstanding balance at September 30, 2001 was $214.0 million, with $336.0 million available to PT Freeport Indonesia and $450.0 million available to the company and PT Freeport Indonesia.
The $253.4 million bank loan to PT Nusamba Mineral Industri that we guarantee matures in March 2002. It is uncertain whether Nusamba will pay its debt at maturity. If we are required to perform under our guarantee of Nusamba's debt, the amended credit facilities provide a mechanism to finance our guarantee obligation. Other significant maturities through 2006 include the expected repayment of the senior notes of $250.0 million in 2003 and $200.0 million in 2006, and the redemption of preferred stock totaling approximately $185.4 million in 2003 and $136.0 million in 2006, based on gold and silver prices as of September 28, 2001.
Amended Credit Facilities
The following summarizes the terms of our amended credit facilities.
Commitments and Availability
The aggregate commitments under the amended credit facilities total $734.0 million including $253.4 million if we are required to perform in March 2002 under the Nusamba guarantee, leaving $480.6 million currently available.
Nusamba indirectly owns 4.7% of PT Freeport Indonesia through its approximate 51% ownership of PT Indocopper Investama. To secure its commercial bank loan, Nusamba pledged its ownership in PT Indocopper Investama. If Nusamba does not pay the loan when due and we are required to perform under the guarantee, we would fund the $253.4 million obligation under the amended credit facilities and would seek to recover the PT Indocopper Investama stock as provided by the Nusamba financing documents, which are governed by Indonesian law.
Maturities and Term Loan Conversion
Amounts that we borrowed under the amended facilities mature on December 31, 2005. On December 31, 2003, all revolving loans will become term loans, except for a $150.0 million revolver for working capital purposes.
We are able to use the amounts available under the amended facilities to pay interest and principal requirements on our other debt when due. We are required to use all available cash flow after debt service and capital expenditures to reduce amounts outstanding under the amended facilities, subject to limited exceptions.
Mandatory Repayments and Reductions in Commitments
If we raise proceeds through future offerings, 25% of the proceeds from debt issuances and 50% of the proceeds from equity issuances will be available to us for general corporate purposes so long as commitments are reduced with the balance of such financing proceeds. All other proceeds from financings and all available cash of the company and PT Freeport Indonesia will be used to pay outstanding borrowings under the amended credit
facilities and the
commitments under the facilities will be reduced by those
amounts, except as necessary to maintain availability to
repay $250.0 million for the 7.20% senior notes and to
preserve the $150.0 million revolving facility that will
continue to be available through December 31, 2005.
Interest Rates and Fees
Interest rates on all loans under the facilities, including any amounts used to fund our obligations under the Nusamba guarantee, are LIBOR plus 4.0% with annual increases of 0.125% on each anniversary of the closing of the amended facilities.
Series I Gold-Denominated Preferred Stock Due in 2003
Prior to the mandatory redemption date in August 2003, we intend to refinance or restructure our obligation to redeem our series I gold-denominated preferred stock. Under the amended credit facilities, we have limitations on the amount of preferred stock we may redeem and, if by August 2003 we have not extended the maturity of 80% of the series I gold-denominated preferred stock beyond 2005, we will not thereafter be permitted to redeem or pay dividends on any of our preferred stock.
Other Covenants
The covenants under the amended credit facilities include (a) a minimum consolidated debt service coverage ratio of 1.25:1.0 through December 31, 2002, and thereafter 1.5:1.0, and (b) a maximum ratio of consolidated debt to EBITDA equal to 4.25:1.0 through September 30, 2002, and thereafter 3.5:1.0. The covenants also include prohibitions on common stock dividends and common stock repurchases, prohibitions on changes in control of the company or PT Freeport Indonesia, limitations on capital expenditures to specified budgets, limitations on investments, limitations on liens, limitations on transactions with affiliates, and a requirement to implement minimum hedging protection for copper prices under certain circumstances.
Security and Guarantees
The obligations of the company and PT Freeport Indonesia under the amended credit facilities are secured by a first security lien on most of PT Freeport Indonesia's assets and by the company's pledge of (1) 50.1% of the outstanding capital stock of PT Freeport Indonesia, (2) the approximate 49% of the outstanding capital stock of PT Indocopper Investama owned by us and (3) the approximate 51% of the outstanding capital stock of PT Indocopper Investama securing the original Nusamba loan, if acquired by us. PT Freeport Indonesia's obligations continue to be secured by its pledge of its rights under the Contract of Work. In addition, PT Freeport Indonesia has guaranteed the company's obligations under the amended credit facilities.
Revised Debt and Redeemable Preferred Stock Maturities
Following is a summary of our debt and redeemable
preferred stock maturities under the amended credit
facilities, including the Nusamba loan maturity, based on
loan balances as of September 30, 2001, and gold and silver
prices (which determine the preferred stock redemption
amounts) as of September 28, 2001:
2001 2002 2003 2004 2005 2006 Thereafter
----- ------ ------ ----- ------ -------- ------
(In Millions)
Bank credit
facilities(a) $ - $ - $ - $ - $214.0 $ - $ -
Infrastructure
financings and 16.4 112.5 56.9 62.3 45.6 47.7 187.1
equipment loans
7.20% Senior
Notes due 2026(b) - - 250.0 - - - -
7.50% Senior
Notes due 2006(c) - - - - - 200.0 -
8 1/4% Convertible
Senior Notes
due 2006 - - - - - 603.8 -
Atlantic Copper
facilities and
other 3.0 75.6 20.1 10.1 24.1 24.1 116.5
----- ------ ------ ----- ------ -------- ------
Total debt
maturities 19.4 188.1 327.0 72.4 283.7 875.6 303.6
Nusamba loan
guarantee(d) - - - - 253.4 - -
Redeemable
preferred
stock(e) - 10.9 185.4 10.9 10.9 136.0 -
----- ------ ------ ----- ------ -------- ------
Total
maturities $19.4 $199.0 $512.4 $83.3 $548.0 $1,011.6 $303.6
===== ====== ====== ===== ====== ======== ======
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(a) Reflects December 2005 maturity based on amended bank credit facilities closed on October 19, 2001.
(b) Although due in 2026, the holders of the 7.20% senior notes may, and are expected to, elect early repayment in November 2003.
(c) Due November 15, 2006, after the maturity of the convertible senior notes.
(d) If we are required to perform under this guarantee in March 2002, we intend to fund the $253.4 million obligation under our amended credit facilities.
(e) Represents $10.9 million each year for our silver-denominated preferred stock, $174.5 million in August 2003 for our series I gold- denominated preferred stock, and $125.1 million in February 2006 for our series II gold-denominated preferred stock.
Increased Cost of Debt
In connection with the amended bank credit facilities, we incurred premiums, fees and expenses that resulted in a cash outlay of approximately $19.0 million. This cash outlay, together with our refinancing transactions, results in an expected approximate 125 basis-point increase in our average borrowing cost.
USE OF PROCEEDS
The selling securityholders will receive all of the proceeds from the sale of the notes and common stock under this prospectus. We will not receive any of the proceeds from the sale by any selling shareholders of notes or the underlying common stock.
DIVIDEND POLICY
In December 1998, in response to low commodity market prices for copper and gold, our board of directors authorized the elimination of the regular quarterly cash dividend on our common stock. Our amended bank credit facilities prohibit the payment of dividends on our common stock. As a result, for the foreseeable future, we do not anticipate declaring or paying any cash dividends on our common stock. Any future determination to declare or pay cash dividends will be made by our board of directors in light of our credit facilities, earnings, financial position, capital requirements and such other factors as our board of directors deems relevant at such time.
RATIO OF EARNINGS TO FIXED CHARGES
Our ratio of earnings to fixed charges was as follows for the years and periods indicated.
Nine months ended
Years ended December 31, September 30,
------------------------------------- -----------------
1996 1997 1998 1999 2000 2000 2001
---- ---- ---- ---- ---- ---- ----
4.5x 3.8x 2.5x 2.9x 2.3x 1.8x 3.3x
|
For this calculation, earnings consist of (1) income from continuing operations before income taxes, (2) minority interests and (3) fixed charges. Fixed charges include interest and that portion of rent our management believes to be representative of interest.
DESCRIPTION OF THE NOTES
The notes were issued under an indenture between us and The Bank of New York, as trustee, dated August 7, 2001. The terms of the notes include those provided in the indenture and those provided in the registration rights agreement, which we entered into with the initial purchaser of the notes. As used in this description, the words "we," "us," or "our" refers to Freeport-McMoRan Copper & Gold Inc. and FCX Investment Ltd. as co-obligors of the notes and the name "Freeport-McMoRan" refers to Freeport-McMoRan Copper & Gold Inc.
The following description of provisions of the notes is not complete and is subject to, and qualified in its entirety by reference to, the notes, the indenture and the registration rights agreement. We will provide you with a copy of any of the foregoing documents without charge upon request.
General
The notes are our general unsecured (except to the extent described under "Security" below) and unsubordinated obligations and are convertible into class A or class B common stock of Freeport-McMoRan, at the option of the holders, as described under "Conversion Rights" below. The notes are limited to $603,750,000 aggregate principal amount and will mature on January 31, 2006, unless earlier redeemed by us or repurchased by us at the option of the holder upon the occurrence of a Change of Control (as defined below).
The notes bear interest from August 7, 2001 at the rate of 8 1/4% per year. Interest is payable semi-annually on January 31 and July 31 of each year to holders of record at the close of business on the preceding January 15 and July 15, respectively, beginning January 31, 2002. We may pay interest on notes represented by certificated notes by check mailed to such holders. However, a holder of notes with an aggregate principal amount in excess of $5,000,000 is paid by wire transfer in immediately available funds at the election of such holder. Interest is computed on the basis of a 360-day year comprised of twelve 30-day months. Interest will cease to accrue on a note upon its maturity, conversion, redemption or purchase by us upon a Change of Control.
Principal is payable, and the notes may be presented for conversion, registration of transfer and exchange, without service charge, at our office or agency in New York City, which shall initially be the office or agency of the trustee in New York, New York. See "Form, Denomination and Registration" below.
The indenture does not contain any financial covenants or any restrictions on the payment of dividends, the repurchase of our securities or the incurrence of indebtedness. The indenture also does not contain any covenants or other provisions that afford protection to holders of notes in the event of a highly leveraged transaction or a Change of Control of Freeport-McMoRan except to the extent described under "Change of Control Permits Purchase of Notes at the Option of the Holder" below.
Security
FCX Investment has purchased and pledged to the trustee as security for the exclusive benefit of the holders of the notes (and not for the benefit of our other creditors), U.S. government securities in the amount of $139.8 million to provide for payment in full of the first six scheduled interest payments due on the notes.
The U.S. government securities have been pledged by FCX Investment to the trustee for the exclusive benefit of the holders of the notes and are held by the trustee in a pledge account. Immediately prior to an interest payment date, the trustee will release from the pledge account proceeds sufficient to pay interest then due on the notes. A failure to pay interest on the notes when due through the first six scheduled interest payment dates will constitute an immediate event of default under the indenture, with no grace period.
The pledged U.S. government securities and the pledge account also secure the repayment of the principal amount and premium on the notes. If prior to July 31, 2004
* an event of default under the notes occurs and is continuing and
* the trustee or the holders of 25% in aggregate principal amount of the notes accelerate the notes by declaring the principal amount of the notes to be immediately due and payable (by written consent, at a meeting of note holders or otherwise), except for the occurrence of an event of default relating to our bankruptcy, insolvency or reorganization, upon which the notes will be accelerated automatically.
then the proceeds from the pledged U.S. government securities will be promptly released to note holders, subject to the automatic stay provisions of bankruptcy law, if applicable. Distributions from the pledge account will be applied:
* first, to any accrued and unpaid interest on the notes, and
* second, to the extent available, to the repayment of a portion of the principal amount of the notes.
However, if any event of default is cured prior to the acceleration of the notes by the trustee or holders of the notes referred to above, the trustee and the holders of the notes will not be able to accelerate the notes as a result of that event of default.
For example, if the first two interest payments were made when due but the third interest payment was not made when due and the note holders promptly exercised their right to declare the principal amount of the notes to be immediately due and payable then, assuming automatic stay provisions of bankruptcy law are inapplicable and the proceeds of the pledged U.S. government securities are promptly distributed from the pledge account,
* an amount equal to the interest payment due on the third interest payment would be distributed from the pledge account as accrued interest and
* the balance of the proceeds of the pledge account would be distributed as a portion of the principal amount of the notes.
In addition, note holders would have an unsecured claim against the issuer for the remainder of the principal amount of their notes.
Once we make the first six scheduled interest payments on the notes, all of the remaining pledged U.S. government securities, if any, will be released to FCX Investment from the pledge account and thereafter the notes will be unsecured.
Conversion Rights
The holders of notes may, at any time prior to the close of business on the final maturity date of the notes, convert any outstanding notes (or portions thereof) into, at the option of the holders, class A or class B common stock of Freeport-McMoRan, initially at a conversion price of $14.30 per share of class A or class B common stock, which is equal to a conversion rate of approximately 69.9301 shares of class A or class B common stock per $1,000 principal amount of notes. The conversion rate is subject to adjustment upon the occurrence of some events described below. Holders may convert notes only in denominations of $1,000 and whole multiples of $1,000. Except as described below, no adjustment will be made on conversion of any notes for interest accrued thereon or dividends paid on any common stock. Notwithstanding the above, if notes are converted after a record date but prior to the next succeeding interest payment date, holders of such notes at the close of business on the record date will receive the interest payable on such notes on the corresponding interest payment date notwithstanding the conversion. Such notes, upon surrender for conversion, must be accompanied by funds equal to the amount of interest payable on the principal amount of notes so converted, unless such notes have been called for redemption on a redemption date that occurs after a regular record date and on or prior to the third business day after the interest payment date to which it relates, in which case no such payment shall be required. We are not required to issue fractional shares of common stock upon conversion of notes and instead will pay a cash adjustment based upon the market price of the common stock on the last trading day before the date of the conversion. In the case of notes
called for redemption, conversion rights will expire at the close of business on the business day preceding the date fixed for redemption, unless we default in payment of the redemption price.
A holder may exercise the right of conversion by delivering the note to be converted to the specified office of a conversion agent, with a completed notice of conversion, together with any funds that may be required as described in the preceding paragraph. The conversion date will be the date on which the notes, the notice of conversion and any required funds have been so delivered. A holder delivering a note for conversion will not be required to pay any taxes or duties relating to the issuance or delivery of the common stock for such conversion, but will be required to pay any tax or duty which may be payable relating to any transfer involved in the issuance or delivery of the common stock in a name other than the holder of the note. Certificates representing shares of common stock will be issued or delivered only after all applicable taxes and duties, if any, payable by the holder have been paid. If any note is converted prior to the expiration of the holding period applicable for sales thereof under Rule 144(k) under the Securities Act (or any successive provision), the common stock issuable upon conversion will not be issued or delivered in a name other than that of the holder of the note unless the applicable restrictions on transfer have been satisfied.
The initial conversion rate will be adjusted for certain events, including:
* the issuance of Freeport-McMoRan common stock as a dividend or distribution on Freeport-McMoRan common stock;
* certain subdivisions and combinations of Freeport-McMoRan common stock;
* the issuance to all holders of Freeport-McMoRan common stock of certain rights or warrants to purchase Freeport-McMoRan common stock (or securities convertible into Freeport-McMoRan common stock) at less than (or having a conversion price per share less than) the current market price of Freeport-McMoRan common stock;
* the dividend or other distribution to all holders of Freeport-McMoRan common stock or shares of Freeport-McMoRan capital stock (other than common stock) of evidences of indebtedness or assets (including securities, but excluding (A) those rights and warrants referred to above, (B) dividends and distributions in connection with a reclassification, change, consolidation, merger, combination, sale or conveyance resulting in a change in the conversion consideration pursuant to the second succeeding paragraph or (C) dividends or distributions paid exclusively in cash);
* dividends or other distributions consisting exclusively of cash to all holders of Freeport-McMoRan common stock to the extent that such distributions, combined together with (A) all other such all-cash distributions made within the preceding 12 months for which no adjustment has been made plus (B) any cash and the fair market value of other consideration paid for any tender offers by Freeport-McMoRan or any of its subsidiaries for Freeport-McMoRan common stock concluded within the preceding 12 months for which no adjustment has been made, exceeds 5% of our market capitalization on the record date for such distribution; market capitalization is the product of the then current market price of Freeport-McMoRan common stock times the number of shares of Freeport-McMoRan common stock then outstanding; and
* the purchase of Freeport-McMoRan common stock pursuant to a tender offer made by Freeport-McMoRan or any of its subsidiaries to the extent that the same involves an aggregate consideration that, together with (A) any cash and the fair market value of any other consideration paid in any other tender offer by Freeport-McMoRan or any of its subsidiaries for Freeport-McMoRan common stock expiring within the 12 months preceding such tender offer for which no adjustment has been made plus (B) the aggregate amount of any all-cash distributions referred to in the immediately preceding bullet above to all holders of Freeport-McMoRan common stock within 12 months preceding the expiration of tender offer for which no adjustments have been made, exceeds 5% of our market capitalization on the expiration of such tender offer.
No adjustment in the conversion rate will be required unless such adjustment would require a change of at least 1% in the conversion rate then in effect at such time. Any adjustment that would otherwise be required to be made shall be carried forward and taken into account in any subsequent adjustment. Except as stated above, the conversion rate will not be adjusted for the issuance of our common stock or any securities convertible into or exchangeable for our common stock or carrying the right to purchase any of the foregoing.
Under the Rights Agreement of Freeport-McMoRan, upon conversion of the notes into Freeport-McMoRan common stock, to the extent that the Rights Agreement is still in effect upon conversion, you will receive, in addition to the Freeport-McMoRan common stock, the rights under the Rights Agreement whether or not the rights have separated from the Freeport-McMoRan common stock at the time of conversion, subject to certain limited exceptions.
In the case of:
* any reclassification or change of Freeport-McMoRan common stock (other than changes resulting from a subdivision or combination) or
* a consolidation, merger or combination involving Freeport-McMoRan or a sale or conveyance to another corporation of all or substantially all of Freeport-McMoRan's property and assets,
in each case as a result of which holders of Freeport-McMoRan common stock are entitled to receive stock, other securities, other property or assets (including cash or any combination thereof) with respect to or in exchange for Freeport-McMoRan common stock, the holders of the notes then outstanding will be entitled thereafter to convert those notes into the kind and amount of shares of stock, other securities or other property or assets (including cash or any combination thereof) which they would have owned or been entitled to receive upon such reclassification, change, consolidation, merger, combination, sale or conveyance had such notes been converted into Freeport-McMoRan common stock immediately prior to such reclassification, change, consolidation, merger, combination, sale or conveyance.
We may not become a party to any such transaction unless its terms are consistent with the foregoing.
If a taxable distribution to holders of Freeport-McMoRan common stock or other transaction occurs which results in any adjustment of the conversion price, the holders of notes may, in certain circumstances, be deemed to have received a distribution subject to U.S. income tax as a dividend. In certain other circumstances, the absence of an adjustment may result in a taxable dividend to the holders of common stock. See "Certain United States Federal Income Tax Considerations."
We may from time to time, to the extent permitted by law, reduce the conversion price of the notes by any amount for any period of at least 20 days. In that case we will give at least 15 days' notice of such decrease. We may make such reductions in the conversion price, in addition to those set forth above, as the board of directors deems advisable to avoid or diminish any income tax to holders of Freeport-McMoRan common stock resulting from any dividend or distribution of stock (or rights to acquire stock) or from any event treated as such for income tax purposes.
Ranking
The notes are our unsecured (except to the extent described under "Security" above) and unsubordinated obligations. The notes rank on a parity (except to the extent described under "Security" above) in right of payment with all of our existing and future unsecured and unsubordinated indebtedness. However, the notes are subordinated to our existing and future secured indebtedness as to the assets securing such indebtedness. As of September 30, 2001, our secured indebtedness was $140.6 million and our unsecured and unsubordinated indebtedness was $955.6 million.
In addition, the notes are effectively subordinated to all existing and future liabilities of our subsidiaries. Freeport-McMoRan is a holding company and conducts business through its various subsidiaries. As a result,
Freeport-McMoRan's cash flow and consequent ability to meet its debt obligations primarily depend on the earnings of its subsidiaries, and on dividends and other payments from its subsidiaries. Under certain circumstances, contractual and legal restrictions, as well as the financial condition and operating requirements of Freeport-McMoRan's subsidiaries, could limit its ability to obtain cash from its subsidiaries for the purpose of meeting debt service obligations, including the payment of principal and interest on the notes. Any rights to receive assets of any subsidiary upon its liquidation or reorganization and the consequent right of the holders of the notes to participate in those assets will be subject to the claims of that subsidiary's creditors, including trade creditors, except to the extent that Freeport-McMoRan is recognized as a creditor of that subsidiary, in which case its claims would still be subordinate to any security interests in the assets of that subsidiary. As of September 30, 2001, our subsidiaries had aggregate indebtedness of $1.6 billion.
Redemption of Notes at Our Option
The notes are not redeemable prior to July 31, 2004. At any time on or after that date, we may redeem the notes for cash, in whole or in part, on at least 30 but not more than 60 days' notice, at the following prices (expressed in percentages of the principal amount), together with accrued and unpaid interest to, but excluding, the date fixed for redemption. However, if a redemption date is an interest payment date, the semi-annual payment of interest becoming due on such date shall be payable to the holder of record as of the relevant record date and the redemption price shall not include such interest payment.
During the twelve months commencing July 31 of the years set forth below:
Year Redemption Price 2004 102.75% 2005 and thereafter 100.92% |
If we do not redeem all of the notes, the trustee will select the notes to be redeemed in principal amounts of $1,000 or whole multiples of $1,000 by lot or on a pro rata basis. If any notes are to be redeemed in part only, a new note or notes in principal amount equal to the unredeemed principal portion thereof will be issued. If a portion of a holder's notes is selected for partial redemption and the holder converts a portion of its notes, the converted portion will be deemed to be taken from the portion selected for redemption.
No sinking fund is provided for the notes.
Change of Control Permits Purchase of Notes at the Option of the Holder
If a Change of Control occurs, each holder of notes will have the right to require us to repurchase all of that holder's notes not previously called for redemption, or any portion of those notes that is equal to $1,000 or a whole multiple of $1,000, on the date that is 45 days after the date we give notice at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, together with interest accrued and unpaid to, but excluding, the repurchase date.
Instead of paying the repurchase price in cash, we may pay the repurchase price in either, at the option of the holder, class A or class B common stock of Freeport-McMoRan if we so elect in the notice referred to below. The number of shares of common stock a holder will receive will equal the repurchase price divided by 95% of the average of the closing sale prices of the applicable common stock for the five trading days immediately preceding and including the third day prior to the repurchase date. However, we may not pay in common stock unless we satisfy certain conditions prior to the repurchase date as provided in the indenture.
Within 30 days after the occurrence of a Change of Control, we are required to give notice to all holders of notes, as provided in the indenture, of the occurrence of the Change of Control and of their resulting repurchase right. We must also deliver a copy of our notice to the trustee. To exercise the repurchase right, a holder of notes must deliver prior to or on the repurchase date irrevocable written notice to the trustee of the holder's exercise of its repurchase right, together with the notes with respect to which the right is being exercised. A "Change of Control"
will be deemed to have occurred at such time after the original issuance of the notes when the following has occurred:
* any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), acquires the beneficial ownership (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be deemed to have "beneficial ownership" of all securities that such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, through a purchase, merger or other acquisition transaction, of 50% or more of the total voting power of the total outstanding voting stock of Freeport-McMoRan other than an acquisition by us, any of our subsidiaries or any of our employee benefit plans;
* Freeport-McMoRan consolidates with, or merges with or into, another person or conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to any person, or any person consolidates with or merges with or into Freeport-McMoRan, other than:
* any transaction (A) that does not result in any reclassification (excluding a reclassification combining Freeport-McMoRan's class A and class B common stock into one class), conversion, exchange or cancellation of outstanding shares of Freeport-McMoRan's capital stock and (B) pursuant to which holders of Freeport-McMoRan's capital stock immediately prior to the transaction have the entitlement to exercise, directly or indirectly, 50% or more of the total voting power of all shares of Freeport-McMoRan's capital stock entitled to vote generally in the election of directors of the continuing or surviving person immediately after the transaction; and
* any merger solely for the purpose of changing Freeport-McMoRan's jurisdiction of incorporation and resulting in a reclassification, conversion or exchange of outstanding shares of common stock solely into shares of common stock of the surviving entity;
* during any consecutive two-year period, individuals who at the beginning of that two-year period constituted the board of directors of Freeport-McMoRan (together with any new directors whose election to such board of directors, or whose nomination for election by stockholders, was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the board of directors of Freeport-McMoRan then in office; or
* Freeport-McMoRan's stockholders pass a special resolution approving a plan of liquidation or dissolution and no additional approvals of stockholders are required under applicable law to cause a liquidation or dissolution.
The definition of Change of Control includes a phrase relating to the lease, transfer, conveyance or other disposition of "all or substantially all" of Freeport-McMoRan's assets. There is no precise established definition of the phrase "substantially all" under applicable law. Accordingly, the ability of a holder of notes to require us to repurchase such notes as a result of a lease, transfer, conveyance or other disposition of less than all of Freeport-McMoRan's assets may be uncertain.
Our right to pay the repurchase price in common stock is subject to our satisfying various conditions, including:
* the registration of the common stock under the Securities Act and the Exchange Act, if required; and
* any necessary qualification or registration under applicable state securities law or the availability of an exemption from such qualification and registration.
If such conditions are not satisfied with respect to a holder prior to the close of business on the repurchase date, we will pay the repurchase price of the notes to the holder entirely in cash. We may not change the form of consideration to be paid for the notes once we have given the notice that we are required to give to holders of notes, except as described in the first sentence of this paragraph.
We will comply with the provisions of any tender offer rules under the Exchange Act that may then be applicable, and will file any schedule required under the Exchange Act in connection with any offer by us to purchase notes at the option of the holders of notes upon a Change of Control. In some circumstances, the Change of Control purchase feature of the notes may make more difficult or discourage a takeover of us and thus the removal of incumbent management. The Change of Control purchase feature, however, is not the result of management's knowledge of any specific effort to accumulate shares of common stock or to obtain control of us by means of a merger, tender offer, solicitation or otherwise, or part of a plan by management to adopt a series of anti-takeover provisions. Instead, the Change of Control purchase feature is the result of negotiations between us and the initial purchaser.
We may to the extent permitted by applicable law, at any time purchase the notes in the open market or by tender at any price or by private agreement. Any note so purchased by us may, to the extent permitted by applicable law, be reissued or resold or may be surrendered to the trustee for cancellation. Any notes surrendered to the trustee may not be reissued or resold and will be canceled promptly.
The foregoing provisions would not necessarily protect holders of the notes if highly leveraged or other transactions involving us occur that may adversely affect holders. Our ability to repurchase notes upon the occurrence of a Change of Control is subject to important limitations. The occurrence of a Change of Control could cause an event of default under, or be prohibited or limited by, the terms of indebtedness that we may incur in the future. Further, we cannot assure you that we would have the financial resources, or would be able to arrange financing, to pay the repurchase price for all the notes that might be delivered by holders of notes seeking to exercise the repurchase right. Any failure by us to repurchase the notes when required following a Change of Control would result in an event of default under the indenture. Any such default may, in turn, cause a default under indebtedness that we may incur in the future.
Events of Default
Each of the following will constitute an event of default under the indenture:
(1) our failure to pay when due the principal of or premium, if any, on any of the notes at maturity, upon redemption or exercise of a repurchase right or otherwise;
(2) our failure to pay an installment of interest (including liquidated damages, if any) on any of the notes for 30 days after the date when due; provided that a failure to make any of the first six scheduled interest payments on the notes on the applicable interest payment date will constitute an event of default with no grace or cure period;
(3) failure by us to deliver shares of common stock, together with cash instead of fractional shares, when those shares of common stock, or cash instead of fractional shares, are required to be delivered following conversion of a note, and that default continues for 10 days;
(4) failure by us to give the notice regarding a Change of Control within 30 days of the occurrence of the Change of Control;
(5) our failure to perform or observe any other term, covenant or agreement contained in the notes or the indenture for a period of 60 days after written notice of such failure, requiring us to remedy the same, shall have been given to us by the trustee or to us and the trustee by the holders of at least 25% in aggregate principal amount of the notes then outstanding;
(6) in the event of either (a) our failure or the failure of any of our significant subsidiaries to make any payment by the end of the applicable grace period, if any, after the final scheduled payment date for such payment with respect to any indebtedness for borrowed money in an aggregate principal amount in excess of $10 million, or (b) the acceleration of indebtedness for borrowed money of the company or any of our significant subsidiaries in an aggregate amount in excess of $10 million because of a default with respect to such indebtedness, without such indebtedness referred to in either (a) or (b) above having been discharged, cured, waived, rescinded or annulled, for a period of 30 days after written notice to us by the trustee or to us and the trustee by holders of at least 25% in aggregate principal amount of the notes then outstanding;
(7) certain events of our bankruptcy, insolvency or reorganization; and
(8) the failure of the pledge agreement to be in full force and effect or to give the trustee the liens, rights powers and privileges purported to be created thereby.
The term "significant subsidiary" means a subsidiary, including its subsidiaries, that meets any of the following conditions:
* Freeport-McMoRan's and its other subsidiaries' investments in and advances to the subsidiary exceed 20% of the total assets of Freeport-McMoRan and its subsidiaries consolidated as of the end of the most recently completed fiscal year;
* Freeport-McMoRan's and its other subsidiaries' proportionate share of the total assets (after intercompany eliminations) of the subsidiary exceeds 20% of the total assets of Freeport-McMoRan and its subsidiaries consolidated as of the end of the most recently completed fiscal year; or
* Freeport-McMoRan's and its other subsidiaries' equity in the income from continuing operations before income taxes, extraordinary items and cumulative effect of a change in accounting principle of the subsidiary exceeds 20% of such income of Freeport-McMoRan and its subsidiaries consolidated for the most recently completed fiscal year.
The indenture provides that the trustee shall, within 90 days of the occurrence of a default, give to the registered holders of the notes notice of all uncured defaults known to it, but the trustee shall be protected in withholding such notice if it, in good faith, determines that the withholding of such notice is in the best interest of such registered holders, except in the case of a default in the payment of the principal of, or premium, if any, or interest on, any of the notes when due or in the payment of any redemption or repurchase obligation.
If an event of default specified in clause (7) above
occurs and is continuing, then automatically the principal
of all the notes and the interest thereon shall become
immediately due and payable. If an event of default shall
occur and be continuing, other than with respect to clause
(7) above (the default not having been cured or waived as
provided under "Modifications and Waiver" below), the
trustee or the holders of at least 25% in aggregate
principal amount of the notes then outstanding may declare
the notes due and payable at their principal amount together
with accrued interest, and thereupon the trustee may, at its
discretion, proceed to protect and enforce the rights of the
holders of notes by appropriate judicial proceedings. Such
declaration may be rescinded or annulled with the written
consent of the holders of a majority in aggregate principal
amount of the notes then outstanding upon the conditions
provided in the indenture. However, if an event of default
is cured prior to such declaration by the trustee or holders
of the notes as discussed above, the trustee and the holders
of the notes will not be able to make such declaration as a
result of that cured event of default.
Overdue payments of interest, liquidated damages and premium, if any, and principal shall accrue interest at 10 1/4%.
The indenture contains a provision entitling the trustee, subject to the duty of the trustee during default to act with the required standard of care, to be indemnified by the holders of notes before proceeding to exercise any
right or power under the indenture at the request of such holders. The indenture provides that the holders of a majority in aggregate principal amount of the notes then outstanding through their written consent may direct the time, method and place of conducting any proceeding for any remedy available to the trustee or exercising any trust or power conferred upon the trustee.
We are required to furnish annually to the trustee a statement as to the fulfillment of our obligations under the indenture.
Consolidation, Merger or Assumption
We may, without the consent of the holders of notes, consolidate with, merge into or transfer all or substantially all of our assets to any other corporation organized under the laws of the United States or any of its political subdivisions provided that:
* the surviving corporation assumes all our obligations under the indenture and the notes;
* at the time of such transaction, no event of default, and no event which, after notice or lapse of time, would become an event of default, shall have happened and be continuing; and
* certain other conditions are met.
Modifications and Waiver
The indenture (including the terms and conditions of the notes) may be modified or amended by us and the trustee, without the consent of the holder of any note, for the purposes of, among other things:
* adding to our covenants for the benefit of the holders of notes;
* surrendering any right or power conferred upon us;
* providing for the assumption of our obligations to the holders of notes in the case of a merger, consolidation, conveyance, transfer or lease;
* reducing the conversion price, provided that the reduction will not adversely affect the interests of holders of notes in any material respect;
* complying with the requirements of the SEC in order to effect or maintain the qualification of the indenture under the Trust Indenture Act of 1939, as amended;
* making any changes or modification to the indenture necessary in connection with the registration of the notes under the Securities Act as contemplated by the registration rights agreement, provided that this action does not adversely affect the interest of the holders of the notes in any material respects;
* curing any ambiguity or correcting or supplementing any defective provision contained in the indenture; provided that such modification or amendment does not adversely affect the interests of the holders of the notes in any material respect; or
* adding or modifying any other provisions which we and the trustee may deem necessary or desirable and which will not adversely affect the interests of the holders of notes in any material respect.
Modifications and amendments to the indenture or to the terms and conditions of the notes may also be made, and past default by us may be waived with the written consent of the holders of at least a majority in
aggregate principal amount
of the notes at the time outstanding. However, no such
modification, amendment or waiver may, without the written
consent or the affirmative vote of the holder of each note
so affected:
* change the maturity of the principal of or any installment of interest on that note (including any payment of liquidated damages);
* reduce the principal amount of, or any premium or interest on (including any payment of liquidated damages), any note;
* change the currency of payment of such note or interest thereon;
* impair the right to institute suit for the enforcement of any payment on or with respect to any note;
* except as otherwise permitted or contemplated by provisions concerning corporate reorganizations, adversely affect the repurchase option of holders upon a Change of Control or the conversion rights of holders of the notes;
* modify the provisions of the indenture relating to the pledge of securities as contemplated under "- Security" above in a manner that adversely affects the interests of the holders of notes; or
* reduce the percentage in aggregate principal amount of notes outstanding necessary to modify or amend the indenture or to waive any past default.
Form, Denomination and Registration
The notes were issued in fully registered form, without coupons, in denominations of $1,000 principal amount and whole multiples of $1,000.
Global Notes: Book-Entry Form. The notes were offered only to qualified institutional buyers as defined in Rule 144A under the Securities Act ("QIBs"). Except as provided below, the notes are evidenced by one or more global notes deposited with the trustee as custodian for The Depository Trust Company, New York, New York ("DTC"), and registered in the name of Cede & Co. as DTC's nominee. The global notes and any notes issued in exchange therefor are subject to certain restrictions on transfer set forth in the global notes and in the indenture and bear a restrictive legend. Record ownership of the global notes may be transferred, in whole or in part, only to another nominee of DTC or to a successor of DTC or its nominee, except as set forth below. A QIB may hold its interests in a global note directly through DTC if such QIB is a participant in DTC, or indirectly through organizations which are direct DTC participants. Transfers between direct DTC participants will be effected in the ordinary way in accordance with DTC's rules and will be settled in same-day funds. QIBs may also beneficially own interests in the global notes held by DTC through certain banks, brokers, dealers, trust companies and other parties that clear through or maintain a custodial relationship with a direct DTC participant, either directly or indirectly. So long as Cede & Co., as nominee of DTC, is the registered owner of the global notes, Cede & Co. for all purposes will be considered the sole holder of the global notes. Except as provided below, owners of beneficial interests in the global notes will not be entitled to have certificates registered in their names, will not receive or be entitled to receive physical delivery of certificates in definitive form, and will not be considered holders thereof. The laws of some states require that certain persons take physical delivery of securities in definitive form. Consequently, the ability to transfer a beneficial interest in the global notes to such persons may be limited. We will wire, through the facilities of the trustee, principal, premium, if any, and interest payments on the global notes to Cede & Co., the nominee for DTC, as the registered owner of the global notes. We, the trustee and any paying agent will have no responsibility or liability for paying amounts due on the global notes to owners of beneficial interests in the global notes. It is DTC's current practice, upon receipt of any payment of principal of and premium, if any, and interest on the global notes, to credit participants' accounts on the payment date in amounts proportionate to their respective beneficial interests in the notes represented by the global notes, as shown on the records of DTC, unless DTC believes that it will not receive payment on the payment date. Payments by DTC participants to owners of beneficial interests in notes represented by the global notes held through DTC participants will be the responsibility
of DTC participants, as is now the case with securities held for the accounts of customers registered in "street name."
If you would like to convert your notes into common stock pursuant to the terms of the notes, you should contact your broker or other direct or indirect DTC participant to obtain information on procedures, including proper forms and cut- off times, for submitting those requests. Because DTC can only act on behalf of DTC participants, who in turn act on behalf of indirect DTC participants and other banks, your ability to pledge your interest in the notes represented by global notes to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of such interest, may be affected by the lack of a physical certificate. Neither we nor the trustee (nor any registrar, paying agent or conversion agent under the indenture) will have any responsibility for the performance by DTC or direct or indirect DTC participants of their obligations under the rules and procedures governing their operations. DTC has advised us that it will take any action permitted to be taken by a holder of notes, including, without limitation, the presentation of notes for conversion as described below, only at the direction of one or more direct DTC participants to whose account with DTC interests in the global notes are credited and only for the principal amount of the notes for which directions have been given.
DTC has advised us as follows: DTC is a limited purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. DTC was created to hold securities for DTC participants and to facilitate the clearance and settlement of securities transactions between DTC participants through electronic book-entry changes to the accounts of its participants, thereby eliminating the need for physical movement of certificates. Participants include securities brokers and dealers, banks, trust companies and clearing corporations and may include certain other organizations such as the initial purchaser of the notes. Certain DTC participants or their representatives, together with other entities, own DTC. Indirect access to the DTC system is available to others such as banks, brokers, dealers and trust companies that clear through, or maintain a custodial relationship with, a participant, either directly or indirectly. Although DTC has agreed to the foregoing procedures in order to facilitate transfers of interests in the global notes among DTC participants, it is under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. If DTC is at any time unwilling or unable to continue as depositary and a successor depositary is not appointed by us within 90 days, we will cause notes to be issued in definitive form in exchange for the global notes. None of us, the trustee or any of their respective agents will have any responsibility for the performance by DTC or direct or indirect DTC participants of their obligations under the rules and procedures governing their operations, including maintaining, supervising or reviewing the records relating to, or payments made on account of, beneficial ownership interests in global notes. According to DTC, the foregoing information with respect to DTC has been provided to its participants and other members of the financial community for informational purposes only and is not intended to serve as a representation, warranty or contract modification of any kind.
Certificated notes may be issued in exchange for beneficial interests in notes represented by the global notes only in the limited circumstances set forth in the indenture.
Governing Law
The indenture and the notes are governed by, and construed in accordance with, the law of the State of New York.
Concerning the Trustee
The Bank of New York, as trustee under the indenture, has been appointed by us as paying agent, conversion agent, registrar and custodian with regard to the notes. Mellon Investor Services LLC is the transfer agent and registrar for Freeport-McMoRan 's common stock. The trustee or its affiliates may from time to time in the future provide banking and other services to us in the ordinary course of their business.
Registration Rights
When we issued the notes, we entered into a registration rights agreement with the initial purchaser of the notes. As required under that agreement, we have filed with the SEC, at our expense, a shelf registration statement, of which this prospectus forms a part, covering resales by holders of the notes and the common stock issuable upon conversion of the notes. Under the terms of the registration rights agreement, we have agreed to use our best efforts to:
* cause the registration statement to become effective as promptly as is practicable, but in no event later than 180 days after the earliest date of original issuance of any of the notes; and
* keep the registration statement effective until such date that the holders of the notes and the common stock issuable upon conversion of the notes are able to sell all such securities immediately without restriction pursuant to the volume limitations of Rule 144 under the Securities Act or any successor rule thereto or otherwise.
We also agreed to provide to each registered holder copies of the prospectus, notify each registered holder when the shelf registration statement has become effective and take certain other actions as are required to permit unrestricted resales of the notes and the common stock issuable upon conversion of the notes. A holder who sells those securities pursuant to the shelf registration statement generally will be required to be named as a selling stockholder in the related prospectus and to deliver a prospectus to purchasers and will be bound by the provisions of the registration rights agreement, which are applicable to that holder (including certain indemnification provisions). Each holder must notify us not later than three business days prior to any proposed sale by that holder pursuant to the shelf registration statement. This notice will be effective for five business days. We may suspend the holder's use of the prospectus for a reasonable period not to exceed 30 days in any 90-day period, and not to exceed an aggregate of 90 days in any 12-month period, if we, in our reasonable judgment, believe we may possess material non-public information the disclosure of which would have a material adverse effect on us and our subsidiaries taken as a whole. Each holder, by its acceptance of a note, agrees to hold any communication by us in response to a notice of a proposed sale in confidence.
If,
* on the 90th day following the earliest date of original issuance of any of the notes, the shelf registration statement, of which this prospectus forms a part, has not been filed with the SEC; or
* on the 180th day following the earliest date of original issuance of any of the notes, the shelf registration statement has not been declared effective; or
* the registration statement shall cease to be effective or fail to be usable without being succeeded within five business days by a post-effective amendment or a report filed with the SEC pursuant to the Exchange Act that cures the failure of the registration statement to be effective or usable; or
* on the 30th day of any period that the prospectus has been suspended as described in the preceding paragraph, such suspension has not been terminated (each, a "registration default"), additional interest as liquidated damages will accrue on the notes, from and including the day following the registration default to but excluding the day on which the registration default has been cured.
Liquidated damages will be paid semi-annually in arrears, with the first semi-annual payment due on the first interest payment date, as applicable, following the date on which such liquidated damages begin to accrue, and will accrue at a rate per year equal to:
* an additional 0.25% of the principal amount to and including the 90th day following such registration default; and
* an additional 0.5% of the principal amount from and after the 91st day following such registration default.
In no event will liquidated damages accrue at a rate per year exceeding 0.5%. If a holder has converted some or all of its notes into common stock, the holder will be entitled to receive equivalent amounts based on the principal amount of the notes converted.
The summary herein of certain provisions of the registration rights agreement between us and the initial purchaser is subject to, and is qualified in its entirety by reference to, all the provisions of the registration rights agreement, a copy of which has been filed as an exhibit to the registration statement of which this prospectus is a part or is available upon request to the Company.
Upon their original issuance, the notes became eligible for trading on The PORTAL Market. The notes sold pursuant to this prospectus, however, will no longer be eligible for trading on The PORTAL Market. Although we intend to apply for listing on the New York Stock Exchange of the notes sold pursuant to this prospectus, we cannot assure you that an active trading market for the notes will develop or as to the liquidity or sustainability of any such market, the ability of the holders to sell their notes or the price at which holders of the notes will be able to sell their notes. Future trading prices of the notes will depend on many factors, including, among other things, prevailing interest rates, our operating results, the price of our common stock and the market for similar securities.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain U.S. federal income tax consequences to a holder with respect to the purchase, ownership and disposition of the notes or our common stock acquired upon conversion of a note as of the date hereof. This summary is generally limited to holders who will hold the notes and the shares of common stock into which the notes are convertible as "capital assets" within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code") and who acquire the notes in this offering at the initial offering price, and does not deal with special situations including those that may apply to particular holders such as exempt organizations, holders subject to the U.S. federal alternative minimum tax, non-U.S. citizens and foreign corporations or other foreign entities, dealers in securities, commodities or foreign currencies, financial institutions, insurance companies, regulated investment companies, holders whose "functional currency" is not the U.S. dollar and persons who hold the notes or shares of common stock in connection with a "straddle," "hedging," "conversion" or other risk reduction transaction.
The federal income tax considerations set forth below are based upon the Code, Treasury Regulations promulgated thereunder, court decisions, and Internal Revenue Service ("IRS") rulings now in effect, all of which are subject to change. Prospective investors should particularly note that any such change could have retroactive application so as to result in federal income tax consequences different from those discussed below. We have not sought any ruling from the IRS with respect to statements made and conclusions reached in this discussion and there can be no assurance that the IRS will agree with such statements and conclusions.
Based on currently applicable authorities, we will treat the notes as indebtedness for U.S. federal income tax purposes. However, since the notes have certain equity characteristics, it is possible that the IRS will contend that the notes should be treated as an equity interest in, rather than indebtedness of our company. Except as otherwise noted, the remainder of this discussion assumes that the notes will constitute indebtedness for U.S. tax purposes.
INVESTORS CONSIDERING THE PURCHASE OF THE NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE FEDERAL ESTATE OR GIFT TAX RULES OR UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.
Taxation of Interest
Holders will be required to recognize as ordinary income any interest paid or accrued on the notes, in accordance with their regular method of tax accounting.
Conversion or Repurchase for Common Stock
A Holder will not recognize income, gain or loss upon conversion of the notes solely into our common stock (except with respect to any amounts attributable to accrued interest on the notes, which will be treated as interest for federal income tax purposes), and except with respect to cash received in lieu of fractional shares. If we repurchase a note in exchange for common stock pursuant to exercise of the repurchase right upon a change of control, although the matter is not entirely clear, such exchange should be treated in the same manner as a conversion of the note as described in the preceding sentence. The holder's tax basis in the common stock received on conversion or repurchase of a note for common stock pursuant to the repurchase right will be the same as the holder's adjusted tax basis in the notes exchanged therefore at the time of conversion or repurchase (reduced by any basis allocable to a fractional share), and the holding period for the common stock received on conversion or repurchase will include the holding period of the notes that were converted or repurchased.
Cash received in lieu of a fractional share of common stock upon conversion of the notes into common stock or upon a repurchase for common stock of a note pursuant to exercise of the repurchase right upon a change of control will generally be treated as a payment in exchange for the fractional share of common stock. Accordingly, the receipt of cash in lieu of a fractional share of common stock generally will result in capital gain or loss measured
by the difference between the cash received for the fractional share and the holder's adjusted tax basis in the fractional share.
Dividends on Common Stock
We do not anticipate paying any dividends on our common stock in the foreseeable future. However, if we do make distributions on our common stock, the distributions will constitute dividends for U.S. federal income tax purposes to the extent of our current or accumulated earnings and profits as determined under U.S. federal income tax principles. To the extent that a holder receives distributions on shares of common stock that would otherwise constitute dividends for U.S. federal income tax purposes but that exceed our current and accumulated earnings and profits, such distributions will be treated first as a non-taxable return of capital reducing the holder's basis in the shares of common stock. Any such distributions in excess of the holder's basis in the shares of common stock will generally be treated as capital gain. Subject to applicable limitations, dividends paid to holders that are U.S. corporations will qualify for the dividends-received deduction so long as there are sufficient earnings and profits.
Disposition, Redemption or Repurchase for Cash
Except as set forth above under "Conversion or Repurchase for Common Stock," holders generally will recognize capital gain or loss upon the sale, redemption, including a repurchase by us for cash pursuant to the repurchase right, or other taxable disposition of the notes or common stock in an amount equal to the difference between:
* the holder's adjusted tax basis in the notes or common stock (as the case may be); and
* the amount of cash and fair market value of any property received from such disposition (other than amounts attributable to accrued interest on the notes, which will be treated as interest for federal income tax purposes).
A holder's adjusted tax basis in a note generally will equal the cost of the note to such holder. (For a discussion of the holder's basis in shares of our common stock, see "Conversion or Repurchase for Common Stock").
Gain or loss from the taxable disposition of the notes or common stock generally will be long-term capital gain or loss if the notes and/or shares of common stock were held for more than one year at the time of the disposition. The deductibility of capital losses is subject to limitations.
Adjustment of Conversion Price
The conversion price of the notes is subject to adjustment under certain circumstances. Under Section 305 of the Code and the Treasury Regulations issued thereunder, certain adjustments to (or the failure to make such adjustments to) the conversion price of the notes that increase the proportionate interest of a holder in our assets or earnings and profits may result in a taxable constructive distribution to the holders of the notes, whether or not the holders ever convert the notes. Such constructive distribution will be treated as a dividend, resulting in ordinary income (and a possible dividends received deduction in the case of corporate holders) to the extent of our current or accumulated earnings and profits, with any excess treated first as a tax-free return of capital which reduces the holder's tax basis in the notes to the extent thereof and thereafter as gain from the sale or exchange of the notes. Generally, a holder's tax basis in a note will be increased to the extent any such constructive distribution is treated as a dividend. Moreover, if there is an adjustment (or a failure to make an adjustment) to the conversion price of the notes that increases the proportionate interest of the holders of outstanding common stock in our assets or earnings and profits, then such increase in the proportionate interest of the holders of the common stock generally will be treated as a constructive distribution to such holders, taxable as described above. As a result, holders of notes could have taxable income as a result of an event pursuant to which they receive no cash or property.
Backup Withholding and Information Reporting
We or our designated paying agent will, where required, report to holders of notes or common stock and the IRS the amount of any interest paid on the notes or dividends paid with respect to the common stock (or other reportable payments) in each calendar year and the amount of tax, if any, withheld with respect to such payments.
Under the backup withholding provisions of the Code and the applicable Treasury Regulations, a holder of notes or our common stock acquired upon the conversion of a note may be subject to backup withholding at the rate of 31% with respect to dividends or interest paid on, or the proceeds of a sale, exchange or redemption of, the notes or the common stock, unless:
* such holder is a corporation or comes within certain other exempt categories and when required demonstrates this fact; or
* provides a correct taxpayer identification number, certifies as to no loss of exemption from backup withholding and otherwise complies with applicable requirements of the backup withholding rules.
The amount of any backup withholding from a payment to a holder will be allowed as a credit against the holder's federal income tax liability and may entitle such holder to a refund, provided that the required information is furnished to the IRS.
THE PRECEDING DISCUSSION OF CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, YOU SHOULD CONSULT YOUR OWN TAX ADVISER AS TO PARTICULAR TAX CONSEQUENCES TO YOU OF PURCHASING, HOLDING AND DISPOSING OF THE NOTES AND OUR COMMON STOCK, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY PROPOSED CHANGES IN APPLICABLE LAWS.
DESCRIPTION OF COMMON STOCK
General
As of the date of this prospectus, our certificate of incorporation authorized us to issue up to 211,800,000 shares of class A common stock, par value $0.10 per share, and 211,800,000 shares of class B common stock, par value $0.10 per share. As of September 30, 2001, 55,459,026 shares of our class A common stock and 88,514,099 shares of our class B common stock were outstanding. Our class A common stock and class B common stock are listed on the New York Stock Exchange.
Voting Rights
With respect to the election of directors, holders of class A common stock, voting together with holders of voting preferred stock, are entitled to elect 20 percent of the authorized number of members of our board of directors, excluding those directors that holders of preferred stock have the exclusive right to elect. Each share of class A common stock and each share of voting preferred stock has one vote. Holders of class B common stock are entitled to elect the remaining directors. Each holder of class B common stock has one vote per share. With respect to all other matters submitted to a vote of our shareholders, except as required by law, the holders of the class A and class B common stock vote together as a single class, and record holders of each class have one vote per share.
The special voting rights of our class A common stock and voting preferred stock may be eliminated by the vote of a majority of the class A and class B common shares present and voting at any annual or special meeting of stockholders. We previously represented to the Internal Revenue Service that we would not change the special voting rights of the class A and class B common stock until after July 2000. While we have not taken steps to eliminate the special voting rights or combine the two classes into a single class of common stock, we may do so in the future.
Dividends
Holders of our class A and class B common stock will share ratably in any cash dividend that may from time to time be declared by our board of directors. Dividends consisting of shares of class A or class B common stock also may be declared and will be paid as follows:
* shares of class A common stock may be paid only to holders of shares of class A common stock, and shares of class B common stock may be paid only to holders of shares of class B common stock; and
* shares will be paid proportionately with respect to each outstanding class A or class B common share.
Our amended credit facilities prohibit the payment of dividends on our common stock. See "Refinancing Transactions" and "Dividend Policy."
Other Rights
In the case of any reorganization or consolidation or merger of our company with another company, holders of shares of class A or class B common stock will be entitled to receive stock, other securities and property of the same kind and amount as that received by the other class. However, holders of each class may receive different kinds of shares if the only difference in the shares is the inclusion of voting rights that continue the special voting rights regarding the election of directors described above.
In the event of a voluntary or involuntary liquidation, dissolution or winding up of our company, prior to any distributions to the holders of our common stock, the holders of preferred stock will receive any payments to which they are entitled. Subsequent to those payments, the holders of our class A and class B common stock will share ratably, according to the number of shares held by them, in our remaining assets, if any.
Shares of our class A and class B common stock are not redeemable and have no subscription, conversion or preemptive rights. Both classes of common stock are freely transferable, except for the common stock issuable upon conversion of the notes.
In 1995, in connection with Rio Tinto plc's purchase of 23.9 million shares of our class A common stock, we entered into an agreement that provided Rio Tinto with certain preemptive rights and first offer rights if we issued common stock, including securities convertible into common stock, in a future public or non-public offering. In addition, the agreement provides Rio Tinto with registration rights. Although Rio Tinto has rights under the agreement to purchase notes in this offering, Rio Tinto has waived its rights to purchase any of the notes.
Provisions of Our Certificate of Incorporation
Our certificate of incorporation contains provisions that are designed in part to make it more difficult and time-consuming for a person to obtain control of our company unless they pay a required value to our stockholders. Some provisions also are intended to make it more difficult for a person to obtain control of our board of directors. These provisions reduce the vulnerability of our company to an unsolicited takeover proposal. On the other hand, these provisions may have an adverse effect on the ability of stockholders to influence the governance of our company. You should read our certificate of incorporation and bylaws for a more complete description of the rights of holders of our common stock.
Classified Board of Directors. Our certificate of incorporation divides the members of our board of directors, other than those that may be elected solely by the holders of our preferred stock, into three classes serving three-year staggered terms. The classification of directors has the effect of making it more difficult for our stockholders to change the composition of our board. At least two annual meetings of stockholders may be required for the stockholders to change a majority of the directors, whether or not a majority of stockholders believes that this change would be desirable.
Supermajority Voting/Fair Price Requirements. Our certificate of incorporation provides that the approval of the holders of two-thirds of our outstanding common stock is required for:
* any merger or consolidation of our company or any of our subsidiaries with or into any person or entity, or any affiliate of that person or entity, who was within the two years prior to the transaction a beneficial owner of 20 percent or more of our common stock or any class of our common stock (an "interested party");
* any merger or consolidation of an interested party with or into our company or any of our subsidiaries;
* any sale, lease, mortgage, pledge or other disposition of more than 10 percent of the fair market value of the assets of our company or any of our subsidiaries in one or more transactions involving an interested party;
* the adoption of any plan or proposal for liquidation or dissolution of our company proposed by or on behalf of any interested party;
* the issuance or transfer by our company or any of our subsidiaries of securities having a fair market value of $10.0 million or more to any interested party; or
* any recapitalization, reclassification, merger or consolidation of our company or any of our subsidiaries that would increase an interested party's voting power in our company or any of our subsidiaries.
However, the two-thirds voting requirement is not applicable if:
* our board approves the transaction, or approves the acquisition of the common stock that caused the interested person to become an interested person, and the vote includes the affirmative vote of a majority of our directors who are not affiliates of the interested party and who were members of our board prior to the time the interested party became the interested party;
* the transaction is solely between us and any of our wholly owned subsidiaries or between any of our wholly owned subsidiaries; or
* the transaction is a merger or consolidation and the consideration to be received by our common stockholders is at least as high as the highest price per share paid by the interested party for our common stock on the date the common stock was last acquired by the interested party or during a period of two years prior.
Supermajority Voting/Amendments to Certificate of Incorporation. The affirmative vote of at least two-thirds of our company's outstanding common stock is required to amend, alter, change or repeal the provisions in our certificate of incorporation providing for the fair price requirements described above or our classified board of directors with staggered three-year terms.
Removal of Directors; Filling Vacancies on Board of Directors. Directors may be removed, with cause, by the vote of the holders of all classes of stock entitled to vote at an election of directors, voting together as a single class. Directors may not be removed without cause by stockholders. Vacancies in a directorship may be filled by the vote of the class or classes of shares that had previously elected the director creating the vacancy, or by the remaining directors or director elected by that class. The board may increase the number of directors and fill the newly created directorships, but following the enlargement, 80 percent of the members of the enlarged board must consist of directors elected by the holders of our class B common stock.
Rights Agreement
Our Rights Agreement is designed to deter abusive takeover tactics and to encourage prospective acquirors to negotiate with our board rather than attempt to acquire the company in a manner or on terms that the board deems unacceptable. Under our Rights Agreement, each outstanding share of class A and class B common stock includes an associated preferred stock purchase right. If the rights become exercisable, each right will entitle its holder to purchase one one-hundredth (1/100) of a share of our series A participating cumulative preferred stock at an exercise price of $60 per unit, subject to adjustment. The rights trade with all outstanding shares of our class A and class B common stock. The rights will separate from our common stock and become exercisable upon the earlier of-
* the tenth day following a public announcement that a person or group of affiliated or associated persons (other than Rio Tinto Indonesia Limited and its affiliates or associates) has acquired beneficial ownership of 20 percent or more of our outstanding common stock, or 20 percent or more of either our class A common stock or class B common stock (an "acquiring person"); or
* the tenth business day, or any later date as determined by our board prior to the time that any person or group becomes an acquiring person, following the commencement of or announcement of an intention to make a tender offer or exchange offer that, if consummated, would result in the person or group becoming an acquiring person.
Term of Rights. The rights will expire on May 3, 2010, unless we extend this date or redeem or exchange the rights as described below.
Exercise After Someone Becomes An Acquiring Person. After any person or group becomes an acquiring person, each holder of a right will be entitled to receive upon exercise that number of shares of our class B common stock having a market value of two times the exercise price of the right. However, this right will not apply to an acquiring person, whose rights will be void.
Upon the occurrence of certain events after someone becomes an acquiring person, each holder of a right, other than the acquiring person, will be entitled to receive, upon exercise of the right, common stock of the acquiring company having a market value equal to two times the exercise price of the right. These rights will arise only if after a person or group becomes an acquiring person:
* we are acquired in a merger or other business combination; or
* we sell or otherwise transfer 50 percent or more of our assets or earning power.
Adjustment. The exercise price, the number of rights outstanding, and the number of preferred shares issuable upon exercise of the rights are subject to adjustment from time to time to prevent certain types of dilution. We will not issue fractional preferred stock shares. Instead, we will make a cash adjustment based on the market price of the preferred stock prior to the date of exercise.
Rights, Preferences, and Limitations of Rights. Preferred stock purchasable upon exercise of the rights will not be redeemable. Each share of preferred stock will entitle the holder to receive a preferential quarterly dividend payment of the greater of $1.00 or 100 times the dividend declared per share of our common stock. In the event of liquidation, the holders of each share of our preferred stock will be entitled to a preferential liquidation payment of the greater of $0.10 per share or 100 times the payment made per share of our common stock. Each share of our preferred stock will entitle the holder to 100 votes and will vote together with our class B common stock, or if we no longer have separate classes of common stock, our common stock. Finally, in the event of any merger, consolidation or other transaction in which our common stock is exchanged, each share of our preferred stock will entitle the holder to receive 100 times the amount received per share of common stock. These rights are protected by customary antidilution provisions. Because of the nature of our preferred stock's dividend, liquidation and voting rights, the value of each one one-hundredth interest in a share of preferred stock should approximate the value of one share of our class B common stock.
Exchange and Redemption. After a person or group becomes an acquiring person, we may exchange the rights, in whole or in part, at an exchange ratio, subject to adjustment, of one share of our class B common stock, or one one-hundredth of a share of preferred stock, per right. We generally may not make an exchange after any person or group becomes the beneficial owner of 50 percent or more of our common stock or 50 percent or more of our class A common stock or class B common stock.
We may redeem the rights in whole, but not in part, at a price of $0.01 per right, subject to adjustment, at any time prior to any person or group becoming an acquiring person. The redemption of the rights may be made effective at such time, on such basis and with such conditions as our board of directors in its sole discretion may establish. Once redeemed, the rights will terminate immediately and the only right of the rights holders will be to receive the cash redemption price.
Amendments. We may amend the terms of the rights without the consent of the rights holders, including an amendment to lower the thresholds described above. However, after any person or group becomes an acquiring person, we may not amend the terms of the rights in any way that adversely affects the interests of the rights holders.
SELLING SECURITYHOLDERS
The notes originally were issued by us and sold by Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, as the initial purchaser in transactions exempt from the registration requirements of the Securities Act to persons reasonably believed by the initial purchases to be qualified institutional buyers. Selling securityholders, including their transferees, pledgees or donees or their successors, may from time to time offer and sell any or all of the notes and the common stock into which the notes are convertible pursuant to this prospectus. The selling securityholders may offer all, some or none of the notes and the common stock into which the notes are convertible.
The table below sets forth information, as of October 31, 2001, with respect to the selling securityholders and the principal amounts of notes and amounts of common stock beneficially owned by each selling securityholder that may be offered under this prospectus by the selling securityholders. The information is based on information provided by or on behalf of the selling securityholders. The selling securityholders identified below may have sold, transferred or otherwise disposed of all or a portion of their notes or common stock since the date on which they provided the information regarding their notes or common stock in transactions exempt from the registration requirements of the Securities Act.
Because the selling securityholders may offer all or some portion of the notes or the common stock to be offered by them, we cannot estimate the amount of any sales.
The initial purchaser of the notes or its affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with us. They have received customary fees and commissions for these transactions. The initial purchaser of the notes is an affiliate of a lender under our bank credit facility. Such affiliates of the initial purchaser received their proportionate share of the repayment by us of amounts outstanding under our bank credit facility from the sale of the notes to the initial purchaser. To our knowledge, none of the other selling securityholders has had any position, office or other material relationship with us or our affiliates within the past three years.
Principal
Amount of Percentage Number of Shares
Notes of of Common Stock
Owned and Notes That May be
Name of Selling Securityholder Offered Outstanding Sold(1)
------------------------------ ---------- ----------- ----------------
AAM Zazove International
Convertible Fund L.P. $ 500,000 * 34,965
Absolute Return Fund Ltd. 150,000 * 10,489
Advent Convertible Master
Cayman L.P. 4,940,000 * 345,454
AIG SoundShore Holdings Ltd. 7,556,000 1.25% 528,391
AIG SoundShore Opportunity
Holding Fund Ltd. 4,354,000 * 304,475
AIG SoundShore Strategic
Holding Fund Ltd. 2,590,000 * 181,118
American Motorist Insurance
Company 658,000 * 46,013
American Samoa Government 27,000 * 1,888
Arapahoe County Colorado 64,000 * 4,475
BP Amoco PLC, Master Trust 1,084,000 * 75,804
|
Principal
Amount of Percentage Number of Shares
Notes of of Common Stock
Owned and Notes That May be
Name of Selling Securityholder Offered Outstanding Sold(1)
------------------------------ ---------- ----------- ----------------
Beta Equities Inc. 6,115,000 1.01% 427,622
CALAMOS Market Neutral Fund -
CALAMOS Investment Trust 2,000,000 * 139,860
Chrysler Corporation Master
Retirement Plan 30,000 * 2,097
Circlet (IMA) Limited 3,000,000 * 209,790
City of New Orleans 264,000 * 18,461
City University of New York 158,000 * 11,048
Commonfund Global Macro Company 842,000 * 58,881
1976 Distribution Trust FBO A.R.
Lauder/Zinterhofer 9,000 * 629
1976 Distribution Trust FBO
Jane A. Lauder 17,000 * 1,188
Delta Air Lines Master Trust
(c/o Oaktree Capital
Management, LLC) 10,000 * 699
Delta Pilots D & S Trust 5,000 * 349
Estate of James Campbell 172,000 * 12,027
Global Bermuda Limited
Partnership 2,000,000 * 139,860
GM Employees Global Grp Pen Tr
(Abs Return Portfolio) 1,500,000 * 104,895
General Motor Welfare Benefit
Trust (VEBA) 3,000,000 * 209,790
Goldman Sachs and Company 8,350,000 1.38% 583,916
Grady Hospital Foundation 139,000 * 9,720
Granville Capital Corporation 3,000,000 * 209,790
HBK Master Fund L.P. 2,500,000 * 174,825
HFR Convertible Arbitrage
Account 435,000 * 30,419
HFR Zazove Master Trust 150,000 * 10,489
Highbridge International LLC 14,500,000 2.40% 1,013,986
Hotel Union & Hotel Industry of
Hawaii 291,000 * 20,349
Independence Blue Cross 280,000 * 19,580
James Campbell Corporation, The 226,000 * 15,804
Jefferies & Company Inc. 7,000 * 489
Lakeshore International, Ltd. 8,250,000 1.37% 576,923
Lexington (IMA) Limited 80,000 * 5,594
Lipper Convertibles, L.P. 5,000,000 * 349,650
Lipper Offshore Convertibles,L.P. 2,500,000 * 174,825
Local Iniatiatives Support
Corporation 66,000 * 4,615
McMahan Securities Co. L.P. 1,450,000 * 101,398
Merced Partners Limited
Partnership 4,500,000 * 314,685
Minnesota Power and Light 285,000 * 19,930
Municipal Employees 239,000 * 16,713
|
Principal
Amount of Percentage Number of Shares
Notes of of Common Stock
Owned and Notes That May be
Name of Selling Securityholder Offered Outstanding Sold(1)
------------------------------ ---------- ----------- ----------------
Nabisco Holdings 37,000 * 2,587
New Orleans Firefighters
Pension / Relief Fund 144,000 * 10,069
Occidental Petroleum
Corporation 267,000 * 18,671
Omega Capital Investors, L.P. 761,000 * 53,216
Omega Capital Partners, L.P. 9,407,000 1.56% 657,832
Omega Overseas Partners, Ltd. 7,875,000 1.30% 550,699
OCM Convertible Trust 30,000 * 2,097
Oz Master Fund, Ltd. 4,770,000 * 333,566
Partner Reinsurance Company Ltd. 60,000 * 4,195
Peoples Benefit Life Insurance
Company TEAMSTERS 1,000,000 * 69,930
Policeman and Firemen
Retirement System of the City
of Detroit 693,000 * 48,461
Pro-mutual 780,000 * 54,545
Ramius Capital Group 279,000 * 19,510
Raytheon Master Pension Trust 219,000 * 15,314
RCG Latitude Master Fund Ltd. 1,115,000 * 77,972
RCG Multi Strategy LP 106,000 * 7,412
RJR Reynolds 112,000 * 7,832
Retail Clerks Pension Trust 1,500,000 * 104,895
Retail Clerks Pension Trust #2 1,000,000 * 69,930
2000 Revocable Trust FBO A.R.
Lauder/Zinterhofer 9,000 * 629
St. Albans Partners Ltd. 4,000,000 * 279,720
San Diego County Employees
Retirement Association 650,000 * 45,454
SG Cowen Securities Corporation 200,000 * 13,986
Shell Pension Trust 653,000 * 45,664
State Employees' Retirement
Fund of the State of Delaware 10,000 * 699
State of Connecticut Combined
Investment Funds 20,000 * 1,398
State of Maryland Retirement
Agency 3,342,000 * 233,706
Susquehanna Capital Group 11,500,000 1.90% 804,195
Tamarack International, Ltd. 4,750,000 * 332,167
TQA Master Fund Ltd. 3,000,000 * 209,790
TQA Master Plus Fund Ltd. 3,000,000 * 209,790
Tribeca Investments, L.L.C. 4,500,000 * 314,685
Vanguard Convertible Securities
Fund, Inc. 675,000 * 47,202
Viacom Inc. Pension Plan Master
Trust 31,000 * 2,167
|
Principal
Amount of Percentage Number of Shares
Notes of of Common Stock
Owned and Notes That May be
Name of Selling Securityholder Offered Outstanding Sold(1)
------------------------------ ---------- ----------- ----------------
Zazove Hedged Convertible Fund
L.P. 600,000 * 41,958
Zazove Income Fund L.P. 500,000 * 34,965
Zurich Institutional Benchmarks 162,000 * 11,328
Zurich Institutional Benchmarks
Master Fund Ltd. 600,000 * 41,958
----------- ----- ----------
TOTAL 161,650,000 26.77% 11,304,162
=========== ===== ==========
|
PLAN OF DISTRIBUTION
The selling securityholders and their successors, including their transferees, pledgees or donees or their successors, may sell the notes and our common stock into which the notes are convertible directly to purchasers or through underwriters, brokers-dealers or agents, who may receive compensation in the form of discounts, concessions or commissions from the selling securityholders or the purchasers. These discounts, concessions or commissions as to any particular underwriter, broker-dealer or agent may be in excess of those customary in the types of transactions involved.
The notes and common stock issuable upon conversion of the notes may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market prices, at varying prices determined at the time of sale, or at negotiated prices. These sales may be effected in transactions, which may involve crosses or block transactions:
* on any national securities exchange or U.S. inter-dealer system of a registered national securities association on which the notes or our common stock may be listed or quoted at the time of sale;
* in the over-the-counter market;
* otherwise than on these exchanges or systems or in the over-the-counter market;
* through the writing of options, whether the options are listed on an options exchange or otherwise; or
* through the settlement of short sales.
In connection with the sale of the notes and common stock issuable upon conversion of the notes, the selling securityholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the notes or common stock in the course of hedging the positions they assume. The selling securityholders also may sell the notes or common stock issuable upon conversion of the notes, short and deliver these securities to close out their short positions, or loan or pledge the notes or common stock to broker-dealers that in turn may sell these securities.
The aggregate proceeds to the selling securityholders from the sale of the notes or common stock offered by them will be the purchase price of the notes or common stock less discounts and commissions, if any. Each of the selling securityholders reserves the right to accept and, together with their agents from time to time, to reject, in whole or in part, any proposed purchase of notes or common stock to be made directly or through agents. We will not receive any of the proceeds from the sales by selling securityholders.
Our class A and class B common stock are traded on the New York Stock Exchange under the symbols "FCXA" and "FCX," respectively. The notes sold pursuant to this prospectus will no longer be eligible for trading on The PORTAL Market. We do not intend to list the notes for trading on any national securities exchange or on the New York Stock Exchange and can give no assurance about the development of any trading market for the notes.
In order to comply with the securities laws of some states, if applicable, the notes and common stock may be sold in these jurisdictions only through registered or licensed brokers or dealers. In addition, in some states the notes and common stock may not be sold unless they have been registered or qualified for sale or an exemption from registration or qualification requirements is available and is complied with.
The selling securityholders and any underwriters, broker-
dealers or agents that participate in the sale of the notes
and common stock may be "underwriters" within the meaning of
Section 2(11) of the Securities Act of 1933. Any discounts,
commissions, concessions or profit they earn on any resale
of the shares may be underwriting discounts and commissions
under the Securities Act. Selling securityholders who are
"underwriters" within the meaning of Section 2(11) of the
Securities Act of 1933 will be subject to the prospectus
delivery requirements of the Securities Act of 1933. The
selling securityholders have acknowledged that they
understand their obligations to
comply with the provisions
of the Securities Exchange Act of 1934 and the rules
thereunder relating to stock manipulation, particularly
Regulation M.
In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 or Rule 144A of the Securities Act of 1933 may be sold under Rule 144 or Rule 144A rather than under this prospectus. A selling securityholder may not sell any notes or common stock described in this prospectus and may not transfer, devise or gift these securities by other means not described in this prospectus.
To the extent required, the specific notes or shares of our common stock to be sold, the names of the selling securityholders, the respective purchase prices and public offering prices, the names of any agent, dealer or underwriter, and any applicable commissions or discounts with respect to a particular offer will be set forth in an accompanying prospectus supplement or, if appropriate, a post-effective amendment to the registration statement of which this prospectus is a part.
We entered into a registration rights agreement for the benefit of holders of the notes to register their notes and our common stock under applicable federal and state securities laws under specific circumstances and at specific times. The registration rights agreement provides for cross- indemnification of the selling securityholders and us and our respective directors, officers and controlling persons against specific liabilities in connection with the offer and sale of the notes and our common stock, including liabilities under the Securities Act of 1933.
We have agreed to pay substantially all of the expenses of registering the notes and common stock under the Securities Act of 1933 and of compliance with blue sky laws, including registration and filing fees, printing and duplicating expenses, legal fees of our counsel, fees for one legal counsel retained by the selling securityholders and fees of the trustee under the indenture pursuant to which we originally issued the notes and of the registrar and transfer agent of our common stock. If the notes or the common stock into which the notes may be converted are sold through underwriters or broker-dealers, the selling securityholders will be responsible for underwriting discounts, underwriting commissions and agent commissions.
Under the registration rights agreement, we are obligated to use reasonable efforts to keep the registration statement effective until, and therefore this offering will terminate on, the earlier of: (1) the date on which all securities offered under this prospectus have been sold pursuant to this prospectus, and (2) the date on which all outstanding securities held by non-affiliates of ours may be resold without registration under the Securities Act of 1933 pursuant to Rule 144(k) under the Securities Act of 1933.
LEGAL MATTERS
The validity of the securities will be passed upon for us by Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P.
EXPERTS
Our audited financial statements and schedules included in this prospectus and incorporated by reference to our Annual Report on Form 10-K for the year ended December 31, 2000 have been audited by Arthur Andersen LLP, independent public accountants as indicated in their reports contained in our Annual Report on Form 10-K. We have relied upon their authority as experts in accounting and auditing in giving these reports. Our future audited financial statements and schedules and the reports of our independent public accountants also will be incorporated by reference in this prospectus in reliance upon the authority of our accountants as experts in giving those reports to the extent our auditors have audited those financial statements and consented to the use of their reports thereon.
Our reserves as of December 31, 2000 included in this prospectus and incorporated by reference to our Annual Report on Form 10-K for the year ended December 31, 2000, have been verified by Independent Mining Consultants, Inc. This reserve information has been included in this prospectus and incorporated by reference herein in reliance upon the authority of Independent Mining Consultants, Inc. as experts in mining, geology and reserve determination.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We are subject to the information and reporting
requirements of the Securities Exchange Act of 1934, as
amended, under which we file periodic reports, proxy
statements and other information with the SEC. Copies of the
reports, proxy statements and other information may be
examined without charge at the following SEC public
reference rooms: 450 Fifth Street, N.W. Room 1024,
Washington, D.C. 20549; and 500 West Madison Street, Suite
1400, Chicago, IL 60661. We also file information
electronically with the SEC. Our electronic filings are
available from the SEC's Internet site at
http://www.see.gov. Copies of all or a portion of our
filings may also be obtained from the Public Reference
Section of the SEC upon payment of prescribed fees. Please
call the SEC at 800-SEC-0330 for further information.
We have agreed that if, at any time that the notes or the common stock issuable upon conversion of the notes are "restricted securities" within the meaning of the Securities Act of 1933 and we are not subject to the information reporting requirements of the Securities Exchange Act of 1934, we will furnish to holders of the notes and such common stock and to prospective purchasers designated by them the information required to be delivered pursuant to Rule 144A(d) (4) under the Securities Act of 1933 to permit compliance with Rule 144A in connection with resales of the notes and such common stock.
We are "incorporating by reference" specified documents that we file with the SEC, which means:
* incorporated documents are considered part of this prospectus;
* we are disclosing important information to you by referring you to those documents, and
* information that we file in the future with the SEC will automatically update and supersede this prospectus.
We incorporate by reference the documents listed below and any documents that we file with the SEC under Section 13(c) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), after the date of this prospectus and before the end of the offering of the notes:
(1) our current reports on Form 8-K, filed on January 2, 2001, July 30, 2001, August 2, 2001 and September 26, 2001;
* our annual report on Form 10-K for the fiscal year ended December 31, 2000 filed March 23, 2001;
* our quarterly reports on Form 10-Q for the fiscal quarters ended March 31, 2001 filed May 7, 2001; June 30, 2001 filed July 30, 2001; and September 30, 2001 filed November 1, 2001.
At your request, we will provide you with a free copy of any of these filings (except for exhibits, unless the exhibits are specifically incorporated by reference into the filing). You may request copies by writing or calling us at:
Freeport-McMoRan Copper & Gold Inc.
1615 Poydras Street
New Orleans, Louisiana 70112
Attention: Christopher D. Sammons
Investor Relations
(504) 582-4000
Freeport-McMoRan Copper & Gold Inc. FCX Investment Ltd.
$603,750,000 8 1/4% Convertible Senior Notes due 2006
Freeport-McMoRan Copper & Gold Inc. Class A Common Stock Class B Common Stock
PROSPECTUS
November 5, 2001
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The estimated fees and expenses payable by us in connection with the issuance and distribution of the securities being registered are as follows:
SEC registration fee $150,750
Printing costs 20,000*
Legal fees and expenses 70,000*
Accounting fees and expenses 30,000*
Rating agency fees 50,000*
Blue sky fees and expenses 10,000*
Trustee's and registrar's fees 20,000*
Miscellaneous 9,250*
--------
Total $360,000*
========
|
*All amounts listed above other than the registration fee are estimated.
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of Delaware empowers us to indemnify, subject to the standards prescribed in that Section, any person in connection with any action, suit or proceeding brought or threatened by reason of the fact that the person is or was our director, officer, employee or agent. Article VIII of our Certificate of Incorporation and Article XXV of our by-laws provides that each person who was or is made a party to, or is threatened to be made a party to, or is otherwise involved in, any action, suit, or proceeding by reason of the fact that the person is or was our director, officer, employee or agent shall be indemnified and held harmless by us to the fullest extent authorized by the General Corporation Law of Delaware. The indemnification covers all expenses, liability and loss reasonably incurred by the person and includes attorneys' fees, judgments, fines and amounts paid in settlement. The rights conferred by Article VIII of our Certificate of Incorporation and Article XXV of our by-laws are contractual rights and include the right to be paid by us the expenses incurred in defending the action, suit or proceeding in advance of its final disposition.
Article VIII of our Certificate of Incorporation
provides that our directors will not be personally liable to
us or our stockholders for monetary damages resulting from
breaches of their fiduciary duty as directors except
(1) for any breach of the duty of loyalty to us or our
stockholders, (2) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation
of law, (3) under Section 174 of the General Corporation Law
of Delaware, which makes directors liable for unlawful
dividend or unlawful stock repurchases or redemptions or
(4) transactions from which directors derive improper
personal benefit.
We have an insurance policy insuring our directors and officers against certain liabilities, including liabilities under the Securities Act of 1933.
Item 16. Exhibits.
1.1 Purchase Agreement dated as of August 7, 2001 among the Registrants and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated.
2.1 Agreement dated as of May 2, 1995 by and between Freeport-McMoRan Inc. (FTX) and Freeport-McMoRan Copper & Gold Inc. (FCX) and The RTZ Corporation PLC., RTZ Indonesia Limited, and RTZ America, Inc. (the Rio Tinto Agreement).
2.2 Amendment dated May 31, 1995 to the Rio Tinto Agreement.
2.3 Distribution Agreement dated as of July 5, 1995 between FTX and FCX.
3.1 Composite Copy of the Certificate of Incorporation of FCX.
4.1 Indenture dated as of August 7, 2001 among the Registrants and The Bank of New York, including the form of the notes.
4.2 Registration Rights Agreement dated as of August 7, 2001 among the Registrants and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated.
4.3 Collateral Pledge and Security Agreement dated as of August 7, 2001 between FCX Investment Ltd. and The Bank of New York.
4.4 Senior Indenture dated as of November 15, 1996 from FCX to The Chase Manhattan Bank, as Trustee.
4.5 First Supplemental Indenture dated as of November 18, 1996 from FCX to The Chase Manhattan Bank, as Trustee, providing for the issuance of the Senior Notes and supplementing the Senior Indenture dated November 15, 1996 from FCX to such Trustee, providing for the issuance of Debt Securities.
5.1 Opinion of Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P. as to the legality of the securities.
10.1 Contract of Work dated December 30, 1991 between the Government of the Republic of Indonesia and PT Freeport Indonesia.
10.2 Contract of Work dated August 15, 1994 between the Government of the Republic of Indonesia and PT Irja Eastern Minerals Corporation.
10.3 Concentrate Purchase and Sales Agreement dated effective December 11, 1996 between PT Freeport Indonesia and PT Smelting.
10.4 Participation Agreement dated as of October 11, 1996 between PT Freeport Indonesia and P.T. RTZ-CRA Indonesia with respect to a certain contract of work.
10.5 Second Amended and Restated Joint Venture and Shareholders' Agreement dated as of December 11, 1996 among Mitsubishi Materials Corporation, Nippon Mining and Metals Company, Limited and PT Freeport Indonesia.
10.6 1995 Long-Term Performance Incentive Plan of
FCX.
10.7 FCX President's Award Program.
10.8 FCX 1995 Stock Option Plan.
12.1 Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P. included as part of Exhibit 5.
23.3 Consent of Independent Mining Consultants,
Inc.
24.1 Powers of Attorney.
25.1 Form T-1; Statement of Eligibility of the Trustee under the Trust Indenture Act.
Item 17. Undertakings.
(1) The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement; notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement;
Provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) do not apply if the information required to
be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by
the Registrant pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934 that are
incorporated by reference in this registration
statement.
(b) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(2) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will,
unless in the
opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as
expressed in the Act and will be governed by the
final adjudication of such issue.
(4) The undersigned registrant hereby undertakes to file an application for the purpose of determining the eligibility of the trustee to act under subsection (a) of section 310 of the Trust Indenture Act of 1939 in accordance with the rules and regulations prescribed by the SEC under section 305(b)(2) of the Trust Indenture Act.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Freeport-McMoRan Copper & Gold Inc. certifies that it had reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in New Orleans, Louisiana, on November 5, 2001.
Freeport-McMoRan Copper & Gold Inc.
By: /S/ Richard C. Adkerson
-----------------------
Richard C. Adkerson
President and Chief
Financial Officer
|
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons and in the capacities indicated on November 5, 2001.
Signature Title
---------- -----
Chairman of the Board,
* Chief Executive
James R. Moffett Officer and Director
(Principal Executive
Officer)
Vice Chairman of the
* Board and Director
B. M. Rankin, Jr.
/s/Richard C. Adkerson President and
Richard C. Adkerson Chief Financial
Officer (Principal
Financial Officer)
Vice President and
Controller -
* Financial Reporting
C. Donald Whitmire, Jr. (Principal Accounting
Officer)
|
* Director Robert J. Allison, Jr.
* Director Robert W. Bruce III
* Director R. Leigh Clifford
* Director Robert A. Day
* Director Gerald J. Ford
* Director H. Devon Graham, Jr.
* Director Steven Green
* Director Oscar L. Groeneveld
* Director J. Bennett Johnston
* Director Bobby Lee Lackey
* Director Gabrielle K. McDonald
* Director J. Stapleton Roy
* Director J. Taylor Wharton
*By: /S/Richard C. Adkerson
Richard C. Adkerson
Attorney-in-Fact
|
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, FCX Investment Ltd. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in New Orleans, Louisiana, on November 5, 2001.
FCX Investment Ltd.
By: /S/Richard C. Adkerson
Richard C. Adkerson
President
|
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons and in the capacities indicated on
November 5, 2001.
Signature Title
--------- -----
/s/Richard C. Adkerson
Richard C. Adkerson President and Director
(Prinicipal Executive, Financial
and Accounting Officer and
Authorized Representative in
the United States)
|
EXHIBIT INDEX
1.1 Purchase Agreement dated as of August 7, 2001 among the Registrants and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated.
2.1 Agreement dated as of May 2, 1995 by and between Freeport-McMoRan Inc. (FTX) and Freeport-McMoRan Copper & Gold Inc. (FCX) and The RTZ Corporation PLC., RTZ Indonesia Limited, and RTZ America, Inc. (the Rio Tinto Agreement).
2.2 Amendment dated May 31, 1995 to the Rio Tinto Agreement.
2.3 Distribution Agreement dated as of July 5, 1995 between FTX and FCX.
3.1 Composite Copy of the Certificate of Incorporation of FCX.
4.1 Indenture dated as of August 7, 2001 among the Registrants and The Bank of New York, including the form of the notes.
4.2 Registration Rights Agreement dated as of August 7, 2001 among the Registrants and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated.
4.3 Collateral Pledge and Security Agreement dated as of August 7, 2001 between FCX Investment Ltd. and The Bank of New York.
4.4 Senior Indenture dated as of November 15, 1996 from FCX to The Chase Manhattan Bank, as Trustee.
4.5 First Supplemental Indenture dated as of November 18, 1996 from FCX to The Chase Manhattan Bank, as Trustee, providing for the issuance of the Senior Notes and supplementing the Senior Indenture dated November 15, 1996 from FCX to such Trustee, providing for the issuance of Debt Securities.
5.1 Opinion of Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P. as to the legality of the securities.
10.1 Contract of Work dated December 30, 1991 between the Government of the Republic of Indonesia and PT Freeport Indonesia.
10.2 Contract of Work dated August 15, 1994 between the Government of the Republic of Indonesia and PT Irja Eastern Minerals Corporation.
10.3 Concentrate Purchase and Sales Agreement dated effective December 11, 1996 between PT Freeport Indonesia and PT Smelting.
10.4 Participation Agreement dated as of October 11, 1996 between PT Freeport Indonesia and P.T. RTZ-CRA Indonesia with respect to a certain contract of work.
10.5 Second Amended and Restated Joint Venture and Shareholders' Agreement dated as of December 11, 1996 among Mitsubishi Materials Corporation, Nippon Mining and Metals Company, Limited and PT Freeport Indonesia.
10.6 1995 Long-Term Performance Incentive Plan of
FCX.
10.7 FCX President's Award Program.
10.8 FCX 1995 Stock Option Plan.
12.1 Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P. included as part of Exhibit 5.
23.3 Consent of Independent Mining Consultants, Inc.
24.1 Powers of Attorney
25.1 Form T-1; Statement of Eligibility of the Trustee under the Trust Indenture Act.
FREEPORT-McMoRan COPPER & GOLD INC.
(a Delaware corporation)
FCX INVESTMENT LTD.
(a Cayman Islands exempted limited liability company)
8 1/4% Convertible Senior Notes due 2006
PURCHASE AGREEMENT
Dated: August 1, 2001
TABLE OF CONTENTS
Page
Section 1. Representations and Warranties by the Issuers 3
(a) Representations and Warranties 3
(b) Officer's Certificates 12
Section 2. Sale and Delivery to Initial Purchaser; Closing 12
(a) Securities 12
(b) Option Securities 12
(c) Payment 13
(d) Denominations; Registration 13
Section 3. Covenants of the Issuers 13
(a) Offering Memorandum 13
(b) Notice and Effect of Material Events 14
|
(c) Amendment to Offering Memorandum and Supplements14
(d) Qualification of Securities for Offer and Sale 14
(e) Rating of Securities 14
(f) DTC 15
(g) Use of Proceeds 15
(h) Restriction on Sale of Securities 15
(i) Restriction on Sale of Common Stock 15
(j) PORTAL Designation 15
(k) Reporting Requirements 15
(l) Co-Obligor 15
Section 4. Payment of Expenses 16
(a) Expenses 16
(b) Termination of Agreement 16
Section 5. Conditions of Initial Purchaser's Obligations 16
(a) Opinion of Counsel for Issuers 16
(b) Opinion of Counsel for Initial Purchaser 16
(c) Officers' Certificate 17
(d) Accountants' Comfort Letter 17
(e) Bring-down Comfort Letter 17
(f) No Downgrading 17
(g) PORTAL 18
(h) Lock-Up Agreements 18
(i) Registration Rights Agreement 18
(j) Indenture and Pledge Agreement 18
(k) Pledge of Securities 18
(l) Opinion of Accountants as to Sufficiency of
Initial Pledged Securities 18
(m) Refinancing Transactions 18
(n) Conditions to Purchase of Option Securities 18
(o) Additional Documents 20
(p) Termination of Agreement 20
Section 6. Subsequent Offers and Resales of the Securities 20
(a) Offer and Sale Procedures 20
(b) Covenants of the Issuers 21
(c) Qualified Institutional Buyer 22
Section 7. Indemnification 22
(a) Indemnification of Initial Purchaser 22
(b) Indemnification of Issuers 23
(c) Actions against Parties; Notification 23
(d) Settlement without Consent if Failure
to Reimburse 24
(e) Engagement Letter Superseded 24
Section 8. Contribution 24
Section 9. Representations, Warranties and Agreements
to Survive Delivery 25
Section 10. Termination of Agreement 25
(a) Termination; General 25
(b) Liabilities 26
Section 11. Notices 26
Section 12. Parties 26
Section 13. GOVERNING LAW AND TIME 26
Section 14. Effect of Headings 27
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SCHEDULES
Schedule A - Pricing Information
Schedule B - List of Designated Subsidiaries
Schedule C - List of Persons Subject to Lock-Up
EXHIBITS
Exhibit A - Form of Opinion of Issuers' Counsel Exhibit B - Form of Lock-Up Agreement
FREEPORT-McMoRan COPPER & GOLD INC.
(a Delaware corporation)
FCX INVESTMENT LTD.
(a Cayman Islands exempted limited liability company)
$525,000,000
8 1/4% Convertible Senior Notes due 2006
PURCHASE AGREEMENT
August 1, 2001
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281
Ladies and Gentlemen:
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation
(the "Company"), and FCX Investment Ltd., a Cayman Islands
exempted limited liability company (the "Co-Obligor," and
together with the Company, the "Issuers," and each, an "Issuer"),
confirm their agreement with Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch" or the
"Initial Purchaser"), with respect to the issue and sale by the
Issuers and the purchase by the Initial Purchaser of $525,000,000
aggregate principal amount of the Issuers' 8 1/4% Convertible Senior
Notes due 2006 (the "Notes"), and with respect to the grant by
the Issuers to the Initial Purchaser of the option described in
Section 2(b) hereof to purchase all or any part of an additional
$78,750,000 principal amount of Notes to cover overallotments, if
any. The aforesaid $525,000,000 principal amount of Notes (the
"Initial Securities") to be purchased by the Initial Purchaser
and all or any part of the $78,750,000 principal amount of Notes
subject to the option described in Section 2(b) hereof (the
"Option Securities") are hereinafter called, collectively, the
"Securities". The Securities are to be issued pursuant to an
indenture to be dated as of August 7, 2001 (the "Indenture")
between the Issuers and The Bank of New York, as trustee (the
"Trustee"). Securities issued in book-entry form will be issued
to Cede & Co. as nominee of The Depository Trust Company ("DTC")
pursuant to a letter agreement, to be dated as of the Closing
Time (as defined in Section 2(c)), among the Issuers, the Trustee
and DTC.
The Securities are convertible into shares of, at the option of the holders of the Securities, Class A Common Stock, par value $.10 per share (the "Class A Common Stock"), or Class B Common Stock, par value $.10 per share, of the Company (the "Class B Common Stock," and together with the Class A Common Stock, the SCommon Stock") in accordance with the terms of the Securities and the Indenture, at the initial conversion price specified in Schedule A hereto.
The Initial Purchaser and its direct and indirect
transferees will be entitled to the benefits of a Registration
Rights Agreement (the "Registration Rights Agreement") dated as
of the Closing Time (as defined in Section 2(c)) between the
Issuers and the Initial Purchaser. In addition, the Co-Obligor
will enter into a Collateral Pledge and Security Agreement (the
"Pledge Agreement") dated as of the Closing Time (as defined in
Section 2(c)) among the Co-Obligor, the Trustee and The Bank of
New York, as Collateral Agent (the "Collateral Agent") for the
benefit of the holders of the Securities.
The Issuers understand that the Initial Purchaser proposes to make an offering of the Securities on the terms and in the manner set forth herein and agree that the Initial Purchaser may resell, subject to the conditions set forth herein, all or a portion of the Securities to purchasers ("Subsequent Purchasers") at any time after this Agreement has been executed and delivered. The Securities are to be offered and sold through the Initial Purchaser without being registered under the Securities Act of 1933, as amended (the "1933 Act"), in reliance upon exemptions therefrom. Pursuant to the terms of the Securities and the Indenture, investors that acquire Securities may only resell or otherwise transfer such Securities if such Securities are hereafter registered under the 1933 Act or if an exemption from the registration requirements of the 1933 Act is available (including the exemption afforded by Rule 144A ("Rule 144A") of the rules and regulations promulgated under the 1933 Act by the Securities and Exchange Commission (the "Commission")).
The Issuers have prepared and delivered to the Initial Purchaser copies of a preliminary offering memorandum dated July 30, 2001 (the "Preliminary Offering Memorandum") and have prepared and will deliver to the Initial Purchaser, on the date hereof or the next succeeding day, copies of a final offering memorandum dated August 1, 2001 (the "Final Offering Memorandum"), each for use by the Initial Purchaser in connection with its solicitation of purchases of, or offering of, the Securities. "Offering Memorandum" means, with respect to any date or time referred to in this Agreement, the most recent offering memorandum (whether the Preliminary Offering Memorandum or the Final Offering Memorandum, or any amendment or supplement to either such document), including exhibits thereto and any documents incorporated therein by reference, which has been prepared and delivered by the Issuers to the Initial Purchaser in connection with their solicitation of purchases of, or offering of, the Securities.
All references in this Agreement to financial statements and schedules and other information which are "contained," "included" or "stated" in the Offering Memorandum (or other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information that are incorporated by reference in the Offering Memorandum; and all references in this Agreement to amendments or supplements to the Offering Memorandum shall be deemed to mean and include the filing of any document under the Securities Exchange Act of 1934 (the "1934 Act") that is incorporated by reference in the Offering Memorandum.
It is understood and agreed that as soon as practical after the Closing Time, but in no event later than October 31, 2001, the Company and PT Freeport Indonesia Company, an Indonesian majority-owned subsidiary of the Company that is domesticated in the State of Delaware ("PTFI"), will use their best efforts to enter into (i) an amendment (the "FCX/PTFI Facility Amendment") to the $450,000,000 senior revolving credit facility under the Credit Agreement dated as of June 30, 1995, as amended, among the Company, PTFI, Chase Manhattan Bank, as administrative agent, security agent and documentary agent, First Trust of New York, National Association, as trustee, and the banks listed therein (as so amended, the "FCX/PTFI Facility") and (ii) an amendment (the "PTFI Facility Amendment," and together with the FCX/PTFI Facility Amendment, the "Facility Amendments") to the $550,000,000 senior secured revolving credit facility under the Credit Agreement dated as of October 27, 1989, as amended, among the Company, PTFI, Chase Manhattan Bank, as administrative agent, security agent and documentary agent, First Trust of New York, National Association, as trustee, and the banks listed therein (as so amended, the "PTFI Facility," and together with the FCX/PTFI Facility, the "Facilities"), in each case on substantially the terms described in the Offering Memorandum. The foregoing transactions are collectively referred to herein as the "Refinancing Transactions."
Section 1. Representations and Warranties by the Issuers.
(a) Representations and Warranties. Each of the Issuers,
jointly and severally, represents and warrants to the Initial
Purchaser as of the date hereof and as of the Closing Time
referred to in Section 2(c) hereof, and, if any Option Securities
are purchased, as of the relevant Date of Delivery referred to in
Section 2(b) hereof, and agrees with the Initial Purchaser, as
follows:
(i) Offering Memorandum. The Offering Memorandum does not, and at the Closing Time (and, if any Option Securities are purchased, at the relevant Date of Delivery) will not, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that this representation, warranty and agreement shall not apply to statements in or omissions from the Offering Memorandum made in reliance upon and in conformity with information furnished to the Issuers in writing by the Initial Purchaser expressly for use in the Offering Memorandum.
(ii) Incorporated Documents. The Offering Memorandum as delivered from time to time shall incorporate by reference the most recent Annual Report of the Company on Form 10-K filed with the Commission and each Quarterly Report of the Company on Form 10-Q and each Current Report of the Company on Form 8-K filed with the Commission since the filing of the end of the fiscal year to which such Annual Report relates. The documents incorporated or deemed to be incorporated by reference in the Offering Memorandum at the time they were or hereafter are filed with the Commission complied and will comply in all material respects with the requirements of the 1934 Act and the rules and regulations of the Commission thereunder (the "1934 Act Regulations"), and, when read together with the other information in the Offering Memorandum, at the time the Offering Memorandum was issued and at the Closing Time (and, if any Option Securities are purchased, at the relevant Date of Delivery), did not and will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading.
(iii) Independent Accountants. The accountants who certified the financial statements and supporting schedules included in the Offering Memorandum are independent public accountants with respect to the Company and its subsidiaries within the meaning of Regulation S-X under the 1933 Act.
(iv) Financial Statements. The financial statements, together with the related schedules and notes, included in the Offering Memorandum present fairly the financial position of the Company and its consolidated subsidiaries at the dates indicated and the statement of operations, stockholders' equity and cash flows of the Company and its consolidated subsidiaries for the periods specified; said financial statements have been prepared in conformity with generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods involved. The supporting schedules, if any, included in the Offering Memorandum present fairly in accordance with GAAP the information required to be stated therein. The selected financial data and the summary financial information included in the Offering Memorandum present fairly the information shown therein and have been compiled on a basis consistent with that of the audited financial statements included in the Offering Memorandum.
(v) No Material Adverse Change in Business. Since the respective dates as of which information is given in the Offering Memorandum, except as otherwise stated therein, (A) there has been no material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business (a "Material Adverse Effect"), (B) there have been no transactions entered into by the Company or any of its subsidiaries, other than those in the ordinary course of business, which are material with respect to the Company and its subsidiaries considered as one enterprise, and (C) there has been no dividend or distribution of any kind declared, paid or made by any Issuer on any class of its capital stock.
(vi) Good Standing of the Issuers. The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware and has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum and to enter into and perform its obligations under this Agreement; the Co-Obligor has been duly incorporated and is validly existing as an exempted limited liability company in good standing under the laws of the Cayman Islands and has all corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum and to enter into and perform its obligations under this Agreement; and each of the Issuers is duly qualified as a foreign corporation to transact business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect.
(vii) Good Standing of Designated Subsidiaries. Each "significant subsidiary" of the Company (as such term is defined in Rule 1-02 of Regulation S-X), each of which is listed on Schedule B hereto (each a "Designated Subsidiary" and, collectively, the "Designated Subsidiaries") has been duly organized and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect; except as otherwise disclosed in the Offering Memorandum, all of the issued and outstanding capital stock of the Co- Obligor and each Designated Subsidiary has been duly authorized and validly issued, is fully paid and non- assessable, and 50% or more of the issued and outstanding capital stock of PTFI, PT Irja Eastern Minerals and FM Services Company, and all of the issued and outstanding capital stock of Atlantic Copper, S.A. ("Atlantic Copper"), and the Co-Obligor is owned by the Company, directly or through subsidiaries, and except for the capital stock of Atlantic Copper, all such capital stock is owned by the Company free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity; none of the outstanding shares of capital stock of the Designated Subsidiaries was issued in violation of any preemptive or similar rights of any securityholder of such Designated Subsidiary; the other subsidiaries of the Company other than Designated Subsidiaries, considered in the aggregate as a single subsidiary, do not constitute a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X; and the Co-Obligor has no subsidiary.
(viii) Capitalization. The authorized, issued and outstanding capital stock of the Company is as set forth in the Offering Memorandum in the column entitled "Actual" under the caption "Capitalization" (except for subsequent issuances, if any, pursuant to this Agreement, pursuant to reservations, agreements, employee benefit plans referred to in the Offering Memorandum or pursuant to the exercise of convertible securities or options referred to in the Offering Memorandum). The shares of issued and outstanding capital stock of the Company have been duly authorized and validly issued and are fully paid and non-assessable; none of the outstanding shares of capital stock of the Company was issued in violation of the preemptive or other similar rights of any securityholder of the Company.
(ix) Authorization of Agreement. This Agreement has been duly authorized, executed and delivered by each Issuer.
(x) Authorization of the Indenture, the Pledge Agreement and the Registration Rights Agreement. Each of the Indenture, the Pledge Agreement and the Registration Rights Agreement has been duly authorized by each Issuer and, when executed and delivered by each Issuer and the other parties thereto, will constitute a valid and binding agreement of each Issuer, enforceable against each Issuer in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law) and except as rights to indemnification and contribution under the Registration Rights Agreement may be limited under applicable law.
(xi) Authorization of the Securities. The Securities have been duly authorized and, at the Closing Time, will have been duly executed by each Issuer and, when authenticated, issued and delivered in the manner provided for in the Indenture and delivered against payment of the purchase price therefor as provided in this Agreement, will constitute valid and binding obligations of each Issuer, enforceable against each Issuer in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers) reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law), and will be in the form contemplated by, and entitled to the benefits of, the Indenture, the Pledge Agreement and the Registration Rights Agreement.
(xii) Description of the Securities, the Indenture, the Pledge Agreement and the Registration Rights Agreement. The Securities, the Indenture, the Pledge Agreement and the Registration Rights Agreement will conform in all material respects to the respective statements relating thereto contained in the Offering Memorandum and will be in substantially the respective forms last delivered to the Initial Purchaser prior to the date of this Agreement.
(xiii) Authorization and Description of Common Stock. The Common Stock conforms to all statements relating thereto contained or incorporated by reference in the Offering Memorandum and such description conforms to the rights set forth in the instruments defining the same. Upon issuance and delivery of the Securities in accordance with this Agreement and the Indenture, the Securities will be convertible at the option of the holder thereof for shares of Common Stock in accordance with the terms of the Securities and the Indenture; the shares of Common Stock issuable upon conversion of the Securities have been duly authorized and reserved for issuance upon such conversion by all necessary corporate action and such shares, when issued upon such conversion, will be validly issued and will be fully paid and non-assessable; the shares of Common Stock issuable at the Issuers' option upon repurchase of the Securities at the option of the holder thereof upon a Change of Control (as defined in the Indenture) will have been, prior to the issuance thereof, duly authorized by all necessary corporate action and such shares, if and when issued in accordance with the terms of the Securities and the Indenture, will be validly issued and will be fully paid and non-assessable; no holder of such shares will be subject to personal liability by reason of being such a holder; and the issuance of such shares upon such conversion or repurchase will not be subject to the preemptive or other similar rights of any securityholder of the Company.
(xiv) Absence of Defaults and Conflicts. None of the Issuers or any of their subsidiaries is in violation of its charter, by-laws or other organizational documents or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which any Issuer or any of its subsidiaries is a party or by which or any of them may be bound, or to which any of the property or assets of any Issuer or any of its subsidiaries is subject (collectively, "Agreements and Instruments") except for such defaults that would not result in a Material Adverse Effect; and the execution, delivery and performance of this Agreement, the Indenture, the Pledge Agreement, the Registration Rights Agreement and the Securities and any other agreement or instrument entered into or issued or to be entered into or issued by any Issuer in connection with the transactions contemplated hereby or thereby or in the Offering Memorandum and the consummation of the transactions contemplated herein and in the Offering Memorandum (including the issuance and sale of the Securities and the use of the proceeds from the sale of the Securities as described in the Offering Memorandum under the caption "Use of Proceeds" and the issuance of the shares of Common Stock issuable upon conversion of the Securities) and compliance by any Issuer with its obligations hereunder have been duly authorized by all necessary corporate action and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or a Repayment Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of any Issuer or any of its subsidiaries pursuant to, the Agreements and Instruments except as disclosed in the Offering Memorandum and except for such conflicts, breaches or defaults or liens, charges or encumbrances that, singly or in the aggregate, would not result in a Material Adverse Effect, nor will such action result in any violation of the provisions of the charter, by-laws or other organizational documents of any Issuer or any of the Designated Subsidiaries or any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over any Issuer or any of the Designated Subsidiaries or any of their assets, properties or operations. As used herein, a "Repayment Event" means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by any Issuer or any of its subsidiaries.
(xv) Absence of Labor Dispute. No labor dispute with the employees of the Issuers or any of their subsidiaries exists or, to the knowledge of the Issuers, is imminent, and the Issuers are not aware of any existing or imminent labor disturbance by the employees of any of their or any of their subsidiaries' principal suppliers, manufacturers, customers or contractors, which, in either case, may reasonably be expected to result in a Material Adverse Effect.
(xvi) Absence of Proceedings. Except as disclosed in the Offering Memorandum, there is no action, suit, proceeding, inquiry or investigation before or brought by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Issuers, threatened, against or affecting any Issuer or any of its subsidiaries which might reasonably be expected to result in a Material Adverse Effect, or which might reasonably be expected to materially and adversely affect the properties or assets of any Issuer or any of its subsidiaries or the consummation of the transactions contemplated by this Agreement, the Indenture, the Pledge Agreement, the Registration Rights Agreement or the Securities or the performance by any Issuer of its obligations hereunder and thereunder. The aggregate of all pending legal or governmental proceedings to which the any Issuer or any of its subsidiaries is a party or of which any of their respective property or assets is the subject which are not described in the Offering Memorandum, including ordinary routine litigation incidental to the business, could not reasonably be expected to result in a Material Adverse Effect.
(xvii) Possession of Intellectual Property. The Issuers and their subsidiaries own or possess, or can acquire on reasonable terms, adequate patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks, trade names or other intellectual property (collectively, "Intellectual Property") necessary to carry on the business now operated by them, and none of the Issuers or any of their subsidiaries has received any notice or is otherwise aware of any infringement of or conflict with asserted rights of others with respect to any Intellectual Property or of any facts or circumstances which would render any Intellectual Property invalid or inadequate to protect the interest of the Issuers or any of their subsidiaries therein, and which infringement or conflict (if the subject of any unfavorable decision, ruling or finding) or invalidity or inadequacy, singly or in the aggregate, would result in a Material Adverse Effect.
(xviii) Absence of Further Requirements. No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency is necessary or required for the performance by each Issuer of its obligations hereunder, in connection with the offering, issuance or sale of the Securities hereunder, the issuance of shares of Common Stock upon conversion of the Securities or the consummation of the transactions contemplated by this Agreement or for the due execution, delivery or performance of the Indenture, the Pledge Agreement, the Registration Rights Agreement or the Securities by each Issuer or the consummation of the transactions contemplated thereunder, except such as have been already obtained and except such as may be required by the Federal and state securities laws with respect to the each Issuer's obligations under the Registration Rights Agreement.
(xix) Possession of Licenses and Permits. The Issuers and their subsidiaries possess such permits, licenses, approvals, consents and other authorizations (collectively, "Governmental Licenses") issued by the appropriate federal, state, local or foreign regulatory agencies or bodies necessary to conduct the business now operated by them; the Issuers and their subsidiaries are in compliance with the terms and conditions of all such Governmental Licenses, except where the failure so to comply would not, singly or in the aggregate, have a Material Adverse Effect; all of the Governmental Licenses are valid and in full force and effect, except where the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not have a Material Adverse Effect; and none of the Issuers or any of their subsidiaries has received any notice of proceedings relating to the revocation or modification of any such Governmental Licenses which are not described in the Offering Memorandum and which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect.
(xx) Title to Property. The Issuers and their subsidiaries have good and marketable title to all real property owned by the Issuers and their subsidiaries and good title to all other properties owned by them, in each case, free and clear of all mortgages, pledges, liens, security interests, claims, restrictions or encumbrances of any kind except such as (a) are described in the Offering Memorandum or (b) do not, singly or in the aggregate, result in a Material Adverse Effect; and all of the leases and subleases material to the business of the Issuers and their subsidiaries, considered as one enterprise, and under which the Issuers or any of their subsidiaries holds properties described in the Offering Memorandum, are in full force and effect, and none of the Issuers or any of their subsidiaries has any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Issuers or any of their subsidiaries under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Issuers or any subsidiary thereof to the continued possession of the leased or subleased premises under any such lease or sublease, which claim, if resolved against the Issuers or such subsidiary, would result in a Material Adverse Effect.
(xxi) Environmental Laws. Except as described in the Offering Memorandum and except such matters as would not, singly or in the aggregate, result in a Material Adverse Effect, (A) none of the Issuers or any of their subsidiaries is in violation of any federal, state, local or foreign statute, law, rule, regulation, ordinance, code, policy or rule of common law or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree or judgment, relating to pollution or protection of human health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products (collectively, "Hazardous Materials") or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, "Environmental Laws"), (B) the Issuers and their subsidiaries have all permits, authorizations and approvals required under any applicable Environmental Laws and are each in compliance with their requirements, (C) there are no pending or threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any Environmental Law against the Issuers or any of their subsidiaries and (D) there are no events or circumstances that might reasonably be expected to form the basis of an order for clean-up or remediation, or an action, suit or proceeding by any private party or governmental body or agency, against or affecting the Issuers or any of their subsidiaries relating to Hazardous Materials or Environmental Laws.
(xxii) Restrictions on Subsidiaries. Other than Atlantic Copper, no subsidiary of the Company is currently prohibited, directly or indirectly, from paying any dividends to the Company, from making any other distribution on such subsidiary's capital stock, from repaying to the Company any loans or advances to such subsidiary from the Company or from transferring any of such subsidiary's property or assets to the Company or any other subsidiary of the Company, except as may be described in or contemplated by the Offering Memorandum, and except such prohibitions that, singly or in the aggregate, would not result in a Material Adverse Effect.
(xxiii) Registration Rights. Except as may be described in the Offering Memorandum, there are no contracts, agreements or understandings between any Issuer and any person granting such person the right to require any Issuer to include any securities with the Securities to be registered pursuant to the Registration Rights Agreement.
(xxiv) Taxes. The Issuers and each of their subsidiaries have filed all foreign, federal, state and local tax returns that are required to be filed or have requested extensions thereof (except in any case in which the failure so to file would not have a Material Adverse Effect) and have paid all taxes required to be paid by any of them and any other assessment, fine or penalty levied against any of them, to the extent that any of the foregoing is due and payable, except for any such assessment, fine or penalty that is currently being contested in good faith or as would not have a Material Adverse Effect.
(xxv) Insurance. The Issuers and each of their subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which they are engaged; none of the Issuers or any such subsidiary has been refused any insurance coverage sought or applied for; and none of the Issuers or any such subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to be obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.
(xxvi) Investment Company Act. Each Issuer is not, and upon the issuance and sale of the Securities as herein contemplated and the application of the net proceeds therefrom as described in the Offering Memorandum will not be, an "investment company" or an entity "controlled" by an "investment company" as such terms are defined in the Investment Company Act of 1940, as amended (the "1940 Act").
(xxvii) Similar Offerings. None of the Issuers or any of their affiliates, as such term is defined in Rule 501(b) under the 1933 Act (each, an "Affiliate"), has, directly or indirectly, solicited any offer to buy, sold or offered to sell or otherwise negotiated in respect of, or will solicit any offer to buy, sell or offer to sell or otherwise negotiate in respect of, in the United States or to any United States citizen or resident, any security which is or would be integrated with the sale of the Securities in a manner that would require the Securities to be registered under the 1933 Act.
(xxviii) Rule 144A Eligibility. The Securities are eligible for resale pursuant to Rule 144A and will not be, at the Closing Time, of the same class as securities listed on a national securities exchange registered under Section 6 of the 1934 Act, or quoted in a U.S. automated interdealer quotation system.
(xxix) No General Solicitation. None of the Issuers, their Affiliates or any person acting on its or any of their behalf (other than the Initial Purchaser, as to whom the Issuers make no representation) has engaged or will engage, in connection with the offering of the Securities, in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the 1933 Act.
(xxx) No Registration Required. Subject to compliance by the Initial Purchaser with the representations and warranties set forth in Section 2 and the procedures set forth in Section 6 hereof, it is not necessary in connection with the offer, sale and delivery of the Securities to the Initial Purchaser and to each Subsequent Purchaser in the manner contemplated by this Agreement and the Offering Memorandum to register the Securities under the 1933 Act or to qualify the Indenture under the Trust Indenture Act of 1939, as amended (the "1939 Act").
(xxxi) Reporting Company. The Company is subject to the reporting requirements of Section 13 or Section 15(d) of the 1934 Act.
(xxxii) Regulation M. The Issuers have not taken, and will not take, directly or indirectly, any action prohibited by Regulation M under the 1934 Act in connection with the offering of the Securities.
(xxxiii) Security Interest. The Pledge Agreement will create valid security interests in the collateral purported to be covered thereby securing the Co-Obligor's obligations under the Notes to the extent contemplated by the Pledge Agreement and the Indenture, which security interests are and will remain perfected first-priority security interests.
(xxxiv) Representations and Warranties in the Pledge Agreement. Each of the representations and warranties made by the Co-Obligor in the Pledge Agreement is true and correct.
(b) Officer's Certificates. Any certificate signed by any officer of any Issuer or any of its subsidiaries delivered to the Initial Purchaser or to counsel for the Initial Purchaser in connection with the matters covered by this Agreement shall be deemed a representation and warranty by such Issuer to the Initial Purchaser as to the matters covered thereby.
Section 2. Sale and Delivery to Initial Purchaser; Closing.
(a) Securities. On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Issuers agree to sell to the Initial Purchaser, and the Initial Purchaser agrees to purchase from the Issuers, at the price set forth in Schedule A, all of the Initial Securities.
(b) Option Securities. In addition, on the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Issuers hereby grant an option to the Initial Purchaser to purchase up to an additional $78,750,000 principal amount of Securities at the same price per share set forth in Schedule A for the Initial Securities, plus accrued interest, if any, from the Closing Time to the Date of Delivery (as defined below). The option hereby granted will expire 30 days after the date hereof and may be exercised in whole or in part from time to time only for the purpose of covering over-allotments which may be made in connection with the offering and distribution of the Initial Securities upon notice by the Initial Purchaser to the Issuers setting forth the number of Option Securities as to which the Initial Purchaser is then exercising the option and the time and date of payment and delivery for such Option Securities. Any such time and date of delivery (a "Date of Delivery") shall be determined by the Initial Purchaser, but shall not be later than seven full business days after the exercise of said option, nor in any event prior to the Closing Time, as hereinafter defined.
(c) Payment. Payment of the purchase price for, and delivery of certificates for, the Securities shall be made at the office of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017, or at such other place as shall be agreed upon by the Initial Purchaser and the Issuers, at 9:00 A.M. (eastern time) on the fourth business day after the date hereof (unless postponed in accordance with the provisions of Section 11), or such other time not later than ten business days after such date as shall be agreed upon by the Initial Purchaser and the Issuers (such time and date of payment and delivery being herein called the "Closing Time").
In addition, in the event that any or all of the Option Securities are purchased by the Initial Purchaser, payment of the purchase price for, and delivery of certificates for, such Option Securities shall be made at the above-mentioned offices, or at such other place as shall be agreed upon by the Initial Purchaser and the Issuers, on each Date of Delivery as specified in the notice from the Initial Purchaser to the Issuers.
Payment shall be made to the Issuers by wire transfer of immediately available funds to a bank account designated by the Issuers, against delivery to the Initial Purchaser for its account of certificates for the Securities to be purchased by it.
(d) Denominations; Registration. Certificates for the Initial Securities and the Option Securities, if any, shall be in such denominations ($1,000 or integral multiples of $1,000 in excess thereof) and registered in such names as the Initial Purchaser may request in writing at least one full business day before the Closing Time or the relevant Date of Delivery, as the case may be. The certificates representing the Initial Securities and the Option Securities, if any, shall be made available for examination and packaging by the Initial Purchaser in The City of New York not later than 10:00 A.M. on the last business day prior to the Closing Time or the relevant Date of Delivery, as the case may be.
Section 3. Covenants of the Issuers. Each Issuer, jointly and severally, covenants with the Initial Purchaser as follows:
(a) Offering Memorandum. The Issuers, as promptly as possible, will furnish to the Initial Purchaser, without charge, such number of copies of the Preliminary Offering Memorandum, the Final Offering Memorandum and any amendments and supplements thereto and documents incorporated by reference therein as the Initial Purchaser may reasonably request.
(b) Notice and Effect of Material Events. The Issuers will immediately notify the Initial Purchaser, and confirm such notice in writing, of (x) any filing made by the Issuers of information relating to the offering of the Securities with any securities exchange or any other regulatory body in the United States or any other jurisdiction, and (y) prior to the completion of the placement of the Securities by the Initial Purchaser as evidenced by a notice in writing from the Initial Purchaser to the Issuers, any material changes in or affecting the condition, financial or otherwise, or the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise which (i) make any statement in the Offering Memorandum false or misleading or (ii) are not disclosed in the Offering Memorandum. In such event or if during such time any event shall occur as a result of which it is necessary, in the reasonable opinion of any of the Issuers, their counsel, the Initial Purchaser or counsel for the Initial Purchaser, to amend or supplement the Final Offering Memorandum in order that the Final Offering Memorandum not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances then existing, the Issuers will forthwith amend or supplement the Final Offering Memorandum by preparing and furnishing to the Initial Purchaser an amendment or amendments of, or a supplement or supplements to, the Final Offering Memorandum (in form and substance satisfactory in the reasonable opinion of counsel for the Initial Purchaser) so that, as so amended or supplemented, the Final Offering Memorandum will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time it is delivered to a Subsequent Purchaser, not misleading.
(c) Amendment to Offering Memorandum and Supplements. The Issuers will advise the Initial Purchaser promptly of any proposal to amend or supplement the Offering Memorandum and will not effect such amendment or supplement without the consent of the Initial Purchaser. Neither the consent of the Initial Purchaser, nor the Initial Purchaser's delivery of any such amendment or supplement, shall constitute a waiver of any of the conditions set forth in Section 5 hereof.
(d) Qualification of Securities for Offer and Sale. The Issuers will use their best efforts, in cooperation with the Initial Purchaser, to qualify the Securities for offering and sale under the applicable securities laws of such states and other jurisdictions as the Initial Purchaser may designate and will maintain such qualifications in effect as long as required for the sale of the Securities; provided, however, that none of the Issuers shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject.
(e) Rating of Securities. The Issuers shall take all reasonable action necessary to enable Standard & Poor's Ratings Services, a division of McGraw Hill, Inc. ("S&P"), and Moody's Investors Service Inc. ("Moody's") to provide their respective credit ratings of the Securities.
(f) DTC. The Issuers will cooperate with the Initial Purchaser and use their best efforts to permit the Securities to be eligible for clearance and settlement through the facilities of DTC.
(g) Use of Proceeds. The Issuers will use the net proceeds received by them from the sale of the Securities in the manner specified in the Offering Memorandum under "Use of Proceeds."
(h) Restriction on Sale of Securities. During a period of 90 days from the date of the Offering Memorandum, none of the Issuers will, without the prior written consent of Merrill Lynch, directly or indirectly, issue, sell, offer or agree to sell, grant any option for the sale of, or otherwise dispose of, any other debt securities of any Issuer or securities of any Issuer that are convertible into, or exchangeable for, the Securities or such other debt securities.
(i) Restriction on Sale of Common Stock. During a period of 90 days from the date of the Offering Memorandum, the Company will not, without the prior written consent of Merrill Lynch, directly or indirectly, (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, lend or otherwise transfer or dispose of any share of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or file any registration statement under the 1933 Act with respect to any of the foregoing or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Common Stock, whether any such swap or transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The foregoing sentence shall not apply to (A) the Securities to be sold hereunder, (B) any shares of Common Stock issued by the Company upon the exercise of an option or warrant or the conversion of a security outstanding on the date hereof and referred to in the Offering Memorandum, (C) any shares of Common Stock issued or options to purchase Common Stock granted pursuant to existing employee benefit plans of the Company referred to in the Offering Memorandum or (D) any shares of Common Stock issued pursuant to any non-employee director stock plan or dividend reinvestment plan.
(j) PORTAL Designation. The Issuers will use their best efforts to permit the Securities to be designated PORTAL securities in accordance with the rules and regulations adopted by the National Association of Securities Dealers, Inc. ("NASD") relating to trading in the PORTAL Market.
(k Reporting Requirements. The Issuers, during the period when the Offering Memorandum is required to be delivered pursuant to Section 6(a)(vi) hereof, will file all documents required to be filed with the Commission pursuant to the 1934 Act within the time periods required by the 1934 Act and the 1934 Act Regulations.
(l Co-Obligor. So long as any of the Securities are outstanding, the Co-Obligor will not issue any shares of its capital stock or other equity interests in the Co-Obligor to any person other than the Company or its subsidiaries, and the Company shall cause the Co-Obligor to remain a wholly-owned subsidiary of the Company at all times.
Section 4. Payment of Expenses.
(a Expenses. Each Issuer, jointly and severally, will pay all expenses incident to the performance of the Issuers' obligations under this Agreement, the Securities, the Indenture, the Pledge Agreement and the Registration Rights Agreement, including, but not limited to, (i) the preparation, printing, delivery to the Initial Purchaser and any filing of the Offering Memorandum (including financial statements and any schedules or exhibits and any document incorporated therein by reference) and of each amendment or supplement thereto, (ii) the preparation, issuance and delivery of the certificates for the Securities to the Initial Purchaser, including any transfer taxes, any stamp or other duties payable upon the sale, issuance and delivery of the Securities to the Initial Purchaser and any charges of DTC in connection therewith, (iii) the fees and disbursements of the Issuers' counsel, accountants and other advisors, (iv) the qualification of the Securities under securities laws in accordance with the provisions of Section 3(d) hereof, including filing fees and the reasonable fees and disbursements of counsel for the Initial Purchaser in connection therewith and in connection with the preparation of the Blue Sky Survey, or any supplement thereto, (v) the fees and expenses of the Trustee and the Collateral Agent, including the fees and disbursements of counsel for the Trustee and the Collateral Agent in connection with the Indenture, the Pledge Agreement and the Securities, (vi) any fees payable in connection with the rating of the Securities and (vii) any fees and expenses payable in connection with the initial and continued designation of the Securities as PORTAL securities under the PORTAL Market Rules pursuant to NASD Rule 5322.
(b Termination of Agreement. If this Agreement is terminated by the Initial Purchaser in accordance with the provisions of Section 5 or Section 10(a)(i) hereof, each Issuer, jointly and severally, shall reimburse the Initial Purchaser for all of its out-of-pocket expenses, including the reasonable fees and disbursements of counsel for the Initial Purchaser.
Section 5. Conditions of Initial Purchaser's Obligations. The obligations of the Initial Purchaser hereunder are subject to the accuracy of the representations and warranties of the Issuers contained in Section 1 hereof or in certificates of any officer of any Issuer or any of its subsidiaries delivered pursuant to the provisions hereof, to the performance by the Issuers of their covenants and other obligations hereunder, and to the following further conditions:
(a Opinion of Counsel for Issuers. At the Closing Time, the Initial Purchaser shall have received the favorable opinion, dated as of the Closing Time, of Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P., counsel for the Issuers, substantially in the form Exhibit A hereto.
(b Opinion of Counsel for Initial Purchaser. At the Closing Time, the Initial Purchaser shall have received the favorable opinion, dated as of the Closing Time, of Davis Polk & Wardwell, counsel for the Initial Purchaser, with respect to the matters set forth in numbered paragraphs 6 through 10, inclusive, 12, 19 and the first paragraph immediately following the fifth paragraph of qualifications, limitations and assumptions of Exhibit A hereto. In giving such opinion such counsel may rely, as to all matters governed by the laws of jurisdictions other than the law of the State of New York and the federal law of the United States and the General Corporation Law of the State of Delaware, upon the opinions of counsel satisfactory to the Initial Purchaser. Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers of any Issuer and its subsidiaries and certificates of public officials.
(c Officers' Certificate. At the Closing Time, there shall not have been, since the date hereof or since the respective dates as of which information is given in the Offering Memorandum, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, and the Initial Purchaser shall have received a certificate of the President or a Vice President of each Issuer and of the chief financial or chief accounting officer of each Issuer, dated as of the Closing Time, to the effect that (i) there has been no such material adverse change, (ii) the representations and warranties in Section 1 hereof are true and correct with the same force and effect as though expressly made at and as of the Closing Time, and (iii) each Issuer has complied with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to the Closing Time.
(d Accountants' Comfort Letter. At the time of the execution of this Agreement, the Initial Purchaser shall have received from Arthur Andersen LLP, independent public accountants, a letter dated such date, in form and substance satisfactory to the Initial Purchaser containing statements and information of the type ordinarily included in accountants' "comfort letters" to Initial Purchaser with respect to the financial statements and certain financial information contained in the Offering Memorandum.
(e Bring-down Comfort Letter. At the Closing Time, the Initial Purchaser shall have received from Arthur Andersen LLP a letter, dated as of the Closing Time, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (d) of this Section, except that the specified date referred to shall be a date not more than three business days prior to the Closing Time.
(f No Downgrading. Since the date of this Agreement, there shall not have occurred a downgrading in the rating assigned to any of the Issuers' securities by any "nationally recognized statistical rating organization", as that term is defined by the Commission for purposes of Rule 436(g)(2) under the 1933 Act, and no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of the Securities or any of the Issuers' other securities.
(g PORTAL. At the Closing Time, the Securities shall have been designated for trading on PORTAL.
(h Lock-Up Agreements. At the date of this Agreement, the Initial Purchaser shall have received an agreement substantially in the form of Exhibit B hereto signed by the persons listed on Schedule C hereto.
(i Registration Rights Agreement. At the Closing Time, the Initial Purchaser shall have received counterparts of the Registration Rights Agreement duly executed by the Issuers.
(j Indenture and Pledge Agreement. At the Closing Time, the Initial Purchaser shall have received a copy of the Indenture and the Pledge Agreement, in each case duly executed by each of the parties thereto.
(k Pledge of Securities. As of the Closing Time, the Issuers shall have caused a portion of the proceeds from this offering to be applied to purchase the Initial Pledged Securities (as defined in the Pledge Agreement) and deposited such Initial Pledged Securities into the Collateral Account (as defined in the Pledge Agreement) to be held therein subject to the terms of the Pledge Agreement and the Co-Obligor shall have granted the assignment and security interest and made the pledge and assignment contemplated by the Pledge Agreement.
(l Opinion of Accountants as to Sufficiency of Initial Pledged Securities. At the Closing Time, the Initial Purchasers shall have received written verification from Arthur Andersen LLP, or another nationally recognized firm of independent public accountants selected by the Issuers, as to the mathematical accuracy of the computation of the sufficient level of the Initial Pledged Securities, upon receipt of scheduled interest and principal payments of such Initial Pledged Securities, to provide for payment in full of the first six scheduled interest payments due on the Initial Securities.
(m Refinancing Transactions. At the Closing Time, the Initial Purchaser shall have received evidence satisfactory to it of the commitment of the lenders under the Facilities to consummate the Refinancing Transactions on substantially the terms and conditions as described in the Offering Memorandum.
(n Conditions to Purchase of Option Securities. In the
event that the Initial Purchaser exercises its option provided in
Section 2(b) hereof to purchase all or any portion of the Option
Securities, the representations and warranties of the Issuers
contained herein and the statements in any certificates furnished
by any Issuer or any subsidiary thereof hereunder shall be true
and correct as of each Date of Delivery and, at the relevant Date
of Delivery:
(i Officers' Certificate. The Initial Purchaser shall have received a certificate, dated such Date of Delivery, of the President or a Vice President of each Issuer and of the chief financial or chief accounting officer of each Issuer confirming that the certificate delivered at the Closing Time pursuant to Section 5(c) hereof remains true and correct as of such Date of Delivery.
(ii Opinion of Counsel for Issuers. The Initial Purchaser shall have received the favorable opinion of Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P., counsel for the Issuers, dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Section 5(a) hereof.
(iii Opinion of Counsel for Initial Purchaser. The
Initial Purchaser shall have received the favorable opinion
of Davis Polk & Wardwell, counsel for the Initial Purchaser,
dated such Date of Delivery, relating to the Option
Securities to be purchased on such Date of Delivery and
otherwise to the same effect as the opinion required by
Section 5(b) hereof.
(iv Bring-down Comfort Letter. The Initial Purchaser shall have received a letter from Arthur Andersen LLP, in form and substance satisfactory to the Initial Purchaser and dated such Date of Delivery, substantially in the same form and substance as the letter furnished to the Initial Purchaser pursuant to Section 5(e) hereof, except that the "specified date" in the letter furnished pursuant to this paragraph shall be a date not more than five days prior to such Date of Delivery.
(v No Downgrading. Subsequent to the date of this Agreement, no downgrading shall have occurred in the rating accorded any of the Issuers' securities by any "nationally recognized statistical rating organization", as that term is defined by the Commission for purposes of Rule 436(g)(2) under the 1933 Act, and no such organization shall have publicly announced that it has under surveillance or review its ratings of any of the Issuers' securities.
(vi Pledge of Securities. As of the relevant Date of Delivery, the Issuers shall have caused such portion of the proceeds from the sale of the Option Securities to be applied to purchase Additional Pledged Securities (as defined in the Pledge Agreement) which, upon the receipt of the scheduled principal and interest payments thereon would be sufficient to provide for the payment in full of the first six scheduled interest payments due on such Option Securities and deposited such Additional Pledged Securities into the Collateral Account (as defined in the Pledge Agreement) to be held therein subject to the terms of the Pledge Agreement and the Co-Obligor shall have granted the assignment and security interest made the pledge and assignment contemplated by the Pledge Agreement.
(vii Opinion of Accountants as to Sufficiency of Additional Pledged Securities. At the relevant Date of Delivery, the Initial Purchasers shall have received written verification from Arthur Andersen LLP, or another nationally recognized firm of independent public accountants selected by the Issuers, as to the mathematical accuracy of the computation of the sufficient level of the Additional Pledged Securities, upon receipt of scheduled interest and principal payments of such Additional Pledged Securities, to provide for payment in full of the first six scheduled interest payments due on the Option Securities issued in connection therewith.
(o Additional Documents. At the Closing Time and at each Date of Delivery, counsel for the Initial Purchaser shall have been furnished with such documents and opinions as they may reasonably require for the purpose of enabling them to pass upon the issuance and sale of the Securities as herein contemplated, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Issuers in connection with the issuance and sale of the Securities as herein contemplated shall be reasonably satisfactory in form and substance to the Initial Purchaser and counsel for the Initial Purchaser.
(p Termination of Agreement. If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, this Agreement, or, in the case of any condition to the purchase of Option Securities, on a Date of Delivery which is after the Closing Time, the obligations of the Initial Purchaser to purchase the relevant Option Securities, may be terminated by the Initial Purchaser by notice to the Issuers at any time at or prior to the Closing Time or such Date of Delivery, as the case may be, and such termination shall be without liability of any party to any other party except as provided in Section 4 and except that Sections 1, 7, 8 and 9 shall survive any such termination and remain in full force and effect.
Section 6. Subsequent Offers and Resales of the Securities.
(a Offer and Sale Procedures. The Initial Purchaser and the Issuers hereby establish and agree to observe the following procedures in connection with the offer and sale of the Securities:
(i Offers and Sales only to Qualified Institutional Buyers. Offers and sales of the Securities shall only be made to persons whom the offeror or seller reasonably believes to be qualified institutional buyers, as defined in Rule 144A under the 1933 Act ("Qualified Institutional Buyers").
(ii No General Solicitation. No general solicitation or general advertising (within the meaning of Rule 502(c) under the 1933 Act) will be used in the United States in connection with the offering or sale of the Securities.
(iii Purchases by Non-Bank Fiduciaries. In the case of a non-bank Subsequent Purchaser of a Security acting as a fiduciary for one or more third parties, each third party shall, in the judgment of the Initial Purchaser, be a Qualified Institutional Buyer.
(iv Subsequent Purchaser Notification. The Initial
Purchaser will take reasonable steps to inform, and cause
each of its U.S. affiliates to take reasonable steps to
inform, persons acquiring Securities from the Initial
Purchaser or affiliate, as the case may be, in the United
States that the Securities (A) have not been and will not be
registered under the 1933 Act, (B) are being sold to them
without registration under the 1933 Act in reliance on Rule
144A or in accordance with another exemption from
registration under the 1933 Act, as the case may be, and (C)
may not be offered, sold or otherwise transferred except (1)
to the Company or a subsidiary thereof, (2) outside the
United States in accordance with Regulation S, or (3) inside
the United States (w) in accordance with Rule 144A to a
person whom the seller reasonably believes is a Qualified
Institutional Buyer that is purchasing such Securities for
its own account or for the account of a Qualified
Institutional Buyer to whom notice is given that the offer,
sale or transfer is being made in reliance on Rule 144A, (x)
to an institutional "accredited investor" within the meaning
of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under
the 1933 Act that is purchasing for its own account or for
the account of such an institutional accredited investor,
(y) pursuant to a registration statement which has been
declared effective under the 1933 Act or (z) pursuant to
another available exemption from registration under the 1933
Act.
(v Restrictions on Transfer. The transfer restrictions and the other provisions set forth in the Offering Memorandum under the heading "Notice to Investors", including the legend required thereby, shall apply to the Securities except as otherwise agreed by the Issuers and the Initial Purchaser.
(vi Delivery of Offering Memorandum. The Initial Purchaser will deliver to each purchaser of the Securities from the Initial Purchaser, in connection with its original distribution of the Securities, a copy of the Offering Memorandum, as amended and supplemented at the date of such delivery.
(b Covenants of the Issuers. Each Issuer, jointly and severally covenants with the Initial Purchaser as follows:
(i Integration. Each Issuer agrees that it will not
and will cause its Affiliates not to, directly or
indirectly, solicit any offer to buy, sell or make any offer
or sale of, or otherwise negotiate in respect of, securities
of any Issuer of any class if, as a result of the doctrine
of "integration" referred to in Rule 502 under the 1933 Act,
such offer or sale would render invalid (for the purpose of
(i) the sale of the Securities by the Issuers to the Initial
Purchaser, (ii) the resale of the Securities by the Initial
Purchaser to Subsequent Purchasers or (iii) the resale of
the Securities by such Subsequent Purchasers to others) the
exemption from the registration requirements of the 1933 Act
provided by Section 4(2) thereof or by Rule 144A thereunder
or otherwise.
(ii Rule 144A Information. Each Issuer agrees that, in order to render the Securities eligible for resale pursuant to Rule 144A under the 1933 Act, while any of the Securities remain outstanding, it will make available, upon request, to any holder of Securities or prospective purchasers of Securities the information specified in Rule 144A(d)(4), unless such Issuer furnishes information to the Commission pursuant to Section 13 or 15(d) of the 1934 Act.
(iii Restriction on Resales. While any of the Securities remain outstanding, each Issuer will not, and will cause its Affiliates not to, resell any Securities which they acquire.
(c Qualified Institutional Buyer. The Initial Purchaser represents and warrants to, and agrees with, the Issuers that it is a "qualified institutional buyer" within the meaning of Rule 144A under the 1933 Act.
Section 7. Indemnification.
(a Indemnification of Initial Purchaser. Each Issuer, jointly and severally, agrees to indemnify and hold harmless the Initial Purchaser and each person, if any, who controls the Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:
(i against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in any Preliminary Offering Memorandum or the Final Offering Memorandum (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;
(ii against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 7(d) below) any such settlement is effected with the written consent of the Issuers; and
(iii against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by Merrill Lynch), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Issuers by the Initial Purchaser expressly for use in the Offering Memorandum (or any amendment thereto).
(b Indemnification of Issuers. The Initial Purchaser agrees to indemnify and hold harmless the Issuers and each person, if any, who controls the Issuers within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Offering Memorandum in reliance upon and in conformity with written information furnished to the Issuers by the Initial Purchaser expressly for use in the Offering Memorandum.
(c Actions against Parties; Notification. Each indemnified
party shall give notice as promptly as reasonably practicable to
each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure
to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it
is not materially prejudiced as a result thereof and in any event
shall not relieve it from any liability which it may have
otherwise than on account of this indemnity agreement. In the
case of parties indemnified pursuant to Section 7(a) above,
counsel to the indemnified parties shall be selected by Merrill
Lynch, and, in the case of parties indemnified pursuant to
Section 7(b) above, counsel to the indemnified parties shall be
selected by the Company. An indemnifying party may participate
at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except
with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be
liable for fees and expenses of more than one counsel (in
addition to any local counsel) separate from their own counsel
for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of
the indemnified parties, settle or compromise or consent to the
entry of any judgment with respect to any litigation, or any
investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever in respect of
which indemnification or contribution could be sought under this
Section or Section 8 hereof (whether or not the indemnified
parties are actual or potential parties thereto), unless such
settlement, compromise or consent (i) includes an unconditional
release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii)
does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any
indemnified party.
(d Settlement without Consent if Failure to Reimburse. If
at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees
and expenses of counsel, such indemnifying party agrees that it
shall be liable for any settlement of the nature contemplated by
Section 7(a)(ii) effected without its written consent if (i) such
settlement is entered into more than 45 days after receipt by
such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of
such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have
reimbursed such indemnified party in accordance with such request
prior to the date of such settlement.
(e Engagement Letter Superseded. The terms of the engagement letter entered into between the Company and the Initial Purchaser, dated July 16, 2001 (the "Engagement Letter"), are hereby superceded and replaced in their entirety by the terms of this Agreement, including any and all indemnity provisions contained in the Engagement Letter, which are specifically replaced by the provisions contained in this Section 7, notwithstanding the fact that the Engagement Letter provides that provisions relating to indemnity shall survive its termination.
Section 8. Contribution. If the indemnification provided for in Section 7 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Issuers on the one hand and the Initial Purchaser on the other hand from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Issuers on the one hand and of the Initial Purchaser on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Issuers on the one hand and the Initial Purchaser on the other hand in connection with the offering of the Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Securities pursuant to this Agreement (before deducting expenses) received by the Issuers and the total underwriting discount received by the Initial Purchaser, bear to the aggregate initial offering price of the Securities.
The relative fault of the Issuers on the one hand and the Initial Purchaser on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Issuers or by the Initial Purchaser and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
The Issuers and the Initial Purchaser agree that it would
not be just and equitable if contribution pursuant to this
Section were determined by pro rata allocation or by any other
method of allocation which does not take account of the equitable
considerations referred to above in this Section. The aggregate
amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this
Section shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in investigating,
preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any
such untrue or alleged untrue statement or omission or alleged
omission.
Notwithstanding the provisions of this Section, the Initial Purchaser shall not be required to contribute any amount in excess of the amount by which the total price at which the Securities purchased and sold by it hereunder exceeds the amount of any damages which the Initial Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section, each person, if any, who controls the Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Initial Purchaser, and each person, if any, who controls the Issuers within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Issuers.
Section 9. Representations, Warranties and Agreements to Survive Delivery. All representations, warranties and agreements contained in this Agreement or in certificates of officers of any Issuer or any of its subsidiaries submitted pursuant hereto shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of the Initial Purchaser or controlling person, or by or on behalf of the Issuers, and shall survive delivery of the Securities to the Initial Purchaser.
Section 10. Termination of Agreement.
(a Termination; General. The Initial Purchaser may
terminate this Agreement, by notice to the Issuers, at any time
at or prior to the Closing Time (i) if there has been, since the
time of execution of this Agreement or since the respective dates
as of which information is given in the Offering Memorandum, any
material adverse change in the condition, financial or otherwise,
or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise,
whether or not arising in the ordinary course of business, or
(ii) if there has occurred any material adverse change in the
financial markets in the United States or the international
financial markets, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development
involving a prospective change in national or international
political, financial or economic conditions, in each case the
effect of which is such as to make it, in the judgment of the
Initial Purchaser, impracticable to market the Securities or to
enforce contracts for the sale of the Securities, or (iii) if
trading in any securities of the Company has been suspended or
materially limited by the Commission or the New York Stock
Exchange, or if trading generally on the American Stock Exchange
or the New York Stock Exchange or in the Nasdaq National Market
has been suspended or materially limited, or minimum or maximum
prices for trading have been fixed, or maximum ranges for prices
have been required, by any of said exchanges or by such system or
by order of the Commission, the National Association of
Securities Dealers, Inc. or any other governmental authority, or
(iv) if a banking moratorium has been declared by either Federal
or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this Section, such termination shall be without liability of any party to any other party except as provided in Section 4 hereof, and provided further that Sections 1, 7, 8 and 9 shall survive such termination and remain in full force and effect.
Section 11. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Initial Purchaser shall be directed to the it at North Tower, World Financial Center, New York, New York 10281, attention of Equity Capital Markets; notices to the Issuers shall be directed to them at 1615 Poydras Street, New Orleans, Louisiana 70112, attention of Richard C. Adkerson.
Section 12. Parties. This Agreement shall inure to the benefit of and be binding upon the Initial Purchaser and the Issuers and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Initial Purchaser and the Issuers and their respective successors and the controlling persons and officers and directors referred to in Sections 7 and 8 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the Initial Purchaser and the Issuers and their respective successors, and said controlling persons and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Securities from the Initial Purchaser shall be deemed to be a successor by reason merely of such purchase.
Section 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EXCEPT AS OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
Section 14. Effect of Headings. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.
If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Issuers a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement between the Initial Purchaser and the Issuers in accordance with its terms.
Very truly yours,
FREEPORT-McMoRan COPPER &
GOLD INC.
By: ____________________________
Name:
Title:
FCX INVESTMENT LTD.
By: ____________________________
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: ____________________________
Authorized Signatory
SCHEDULE A
FREEPORT MCMORAN COPPER & GOLD INC.
FCX INVESTMENT LTD.
$525,000,000 8 1/4% Convertible Senior Notes due 2006
1. The initial offering price of the Securities shall be 100% of the principal amount thereof, plus accrued interest, if any, from the date of issuance.
2. The purchase price to be paid by the Initial Purchaser for the Securities shall be 96.5% of the principal amount thereof.
3. The interest rate on the Securities shall be 8 1/4% per annum.
4. The Securities shall be convertible into shares of, at the option of the holder, Class A Common Stock, par value $.10 per share or Class B Common Stock, par value $.10 per share, of the Company at an initial conversion price of $14.30 per share (equivalent to a conversion rate of 69.9301 shares of Class A Common Stock or Class B Common Stock per $1,000 principal amount of Securities).
5. The Co-Obligor shall pledge a portfolio of U.S. government securities to secure the payment of the first six scheduled installments of interest.
6. The Securities shall be redeemable, in whole or in part, at the option of the Issuers on or after July 31, 2004.
7. Holders of the Securities shall have the option to require the Issuers to repurchase the Securities upon a Change of Control of the Company, in cash or in Common Stock.
8. Registration rights shall be granted to the holders of the Securities.
SCHEDULE B
List of Designated Subsidiaries
PT Freeport Indonesia
PT Irja Eastern Minerals
Atlantic Copper, S.A.
FM Services Company
SCHEDULE C
List of Persons Subject to Lock-Up
All directors and executive officers of the Company:
A. Directors
Robert J. Allison, Jr.
Robert W. Bruce III
R. Leigh Clifford
Robert A. Day
Gerald J. Ford
H. Devon Graham, Jr.
Oscar Y.L. Groeneveld
J. Bennett Johnston
Bobby Lee Lackey
Gabrielle K. McDonald
James R. Moffett
B.M. Rankin, Jr.
J. Stapleton Roy
J. Taylor Wharton
B. Executive Officers
Name Title
James R. Moffett Chairman of the Board & Chief Executive Officer
Richard C. Adkerson President & Chief Financial Officer
Adrianto Machribie President Director of PT Freeport Indonesia
Exhibit A
|
FORM OF OPINION OF ISSUERS' COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(a)
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281
Re: Freeport-McMoRan Copper & Gold Inc. and FCX
Investment Ltd.
8 1/4% Convertible Senior Notes Due 2006
Ladies and Gentlemen:
We have served as counsel to Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the "Company"), and FCX Investment Ltd., a Cayman Islands exempted limited liability company (the "Co-Obligor," and together with the Company, the "Issuers," and each an "Issuer") in connection with the sale of 8 1/4% Convertible Senior Notes due 2006 (the ANotes@) pursuant to an indenture (the "Indenture") dated August 7, 2001 by and among the Company, the Co-Obligor and The Bank of New York, as trustee (the "Trustee"), and a Purchase Agreement dated August 1, 2001 (the "Purchase Agreement") by and among the Company, the Co-Obligor and Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Initial Purchaser"). This opinion is furnished to you pursuant to Section 5(a) of the Purchase Agreement at the request of the Issuers. Capitalized terms used but not defined herein will have the meanings assigned to them in the Purchase Agreement.
In connection with rendering the opinions expressed herein, we have examined (1) the Offering Memorandum, (2) the following documents (collectively, the "Transaction Documents"): (a) the Purchase Agreement, (b) the Registration Rights Agreement, (c) the Indenture, and (d) the Pledge Agreement, and (3) the corporate records of the Company and its subsidiaries, including without limitation, their organizational documents, stock records and records of the proceedings of stockholders, the boards of directors and committees thereof. We have also relied upon factual representations made by the Issuers and the Initial Purchaser in the Purchase Agreement and upon such other documents, records, certificates and other instruments, including certificates of public officials and officers of the Issuers, as we have deemed appropriate, copies of which have been furnished to you.
In our examination of such documents, we have assumed
without verification that (1) the Purchase Agreement,
Registration Rights Agreement, the Indenture and the Pledge
Agreement have been duly authorized, executed and delivered by
the parties thereto other than the Issuers and are enforceable
against such parties in accordance with the terms thereof, (2)
the authenticity of all documents submitted to us as originals,
(3) the conformity to the originals of all documents submitted to
us as conformed, certified or photostatic copies, (4) the
accuracy and completeness of all corporate records made available
to us by the Company, and (5) the genuineness of all signatures
on all documents and instruments examined by us.
Based on the foregoing, and subject to the qualifications, limitations and assumptions set forth herein, we are of the opinion that:
1. The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware; the Co-Obligor has been duly incorporated and is validly existing as an exempted limited liability company in good standing under the laws of the Cayman Islands.
2. Each Issuer has the power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum and to enter into and perform its obligations under the Purchase Agreement.
3. To our best knowledge and following due inquiry of appropriate representatives of the Company, each Issuer is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except for such jurisdictions where the failure to so qualify or to be in good standing would not result in a Material Adverse Effect.
4. The Company's authorized Common Stock is as set forth in the Offering Memorandum under the caption "Description of Common Stock" and all of the outstanding shares of the Company's Common Stock have been duly authorized and validly issued, are fully paid and nonassessable and, to our best knowledge and following due inquiry of appropriate representatives of the Company, have not been issued in violation of preemptive or other similar rights of any securityholder of the Company.
5. PT Freeport Indonesia has been duly domesticated and is in good standing under the laws of the State of Delaware; FM Service Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware; and Atlantic Copper, S.A. has been duly incorporated and is validly existing as a corporation in good standing under the laws of Spain; each of PT Freeport Indonesia, FM Service Company, and Atlantic Copper, S.A. has power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum and, to our best knowledge and following due inquiry of appropriate representatives of the Company, is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except for such jurisdictions where the failure to so qualify or to be in good standing would not result in a Material Adverse Effect; all of the issued and outstanding shares of capital stock of each of the Co-Obligor, PT Freeport Indonesia, FM Services Company and Atlantic Copper, S.A. as shown in the Offering Memorandum as beneficially owned by the Company have been duly authorized, validly issued and are fully paid and nonassessable and, to our best knowledge, are owned by the Company as shown in the Offering Memorandum free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity, other than a security interest in the issued and outstanding shares of Atlantic Copper, S.A.
6. The Purchase Agreement has been duly authorized, executed and delivered by each Issuer.
7. Each of the Indenture and the Registration Rights Agreement has been duly authorized, executed and delivered by each Issuer and, assuming the due authorization, execution and delivery thereof by the other parties thereto, constitutes a valid and binding agreement of each Issuer, enforceable against each Issuer in accordance with its terms.
8. The Pledge Agreement has been duly authorized, executed and delivered by the Co-Obligor and, assuming the due authorization, execution and delivery thereof by the other parties thereto, constitutes a valid and binding agreement of the Co-Obligor enforceable against the Co-Obligor in accordance with its terms.
9. The Securities are in the form contemplated by the Indenture and have been duly authorized by each Issuer and, when executed by each Issuer and authenticated by the Trustee in the manner provided in the Indenture, assuming the due authorization, execution and delivery of the Indenture by the Trustee and assuming that the Securities are issued and delivered against payment of the purchase price therefor, will constitute valid and binding obligations of each Issuer, enforceable against each Issuer, in accordance with their terms.
10. Upon issuance and delivery of the Securities in accordance with the Purchase Agreement and the Indenture, the Securities shall be convertible at the option of the holder thereof for shares of Common Stock in accordance with the terms of the Securities and the Indenture; the shares of Common Stock issuable upon conversion of the Securities have been duly authorized and reserved for issuance upon such conversion by all necessary corporate action; such shares, when issued upon such conversion, will be validly issued and will be fully paid and nonassessable and no holder of such Common Stock will be subject to personal liability by reason of being such a holder.
11. The issuance of the shares of Common Stock upon conversion of the Securities is not subject to the preemptive or other similar rights of any securityholder of the Company, other than certain preemptive rights and a right of first offer of Rio Tinto plc and its affiliates, which rights have been waived.
12. The Securities, the Indenture and the Pledge Agreement and the Registration Rights Agreement conform in all material respects to the descriptions thereof contained in the Offering Memorandum.
13. The documents incorporated by reference in the Offering Memorandum (other than the financial statements and supporting schedules therein, as to which we render no opinion), when they were filed with the Commission, complied as to form in all material respects with the requirements of the 1934 Act and the rules and regulations of the Commission thereunder.
14. Except as described in the Offering Memorandum, there is not pending or, to our best knowledge and following due inquiry of appropriate representatives of the Company, threatened any action, suit, proceeding, inquiry or investigation, to which either Issuer or any subsidiary thereof is a party, or to which the property of either Issuer or any subsidiary thereof is subject, before or brought by any court or governmental agency or body, domestic or foreign, which might reasonably be expected to result in a Material Adverse Effect, or which might reasonably be expected to materially and adversely affect the properties or assets of the Company taken as a whole, or the consummation of the transactions contemplated in the Purchase Agreement, the Indenture, the Pledge Agreement, the Registration Rights Agreement or the Securities or the performance by each Issuer of its obligations thereunder or the transactions contemplated by the Offering Memorandum.
15. The information in the Offering Memorandum under the captions "Refinancing Transactions," "Description of the Notes," "Description of Common Stock" and "Certain United States Federal Income Tax Considerations," in Part I, Item 3 of the Company's most recent Annual Report on Form 10-K under the caption "Legal Proceedings," in Part II, Item 1 of the Company's most recent Quarterly Report on Form 10-Q under the caption "Legal Proceedings" and in the Company's most recent Proxy Statement on Schedule 14A under the caption "Certain Transactions," to the extent that it constitutes matters of law, summaries of legal matters, the Issuers' charter, bylaws or other organizational documents or legal proceedings, or legal conclusions, has been reviewed by us and fairly present and summarize, in all material respects, the matters referred to therein.
16. All descriptions in the Offering Memorandum of contracts and other documents to which any Issuer or any if its subsidiaries is a party fairly present and summarize, in all material respects, the matters referred to therein; to our best knowledge and following due inquiry of appropriate representatives of the Company, there are no material contracts, indentures, mortgages, loan agreements, notes, leases or other agreements that would be required to be filed as exhibits to the Company's reports filed with the Commission under the 1934 Act that are incorporated by reference in the Offering Memorandum.
17. To our best knowledge and following due inquiry of appropriate representatives of the Company, (a) none of the Issuers or any of their subsidiaries is in violation of its charter, by-laws or other organizational documents and (b) no default by any Issuer or any of its subsidiaries exists in the due performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan agreement, note, lease or other agreement that is described or referred to in the Offering Memorandum or incorporated by reference therein, except in each such case for violations or defaults as would not, individually or in the aggregate, result in a Material Adverse Effect.
18. No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or government authority or agency, domestic or foreign (other than such as may be required under the applicable securities laws of the various jurisdictions in which the Securities will be offered or sold, as to which we need express no opinion) is necessary or required in connection with the due authorization, execution and delivery of the Purchase Agreement or the due execution, delivery or performance of the Indenture, the Pledge Agreement, the Registration Rights Agreement or the Securities by any Issuer or for the offering, issuance, sale or delivery of the Securities to the Initial Purchaser or the resale by the Initial Purchaser in accordance with the terms of the Purchase Agreement or the issuance of shares of Common Stock upon conversion of the Securities, except as may be required by federal and state securities laws with respect to the Issuer's obligations under the Registration Rights Agreement.
19. Assuming the accuracy of the representations,
warranties and covenants of the Issuers in paragraphs (xxvii) and
(xxix) of Section 1(a) and in Section 6 and the Initial Purchaser
in Section 6 contained in the Purchase Agreement, no registration
of the Securities under the 1933 Act and no qualification of the
Indenture under the Trust Indenture Act is necessary in
connection with the offer, sale and delivery of the Securities to
the Initial Purchaser and the initial resale of the Securities by
the Initial Purchaser in the manner contemplated by the Purchase
Agreement and the Offering Memorandum. No opinion is expressed,
however, as to when or under what circumstances any of the
Securities initially sold by the Initial Purchaser may be
reoffered or resold.
20. The execution, delivery and performance by the Issuers of the Purchase Agreement, the Indenture, the Pledge Agreement, the Registration Rights Agreement and the Securities and the consummation of the transactions contemplated therein and in the Offering Memorandum (including the issuance and sale of the Securities and the use of the proceeds from the sale of the Securities as described in the Offering Memorandum under the caption "Use of Proceeds" and the issuance of the shares of Common Stock issuable upon conversion of the Securities) and compliance by each Issuer with its obligations under the Purchase Agreement, the Indenture, the Pledge Agreement, the Registration Rights Agreement and the Securities do not and will not, whether with or without the giving of notice or lapse of time or both, conflict with or constitute a breach of, or default or Repayment Event (as defined in Section 1(a)(xiv) of the Purchase Agreement) under or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of any Issuer or any subsidiary thereof pursuant to any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or any other agreement, known to us, to which any Issuer or any of its subsidiaries is a party or by which it or any of them may be bound, or to which any of the property or assets of any Issuer or any subsidiary thereof is subject (except for such conflicts, breaches or defaults or liens, charges or encumbrances that would not have a Material Adverse Effect), nor will such action result in any violation of the provisions of the charter, by-laws or other organizational documents of any Issuer or any of its subsidiaries, or any applicable law, statute, rule, regulation, judgment, order, writ or decree, known to us, of any government, government instrumentality or court, having jurisdiction over any Issuer or any of its subsidiaries or any of their respective properties, assets or operations.
21. Each Issuer is not, and upon issuance and sale of the Securities as contemplated in the Purchase Agreement and the application of the net proceeds therefrom as described in the Offering Memorandum will not be, an "investment company" or an entity "controlled" by an "investment company," as such terms are defined in the 1940 Act.
22. The Pledge Agreement is effective to create, in favor of the Collateral Agent for the benefit of the Trustee and for the ratable benefits of the Holders (collectively, the "Secured Parties"), a valid security interest (the "Security Interest") in all right, title and interest of the Co-Obligor in the Collateral (as defined in the Pledge Agreement) to secure the Obligations (as defined therein) to the extent that the Uniform Commercial Code as in effect in the State of New York (the "UCC") or 31 C.F.R. Part 357 is applicable thereto and governs the creation of security interests therein (such Collateral, the "Specified Collateral").
23. With respect to Specified Collateral that consists of U.S. Government Obligations (as defined in the Indenture) that are held in a "Participant's Securities Account" (as defined in 31 C.F.R. section 357.2) with a Federal Reserve Bank pursuant to the Treasury/Reserve Automated Debt Entry System ("TRADES"), upon the Collateral Agent's indication by book entry that such U.S. Government Obligations have been credited to the Collateral Account (as defined in the Pledge Agreement) as contemplated in the Pledge Agreement, the Security Interest in a security entitlement in respect thereof will be perfected and the Collateral Agent will have control (within the meaning of Section 8-106 of the UCC) of such security entitlement.
24. With respect to Specified Collateral that consists of uncertificated securities, upon the registration of such uncertificated securities by the issuer thereof in the name of the Collateral Agent, the Security Interest in such uncertificated securities will be perfected, the Collateral Agent will have control (within the meaning of Section 8-106 of the UCC) of such uncertificated securities and the Collateral Agent will be a protected purchaser (within the meaning of Section 8- 303(a) of the UCC) thereof (assuming the Collateral Agent has no prior notice of an adverse claim).
25. With respect to Specified Collateral that consists of security entitlements or financial assets, upon the crediting of such financial assets or the financial assets underlying such security entitlements to the Collateral Account, the Security Interest in a security entitlement in respect of such financial assets will be perfected and the Collateral Agent will have control (within the meaning of Section 8-106 of the UCC) of such security entitlement.
The opinions expressed herein are subject to the following qualifications, limitations and assumptions:
1. All of our opinions are subject to (a) the application of any fraudulent conveyance, fraudulent transfer, fraudulent obligation or similar law, (b) bankruptcy, insolvency, reorganization, moratorium, receivership and other similar laws relating to or affecting the enforcement of creditors' rights generally, and (c) general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, and the possible unavailability of specific performance or injunctive relief.
2. We express no opinion as to the indemnification, exculpation, choice of law, consent to jurisdiction and severability provisions contained in any of the Transaction Documents or any Blue Sky laws of any jurisdiction.
3. Certain rights and remedies contained in the Pledge Agreement may be rendered ineffective or limited by applicable laws or judicial decisions governing such provisions but which, in our opinion, do not affect the validity of the Pledge Agreement and will not interfere with the practical realization of the rights and benefits of the security intended to be provided therein or thereby.
4. We express no opinion as to (a) except as expressly set forth herein, the perfection or priority of any security interest or other lien created pursuant to any of the Transaction Documents or (b) the right of any Person, other than the Collateral Agent, to enforce any right or avail itself of any remedy set forth in the Pledge Agreement.
5. The perfection of the liens created by the Pledge Agreement in or with respect to any Collateral constituting "proceeds," as defined in the UCC, will be a continuously perfected security interest if the interest in the original Collateral was perfected; but such security interest will cease to be a perfected lien and will become unperfected twenty-one days after receipt of the proceeds by the applicable debtor unless (a) a filed Financing Statement covers the original Collateral, the proceeds are Collateral in which a security interest may be perfected by filing in the office or offices where such Financing Statement was filed and the proceeds are not acquired with cash proceeds or (b) the proceeds are identifiable cash proceeds or (c) the security interest in the proceeds is perfected within twenty days after receipt of the proceeds by the applicable debtor.
We have participated in conferences with officers and other representatives of the Company, representatives of the independent public or certified public accountants for the Company and with representatives of the Initial Purchaser at which the contents of the Offering Memorandum and related matters were discussed and, although we are not passing upon and do not assume any responsibility for, and have not made any independent verification of, the accuracy, completeness or fairness of the statements contained in the Offering Memorandum (other than as specified above), on the basis of the foregoing, nothing has come to our attention that would lead us to believe that the Offering Memorandum, as of its date or at the Closing Time contained or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading (it being understood that no opinion is expressed as to the financial statements or other financial data derived therefrom, included or incorporated by reference in the Offering Memorandum).
The opinions rendered herein are specifically limited to the General Corporation Law of the State of Delaware, the laws of the State of Louisiana and the federal laws of the United States of America. For purposes of expressing the opinions contained in paragraphs 7, 8, 9, 22, 23, 24 and 25 above, we note that the laws of the State of New York expressly govern the Purchase Agreement, the Indenture, the Registration Rights Agreement and the Pledge Agreement. We are not licensed to practice law in New York; accordingly, we have assumed, with your consent and without investigation, that the laws of New York are the same as the laws of the State of Louisiana on matters pertaining to such agreements. In addition, as to the matters addressed therein pertaining to the laws of the Cayman Islands we have relied with your consent on the opinion, dated the date hereof, of Maples and Calder, special Cayman Islands counsel to the Issuers, and as to the matters addressed therein pertaining to the laws of Spain we have relied with your consent on the opinion, dated the date hereof, of Linklaters & Alliance, counsel to Atlantic Copper, S.A.; we believe that the Initial Purchaser is justified in relying on such opinions, copies of which are attached.
Whenever our opinion is given with respect to the existence or absence of facts (or legal conclusions which necessarily are based upon the existence or absence of facts) and is indicated to be based on our best knowledge, it is intended to signify that, during the course of our representation of the Company, no information has come to the conscious awareness of any attorney in our firm who has had active involvement with such representation that would give any such person actual knowledge of the existence or absence of such facts, and that except to the extent expressly set forth, we have not undertaken any independent investigation to determine or verify the existence or absence of facts, and no inference as to such knowledge or the existence or absence of such facts should be drawn from our representation of the Company.
We assume no obligation to revise or supplement this opinion should such currently applicable laws be changed by legislative action, judicial decision or otherwise.
This opinion is being rendered solely to you in connection with the above matter and, accordingly, may not be relied upon by you for any other purpose or furnished to, or relied on by, any other person without our prior written consent. We express no opinion as to any matter other than expressly set forth above, and no other opinion is to or may be interpreted or implied herefrom. This opinion is given as of the date hereof and is based upon the facts and circumstances presently known to us, and we undertake no, and hereby disclaim any, obligation to advise you of any change in the matters set forth herein.
The foregoing expresses our legal opinion as to the matters set forth above and is based upon our professional knowledge and judgment at this time; it is not, however, to be construed as a guarantee, nor is it a warranty that a court considering such matters would not rule in a manner contrary to the opinions set forth above.
Very truly yours,
Jones, Walker, Waechter, Poitevent, Carrere & Denegre L.L.P.
By:___________________________ Douglas N. Currault II
Exhibit B
FORM OF LOCK-UP AGREEMENT TO BE DELIVERED
PURSUANT TO SECTION 5(h)
August 1, 2001
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Re: Proposed Offering by Freeport-McMoRan Copper & Gold
Inc.
and FCX Investment Ltd.
Dear Sirs:
The undersigned, a stockholder [and an officer and/or director]1 of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the "Company"), understands that Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") proposes to enter into a Purchase Agreement (the "Purchase Agreement") with the Company and FCX Investment Ltd., a Cayman Islands exempted company (together with the Company, the "Issuers"), providing for the offering of $525,000,000 aggregate principal amount (or up to $603,750,000 if the overallotment option is exercised in full) of the Issuers' 8 1/4% Convertible Senior Notes due 2006 (the "Securities"). In recognition of the benefit that such an offering will confer upon the undersigned as a stockholder [and an officer and/or director] of the Company, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned agrees with the Initial Purchaser to be named in the Purchase Agreement that, during a period of 90 days from the date of the Purchase Agreement, the undersigned will not, without the prior written consent of Merrill Lynch, directly or indirectly, (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, lend or otherwise dispose of or transfer any shares of the Company's Class A Common Stock, par value $.10 per share, or Class B Common Stock, par value $.10 per share (collectively, the "Common Stock"), or any securities convertible into or exchangeable or exercisable for Common Stock, whether now owned or hereafter acquired by the undersigned or with respect to which the undersigned has or hereafter acquires the power of disposition, or file any registration statement under the Securities Act of 1933, as amended, with respect to any of the foregoing or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of Common Stock or any securities convertible into or exchangeable for Common Stock, whether any such swap or transaction described in (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash or otherwise.
The foregoing sentence shall not apply to (i) transfers of shares of Common Stock or options to purchase the Common Stock made as a bona fide gift or gifts, provided that the donee or donees thereof agree to be bound by the restrictions set forth herein and (ii) transfers of shares of Common Stock or options to purchase the Common Stock made to any trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned, provided that the trustee of the trust agrees to be bound by the restrictions set forth herein, and provided further that any such transfer shall not involve a disposition for value.
Very truly yours,
Signature: ___________________________
Print Name: _________________________
EXHIBIT 2.1
AGREEMENT
DATED AS OF MAY 2, 1995
by and between
FREEPORT-McMoRan INC.
and
FREEPORT-McMoRan COPPER & GOLD INC.,
on the one hand,
and
The RTZ CORPORATION PLC,
RTZ INDONESIA LIMITED
and
RTZ AMERICA, INC.,
on the other hand
AGREEMENT, dated as of May 2, 1995, by and between
Freeport-McMoRan Inc., a Delaware corporation ("Parent"), and
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), on the one hand, and The RTZ Corporation PLC, a
company organized under the laws of England ("RTZ"), RTZ Indonesia
Limited, a company organized under the laws of England (the
"Purchaser") and a subsidiary of RTZ, and RTZ America, Inc., a
Delaware corporation ("RTZA") and a subsidiary of RTZ, on the
other hand. Capitalized terms that are used herein are defined in
this Agreement.
RECITALS
WHEREAS, the parties desire to effect certain
transactions relating to the restructuring of Parent and the
Company and to the distribution by Parent of all of the shares of
Class B Common Stock owned by Parent as of the distribution date
thereof, in the form of a stock dividend to the holders of Parent
Common Stock (the "Spin-Off").
NOW, THEREFORE, in consideration of the terms and
conditions set forth herein and other good and valuable
consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions.
1.1 "ABC Debentures" means Zero Coupon
Convertible Subordinated Debentures due 2006 of Parent.
1.2 "ABC Redemption Date" shall have the
meaning set forth in Section 4.1(a).
1.3 "Additional Purchase Notice" shall have
the meaning set forth in Section 6.1(a).
1.4 "Additional Shares" shall have the meaning
set forth in Section 6.1(a).
1.5 "Additional Stock Closing" shall have the
meaning set forth in Section 6.3(a).
1.6 "Additional Stock Closing Date" shall have
the meaning set forth in Section 6.3(a).
1.7 "Affiliate" means, with respect to any
Person, any other Person controlling, controlled by or under
common control with such Person.
1.8 "Affiliate Agreements" shall have the
meaning set forth in Section 9.1.4.
1.9 "business day" shall mean any day other
than a Saturday, Sunday or a day which shall be in the City of
London or the City of New York a legal holiday or a day on which
banking institutions are authorized or obligated by law or other
government action to close.
1.10 "Class A Common Stock" means the Class A
Common Stock, par value $.10 per share, of the Company.
1.11 "Class A Directors" shall mean the
directors elected by the holders of Class A Common Stock.
1.12 "Class B Common Stock" means the Class B
Common Stock, par value $.10 per share, of the Company.
1.13 "Class B Directors" shall mean the
directors elected by the holders of Class B Common Stock.
1.14 "Code" means the Internal Revenue Code of
1986, as amended.
1.15 "Company" or "FCX" means Freeport-McMoRan
Copper & Gold Inc., a Delaware corporation.
1.16 "Company Common Stock" means Class A
Common Stock, Class B Common Stock and any other shares of common
equity of the Company.
1.17 "Company Material Adverse Effect" shall
mean any adverse effect or change (alone or taken together with
others) in the business, condition (financial or otherwise),
assets, Liabilities, properties, operations or results of
operations of the Company or its subsidiaries material to the
Company and its subsidiaries taken as a whole, provided that no
Company Material Adverse Effect shall be deemed to result from
general changes in economic conditions or any change affecting
copper or gold mining companies generally (including laws and
regulations applicable to such companies, other than such laws and
regulations of any governmental or regulatory authority in
Indonesia).
1.18 "Company Notice" shall have the meaning
set forth in Section 11(a).
1.19 "Company Registration Rights Agreement"
shall mean the Registration Rights Agreement substantially in the
form attached hereto as Exhibit A.
1.20 "Company Voting Stock" shall mean any
capital stock of the Company which is then entitled to vote for
the election of directors.
1.21 "Consent Solicitation Statement" means the
Consent Solicitation Statement of the Company, dated February 7,
1995 relating to, among other things, approval of the Merger and
New Certificate of Incorporation.
1.22 "Debt Issues" shall have the meaning set
forth in Section 4.1(a).
1.23 "Declaration Date" shall mean the date
upon which Parent shall declare the record date for the Spin-Off.
1.24 "DGCL" means the Delaware General
Corporation Law, as amended.
1.25 "Distribution Date" shall have the meaning
set forth in Section 7(a).
1.26 "Exchange Act" means the Securities
Exchange Act of 1934, as amended, or any successor federal
statute, and the rules and regulations of the SEC thereunder, all
as the same shall be in effect at the time.
1.27 "Facilitating Company" means FM
Facilitating Company, Inc., a Delaware corporation.
1.28 "$4.375 Parent Preferred Stock" means
$4.375 Convertible Exchangeable Preferred Stock, par value $1.00
per share, of Parent.
1.29 "GAAP" means United States generally
accepted accounting principles.
1.30 "governmental or regulatory authority"
means any government or political subdivision thereof, whether
Federal, state, local or foreign, or any agency or instrumentality
of any such government or political subdivision.
1.31 "including" and "including, without
limitation," and other forms of such terms, with respect to any
matter or thing, shall be construed to mean "including but not
limited to" such matter or thing.
1.32 "Indemnified Party" shall have the meaning
set forth in Section 13.4(d).
1.33 "Indemnifying Party" shall have the
meaning set forth in Section 13.4(d).
1.34 "Indenture" means the Indenture between
Freeport-McMoRan Inc. and Chemical Bank, as Trustee, dated as of
November 9, 1990, as supplemented by Supplemental Indenture No. 1
and Supplemental Indenture No. 2.
1.35 "IRS" means the Internal Revenue Service
of the United States of America.
1.36 "Laws" shall mean any foreign or domestic
(Federal, state or local) law, statute, ordinance, rule or
regulation or bodies of law.
1.37 "Liabilities" means any direct or indirect
indebtedness, liability, claim, loss, damage, deficiency,
obligation or responsibility, fixed or unfixed, choate or
inchoate, liquidated or unliquidated, secured or unsecured,
accrued, absolute, contingent or otherwise, of a kind required by
GAAP to be set forth on a financial statement (including the notes
thereto).
1.38 "Majority Shares" means the number of
shares of Company Voting Stock as will elect a majority of the
directors of the Company; provided that, solely for purposes of
such calculation, the shares of Company Voting Stock issuable upon
exercise of warrants, options or other rights, or upon conversion
or exchange of convertible or exchangeable securities, owned by
RTZ and its Affiliates, shall be treated as outstanding Company
Voting Stock.
1.39 "Merger" means the merger of Facilitating
Company with and into the Company pursuant to the Merger
Agreement.
1.40 "Merger Agreement" means the Agreement and
Plan of Merger, dated February 7, 1995, between the Company and
Facilitating Company.
1.41 "New By-laws" means the By-laws of the
Company substantially in the form attached as Exhibit 2 to Annex I
to the Consent Solicitation Statement.
1.42 "New Certificate of Incorporation" means
the Certificate of Incorporation of the Company substantially in
the form attached as Exhibit 1 to Annex I to the Consent
Solicitation Statement.
1.43 "NYSE" means The New York Stock Exchange, Inc. 1.44 "Offer Price" shall have the meaning set |
forth in Section 11(a).
1.45 "Option" shall have the meaning set forth
in Section 6.2(a).
1.46 "Option Notice" shall have the meaning set
forth in Section 6.2(a).
1.47 "Option Shares" shall have the meaning set
forth in Section 6.2(a).
1.48 "Parent" or "FTX" means Freeport-McMoRan
Inc., a Delaware corporation.
1.49 "Parent Common Stock" means the Common
Stock, par value $.10 per share, of Parent and any other shares of
common equity of Parent.
1.50 "Parent Material Adverse Effect" shall
mean any adverse effect or change (alone or taken together with
others) in the business, condition (financial or otherwise),
assets, Liabilities, properties, operations or results of
operations of Parent or its subsidiaries material to Parent and
its subsidiaries taken as a whole, provided that no Parent
Material Adverse Effect shall be deemed to result from general
changes in economic conditions or any change affecting
agrichemical or copper or gold mining companies generally
(including laws and regulations applicable to such companies,
other than such laws and regulations of any governmental or
regulatory authority in Indonesia).
1.51 "Parent Registration Rights Agreement"
shall mean the Registration Rights Agreement substantially in the
form attached hereto as Exhibit B.
1.52 "Permits" means all licenses, permits,
orders, approvals, registrations, authorizations, qualifications
and filings with and under all Federal, state, local or foreign
Laws and governmental or regulatory authorities and all industry
or other nongovernmental self-regulatory organizations that are
necessary for the conduct of the applicable Person's business and
the ownership of its properties.
1.53 "Person" means a corporation, an
association, a partnership, an organization, a business, an
individual, a governmental or political subdivision thereof or a
governmental or regulatory authority.
1.54 "Proposed Closing Date" shall have the
meaning set forth in Section 3.2(a).
1.55 "Public Offering" shall have the meaning
set forth in Section 11(b).
1.56 "Purchaser" means RTZ Indonesia Limited, a
company organized under the laws of England and a subsidiary of
RTZ.
1.57 "Purchaser Notice" shall have the meaning
set forth in Section 11(f).
1.58 "Related Agreements" means, individually
and collectively, the Company Registration Rights Agreement and
the Parent Registration Rights Agreement.
1.59 "RTZ" means The RTZ Corporation PLC, a
company organized under the laws of England.
1.60 "RTZA" means RTZ America, Inc., a Delaware
corporation and a subsidiary of RTZ.
1.61 "Schedule 14D-1" shall have the meaning
set forth in Section 5.1(b).
1.62 "Schedule 14D-9" shall have the meaning
set forth in Section 5.1(d).
1.63 "SEC" means the Securities and Exchange
Commission.
1.64 "SEC Reports" shall have the meaning set
forth in Section 8.1.8(a).
1.65 "Securities Act" means the Securities Act
of 1933, as amended, or any successor federal statute, and the
rules and regulations of the SEC thereunder, all as the same shall
be in effect at the time.
1.66 "6.55% Notes" means the 6.55% Convertible
Subordinated Notes due January 15, 2001, of Parent.
1.67 "6.55% Redemption Date" shall have the
meaning set forth in Section 4.1(a).
1.68 "6.55% Redemption Price" shall have the
meaning set forth in Section 6.1(b).
1.69 "6.55% Remainder" shall have the meaning
set forth in Section 6.1(b).
1.70 "Spin-Off" shall have the meaning set
forth in the Recitals.
1.71 "Spin-Off Private Letter Ruling" means the
private letter ruling to Parent from the IRS dated November 21,
1994 concerning the Spin-Off, together with any supplements and
amendments thereto.
1.72 "Stock Closing" shall have the meaning set
forth in Section 3.2(b).
1.73 "Stock Closing Date" shall have the
meaning set forth in Section 3.2(b).
1.74 "Supplemental Indenture No. 1" means
Freeport-McMoRan Inc. Supplemental Indenture No. 1, dated as of
February 5, 1991, relating to the Series of 6.55% Convertible
Subordinated Notes due January 15, 2001.
1.75 "Supplemental Indenture No. 2" means
Freeport-McMoRan Inc. Supplemental Indenture No. 2, dated as of
July 15, 1991, relating to the Series of Zero Coupon Convertible
Subordinated Debentures due 2006 (ABC Securities).
1.76 "Tender Offer" shall have the meaning set
forth in Section 5.1(b).
1.77 "Termination Notice" shall have the
meaning set forth in Section 6.1(c).
1.78 "Trustee" means Chemical Bank, as trustee
under the Indenture.
2. Registration Rights Agreements.
Simultaneously with the Stock Closing (i) the
Company and the Purchaser shall execute and deliver the Company
Registration Rights Agreement, and (ii) Parent and RTZA shall
execute and deliver the Parent Registration Rights Agreement.
3. Purchases of Class A Common Stock.
3.1 Sale of Shares.
Upon the terms and subject to the conditions
set forth in this Agreement, at the Stock Closing, Parent shall
sell to the Purchaser, and the Purchaser shall purchase,
21,531,100 shares of Class A Common Stock, free and clear of any
and all liens, encumbrances, equities or adverse claims, at a
purchase price per share of $20.90, the total purchase price being
rounded to $450,000,000.
3.2 Stock Closing.
(a) No later than 5 business days prior
to the Stock Closing, Parent shall deliver written notice to the
Purchaser stating the proposed date for the Stock Closing (the
"Proposed Closing Date").
(b) Upon the terms and subject to the
conditions of this Agreement, the closing of the transactions
contemplated by this Article 3 (the "Stock Closing") shall take
place at the offices of Fried, Frank, Harris, Shriver & Jacobson,
One New York Plaza, New York, New York, commencing at 10:00 a.m.
(New York local time) on the Proposed Closing Date, or as soon as
possible thereafter, upon satisfaction or waiver of the applicable
conditions set forth in Article 10 hereof, or at such other time
and/or place and/or on such other date as the parties may mutually
agree (the "Stock Closing Date"). No later than 3 business days
prior to the Stock Closing Date, Parent shall provide written
notice to the Purchaser specifying the accounts to which payment
shall be made.
(c) At the Stock Closing (i) Parent
shall deliver to the Purchaser the certificates representing
21,531,100 shares of Class A Common Stock purchased in accordance
with this Article 3, duly endorsed in blank or accompanied by
stock powers or other instruments of transfer duly executed in
blank, with all necessary transfer tax and other documentary
stamps affixed thereto, (ii) the Purchaser shall pay to Parent in
consideration for the shares being purchased, by wire transfer of
immediately available funds, the aggregate purchase price equal to
$450,000,000, and (iii) the parties hereto shall execute and
deliver such certificates, documents and instruments as may be
required to be executed or delivered pursuant to the terms hereof.
4. Certain Actions by Parent.
4.1 Redemption of the 6.55% Notes and the ABC
Debentures.
(a) Parent shall redeem the 6.55% Notes
and the ABC Debentures (the "Debt Issues") as soon as is
reasonably practicable after consummation of the Stock Closing,
and in any case, prior to the Spin-Off; provided that Parent shall
give notice of the redemption of one of the Debt Issues within 24
hours after the Stock Closing and notice of the redemption of the
other Debt Issue as soon as is reasonably practicable thereafter.
The redemption date specified in such notice with respect to the
6.55% Notes is herein called the "6.55% Redemption Date" and that
with respect to the ABC Debentures is herein called the "ABC
Redemption Date".
(b) If Parent causes RTZA to commence
the Tender Offer in accordance with Section 5.1(a) hereof, the
6.55% Redemption Date shall be midnight
on the Sunday following the expiration of
the Tender Offer, which shall occur at 5:00 p.m. (New York City
time) on the prior Friday.
(c) Prior to mailing the notice of
redemption in respect of the 6.55% Notes and in respect of the ABC
Debentures, Parent shall have obtained, and furnished to RTZA a
copy of, the consent of the Trustee in writing that the notice to
the Trustee with respect to the 6.55% Notes and the notice to the
Trustee with respect to the ABC Debentures, respectively, as
contemplated by this Agreement, each constitutes sufficient notice
for purposes of the respective Indenture.
5. Tender Offer for, and Conversion of, 6.55%
Notes.
5.1 Tender Offer.
(a) No later than 5 business days prior
to sending a notice of redemption with respect to the 6.55% Notes,
Parent shall deliver written notice to RTZA stating whether or not
Parent elects to cause RTZA to commence the Tender Offer in
accordance with this Article 5.
(b) If Parent requests in accordance
with Section 5.1(a) hereof that RTZA commence a tender offer,
Parent and RTZA shall at such time agree on the price to be
offered in, and the conditions to, such all-cash tender offer for
all outstanding 6.55% Notes (the "Tender Offer") and, thereafter,
subject to Sections 5.1(c), (e) and (f) hereof and to the receipt
of the written consent referred to in Section 8.1.8(c), RTZA shall
commence the Tender Offer. In connection therewith, RTZA shall
take, or cause to be taken, all actions and do, or cause to be
done, all things necessary, proper or advisable to cause the
consummation of the Tender Offer, including the filing with the
SEC, the NYSE and any other applicable governmental or regulatory
authorities of a Tender Offer Statement on Schedule 14D-1 and any
amendments thereto and any other offering documents required to be
filed therewith (the "Schedule 14D-1"). The expiration of the
Tender Offer shall occur at 5:00 p.m. (New York local time) on the
twenty-first business day, or if such twenty-first business day is
not a Friday, on the first Friday following the twenty-first
business day, following the commencement thereof (unless extended
with the consent of the parties hereto), whereupon, subject to the
satisfaction of the conditions to the Tender Offer, RTZA shall
purchase the 6.55% Notes tendered therein in accordance with the
terms of the Tender Offer.
(c) RTZA shall not be obligated to
commence the Tender Offer unless prior thereto it shall have
received a certificate from the chief financial officer of Parent,
dated no earlier than the date the notice of redemption of the
6.55% Notes is mailed to the Trustee and to the holders thereof in
accordance with Article 4 hereof, to the effect that, to the best
of his knowledge, no event has occurred or is
contemplated by this Agreement which
causes Parent to believe that the nonrecognition provisions of
Code Section 355(a)(1) and (c) shall not apply with respect to the
Spin-Off, other than as a result of Code Section 367(e).
(d) No later than the date on which the
Schedule 14D-1 is filed with the SEC (i) Parent shall file with
the SEC, the NYSE and any other applicable governmental or
regulatory authorities a Solicitation/Recommendation Statement on
Schedule 14D-9 and any other necessary or appropriate
documentation (the "Schedule 14D-9"), and (ii) Parent shall mail
to holders of record of 6.55% Notes the Schedule 14D-1, the
Schedule 14D-9 and related documents.
(e) If Parent requests that RTZA
commence the Tender Offer, Parent and RTZA will also agree at such
time upon the terms mutually acceptable to Parent and RTZA upon
which RTZA will have the right to acquire shares of Parent Common
Stock upon conversion of the 6.55% Notes purchased in the Tender
Offer. In connection therewith, Parent shall take, or cause to be
taken, all actions and do, or cause to be done, all things
necessary, proper or advisable to permit such acquisition of
Parent Common Stock.
(f) Parent and RTZA shall enter into an
agreement with the Trustee and Mellon Securities Trust Company
pursuant to which all 6.55% Notes validly tendered and purchased
in the Tender Offer shall be converted into Parent Common Stock,
upon the terms referred to in Section 5.1(e), immediately upon
expiration of the Tender Offer and prior to the 6.55% Redemption
Date.
(g) As promptly as practicable after the
6.55% Redemption Date, Parent shall provide written notice to the
Purchaser of the aggregate principal amount of 6.55% Notes
redeemed by Parent.
5.2 Conversion of 6.55% Notes.
In accordance with the terms of Section
5.1(f), all 6.55% Notes purchased by RTZA in the Tender Offer
shall be converted into shares of Parent Common Stock upon the
terms referred to in Section 5.1(e), and, no later than the day
following the expiration of the Tender Offer, RTZA shall become
the holder of record of such shares. As soon as practicable
following expiration of the Tender Offer, Parent shall cause to be
issued and delivered to RTZA certificates representing the shares
of Parent Common Stock issuable in connection with such
conversion.
5.3 Transfer of Shares Issued Upon Conversion.
Except to the extent such sales occur on the
NYSE, RTZA shall not, prior to the Distribution Date, sell or
transfer any shares of Parent Common Stock received upon
conversion of the 6.55% Notes unless the purchaser or transferee
thereof shall have represented to RTZA in
writing that such purchaser or transferee (i) is
a "United States person" as defined in Code Section 7701(a)(30),
(ii) is not an entity controlled by any person other than a United
States person, (iii) has no plan or intention to sell, prior to
the Spin-Off, any shares of Parent Common Stock to a person that
is (A) not a United States person or (B) an entity controlled by a
person that is not a United States person, and (iv) if such
purchaser or transferee is or becomes, prior to the Distribution
Date, a holder of at least 5% of the Parent Common Stock, will
represent that it has no plan or intention to sell, exchange,
transfer or otherwise dispose of, following the Spin-Off, such
shares of Parent Common Stock or any shares of Class B Common
Stock which such purchaser or transferee may receive in the Spin-
Off. Notwithstanding the foregoing, RTZA shall not sell on the
public market any shares of Parent Common Stock during the period
commencing on the date on which the Parent Common Stock trades
"ex-dividend" (i.e., without the Class B Common Stock which would
be distributed to the holder of such stock pursuant to the Spin-
Off) and ending on the Distribution Date.
5.4 Code Section 367(e) Indemnification.
(a) If RTZA or any Affiliate of RTZA
owns shares of Parent Common Stock as of the Distribution Date,
RTZA will indemnify Parent for 50% of any Section 367(e) Tax Cost.
The "Section 367(e) Tax Cost" shall mean the sum of (a) any
federal, state and local income and franchise taxes based in whole
or in part on net income ("Income Tax or Income Taxes") paid by
Parent to the extent resulting from a determination by Parent
(subject to the provisions of Section 5.4(h) or (i), if
applicable) or a Taxing Authority that Code Section 367(e) applies
to any Class B Common Stock received by RTZA or any Affiliate of
RTZA in the Spin-Off and (b) any interest and penalties paid by
Parent related thereto. The amount described in (a) of the
preceding sentence shall equal the excess of (i) the sum of the
Income Taxes actually paid by Parent with respect to the taxable
year in which the Spin-Off occurred (the "Spin-Off Year"), over
(ii) the total amount of Income Taxes that would have been paid
with respect to the Spin-Off Year if there had been no
determination that Code Section 367(e) applies to any Class B
Common Stock received by RTZA or any Affiliate of RTZA in the
Spin-Off. In calculating the Section 367(e) Tax Cost, the Income
Taxes actually paid by Parent with respect to the Spin-Off Year
shall reflect such carryovers of net operating losses, tax credits
and other tax attributes as are available to Parent as of the end
of the Spin-Off Year. Notwithstanding anything to the contrary
contained in this Section 5.4, the tax attributes to which Parent
becomes entitled after the Spin-Off Year that are attributable to
taxable years after the Spin-Off Year shall not be taken into
account in calculating the Section 367(e) Tax Cost.
Notwithstanding anything contained in this Section 5.4 to the
contrary, Parent shall determine, in its reasonable good faith
discretion, the position that it shall take on its Income Taxes
returns submitted to any Taxing Authority. RTZA shall not
challenge, using the dispute resolution procedure set forth in
Section 5.4(c), the
appropriateness, but not the calculation
of, the filing positions adopted by Parent on its Income Taxes
returns.
(b) Parent shall provide a certificate
of its chief financial officer notifying RTZA of any obligation to
indemnify Parent pursuant to this Section 5.4 at least 30 days
prior to the date specified in such certificate on which Parent
intends to pay the Section 367(e) Tax Cost to which such
obligation to indemnify Parent relates, together with a statement
from a "Big Six" accounting firm (which may be Parent's
independent auditor) setting forth in detail a calculation of the
Section 367(e) Tax Cost. Notwithstanding anything contained in
Section 5.4(c) to the contrary, RTZA shall pay the amount shown
due on such officer's certificate no later than 5 days prior to
the date that Parent specified in such officer's certificate as
the date on which it intends to pay such Section 367(e) Tax Cost.
Within 5 days after the date of payment specified in such
officer's certificate, Parent shall provide RTZA with a second
certificate of its chief financial officer stating that payment of
the Section 367(e) Tax Cost giving rise to the indemnification
obligation has been made, specifying the date and amount of
payment, or return such indemnification payment to RTZA. If
Parent is required to make a payment to RTZA as a result of its
receipt of a refund of a previously paid Section 367(e) Tax Cost
in accordance with Section 5.4(d) or the resolution of a dispute
in RTZA's favor in accordance with Section 5.4(c), Parent shall
make such payment within 5 days of the receipt of the refund or
the resolution of the dispute.
(c) In the event that a dispute arises
as to the calculation of the Section 367(e) Tax Cost, an
independent "Big Six" accounting firm mutually acceptable to RTZA
and Parent shall be selected to resolve the dispute (the costs of
which shall be shared equally by RTZA and Parent).
(d) If, subsequent to the date on which
RTZA first indemnifies Parent, Parent is informed by a Taxing
Authority of the need to pay an additional Section 367(e) Tax Cost
or receives a refund of a previously paid Section 367(e) Tax Cost,
Parent shall promptly notify RTZA in writing, the Section 367(e)
Tax Cost shall be recomputed, any excess of the amount previously
paid by RTZA over 50% of such recomputed Section 367(e) Tax Cost
shall be repaid to RTZA, and any excess of 50% of such recomputed
Section 367(e) Tax Cost over the amount previously paid by RTZA
shall be paid by RTZA in each case in accordance with the
procedures of Section 5.4(b).
(e) Parent will notify RTZA promptly in
writing if any taxing agency makes, orally or in writing, any
assertion that Section 367(e) applies to any Class B Common Stock
received by RTZA or any Affiliate of RTZA in the Spin-Off (a
"Section 367(e) Issue"). Parent shall (i) keep RTZA fully
apprised, on a timely basis, of any developments relating to its
contest of a Section 367(e) Issue, (ii) consult RTZA with
respect to the contest of such issue, and
(iii) after such issue has been referred to an IRS Appeals
Officer, permit RTZA to participate, at RTZA's sole cost and
expense, in meetings (including telephonic conferences) regarding
a Section 367(e) Issue.
(f) An "Open Issue" shall mean an issue
in connection with which Parent or any Consolidated Subsidiary may
be liable for Income Taxes, interest and penalties, and which has
not been settled or otherwise resolved pursuant to a
Determination. A "Determination" shall mean, with respect to
federal income taxes, a determination under Code Section 1313,
and, with respect to Income Taxes other than federal income taxes,
any final determination of the liability in respect of an Income
Tax that, under applicable law, is not subject to further appeal,
review or modification through administrative or judicial
proceedings or otherwise. A "Material Open Issue" shall mean an
Open Issue or a number of Open Issues in the aggregate, with
respect to which the potential tax liability of Parent or any
Consolidated Subsidiary exceeds $5,000,000 exclusive of interest
and penalties, except for Section 367(e) Issues. A "Consolidated
Subsidiary" shall mean any corporation which files a consolidated
return with Parent for federal income tax purposes in the Spin-Off
Year or a Related Year. A "Related Year" shall mean any taxable
year which is audited by a governmental authority responsible for
levying, auditing or otherwise supervising the administration of
Income Taxes (a "Taxing Authority"), in conjunction with the Spin-
Off Year. A "Settling Party" shall be whichever of RTZA or Parent
is willing to settle a Section 367(e) Issue on certain terms
acceptable to a Taxing Authority and a "Contesting Party" shall be
the other party if it is unwilling to so settle.
(g) Parent shall choose the forum in
which a Section 367(e) Issue is to be contested; provided that
RTZA shall choose such forum if (i) a Taxing Authority has
proposed a settlement on certain terms, (ii) RTZA has become the
Contesting Party, (iii) Parent has become the Settling Party, and
(iv) there is no Material Open Issue for the Spin-Off Year or any
Related Year.
(h) Parent shall have the right to
settle a Section 367(e) Issue at any time; provided that in
determining whether to settle, Parent (i) shall exercise its
reasonable business judgment in good faith, taking into account
the merits of the Section 367(e) Issue, the interests of Parent
and RTZA, the risks and potential costs and benefits of further
contesting the Section 367(e) Issue, and such other criteria as
Parent shall consider to be appropriate, and (ii) shall not make a
concession on or "trade" any issue that has an effect on the
amount of the Section 367(e) Issue for a concession by a Taxing
Authority on an issue that does not affect RTZA and its
Affiliates. Notwithstanding the foregoing, Parent shall not
settle a Section 367(e) Issue if (i) RTZA has requested that
Parent not settle such issue, (ii) RTZA has become the Contesting
Party, (iii) Parent has become the Settling Party, and (iv) there
is no Material Open Issue with respect to the Spin-Off Year or any
Related Year.
(i) Notwithstanding anything contained
in this Section 5.4 to the contrary, the provisions of this
Section 5.4(i) shall apply if (A) either Parent or RTZA has become
the Settling Party, (B) the other party has become the Contesting
Party, and (C) Parent has not settled the Section 367(e) Issue.
If the provisions of this Section 5.4(i) apply, (i) the Contesting
Party shall thereafter pay all costs and expenses of pursuing any
courses of action in connection with the Section 367(e) Issue
(including, without limitation, the costs of participating in
administrative and judicial proceedings to challenge the Taxing
Authority's position with respect to such issue), (ii) if the
Contesting Party is RTZA, RTZA shall indemnify Parent for a total
amount equal to the RTZA Contesting Tax Cost, and (iii) if the
Contesting Party is Parent, RTZA shall indemnify Parent for a
total amount equal to the RTZA Settling Tax Cost, in each of (ii)
and (iii) with appropriate adjustment for any amounts previously
paid pursuant to Sections 5.4(b) and (d). If the provisions of
this Section 5.4(i) apply, RTZA or Parent, as the case may be,
shall promptly remit to the other party, after a Determination has
been reached, (i) an amount such that RTZA shall have indemnified
Parent in total for an amount equal to the RTZA Contesting Tax
Cost or the RTZA Settling Tax Cost, as the case may be, or (ii) if
the Parent Settling Tax Cost exceeds the Final Section 367(e) Tax
Cost, an amount such that Parent shall have paid to the Taxing
Authorities and to RTZA in the aggregate an amount equal to such
Parent Settling Tax Cost. The RTZA Contesting Tax Cost shall be
the excess, if any, of (I) the Section 367(e) Tax Cost computed on
the basis of a Determination with respect to each of the Income
Taxes (the "Final Section 367(e) Tax Cost"), over (II) the sum of
(a) 50% of the amount which the Final Section 367(e) Tax Cost
would have been if the Section 367(e) Issue had been settled on
the terms upon which, and at the time at which, Parent and the
Taxing Authority had been willing to settle and (b) interest on
the unpaid amount thereof at the rate applicable to overpayments
under Code Section 6621, calculated for the period beginning on
the date that RTZA became the Contesting Party and ending on the
date of the Determination which is the basis for indemnification
under this Section 5.4(i) (the sum described in (II) shall be
denoted as the "Parent Settling Tax Cost"). The RTZA Settling Tax
Cost shall be the sum of (a) 50% of the amount which the Final
Section 367(e) Tax Cost would have been if the Section 367(e)
Issue had been settled on the terms upon which, and at the time at
which, RTZA and the Taxing Authority had been willing to settle
and (b) interest on the unpaid amount thereof at the rate
applicable to overpayments under Code Section 6621, calculated for
the period beginning on the date that Parent became the Contesting
Party and ending on the date of the Determination which is the
basis for indemnification under this Section 5.4(i). If pursuant
to this Section 5.4(i), a Contesting Party contests a Section
367(e) Issue by paying Income Taxes and seeking a refund thereof,
it shall fund the full amount of such payment less the excess, if
any, of (i) the amount the Settling Party would have paid, had the
Section 367(e) Issue been settled on the terms upon which, and at
the time at which, the Settling Party and the Taxing Authority had
been willing to settle, over
(ii) the amounts already paid by the
Settling Party; provided that, if the Contesting Party is RTZA,
RTZA shall fund such payment by extending an interest-free loan to
Parent.
(j) Each of the parties hereto and their
Affiliates shall furnish or cause to be furnished to Parent or
RTZA, as the case may be, upon request, as promptly as
practicable, such reasonable information and reasonable assistance
relating to a Section 367(e) Issue as is reasonably necessary for
Parent's filing of its Income Taxes returns, provision of
information requested by a Taxing authority, preparation for any
audit covering the Spin-Off Year or a Related Year, and Parent's
or RTZA's prosecution or defense of any claim, suit or proceeding
relating to a Section 367(e) Issue. Each of the parties hereto
and their Affiliates shall cooperate with Parent or RTZA, as the
case may be, in the conduct of any audit or proceeding relating to
a Section 367(e) Issue, and shall execute and deliver such powers
of attorney and other documents as are necessary to carry out the
intent of this Section 5.4(j). Nothing in this Section 5.4(j)
shall be construed to require the parties hereto, or their
Affiliates, to make any representations or warranties not
expressly contemplated by this Agreement.
6. Purchase of Additional Shares and Option Shares.
6.1 Request to Purchase Additional Shares.
(a) Upon the terms and subject to the
conditions set forth in this Agreement, if Parent redeems any
6.55% Notes in accordance with Article 4 hereof, then (whether or
not a Tender Offer has occurred) provided that the rights granted
to holders in connection with the redemption of the 6.55% Notes
are acceptable to Purchaser, Parent may request, by the delivery
to the Purchaser of a written notice (the "Additional Purchase
Notice") or a copy of the Escrow Notice referred to in Section
6.1(d) at any time after the later of the ABC Redemption Date and
the 6.55% Redemption Date, that the Purchaser purchase, and the
Purchaser shall purchase from Parent, that number of shares of
Class A Common Stock set forth in the Additional Purchase Notice
(the "Additional Shares"), at a purchase price per share of
$20.90, on the date provided in the Additional Purchase Notice or
the Escrow Notice, but, in the case of the Additional Purchase
Notice, no earlier than the date 3 business days thereafter and no
later than the date 5 business days prior to the Distribution
Date; provided that, (x) if the 6.55% Redemption Date is scheduled
to occur prior to the ABC Redemption Date and (y) the ABC
Conversion Value is an amount which is less than 85% of the ABC
Redemption Value (the "Article 6 Event"), then the Additional
Purchase Notice or Escrow Notice, as the case may be, may be
delivered to the Purchaser at any time after the receipt by
Purchaser of the notice specified in Section 5.1(g). The "ABC
Conversion Value" means the product of the number of shares of
Parent Common Stock issuable upon conversion of $1000 principal
amount of ABC Debentures, times the Average Trading Price. The
"Average Trading Price" means the average daily stock price of
Parent Common Stock
for the ten trading days immediately prior
to the 6.55% Redemption Date. The "ABC Redemption Value" means
the redemption price for the ABC Debentures per $1,000 principal
amount of the ABC Debentures (including any accrued interest
component thereof).
(b) Notwithstanding anything contained
herein to the contrary, in no event shall the aggregate purchase
price paid by the Purchaser for the Additional Shares pursuant to
Section 6.1(a) exceed the amount equal to the excess of (I) the
sum of (x) the product of the 6.55% Redemption Price per $1,000 of
face value of the 6.55% Notes times the quotient of (A) the 6.55%
Remainder divided by (B) $1,000, plus (y) accrued and unpaid
interest on the 6.55% Remainder to and including the 6.55%
Redemption Date, over (II) the aggregate accreted value of ABC
Debentures, if any, surrendered for conversion by the holders
thereof; provided, that if the Article 6 Event shall have occurred
and the ABC Redemption Date shall not yet have occurred, the
aggregate accreted value of ABC Debentures surrendered for
conversion shall be deemed to be zero for purposes of this clause
(II). The term "6.55% Remainder" means the aggregate principal
amount of the 6.55% Notes redeemed by Parent in accordance with
Section 4.1 hereof. The "6.55% Redemption Price" shall mean the
redemption price for the 6.55% Notes as determined in accordance
with the Indenture, which redemption price is $912.14 per $1,000
of face value of the 6.55% Notes for the twelve-month period
commencing January 15, 1995.
(c) In the event Parent determines not
to exercise its right to cause Purchaser to purchase Additional
Shares in accordance with this Section 6.1, Parent shall deliver
written notice (the "Termination Notice") to the Purchaser of such
determination as promptly as practicable after such determination
is made, but no later than 8 business days prior to the
Distribution Date, whereupon the obligation of Purchaser to
purchase any shares of Class A Common Stock in accordance with
this Section 6.1 shall terminate.
(d) In the event the 6.55% Redemption
Date is scheduled to occur prior to the ABC Redemption Date, at
any time after receipt by the Purchaser of the notice specified in
Section 5.1(g), Parent may by written notice request (the "Escrow
Request") that Purchaser deposit with the Escrow Agent (as defined
below) the funds referred to in this Section 6.1(d) on a date no
earlier than three business days following the date of such
request. No later than such date specified in such request (i)
Purchaser shall, in accordance with an escrow agreement reasonably
acceptable to Parent and Purchaser, deposit with an Escrow Agent
(the "Escrow Agent") mutually acceptable to Purchaser and Parent
(it being agreed that the Trustee is mutually acceptable) an
amount equal to the sum of (x) the product of the 6.55% Redemption
Price times the 6.55% Remainder, plus (y) accrued and unpaid
interest on the 6.55% Remainder to and including the 6.55%
Redemption Date, and (ii) Parent shall deposit with such Escrow
Agent the number of shares of Class A
Common Stock, (together with stock powers duly executed in blank)
equal to the amount of funds deposited by Purchaser pursuant to
clause (i) above divided by $20.90. Such Escrow Agent shall hold
such funds and stock in escrow pending receipt of notice from
Parent (the "Escrow Notice"), pursuant to which Parent shall
instruct the Escrow Agent to transfer, and the Escrow Agent shall
transfer, to Parent from the funds deposited by Purchaser an
amount not greater than the amount calculated in accordance with
Section 6.1(b) hereof (the "Section 6.1(d) Amount"); provided
that, if the Article 6 Event has occurred, the Escrow Notice may
be delivered at any time and, if the Article 6 Event has not
occurred, the Escrow Notice may be delivered no earlier than the
next business day following the ABC Redemption Date, but in either
case, no later than the date 8 business days prior to the
Distribution Date. The escrow agreement shall provide that,
simultaneously with such transfer to Parent of such funds, the
Escrow Agent shall (I) transfer to Purchaser the excess, if any,
of the amount deposited by Purchaser (including any interest
earned) over the Section 6.1(d) Amount; (II) transfer and deliver
to Purchaser the number of shares of Class A Common Stock equal to
the Section 6.1(d) Amount divided by $20.90 (together with such
executed stock powers effecting the transfer to Purchaser of such
number of shares of Class A Common Stock); and (III) deliver to
Parent the remainder of the shares of Class A Common Stock, if
any, not transferred and delivered to Purchaser in accordance with
clause II above. The escrow agreement shall further provide for
the return to Purchaser of the funds deposited (plus any interest
earned thereon) and the return to Parent of the shares of Class A
Common Stock deposited, if the Escrow Notice has not been given
within 60 days after the date of the Escrow Request referred to in
the first sentence of this Section 6.1(d).
6.2 Option to Purchase Class A Common Stock.
(a) The Purchaser shall have the option
(the "Option") to purchase from Parent, and Parent shall sell to
the Purchaser, the number of shares of Class A Common Stock set
forth in the Option Notice (the "Option Shares"), at a purchase
price per share of $20.90, provided that the number of Option
Shares shall not exceed 3,588,517 shares of Class A Common Stock.
No later than the fifth business day following receipt of the
Additional Purchase Notice, the Escrow Notice or the Termination
Notice, as the case may be, the Purchaser shall deliver written
notice to Parent (the "Option Notice"), which shall state the
number of shares of Class A Common Stock in respect of which the
Option is being exercised or, subject to Section 6.2(b), if none,
that the Purchaser elects not to exercise the Option.
(b) If RTZA has not acquired any 6.55%
Notes pursuant to the terms hereof, and Parent has previously
delivered the Termination Notice, the Purchaser shall, in the
Option Notice, exercise the Option to purchase 3,588,517 shares of
Class A Common Stock at a purchase price per share of $20.90 in
accordance with this Article 6.
6.3 Purchase of Additional Shares and Option
Shares.
(a) Upon the terms and subject to the
conditions of this Agreement, the closings of the transactions
contemplated by Section 6.1 and Section 6.2 (each, an "Additional
Stock Closing") shall take place at the offices of Fried, Frank,
Harris, Shriver & Jacobson, One New York Plaza, New York, New
York, commencing at 10:00 a.m. (New York local time), in the case
of the purchase of the Additional Shares, on the date specified in
the Additional Purchase Notice or the Escrow Notice in accordance
with Section 6.1(a) and, in the case of the purchase of the Option
Shares, on the third business day following the delivery of the
Option Notice or, in either case, at such other time and/or place
and/or on such other dates as the parties may mutually agree
(each, an "Additional Stock Closing Date"). No later than 2
business days prior to an Additional Stock Closing Date, Parent
shall provide written notice to the Purchaser and the Escrow Agent
specifying the accounts to which payment shall be made on such
Additional Stock Closing Date.
(b) At an Additional Stock Closing (i)
Parent shall deliver, or cause to be delivered, to the Purchaser
the certificates representing the number of shares of Class A
Common Stock purchased in accordance with Section 6.1 and/or
Section 6.2, as the case may be, duly endorsed in blank or
accompanied by stock powers or other instruments of transfer duly
executed in blank, with all necessary transfer tax and other
documentary stamps affixed thereto, (ii) the Purchaser shall pay,
or cause to be paid, to Parent in consideration for the shares
being purchased, by wire transfer of immediately available funds,
the aggregate purchase price equal to the sum of (x) subject to
the provisions of Section 6.1(b), the product of $20.90 times the
number of Additional Shares, if any, plus (y) the product of
$20.90 times the number of Option Shares, if any, and (iii) the
parties hereto shall execute and deliver such certificates,
documents and instruments as may be required to be executed or
delivered pursuant to the terms hereof.
7. Spin-Off and Merger.
(a) As promptly as it deems practicable after
the latest to occur of the 6.55% Redemption Date, the ABC
Redemption Date and (if (i) an Option Notice pursuant to which the
Purchaser elects to purchase shares, or (ii) an Additional
Purchase Notice or Escrow Notice, in either case, has been
delivered in accordance with Article 6) the final Additional Stock
Closing, to the extent not otherwise prohibited by applicable Law
or regulation or a judgment, injunction, order or decree of a
proper governmental or regulatory authority of competent
jurisdiction, Parent shall declare the record date for the Spin-
Off, which shall also be the date on which the shares of Class B
Common Stock will be distributed to holders of Parent Common Stock
(the "Distribution Date"); provided that,
(i) if Parent requests RTZA to commence the
Tender Offer and RTZA acquires any 6.55% Notes in
connection with the Tender Offer, then Parent shall
delay the Declaration Date a reasonable period of time
(it being agreed that a delay of 60 business days is
reasonable for purposes of this Section 7(a)(i)),
(ii) if the Purchaser elects not to exercise
the Option with respect to all 3,588,517 shares of
Class A Common Stock, or if Parent otherwise wishes to
sell shares of Class A Common Stock prior to the Spin-
Off, then Parent may delay the Declaration Date a
reasonable period of time in order to permit it to
sell any Class A Common Stock that it desires to sell,
and
(iii) prior to the Spin-Off, Parent shall have
received satisfactory confirmation that the
nonrecognition provisions of Code Section 355(a)(1)
and (c) shall apply, such that no gain or loss shall
be recognized to Parent or its shareholders, other
than as a result of Code Section 367(e).
(b) In accordance with the terms of the
Consent Solicitation Statement, no later than the business day
immediately preceding the Distribution Date, the Company and
Facilitating Company will file a certificate of merger with the
Secretary of State of the State of Delaware, which certificate
will state that the Merger shall become effective upon the filing
thereof with the Secretary of State of the State of Delaware, and
make all other filings or recordings required by Delaware Law in
connection with the Merger.
8. Representations and Warranties.
8.1 Representations and Warranties of Parent
and the Company
. Parent severally with respect to
representations and warranties as to Parent and its subsidiaries
and Affiliates (other than the Company and its direct and indirect
subsidiaries), and the Company severally with respect to
representations and warranties as to the Company and its direct
and indirect subsidiaries, represent and warrant to RTZ, RTZA and
the Purchaser as follows:
8.1.1 Organization and Qualifications
. Each of Parent, the Company and their
respective material subsidiaries is a corporation duly organized,
validly existing, and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate
power and authority to own and operate its properties and to carry
on its business as it is now being conducted. Each of Parent, the
Company and their respective material subsidiaries is duly
qualified to do business as a foreign corporation and is in good
standing in every jurisdiction in which the nature of the business
conducted or properties owned or leased or the nature of its
activities makes
such qualification necessary, except for
those jurisdictions where the failure to be so qualified would
not, individually or in the aggregate, have a Parent Material
Adverse Effect or a Company Material Adverse Effect.
8.1.2 Capitalization.
(a) Schedule 8.1.2 sets forth the
authorized capital stock of each of Parent and the Company and the
number of outstanding shares of capital stock of each of Parent
and the Company as of April 30, 1995. All of the outstanding
shares of capital stock of each of Parent and the Company have
been duly authorized and validly issued and are fully paid and
non-assessable. Except as set forth on Schedule 8.1.2, there are
no shares of capital stock of either Parent or the Company
authorized, issued or outstanding, and except as set forth on
Schedule 8.1.2., there are no outstanding subscriptions, options,
warrants, rights, convertible or exchangeable securities or other
agreements or commitments of any character relating to the issued
or unissued capital stock or other securities of the Company or
Parent obligating the Company or Parent to issue, deliver or sell,
or cause to be issued, delivered or sold, or to make any payments
based upon the value of, shares of capital stock or other
securities of the Company or Parent or obligating the Company or
Parent to grant, extend or enter into any subscription, warrant,
right, convertible or exchangeable security or other similar
agreement or commitment. There are no voting trusts or other
agreements or understandings to which either Parent or the Company
is a party with respect to the voting of capital stock of Parent
or the Company. Parent and the Company have furnished to the
Purchaser and RTZA all agreements, commitments and understandings
to which any of Parent, the Company or their respective
subsidiaries is a party and which relate to the capital stock of
Parent, the Company or any of their respective subsidiaries.
(b) The shares of Class A Common
Stock purchased by the Purchaser at the Stock Closing, the shares
of Class A Common Stock purchased by the Purchaser at an
Additional Stock Closing, if any, the shares of Parent Common
Stock issued to RTZA upon conversion of the 6.55% Notes, if any,
and the shares of Class B Common Stock, if any, received by RTZA
in the Spin-Off, will have been duly authorized and, upon the
issuance thereof, will be validly issued, fully paid and non-
assessable with no personal liability attaching to the ownership
thereof. The issuance to the Purchaser of the shares of Class A
Common Stock at the Stock Closing, the issuance to the Purchaser
of the shares of Class A Common Stock at an Additional Stock
Closing, if any, the issuance to RTZA of the shares of Parent
Common Stock upon conversion of the 6.55% Notes, if any, and the
distribution of the shares of Class B Common Stock, if any, to
RTZA in the Spin-Off, is not and will not be subject to preemptive
rights of any Person.
8.1.3 Authority.
(a) Each of Parent and the Company
has the requisite corporate power and authority to enter into this
Agreement and the Related Agreements to which either Parent or the
Company is or will be a party and to perform its obligations
hereunder and thereunder. The execution and delivery of this
Agreement and the Related Agreements to which either Parent or the
Company is or will be a party and the consummation of the
transactions contemplated hereby and thereby have been duly
authorized and approved by each of Parent's and the Company's
Board of Directors and, except as set forth on Schedule 8.1.3, no
other corporate proceedings on the part of Parent or the Company
are necessary to authorize this Agreement or the Related
Agreements to which either of them is or will be a party or the
transactions contemplated hereby and thereby, except for the
approval of stockholders specified in paragraphs (b) and (c) of
this Section 8.1.3, which have been obtained. This Agreement has
been, and the Related Agreements, when executed and delivered by
each of Parent and the Company pursuant to Article 2 hereof, will
be, duly and validly executed and delivered by each of Parent and
the Company, respectively. This Agreement constitutes, and the
Related Agreements, when executed and delivered by each of Parent
and the Company pursuant to Article 2 hereof, will constitute, a
valid and binding agreement of Parent and the Company,
respectively, enforceable against Parent and the Company,
respectively, in accordance with their respective terms, subject
to bankruptcy, reorganization, insolvency, moratorium and other
Laws affecting the enforcement of creditors' rights generally and
subject to general equitable principles.
(b) Each of the New Certificate of
Incorporation and the New By-laws has been approved by the Board
of Directors of the Company and the New Certificate of
Incorporation has been approved by the stockholders of the
Company; and no other corporate proceedings on the part of the
Company are necessary to authorize and adopt the New Certificate
of Incorporation or the New By-laws.
(c) The Merger Agreement has been
approved by the Board of Directors of each of Parent, the Company
and Facilitating Company and the stockholders of the Company and
Facilitating Company; and no other corporate proceedings on the
part of Parent, the Company or Facilitating Company are necessary
to authorize and consummate the transactions contemplated thereby.
(d) The Spin-Off has been approved
by the Board of Directors of Parent; and, except as set forth on
Schedule 8.1.3, no other corporate proceedings on the part of
Parent or the Company are necessary to authorize and consummate
the transactions contemplated thereby.
(e) To the extent the transactions
contemplated by this Agreement result in RTZ or its Affiliates
becoming an "interested stockholder" (as defined in DGCL 203) of
Parent or the Company, the Board of Directors of Parent and the
Company, respectively, have approved the transactions contemplated
by this Agreement for purposes of DGCL 203. To the extent the
transactions contemplated by this Agreement result in RTZ or its
Affiliates becoming an "Interested Party" (as defined in the New
Certificate of Incorporation), the Board of Directors has approved
the transactions contemplated by this Agreement for purposes of
paragraph (a) of Article SEVENTH of the New Certificate of
Incorporation. The Board of Directors of each of Parent and the
Company have approved, for purposes of such 203 and Article
SEVENTH, any subsequent acquisitions in one or more transactions
by RTZ or its Affiliates of shares of Company Common Stock or
warrants, options or other rights to purchase shares of Company
Common Stock, or securities convertible into or exchangeable for
shares of Company Common Stock, provided that as a result of such
acquisitions the shares of Company Common Stock beneficially owned
by RTZ and its Affiliates does not equal or exceed the number of
Majority Shares.
8.1.4 Title
. Parent has good and valid title to any
shares of Class B Common Stock beneficially owned by it which
shall be exchanged pursuant to Section 9.2.2, and has good and
valid title to the shares of Class B Common Stock beneficially
owned by it which shall be distributed to RTZA in the Spin-Off, in
each case, free and clear of all liens, encumbrances, equities or
adverse claims. Parent shall have good and valid title to the
shares of Class A Common Stock received upon the exchange pursuant
to Section 9.2.2 and sold to the Purchaser pursuant to Article 3
and/or Article 6 hereof, free and clear of all liens,
encumbrances, equities or adverse claims.
8.1.5 Compliance with Other Instruments
. Neither Parent, the Company nor any of
their respective material subsidiaries is in violation of any term
of its certificate of incorporation or by-laws, as in effect on
the date hereof. None of the execution, delivery and performance
of this Agreement or any Related Agreement to which Parent, the
Company or any of their respective subsidiaries is a party or any
of the transactions contemplated hereby or thereby, does or will,
with or without the passage of time or the giving of notice or
both, (i) violate, conflict with, or result in a breach of, or
default under, any agreement, obligation or commitment to which
Parent, the Company or any of their respective subsidiaries is a
party or by which Parent, the Company or any of their respective
subsidiaries is bound, (ii) assuming the transfers, consents,
licenses, approvals, waivers, expirations of waiting periods,
authorizations, declarations and filings, if any, set forth in
Schedule 8.1.6 are obtained or made, violate any provision of any
applicable Law or Permit to which Parent, the Company or any of
their respective subsidiaries is subject, (iii) violate any order,
judgment or decree applicable to Parent, the Company or any of
their respective subsidiaries, (iv) conflict with, or result in a
breach of, or default under, any term of Parent's, the Company's
or any of their respective
material subsidiaries' certificate of
incorporation or by-laws in effect on the date hereof or the New
Certificate of Incorporation or New By-laws, or (v) result in the
creation of any mortgage, pledge, lien, encumbrance, or charge
upon any of the properties or assets of Parent, the Company or any
of their respective subsidiaries except, in the case of clauses
(i), (ii), (iii) and (v), for any such items which, individually
or in the aggregate, would not reasonably be expected (x) to have
or result in a Company Material Adverse Effect or a Parent
Material Adverse Effect, (y) to materially impair the ability of
the Company or Parent to consummate the transactions contemplated
by this Agreement or the Related Agreements, or (z) to materially
impair the ability of RTZ, RTZA or the Purchaser to receive the
benefits of the transactions contemplated by this Agreement or the
Related Agreements.
8.1.6 Consents
. Except as set forth on Schedule 8.1.6,
no transfer, consent, license, approval, waiver, expiration of
waiting period, authorization or declaration of, and no filing or
registration with, any governmental or regulatory authority or
other third party is required to be obtained or made by Parent,
the Company or any of their respective subsidiaries in connection
with the execution, delivery and performance of this Agreement or
any Related Agreement or the consummation of the transactions
contemplated hereby and thereby, other than such other transfers,
consents, licenses, approvals, waivers, expirations of waiting
periods, authorizations, declarations or filings, which if not
obtained or made, individually or in the aggregate, would not
reasonably be expected (x) to have or result in a Company Material
Adverse Effect or a Parent Material Adverse Effect, (y) to
materially impair the ability of the Company or Parent to
consummate the transactions contemplated by this Agreement or the
Related Agreements, or (z) to materially impair the ability of
RTZ, RTZA or the Purchaser to receive the benefits of the
transactions contemplated by this Agreement or the Related
Agreements.
8.1.7 Actions Pending
. There is no action, suit, investigation
or proceeding pending or (to the knowledge of Parent or the
Company) threatened against Parent, the Company or any of their
respective subsidiaries or any of their respective properties or
assets by or before any court, arbitrator or governmental or
regulatory authority, department, commission, board, bureau,
agency or instrumentality, which questions the validity or
enforceability of, or seeks to enjoin or invalidate, this
Agreement or any Related Agreement or any action taken or to be
taken pursuant hereto or thereto, or which has had or is
reasonably likely to have or result in a Parent Material Adverse
Effect or Company Material Adverse Effect, and neither Parent, the
Company nor any of their respective subsidiaries is in default in
any material respect with respect to any material judgment, order,
writ, injunction, decree or award.
8.1.8 SEC Reports.
(a) Each of Parent and the Company
has filed all registration statements, proxy statements, annual
and quarterly reports and other documents required to be filed by
it under the Securities Act or Exchange Act since December 31,
1992. Each of the Parent and the Company has delivered to the
Purchaser and RTZA its Annual Reports on Form 10-K for the year
ended December 31, 1994, and all registration statements, proxy
statements, consent solicitation statements and reports under the
Securities Act or Exchange Act filed by the Company after such
date, each as filed with the SEC (collectively, the "SEC
Reports"). Each SEC Report complied as to form in all material
respects with the requirements of its respective report form and
on the date of filing did not, and any registration statement,
report, proxy statement or information statement filed by Parent
or the Company with the SEC prior to the Distribution Date will
not, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
(b) Except as otherwise disclosed
in the SEC Reports (i) there are no material agreements,
obligations or commitments among any of Parent, the Company or any
of their respective subsidiaries, Affiliates or stockholders, (ii)
Parent, Company and their respective subsidiaries are in
compliance in all material respects with all applicable federal,
state, local and foreign laws and regulations relating to
protection of the environment and human health, and are in
compliance with all other applicable federal, state, local and
foreign laws and regulations, including, without limitation, those
relating to equal employment opportunity, employee safety and
health and welfare, except, in either case, where the failure to
comply, individually or in the aggregate, has not had or would not
reasonably be expected to have or result in a Company Material
Adverse Effect or a Parent Material Adverse Effect and (iii) there
are no claims, notices, civil, criminal or administrative actions,
suits, hearings, investigations, inquiries or proceedings pending
or, to the best knowledge of Parent or the Company, threatened,
against Parent, the Company or any of their respective
subsidiaries that are based on or related to any material
environmental matters, including any disposal of hazardous
substances at any place, or the failure to have any required
environmental permits, and there are no past or present conditions
that Parent or the Company has reason to believe are likely to
give rise to any material liability or other material obligations
of Parent, the Company or any of their respective subsidiaries
under any environmental laws.
(c) With respect solely to
information describing Parent and the Company, at the time the
Schedule 14D-1 (and any amendment thereto) is filed, if ever, the
Schedule 14D-1 (or any amendment thereto) shall not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or
necessary to make the statements
made therein, in light of the circumstances under which they were
made, not misleading, provided that Parent and the Company shall
have given their prior written consent to any such description
prior to the filing of the Schedule 14D-1 (or any amendment
thereto).
8.1.9 Financial Statements.
The financial statements of Parent and
the Company (including any related schedules and/or notes)
included in the SEC Reports have been prepared in accordance with
GAAP consistently followed (except as indicated in the notes
thereto) throughout the periods involved and fairly present the
consolidated financial condition, results of operations and
changes in stockholders' equity of Parent and the Company,
respectively, as of the dates thereof and for the periods ended on
such dates (in each case subject, as to interim statements, to
changes resulting from year-end adjustments, none of which will be
material in amount or effect), and neither Parent nor the Company
has any material Liabilities not reflected in Parent's or the
Company's balance sheet as of December 31, 1994, included in the
SEC Reports, other than any such liabilities incurred in the
ordinary course of business since December 31, 1994 or as set
forth on Schedule 8.1.9. Except as otherwise contemplated by this
Agreement, any Related Agreement, any Affiliate Agreement or the
Consent Solicitation Statement, since December 31, 1994, each of
Parent, the Company and their respective subsidiaries have
operated their respective businesses only in the ordinary course
and there has been no event or events which, individually or in
the aggregate, have had or would reasonably be expected to have or
result in a Parent Material Adverse Effect or a Company Material
Adverse Effect.
8.1.10 Compliance with Laws; Permits.
Except as set forth on Schedule 8.1.10,
each of Parent, the Company and their respective subsidiaries is
in compliance with all Laws, except where noncompliance,
individually or in the aggregate, has not had or would not
reasonably be expected to have or result in a Parent Material
Adverse Effect or a Company Material Adverse Effect. Except as
set forth on Schedule 8.1.10, none of Parent, the Company or any
of their respective subsidiaries has received any notice of any
alleged violation of Law applicable to it or any of their
respective Affiliates from a governmental or regulatory authority
of proper jurisdiction, or any formal notice of any alleged
violation of Law applicable to it or any of their respective
Affiliates from any other Person, other than any alleged
violation, which if proven, would not reasonably be expected to
have or result in a Company Material Adverse Effect or a Parent
Material Adverse Effect. Except as set forth on Schedule 8.1.10,
each of Parent, the Company and their respective subsidiaries has
all Permits required for the conduct of its business as presently
conducted and the ownership, maintenance or operation of its
properties and assets ("Material Permits," which shall not include
any such Permits, the failure of which to have, individually or in
the aggregate, would not reasonably be expected to have or result
in a Company Material Adverse Effect or a Parent Material Adverse
Effect). All of such Material Permits are valid and in full
force and effect. The holder of each
Permit has duly performed and is in compliance with all of its
obligations under such Permits, except to the extent that
noncompliance, individually or in the aggregate, would not
reasonably be expected to have or result in a Company Material
Adverse Effect or a Parent Material Adverse Effect. No event has
occurred with respect to the Material Permits which allows, or
after notice or lapse of time or both would allow, the suspension,
limitation, revocation, non-renewal or termination thereof or
would result in any other material impairment of the rights of the
holder thereof in and under any of the Material Permits, and no
terminations thereof or proceedings to suspend, limit, revoke or
terminate any Material Permit (to the knowledge of Parent or the
Company) have been threatened.
8.1.11 Books and Records.
All the books, records and accounts of
Parent, the Company and their respective subsidiaries are in all
material respects true and complete, are maintained in accordance
with good business practice and all Laws applicable to its
business, and accurately present and reflect in all material
respects all of the transactions therein described.
8.1.12 Financial Advisors and Brokers.
Other than PaineWebber Incorporated,
whose fees and expenses will be paid by Parent, none of Parent,
the Company or any of their respective subsidiaries has employed
any investment banker, broker or finder or incurred any liability
for any financial advisory fees, brokerage fees, commissions,
finders' fees or similar payment in connection with the
transactions contemplated hereby.
8.1.13 Accuracy of Information.
All documents delivered by or on behalf
of Parent, the Company or their respective subsidiaries in
connection with this Agreement are true and correct in all
material respects. To the best of the knowledge of Parent and the
Company, neither this Agreement nor any Related Agreement nor any
certificate, information, documents or other written disclosure
document referred to herein or furnished to RTZ or any of its
Affiliates pursuant to this Agreement or any Related Agreement or
in connection with the transactions contemplated hereby or thereby
contains an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary to make
the statements made, in the context in which made, not materially
false or misleading. To the best knowledge of Parent and the
Company, there is no fact that has not been disclosed to RTZ that
could reasonably be expected to impair the ability of Parent, the
Company or their respective subsidiaries to perform this Agreement
or any Related Agreement and the transactions contemplated hereby
and thereby or to materially impair the ability of RTZ, RTZA or
the Purchaser to receive the benefits of the transactions
contemplated by this Agreement or the Related Agreements.
8.1.14 Consolidated Group.
For federal income tax purposes, the
Company is not and will not be a member of a consolidated return
group of
which Parent is a member in the tax year
in which the Spin-Off occurs. Except as set forth on Schedule
8.1.14, which exceptions relate to (i) consolidated, combined or
unitary return positions required on audit or other administrative
review, or (ii) in the case of returns as filed in which Parent
has reported the foreign metals business as a separate line of
business, for state and local income tax purposes, the Company is
not and will not be a member of a consolidated or combined or
unitary return group of which Parent is a member in the tax year
in which the Spin-Off occurs.
8.1.15 Tax Sharing Agreement.
Except (i) as set forth on Schedule
8.1.15, which exceptions pertain solely to continuing obligations
with respect to years prior to the year in which the Spin-Off
occurs or (ii) with respect to the provisions of the Distribution
Agreement, as described in Exhibit 8.1.15, neither the Company nor
any of its subsidiaries is a party to, and neither has any rights
or obligations under, any tax sharing agreement or arrangement or
similar understanding to which Parent is a member or to any
contract which would otherwise subject the Company or any of its
subsidiaries to any liability for taxes (including interest and
penalties) of Parent or any of its Affiliates (other than the
Company and its subsidiaries).
8.2 Representations and Warranties of RTZ, the
Purchaser and RTZA.
Each of RTZ, the Purchaser and RTZA represents
and warrants to Parent and the Company as follows:
8.2.1 Organization.
Each of RTZ, RTZA and the Purchaser is a
company duly organized, validly existing, and in good standing
under the laws of the jurisdiction of its organization.
8.2.2 Authority.
Each of RTZ, the Purchaser and RTZA has
the requisite corporate power and authority to enter into this
Agreement and the Related Agreements to which it is or will be a
party and to perform its obligations hereunder and thereunder.
The execution and delivery of this Agreement and the Related
Agreements to which it is or will be a party and the consummation
of the transactions contemplated hereby and thereby have been duly
authorized by each of RTZ's, the Purchaser's and RTZA's Board of
Directors and no other corporate proceedings on the part of RTZ,
the Purchaser or RTZA are necessary to authorize this Agreement or
the Related Agreements to which it is or will be a party or the
transactions contemplated hereby and thereby. This Agreement has
been, and the Related Agreements, when executed and delivered by
each of RTZ, the Purchaser and RTZA, as the case may be, pursuant
to Article 2 hereof, will be, duly and validly executed and
delivered by each of RTZ, the Purchaser and RTZA, respectively.
This Agreement constitutes, and the Related Agreements, when
executed and delivered by each of RTZ, the Purchaser and RTZA, as
the case may be, pursuant to Article 2 hereof, will constitute, a
valid and binding agreement of each of RTZ, the Purchaser and
RTZA, respectively, enforceable
against RTZ, the Purchaser and RTZA,
respectively, in accordance with their respective terms, subject
to bankruptcy, reorganization, insolvency, moratorium and other
Laws affecting the enforcement of creditors' rights generally and
subject to general equitable principles.
8.2.3 Compliance with Other Instruments.
None of the execution, delivery and
performance of this Agreement or any Related Agreement to which
RTZ, RTZA or the Purchaser or any of their respective subsidiaries
is a party or any of the transactions contemplated hereby or
thereby, does or will, with or without the passage of time or the
giving of notice or both, (i) violate, conflict with, or result in
a breach of, or default under, any agreement, obligation or
commitment to which RTZ, RTZA or the Purchaser or any of their
respective subsidiaries is a party or by which RTZ, RTZA or the
Purchaser or any of their respective subsidiaries is bound, (ii)
assuming the transfers, consents, licenses, approvals, waivers,
expirations of waiting periods, authorizations, declarations and
filings, if any, set forth in Schedule 8.2.4 are obtained or made,
violate any provision of any applicable Law or Permit to which
RTZ, RTZA or the Purchaser or any of their respective subsidiaries
is subject, (iii) violate any order, judgment, or decree
applicable to RTZ, RTZA or the Purchaser or any of their
respective subsidiaries, or (iv) conflict with, or result in a
breach of or default under, any term of RTZ's, RTZA's or the
Purchaser's or any of their respective material subsidiaries'
constituent documents in effect on the date hereof, except, in the
case of clause (i), (ii) or (iii), for any such items which,
individually or in the aggregate, would not reasonably be expected
to materially impair the ability of RTZ, RTZA or the Purchaser to
consummate the transactions contemplated by this Agreement or the
Related Agreements.
8.2.4 Consents.
Except as set forth on Schedule 8.2.4,
no transfer, consent, license, approval, waiver, expiration of
waiting period, authorization or declaration of, and no filing or
registration with, any governmental or regulatory authority is
required to be obtained or made by RTZ, the Purchaser or RTZA in
connection with the execution, delivery and performance of this
Agreement or any Related Agreement or the transactions
contemplated hereby or thereby, other than such other transfers,
consents, licenses, approvals, waivers, expirations of waiting
periods, authorizations, declarations or filings, which if not
obtained or made, individually or in the aggregate, would not
reasonably be expected to materially impair the ability of RTZ,
RTZA or the Purchaser to consummate the transactions contemplated
by this Agreement or the Related Agreements.
8.2.5 Actions Pending.
There is no action, suit, investigation
or proceeding pending or (to the knowledge of RTZ, the Purchaser
or RTZA) threatened against RTZ, the Purchaser or RTZA or any of
their respective subsidiaries by or before any court, arbitrator
or governmental or regulatory authority, department, commission,
board, bureau, agency or instrumentality, which questions the
validity or enforceability of, or seeks to
enjoin or invalidate, this Agreement or any Related Agreement or
any action taken or to be taken pursuant hereto or thereto.
8.2.6 Investment Representations.
The Purchaser is acquiring the shares of
Class A Common Stock pursuant to this Agreement for its own
account, solely for investment purposes and not with a view to, or
for resale in connection with, the distribution thereof in
violation of federal or applicable state securities laws.
8.2.7 Financial Advisors and Brokers.
Other than Lehman Brothers, Inc., whose
fees and expenses will be paid by RTZ, RTZA and/or the Purchaser,
neither the Purchaser nor RTZA has employed any investment banker,
broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions, finders' fees or
similar payment in connection with the transactions contemplated
hereby.
8.2.8 Ownership of Securities of Parent
and the Company.
As of the date of this Agreement, RTZ,
RTZA, the Purchaser and their respective Affiliates do not
together own more than 1% of the outstanding capital stock of
Parent or of the Company.
8.2.9 Accuracy of Information.
To the best of the knowledge of RTZ,
RTZA and the Purchaser, no representation or warranty of RTZ, RTZA
or the Purchaser contained in this Agreement, any Related
Agreement or in any Schedule or Exhibit hereto or thereto contains
an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make
the statements made, in the context in which made, not materially
false or misleading.
9. Covenants.
9.1 Covenants of All Parties.
Each of the parties hereto covenants and
agrees as follows:
9.1.1 Cooperation.
The parties hereto shall use their
respective reasonable efforts, and shall cooperate with each
other, to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable, to
cause the conditions set forth in Article 10 to be satisfied and
to cause the consummation of the transactions contemplated by this
Agreement and the Related Agreements in accordance with the terms
and conditions hereof and thereof.
9.1.2 Breach of Representations and
Warranties.
None of the parties hereto will
knowingly or voluntarily take any action which would cause or
constitute a material breach of any of the representations or
warranties set forth in Article 8 hereof, or which would cause any
of such respective representations and
warranties to be materially inaccurate.
Each of the parties will, in the event of, and promptly after
becoming aware of the occurrence of, or the pending or threatened
occurrence of, such a material breach or inaccuracy, notify the
other parties of such breach or inaccuracy in reasonable detail
and will use its reasonable efforts to prevent or promptly remedy
such breach or inaccuracy.
9.1.3 Communications with Regulators.
(a) With respect to the
transactions contemplated by this Agreement and the Related
Agreements, but except with respect to the IRS, each of Parent and
the Company on the one hand, and each of the Purchaser and RTZA,
on the other hand, shall notify the other parties promptly of the
receipt by it of any comments from the SEC, the NYSE or any other
governmental or regulatory authority (other than the IRS) or their
respective staffs and of any request by the SEC, the NYSE or any
other governmental or regulatory authority (other than the IRS)
for amendments or supplements to any filings made by or on behalf
of it or for additional information and will supply the other
parties with copies of all correspondence between it and its
representatives, on the one hand, and the SEC, the NYSE or any
other governmental or regulatory authority (other than the IRS) or
the members of their respective staffs or any other governmental
officials (other than the IRS), on the other hand, with respect to
any filings made by or on behalf of it.
(b) Each of Parent and the Company
(i) shall notify RTZA promptly of the receipt by Parent or the
Company of any comments from the IRS or its staff regarding the
Spin-Off and of any request by the IRS for amendments or
supplements to the Spin-Off Private Letter Ruling or for
additional information, (ii) shall supply RTZA with draft copies
of all written correspondence from it or its representatives in
sufficient time so as to give RTZA and its representatives an
opportunity to comment on such correspondence, shall consider all
such comments in good faith and, in particular, shall not make any
representations about RTZ or its Affiliates without RTZ's written
consent, (iii) shall supply RTZA with copies of all correspondence
between it and its representatives, on the one hand, and the IRS
or the members of its staff or any other governmental officials,
on the other hand, with respect to the Spin-Off Private Letter
Ruling, and (iv) shall advise RTZA of any proposed meetings
(including telephonic conferences) with the IRS in advance thereof
and permit, to the extent practicable, determined in Parent's or
the Company's good faith judgment, as the case may be, a
representative of RTZA to attend such meetings (including
telephonic conferences) and to participate therein to the extent
such meetings discuss RTZ or any of its Affiliates; provided,
however, to the extent that it is not practicable for RTZA to
attend any such meetings, Parent or Company, as the case may be,
shall promptly notify RTZA of the content of such meetings
(including telephonic conferences).
9.1.4 Affiliate Agreements.
Each of Parent and the Company shall
take, or cause to be taken, all actions and do, or cause to be
done, all things, and shall cause their respective Affiliates to
take, or cause to be taken, all actions and do, or cause to be
done, all things, necessary or appropriate pursuant to any
agreement between Parent, the Company or any of their respective
Affiliates, on the one hand, and RTZ, the Purchaser, RTZA or any
of their respective Affiliates, on the other hand (collectively,
the "Affiliate Agreements"), and each of RTZ, the Purchaser and
RTZA shall take, or cause to be taken, all actions and do, or
cause to be done all things, and shall cause their respective
Affiliates to take, or cause to be taken, all actions and do, or
cause to be done, all things, necessary or appropriate pursuant to
any Affiliate Agreements.
9.1.5 Certain Specified Actions.
Each of Parent, Company, RTZ, RTZA and
the Purchaser shall not take any of the actions specified on
Schedule 9.1.5 during the periods specified therein.
9.2 Covenants of Parent and the Company.
In addition to the covenants and agreements in
Section 9.1 hereof, each of Parent and the Company covenants and
agrees as follows:
9.2.1 Conduct of Business Pending the
Spin-Off.
Except as otherwise contemplated by this
Agreement, the Consent Solicitation Statement or any Affiliate
Agreement or as specified in Schedule 9.2.1, from and after the
date hereof and prior to completion of the Spin-Off, neither
Parent nor the Company shall, without the prior written consent of
the Purchaser and RTZA, enter into any transaction, contract,
agreement, commitment, plan or arrangement which would reasonably
be expected to have or result in a Parent Material Adverse Effect
or a Company Material Adverse Effect or would materially impair or
materially adversely affect the ability of Parent, the Company or
any of their respective Affiliates or the Purchaser, RTZA or any
of their respective Affiliates to consummate the transactions
contemplated by this Agreement, the Consent Solicitation Statement
or any Affiliate Agreement or would reasonably be expected to
materially impair the ability of RTZ, RTZA or the Purchaser to
receive the benefits of the transactions contemplated by this
Agreement or any Affiliate Agreement (including any transaction,
contract, agreement, commitment, plan, arrangement or other action
which might impair or adversely affect the Spin-Off Private Letter
Ruling). As of the date of the Spin-Off, the representations
referred to in Exhibit 8.1.15 shall be reaffirmed between Parent
and the Company pursuant to the Distribution Agreement.
Subsequent to the completion of the Spin-Off, neither Parent nor
the Company shall, without the prior written consent of RTZA, take
any prohibited actions described in Exhibit 8.1.15.
Notwithstanding anything to the contrary contained in this Section
9.2.1, Parent and the Company shall have the right to take any
action described in this Section 9.2.1 (including activities
described in Exhibit 8.1.15) if they first obtain either a
supplemental private letter ruling from
the IRS or an opinion of nationally recognized tax counsel,
reasonably satisfactory to RTZ, that such action shall not
adversely affect the tax-free nature of the Spin-Off or the
ability of Parent to rely on the Spin-Off Private Letter Ruling.
9.2.2 Exchange of Shares.
On or prior to the Stock Closing Date
and each Additional Stock Closing Date, the Company shall issue
and deliver to Parent, in exchange for shares of Class B Common
Stock owned by Parent, a sufficient number of shares of Class A
Common Stock to permit Parent to consummate the applicable
transactions on such closing date as contemplated by Article 3 or
Article 6 hereof, as the case may be.
9.2.3 Certain Arrangements Following the
Spin-Off.
As promptly as practicable after the
date hereof, Parent and the Company shall enter into (i) a Benefit
Allocation Agreement containing substantially the same terms set
forth in Exhibit C and (ii) a Transition Management Services
Agreement containing substantially the same terms set forth in
Exhibit D.
9.3 Covenants of Parent.
In addition to the covenants and agreements in
Section 9.1 and 9.2 hereof, Parent covenants and agrees as
follows:
9.3.1 Minimum Price of Sales.
From and after the date hereof and prior
to completion of the Spin-Off, without the prior written consent
of RTZ, Parent shall not sell, transfer, assign, exchange or
otherwise dispose of any shares of Class A Common Stock or Class B
Common Stock owned by it, or grant any option or right to purchase
such shares or any legal or beneficial interest therein for a
purchase price per share of less than $20.90.
9.4 Covenants of the Company.
In addition to the covenants and agreements
set forth in Section 9.1 and 9.2, the Company covenants and agrees
as follows:
9.4.1 Right to Nominate Directors.
After completion of the Purchaser's
purchase of Class A Common Shares pursuant to Article 3, the
Purchaser and RTZA will have the right to nominate for submission
to the Company's stockholders at stockholders' meetings or in
connection with any consent solicitation for the election of
directors, the number of directors (rounded to the nearest whole
number) (which nominees may be nominees for Class A Directors or
Class B Directors) which is proportionately equal to the aggregate
percentage ownership of the Purchaser and RTZA of all outstanding
shares of Class A Common Stock and Class B Common Stock; provided,
that the percentage that the number of Class B Directors nominated
by the Purchaser and RTZA bears to the total number of Class B
Directors shall not exceed the
percentage that the number of shares of
Class B Common Stock owned by the Purchaser and RTZA bears to the
total number of outstanding shares of Class B Common Stock
(rounded down to the nearest whole number). The Company shall
include the directors nominated pursuant to the foregoing sentence
in the directors recommended by management, and shall not take any
actions which may be inconsistent with, conflict with, or
otherwise hinder, the election of such individuals. No later than
the earlier of 60 days after the Distribution Date or January 2,
1996, the Company shall appoint the number of persons nominated by
the Purchaser and RTZA in accordance with the foregoing sentence
as interim directors to take office until the next stockholders'
meeting or consent solicitation for the election of directors.
Notwithstanding anything contained herein to the contrary, (i) if
the number of directors of the Company is less than ten, the
Purchaser and RTZA will have the right to so nominate for
submission to the Company's stockholders, no less than one Class A
Director, provided that the Purchaser continues to hold
substantially all the shares of Class A Common Stock purchased
hereunder, and (ii) if at any time the Company shall no longer be
subject to the reporting requirements of the Exchange Act, the
Company shall cause the directors nominated by the Purchaser and
RTZA in accordance with this Section 9.4.1 to be elected as
directors.
9.5 Covenants of RTZ, RTZA and the Purchaser.
In addition to the covenants and agreements
set forth in Section 9.1, RTZA covenants and agrees as follows:
9.5.1 Lack of Certain Stock Ownership.
Except as a result of the transactions
described in this Agreement, RTZ, RTZA, the Purchaser and their
Affiliates will not acquire any shares of $4.375 Parent Preferred
Stock, Parent Common Stock or Company Voting Stock at any point
during the period from and including the date hereof to and
including the Distribution Date.
9.5.2 Certain Specified Actions.
Each of RTZ, RTZA and the Purchaser
shall not take any of the actions specified on Schedule 9.5.2
during the periods specified therein.
9.6 Additional Covenants.
9.6.1 Future Acquisitions.
RTZ and its Affiliates will not be
directly or indirectly restricted from future acquisitions of
shares of Company Voting Stock, except that approval of the
Company Board of Directors will be required for RTZ or its
Affiliates, alone or acting in concert with others, to acquire
beneficial ownership of shares of Company Voting Stock equal to
the Majority Shares. Without limiting the generality of the
foregoing, the Board of Directors of each of Parent and the
Company hereby agree that if the Company adopts a "rights plan,"
"poison pill" or other plan or arrangement which provides for the
distribution to its shareholders, by way of dividend or
otherwise, of shares of capital stock of
the Company, warrants, options or other rights to purchase shares
of capital stock of the Company, or securities convertible into or
exchangeable for shares of capital stock of the Company, upon the
occurrence of specified events, then any transactions between the
Company and any of its Affiliates, on the one hand, and RTZ and
any of its Affiliates, on the other hand, and any transactions by
RTZ or its Affiliates relating to shares of the capital stock of
the Company, or warrants, options or other rights to purchase
shares of capital stock of the Company, or securities convertible
into or exchangeable for shares of capital stock of the Company
shall be excluded from such specified events, unless such
transactions result in the acquisition by RTZ and its Affiliates
of beneficial ownership of shares of Company Voting Stock equal to
the Majority Shares.
9.6.2 Voting.
RTZ, RTZA and the Purchaser agree that
if at any time, and for so long as, RTZ, RTZA, the Purchaser or
their Affiliates beneficially own, in the aggregate, more than 5%
of the outstanding shares of Company Voting Stock, and directors
nominated pursuant to Section 9.4.1 (or replacements therefor)
continue to serve as directors of the Company, RTZ, RTZA and the
Purchaser (i) shall cause all such Company Voting Stock as of the
record date of each stockholder meeting or consent of stockholders
of the Company to be represented, in person or by proxy, at each
such meeting or in such consent, and (ii) shall, with respect to
any action at any stockholder meeting or by consent of the
stockholders of the Company which action relates solely to the
electing of directors, cause all such Company Voting Stock to be
voted at each such meeting or by such consent for election of the
slate of directors as affirmatively recommended by a majority of
the Board of Directors of the Company, which will include the
nominees of the Purchaser and RTZA pursuant to Section 9.4.1
hereof. 10. Conditions to Stock Closings. 10.1 Conditions to Stock Closing. 10.1.1 Conditions to the Obligations of |
All Parties.
The obligations of each of the parties
hereto to consummate the Stock Closing shall be subject to the
satisfaction (or waiver by each of the parties hereto) at or prior
to the Stock Closing of each of the following conditions:
(a) The consummation of the Stock
Closing and the consummation of the other transactions
contemplated by this Agreement or any Affiliate Agreement shall
not be prohibited by any order or injunction of a United States
federal or state court of competent jurisdiction, or other
governmental or regulatory authority of competent jurisdiction of
the United States, the United Kingdom, Indonesia, or Spain, and
there shall not have been any action taken or any statute, rule or
regulation enacted, promulgated or deemed applicable to the Stock
Closing or the other transactions
contemplated by this Agreement or
any Affiliate Agreement by any United States federal or state
government or governmental agency or other governmental or
regulatory authority of competent jurisdiction of the United
States, the United Kingdom, Indonesia, or Spain, that makes
consummation of the Stock Closing or such transactions illegal.
(b) Each other party and its
Affiliates shall have complied in all material respects with its
agreements and covenants contained herein or in any Affiliate
Agreement to be performed on or prior to the Stock Closing, and
all representations and warranties of each other party and its
Affiliates contained herein or in any Affiliate Agreement shall be
true and correct in all material respects on and as of the Stock
Closing with the same effect as though made on and as of the Stock
Closing Date.
(c) All consents, approvals,
authorizations, exemptions and waivers from governmental agencies
as specified in Schedules 8.1.6 and 8.2.4 and required to
consummate the transactions contemplated by this Agreement and any
Affiliate Agreement shall have been obtained (except for such
consents, approvals, authorizations, exemptions and waivers, the
absence of which would not prohibit such sale or render such sale
illegal).
10.1.2 Conditions to Obligations of the
Purchaser.
The obligations of the Purchaser to
consummate the Stock Closing shall be subject to the satisfaction
(or waiver by the Purchaser) of each of the following additional
conditions:
(a) The Purchaser shall have
received the opinion of Davis Polk & Wardwell, counsel for Parent
and the Company, in form and substance reasonably requested by
Purchaser.
(b) Each of Parent and the Company
shall have delivered to the Purchaser a certificate of the
President and the chief financial officer of each of Parent and
the Company, dated the Stock Closing Date, satisfactory in form
and substance to the Purchaser and its counsel, certifying that
(i) each of Parent and the Company has complied in all material
respects with its agreements and covenants contained herein to be
performed on or prior to the Stock Closing, and (ii) all
representations and warranties of Parent and the Company set forth
in Article 8 hereof are true and correct in all material respects
on and as of the Stock Closing with the same effect as though made
on and as of the Stock Closing Date.
(c) Each of Parent and the Company
shall have delivered to the Purchaser resolutions of the Board of
Directors of Parent and the Company, respectively, duly certified
by the Secretary of Parent and the Company, respectively,
authorizing and approving the transactions contemplated hereby.
(d) No event shall have occurred
or be threatened which is reasonably likely to make impossible or
impracticable the satisfaction of any express condition to the
effectiveness of or closing under any Affiliate Agreement.
(e) Purchaser shall have received
a certificate of the chief financial officer of Parent, dated the
date of the Stock Closing, to the effect that, to the best of his
knowledge, no event has occurred or is contemplated by this
Agreement which causes Parent to believe that the nonrecognition
provisions of Code Section 355(a)(1) and (c) shall not apply with
respect to the Spin-Off, other than as a result of Code Section
367(e).
(f) Each of Parent and the Company
shall have received the consent of the banks party to Parent's
current credit facilities, in form and substance reasonably
satisfactory to Parent and the Company, and such consents shall
not have been revoked or Parent and the Company shall have
received assurances satisfactory to Parent and the Company that
such consents will be forthcoming.
10.1.3 Conditions to Obligations of
Parent.
The obligations of Parent to consummate
the Stock Closing shall be subject to the satisfaction or waiver
by Parent to each of the following additional conditions:
(a) Parent shall have received the
opinion of Fried, Frank, Harris, Shriver & Jacobson, counsel for
RTZ, the Purchaser and RTZA, and the opinion of C.H.H. Lawton,
Esq. of RTZ, in each case, in form and substance reasonably
requested by Parent.
(b) Each of RTZ, the Purchaser and
RTZA shall have delivered to Parent a certificate of the President
and the chief financial officer of each of the Purchaser and RTZA,
dated the Stock Closing Date, satisfactory in form and substance
to Parent and its counsel, certifying that (i) each of RTZ, the
Purchaser and RTZA has complied in all material respects with its
agreements and covenants contained herein to be performed on or
prior to the Stock Closing and (ii) all representations and
warranties of each of RTZ, the Purchaser and RTZA set forth in
Article 8 hereof are true and correct in all material respects on
and as of the Stock Closing with the same effect as though made on
and as of the Stock Closing Date.
(c) No event shall have occurred
or be threatened which is reasonably likely to make impossible or
impracticable the satisfaction of any express condition to the
effectiveness of or closing under any Affiliate Agreement.
(d) Nothing shall have occurred
which causes Parent to believe that the nonrecognition provisions
of Code Section 355(a)(1) and (c) shall not apply with respect to
the Spin-Off, other than as a result of Code Section 367(e).
10.2 Conditions to Additional Stock Closings.
10.2.1 Conditions to the Obligations of
All Parties.
The obligations of each of the parties
hereto to consummate each Additional Stock Closing shall be
subject to the satisfaction or waiver by each of the parties
hereto of each of the following conditions:
(a) The Stock Closing shall have
been consummated.
(b) The consummation of such
Additional Stock Closing shall not be prohibited by any order or
injunction of a United States federal or state court of competent
jurisdiction, or other governmental or regulatory authority of
competent jurisdiction of the United States, the United Kingdom,
Indonesia, or Spain, and there shall not have been any action
taken or any statute, rule or regulation enacted, promulgated or
deemed applicable to such Additional Stock Closing by any United
States federal or state government or governmental agency or other
governmental or regulatory authority of competent jurisdiction of
the United States, the United Kingdom, Indonesia, or Spain, that
makes consummation of such Additional Stock Closing illegal.
10.2.2 Conditions to Obligations of the
Purchaser.
The obligations of the Purchaser
to consummate each Additional Stock Closing shall be subject to
the satisfaction (or waiver by the Purchaser) of each of the
following conditions: prior to the date the notice of redemption
of the 6.55% Notes is sent to the Trustee and the holders thereof,
(i) there shall have occurred no Company Material Adverse Effect
or Parent Material Adverse Effect and (ii) no change (or any
condition, event or development) shall have occurred which, with
or without the giving of notice or lapse of time, is reasonably
likely to result in a Company Material Adverse Effect or Parent
Material Adverse Effect.
11. Preemptive Rights; Rights of First Offer.
(a) In case of the proposed issuance, sale or
grant by the Company of shares of Company Common Stock or
securities convertible into or exchangeable for, or warrants,
options or other rights to purchase, shares of Company Common
Stock, the Company shall deliver to the Purchaser written notice
of its intent to issue, sell or grant such securities, which shall
specify the number and kind of securities proposed to be issued,
sold or granted, whether such issuance, sale or grant will be
effected through a transaction involving a Public Offering or
otherwise, and, if the transaction does not involve a Public
Offering, the amount and type of consideration which the Company
proposes to be paid for such securities (the "Offer Price"), and
the
other material terms and conditions of the
proposed issuance, sale or grant (the "Company Notice").
(b) In the event of any such proposed
issuance, sale or grant in any transaction involving a Public
Offering, the Purchaser shall have the right, exercisable by
written notice to the Company in accordance with Section 11(e), to
purchase up to such number of shares of Company Common Stock, or
securities, warrants, options or rights as will preserve the
Purchaser's and RTZA's then existing percentage ownership of the
outstanding shares of Company Common Stock as at a record date not
more than 30 days prior to such issuance, sale or grant; provided
that any such purchases made by the Purchaser pursuant to this
Section 11(b) shall be made (i) at the time of the closing with
respect to such Public Offering and in accordance with the
Purchaser Notice given prior to the effective date of the
registration statement related thereto, (ii) pursuant to an
exemption from the registration requirements of the Securities Act
and (iii) at a price equal to the public offering price of such
shares of Company Common Stock or such securities, warrants,
options or rights. The term "Public Offering" means an offering
of any such securities pursuant to a registration statement under
the Securities Act which results in the widespread distribution of
such securities to the public.
(c) Subject to Section 11(d), in the event of
any such proposed issuance, sale or grant in any transaction not
involving a Public Offering, the Purchaser shall have the right,
exercisable by written notice to the Company in accordance with
Section 11(e), to purchase (i) such number of shares of Company
Common Stock, or securities, warrants, options or rights, as will
preserve the Purchaser's and RTZA's then existing percentage
ownership of the outstanding shares of Company Common Stock as at
a record date not more than 30 days prior to such issuance, sale
or grant, or (ii) all of such shares of Company Common Stock,
securities, warrants, options or rights, provided that approval of
the Company Board of Directors will be required to the extent that
as a result of such purchases the shares of Company Voting Stock
beneficially owned by RTZ and its Affiliates, alone or acting in
concert with others, equals or exceeds the number of Majority
Shares.
(d) In the event of any such proposed
issuance, sale or grant of any such securities in connection with
any acquisition of securities or assets of another company or
otherwise, the Purchaser shall have the right, exercisable by
written notice to the Company in accordance with Section 11(e), to
purchase up to such number of shares of Company Common Stock, or
securities, warrants, options or rights as will preserve the
Purchaser's and RTZA's then existing percentage ownership of the
outstanding shares of Company Common Stock as at a record date not
more than 30 days prior to such issuance, sale or grant.
(e) Any issuance, sale or grant by the Company
to the Purchaser pursuant to this Section 11 shall be on terms no
less favorable than that of the proposed issuance, sale or grant
and for a price in cash and, with respect to securities offered
pursuant to Section 11(b) hereof, for a price equal to the public
offering price per share, and, with respect to securities offered
pursuant to Section 11(c) or Section 11(d) hereof, for a price no
greater than the Offer Price; provided that in the event of any
transaction contemplated by Section 11(b) or Section 11(c) for
consideration other than cash or any transaction contemplated by
Section 11.1(d), the purchase price per share of such securities
purchased by the Purchaser shall be in cash and shall be no
greater than the average of the closing prices of such securities
on the NYSE or other national securities exchange on which such
securities are listed or quoted for the 10 business days preceding
the announcement of such transaction, or if the security is not so
listed or authorized for quotation, the product of the average of
the closing bid and asked prices reported by the National
Association of Securities Dealers Automated Quotation System for
the ten business days preceding the announcement of such
transaction, or if not so listed or authorized for quotation, the
fair market value of the securities as agreed between the
Purchaser and the Company or, failing agreement within 10 days
from the establishment of the Offer Price, as determined by an
independent appraiser mutually acceptable to the Purchaser and the
Company.
(f) Within 10 business days after the date of
receipt by the Purchaser of the Company Notice, the Purchaser
shall send the Purchaser Notice to the Company. The term
"Purchaser Notice" means any written notice given by the
Purchaser, pursuant to which the Purchaser elects whether to
purchase securities in accordance with this Section 11 and, in the
case of a transaction contemplated by Section 11(c), which states
whether the Purchaser elects to purchase its proportionate share
or all of the securities. The Purchaser Notice shall be deemed to
be an irrevocable commitment to purchase from the Company the
number of securities which the Purchaser specifies in the
Purchaser Notice. The closing of any purchase of securities
pursuant to this Article 11 shall occur as promptly as practicable
after receipt by the Company of the Purchaser Notice, on such date
and at such time as the Purchaser and the Company shall agree;
provided that such closing will not take place earlier than the
date of the issuance, sale or grant giving rise to the Purchaser's
rights under this Article 11. Such closing shall take place at
the offices of Fried, Frank, Harris, Shriver & Jacobson, presently
at One New York Plaza, New York, New York 10004, or at such other
place as the Purchaser and the Company shall agree.
(g) If the Purchaser fails to deliver the
Purchaser Notice within 10 business days after receipt of the
Company Notice, or if in the Purchaser Notice the Purchaser elects
not to purchase securities in accordance with this Article 11,
then the Company (i) shall be under no obligation to sell any of
the securities proposed to be issued, sold or granted to the
Purchaser, and (ii) may, within a period of six months from
the date of the Company Notice, sell all the
securities proposed to be issued, sold or granted to one or more
third parties for cash at a price per share which, with respect to
shares offered pursuant to Section 11(b) hereof, shall be not less
than the public offering price per share, and, with respect to
securities offered pursuant to Section 11(c) or Section 11(d)
hereof, shall be not less than the Offer Price.
(h) The provisions of Section 11 shall not
apply to any of the following transactions: (i) the grant of
stock options to any director, officer or employee of the Company,
or any consultant or advisor who is receiving cash compensation
from the Company; (ii) the issuance of shares of Company Common
Stock upon the exercise of any of the options specified in clause
(i) above; and (iii) the issuance of shares of Company Common
Stock issued pursuant to the terms of warrants, options, rights or
convertible or exchangeable securities (x) as set forth on
Schedule 8.1.2 or (y) issued, sold or granted in compliance with
the provisions of this Article 11.
12. Termination.
12.1 Termination Prior to Stock Closing.
This Agreement may be terminated and the
transactions contemplated by this Agreement and the Related
Agreements may be abandoned at any time prior to the Stock
Closing:
(i) by the mutual written consent of the
parties hereto; or
(ii) by any party hereto, if there is a
failure of any of the conditions specified in Section 10.1.1
hereof or the Stock Closing has not taken place on or prior to
December 31, 1995.
12.2 Effect of Termination.
In the event this Agreement is terminated
pursuant to Section 12.1.1, all further obligations of the parties
hereunder shall terminate, except that nothing in this Article 12
shall relieve any party hereto of any liability for breach of this
Agreement.
13. Miscellaneous.
13.1 Transfer Taxes.
Parent and the Company jointly and severally
agree that it will pay, and will hold the Purchaser and RTZA
harmless from, any and all liability with respect to any United
States federal, state and local stamp or similar transfer taxes
which may be determined to be payable in connection with the
execution and delivery and performance of this Agreement or any
Related Agreement and the transactions described herein and
therein or any modification, amendment or alteration of the terms
or provisions of this Agreement or any Related Agreement and the
transactions described herein and therein.
13.2 Survival of Representations, Warranties
and Agreements, Etc.
All representations and warranties contained
herein or made in writing by any party in connection herewith
shall survive the execution and delivery of this Agreement, except
that the representations and warranties contained in Sections
8.1.7, 8.1.8, 8.1.9, 8.1.10, 8.1.11, 8.1.13, 8.2.5 and 8.2.9
hereof shall survive the execution and delivery of this Agreement
only until the date which is 2 years after the Distribution Date.
All statements contained in any certificate or other instrument
delivered by Parent or the Company pursuant to this Agreement or
any Related Agreement or in connection with the transactions
contemplated hereby or thereby shall constitute representations
and warranties by the Parent or the Company under this Agreement.
All agreements contained herein shall survive indefinitely until,
by their respective terms, they are no longer operative.
13.3 Expenses.
Except as otherwise provided herein, each of
Parent, the Company, RTZ, the Purchaser and RTZA shall pay all
costs and expenses incurred by it or on its behalf in connection
with this Agreement, any Related Agreement and the transactions
contemplated hereby and thereby, including, without limiting the
generality of the foregoing, fees and expenses of its own
financial consultants, accountants and counsel.
13.4 Indemnification.
(a) Parent shall indemnify, defend and
hold harmless RTZ, the Purchaser and RTZA against all liability,
loss or damage, together with all reasonable costs and expenses
related thereto (including reasonable legal and accounting fees
and expenses) ("RTZ Damages") incurred or suffered by RTZ, the
Purchaser or RTZA, arising from the untruth, inaccuracy or breach
of any of the representations, warranties, covenants or agreements
made by Parent herein.
(b) The Company shall indemnify,
defend and hold harmless RTZ, the Purchaser and RTZA against all
RTZ Damages incurred or suffered by RTZ, the Purchaser or RTZA,
arising from the untruth, inaccuracy or breach of any of the
representations, warranties, covenants or agreements made by the
Company herein.
(c) RTZ, the Purchaser and RTZA,
jointly and severally, shall indemnify, defend and hold harmless
Parent and the Company against all liability, loss or damage,
together with all reasonable costs and expenses related thereto
(including reasonable legal and accounting fees and expenses),
incurred or suffered by Parent or the Company arising from the
untruth, inaccuracy or breach of any of the representations,
warranties, covenants or agreements made by each of them herein.
(d) Any party seeking indemnification
hereunder (the "Indemnified Party") (i) shall promptly notify the
other party (the "Indemnifying Party") of the pendency of any
claim or proceeding asserted by any third party against the
Indemnified Party pursuant to which indemnity may be sought
hereunder, (ii) shall permit the Indemnifying Party to assume the
defense of the Indemnified Party with respect to any such claim or
proceeding at the Indemnifying Party's sole cost and expense, and
(iii) shall not settle any claim or proceeding for which indemnity
may be sought hereunder without the consent of the Indemnifying
Party. Except as otherwise provided for in this Agreement
(including without limitation Section 13.8 hereof), this Section
13.4 shall provide the exclusive remedy for any misrepresentation
or breach of warranty, covenant, or agreement arising out of this
Agreement or the transactions contemplated hereby.
13.5 Termination of Certain Provisions.
(a) In the event that RTZ and its
Affiliates fail to beneficially own in the aggregate, at any time
after the Stock Closing Date, at least 5% of the then outstanding
shares of the Company Common Stock, Section 9.4.1 and Article 11
hereof shall terminate and have no further force and effect and
all rights and obligations of the parties hereto under the
provisions of such sections shall thereafter cease.
(b) Notwithstanding anything herein to
the contrary, except as otherwise agreed by RTZ, RTZA and the
Purchaser, the Company and Parent will not be entitled to deliver
the notice pursuant to Section 5.1(a), the notice pursuant to
Section 6.1(c), the request pursuant to Section 6.1(d) or any
Additional Purchase Notice pursuant to Section 6.1(a) after
December 31, 1995; provided further that any such notice, whenever
given, shall not provide for, or otherwise result in, the
obligation of RTZA and/or Purchaser, as the case may be, to
commence the Tender Offer, to purchase Additional Shares or to
purchase Option Shares, in each case, after June 30, 1996.
13.6 Further Assurances.
Each party hereto shall do and perform or
cause to be done and performed all further acts and things and
shall execute and deliver all other agreements, certificates,
instruments, and documents as any other party hereto reasonably
may request in order to carry out the intent and accomplish the
purposes of this Agreement and the Related Agreements and the
consummation of the transactions contemplated hereby and thereby.
13.7 Governing Law.
This Agreement and the rights and obligations
of the parties hereto shall be governed by, and construed and
enforced in accordance with, the laws of the State of New York,
without giving effect to the principles of conflicts of law
thereof. Each party hereto hereby irrevocably and unconditionally
consents to submit to the exclusive jurisdiction (except for the
purposes
of or proceedings regarding enforcement) of
courts of the State of New York located in the Borough of
Manhattan in The City of New York and of the United States
District Court for the Southern District of New York (the "New
York Courts") for any litigation arising out of or relating to
this Agreement or any Related Agreement and the transactions
contemplated hereby and thereby (and agrees not to commence any
litigation relating thereto except in such courts), waives any
objection to the laying of venue of any such litigation in the New
York Courts and agrees not to plead or claim in any New York Court
that such litigation brought therein has been brought in an
inconvenient forum.
13.8 Specific Performance.
The parties hereto agree that money damages or
other remedy at law would not be sufficient or adequate remedy for
any breach or violation of, or a default under, this Agreement by
them and that in addition to all other remedies available to them,
each of them shall be entitled to the fullest extent permitted by
law to an injunction restraining such breach, violation or default
or threatened breach, violation or default and to any other
equitable relief, including without limitation specific
performance, without bond or other security being required.
13.9 Notice.
All notices and other communications hereunder
shall be in writing and, unless otherwise provided herein, shall
be deemed to have been given when received by the party to whom
such notice is to be given at its address set forth below, or such
other address for the party as shall be specified by notice given
pursuant hereto:
(a)If to Parent or the Company, to it at:
Freeport-McMoRan
1615 Poydras Street
New Orleans, Louisiana 70112
Attn:General Counsel
Fax:(504) 585-3513
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attn:E. Deane Leonard, Esq.
and David W. Ferguson, Esq.
Fax:(212) 450-4800
(b) If to RTZ or the Purchaser to:
The RTZ Corporation PLC
6 St. James's Square
London SWIY 4LD
England
Attn: The Company Secretary
|
with a copy to:
Fried, Frank, Harris, Shriver
& Jacobson
One New York Plaza
New York, New York 10004
Attn: Allen I. Isaacson, P.C.
(c) If to RTZA to:
RTZ America, Inc.
100 Quentin Roosevelt Blvd.
Suite 503
Garden City, NY 11530
Attn: The Company Secretary
with a copy to:
Fried, Frank, Harris, Shriver
& Jacobson
One New York Plaza
New York, New York 10004
Attn: Allen I. Isaacson, P.C.
13.10 Binding Effect; Assignment.
This Agreement shall inure to the benefit of
and shall be binding upon the parties hereto and their respective
heirs, legal representatives, successors and assigns. Neither
this Agreement nor any of the rights hereunder may be assigned by
any of the parties hereto without the consent of the other
parties.
13.11 Amendment and Modification.
This Agreement may be amended, modified,
supplemented or waived only by written agreement of the party
against whom enforcement of such amendment, modification,
supplement or waiver is sought.
13.12 Headings; References; Execution in
Counterparts; Interpretation.
The headings and captions contained herein are
for convenience only and shall not control or affect the meaning
or construction of any provision hereof. All article, section,
schedule, exhibit and paragraph references are to this Agreement,
unless otherwise expressly provided. This Agreement may be
executed in any number of counterparts, each of which shall be
deemed to be an original and which together shall constitute one
and the same instrument. In this Agreement, unless the context
otherwise requires, words in the singular number or in the plural
number shall each include the singular number and the plural
number.
13.13 Entire Agreement.
This Agreement, the Schedules and Exhibits
attached hereto, constitute the entire agreement, and supersede
all prior agreements and understandings, oral and written, between
the parties hereto with respect to the subject matter hereof.
13.14 Publicity.
Promptly following the execution and delivery
of the Agreement, the parties hereto shall issue a press release
in an agreed form. Thereafter the parties hereto shall consult
regarding the content and timing of any formal disclosure to be
made at any time after the date hereof. Notwithstanding the
foregoing, each of the parties hereto may, in documents required
to be filed by it with any governmental or regulatory authority,
make such statements with respect to the transactions contemplated
hereby as each may be advised is legally necessary upon advice of
its counsel.
PAGE 45 INTENTIONALLY OMITTED
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement on the date first above written.
FREEPORT-McMoRan INC.
By: /s/ James R. Moffet Name: James R. Moffett Title: Chairman of the Board |
FREEPORT-McMoRan COPPER & GOLD INC.
By: /s/ George A. Mealey Name: George A. Mealey Title: President |
THE RTZ CORPORATION PLC
By: /s/ R. Adams Name: Robert Adams Title: Director |
RTZ INDONESIA LIMITED
By /s/ G.C. Lloyd-Davis Name: G.C. Lloyd-Davis Title: Director, Secretary |
RTZ AMERICA, INC.
By /s/ C. Lenon Name: C. Lenon Title: President |
TABLE OF CONTENTS
Page
1. Definitions................................................1
2. Registration Rights Agreements.............................7
3. Purchases of Class A Common Stock..........................7
3.1 Sale of Shares.......................................7
3.2 Stock Closing........................................7
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4. Certain Actions by Parent..................................8
4.1 Redemption of the 6.55% Notes and the ABC Debentures. 8
5. Tender Offer for, and Conversion of, 6.55% Notes...........9
5.1 Tender Offer.........................................9
5.2 Conversion of 6.55% Notes...........................10
5.3 Transfer of Shares Issued Upon Conversion...........10
5.4 Code Section 367(e) Indemnification.................11
6. Purchase of Additional Shares and Option Shares...........15
6.1 Request to Purchase Additional Shares...............15
6.2 Option to Purchase Class A Common Stock.............17
6.3 Purchase of Additional Shares and Option Shares.....17
|
7. Spin-Off and Merger.......................................18
8. Representations and Warranties............................19
8.1 Representations and Warranties of Parent and the
............Company.............................................19
8.1.1 Organization and Qualifications.............19
8.1.2 Capitalization..............................19
8.1.3 Authority...................................20
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Page
8.1.4 Title......................................21
8.1.5...Compliance with Other Instruments..........22
8.1.6 Consents...................................22
8.1.7 Actions Pending............................23
8.1.8 SEC Reports................................23
8.1.9 Financial Statements.......................24
8.1.10 Compliance with Laws; Permits.............24
8.1.11 Books and Records.........................25
8.1.12 Financial Advisors and Brokers............25
8.1.13 Accuracy of Information...................25
8.1.14 Consolidated Group........................26
8.1.15 Tax Sharing Agreement.....................26
8.2 Representations and Warranties of RTZ, the Purchaser
and RTZA............................................26
8.2.1 Organization................................26
8.2.2 Authority...................................26
8.2.3 Compliance with Other Instruments...........27
8.2.4 Consents....................................27
8.2.5 Actions Pending.............................28
8.2.6 Investment Representations..................28
8.2.7 Financial Advisors and Brokers..............28
8.2.8 Ownership of Securities of Parent and the
Company.............................................28
8.2.9 Accuracy of Information.....................28
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- ii -
Page
9. Covenants.................................................28
9.1 Covenants of All Parties............................28
9.1.1 Cooperation.................................28
9.1.2 Breach of Representations and Warranties....29
9.1.3 Communications with Regulators..............29
9.1.4 Affiliate Agreements........................30
9.1.5 Certain Specified Actions...................30
9.2 Covenants of Parent and the Company.................30
9.2.1 Conduct of Business Pending the Spin-Off....30
9.2.2 Exchange of Shares..........................31
9.2.3 Certain Arrangements Following the Spin-Off. 31
9.3 Covenants of Parent.................................31
9.3.1 Minimum Price of Sales......................31
9.4 Covenants of the Company............................31
9.4.1 Right to Nominate Directors.................31
9.5 Covenants of RTZ, RTZA and the Purchaser............32
9.5.1 Lack of Certain Stock Ownership.............32
9.5.2 Certain Specified Actions...................32
9.6 Additional Covenants................................32
9.6.1 Future Acquisitions.........................32
9.6.2 Voting......................................33
|
10. Conditions to Stock Closings..............................33
10.1 Conditions to Stock Closing........................33
- iii -
Page
10.1.1 Conditions to the Obligations of All
Parties....................................33
10.1.2 Conditions to Obligations of the Purchaser.34
10.1.3 Conditions to Obligations of Parent........35
10.2 Conditions to Additional Stock Closings.............35
10.2.1 Conditions to the Obligations of All
Parties....................................35
10.2.2 Conditions to Obligations of the Purchaser.36
11. Preemptive Rights; Rights of First Offer..................36
12. Termination...............................................39
12.1 Termination Prior to Stock Closing..................39
12.2 Effect of Termination...............................39
13. Miscellaneous.............................................39
13.1 Transfer Taxes.....................................39
13.2 Survival of Representations, Warranties and
Agreements, Etc....................................39
13.3 Expenses...........................................40
13.4 Indemnification....................................40
13.5 Termination of Certain Provisions..................41
13.6 Further Assurances.................................41
13.7 Governing Law......................................41
13.8 Specific Performance...............................41
13.9 Notice.............................................42
13.10 Binding Effect; Assignment........................43
13.11 Amendment and Modification........................43
13.12 Headings; References; Execution in Counterparts;
Interpretation....................................43
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- iv -
Page
13.13 Entire Agreement..................................43
13.14 Publicity.........................................43
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List of Exhibits
Exhibit A Form of Company Registration Rights Agreement Exhibit B Form of Parent Registration Rights Agreement Exhibit C Term Sheet for Benefit Allocation Agreement Exhibit D Term Sheet for Transaction Management Services Agreement Exhibit 8.1.15 Certain Actions |
List of Schedules
Schedule 8.1.2 -- Capitalization Schedule 8.1.3 -- Authority Schedule 8.1.6 -- Consents Schedule 8.1.9 -- Financial Statements Schedule 8.1.10 -- Compliance with Laws; Permits Schedule 8.1.14 -- Consolidated Group Schedule 8.1.15 -- Tax Sharing Agreements Schedule 8.2.4 -- Consents Schedule 9.1.5 -- Maintenance of the Voting Structure of the Company Schedule 9.2.1 -- Conduct of Business Pending the Spin-Off Schedule 9.5.2 -- Certain Disallowed Transactions |
Privileged and Confidential May 31, 1995
The RTZ Corporation PLC &
RTZ Indonesia Limited
6 St. James's Square
London SW1Y 4LD
England
Attention: The Company Secretary
RTZ America, Inc.
100 Quentin Roosevelt Blvd.
Suite 503
Garden City, New York 11530
Attention: The Company Secretary
Ladies and Gentlemen:
Reference is made to the Agreement, dated as of May 2, 1995, by and between Freeport-McMoRan Inc. ("Parent") and Freeport-McMoRan Copper & Gold Inc. (the "Company), on the one hand, and The RTZ Corporation PLC ("RTZ"), RTZ Indonesia Limited (the "Purchaser") and RTZ America, Inc. ("RTZA"), on the other hand (the "Agreement"). Capitalized terms used herein have the meanings specified in the Agreement, unless otherwise defined herein.
1. The parties agree that Section 9.5.1 of the Agreement is not intended to, and does not restrict RTZ or its Affiliates from acquiring Parent Common Stock upon conversion of any 6.55% Notes, however such 6.55% Notes are acquired.
2. The parties agree that (a) the term "Registrable Securities" in the Registration Rights Agreement, dated as of May 12, 1995, by and among Parent, on the one hand, and RTZ and RTZA, on the other hand (the "Parent Registration Rights Agreement"), includes any shares of Parent Common Stock acquired by RTZ or its Affiliates upon conversion of any 6.55% Notes, however such 6.55% Notes are acquired, to the extent that such shares of Parent Common Stock are not freely transferable by RTZ or its Affiliates without registration under the Securities Act and (b) the term "Registrable Securities" in the Registration Rights Agreement, dated as of May 12, 1995, between the Company, on the one hand, and RTZ, RTZA and the Purchaser, on the other hand (the "Company Registration Rights Agreement") includes any shares of Class B Common Stock acquired by RTZ and/or its Affiliates in the Spin-Off as a result of ownership of Parent Common Stock acquired by RTZ or its Affiliates upon conversion of any 6.55% Notes, however such 6.55% Notes are acquired.
3. The first sentence of Schedule 9.5.2 to the Agreement is hereby amended and restated to read in its entirety as follows:
"RTZA, RTZ and their Affiliates will not during the
five-year period following the Spin-Off sell, exchange,
transfer or otherwise dispose of ("Dispose of") any
shares of Parent Common Stock received upon the
conversion of the 6.55% Notes or any shares of the
Class B Common Stock received in the Spin-Off with
respect thereto unless they first obtain either a
supplemental private letter ruling from the IRS or an
opinion of nationally recognized tax counsel,
reasonably satisfactory to Parent, that such sale,
exchange, transfer or other disposition (a
"Disposition") will not adversely affect the tax-free
nature of the Spin-Off or the ability of Parent to rely
on the Spin-Off Private Letter Ruling, in each case
other than with respect to Section 367(e); provided
that this restriction will not apply to the Disposition
by RTZA, RTZ and their Affiliates following the Spin-
Off of (i) shares of Parent Common Stock that, when
combined with any other shares of Parent Common Stock
Disposed of by RTZA, RTZ and their Affiliates following
the Spin-Off (other than in the manner described in
(iii) below), aggregate less than 1% of the number of
shares of Parent Common Stock outstanding immediately
following the Spin-Off, (ii) shares of Class B Common
Stock that, when combined with any other shares of
Class B Common Stock Disposed of by RTZA, RTZ and their
Affiliates following the Spin-Off (other than in the
manner described in (iii) below), aggregate less than
1% of the number of shares of Company Common Stock
outstanding immediately following the Spin-Off, or
(iii) shares of both Parent Common Stock and Class B
Common Stock where (x) such shares are Disposed of in
accordance with a single plan of disposition that has
been communicated by RTZA, RTZ or their Affiliates to a
sales agent, (y) the Disposition is completed within 60
business days from the date of the first sale of Parent
Common Stock or Class B Common Stock pursuant to such
plan and (z) the shares of Parent Common Stock and
Class B Common Stock Disposed of represent equal
percentages of the respective numbers of shares of the
Parent Common Stock and the Class B Common Stock that
RTZA, RTZ and their Affiliates, in the aggregate, held
immediately following the Spin-Off."
4. Except to the extent amended by this letter, all of the provisions of the Agreement, the Parent Registration Rights Agreement and the Company Registration Rights Agreement shall continue in full force and effect and shall inure to the benefit of and shall be binding upon the parties thereto and their successors and permitted assigns.
If the foregoing accurately sets forth our agreement, please so indicate by signing and returning to the undersigned a copy of this letter, whereupon this letter agreement shall become a binding agreement among us.
Very truly yours,
FREEPORT-McMoRan INC.
By /s/ James R. Moffett
Name: James R. Moffett
Title:Chairman of the Board
and Chief Executive Officer
|
FREEPORT-McMoRan COPPER &
GOLD, INC.
By /s/ Charles W. Goodyear
Name: Charles W. Goodyear
Title: Senior Vice President
and Chief Investment
Officer
ACCEPTED AND AGREED TO AS OF THE
DATE FIRST ABOVE WRITTEN:
|
THE RTZ CORPORATION PLC
By /s/ R. Adams Name: Robert Adams Title: Director |
RTZ INDONESIA LIMITED
By /s/ M.M. Freeman Name: Michael Freeman Title: Director |
RTZ AMERICA, INC.
By /s/ William M. Higgins
Name: William M. Higgins
Title: Vice President
|
CONFORMED COPY
DISTRIBUTION AGREEMENT
dated as of
July 5, 1995
between
FREEPORT-McMoRan INC.
and
FREEPORT-McMoRan COPPER & GOLD INC.
TABLE OF CONTENTS*
ARTICLE I
DEFINITIONS
Section 1.01. Definitions . . . . . . . . . . . . . . . . 2
ARTICLE II
THE DISTRIBUTION
Section 2.01. Cooperation Prior to the Distribution . . . 4
Section 2.02. FTX Board Action; Conditions Precedent
to the Distribution . . . . . . . . . . . . . . . . . . . . . 4
Section 2.03. The Distribution . . . . . . . . . . . . . 5
Section 2.04. Sale of Fractional Shares . . . . . . . . . 5
ARTICLE III
TRANSITION
Section 3.01. Transition . . . . . . . . . . . . . . . . 5
Section 3.02. Office Lease . . . . . . . . . . . . . . . 6
Section 3.03. Further Assurances and Consents . . . . . . 6
Section 3.04. Intercompany Accounts . . . . . . . . . . . 6
Section 3.05. Certain Intellectual Property Matters . . . 7
ARTICLE IV
INFORMATION
Section 4.01. Access to Information . . . . . . . . . . . 8
Section 4.02. Litigation Cooperation . . . . . . . . . . 8
Section 4.03. Tax Cooperation . . . . . . . . . . . . . . 8
Section 4.04. Reimbursement . . . . . . . . . . . . . . . 9
Section 4.05. Retention of Records . . . . . . . . . . . 9
Section 4.06. Confidentiality . . . . . . . . . . . . . . 9
ARTICLE V
REPRESENTATIONS AND COVENANTS
Section 5.01. Certain Prohibited Actions . . . . . . . . 10
Section 5.02. Representations and Covenants
Set Forth in the Ruling . . . . . . . . . . . . . . . . . . . . . 13
Section 5.03. State and Local Taxes . . . . . . . . . . . 13
Section 5.04. Applicability of Management Services
*The Table of Contents is not a part of this Agreement.
i
Agreement . . . . . . . . . . . . . . . . . . . . . 13
Section 5.05. Employee Matters . . . . . . . . . . . . . 13
ARTICLE VI
MISCELLANEOUS
Section 6.01. Expenses . . . . . . . . . . . . . . . . . 13
Section 6.02. Notices . . . . . . . . . . . . . . . . . . 13
Section 6.03. Amendment and Waiver . . . . . . . . . . . 14
Section 6.04. Arbitration . . . . . . . . . . . . . . . . 14
Section 6.05. Counterparts . . . . . . . . . . . . . . . 15
Section 6.06. Governing Law . . . . . . . . . . . . . . . 15
Section 6.07. Entire Agreement . . . . . . . . . . . . . 15
Section 6.08. Parties in Interest . . . . . . . . . . . . 15
Section 6.09. Specific Enforcement . . . . . . . . . . . 15
|
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT dated as of July 5, 1995 (the "Agreement") between FREEPORT-McMoRan INC., a Delaware corporation (together with its successors and permitted assigns, "FTX"), and FREEPORT-McMoRan COPPER & GOLD INC., a Delaware corporation (together with its successors and permitted assigns, "FCX").
W I T N E S S E T H
WHEREAS, FTX owns as of the close of business on the date hereof 117,909,323 shares of Class B Common Stock of FCX;
WHEREAS, the Board of Directors of FTX has determined that it is in the best interest of FTX and the stockholders of FTX to distribute all of the outstanding shares of FCX's Class B Common Stock which FTX owns at the time of such distribution to the holders of FTX Common Stock (the "Distribution");
WHEREAS, the parties have been members of an affiliated group of companies, including FCX and its affiliates, and FTX has entered into certain obligations for the joint benefit of the members of the group which the parties agree should be allocated among such members on a fair and equitable basis;
WHEREAS, the parties have determined that it is necessary and desirable to set forth the principal transactions required to effect such Distribution and to enter into other agreements that shall govern certain other matters following such Distribution; and
WHEREAS, prior to the Distribution, FTX shall enter into certain other agreements with FCX in addition to this Agreement, including, but not limited to, the Employee Benefits Allocation Agreement;
NOW, THEREFORE, in consideration of the mutual agreements and covenants contained in this Agreement, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. As used herein, the following terms have the following meaning:
"Action" means any claim, suit, arbitration, inquiry, proceeding or investigation by or before any court, governmental or other regulatory or administrative agency or commission or any other tribunal.
"Affiliate" means, with respect to any Person, any
Person that is directly or indirectly controlled by such
Person; provided that for the purposes of this Agreement,
(i) IMC-Agrico Company shall be considered an Affiliate of
FTX, and (ii) FCX and its Affiliates shall not be considered
Affiliates of FTX. As used in this definition, the term
"control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management
and policies of the Person whether through ownership of
voting securities, by contract or otherwise.
"Class A Common Stock" means the Class A Common Stock, par value $.10 per share, of FCX.
"Class B Common Stock" means the Class B Common Stock, par value $.10 per share, of FCX.
"Commission" means the Securities and Exchange Commission.
"Consent Solicitation Statement" means the Consent Solicitation Statement of FCX dated February 7, 1995, as supplemented by the letter of FCX dated March 8, 1995.
"Distribution Agent" means Mellon Securities Trust Company, as agent of the holders of the FTX Common Stock.
"Distribution Date" means July 17, 1995.
"Employee Benefits Allocation Agreement" means an employee benefits allocation agreement between FTX and FCX, as amended from time to time.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"FCX Board" means the Board of Directors of FCX.
"Five-Year Period" means the five-year period
immediately following the Distribution Date.
"Form 8-A" means the registration statement on Form 8-A in respect of the Class B Common Stock filed with the Commission under the Exchange Act on June 29, 1995, together with any amendments thereto.
"FRP" means Freeport-McMoRan Resource Partners, Limited Partnership, a Delaware publicly traded limited partnership.
"FTX Common Stock" means the common stock, par value $1.00 per share, of FTX.
"Implementation Agreement" means the Implementation Agreement dated May 2, 1995 between FCX and RTZ.
"Management Services Agreement" means, individually and collectively (unless otherwise indicated), (i) the agreement dated as of May 1, 1988 between FTX, Freeport- McMoRan Copper Company, Inc. and Freeport Indonesia, Incorporated, and (ii) any transitional management services agreement that may be entered into involving FTX, FCX and PT-FI and that expires no later than one year after the Distribution Date, pursuant to each of which FTX furnishes from time to time certain services to FCX and PT-FI.
"NYSE" means the New York Stock Exchange, Inc.
"Person" means an individual, corporation, association, partnership, organization, business, governmental authority or regulatory body or any other entity.
"Preferred Stock" means the 7% Convertible Exchangeable Preferred Stock, the Step-Up Convertible Preferred Stock, Series I and II of the Gold-Denominated Preferred Stock and the Silver-Denominated Preferred Stock of FCX, collectively.
"PT-FI" means P.T. Freeport Indonesia Company, an Indonesian limited liability company that is domesticated in Delaware.
"Record Date" means July 17, 1995.
"RTZ" means The RTZ Corporation PLC, a corporation organized under the laws of England.
"Ruling" means the private letter ruling that the Internal Revenue Service issued to FTX on November 21, 1994 and that addresses the United States federal income tax consequences of the Distribution.
"Tax" means any net income, alternative or add-on minimum, gross income, gross receipts, sales, use, ad valorem, franchise, profits, license, withholding, payroll, employment, excise, transfer, recording, severance, stamp, occupation, premium, property, environmental or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest, penalty, addition to tax or additional amount related thereto.
"Two-Year Period" means the two-year period immediately following the Distribution Date.
ARTICLE II
THE DISTRIBUTION
Section 2.01. Cooperation Prior to the Distribution. (a) FCX has prepared and filed with the Commission the Form 8-A, which includes or incorporates by reference the Consent Solicitation Statement setting forth appropriate disclosure concerning the capital stock of FCX and any other appropriate matters required to be stated therein. FCX shall use reasonable efforts to cause the Form 8-A to become effective under the Exchange Act.
(b) FTX and FCX shall take all such action as may be necessary or appropriate under the securities or blue sky laws of states or other political subdivisions of the United States in connection with the Distribution and the transactions contemplated by this Agreement.
(c) FCX shall prepare and file applications to list the Class B Common Stock to be distributed by FTX on the NYSE and the Australian Stock Exchange.
Section 2.02. FTX Board Action; Conditions Precedent to the Distribution. FTX's Board of Directors has on the date hereof established the Record Date and the Distribution Date and appropriate procedures in connection with the Distribution and the merger of FM Facilitating Company, Inc. ("Facilitating") with and into FCX has been consummated in accordance with the Agreement and Plan of Merger dated as of February 7, 1995 between Facilitating and FCX. In no event shall the Distribution occur unless the
following conditions shall have been satisfied or waived by
FTX:
(i) the Form 8-A shall have become effective under the Exchange Act and the Commission shall have confirmed that it has no further comments thereon; and
(ii) the Class B Common Stock shall have been approved for listing on the NYSE, subject to official notice of issuance.
Section 2.03. The Distribution. On the
Distribution Date, subject to the conditions set forth in
this Agreement, FTX shall cause the Distribution Agent to
distribute, on a pro rata basis and taking into account
Section 2.04, to the holders of record of FTX Common Stock
on the Record Date, all shares of Class B Common Stock held
by FTX on the Distribution Date. On the Distribution Date,
FTX shall relinquish any and all ownership interest of and
control over such shares of Class B Common Stock. During
the period commencing on the Distribution Date and ending
upon the date(s) on which certificates evidencing such
shares are mailed to holders of record of FTX Common Stock
on the Record Date or on which fractional shares of Class B
Common Stock are sold on behalf of such holders, the
Distribution Agent shall hold the Class B Common Stock on
behalf of such holders. FCX agrees to provide all
certificates evidencing shares of Class B Common Stock that
FTX shall require in order to effect the Distribution.
Section 2.04. Sale of Fractional Shares. FTX shall appoint the Distribution Agent as agent for each holder of record of FTX Common Stock who would receive in the Distribution any fractional share of Class B Common Stock. The Distribution Agent shall aggregate all such fractional shares and sell them in an orderly manner after the Distribution Date in the open market and, after completion of such sales, distribute a pro rata portion of the gross proceeds from such sales, based upon the average gross selling price of all such fractional shares, to each shareholder of FTX who would otherwise have received a fractional share. FCX shall reimburse the Distribution Agent for its reasonable costs, expenses and fees in connection with the sale of fractional shares of Class B Common Stock.
ARTICLE III
TRANSITION
Section 3.01. Transition. The parties agree that prior to the Distribution FTX entered into certain commitments and arrangements for the joint benefit of FTX, FCX and their respective Affiliates. FCX and its Affiliates have been allocated from time to time a portion of the costs of such commitments and arrangements. The parties agree that, to the extent applicable, the benefits of such commitments and arrangements entered into by FTX prior to the Distribution shall continue to be made available to FCX and its Affiliates following the Distribution and that following the Distribution each of the parties on whose behalf such commitments and arrangements were made shall be liable on a fair and equitable basis for its proportionate share for any costs associated with such commitments and arrangements.
Section 3.02. Office Lease. FTX has entered into an office lease and ancillary agreements (the "Lease") in respect of a portion of the building located at 1615 Poydras Street, New Orleans, Louisiana, which houses the offices of both FTX and FCX and includes the location of personnel who have provided services to both parties. FCX and its Affiliates have been allocated from time to time a portion of the costs of the Lease and pursuant to the Management Services Agreement FCX and its Affiliates shall continue to pay a portion of the costs of the Lease. The parties agree that, no later than one year after the Distribution Date, they shall negotiate a fair and equitable agreement in respect of the Lease pursuant to which the costs thereunder and the use of the space covered thereby shall be allocated on a fair and equitable basis for the balance of the term of the Lease.
Section 3.03. Further Assurances and Consents. (a) Each of the parties hereto shall execute and deliver such further instruments of conveyance and assignment and shall take such other actions as any other party may reasonably request in order to effectuate the purposes of this Agreement and to carry out the terms hereof.
(b) In addition to the actions specifically provided for elsewhere in this Agreement, each of the parties hereto shall use its reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things, reasonably necessary, proper or advisable under applicable laws, regulations and agreements or otherwise to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation, using its reasonable efforts to obtain any approvals, consents and assignments and to make any filings and applications necessary or desirable in order to consummate the transactions contemplated by this Agreement; provided that no party hereto shall be obligated to pay any consideration therefor (except for filing fees and other similar charges) to any third party from whom such approvals, consents and assignments are requested or to take any action or omit to take any action if the taking of or the omission to take such action would be unreasonably burdensome to the party or its business.
Section 3.04. Intercompany Accounts. On the Distribution Date, all intercompany loans, receivables and payables in existence as of the Distribution Date between FTX and FCX shall be settled for cash, except with respect to any receivables and payables arising (i) under the Management Services Agreement dated May 1, 1988 which have not been billed as of the Distribution Date or (ii) in connection with transferred employees, including arrangements in respect of employee benefits. The excepted receivables and payables shall be settled in ordinary course.
Section 3.05. Certain Intellectual Property Matters. The following provisions shall apply, from and after the Distribution Date, except as shall otherwise be agreed by FTX and FCX, to the use of the terms "Freeport- McMoRan", "Freeport" and "McMoRan":
(i) except as provided below, neither FTX nor FCX nor any of their subsidiaries, divisions or Affiliates shall use the word "McMoRan" as part of the name of such subsidiary, division or Affiliate;
(ii) FTX, FRP and FCX and their successors shall be entitled to continue to use the term "Freeport- McMoRan" in their corporate or partnership name, as the case may be, but (A) such entities shall not permit the use of such term in its name by any subsidiary, division or Affiliate which does not, as of the Distribution Date, use such term in its name and (B) with respect to each subsidiary, division and Affiliate currently using the term "Freeport-McMoRan" in its corporate, division or Affiliate title, FTX, FRP and FCX will as soon as practicable after the Distribution Date cause such subsidiary, division or Affiliate to change its name to one which does not include the term "Freeport-McMoRan" or, except as provided below, "Freeport";
(iii) FCX shall be entitled to use the separate word "Freeport" as part of the name of any of its subsidiaries, divisions and Affiliates associated with its Indonesian operations;
(iv) FTX and FRP shall be entitled to use the separate word "Freeport" as part of the name of any of their subsidiaries, divisions and Affiliates engaged in the business of mining, extracting, processing or marketing sulphur and other agricultural minerals and chemicals; and
(v) except as set forth above, neither FTX, FCX nor any of their subsidiaries, divisions and Affiliates shall use the separate word "Freeport" as part of its name.
ARTICLE IV
INFORMATION
Section 4.01. Access to Information. From and after the date hereof, each party shall afford the other party and its accountants, counsel and other designated representatives reasonable access (including using reasonable efforts to give access to persons or firms possessing information) and duplicating rights during normal business hours to all records, books, contracts, instruments, computer data and other data and information in such party's possession relating to the business and affairs of such other party (other than data and information subject to an attorney/client or other privilege or otherwise required to be kept confidential pursuant to binding agreements), insofar as such access is reasonably required by such other party including, without limitation, for audit, accounting, Tax and litigation purposes, as well as for purposes of fulfilling disclosure and reporting obligations.
Section 4.02. Litigation Cooperation. Each party shall use reasonable efforts to make available to the other party, upon written request, its officers, directors, employees and agents as witnesses to the extent that such persons may reasonably be required in connection with any Action arising out of the business of such other party and its predecessors, if any, in which the requesting party may from time to time be involved.
Section 4.03. Tax Cooperation. (a) Without
limiting the generality of Sections 3.03, 4.01, 4.02 or 4.05
and notwithstanding anything contained herein to the
contrary, FTX and FCX shall cooperate, and shall cause their
respective Affiliates to cooperate fully, at such time and
to the extent reasonably requested by the other party in
connection with (i) such other party's preparation and
filing of any Tax return or claim for refund of Tax, (ii)
such other party's ascertainment of the existence and amount
of any liability for, or refund of, Tax, or (iii) the
conduct of any audit, dispute or Action regarding Taxes in
which such other party is engaged. The cooperation under
this Section 4.03 by each party shall include, without
limitation, (i) the retention and provision on demand, until
the expiration of the applicable statute of limitations
(giving effect to any extension, waiver, or mitigation
thereof), of documentation and information regarding Taxes
and Tax returns that could be relevant to the Taxes of the
other party, (ii) the provision of additional information
and explanation of such documentation, information and
returns, (iii) the execution of any document regarding Taxes
that would be reasonably helpful to the other party, and
(iv) the use of a party's best efforts to obtain, from
governmental authorities or third parties, documentation or
information regarding Taxes that would be reasonably helpful
to the other party.
Section 4.04. Reimbursement. Each party providing information or witnesses under Sections 4.01, 4.02 or 4.03 to any other party shall be entitled to receive from the recipient, upon the presentation of invoices therefor, payment for all out-of-pocket costs and expenses as may be reasonably incurred in providing such information or witnesses.
Section 4.05. Retention of Records. Except as otherwise required by law or agreed to in writing, each party shall preserve and retain all information relating to the other party's business in accordance with the record retention policies of such party as may be in effect from time to time. Notwithstanding the foregoing, any party may destroy or otherwise dispose of any information at any time; provided that prior to such destruction or disposal, (i) such party shall provide no less than 90 days prior written notice to the other party, specifying the information proposed to be destroyed or disposed of and (ii) if the recipient of such notice shall request in writing prior to the scheduled date for such destruction or disposal that any of the information proposed to be destroyed or disposed of be delivered to such requesting party, the party proposing the destruction or disposal shall promptly arrange for the
delivery of such of the information as was requested at the expense of the requesting party.
Section 4.06. Confidentiality. Each party shall hold and shall cause its directors, officers, employees, agents, consultants and advisors to hold in strict confidence, unless compelled to disclose by judicial or administrative process or, in the opinion of its counsel, by other requirements of law, all information (other than any such information relating solely to the business or affairs of such party) concerning the other party (except to the extent that such information can be shown to have been (i) in the public domain through no fault of such party or (ii) later lawfully acquired on a non-confidential basis from other sources by the party to which it was furnished), and neither party shall release or disclose such information to any other person, except its auditors, attorneys, financial advisors, bankers and other consultants and advisors who shall be advised of and agree in writing to comply with the provisions of this Section 4.06. Each party shall be deemed to have satisfied its obligation to hold confidential information concerning or supplied by the other party if it exercises the same care as it takes to preserve confidentiality for its own similar information.
ARTICLE V
REPRESENTATIONS AND COVENANTS
Section 5.01. Certain Prohibited Actions. (a) Each of FTX and FCX covenants that it shall comply with Section 5.01(b), to the extent that the prohibited actions specified therein apply to it, unless it shall have first (i) obtained either an opinion of nationally recognized tax counsel or a supplemental private letter ruling from the Internal Revenue Service, stating that the contemplated actions would not adversely affect the tax-free nature of the Distribution or the ability of FTX to rely on the Ruling, (ii) presented such opinion of counsel or supplemental private letter ruling to the other party, and (iii) described all material aspects of the contemplated actions to such other party.
(b) (i) FTX and FCX shall not initiate or support any action during the Five-Year Period that would in any way change the ability of the holders of the Class B Common Stock to elect at least 80% of the members of the FCX Board and the ability of the holders of the Class A Common Stock and the Preferred Stock, voting together as a single class, to elect the remaining members of the FCX Board, including, without limitation, voting to combine
the Class A Common Stock and the Class B Common Stock. In addition, FCX shall not permit its shareholders to vote during the Five-Year Period to change the described voting structure.
(ii) During the Two-Year Period, FCX shall not issue shares of any preferred stock that would not entitle the holders to vote together with the Class A Common Stock and the existing classes of Preferred Stock in the election of certain members of the FCX Board.
(iii) During the Two-Year Period, FCX shall not dispose of any of the common stock of PT-FI, subordinated promissory notes of PT-FI or production payment loans of PT-FI that it holds on the Distribution Date.
(iv) FCX shall use its best efforts to cause PT-FI
to (A) remain the operator under the Contract of Work
dated December 30, 1991 between PT-FI and the Government
of the Republic of Indonesia, and (B) continue the
conduct of its copper and gold business in a
substantially unchanged manner during the Two-Year Period
as such business is operated prior thereto and to use its
business assets in such business; provided that any
transaction contemplated or described in or in connection
with the following agreements shall not be taken into
account for the purposes of this Section 5.01(b)(iv): (I)
the Implementation Agreement, (II) the Participation
Agreement between PT-FI and an Indonesia limited
liability company to be formed as a wholly owned
subsidiary of RTZ, the form of which agreement is set
forth in Schedule 1 to the Implementation Agreement,
(III) the Credit Facility of up to $450 million between
PT-FI and a United Kingdom subsidiary of RTZ, the form of
which facility is set forth in Schedule 2 to the
Implementation Agreement, and (IV) any other agreements
between FTX, FCX, RTZ and their respective Affiliates.
(v) During the Two-Year Period, FTX shall not dispose of the direct or indirect interests in FRP that it holds on the Distribution Date; provided that FTX shall be allowed to transfer interests in FRP pursuant to compensatory or incentive stock options for employees, officers or directors if FTX shall beneficially own at least 50.1% of FRP following such transfer.
(vi) FTX shall use its best efforts to (A) remain the administrative managing general partner of FRP during the Two-Year Period, and (B) cause FRP to continue the conduct of its sulphur and phosphate fertilizer businesses in a substantially unchanged manner during the
Two-Year Period as such businesses are operated prior thereto and to use its business assets in such businesses.
(vii) During the Two-Year Period, FTX, FRP, FCX and PT-FI shall not take affirmative steps to merge into another entity, to liquidate or to sell or otherwise dispose of any of their assets except for asset dispositions made in the ordinary course of business.
(viii) FTX and FCX shall not directly or indirectly redeem or otherwise reacquire shares of the FTX Common Stock and the Class B Common Stock, respectively, during the Two-Year Period except to the extent that (A) a corporate business purpose shall support such redemption or reacquisition, (B) the redeemed or reacquired stock shall be widely held, (C) the redemption or reacquisition shall be made on the open market, (D) to the best of the knowledge of FTX or FCX, as the case may be, the redemption or reacquisition shall not be made from a director or officer, or any shareholder owning 1% or more of the outstanding stock of the corporation, and (E) FTX and FCX shall have no plan or intention, as of the Distribution Date, that the aggregate amount of stock repurchased would equal or exceed 20% of the outstanding stock of the relevant corporation; provided that these prohibitions shall not be effective as to the receipt by FTX or FCX, as the case may be, of FTX Common Stock or Class B Common Stock, respectively, in lieu of the payment of cash upon the exercise by an employee, officer or director of compensatory or incentive stock options. Neither FTX nor FCX shall initiate a periodic stock redemption program during the Two-Year Period unless such program shall be expected to comply with the requirements set forth in (A) through (E) of this Section 5.01(b)(viii).
(ix) FCX shall not redeem or otherwise reacquire the Class B Common Stock during the Two-Year Period, to the extent that such redemption or reacquisition would result in the Class B Common Stock representing less than 50% of the common equity of FCX.
(x) After the expiration of one year from the Distribution Date, FTX and FCX shall not operate under the Management Services Agreement. Except for the temporary supply of certain administrative services under such agreement, each of FTX and FCX shall arrange for the provision of the administrative services requisite to the conduct of its business. FTX and FRP shall conduct their sulphur and phosphate fertilizer businesses through
employees, officers and directors of FTX or FRP or both and FCX and PT-FI shall conduct their copper and gold business through employees, officers and directors of FCX or PT-FI or both; provided that the foregoing shall not prevent certain individuals from being employees, officers or directors of both FTX and FCX.
(c) For the purposes of this Section 5.01, a transaction occurring at any point in time subsequent to the expiration of the Two-Year Period or the Five-Year Period, as the case may be, shall be deemed to occur within such period if (i) such transaction results from a binding commitment of the relevant entity entered into within such period, or (ii) such transaction or a transaction of substantially similar nature for Tax purposes shall have been publicly announced, proposed (whether or not accepted) or approved (in principle or otherwise) by its Board of Directors (or, in the case of FRP, FTX) during such period.
Section 5.02. Representations and Covenants Set Forth In the Ruling. Each of FTX and FCX hereby reaffirms that the representations and covenants set forth in the Ruling are valid as of the date hereof and covenants to reaffirm on the Distribution Date that such representations and covenants are valid on such date, in each case to the extent that such representations and covenants apply to it.
Section 5.03. State and Local Taxes. Each of FTX and FCX covenants that, in the event the two parties are treated as members of a consolidated, combined or unitary group in any taxable year for the purposes of state and local income taxes in California, Kansas, Minnesota, Montana, Nebraska or North Dakota or with respect to the foreign metals business, it shall indemnify, defend and hold harmless the other party and its Affiliates from and against the portion of such taxes, together with any interest, penalty, addition to tax or additional amount related to such taxes, that is allocable to the indemnifying party using principles analogous to those described in paragraph 4 of the Management Services Agreement dated May 1, 1988, except for paragraphs 4(h) and 4(i) thereof.
Section 5.04. Applicability of the Management Services Agreement. Subject to Section 5.01(b)(x), FTX, FCX and PT-FI shall continue to comply with, and be bound by, such provisions of the Management Services Agreement dated May 1, 1988 as shall be applicable, including, without limitation, paragraph 4 thereof.
Section 5.05. Employee Matters. Each of FTX and FCX covenants that, except as otherwise agreed by FTX and
FCX, all employee matters and employee benefits arrangements shall be governed by the Employee Benefits Allocation Agreement, the form of which is attached hereto as Exhibit A.
ARTICLE VI
MISCELLANEOUS
Section 6.01. Expenses. Except as specifically provided in this Agreement, each of FTX and FCX shall pay all costs and expenses incurred by it or on its behalf in connection with this Agreement, the Distribution and the transactions contemplated hereby and thereby, including, without limitation, the fees and expenses of its own legal counsel, accountants and financial and other advisors.
Section 6.02. Notices. All notices, requests and other communications under this Agreement to any party shall be in writing (including facsimile or similar writing) and shall be given
if to FTX, to:
Freeport-McMoRan Inc.
1615 Poydras Street
New Orleans, Louisiana 70112
Attention: General Counsel
Telecopier: (504) 585-3512
if to FCX, to:
Freeport-McMoRan Copper & Gold Inc.
1615 Poydras Street
New Orleans, Louisiana 70112
Attention: General Counsel
Telecopier: (504) 585-3512
or to such other address or telecopier number as such party
may hereafter specify for the purpose by notice to the other
parties. Each such notice, request or other communication
shall be effective (i) if given by facsimile, when such
facsimile is transmitted to the telecopier number specified
in this Section 6.02 and transmission of the appropriate
number of pages is confirmed or (ii) if given by any other
means, when delivered at the address specified in this
Section 6.02.
Section 6.03. Amendment and Waiver. This Agreement may not be altered or amended, nor may rights hereunder be
waived, except by an instrument in writing executed by each
party, or in the case of a waiver by an instrument in
writing executed by the party against whom such waiver is to
be effective. No waiver of any terms, provision or
condition of or failure to exercise or delay in exercising
any rights or remedies under this Agreement, in any one or
more instances, shall be deemed to be, or construed as, a
further or continuing waiver of any such term, provision,
condition, right or remedy or as a waiver of any other term,
provision or condition of this Agreement.
Section 6.04. Arbitration. All disputes between
FTX and its Affiliates, on the one hand, and FCX and its
Affiliates, on the other, arising out of or in connection
with this Agreement, or the breach thereof, shall be settled
by arbitration in New Orleans, Louisiana, in accordance with
the Rules of the American Arbitration Association in effect
at the time of such reference. Judgment upon the award
rendered may be entered in any court having jurisdiction or
application may be made to such court for a judicial
acceptance of the award and a order of enforcement, as the
case may be. The parties hereto agree to cooperate in good
faith to expedite to the maximum practicable extent the
conduct of any arbitral proceedings commenced under this
Agreement.
Section 6.05. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original instrument, but all of which together shall constitute but one and the same Agreement.
Section 6.06. Governing Law. This Agreement shall be construed in accordance with, and governed by, the laws of the State of Delaware.
Section 6.07. Entire Agreement. This Agreement and the Employee Benefits Allocation Agreement shall constitute the entire understanding of the parties hereto with respect to the subject matter hereof, superseding all negotiations, prior discussions and prior agreements and understandings relating to such subject matter.
Section 6.08. Parties in Interest. Neither party hereto may assign any of its rights or delegate any of its duties under this Agreement without the prior written consent of the other party. This Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective successors and permitted assigns. Nothing contained in this Agreement, express or implied, is intended to confer upon any Person other than the parties hereto, any benefits, rights or remedies.
Section 6.09. Specific Enforcement. FTX and FCX acknowledge that the other would be irreparably harmed by a breach of any provision of Section 5.01 or 5.02 of this Agreement and that there would be no adequate remedy at law or in damages to compensate for such breach. Each agrees that the other shall be entitled to injunctive relief requiring specific performance by FTX or FCX, as the case may be, of any provision of Section 5.01 or 5.02 of this Agreement and consents to the entry thereof.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed as of the date first above written.
FREEPORT-McMoRan INC.
By /s/ Rene L. Latiolais
Name: Rene L. Latiolais
Title: President and
Chief Operating Officer
|
FREEPORT-McMoRan COPPER & GOLD INC.
By /s/ George A. Mealey
Name: George A. Mealey
Title: President and
Chief Operating Officer
|
Exhibit A
EMPLOYEE BENEFITS ALLOCATION AGREEMENT
This Employee Benefits Allocation Agreement dated as of July 5, 1995 is entered into between Freeport-McMoRan Inc., a Delaware corporation ("FTX"), and Freeport-McMoRan Copper & Gold Inc., a Delaware corporation ("FCX" or the "Company").
Background
1. FTX currently owns common stock of FCX representing a controlling interest in FCX.
2. From the date of its inception, FCX has employed no United States employees, but has relied on FTX for management and other services that have been provided pursuant to a management services agreement among, inter alia, FTX and FCX.
3. FTX intends to distribute to its common stockholders, on a tax-free basis, all of the Class B Common Stock, par value $0.10 per share, of FCX owned by FTX at the time of such distribution (the "Distribution").
4. In connection with the Distribution, the parties intend that FTX will continue for a period of time to provide employment and management services to FCX pursuant to the existing management services agreement and that certain FTX employees will at a future time become employees of FCX.
5. FTX and FCX wish to agree as to the allocation of liabilities and responsibilities relating to the transferred employees in connection with employee compensation and benefit arrangements.
Agreement
1. Definitions. For purposes of this Agreement, the following terms shall have the meaning set forth below.
(a) "Adjusted FCX Award" shall mean an option to purchase, or stock appreciation right or stock incentive unit relating to, FCX Shares that results from the adjustment and conversion of an FTX Award pursuant to Paragraph 6.
(b) "Adjusted FTX Award" shall mean an FTX Award that is adjusted in accordance with the provisions of Paragraph 6.
(c) "Adjusted Stock Award Plan" shall mean the Freeport-McMoRan Copper & Gold Inc. Adjusted Stock Award Plan, adopted pursuant to Paragraph 6.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended, and the regulations (including temporary and proposed regulations) promulgated thereunder.
(e) "Directors Plan" shall mean the Freeport- McMoRan Copper & Gold Inc. 1995 Stock Option Plan for Non-Employee Directors, adopted pursuant to paragraph 6.
(f) "Distribution Date" shall mean the effective date of the Distribution.
(g) "Dual Employee" shall mean an employee who becomes a Transferred Employee but who thereafter also remains employed by FTX or its subsidiaries (other than FCX).
(h) "Effective Date" shall mean, with respect to any Transferred Employee, such Employee's date of hire by FCX or one of its subsidiaries.
(i) "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended.
(j) "FCX Individual Account Plan" shall mean one or more defined contribution plans to be established or designated by FCX for the benefit of Transferred Employees, pursuant to Paragraph 5.
(k) "FCX Pension Plan" shall mean one or more defined benefit pension plans to be established or designated by FCX for the benefit of Transferred Employees, pursuant to Paragraph 4.
(l) "FCX Shares" shall mean Class B Common Stock, par value $0.10 per share, of FCX.
(m) "FTX AIP" shall mean the Freeport-McMoRan Inc. Annual Incentive Plan.
(n) "FTX Award" shall mean an option, stock appreciation right, limited right, stock incentive unit or other award relating to FTX Shares that has been granted under an FTX Stock Plan and is outstanding on the Effective Date.
(o) "FTX Benefit Arrangements" shall mean each employment, severance or similar contract, arrangement or policy (exclusive of any such contract, arrangement or policy that is terminable within 30 days without liability of FTX or any of its affiliates), and each plan or arrangement (whether or not written) providing for severance benefits, insurance coverage (including any self-insured arrangements), workers' compensation, disability benefits, supplemental unemployment benefits, vacation benefits, retirement benefits or for deferred compensation, profit-sharing, bonuses, stock options, stock appreciation rights or other forms of incentive compensation or post-retirement insurance, compensation or benefits that (i) is not an FTX Employee Plan, (ii) is entered into or maintained, as the case may be, by FTX or any of its affiliates (other than FCX) and (iii) covers any Transferred Employee.
(p) "FTX EBP" shall mean the Freeport-McMoRan Inc. Excess Benefits Plan.
(q) "FTX Employee Plans" shall mean each "employee
benefit plan", as defined in Section 3(3) of ERISA, that
(i) is subject to any provision of ERISA, (ii) is
maintained, administered or contributed to by FTX or any
of its affiliates (other than FCX) and (iii) covers any
Transferred Employee.
(r) "FTX Executive Plans" shall mean the FTX AIP,
the FTX LTPIP, the FTX PIAP, the FTX SECAP and the FTX
EBP.
(s) "FTX Individual Account Plan" shall mean the Freeport-McMoRan Inc. Employee Capital Accumulation Program.
(t) "FTX LTPIP" shall mean either or both of the Freeport-McMoRan Inc. 1987 Long-Term Performance Incentive Plan and the Freeport-McMoRan Inc. 1992 Long- Term-Performance Incentive Plan.
(u) "FTX Pension Plan" shall mean the Freeport- McMoRan Inc. Employee Retirement Plan.
(v) "FTX PIAP" shall mean the Freeport-McMoRan Inc. Performance Incentive Awards Program.
(w) "FTX SECAP" shall mean the Freeport-McMoRan Inc. Supplemental Executive Capital Accumulation Plan.
(x) "FTX Shares" shall mean shares of FTX common stock, par value $1 per share.
(y) "FTX Stock Plan" shall mean any plan of FTX, other than an FTX Executive Plan, under which any award is or has been granted to FTX employees, officers or directors and is outstanding on the Effective Date, which award relates to FTX Shares, including, without limitation, options, stock appreciation rights, performance units, stock incentive units, Limited Rights, as defined in any such Plan, tax-offset payment rights, etc.
(z) "Retired Employees" shall mean all former, retired and long-term disabled employees of FTX and its subsidiaries (including FCX), as of the Distribution Date.
(aa) "Rule 16b-3" shall mean Rule 16b-3 promulgated under Section 16 of the Securities Exchange Act of 1934, and any successor provision.
(bb) "Section 162(m)" shall mean Section 162(m) of the Code and any memoranda or decisions issued by the Internal Revenue Service or the Department of the Treasury with respect thereto.
(cc) "Securities Act" shall mean the Securities Act of 1933, as amended.
(dd) "SIU Plan" shall mean the Freeport-McMoRan Copper & Gold Inc. Stock Incentive Unit Plan, adopted pursuant to paragraph 6.
(ee) "Stock Plan" shall mean the Freeport-McMoRan Copper & Gold Inc. 1995 Stock Option Plan, adopted pursuant to Paragraph 6.
(ff) "Transferred Employees" shall mean those active employees of FTX or its subsidiaries (other than FCX) who by mutual agreement between FTX and FCX become employees of FCX or one of its subsidiaries following the
Distribution. Any such employee shall be considered a Transferred Employee whether or not such employee remains employed by FTX following the Distribution.
2. Employment by FCX. (a) As used in this Agreement, unless otherwise expressly stated or required by context, "FTX employee", or words with similar effect, shall refer to employees of any of FTX and its subsidiaries other than FCX, and "FCX employee", or words with similar effect, shall refer to employees of any of FCX and its subsidiaries.
(b) Each Transferred Employee will become an employee of FCX as of such Transferred Employee's Effective Date. Such employment shall initially be upon the same terms and conditions, with the same wage or salary level, seniority and job location as those on which or at which such employees were employed by FTX immediately prior to such Effective Date; provided, however, that in the case of Dual Employees, such employment shall be on such terms and conditions as are determined by the Board of Directors of FCX. No provision of this Agreement shall preclude or impair the ability of FCX to terminate the employment of any Transferred Employee or to change the terms, conditions or location of employment following the Effective Date.
3. Representations. (a) FTX has furnished or made available to FCX copies or descriptions of all FTX Employee Plans and FTX Benefit Arrangements.
(b) The FTX Pension Plan and the FTX Individual Account Plan have each received a favorable determination letter from the Internal Revenue Service and FTX knows of no event or circumstance occurring or existing since the date of such letter, in either case, that would cause such plan to fail to be qualified under Section 401(a) of the Code, or that would cause the trust related to such plan to fail to be exempt from taxation under Section 501(a) of the Code.
(c) Each FTX Employee Plan and FTX Benefit Arrangement has been maintained in substantial compliance with its terms and with the requirements prescribed by any and all statutes, orders, rules and regulations, including but not limited to ERISA and the Code, that are applicable thereto.
(d) No FTX Employee Plan is a "multiemployer plan", as described in Sections 3(37) or 4001(a)(3) of ERISA.
(e) As of December 31, 1994, the fair market value of the assets of the FTX Pension Plan (excluding for these purposes any accrued but unpaid contributions) exceeded the
"Accumulated Benefit Obligation" of such Plan, as determined for purposes of GAAP, using methods and assumptions required under GAAP.
(f) The representations set forth in this Paragraph 3 shall survive until the obligations of the parties hereunder have been fully performed.
4. Pension Plan. (a) At such time following the
Distribution Date as is agreed by FTX and FCX, FTX shall
cause the trustee of the FTX Pension Plan to segregate, in
accordance with the spin-off provisions set forth under
Section 414(l) of the Code and in accordance with the
provisions set forth below, the assets of the FTX Pension
Plan allocable to Transferred Employees (other than Dual
Employees) and shall make any and all filings and
submissions to the appropriate governmental agencies arising
in connection with such segregation of assets and all
necessary amendments to the FTX Pension Plan and related
trust agreement to provide for such segregation of assets
and the transfer of assets as described below. The assets
of the FTX Pension Plan allocable to Transferred Employees
shall be segregated in the form of cash and marketable
securities.
(b) The amount of such assets (the "Transfer Amount") shall be equal to the Accumulated Benefit Obligation of Transferred Employees other than Dual Employees, determined under GAAP in accordance with SFAS 87, or, if greater, the minimum amount that is necessary to comply with Section 414(l) of the Code. The Transfer Amount shall be determined as of a date mutually agreed by FTX and FCX and shall be increased by appropriate earnings attributable to the period from the date of such segregation to the date of transfer described herein and reduced by a pro rata share of the administrative expenses of the FTX Pension Plan for such period and any benefit payments made to Transferred Employees prior to the date of transfer of the Transfer Amount. FTX shall provide the actuary designated by FCX with all information necessary to verify the calculation of the Transfer Amount.
(c) The disposition of the accrued benefits of Dual Employees under the FTX Pension Plan and the FTX EBP, and assets of the plan allocable thereto, if any, shall be as mutually agreed by FTX and FCX.
(d) At such time as is agreed by FTX and FCX, FCX shall establish or designate the FCX Pension Plan, which shall be substantially comparable to the FTX Pension Plan, shall take all necessary action to qualify such Plan under
the applicable provisions of the Code and shall make any and all filings and submissions to the appropriate governmental agencies required to be made by it in connection with the transfer of assets described in this Paragraph 4. As soon as practicable following the earlier of the receipt of a favorable determination letter from the Internal Revenue Service regarding the qualified status of the FCX Pension Plan as amended to the date of transfer, or the issuance of indemnities satisfactory to FTX and FCX, FTX shall cause the trustee of the FTX Pension Plan to transfer the Transfer Amount to the appropriate trustee designated by FCX under the trust agreement forming a part of the FCX Pension Plan.
(e) In consideration for the transfer of assets described herein, FCX shall, or shall cause one of its subsidiaries to, effective as of the date of transfer described herein, assume all of the obligations of FTX and its subsidiaries in respect of benefits accrued by Transferred Employees under the FTX Pension Plan (exclusive of benefits paid prior to the date of transfer described herein) on or prior to the mutually agreed date. Neither FCX nor any of its affiliates shall assume any other obligations or liabilities arising under or attributable to the FTX Pension Plan.
(f) The liabilities of Transferred Employees under the FTX EBP shall be calculated in accordance with the methods and procedures specified above with respect to the qualified pension plan to which the FTX EBP relates. In consideration of a payment by FTX to FCX of an amount in cash equal to the present value of such liabilities, FCX will, or will cause one or more of its subsidiaries to, assume all such liabilities of Transferred Employees.
5. Individual Account Plan. (a) At such time following the Distribution Date as is agreed by FTX and FCX, FTX shall (i) cause the trustee of the FTX Individual Account Plan to identify the assets of the FTX Individual Account Plan representing the full account balances of Transferred Employees (other than Dual Employees) as of a date mutually agreed by FTX and FCX, (ii) make any and all filings and submissions to the appropriate governmental agencies arising in connection with such segregation of assets and (iii) make all necessary amendments to the FTX Individual Account Plan and related trust agreement to provide for such identification of assets and the transfer of assets as described below. The manner in which the account balances of Transferred Employees under the FTX Individual Account Plan are invested shall not be affected by such identification of assets.
(b) At such time as is agreed by FTX and FCX, FCX shall establish or designate the FCX Individual Account Plan, which shall be substantially comparable to the FTX Individual Account Plan, shall take all necessary action to qualify such plan under the applicable provisions of the Code and register such plan under the Securities Act, if applicable, and shall make any and all filings and submissions to the appropriate governmental agencies required to be made by it in connection with the transfer of assets described in this Paragraph 5. As soon as practicable following the earlier of the delivery to FTX of a favorable determination letter from the Internal Revenue Service regarding the qualified status of the FCX Individual Account Plan as amended to the date of transfer, or the issuance of indemnities satisfactory to FTX and FCX, FTX shall cause the trustee of the FTX Individual Account Plan to transfer in the form of cash or marketable securities (or such other form, including participant loans, as may be agreed by FCX and FTX) the full account balances of Transferred Employees under the FTX Individual Account Plan (which account balances will have been credited with appropriate earnings attributable to the period from the date of the identification thereof pursuant to Paragraph 5(a) to the date of transfer described herein), reduced by any necessary benefit or withdrawal payments to or in respect of Transferred Employees occurring during such period, to the appropriate trustee as designated by FCX under the trust agreement forming a part of the FCX Individual Account Plan.
(c) Unless otherwise agreed by FTX and FCX, and notwithstanding any other provision of this Paragraph 5 to the contrary, any portion of such transferred account balances that is invested in equity securities of either FCX or FTX shall be transferred in the form of such securities. After the Effective Date, the FTX Individual Account Plan shall not be obligated to permit further investment in FCX equity securities, and the FCX Individual Account Plan shall not be obligated to permit further investment in FTX equity securities.
(d) The disposition of the account balances of Dual Employees under the FTX Individual Account Plan and FTX SECAP shall be as mutually agreed by FTX and FCX.
(e) In consideration for the transfer of assets described herein, FCX shall, or shall cause one or more of its subsidiaries to, effective as of the date of transfer described herein, assume all of the obligations of FTX and its subsidiaries in respect of the account balances accumulated by Transferred Employees under the FTX
Individual Account Plan (exclusive of any portion of such account balances that are paid or otherwise withdrawn prior to the date of transfer described herein) on or prior to the mutually agreed date. Neither FCX nor any of its affiliates shall assume any other obligations or liabilities arising under or attributable to the FTX Individual Account Plan.
(f) The account balances of Transferred Employees in the FTX SECAP will be transferred to FCX or one or more of its subsidiaries using the same methods and procedures as are specified above for the qualified plan to which the FTX SECAP relates. In consideration of a cash payment by FTX to FCX in an amount equal to such account balances of Transferred Employees, FCX will, or will cause one or more of its subsidiaries to, assume liability therefor.
6. Stock Plan Adjustments; Establishment of New Stock Plans. (a) Effective as of the Effective Date, FCX shall adopt the Adjusted Stock Award Plan, the Stock Plan, the SIU Plan and the Directors Plan and shall take all action necessary in regard to such plans to ensure compliance with Rule 16b-3, Section 162(m) and the Securities Act, as applicable and as deemed desirable by FCX. The Adjusted Stock Award Plan shall be established for the exclusive purpose of granting the Adjusted FCX Awards as described in this Paragraph 6.
(b) Each outstanding FTX Award on the Effective Date shall be converted, in accordance with the procedures described in this Paragraph 6, into an Adjusted FTX Award and an Adjusted FCX Award with the same features as such FTX Award. The number of FCX Shares subject to an Adjusted FCX Award shall be that number of FCX Shares that a record holder of the number of FTX Shares underlying the related FTX Award would have received in the Distribution.
(c) Each Adjusted FCX Award and each Adjusted FTX Award will have the same remaining duration and other terms and conditions as the FTX Award from which it was derived; provided, however, that if an Adjusted FCX Award provides the holder thereof with a stock option and if the FTX Award from which such Adjusted FCX Award is derived has a term that will expire prior to one hundred and eighty days after the Effective Date, the term of such Adjusted FCX Award shall expire on the one hundred and eightieth day after the Effective Date; and further provided, however, that no Adjusted FCX Award providing the holder thereof with a stock option shall be exercisable prior to the ninetieth day after the Effective Date. Without limiting the generality of the foregoing, if an FTX Award contains a feature providing for a cash payment upon exercise to defray in whole or in part
income tax obligations arising in connection therewith, then the resulting Adjusted FCX Award and Adjusted FTX Award will have such feature, and, if an FTX Award contains "limited rights", then the resulting Adjusted FCX Award and Adjusted FTX Award will have "limited rights".
(d) The exercise price of an Adjusted FTX Award shall be determined by multiplying the exercise price of the FTX Award from which such Adjusted FTX Award was derived by a fraction, the numerator of which is the FTX Net Distribution Value, as defined below, and the denominator of which is the FTX Distribution Value, as defined below.
(e) The exercise price of an Adjusted FCX Award shall be determined by multiplying the exercise price of the FTX Award from which such Adjusted FCX Award was derived by a fraction, the numerator of which is the FCX Distribution Value, as defined below, and the denominator of which is the FTX Distribution Value.
(f) For purposes of the foregoing, the "FCX Distribution Value" shall be the weighted average when- issued per share price of the FCX Shares on the New York Stock Exchange on the first day on which the FCX Shares are traded on a when-issued basis on the New York Stock Exchange; the "FTX Distribution Value" shall be the weighted average per share price of the FTX Shares on the New York Stock Exchange on such trading day (trading with due bills, if such date is after the record date of the Distribution) and the "FTX Net-Distribution Value" shall be (i) the FTX Distribution Value minus (ii) the product of the Distribution Ratio, as hereinafter defined, and the FCX Distribution Value. The "Distribution Ratio" shall mean the number of FCX Shares distributed in the Distribution per FTX Share, rounded to the nearest one-millionth (.000001) of an FCX Share.
7. Deferred Compensation Liabilities. As of the Transferred Employees' respective Effective Dates, FTX shall calculate the liability of FTX and its subsidiaries other than FCX in respect of such Transferred Employees' deferred compensation, including without limitation deferred awards under the FTX PIAP, FTX AIP, FTX LTPIP and predecessor plans, if any. In consideration of a cash payment by FTX to FCX in an amount equal to such accrued liability, FCX will, or will cause one or more of its subsidiaries to, assume such liability in respect of Transferred Employees. Notwithstanding the foregoing, FTX liability in respect of Dual Employees will be allocated as agreed by FTX and FCX.
8. Welfare Plans. (a) As of their respective
Effective Dates, subject to the provisions of Paragraph
8(d), Transferred Employees shall cease participation in all
FTX Employee Plans and FTX Benefit Arrangements providing
for health, medical, dental and life insurance or similar
benefits ("welfare plan"). Except as otherwise set forth in
this Agreement, FTX shall retain all obligations and
liabilities under the FTX Employee Plans and FTX Benefit
Arrangements.
(b) FTX's welfare plans shall retain liability for and shall pay when due all benefits described in Paragraph 8(a) that are attributable to claims incurred prior to a Transferred Employee's Effective Date by such Transferred Employees (and his or her eligible dependents). FCX and its welfare plans shall be liable for and shall pay when due all such benefits attributable to claims incurred on or after a Transferred Employee's Effective Date by such Transferred Employees (and his or her eligible dependents). For such purpose, unless otherwise agreed by FTX and FCX, a claim is deemed incurred when the services that are the subject of the claim are performed, when the death occurs (in the case of life insurance), as of the date beginning a period of absence eventually resulting in entitlement to benefits (in the case of long-term disability benefits) and in the case of a hospital stay, based on the date any such hospitalization is initiated.
(c) The group health plans established by FCX for the benefit of Transferred Employees shall (i) waive any pre-existing condition limitations, (ii) waive any eligibility waiting periods and (iii) give effect, in determining or applying any deductible and maximum out-of- pocket limitations to claims incurred, amounts paid by, and amounts reimbursed to, such employees under the group health plans maintained by FTX for their benefit immediately prior to the applicable Effective Date.
(d) FCX will give Transferred Employees full credit for purposes of eligibility, vesting and benefit accrual (as such purposes may be applicable) under the employee benefit plans of FCX for such employees' respective service recognized for such purposes under the corresponding FTX Employee Plan or FTX Benefit Arrangement.
(e) Notwithstanding any other provision of this Paragraph 8 to the contrary, the welfare benefits of Dual Employees after their respective Effective Dates shall be provided as agreed by FTX and FCX.
(f) FTX and FCX shall provide each other with copies of such records as are reasonably required to enable the parties to perform their obligations hereunder.
(g) In respect of the Accumulated Post-Retirement Benefit Obligation ("APBO") of FTX employees and FCX employees under SFAS 106, FCX agrees to pay to FTX an amount in cash equal to the excess, if any, of (i) the decrease in FCX SFAS 106 APBO liability after the Distribution which is attributable to the assumption by FTX of SFAS 106 APBO liability which prior to the Distribution was reflected on the audited balance sheet of FCX over (ii) the increase in FCX SFAS 106 APBO liability after the Distribution which is attributable to the assumption by FCX of SFAS 106 APBO liability which prior to the Distribution was reflected on the audited balance sheet of FTX. For purposes of this Paragraph 8(g), APBO shall be calculated as of employees' Effective Dates that relate to or coincide with the termination of the management services agreement referred to in Paragraph 4 under "Background", above. In the event that the amount described in clause (ii) of this Paragraph 8(g) exceeds the amount described in clause (i), FTX agrees to pay to FCX an amount in cash equal to such excess.
9. Expenses. Each of FCX and FTX shall pay its own expenses in connection with the performance of its obligations under this Agreement.
10. Third-Party Beneficiaries. No provision of this Agreement shall create any third party beneficiary rights in any Transferred Employee, Retired Employee or any employee or former employee of FTX (including any beneficiary or dependent thereof), including any rights in respect of continued employment or resumed employment, and no provision of this Agreement shall create any rights in any such persons in respect of any benefits that may be provided, directly or indirectly, under any employee benefit plan or arrangement.
11. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written.
FREEPORT-McMoRan COPPER & GOLD INC.
By: /s/ George A. Mealey
Name: George A. Mealey
Title: President and Chief
Operating Officer
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FREEPORT-McMoRan INC.
By: /s/ Rene L. Latiolais
Name: Rene L. Latiolais
Title: President and Chief
Operating Officer
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FREEPORT-McMoRan COPPER & GOLD INC.
CERTIFICATE OF INCORPORATION
FIRST: The name of the corporation is Freeport-McMoRan Copper & Gold Inc.
SECOND: The address of the registered office of the corporation in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle, and the name of its registered agent at such address is The Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or promoted are:
(a) To enter into, maintain, operate and carry on the business of mining in all its branches in the United States of America and in any other part of the world, and to quarry, mine, pump, extract, remove and otherwise produce, and to grind, treat, concentrate, smelt, refine, dress and otherwise prepare, produce, buy, sell and in every way deal in and with minerals, ores, concentrates and other mineral and chemical substances of all kinds, metallic and nonmetallic, including, but without in any way limiting the generality of the foregoing, antimony, barite, chromium, coal, cobalt, copper, gas, gold, iron, lead, molybdenum, nickel, oil, potash, salt, silica, sand, silver, sulphur, tantalum, tin, titanium, tungsten, uranium, zinc, and ores and concentrates thereof.
(b) To purchase, locate, denounce or otherwise acquire, take, hold and own, and to assign, transfer, lease, exchange, mortgage, pledge, sell or otherwise dispose of and in any manner deal with and contract with reference to, mines, wells, mining claims, mining rights, mineral lands, mineral leases, mineral rights, royalty rights, water rights, timber lands, timber and timber rights, and real and personal property of every kind, and any interest therein, in the United States of America or in any other country, to prospect, explore, work, exercise, develop, manage, operate and turn the same to account, and to engage in mining, geological, economic, feasibility, development, and other studies in the United States of America or in any other country.
(c) To make, manufacture, treat, process, produce, buy, sell and in every way deal in and with minerals, ores, concentrates and chemicals of every description, organic or inorganic, natural or synthetic, in the form of raw materials, intermediate or finished products and any other related products and substances whatsoever related thereto or of a like or similar nature or which may enter into the manufacture of any of the foregoing or be used in connection therewith, and derivatives and by-products derived from the manufacture thereof and products to be made therefrom and generally without limitation by reference of the foregoing, all other products and substances of every kind, character and description.
(d) To engage in any lawful act or activity, whether or not related to the foregoing, for which corporations may be organized under the General Corporation Law of Delaware.
FOURTH: (a) Authorized Stock. The total number of shares of capital stock that the corporation shall have authority to issue is 473,600,000 shares, consisting of 50,000,000 shares of Preferred Stock, par value $0.10 per share, 211,800,000 shares of Class A Common Stock, par value $0.10 per share, and 211,800,000 shares of Class B Common Stock, par value $0.10 per share. The Class A Common Stock and the Class B Common Stock are collectively referred to herein as the "Common Stock". Of the authorized number of shares of Preferred Stock, 447,800 of such shares shall be a series of Preferred Stock designated as "7% Convertible Exchangeable Preferred Stock"; 700,000 of such shares shall be a series of Preferred Stock designated as "Step-Up Convertible Preferred Stock"; 300,000 of such shares shall be a series of Preferred Stock designated as "Gold-Denominated Preferred Stock"; 215,279 of such shares shall be a series of Preferred Stock designated as "Gold-Denominated Preferred Stock, Series II"; and 119,000 of such shares shall be a series of Preferred Stock designated as "Silver-Denominated Preferred Stock" (collectively referred to herein as the "Existing Preferred Stock").
(b) Common Stock. The Class A Common Stock and the Class B Common Stock shall be identical in all respects, except as otherwise expressly provided herein, and the relative powers, preferences, rights, qualifications, limitations and restrictions of the shares of Class A Common Stock and Class B Common Stock shall be as follows:
(1) Cash or Property Dividends. Subject to the rights
and preferences of the Preferred Stock as set forth in any
resolution or resolutions of the Board of Directors
providing for the issuance of such stock pursuant to Section
(c) of this Article FOURTH, and except as otherwise provided
for herein, the holders of Class A Common Stock and Class B
Common Stock are entitled to receive dividends out of assets
legally available therefor at such times and in such equal
per share amounts as the Board of Directors may from time to
time determine.
(2) Stock Dividends. If at any time a dividend is to be paid in shares of Class A Common Stock or shares of Class B Common Stock (a "stock dividend"), such stock dividend may be declared and paid only as follows: only Class A Common Stock may be paid to holders of Class A Common Stock and only Class B Common Stock may be paid to holders of Class B Common Stock, and whenever a stock dividend is paid, the same rate or ratio of shares shall be paid in respect of each outstanding share of Class A Common Stock and Class B Common Stock.
(3) Stock Subdivisions and Combinations. The corporation shall not subdivide, reclassify or combine stock of either class of Common Stock without at the same time making a proportionate subdivision or combination of the other class.
(4) Voting. Voting power shall be divided between the classes and series of stock as follows:
(A) Subject to Section (b)(4)(B) of this Article
FOURTH, with respect to the election of directors, holders
of Class A Common Stock and holders of Voting Preferred
Stock (as defined below), voting together, shall be entitled
to elect that number of directors which constitutes 20% of
the authorized number of members of the Board of Directors
(or, if such 20% is not a whole number, then the nearest
lower whole number of directors that is closest to 20% of
such membership). Each share of Class A Common Stock and
each share of Voting Preferred Stock shall have one vote in
the election of such directors. Subject to Section
(b)(4)(B) of this Article FOURTH, holders of Class B Common
Stock shall be entitled to elect the remaining directors.
Each share of Class B Common Stock shall have one vote in
the election of such directors. For purposes of this
Section (b)(4) and Section (b)(5) of this Article FOURTH,
references to the authorized number of members of the Board
of Directors (or the remaining directors) shall not include
any directors which the holders of any shares of Preferred
Stock have the exclusive right to elect as granted in
accordance with Section (c)(6) of this Article FOURTH. For
purposes of this Section (b)(4), "Special Voting Rights"
means the different voting rights of the holders of Class A
Common Stock, holders of Class B Common Stock and holders of
Voting Preferred Stock with respect to the election of the
applicable percentage of the authorized number of members of
the Board of Directors as described in this Section
(b)(4)(A). The "Voting Preferred Stock" means (i) each
series of the Existing Preferred Stock, in each case so long
as such series remains outstanding and (ii) any other series
of Preferred Stock upon which the right to vote for
directors pursuant to this Section (b)(4) has been conferred
in accordance with Section (c)(6) of this Article FOURTH.
(B) In the event that a majority of the shares of Class A Common Stock and Class B Common Stock present and voting at any annual or special meeting of stockholders of the corporation are voted to eliminate the Special Voting Rights, then Section (b)(4)(A) of this Article FOURTH shall have no further force or effect, and thereafter holders of Common Stock and holders of Voting Preferred Stock, voting together, shall be entitled to elect all members of the Board of Directors.
(C) Any director may be removed, with cause, by a vote of the holders of Class A Common Stock, holders of Class B Common Stock, and holders of Voting Preferred Stock, voting together.
(D) Except as otherwise specified herein, the holders of Class A Common Stock and holders of Class B Common Stock (i) shall in all matters not otherwise specified in this Section (b)(4) or Section (b)(5) of this Article FOURTH vote together (including, without limitation, with respect to increases or decreases in the authorized number of shares of any class of Common Stock), with each share of Class A Common Stock and Class B Common Stock having one vote, and (ii) shall be entitled to vote as separate classes only when required by law to do so under mandatory statutory provisions that may not be excluded or overridden by a provision in the certificate of incorporation or as provided herein.
(E) Except as set forth in this Section (b)(4) or
Section (b)(5) of this Article FOURTH, the holders of Class
A Common Stock shall have exclusive voting power (except for
any voting powers of any Preferred Stock) on all matters at
any time when no Class B Common Stock is issued and
outstanding, and the holders of Class B Common Stock shall
have exclusive voting power (except for any voting powers of
any Preferred Stock) on all matters at any time when no
Class A Common Stock is issued and outstanding.
(5) Vacancies; Increases or Decreases in Size of the
Board of Directors. Any vacancy in the office of a director
created by the death, resignation or removal of a director
elected by (or appointed on behalf of) the holders of a
class or classes of stock may be filled by a vote of holders
of such class of stock, or if applicable, classes of stock,
voting together, unless the Special Voting Rights have been
eliminated in accordance with Section (b)(4)(B) of this
Article FOURTH. Notwithstanding anything in this Section
(b)(5) or Section (b)(4) of this Article FOURTH to the
contrary, any vacancy in the office of a director may also
be filled by the vote of the majority of the directors (or
the sole remaining director) elected by (or appointed on
behalf of) the same class or classes of stock that elected
that director (or on behalf of which that director was
appointed) whose death, resignation or removal created the
vacancy, unless there are no such directors or the Special
Voting Rights have been eliminated in accordance with
Section (b)(4)(B) of this Article FOURTH, in which case such
vacancy may be filled by the vote of the majority of the
directors or by the sole remaining director, regardless, in
each instance, of any quorum requirements set out in the by-
laws. Any director elected by some or all of the directors
or by the stockholders to fill a vacancy shall hold office
for the remainder of the full term of the director whose
vacancy is being filled and until such director's successor
shall have been elected and qualified unless removed and
replaced pursuant to Section (b)(4)(C) of this Article
FOURTH and this Section (b)(5). The Board may increase the
number of directors and any newly-created directorship so
created may be filled by the Board, provided that (unless
the Special Voting Rights have been eliminated in accordance
with Section (b)(4)(B) of this Article FOURTH) the Board may
be so enlarged by the Board only to the extent that 20% (or,
if such 20% is not a whole number, then the nearest lower
whole number of directors that is closest to 20%) of the
authorized number of members of the enlarged Board consists
of directors elected by (or appointed on behalf of) the
holders of Class A Common Stock and Voting Preferred Stock.
Any director elected (or appointed) in accordance with the
preceding sentence shall hold office for the remainder of
the full term of the class of directors in which the new
directorship was created and until such director's successor
shall have been elected and qualified unless removed and
replaced pursuant to Section (b)(4)(C) of this Article
FOURTH and this Section (b)(5). No decrease in the number
of directors constituting the Board of Directors shall
shorten the term of any incumbent director. If the number
of directors is changed, any increase or decrease shall be
apportioned among the classes of directors established
pursuant to Article FIFTH so as to maintain the number of
directors in each class as nearly equal as possible.
(6) Merger or Reorganization. In case of any reorganization or any consolidation of the corporation with one or more other corporations or a merger of the corporation with another corporation, each holder of a share of Class A Common Stock shall be entitled to receive with respect to such share the same kind and amount of shares of stock and other securities and property (including cash) receivable upon such reorganization, consolidation or merger by a holder of a share of Class B Common Stock, and each holder of a share of Class B Common Stock shall be entitled to receive with respect to such share the same kind and amount of shares of stock and other securities and property (including cash) receivable upon such reorganization, consolidation or merger by a holder of a share of Class A Common Stock; provided that, in any such transaction, the holders of shares of Class A Common Stock and the holders of shares of Class B Common Stock may receive different kinds of shares of stock if the only difference in such shares is the inclusion of voting rights which continue the Special Voting Rights.
(7) Liquidation. In the event of any liquidation, dissolution or winding up of the corporation, the holders of the Class A Common Stock and Class B Common Stock shall participate equally per share in any distribution to stockholders, without distinction between classes.
(c) Preferred Stock. The Preferred Stock may be divided into and issued in series. The Board of Directors is hereby expressly authorized, at any time or from time to time, to divide any or all of the shares of the Preferred Stock into series, and in the resolution or resolutions establishing a particular series, before issuance of any of the shares thereof, to fix and determine the powers, designations, preferences and relative, participating, optional or other rights, and any qualifications, limitations or restrictions, of the series so established, to the fullest extent now or hereafter permitted by the laws of the State of Delaware, including, but not limited to, the variations between the different series in the following respects:
(1) The distinctive serial designation of such series;
(2) The annual dividend rate for such series, and the date or dates from which dividends shall commence to accrue;
(3) The redemption price or prices, if any, for shares of such series and the terms and conditions on which such shares may be redeemed;
(4) The sinking fund provisions, if any, for the redemption or purchase of shares of such series;
(5) The preferential amount or amounts payable upon shares of such series in the event of the voluntary or involuntary liquidation of the corporation;
(6) The voting rights of shares of such series;
(7) The terms and conditions, if any, upon which shares of such series may be converted and the class or classes or series of shares of the corporation into which such shares may be converted; and
(8) Such other terms, limitations and relative rights and preferences, if any, of shares of such series as the Board of Directors may, at the time of such resolutions, lawfully fix and determine under the laws of the State of Delaware.
All shares of the Preferred Stock shall be of equal rank with each other, regardless of series.
The number, voting powers, designations, preferences, rights, qualifications, limitations and restrictions of the 7% Convertible Exchangeable Preferred Stock shall be as set forth in Exhibit A attached hereto.
The number, voting powers, designations, preferences, rights, qualifications, limitations and restrictions of the Step- Up Convertible Preferred Stock shall be as set forth in Exhibit B attached hereto.
The number, voting powers, designations, preferences, rights, qualifications, limitations and restrictions of the Gold- Denominated Preferred Stock shall be as set forth in Exhibit C attached hereto.
The number, voting powers, designations, preferences, rights, qualifications, limitations and restrictions of the Gold- Denominated Preferred Stock, Series II shall be as set forth in Exhibit D attached hereto.
The number, voting powers, designations, preferences, rights, qualifications, limitations and restrictions of the Silver-Denominated Preferred Stock shall be as set forth in Exhibit E attached hereto.
(d) General. (1) Except as otherwise required by law and except for such voting powers with respect to the election of directors as are provided for herein for the Existing Preferred Stock or as may be stated in the resolution or resolutions of the Board of Directors providing for the issue of any series of Preferred Stock, the holders of any such series of Preferred Stock shall have no voting power whatsoever. Subject to such restrictions as may be stated in the resolution or resolutions of the Board of Directors providing for the issue of any series of Preferred Stock, any amendment to the Certificate of Incorporation which shall increase or decrease the authorized stock of any class or classes may be adopted by the affirmative vote of the holders of a majority of the outstanding shares of the Common Stock of the corporation irrespective of the provisions of Section 242(b)(2) of Delaware General Corporation Law.
(2) No holder of stock of any series or class of stock of the corporation shall as such holder have under this Certificate of Incorporation any preemptive or preferential right of subscription to any stock of any series or class of stock of the corporation or to any obligations convertible into stock of the corporation, issued or sold, or to any right of subscription to, or to any warrant or option for the purchase of any thereof.
(3) Except as otherwise stated in this Certificate of Incorporation, the corporation may from time to time issue and dispose of any of the authorized and unissued shares of Common Stock or of Preferred Stock for such consideration, not less than its par value, as may be fixed from time to time by the Board of Directors, without action by the stockholders. The Board of Directors may provide for payment therefor to be received by the corporation in cash, property or services rendered. Any and all such shares of Common Stock or Preferred Stock the issuance of which has been so authorized, and for which consideration so fixed by the Board of Director has been paid or delivered, shall be deemed fully paid stock and shall not be liable to any further call or assessment thereon.
FIFTH: (a) Subject to such rights to elect additional
directors under specified circumstances as may be granted to
holders of any shares of the Preferred Stock pursuant to the
provisions of Article FOURTH, the number of directors of the
corporation shall be fixed from time to time by the Board of
Directors but shall not be less than five. The directors, other
than those who may be elected solely by the holders of any class
or series of Preferred Stock, if any, shall be classified, with
respect to the time for which they severally hold office, into
three classes, as nearly equal in number as possible, as
determined by the Board of Directors, one class ("Class I") to
hold office initially for a term expiring at the first annual
meeting of stockholders to be held after the date this
Certificate of Incorporation is initially filed with the Delaware
Secretary of State (the "Initial Filing Date"), another class
("Class II") to hold office initially for a term expiring at the
second annual meeting of stockholders to be held after the
Initial Filing Date, and another class ("Class III") to hold
office initially for a term expiring at the third annual meeting
of stockholders to be held after the Initial Filing Date, with
the members of each class to hold office until their successors
are elected and qualified. Directors elected by a class of
stock, or if applicable, classes of stock voting together, shall
be divided as evenly as possible, as determined by the Board of
Directors, among Class I, Class II and Class III.
Notwithstanding the foregoing, each Director initially appointed
on behalf of the Class A Common Stock and Existing Preferred
Stock, shall hold office initially for a term expiring at the
first annual meeting of stockholders to be held after the Initial
Filing Date. Subject to the immediately preceding sentence, at
each annual meeting of stockholders, the successors of the class
of directors whose term expires at that meeting shall be elected
to hold office for a term expiring at the annual meeting of
stockholders held in the third year following the year of their
election.
(b) Notwithstanding any other provision of this certificate of incorporation or any provision of law which might otherwise permit a lesser vote or no vote, the affirmative vote of the holders of 66 2/3% or more of the outstanding shares of Common Stock shall be required to amend, alter, change or repeal this Article FIFTH.
SIXTH: In furtherance and not in limitation of the powers
conferred by law, (a) the Board of Directors is expressly
authorized to adopt, amend or repeal the by-laws of the
corporation in any manner not inconsistent with the laws of the
State of Delaware or the certificate of incorporation of the
corporation, subject to the power of the stockholders to adopt,
amend or repeal the by-laws or to limit or restrict the power of
the Board of Directors to adopt, amend or repeal the by-laws, and
(b) the corporation may in its by-laws confer powers and
authorities upon its Board of Directors in addition to those
conferred upon it by statute.
SEVENTH: The affirmative vote of the holders of not less than 66 2/3% of the outstanding shares of Common Stock shall be required for the approval or authorization of any Business Combination; provided, however, that the 66 2/3% voting requirement shall not be applicable if
(a) the Board of Directors of the corporation by
affirmative vote which shall include not less than a
majority of the entire number of Continuing Directors
(1) has approved in advance the acquisition of those
outstanding shares of Common Stock which caused the
Interested Party to become an Interested Party or (2)
has approved the Business Combination;
(b) the Business Combination is solely between the corporation and one or more other corporations all of the common stock of each of which other corporations is owned directly or indirectly by the corporation or between two or more of such other corporations; or
(c) the Business Combination is a merger or consolidation and the cash and/or fair market value of the property, securities or other consideration to be received per share by holders of Common Stock in the Business Combination is at least equal to the highest price per share (after giving effect to appropriate adjustments for any recapitalizations and for any stock splits, stock dividends and like distributions) paid by the Interested Party in acquiring any shares of Common Stock on the date when last acquired or during a period of two years prior thereto.
(d) For purposes of this Article SEVENTH:
(1) The terms "affiliate" and "associate" shall have the respective meanings assigned to those terms in Rule 12b-2 under the Securities Exchange Act of 1934, as such Rule was in effect on the Initial Filing Date.
(2) A person shall be deemed to be a "beneficial owner" of any Common Stock
(A) which such person or any of its affiliates or associates beneficially owns, directly or indirectly; or
(B) which such person or any of its affiliates or associates has the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or has the right to vote pursuant to any agreement, arrangement or understanding; or
(C) which are beneficially owned, directly or indirectly, by any other person with which such person or any of its affiliates or associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Common Stock.
(3) The term "Business Combination" shall mean (A) any merger or consolidation of the corporation or a subsidiary of the corporation with or into an Interested Party, (B) any merger or consolidation of an Interested Party with or into the corporation or a subsidiary, (C) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) of all or any Substantial Part of the assets either of the corporation (including without limitation any voting securities of a subsidiary) or of a subsidiary, in which an Interested Party is involved, (D) the adoption of any plan or proposal for the liquidation or dissolution of the corporation proposed by or on behalf of any Interested Party, (E) the issuance or transfer (in one transaction or a series of transactions) by the corporation or a subsidiary of the corporation to an Interested Party of any securities of the corporation or such subsidiary, which securities have a fair market value of $10,000,000 or more, or (F) any recapitalization, reclassification, merger or consolidation involving the corporation or a subsidiary of the corporation that would have the effect of increasing, directly or indirectly, the Interested Party's voting power in the corporation or such subsidiary.
(4) The term "Interested Party" shall mean and include (A) any individual, corporation, partnership, trust or other person or entity which, together with its affiliates and associates, is (or with respect to a Business Combination was within two years prior thereto) a beneficial owner of shares aggregating 20% or more of the outstanding Common Stock or any class thereof, and (B) any affiliate or associate of any such individual, corporation, partnership, trust or other person or entity. For the purposes of determining whether a person is an Interested Party the number of shares deemed to be outstanding shall include shares deemed beneficially owned through application of subclause (B) of the foregoing clause (2) but shall not include any other shares of Common Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.
(5) The term "Substantial Part" shall mean more than 10% of the fair market value of the total assets of the particular corporation.
(6) The term "Continuing Director" shall mean a director who is not an affiliate of an Interested Party and who was a member of the Board of Directors of the corporation immediately prior to the time that the Interested Party involved in a Business Combination became an Interested Party, and any successor to a Continuing Director who is not such an affiliate and who is nominated to succeed a Continuing Director by a majority of the Continuing Directors in office at the time of such nomination.
(7) For the purposes of Section (c) of this Article SEVENTH, the term "other consideration to be received" shall include without limitation Common Stock retained by its existing public stockholders in the event of a Business Combination in which the corporation is the surviving corporation.
(e) The provisions of this Article SEVENTH shall be construed liberally to the end that the consideration paid to holders whose Common Stock is acquired by an Interested Party in connection with a Business Combination to which Section (c) of this Article SEVENTH is applicable shall be not less favorable than that paid to holders of such Common Stock prior to such Business Combination. Nothing contained in this Article SEVENTH shall be construed to relieve any Interested Party from any fiduciary duties or obligations imposed by law, nor shall anything herein be deemed to supersede any vote of holders of any series or class of stock other than Common Stock that shall be required by law, by or pursuant to this certificate of incorporation or by the by-laws of the corporation.
(f) Notwithstanding any other provisions of this certificate of incorporation or the by-laws of the corporation and notwithstanding the fact that a lesser percentage may be specified by law, this certificate of incorporation or the by-laws of the corporation, the affirmative vote of the holders of 66 2/3% or more of the shares of the outstanding Common Stock shall be required to amend or repeal, or adopt any provisions inconsistent with, this Article SEVENTH.
EIGHTH: (a) A director of this corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (1) for any breach of the director's duty of loyalty to the corporation or its stockholders, (2) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law, (3) under Section 174 of the Delaware General Corporation Law, or (4) for any transaction from which the director derived an improper personal benefit.
(b) The corporation shall indemnify any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, to the fullest extent permitted by applicable law. The determination as to whether such person has met the standard required for indemnification shall be made in accordance with applicable law.
Expenses incurred by such a director, officer, employee or agent in defending a civil or criminal action, suit or proceeding shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized in this Article EIGHTH.
(c) The provisions of this Article EIGHTH shall be deemed to be a contract between the corporation and each person who serves as such director, officer, employee or agent of the corporation in any such capacity at any time while this Article EIGHTH is in effect. No repeal or modification of the foregoing provisions of this Article EIGHTH nor, to the fullest extent permitted by law, any modification of law shall adversely affect any right or protection of a director, officer, employee or agent of the corporation existing at the time of such repeal or modification.
The foregoing indemnification shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any applicable law, by-law, agreement, vote of stockholders or disinterested directors or otherwise.
NINTH: The name and mailing address of the incorporator
are:
Name Mailing Address
R. Blain Andrus 6110 Plumas Street
Reno, Nevada 89509
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TENTH: The corporation reserves the right to amend, alter, change or repeal any provision contained in this certificate of incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.
EXHIBITS TO THE CERTIFICATE OF INCORPORATION
EXHIBIT A - CERTIFICATE OF DESIGNATIONS OF THE 7% CONVERTIBLE
EXCHANGEABLE PREFERRED STOCK
EXHIBIT B - CERTIFICATE OF DESIGNATIONS OF THE STEP-UP
CONVERTIBLE PREFERRED STOCK
EXHIBIT C - CERTIFICATE OF DESIGNATIONS OF THE GOLD-
DENOMINATED PREFERRED STOCK
EXHIBIT D - CERTIFICATE OF DESIGNATIONS OF THE GOLD-
DENOMINATED PREFERRED STOCK, SERIES II
EXHIBIT E - CERTIFICATE OF DESIGNATIONS OF THE SILVER-
DENOMINATED PREFERRED STOCK
FREEPORT-McMoRan COPPER & GOLD INC.
FCX INVESTMENT LTD.
8 1/4% Convertible Senior Notes due 2006
INDENTURE
Dated as of August 7, 2001
THE BANK OF NEW YORK
TRUSTEE
ARTICLE 1
Definitions and Other Provisions of General Application
Section 1.01. Definitions 2
Section 1.02. Other Definitions 9
Section 1.03. Incorporation by Reference of Trust
Indenture Act 10
Section 1.04. Rules of Construction 11
Section 1.05. Acts of Holders 11
ARTICLE 2
The Notes
Section 2.01. Designation Amount and Issue of
Notes 12
Section 2.02. Form of Notes 13
Section 2.03. Execution and Authentication 13
Section 2.04. Note Registrar, Paying Agent and
Conversion Agent 14
Section 2.05. Paying Agent to Hold Money and
Notes in Trust 14
Section 2.06. Noteholder Lists 15
Section 2.07. Transfer and Exchange; Restrictions
on Transfer; Depositary 15
Section 2.08. Replacement Notes 25
Section 2.09. Outstanding Notes; Determination of
Holders' Action 26
Section 2.10. Temporary Notes 27
Section 2.11. Cancellation 27
Section 2.12. Persons Deemed Owners 28
Section 2.13. CUSIP Numbers 28
Section 2.14. Default Interest 28
ARTICLE 3
Redemption and Purchases
Section 3.01. Right to Redeem; Notices to Trustee 28
Section 3.02. Selection of Notes to Be Redeemed 29
Section 3.03. Notice of Redemption 29
Section 3.04. Effect of Notice of Redemption 30
Section 3.05. Deposit of Redemption Price 30
Section 3.06. Notes Redeemed in Part 30
Section 3.07. Conversion Arrangement on Call for
Redemption 31
Section 3.08. Repurchase of Notes at Option of
the Holder upon Change of Control 31
Section 3.09. Effect of Change of Control
Repurchase Notice 36
Section 3.10. Deposit of Change of Control
Repurchase Price 37
Section 3.11. Notes Purchased in Part 38
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Section 3.12. Covenant to Comply with Securities
Laws upon Purchase of Notes 38
Section 3.13. Repayment to the Issuers 38
ARTICLE 4
Covenants
Section 4.01. Payment of Principal, Premium, Interest
on the Notes 39
Section 4.02. Reports by the Issuers 39
Section 4.03. Compliance Certificate 39
Section 4.04. Further Instruments and Acts 40
Section 4.05. Maintenance of Office or Agency 40
Section 4.06. Delivery of Certain Information 40
Section 4.07. Existence 41
Section 4.08. Maintenance of Properties 41
Section 4.09. Payment of Taxes and Other Claims 41
Section 4.10. Liquidated Damages Notice 41
ARTICLE 5
Successor Corporation
Section 5.01. When Issuers May Merge or Transfer
Assets 42
ARTICLE 6
Defaults and Remedies
Section 6.01. Events of Default 43
Section 6.02. Acceleration 45
Section 6.03. Other Remedies 46
Section 6.04. Waiver of Past Defaults 46
Section 6.05. Control by Majority 46
Section 6.06. Limitation on Suits 47
Section 6.07. Rights of Holders To Receive Payment 47
Section 6.08. Collection Suit by Trustee 48
Section 6.09. Trustee May File Proofs of Claim 48
Section 6.10. Priorities 48
Section 6.11. Undertaking for Costs 49
Section 6.12. Waiver of Stay, Extension or Usury Laws 49
ARTICLE 7
Trustee
Section 7.01. Duties and Responsibilities of the
Trustee; During Default; Prior to Default 50
Section 7.02. Certain Rights of the Trustee 51
Section 7.03. Trustee Not Responsible for Recitals,
Dispositions of Notes or Application of
Proceeds Thereof 52
Section 7.04. Trustee and Agents May Hold Notes;
Collections, etc 52
Section 7.05. Moneys Held by Trustee 53
Section 7.06. Compensation and Indemnification of
Trustee and its Prior Claim 53
Section 7.07. Right of Trustee to Rely on Officers'
Certificate, etc 54
Section 7.08. Conflicting Interests 54
Section 7.09. Persons Eligible for Appointment as
Trustee 54
Section 7.10. Resignation and Removal; Appointment of
Successor Trustee 54
Section 7.11. Acceptance of Appointment by Successor
Trustee 56
Section 7.12. Merger, Conversion, Consolidation or
Succession to Business of Trustee 56
Section 7.13. Preferential Collection of Claims
Against the Issuers 57
Section 7.14. Reports by the Trustee 57
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Section 7.15. Trustee to Give Notice of Default, but May Withhold in Certain Circumstances 57
ARTICLE 8
Discharge of Indenture
Section 8.01. Discharge of Indenture 58
Section 8.02. [Intentionally Omitted] 58
Section 8.03. Paying Agent to Repay Monies Held 58
Section 8.04. Return of Unclaimed Monies 58
ARTICLE 9
Supplemental Indentures
Section 9.01. Without Consent of Holders 59
Section 9.02. With Consent of Holders 59
Section 9.03. Compliance with Trust Indenture Act 60
Section 9.04. Revocation and Effect of Consents,
Waivers and Actions 61
Section 9.05. Notation on or Exchange of Notes 61
Section 9.06. Trustee to Sign Supplemental Indentures 61
Section 9.07. Effect of Supplemental Indentures 61
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ARTICLE 10
Conversion
Section 10.01. Conversion Right and Conversion Price 62
Section 10.02. Exercise of Conversion Right 62
Section 10.03. Fractions of Shares 63
Section 10.04. Adjustment of Conversion Price 63
Section 10.05. Notice of Adjustments of Conversion Price 74
Section 10.06. Notice Prior to Certain Actions 74
Section 10.07. Company to Reserve Common Stock 76
Section 10.08. Taxes on Conversions 76
Section 10.09. Covenant as to Common Stock 76
Section 10.10. Cancellation of Converted Notes 76
Section 10.11. Effect of Reclassification,
Consolidation, Merger or Sale 76
Section 10.12. Responsibility of Trustee for Conversion Provisions 78
ARTICLE 11
Security
Section 11.01. Security 78
ARTICLE 12
Miscellaneous
Section 12.01. Trust Indenture Act Controls 81
Section 12.02. Notices 81
Section 12.03. Communication by Holders with Other
Holders 82
Section 12.04. Certificate and Opinion as to
Conditions Precedent 82
Section 12.05. Statements Required in Certificate or
Opinion 83
Section 12.06. Separability Clause 83
Section 12.07. Rules by Trustee, Paying Agent,
Conversion Agent and Note Registrar 83
Section 12.08. Legal Holidays 83
Section 12.09. GOVERNING LAW 83
Section 12.10. No Recourse Against Others 84
Section 12.11. Successors 84
Section 12.12. Benefits of Indenture 84
Section 12.13. Table of Contents, Heading, Etc 84
Section 12.14. Authenticating Agent 84
Section 12.15. Execution in Counterparts 85
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EXHIBITS
Exhibit A Form of Global Note
Exhibit B-1 Transfer Certificate
Exhibit B-2 Form of Letter to Be Delivered by
Institutional Accredited Investors
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CROSS REFERENCE TABLE*
TIA SECTION INDENTURE SECTION
310(a)(1) 7.09
(a)(2) 7.09
(a)(3) N.A.
(a)(4) N.A.
(a)(5) 7.09
(b) 7.08; 7.09; 7.10; 7.11
(c) N.A.
311(a) 7.13
(b) 7.13
(c) N.A.
312(a) 2.06
(b) 12.03
(c) 12.03
313(a) 7.14(a)
(b)(1) 7.14(a)
(b)(2) 7.14(a)
(c) 12.02
(d) 7.14(b)
314(a) 4.02; 4.03; 12.02
(b) 11.01(e)
(c)(1) 12.04
(c)(2) 12.04
(c)(3) N.A.
(d) 11.01(d)
(e) 12.05
(f) N.A.
315(a) 7.01
(b) 7.15; 12.02
(c) 7.01
(d) 7.01
(e) 6.11
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316(a)(last sentence) 2.09
(a)(1)(A) 6.05
(a)(1)(B) 6.04
(a)(2) N.A.
(b) 6.07
317(a)(1) 6.08
(a)(2) 6.09
(b) 2.05
318(a) 12.01
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N.A. means Not Applicable
Note: This Cross Reference Table shall not, for any purpose, be deemed to be part of the Indenture.
INDENTURE dated as of August 7, 2001 between FREEPORT- McMoRan COPPER & GOLD INC., a Delaware corporation (the "Company"), FCX INVESTMENT LTD., a Cayman Islands exempted limited liability company (the "Co-Obligor," and together with the Company, the "Issuers," and each, an "Issuer") and THE BANK OF NEW YORK, a New York banking corporation, as Trustee hereunder (the "Trustee").
RECITALS OF THE ISSUERS
The Issuers have duly authorized the creation of an issue of their 8 1/4% Convertible Senior Notes due 2006 (herein called the "Notes") of substantially the tenor and amount hereinafter set forth, and to provide therefor the Issuers have duly authorized the execution and delivery of this Indenture.
All things necessary to make the Notes, when the Notes are executed by the Issuers and authenticated and delivered hereunder, the valid and legally binding obligations of the Issuers, and to make this Indenture a valid agreement of the Issuers, in accordance with their and its terms, have been done. Further, all things necessary to duly authorize the issuance of the Common Stock of the Company issuable upon the conversion of the Notes, and to duly reserve for issuance the number of shares of Common Stock issuable upon such conversion, have been done.
The Notes will be partially secured pursuant to the terms of the Pledge Agreement (as defined herein) by Pledged Securities as provided by Article 11 of this Indenture.
This Indenture is subject to, and shall be governed by, the provisions of the Trust Indenture Act of 1939, as amended, that are required to be a part of and to govern indentures qualified under the Trust Indenture Act of 1939, as amended.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Notes by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Notes, as follows:
ARTICLE 1
Definitions and Other Provisions of General Application
Section 1.01. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular;
(2) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP; and
(3) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision.
"Additional Pledged Securities" has the meaning specified in the Pledge Agreement.
"Affiliate" of any specified person means any other person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person. For purposes of this definition, "control" when used with respect to any specified person means the power to direct or cause the direction of the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Board of Directors" means either the board of directors of an Issuer, or any duly authorized committee of such board.
"Board Resolution" means a resolution duly adopted by the Board of Directors, a copy of which, certified by the Secretary or an Assistant Secretary of the applicable Issuer, to be in full force and effect on the date of such certification, shall have been delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which the banking institutions in The City of New York or the city in which the Corporate Trust Office is located are authorized or obligated by law or executive order to close or be closed.
"Capital Stock" of any corporation means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) stock issued by that corporation.
"Class A Common Stock" means the Class A Common Stock, par value $.10 per share, of the Company, authorized at the date of this instrument as originally executed.
"Class B Common Stock" means the Class B Common Stock, par value $.10 per share, of the Company, authorized at the date of this instrument as originally executed.
"Closing Price" of any security on any date of determination
means:
(1) the closing sale price (or, if no closing
sale price is reported, the last reported sale price) of
such security on the New York Stock Exchange on such date;
(2) if such security is not listed for trading on the New York Stock Exchange on any such date, the closing sale price as reported in the composite transactions for the principal U.S. securities exchange on which such security is so listed;
(3) if such security is not so listed on a U.S. national or regional securities exchange, the closing sale price as reported by the NASDAQ National Market;
(4) if such security is not so reported, the last quoted bid price for such security in the over-the-counter market as reported by the National Quotation Bureau or similar organization; or
(5) if such bid price is not available, the average of the mid-point of the last bid and ask prices of such security on such date from at least three nationally recognized independent investment banking firms retained for this purpose by the Company.
"Closing Time" has the meaning specified in the Purchase Agreement.
"Collateral Account" means an account established with the Collateral Agent pursuant to the terms of the Pledge Agreement for the deposit of the Pledged Securities to be purchased by the Co-Obligor with a portion of the net proceeds from the sale of the Notes.
"Collateral Agent" means The Bank of New York, as collateral agent under the Pledge Agreement.
"Common Stock" means the Class A Common Stock and Class B Common Stock. Subject to the provisions of Section 10.11, shares issuable on conversion or repurchase of Notes shall include only shares of Common Stock or shares of any class or classes of common stock resulting from any reclassification or reclassifications thereof; provided, however, that if at any time there shall be more than one such resulting class, the shares so issuable on conversion of Notes shall include shares of all such classes, and the shares of each such class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications.
"common stock" means any stock of any class of capital stock which has no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the issuer.
"Company" means the party named as the "Company" in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor. The foregoing sentence shall likewise apply to any subsequent such successor or successors.
"Conversion Agent" means any person authorized by the Issuers to convert Notes in accordance with Article 10 hereof.
"Co-Obligor" means the party named as the "Co-Obligor" in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor. The foregoing sentence shall likewise apply to any subsequent such successor or successors.
"Corporate Trust Office" means the principal office of the Trustee at which at any time its corporate trust business shall be administered, which office at the date hereof is located at 101 Barclay Street, Floor 21 West, New York, New York 10286, or such other address as the Trustee may designate from time to time by notice to the Holders and the Issuers, or the principal corporate trust office of any successor Trustee (or such other address as a successor Trustee may designate from time to time by notice to the Holders and the Issuers).
"Date of Delivery" has the meaning specified in the Purchase Agreement.
"Default" means any event which is, or after notice or passage of time or both would be, an Event of Default.
"Depositary" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in 2.07(d) as the Depositary with respect to such Notes, until a successor shall have been appointed and become such pursuant to the applicable provisions of this Indenture, and thereafter, "Depositary" shall mean or include such successor.
"GAAP" means United States generally accepted accounting principles as in effect from time to time.
"Holder" or "Noteholder" as applied to any Note, or other similar terms (but excluding the term "beneficial holder"), means any Person in whose name at the time a particular Note is registered on the Note Registrar's books.
"Indenture" means this Indenture, as amended or supplemented from time to time in accordance with the terms hereof, including the provisions of the TIA that are deemed to be a part hereof.
"Initial Pledged Securities" has the meaning specified in the Pledge Agreement.
"Initial Purchaser" means Merrill Lynch, Pierce, Fenner & Smith Incorporated.
"Institutional Accredited Investor" means an institutional
"accredited investor" as described in Rule 501(a)(1), (2),
(3) or (7) under the Securities Act.
"Interest Payment Date" means the Stated Maturity of an installment of interest on the Notes.
"Issue Date" of any Note means the date on which the Note was originally issued or deemed issued as set forth on the face of the Note.
"Issuer Order" means a written order signed in the name of the Issuers by any two Officers of each Issuer.
"Issuers" means the Company and the Co-Obligor, and "Issuer" means either of them.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset given to secure indebtedness, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction with respect to any such lien, pledge, charge or security interest).
"Liquidated Damages" has the meaning specified for "Liquidated Damages Amount" in Section 2(e) of the Registration Rights Agreement.
"Notes" has the meaning ascribed to it in the first paragraph under the caption "Recitals of the Issuers".
"Officer" means the Chairman of the Board, the Vice Chairman, the Chief Executive Officer, the President, any Executive Vice President, any Senior Vice President, any Vice President, the Treasurer or the Secretary or any Assistant Treasurer or Assistant Secretary of an Issuer.
"Officers' Certificate" means a written certificate containing the information specified in Sections 12.04 and 12.05, signed in the name of the Issuers by any two Officers of each Issuer, and delivered to the Trustee. An Officers' Certificate given pursuant to Section 4.03 shall be signed by an authorized financial or accounting Officer of each Issuer but need not contain the information specified in Sections 12.04 and 12.05.
"Opinion of Counsel" means a written opinion containing the information specified in Sections 12.04 and 12.05, from legal counsel. The counsel may be an employee of, or counsel to, the Issuers.
"Overallotment Option" means the overallotment option granted by the Issuers to the Initial Purchaser to purchase up to $78,750,000 aggregate principal amount of Notes to cover overallotments pursuant to the Purchase Agreement.
"person" or "Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, or government or any agency or political subdivision thereof.
"Pledge Agreement" means the Collateral Pledge and Security Agreement, dated as of August 7, 2001, among the Co-Obligor, the Trustee and the Collateral Agent, as such agreement may be amended, restated, supplemented or otherwise modified from time to time.
"Pledged Securities" means the U.S. Government Obligations to be purchased by the Co-Obligor and held in the Collateral Account in accordance with the Pledge Agreement.
"Portal Market" means The Portal Market operated by the National Association of Securities Dealers, Inc. or any successor thereto.
"principal" of a Note means the principal amount due on the Stated Maturity as set forth on the face of the Note.
"Purchase Agreement" means the Purchase Agreement dated as of August 1, 2001, between the Issuers and the Initial Purchaser.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Redemption Date" or "redemption date" means the date specified for redemption of the Notes in accordance with the terms of the Notes and this Indenture.
"Redemption Price" or "redemption price" shall have the meaning set forth in paragraph 5 of the Notes.
"Registration Rights Agreement" means that certain Registration Rights Agreement, dated as of August 7, 2001, between the Issuers and the Initial Purchaser, as amended from time to time in accordance with its terms.
"Regular Record Date" means, with respect to the interest payable on any Interest Payment Date, the close of business on January 15 or July 15 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date.
"Responsible Officer" means, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject, and who shall have direct responsibility for the administration of this Indenture.
"Rule 144A" means Rule 144A under the Securities Act (or any successor provision), as it may be amended from time to time.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the United States Securities Act of 1933 (or any successor statute), as amended from time to time.
"Significant Subsidiary" means any direct or indirect
Subsidiary of the Company that meets any of the following
conditions:
(1) the Company's and its other Subsidiaries'
investments in and advances to such Subsidiary exceed 20% of
the total assets of the Company and its Subsidiaries
consolidated as of the end of the most recently completed
fiscal year;
(2) the Company's and its other Subsidiaries' proportionate share of the total assets (after intercompany eliminations) of such Subsidiary exceed 20% of the total assets of the Company and its Subsidiaries consolidated as of the end of the most recently completed fiscal year; or
(3) the Company's and its other Subsidiaries' equity in the income from continuing operations before income taxes, extraordinary items and cumulative effect of a change in accounting principle of such Subsidiary exceed 20% of such income of the Company and its Subsidiaries consolidated for the most recently completed fiscal year.
"Stated Maturity," when used with respect to any Note or any installment of interest thereon, means the date specified in such Note as the fixed date on which the principal of such Note or such installment of interest is due and payable.
"Subsidiary" means (i) a corporation, a majority of whose Capital Stock with voting power, under ordinary circumstances, to elect directors is, at the date of determination, directly or indirectly owned by an Issuer, by one or more Subsidiaries of such Issuer or by such Issuer and one or more Subsidiaries of such Issuer, (ii) a partnership in which an Issuer or a Subsidiary of such Issuer holds a majority interest in the equity capital or profits of such partnership, or (iii) any other person (other than a corporation) in which an Issuer, a Subsidiary of such Issuer or such Issuer and one or more Subsidiaries of such Issuer, directly or indirectly, at the date of determination, has (x) at least a majority ownership interest or (y) the power to elect or direct the election of a majority of the directors or other governing body of such person.
"Supplement" has the meaning specified in the Pledge Agreement.
"TIA" means the Trust Indenture Act of 1939 as in effect on the date of this Indenture; provided, however, that in the event the TIA is amended after such date, TIA means, to the extent required by any such amendment, the TIA as so amended.
"Trading Day" means a day during which trading in Notes generally occurs on the New York Stock Exchange or, if the Common Stock is not listed on the New York Stock Exchange, on the principal other national or regional securities exchange on which the Common Stock is then listed or, if the Common Stock is not listed on a national or regional securities exchange, on the National Association of Notes Dealers Automated Quotation System or, if the Common Stock is not quoted on the National Association of Securities Dealers Automated Quotation System, on the principal other market on which the Common Stock is then traded.
"Trustee" means the party named as the "Trustee" in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor. The foregoing sentence shall likewise apply to any subsequent such successor or successors.
"United States" means the United States of America (including the States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction (its "possessions" including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands).
"U.S. Government Obligations" means securities that are (i)
direct obligations of the United States of America for the
payment of which its full faith and credit is pledged or
(ii) obligations of a Person controlled or supervised by or
acting as an agency or instrumentality of the United States
of America the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the
United States of America, which, in either case, are not
callable or redeemable at the option of the issuer thereof
at any time prior to the Stated Maturity of the Notes, and
shall also include a depository receipt issued by a bank or
trust company as custodian with respect to any such U.S.
Government Obligation or a specific payment of interest on
or principal of any such U.S. Government Obligation held by
such custodian for the account of the holder of a depository
receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from
any amount received by the custodian in respect of the U.S.
Government Obligation or the specific payment of interest on
or principal of the U.S. Government Obligation evidenced by
such depository receipt.
"Voting Stock" means with respect to any Person, Capital Stock of any class or kind ordinarily having the power to vote for the election of directors of such Person.
Section 1.02. Other Definitions. Term Defined in Section "Act" 1.05(a) "Agent Members" 2.06(d) "Authenticating Agent" 12.14 "Bankruptcy Law" 6.01 "Certificated Notes" 2.07(b) "Change of Control" 3.08(a) "Change of Control Repurchase Date" 3.08(a) "Change of Control Repurchase Notice" 3.08(d) "Change of Control Repurchase Price" 3.08(a) "Conversion Price" 10.01 "Current Market Price" 10.04(g) "Custodian" 6.01 "Event of Default" 6.01 "Exchange Act" 3.08(a) "excluded securities" 10.04(d) "Expiration Time" 10.04(f) "fair market value" 10.04(g) "Globe Note" 2.07(b) "Legal Holiday" 12.08 "Liquidated Damages Notice" 4.10 "Non-Electing Share" 10.11 "Note Register" 2.07(a) "Note Registrar" 2.07(a) "Notice of Default" 6.01 "Paying Agent" 2.03 "Principal Amount" 2.07(b) "Purchased Shares" 10.04(f) "Record Date" 10.04(g) "Reference Period" 10.04(d) "Restricted Note" 10.02 "Restricted Securities" 2.07(d) "Rule 144A Information" 4.06 "transfer" 2.07(d) "Trigger Event" 10.04(d) |
Section 1.03. Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture Notes" means the Notes.
"indenture Note holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture Notes means the Issuers.
All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions.
Section 1.04. Rules of Construction. Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles as in effect from time to time;
(c) "or" is not exclusive;
(d) "including" means including, without limitation; and
(e) words in the singular include the plural, and words in the plural include the singular.
Section 1.05. Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by their agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Issuers. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Issuers, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to such officer the execution thereof. Where such execution is by a signer acting in a capacity other than such signer's individual capacity, such certificate or affidavit shall also constitute sufficient proof of such signer's authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient.
The ownership of Notes shall be proved by the Note Register or by a certificate of the Note Registrar.
Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Note shall bind every future Holder of the same Note and the holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Issuers in reliance thereon, whether or not notation of such action is made upon such Note.
If the Issuers shall solicit from the Holders any request, demand, authorization, direction, notice, consent, waiver or other Act, the Issuers may, at its option, by or pursuant to a resolution of the Board of Directors each Issuer, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Issuers shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for purposes of determining whether Holders of the requisite proportion of outstanding Notes have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the outstanding Notes shall be computed as of such record date; provided that no such authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date.
ARTICLE 2
The Notes
Section 2.01. Designation Amount and Issue of Notes. The Notes shall be designated as "8 1/4% Convertible Senior Notes due 2006". Except pursuant to Sections 2.07, 2.08, 3.06, 3.11 and 10.02 hereof, Notes not to exceed the aggregate principal amount of $525,000,000 (or $603,750,000, if the Overallotment Option is fully exercised by the Initial Purchaser) upon the execution of this Indenture, or from time to time thereafter, may be executed by the Issuers and delivered to the Trustee for authentication, and the Trustee shall thereupon authenticate and deliver said Notes upon a Issuer Order, without any further action by the Issuers hereunder.
Section 2.02. Form of Notes. The Notes and the Trustee's certificate of authentication to be borne by such Notes shall be substantially in the form set forth in Exhibit A, which is incorporated in and made a part of this Indenture.
Any of the Notes may have such letters, numbers or other marks of identification and such notations, legends and endorsements as the officers executing the same may approve (execution thereof to be conclusive evidence of such approval) and as are not inconsistent with the provisions of this Indenture, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any securities exchange or automated quotation system on which the Notes may be listed, or to conform to usage.
Any Global Note shall represent such of the outstanding Notes as shall be specified therein and shall provide that it shall represent the aggregate amount of outstanding Notes from time to time endorsed thereon and that the aggregate amount of outstanding Notes represented thereby may from time to time be increased or reduced to reflect transfers or exchanges permitted hereby. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the amount of outstanding Notes represented thereby shall be made by the Trustee, in such manner and upon instructions given by the holder of such Notes in accordance with this Indenture. Payment of principal of and interest and premium, if any, on any Global Note shall be made to the holder of such Note.
The terms and provisions contained in the form of Note attached as Exhibit A hereto shall constitute, and are hereby expressly made, a part of this Indenture and, to the extent applicable, the Issuers and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby.
Section 2.03. Execution and Authentication. The Notes shall be executed on behalf of the Issuers by an Officer of each Issuer, under its corporate seal reproduced thereon, which may be manual or facsimile. The signatures of such Officers on the Notes may be manual or facsimile.
Notes bearing the manual or facsimile signatures of individuals who were at the time of the execution of the Notes the proper Officers of the Issuers shall bind the Issuers, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Notes or did not hold such offices at the date of authentication of such Notes. Notes shall be dated the date of their authentication.
No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Note a certificate of authentication substantially in the form provided for herein duly executed by the Trustee or an Authenticating Agent by manual signature of an authorized officer, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder.
The Notes shall be issued only in registered form without coupons and only in denominations of $1,000 in principal amount and any integral multiple thereof.
Section 2.04. Note Registrar, Paying Agent and Conversion
Agent. The Issuers shall maintain an office or agency where
Notes may be presented for registration of transfer or for
exchange ("Note Registrar"), an office or agency where Notes
may be presented for purchase or payment ("Paying Agent")
and an office or agency where Notes may be presented for
conversion ("Conversion Agent"). The Note Registrar shall
keep a register (the "Note Register") in which, subject to
such reasonable regulations as it may prescribe it shall
provide for the registration and transfer of the Notes. The
Issuers may have one or more co-registrars, one or more
additional paying agents and one or more additional
conversion agents. The term Paying Agent includes any
additional paying agent, including any named pursuant to
Section 4.05. The term Conversion Agent includes any
additional conversion agent, including any named pursuant to
Section 4.05.
The Issuers shall notify the Trustee of the name and address of any such agent. If the Issuers fail to maintain a Note Registrar, Paying Agent or Conversion Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.06. The Issuers or any Subsidiary or an Affiliate of either of them may act as Paying Agent, Note Registrar, Conversion Agent or co- registrar.
The Issuers initially appoint the Trustee as Note Registrar, Conversion Agent and Paying Agent in connection with the Notes.
Section 2.05. Paying Agent to Hold Money and Notes in Trust. Except as otherwise provided herein, on or prior to each due date of payments in respect of any Note, the Issuers shall deposit with the Paying Agent a sum of money (in immediately available funds if deposited on the due date) or Common Stock sufficient to make such payments when so becoming due. The Issuers shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Noteholders or the Trustee all money and Common Stock held by the Paying Agent for the making of payments in respect of the Notes and shall notify the Trustee of any default by the Issuers in making any such payment. At any time during the continuance of any such default, the Paying Agent shall, upon the written request of the Trustee, forthwith pay to the Trustee all money and Common Stock so held in trust. If the Issuers, a Subsidiary or an Affiliate of either of them acts as Paying Agent, it shall segregate the money and Common Stock held by it as Paying Agent and hold it as a separate trust fund. The Issuers at any time may require a Paying Agent to pay all money and Common Stock held by it to the Trustee and to account for any funds and Common Stock disbursed by it. Upon doing so, the Paying Agent shall have no further liability for the money or Common Stock.
Section 2.06. Noteholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Noteholders. If the Trustee is not the Note Registrar, the Issuers shall cause to be furnished to the Trustee at least semiannually on January 1 and July 1 a listing of Noteholders dated within 15 days of the date on which the list is furnished and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Noteholders.
Section 2.07. Transfer and Exchange; Restrictions on Transfer; Depositary. (a) Upon surrender for registration of transfer of any Note, together with a written instrument of transfer satisfactory to the Note Registrar duly executed by the Noteholder or such Noteholder's attorney duly authorized in writing, at the office or agency of the company designated as Note Registrar or co-registrar pursuant to Section 2.04, and satisfaction of the requirements of such transfer set forth in this Section, the Issuers shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Notes of any authorized denomination or denominations, of a like aggregate principal amount and bearing such restrictive legends as may be required by this Indenture. The Issuers shall not charge a service charge for any registration of transfer or exchange, but the Issuers may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges that may be imposed in connection with the transfer or exchange of the Notes from the Noteholder requesting such transfer or exchange.
At the option of the Holder, Notes may be exchanged for other Notes of any authorized denomination or denominations, of a like aggregate principal amount, upon surrender of the Notes to be exchanged, together with a written instrument of transfer satisfactory to the Note Registrar duly executed by the Noteholder or such Noteholder's attorney duly authorized in writing, at such office or agency. Whenever any Notes are so surrendered for exchange, the Issuers shall execute, and the Trustee shall authenticate and deliver, the Notes which the Holder making the exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Issuers, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Notes surrendered upon such registration of transfer or exchange.
The Issuers shall not be required to make, and the Note Registrar need not register, transfers or exchanges of Notes selected for redemption (except, in the case of Notes to be redeemed in part, the portion thereof not to be redeemed) or any Notes in respect of which a Change of Control Repurchase Notice (as defined in Section 3.08(d)) has been given and not withdrawn by the Holder thereof in accordance with the terms of this Indenture (except, in the case of Notes to be purchased in part, the portion thereof not to be purchased) or any Notes for a period of 15 days before the mailing of a notice of redemption of Notes to be redeemed.
(b) So long as the Notes are eligible for book-entry settlement with the Depositary, or unless otherwise required by law, all Notes that, upon initial issuance are beneficially owned by QIBs or as a result of a sale or transfer after initial issuance are beneficially owned by QIBs, will be represented by one or more Notes in global form registered in the name of the Depositary or the nominee of the Depositary (the "Global Note"), except as otherwise specified below. The transfer and exchange of beneficial interests in any such Global Note shall be effected through the Depositary in accordance with this Indenture and the procedures of the Depositary therefor. The Trustee shall make appropriate endorsements to reflect increases or decreases in the principal amounts of any such Global Note as set forth on the face of the Note ("Principal Amount") to reflect any such transfers. Except as provided below, beneficial owners of a Global Note shall not be entitled to have certificates registered in their names, will not receive or be entitled to receive physical delivery of certificates in definitive form ("Certificated Notes") and will not be considered holders of such Global Note.
(c) (i) So long as the Notes are eligible for book- entry settlement with the Depositary, or unless otherwise required by law, upon any transfer of a Certificated Note to a QIB in accordance with Rule 144A that requests delivery of such Note in the form of an interest in the Global Note, and upon receipt of the Certificated Note or Notes being so transferred, together with a certification, substantially in the form of Exhibit B-1 hereto, from the transferor that the transfer is being made in compliance with Rule 144A (or other evidence satisfactory to the Trustee), the Trustee shall make an endorsement on the Global Note to reflect an increase in the aggregate Principal Amount of the Notes represented by such Global Note, and the Trustee shall cancel such Certificated Note or Notes in accordance with the standing instructions and procedures of the Depositary.
(ii) Upon any sale or transfer of a Note to the Company or any Subsidiary thereof (other than pursuant to a registration statement that has been declared effective under the Securities Act or after the expiration of the holding period applicable to sales thereof under Rule 144(k) under the Securities Act), the transferor shall, prior to such sale or transfer, furnish to the Issuers and/or Trustee such certifications, including a certification substantially in the form of Exhibit B-1 hereto, legal opinions or other information as they may reasonably require to confirm that the proposed transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Upon any transfer of a beneficial interest in the Global Note to the Company or such Subsidiary, as the case may be, the Trustee shall make an endorsement on the Global Note to reflect a decrease in the aggregate Principal Amount of the Notes represented by such Global Note, and the Issuers shall execute a Certificated Note or Notes in exchange therefor, and the Trustee, upon receipt of such Certificated Note or Notes and an Issuer Order, shall authenticate and deliver such, Certificated Note or Notes.
(iii) Upon any sale or transfer of a Note to an Institutional Accredited Investor (other than pursuant to a registration statement that has been declared effective under the Securities Act or after the expiration of the holding period applicable to sales thereof under Rule 144(k) under the Securities Act), such Institutional Accredited Investor shall, prior to such sale or transfer, furnish to the Issuers and/or the Trustee a signed letter containing representations and agreements relating to restrictions on transfer substantially in the form set forth in Exhibit B-2 hereto and the transferor shall, prior to such sale or transfer, furnish to the Issuers and/or Trustee such certifications, including a certification substantially in the form of Exhibit B-1 hereto, legal opinions or other information as they may reasonably require to confirm that the proposed transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Upon any transfer of a beneficial interest in the Global Note to an Institutional Accredited Investor, the Trustee shall make an endorsement on the Global Note to reflect a decrease in the aggregate Principal Amount of the Notes represented by such Global Note, and the Issuers shall execute a Certificated Note or Notes in exchange therefor, and the Trustee, upon receipt of such Certificated Note or Notes and an Issuer Order, shall authenticate and deliver such, Certificated Note or Notes.
(iv) Upon any sale or transfer of a Note outside the United States in compliance with Rule 904 under the Securities Act (other than pursuant to a registration statement that has been declared effective under the Securities Act or after the expiration of the holding period applicable to sales thereof under Rule 144(k) under the Securities Act), the transferor shall, prior to such sale or transfer, furnish to the Issuers and/or the Trustee such certifications, including a certification substantially in the form of Exhibit B-1 hereto, legal opinions or other information as they may reasonably require to confirm that the proposed transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Upon any transfer of a beneficial interest in the Global Note to such transferee, the Trustee shall make an endorsement on the Global Note to reflect a decrease in the aggregate Principal Amount of the Notes represented by such Global Note, and the Issuers shall either (1) execute a Certificated Note or Notes in exchange therefor, and the Trustee, upon receipt of such Certificated Note or Notes and an Issuer Order, shall authenticate and deliver such, Certificated Note or Notes or (2) if a Global Note with respect to Notes transferred in compliance with Regulation S under the Securities Act has previously been executed and authenticated, the Trustee shall make an endorsement on such Global Note to reflect a corresponding increase in the aggregate Principal Amount of Notes represented by such Global Note.
(v) Upon any sale or transfer of a Note pursuant to the exemption from registration provided by Rule 144 under the Securities Act, the transferor shall, prior to such sale or transfer, furnish to the Issuers and/or the Trustee such certifications, including a certification substantially in the form of Exhibit B-1 hereto, legal opinions or other information as they may reasonably require to confirm that the proposed transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Upon any transfer of a beneficial interest in the Global Note to such transferee, the Trustee shall make an endorsement on the Global Note to reflect a decrease in the aggregate Principal Amount of the Notes represented by such Global Note, and, at the request of the transferee, either (1) the Issuers shall execute a Certificated Note or Notes in exchange therefor, and the Trustee, upon receipt of such Certificated Note or Notes and an Issuer Order, shall authenticate and deliver such, Certificated Note or Notes or (2) if a Global Note that does not bear the legend set forth in Section 2.07(d) has previously been executed and authenticated, the Trustee shall make an endorsement on such Global Note to reflect a corresponding increase in the aggregate Principal Amount of Notes represented by such Global Note.
Any Global Note may be endorsed with or have incorporated in the text thereof such legends or recitals or changes not inconsistent with the provisions of this Indenture as may be required by the Trustee, the Depositary or by the National Association of Securities Dealers, Inc. in order for the Notes to be tradeable on The Portal Market or as may be required for the Notes to be tradeable on any other market developed for trading of securities pursuant to Rule 144A or required to comply with any applicable law or any regulation thereunder or with the rules and regulations of any securities exchange or automated quotation system upon which the Notes may be listed or traded or to conform with any usage with respect thereto, or to indicate any special limitations or restrictions to which any particular Notes are subject.
(d) Every Note that bears or is required under this
Section 2.07(d) to bear the legend set forth in this Section
2.07(d) (together with any Common Stock issued upon
conversion of the Notes and required to bear the legend set
forth in Section 2.07(e), collectively, the "Restricted
Securities") shall be subject to the restrictions on
transfer set forth in this Section 2.07(d) (including those
set forth in the legend set forth below) unless such
restrictions on transfer shall be waived by written consent
of the Issuers, and the holder of each such Restricted
Security, by such Noteholder's acceptance thereof, agrees to
be bound by all such restrictions on transfer. As used in
Section 2.07(d) and 2.07(c), the term "transfer" encompasses
any sale, pledge, loan, transfer or other disposition
whatsoever of any Restricted Security.
Until the expiration of the holding period applicable to sales thereof under Rule 144(k) under the Securities Act (or any successor provision), any certificate evidencing such Note (and all securities issued in exchange therefor or substitution thereof, other than Common Stock, if any, issued upon conversion thereof, which shall bear the legend set forth in Section 2.07(e), if applicable) shall bear a legend in substantially the following form, unless such Note has been sold pursuant to a registration statement that has been declared effective under the Securities Act (and which continues to be effective at the time of such transfer), or unless otherwise agreed by the Issuers in writing, with written notice thereof to the Trustee:
THIS SECURITY AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY, THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES THEREOF UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION) (THE "RESALE RESTRICTION PERIOD") ONLY (A) TO FREEPORT-MCMORAN COPPER & GOLD OR ANY SUBSIDIARY THEREOF, (B) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHICH NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) OUTSIDE THE UNTIED STATES TO NON-U.S. PERSONS IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S, (D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) or (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, (E) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, INCLUDING UNDER RULE 144, IF AVAILABLE, SUBJECT IN EACH OF THE FOREGOING CASES TO ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF ITS PROPERTY OR THE PROPERTY OF SUCH INVESTOR ACCOUNT OR ACCOUNTS BE AT ALL TIME WITHIN ITS OR THEIR CONTROL. IF ANY RESALE OR OTHER TRANSFER OF THIS SECURITY OR SHARES OF COMMON STOCK ISSUED UPON CONVERSION OF THIS SECURITY IS PROPOSED TO BE MADE PURSUANT TO CLAUSE (D) ABOVE PRIOR TO THE EXPIRATION OF THE RESALE RESTRICTION PERIOD (OR THE DATE OF REGISTRATION THEREOF), THE TRANSFEROR SHALL BE REQUIRED TO DELIVER A LETTER FROM THE TRANSFEREE TO THE TRUSTEE WHICH SHALL PROVIDE, AMONG OTHER THINGS, THAT THE TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) or (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY OR THE SHARES OF COMMON STOCK ISSUED UPON CONVERSION OF THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT. PRIOR TO THE EXPIRATION OF THE RESALE RESTRICTION PERIOD, THE ISSUERS AND THE TRUSTEE RESERVE THE RIGHT TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE EXPIRATION OF THE RESALE RESTRICTION PERIOD.
Any Note (or security issued in exchange or substitution
therefor) as to which such restrictions on transfer shall
have expired in accordance with their terms or as to
conditions for removal of the foregoing legend set forth
therein have been satisfied may, upon surrender of such Note
for exchange to the Note Registrar in accordance with the
provisions of this Section 2.07, be exchanged for a new Note
or Notes, of like tenor and aggregate principal amount,
which shall not bear the restrictive legend required by this
Section 2.07(d).
Notwithstanding any other provisions of this Indenture (other than the provisions set forth in Section 2.07(c), with respect to transfers of beneficial interests in a Global Note, and in this Section 2.07(d)), a Global Note may not be transferred as a whole or in part except by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary.
Neither any members of, or participants in, the Depositary (collectively, the "Agent Members") nor any other Persons on whose behalf Agent Members may act shall have any rights under this Indenture with respect to any Global Note registered in the name of the Depositary or any nominee thereof, or under any such Global Note, and the Depositary or such nominee, as the case may be, may be treated by the Issuers, the Trustee and any agent of the Issuers or the Trustee as the absolute owner and holder of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Issuers, the Trustee or any agent of the Issuers or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or such nominee, as the case may be, or impair, as between the Depositary, its Agent Members and any other person on whose behalf an Agent Member may act, the operation of customary practices of such Persons governing the exercise of the rights of a holder of any Note.
The Depositary shall be a clearing agency registered under the Exchange Act. The Issuers initially appoint The Depository Trust Company to act as Depositary with respect to the Notes in global form. Initially, the Global Note shall be issued to the Depositary, registered in the name of Cede & Co., as the nominee of the Depositary, and deposited with the Trustee, as custodian for Cede & Co.
If at any time the Depositary for a Global Note notifies the Issuers that it is unwilling or unable to continue as Depositary for such Note, the Issuers may appoint a successor Depositary with respect to such Note. If a successor Depositary is not appointed by the Issuers within ninety (90) days after the Issuers receive such notice, the Issuers will execute, and the Trustee, upon receipt of an Officers' Certificate for the authentication and delivery of Notes, will authenticate and deliver, Certificated Notes, in aggregate principal amount equal to the principal amount of such Global Note, in exchange for such Global Note.
If a Certificated Note is issued in exchange for any portion of a Global Note after the close of business at the office or agency where such exchange occurs on any Regular Record Date and before the opening of business at such office or agency on the next succeeding Interest Payment Date, interest will not be payable on such Interest Payment Date in respect of such Certificated Note, but will be payable on such Interest Payment Date only to the Person to whom interest in respect of such portion of such Global Note is payable in accordance with the provisions of this Indenture.
Certificated Notes issued in exchange for all or a part of a Global Note pursuant to this Section 2.07 shall be registered in such names and in such authorized denominations as the Depositary, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. Upon execution and authentication, the Trustee shall deliver such Certificated Notes to the Persons in whose names such Certificated Notes are so registered.
At such time as all interests in a Global Note have been redeemed, converted, canceled, exchanged for Certificated Notes, or transferred to a transferee who receives Certificated Notes thereof, such Global Note shall, upon receipt thereof, be canceled by the Trustee in accordance with standing procedures and instructions existing between the Depositary and the Trustee. At any time prior to such cancellation, if any interest in a Global Note is exchanged for Certificated Notes, redeemed, converted, repurchased or canceled, or transferred to a transferee who receives Certificated Notes therefor or any Certificated Note is exchanged or transferred for part of a Global Note, the principal amount of such Global Note shall, in accordance with the standing procedures and instructions existing between the Depositary and the Trustee, be appropriately reduced or increased, as the case may be, and an endorsement shall be made on such Global Note, by the Trustee to reflect such reduction or increase.
(e) Until the expiration of the holding period applicable to sales thereof under Rule 144(k) under the Securities Act (or any successor provision), any stock certificate representing Common Stock issued upon conversion of any Note shall bear a legend in substantially the following form, unless such Common Stock has been sold pursuant to a registration statement that has been declared effective under the Securities Act (and which continues to be effective at the time of such transfer) or such Common Stock has been issued upon conversion of Notes that have been transferred pursuant to a registration statement that has been declared effective under the Securities Act, or unless otherwise agreed by the Issuers in writing with written notice thereof to the transfer agent:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES THEREOF UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION) (THE "RESALE RESTRICTION PERIOD") ONLY (A) TO FREEPORT-MCMORAN COPPER & GOLD OR ANY SUBSIDIARY THEREOF, (B) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHICH NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) OUTSIDE THE UNTIED STATES TO NON-U.S. PERSONS IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S, (D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) or (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, (E) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, INCLUDING UNDER RULE 144, IF AVAILABLE, SUBJECT IN EACH OF THE FOREGOING CASES TO ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF ITS PROPERTY OR THE PROPERTY OF SUCH INVESTOR ACCOUNT OR ACCOUNTS BE AT ALL TIME WITHIN ITS OR THEIR CONTROL. IF ANY RESALE OR OTHER TRANSFER OF THIS SECURITY IS PROPOSED TO BE MADE PURSUANT TO CLAUSE (D) ABOVE PRIOR TO THE EXPIRATION OF THE RESALE RESTRICTION PERIOD (OR THE DATE OF REGISTRATION THEREOF), THE TRANSFEROR SHALL BE REQUIRED TO DELIVER A LETTER FROM THE TRANSFEREE TO THE TRANSFER AGENT WHICH SHALL PROVIDE, AMONG OTHER THINGS, THAT THE TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) or (7) OF RULE 501 UNDER THE SECURITIES ACT AND THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT. PRIOR TO THE EXPIRATION OF THE RESALE RESTRICTION PERIOD, THE ISSUERS AND THE TRANSFER AGENT RESERVE THE RIGHT TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRANSFER AGENT. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE EXPIRATION OF THE RESALE RESTRICTION PERIOD.
Any such Common Stock as to which such restrictions on transfer shall have expired in accordance with their terms or as to which the conditions for removal of the foregoing legend set forth therein have been satisfied may, upon surrender of the certificates representing such shares of Common Stock for exchange in accordance with the procedures of the transfer agent for the Common Stock, be exchanged for a new certificate or certificates for a like number of shares of Common Stock, which shall not bear the restrictive legend required by this Section 2.07(e).
(f) Any Note or Common Stock issued upon the conversion or exchange of a Note that, prior to the expiration of the holding period applicable to sales thereof under Rule 144(k) under the Securities Act (or any successor provision), is purchased or owned by the Company or any Affiliate thereof may not be resold by the Company or such Affiliate unless registered under the Securities Act or resold pursuant to an exemption from the registration requirements of the Securities Act in a transaction which results in such Notes or Common Stock, as the case may be, no longer being "restricted securities" (as defined under Rule 144).
Section 2.08. Replacement Notes. If (a) any mutilated Note is surrendered to the Trustee, or (b) the Issuers, the Trustee and, if applicable, the Authenticating Agent receive evidence to their satisfaction of the destruction, loss or theft of any Note, and there is delivered to the Issuers, the Trustee and, if applicable, the Authenticating Agent such Note or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Issuers, the Trustee or, if applicable, the Authenticating Agent that such Note has been acquired by a bona fide purchaser, the Issuers shall execute and upon their written request the Trustee or the Authenticating Agent shall authenticate and deliver, in exchange for any such mutilated Note or in lieu of any such destroyed, lost or stolen Note, a new Note of like tenor and principal amount, bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, or is about to be purchased by the Issuers pursuant to Article 3 hereof, the Issuers in their discretion may, instead of issuing a new Note, pay or purchase such Note, as the case may be.
Upon the issuance of any new Notes under this Section 2.08, the Issuers may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee and any Authenticating Agent) connected therewith.
Every new Note issued pursuant to this Section 2.08 in lieu of any mutilated, destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Issuers, whether or not the destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section 2.08 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes.
Section 2.09. Outstanding Notes; Determination of Holders' Action. Notes outstanding at any time are all the Notes authenticated by the Trustee except for those cancelled by it or delivered to it for cancellation, those paid pursuant to Section 2.08 and those described in this Section 2.09 as not outstanding. A Note does not cease to be outstanding because the Issuers or an Affiliate thereof holds the Note; provided, however, that in determining whether the Holders of the requisite principal amount of the outstanding Notes have given or concurred in any request, demand, authorization, direction, notice, consent or waiver hereunder, Notes owned by the Issuers or any other obligor upon the Notes or any Affiliate of the Issuers or such other obligor shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes which a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded. Subject to the foregoing, only Notes outstanding at the time of such determination shall be considered in any such determination (including, without limitation, determinations pursuant to Articles 6 and 9).
If a Note is replaced pursuant to Section 2.08, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser.
If the Paying Agent holds, in accordance with this
Indenture, on a Redemption Date, or on the Business Day
following the Change of Control Repurchase Date, or on
Stated Maturity, money or securities, if permitted
hereunder, sufficient to pay Notes payable on that date,
then immediately after such Redemption Date, Change of
Control Repurchase Date or Stated Maturity, as the case may
be, such Notes shall cease to be outstanding and interest on
such Notes shall cease to accrue; provided that, if such
Notes are to be redeemed, notice of such redemption has been
duly given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made.
If a Note is converted in accordance with Article 10, then
from and after the time of conversion on the conversion
date, such Note shall cease to be outstanding and interest
shall cease to accrue on such Note.
Section 2.10. Temporary Notes. Pending the preparation of definitive Notes, the Issuers may execute, and upon an Issuer Order the Trustee shall authenticate and deliver, temporary Notes which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Notes in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Notes may determine, as conclusively evidenced by their execution of such Notes.
If temporary Notes are issued, the Issuers will cause definitive Notes to be prepared without unreasonable delay. After the preparation of definitive Notes, the temporary Notes shall be exchangeable for definitive Notes upon surrender of the temporary Notes at the office or agency of the Issuers designated for such purpose pursuant to Section 2.04, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Notes the Issuers shall execute and the Trustee or an Authenticating Agent shall authenticate and deliver in exchange therefor a like principal amount of definitive Notes of authorized denominations. Until so exchanged the temporary Notes shall in all respects be entitled to the same benefits under this Indenture as definitive Notes.
Section 2.11. Cancellation. All Notes surrendered for payment, purchase by the Issuers pursuant to Article 3, conversion, redemption or registration of transfer or exchange shall, if surrendered to any person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The Issuers may at any time deliver to the Trustee for cancellation any Notes previously authenticated and delivered hereunder which the Issuers may have acquired in any manner whatsoever, and all Notes so delivered shall be promptly cancelled by the Trustee. The Issuers may not issue new Notes to replace Notes it has paid or delivered to the Trustee for cancellation or that any Holder has converted pursuant to Article 10. No Notes shall be authenticated in lieu of or in exchange for any Notes cancelled as provided in this Section 2.11, except as expressly permitted by this Indenture. All cancelled Notes held by the Trustee shall be disposed of by the Trustee in its customary manner.
Section 2.12. Persons Deemed Owners. Prior to due presentment of a Note for registration of transfer, the Issuers, the Trustee and any agent of the Issuers or the Trustee may treat the Person in whose name such Note is registered as the owner of such Note for the purpose of receiving payment of principal of the Note or the payment of any Redemption Price or Change of Control Repurchase Price in respect thereof, and interest thereon, for the purpose of conversion and for all other purposes whatsoever, whether or not such Note be overdue, and neither the Issuers, the Trustee nor any agent of the Issuers or the Trustee shall be affected by notice to the contrary.
Section 2.13. CUSIP Numbers. The Issuers in issuing the
Notes may use "CUSIP" numbers (if then generally in use),
and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided that any
such notice may state that no representation is made as to
the correctness of such numbers either as printed on the
Notes or as contained in any notice of a redemption and that
reliance may be placed only on the other identification
numbers printed on the Notes, and any such redemption shall
not be affected by any defect in or omission of such
numbers. The Issuers will promptly notify the Trustee of any
change in the CUSIP numbers.
Section 2.14. Default Interest. If the Issuers default in
a payment of interest on the Notes, it shall pay, or shall
deposit with the Paying Agent money in immediately available
funds sufficient to pay, the defaulted interest, plus (to
the extent lawful) any interest payable on the defaulted
interest, to the Persons who are Holders on a subsequent
special record date. A special record date, as used in this
Section 2.14 with respect to the payment of any defaulted interest, shall mean the 15th day next preceding the date fixed by the Issuers for the payment of defaulted interest, whether or not such day is a Business Day. At least 15 days before the subsequent special record date, the Issuers shall mail to each Holder and to the Trustee a notice that states the subsequent special record date, the payment date and the amount of defaulted interest to be paid.
ARTICLE 3
Redemption and Purchases
Section 3.01. Right to Redeem; Notices to Trustee. The Issuers, at their option, may redeem the Notes in accordance with the provisions of paragraphs 5 and 7 of the Notes. If the Issuers elect to redeem Notes pursuant to paragraph 5 of the Notes, they shall notify the Trustee in writing of the Redemption Date, the principal amount of Notes to be redeemed and the Redemption Price.
The Issuers shall give the notice to the Trustee provided for in this Section 3.01 by an Issuer Order, at least 45 days before the Redemption Date (unless a shorter notice shall be satisfactory to the Trustee).
Section 3.02. Selection of Notes to Be Redeemed. If less than all the Notes are to be redeemed, the Trustee shall select the Notes to be redeemed pro rata or by lot or by any other method the Trustee considers fair and appropriate (so long as such method is not prohibited by the rules of any stock exchange on which the Notes are then listed). The Trustee shall make the selection at least 15 days but not more than 60 days before the Redemption Date from outstanding Notes not previously called for redemption. The Trustee may select for redemption portions of the principal amount of Notes that have denominations larger than $1,000.
Notes and portions of them the Trustee selects shall be in principal amounts of $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. The Trustee shall notify the Issuers promptly of the Notes or portions of Notes to be redeemed.
If any Note selected for partial redemption is converted in part before termination of the conversion right with respect to the portion of the Note so selected, the converted portion of such Note shall be deemed (so far as may be) to be the portion selected for redemption. Notes which have been converted during a selection of Notes to be redeemed may be treated by the Trustee as outstanding for the purpose of such selection.
Section 3.03. Notice of Redemption. At least 30 days but not more than 60 days before a Redemption Date, the Issuers shall mail a notice of redemption by first-class mail, postage prepaid, to each Holder of Notes to be redeemed.
The notice shall identify the Notes to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) the Conversion Price;
(4) the name and address of the Paying Agent and Conversion Agent;
(5) that Notes called for redemption may be converted at any time before the close of business on the Redemption Date;
(6) that Holders who want to convert Notes must satisfy the requirements set forth in paragraph 8 of the Notes;
(7) that Notes called for redemption must be surrendered to the Paying Agent to collect the Redemption Price;
(8) if fewer than all the outstanding Notes are to be redeemed, the certificate number and principal amounts of the particular Notes to be redeemed;
(9) that, unless the Issuers default in making payment of such Redemption Price, any interest on Notes called for redemption will cease to accrue on and after the Redemption Date; and
(10) the CUSIP number of the Notes.
At the Issuers' request, the Trustee shall give the notice of redemption in the Issuers' name and at the Issuers' expense; provided that the Issuers make such request at least three Business Days prior to such notice of redemption.
Section 3.04. Effect of Notice of Redemption. Once notice of redemption is given, Notes called for redemption become due and payable on the Redemption Date and at the Redemption Price stated in the notice, except for Notes which are converted in accordance with the terms of this Indenture. Upon surrender to the Paying Agent, such Notes shall be paid at the Redemption Price stated in the notice.
Section 3.05. Deposit of Redemption Price. Prior to 10:00
a.m. (New York City time) on the Redemption Date, the
Issuers shall deposit with the Paying Agent (or if an Issuer
or a Subsidiary or an Affiliate of either of them is the
Paying Agent, shall segregate and hold in trust) money
sufficient to pay the Redemption Price of all Notes to be
redeemed on that date other than Notes or portions of Notes
called for redemption which on or prior thereto have been
delivered by the Issuers to the Trustee for cancellation or
have been converted. The Paying Agent shall as promptly as
practicable return to the Issuers any money, with interest,
if any, thereon, not required for that purpose because of
conversion of Notes pursuant to Article 10. If such money is
then held by the Issuers in trust and is not required for
such purpose, it shall be discharged from such trust.
Section 3.06. Notes Redeemed in Part. Upon surrender of a Note that is redeemed in part, the Issuers shall execute and the Trustee or an Authenticating Agent shall authenticate and deliver to the Holder a new Note in an authorized denomination equal in principal amount to the unredeemed portion of the Note surrendered.
Section 3.07. Conversion Arrangement on Call for Redemption. In connection with any redemption of Notes, the Issuers may arrange for the purchase and conversion of any Notes called for redemption by an agreement with one or more investment banks or other purchasers to purchase such Notes by paying to the Trustee in trust for the Noteholders, on or prior to 10:00 a.m. New York City time on the Redemption Date, an amount that, together with any amounts deposited with the Trustee by the Issuers for the redemption of such Notes, is not less than the Redemption Price of such Notes. Notwithstanding anything to the contrary contained in this Article 3, the obligation of the Issuers to pay the Redemption Price of such Notes shall be deemed to be satisfied and discharged to the extent such amount is so paid by such purchasers. If such an agreement is entered into, any Notes not duly surrendered for conversion by the Holders thereof may, at the option of the Issuers, be deemed, to the fullest extent permitted by law, acquired by such purchasers from such Holders and (notwithstanding anything to the contrary contained in Article 10) surrendered by such purchasers for conversion, all as of immediately prior to the close of business on the Redemption Date, subject to payment of the above amount as aforesaid. The Trustee shall hold and pay to the Holders whose Notes are selected for redemption any such amount paid to it for purchase and conversion in the same manner as it would moneys deposited with it by the Issuers for the redemption of Notes. Without the Trustee's prior written consent, no arrangement between the Issuers and such purchasers for the purchase and conversion of any Notes shall increase or otherwise affect any of the powers, duties, responsibilities or obligations of the Trustee as set forth in this Indenture, and the Issuers agree to indemnify the Trustee from, and hold it harmless against, any loss, liability or expense arising out of or in connection with any such arrangement for the purchase and conversion of any Notes between the Issuers and such purchasers, including the costs and expenses incurred by the Trustee in the defense of any claim or liability arising out of or in connection with the exercise or performance of any of its powers, duties, responsibilities or obligations under this Indenture.
Section 3.08. Repurchase of Notes at Option of the Holder upon Change of Control. (a) If there shall have occurred a Change of Control, all or any portion of the Notes of any Holder equal to $1,000 or a whole multiple of $1,000, not previously called for redemption, shall be repurchased by the Issuers, at the option of such Holder, at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, together with interest accrued and unpaid to, but excluding, the repurchase date (the "Change of Control Repurchase Price"), on the date (the "Change of Control Repurchase Date") that is 45 days after the date the Issuers delivered the notice required under Section 3.08(c) (or if such 45th day is not a Business Day, the next succeeding Business Day); provided, however, that installments of interest on Notes the Stated Maturity of which is prior to or on the Change of Control Repurchase Date shall be payable to the Holders of such Notes, or one or more predecessor Notes, registered as such on the relevant Regular Record Date according to their terms.
Subject to the fulfillment by the Issuers of the conditions set forth in Section 3.08(b) hereof, the Issuers may elect to pay the Change of Control Repurchase Price in Common Stock by delivering the number of shares of, at the option of the Holders, Class A Common Stock or Class B Common Stock equal to (i) the Change of Control Repurchase Price divided by (ii) 95% of the average of the Closing Prices per share of the applicable Common Stock for the five consecutive Trading Days immediately preceding and including the third Trading Day prior to the Change of Control Repurchase Date.
Whenever in this Indenture (including Sections 2.01, 6.01(a) and 6.07 hereof) or Exhibit A annexed hereto there is a reference, in any context, to the principal of any Note as of any time, such reference shall be deemed to include reference to the Change of Control Repurchase Price payable in respect to such Note to the extent that such Change of Control Repurchase Price is, was or would be so payable at such time, and express mention of the Change of Control Repurchase Price in any provision of this Indenture shall not be construed as excluding the Change of Control Repurchase Price in those provisions of this Indenture when such express mention is not made.
A "Change of Control" of the Company shall be deemed to have occurred at such time as either of the following events shall occur:
(i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), acquires the beneficial ownership (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to have "beneficial ownership" of all securities that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, through a purchase, merger or other acquisition transaction, of 50% or more of the total voting power of the Company's total outstanding Voting Stock other than an acquisition by the Company, any of its Subsidiaries or any of its employee benefit plans;
(ii) the Company consolidates with, or merges with or into, another Person or conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to any Person, or any Person consolidates with or merges with or into the Company other than:
(A) any transaction (1) that does not result in any reclassification (excluding a reclassification combining the Class A Common Stock and Class B Common Stock into one class), conversion, exchange or cancellation of outstanding shares of the Company's Capital Stock and (2) pursuant to which holders of the Company's Capital Stock immediately prior to such transaction have the entitlement to exercise, directly or indirectly, 50% or more of the total voting power of all shares of the Company's Capital Stock entitled to vote generally in the election of directors of the continuing or surviving person immediately after the transaction; and
(B) any merger solely for the purpose of changing the Company's jurisdiction of incorporation and resulting in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of common stock of the surviving entity;
(iii) during any consecutive two-year period, individuals who at the beginning of that two-year period constituted the Company's board of directors (together with any new directors whose election to such board of directors, or whose nomination for election by the Company's stockholders, was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority the Company's board of directors then in office; or
(iv) the Company's stockholders pass a special resolution approving a plan of liquidation or dissolution and no additional approvals of the Company's stockholders are required under applicable law to cause a liquidation or dissolution.
(b) The following are conditions to the Issuers' election to pay for the Change of Control Repurchase Price in Common Stock:
(i) The shares of Common Stock to be issued upon repurchase of Notes hereunder:
(A) shall not require registration under any federal securities law before such shares may be freely transferable without being subject to any transfer restrictions under the Securities Act upon repurchase or, if such registration is required, such registration shall be completed and shall become effective prior to the Change of Control Repurchase Date; and
(B) shall not require registration with, or approval of, any governmental authority under any state law or any other federal law before shares may be validly issued or delivered upon repurchase or if such registration is required or such approval must be obtained, such registration shall be completed or such approval shall be obtained prior to the Change of Control Repurchase Date.
(ii) The shares of Common Stock to be listed upon repurchase of Notes hereunder are, or shall have been, approved for listing on the Nasdaq National Market or the New York Stock Exchange or listed on another national securities exchange, in any case, prior to the Change of Control Repurchase Date.
(iii) All shares of Common Stock which may be issued upon repurchase of Notes will be issued out of the Company's authorized but unissued Common Stock and will, upon issue, be duly and validly issued and fully paid and nonassessable and free of any preemptive or similar rights.
(iv) If any of the conditions set forth in clauses
(i) through (iii) of this Section 3.08(b) are not satisfied
in accordance with the terms thereof, the Change of Control
Repurchase Price shall be paid by the Issuers only of cash.
(c) Unless the Issuers shall have theretofore called for redemption all of the outstanding Notes, prior to or on the 30th day after the occurrence of a Change of Control, the Issuers, or, at the written request and expense of the Issuers prior to or on the 30th day after such occurrence, the Trustee, shall give to all Noteholders, in the manner provided in Section 12.02 hereof, notice of the occurrence of the Change of Control and of the repurchase right set forth herein arising as a result thereof. The Issuers shall also deliver a copy of such notice of a repurchase right to the Trustee. The notice shall include a form of Change of Control Repurchase Notice (as defined in Section 3.08(d)) to be completed by the Noteholder and shall state:
(1) briefly, the events causing a Change of Control and the date of such Change of Control;
(2) the date by which the Change of Control Repurchase Notice pursuant to this Section 3.08 must be given;
(3) the Change of Control Repurchase Date;
(4) the Change of Control Repurchase Price and whether the Change of Control Repurchase Price will be payable in cash or Common Stock;
(5) the name and address of the Paying Agent and the Conversion Agent;
(6) the Conversion Price and any adjustments thereto;
(7) that Notes as to which a Change of Control Repurchase Notice has been given may be converted pursuant to Article 10 hereof only if the Change of Control Repurchase Notice has been withdrawn in accordance with the terms of this Indenture;
(8) that Notes must be surrendered to the Paying Agent to collect payment;
(9) that the Change of Control Repurchase Price for any Note as to which a Change of Control Repurchase Notice has been duly given and not withdrawn will be paid promptly following the later of the Change of Control Repurchase Date and the time of surrender of such Note as described in (8) above;
(10) briefly, the procedures the Holder must follow to exercise rights under this Section 3.08;
(11) briefly, the conversion rights of the Notes;
(12) the procedures for withdrawing a Change of Control Repurchase Notice;
(13) that, unless the Issuers default in making payment of such Change of Control Repurchase Price, interest on Notes submitted for repurchase will cease to accrue on and after the Change of Control Repurchase Date; and
(14) the CUSIP number of the Notes.
(d) A Holder may exercise its rights specified in Section 3.08(a) hereof upon delivery of a written notice of purchase (a "Change of Control Repurchase Notice"), substantially in the form as set forth on the reverse of the Notes, to the Paying Agent at any time prior to the close of business on the Change of Control Repurchase Date, stating:
(1) the certificate number of the Note which the Holder will deliver to be purchased;
(2) the portion of the principal amount of the Note which the Holder will deliver to be purchased, which portion must be $1,000 or an integral multiple thereof;
(3) if the Issuers have elected to pay the Change of Control Repurchase Price in Common Stock, such Holder's election to receive the Change of Control Repurchase Price in Class A Common Stock or Class B Common Stock; and
(4) that such Note shall be purchased pursuant to the terms and conditions specified in paragraph 6 of the Notes.
The delivery of such Note to the Paying Agent prior to, on or after the Change of Control Repurchase Date (together with all necessary endorsements) at the offices of the Paying Agent shall be a condition to the receipt by the Holder of the Change of Control Repurchase Price therefor; provided, however, that such Change of Control Repurchase Price shall be so paid pursuant to this Section 3.08 only if the Note so delivered to the Paying Agent shall conform in all respects to the description thereof set forth in the related Change of Control Repurchase Notice.
The Issuers shall purchase from the Holder thereof, pursuant to this Section 3.08, a portion of a Note if the principal amount of such portion is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to the purchase of all of a Note also apply to the purchase of such portion of such Note.
Any purchase by the Issuers contemplated pursuant to the provisions of this Section 3.08 shall be consummated by the delivery of the consideration to be received by the Holder promptly following the later of the Change of Control Repurchase Date and the time of delivery of the Note to the Paying Agent in accordance with this Section 3.08.
Notwithstanding anything herein to the contrary, any Holder
delivering to the Paying Agent the Change of Control
Repurchase Notice contemplated by this Section 3.08(d) shall
have the right to withdraw such Change of Control Repurchase
Notice at any time prior to the close of business on the
Change of Control Repurchase Date by delivery of a written
notice of withdrawal to the Paying Agent in accordance with
Section 3.09.
The Paying Agent shall promptly notify the Issuers of the receipt by it of any Change of Control Repurchase Notice or written withdrawal thereof.
Section 3.09. Effect of Change of Control Repurchase Notice. Upon receipt by the Paying Agent of the Change of Control Repurchase Notice specified in Section 3.08(d), the Holder of the Note in respect of which such Change of Control Repurchase Notice was given shall (unless such Change of Control Repurchase Notice is withdrawn as specified in the following two paragraphs) thereafter be entitled to receive solely the Change of Control Repurchase Price with respect to such Note. Such Change of Control Repurchase Price shall be paid to such Holder, subject to receipts of funds and/or Notes by the Paying Agent, promptly following the later of (x) the Change of Control Repurchase Date with respect to such Note (provided that the conditions in Section 3.08(d) have been satisfied) and (y) the time of delivery of such Note to the Paying Agent by the Holder thereof in the manner required by Section 3.08(d). Notes in respect of which a Change of Control Repurchase Notice, has been given by the Holder thereof may not be converted pursuant to Article 10 hereof on or after the date of the delivery of such Change of Control Repurchase Notice unless such Change of Control Repurchase Notice has first been validly withdrawn as specified in the following two paragraphs.
A Change of Control Repurchase Notice may be withdrawn by means of a written notice of withdrawal delivered to the office of the Paying Agent in accordance with the Change of Control Repurchase Notice at any time prior to the close of business on the Change of Control Repurchase Date specifying:
(1) the certificate number of the Note in respect of which such notice of withdrawal is being submitted,
(2) the principal amount of the Note with respect to which such notice of withdrawal is being submitted, and
(3) the principal amount, if any, of such Note which remains subject to the original Change of Control Repurchase Notice and which has been or will be delivered for purchase by the Issuers.
There shall be no repurchase of any Notes pursuant to
Section 3.08 if there has occurred (prior to, on or after,
as the case may be, the giving, by the Holders of such
Notes, of the required Change of Control Repurchase Notice)
and is continuing an Event of Default (other than a default
in the payment of the Change of Control Repurchase Price
with respect to such Notes). The Paying Agent will promptly
return to the respective Holders thereof any Notes (x) with
respect to which a Change of Control Repurchase Notice has
been withdrawn in compliance with this Indenture, or (y)
held by it during the continuance of an Event of Default
(other than a default in the payment of the Change of
Control Repurchase Price with respect to such Notes) in
which case, upon such return, the Change of Control
Repurchase Notice with respect thereto shall be deemed to
have been withdrawn.
Section 3.10. Deposit of Change of Control Repurchase Price. Prior to 10:00 a.m. (New York City time) on the Business Day following the Change of Control Repurchase Date the Issuers shall deposit with the Trustee or with the Paying Agent (or, if an Issuer or a Subsidiary or an Affiliate of either of them is acting as the Paying Agent, shall segregate and hold in trust as provided in Section 2.05) an amount of money (in immediately available funds if deposited on such Business Day) or Common Stock, if permitted hereunder, sufficient to pay the aggregate Change of Control Repurchase Price of all the Notes or portions thereof which are to be purchased as of the Change of Control Repurchase Date.
Section 3.11. Notes Purchased in Part. Any Note which is to be purchased only in part shall be surrendered at the office of the Paying Agent (with, if the Issuers or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Issuers and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing) and the Issuers shall execute and the Trustee or an Authenticating Agent shall authenticate and deliver to the Holder of such Note, without service charge, a new Note or Notes, of any authorized denomination as requested by such Holder in aggregate principal amount equal to, and in exchange for, the portion of the principal amount of the Note so surrendered which is not purchased.
Section 3.12. Covenant to Comply with Securities Laws upon Purchase of Notes. In connection with any offer to purchase or repurchase of Notes under Section 3.08 hereof (provided that such offer or purchase constitutes an "issuer tender offer" for purposes of Rule 13e-4 (which term, as used herein, includes any successor provision thereto) under the Exchange Act at the time of such offer or purchase), the Issuers shall (i) comply with Rule 13e-4, Rule 14e-1 and any other tender offer rules under the Exchange Act which may then be applicable, (ii) file the related Schedule 13E-3 (or any successor schedule, form or report) or any other schedule required under the Exchange Act, and (iii) otherwise comply with all federal and state securities laws so as to permit the rights and obligations under Section 3.08 to be exercised in the time and in the manner specified in Section 3.08.
Section 3.13. Repayment to the Issuers. The Trustee and
the Paying Agent shall return to the Issuers any cash or
shares of Common Stock that remain unclaimed as provided in
paragraph 12 of the Notes, together with interest or
dividends, if any, thereon, held by them for the payment of
the Change of Control Repurchase Price; provided, however,
that to the extent that the aggregate amount of cash or
shares of Common Stock deposited by the Issuers pursuant to
Section 3.10 exceeds the aggregate Change of Control
Repurchase Price of the Notes or portions thereof which the
Issuers are obligated to purchase as of the Change of
Control Repurchase Date, then promptly after the Business
Day following the Change of Control Repurchase Date, the
Trustee shall return any such excess to the Issuers together
with interest or dividends, if any, thereon.
ARTICLE 4
Covenants
Section 4.01. Payment of Principal, Premium, Interest on the Notes. The Issuers will duly and punctually pay the principal of and premium, if any, and interest (including Liquidated Damages, if any) in respect of the Notes in accordance with the terms of the Notes and this Indenture. The Issuers will deposit or cause to be deposited with the Trustee as directed by the Trustee, no later than the day of the Stated Maturity of any Note or installment of interest, all payments so due. Principal amount, Redemption Price, Change of Control Repurchase Price, and cash interest shall be considered paid on the applicable date due if on such date (or, in the case of a Change of Control Repurchase Price on the Business Day following the applicable Change of Control Repurchase Date) the Trustee or the Paying Agent holds, in accordance with this Indenture, money or Notes, if permitted hereunder, sufficient to pay all such amounts then due.
The Issuers shall, to the extent permitted by law, pay cash interest on overdue amounts at the rate per annum set forth in paragraph 1 of the Notes, compounded semiannually, which interest shall accrue from the date such overdue amount was originally due to the date payment of such amount, including interest thereon, has been made or duly provided for. All such interest shall be payable on demand.
Section 4.02. Reports by the Issuers. The Issuers shall
file with the Trustee (and the SEC after the Indenture
becomes qualified under the TIA), and transmit to holders of
Notes, such information, documents and other reports and
such summaries thereof, as may be required pursuant to the
TIA at the times and in the manner provided pursuant to the
TIA, whether or not the Notes are governed by the TIA;
provided, however, that any such information, documents or
reports required to be filed with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act shall be filed with
the Trustee within fifteen (15) days after the same is so
required to be filed with the SEC. Delivery of such
reports, information and documents to the Trustee is for
informational purposes only and the Trustee's receipt of
such shall not constitute constructive notice of any
information contained therein or determinable from
information contained therein, including the Issuers'
compliance with any of its covenants hereunder (as to which
the Trustee is entitled to rely exclusively on Officers'
Certificates).
Section 4.03. Compliance Certificate. The Issuers shall deliver to the Trustee within 120 days after the end of each fiscal year of the Issuers (beginning with the fiscal year ending on December 31, 2001) an Officers' Certificate, stating whether or not to the best knowledge of the signers thereof the Issuers are in default in the performance and observance of any of the terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and if the Issuers shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge.
Section 4.04. Further Instruments and Acts. Upon request of the Trustee, the Issuers will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture.
Section 4.05. Maintenance of Office or Agency. The Issuers will maintain in the Borough of Manhattan, the City of New York, an office or agency of the Trustee, Note Registrar, Paying Agent and Conversion Agent where Notes may be presented or surrendered for payment, where Notes may be surrendered for registration of transfer, exchange, purchase, redemption or conversion and where notices and demands to or upon the Issuers in respect of the Notes and this Indenture may be served. The Corporate Trust Office and each office or agency of the Trustee in the Borough of Manhattan, the City of New York, shall initially be one such office or agency for all of the aforesaid purposes. The Issuers shall give prompt written notice to the Trustee of the location, and of any change in the location, of any such office or agency (other than a change in the location of the office of the Trustee). If at any time the Issuers shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 12.02.
The Issuers may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Issuers of their obligation to maintain an office or agency in the Borough of Manhattan, the City of New York, for such purposes.
Section 4.06. Delivery of Certain Information. At any time when the Issuers are not subject to Section 13 or 15(d) of the Exchange Act, upon the request of a holder or any beneficial holder of Notes or shares of Common Stock issued upon conversion thereof, the Issuers will promptly furnish or cause to be furnished Rule 144A Information (as defined below) to such Holder or any beneficial holder of Notes or holder of shares of Common Stock issued upon conversion of Notes, or to a prospective purchaser of any such security designated by any such holder, as the case may be, to the extent required to permit compliance by such Holder or holder with Rule 144A under the Securities Act in connection with the resale of any such security. "Rule 144A Information" shall be such information as is specified pursuant to Rule 144A(d)(4) under the Securities Act.
Section 4.07. Existence. Subject to Article 5, the Issuers will do or cause to be done all things necessary to preserve and keep in full force and effect its existence and rights (charter and statutory); provided, however, that the Issuers shall not be required to preserve any such right if the Issuers shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Issuers and that the loss thereof is not disadvantageous in any material respect to the Noteholders.
Section 4.08. Maintenance of Properties. The Issuers will cause all properties used or useful in the conduct of their business or the business of any Significant Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Issuers may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Issuers from discontinuing the operation or maintenance of any of such properties if such discontinuance is, in the judgment of the Issuers, desirable in the conduct of their business or the business of any Significant Subsidiary and not disadvantageous in any material respect to the Noteholders.
Section 4.09. Payment of Taxes and Other Claims. The Issuers will pay or discharge, or cause to be paid or discharged, before the same may become delinquent, (i) all taxes, assessments and governmental charges levied or imposed upon the Issuers or any Significant Subsidiary or upon the income, profits or property of the Issuers or any Significant Subsidiary, (ii) all claims for labor, materials and supplies which, if unpaid, might by law become a lien or charge upon the property of the Issuers or any Significant Subsidiary and (iii) all stamps and other duties, if any, which may be imposed by the United States or any political subdivision thereof or therein in connection with the issuance, transfer, exchange or conversion of any Notes or with respect to this Indenture; provided, however, that, in the case of clauses (i) and (ii), the Issuers shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim (A) if the failure to do so will not, in the aggregate, have a material adverse impact on the Issuers, or (B) if the amount, applicability or validity is being contested in good faith by appropriate proceedings.
Section 4.10. Liquidated Damages Notice. In the event that the Issuers are required to pay Liquidated Damages to holders of Notes pursuant to the Registration Rights Agreement, the Issuers will provide written notice ("Liquidated Damages Notice") to the Trustee of their obligation to pay Liquidated Damages no later than fifteen days prior to the proposed payment date for the Liquidated Damages, and the Liquidated Damages Notice shall set forth the amount of Liquidated Damages to be paid by the Issuers on such payment date. The Trustee shall not at any time be under any duty or owe a responsibility to any holder of Notes to determine the Liquidated Damages, or with respect to the nature, extent or calculation of the amount of Liquidated Damages when made, or with respect to the method employed in such calculation of the Liquidated Damages.
ARTICLE 5
Successor Corporation
Section 5.01. When Issuers May Merge or Transfer Assets. Each Issuer shall not consolidate with, merge with or into any other person or convey, transfer or lease all or substantially all of its properties and assets to any Person, unless:
(a) either (1) such Issuer shall be the continuing corporation or (2) the person (if other than such Issuer) formed by such consolidation or into which such Issuer is merged or the person which acquires by conveyance, transfer or lease all or substantially all of the properties and assets of such Issuer (i) shall be organized and validly existing under the laws of the United States or any State thereof or the District of Columbia and (ii) shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, all of the obligations of such Issuer under the Notes and this Indenture;
(b) at the time of such transaction, no Event of Default and no event which, after notice or lapse of time, would become an Event of Default, shall have happened and be continuing; and
(c) such Issuer shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this Article 5 and that all conditions precedent herein provided for relating to such transaction have been satisfied.
For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise) of the properties and assets of one or more Subsidiaries (other than to such Issuer or another Subsidiary), which, if such assets were owned by such Issuer, would constitute all or substantially all of the properties and assets of such Issuer, shall be deemed to be the transfer of all or substantially all of the properties and assets of such Issuer.
The successor person formed by such consolidation or into which an Issuer is merged or the successor person to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, such Issuer under this Indenture with the same effect as if such successor had been named as such Issuer herein; and thereafter, except in the case of a lease and obligations an Issuer may have under a supplemental indenture pursuant to Section 10.11, such Issuer shall be discharged from all obligations and covenants under this Indenture and the Notes. Subject to Section 9.06, such Issuer, the Trustee and the successor person shall enter into a supplemental indenture to evidence the succession and substitution of such successor person and such discharge and release of such Issuer.
ARTICLE 6
Defaults and Remedies
Section 6.01. Events of Default. An "Event of Default" occurs if:
(a) the Issuers fail to pay when due the principal of or premium, if any, on any of the Notes at maturity, upon redemption or exercise of a repurchase right or otherwise;
(b) the Issuers fail to pay an installment of interest (including Liquidated Damages, if any) on any of the Notes that continues for 30 days after the date when due; provided that a failure to make any of the first six scheduled interest payments on the Notes on the applicable Interest Payment Date shall constitute an Event of Default with no grace or cure period;
(c) the Issuers fail to deliver shares of Common Stock, together with cash in lieu of fractional shares, when such Common Stock or cash in lieu of fractional shares is required to be delivered upon conversion of a Note and such failure continues for 10 days after such delivery date;
(d) the Issuers fail to give notice regarding a Change of Control within the time period specified in Section 3.08(c);
(e) the Issuers fail to perform or observe any other term, covenant or agreement contained in the Notes or this Indenture for a period of 60 days after receipt by the Issuers of a Notice of Default (as defined below);
(f) (i) the Issuers or any Significant Subsidiary
fails to make any payment by the end of the applicable grace
period, if any, after the final scheduled payment date for
such payment with respect to any indebtedness for borrowed
money in an aggregate amount in excess of $10 million or
(ii) indebtedness for borrowed money of the Issuers or any
Significant Subsidiary in an aggregate amount in excess of
$10 million shall have been accelerated or otherwise
declared due and payable, or required to be prepaid or
repurchased (other than by regularly scheduled required
prepayment) prior to the scheduled maturity thereof as a
result of a default with respect to such indebtedness, in
either case without such indebtedness referred to in
subclause (i) or (ii) of this clause (f) having been
discharged, cured, waived, rescinded or annulled, for a
period of 30 days after receipt by the Issuers of a Notice
of Default;
(g) an Issuer, or any Significant Subsidiary, or any Subsidiaries of an Issuer which in the aggregate would constitute a Significant Subsidiary pursuant to or under or within the meaning of any Bankruptcy Law:
(i) commences a voluntary case or proceeding;
(ii) consents to the entry of an order for relief against it in an involuntary case or proceeding or the commencement of any case against it;
(iii) consents to the appointment of a Custodian of it or for any substantial part of its property;
(iv) makes a general assignment for the benefit of its creditors;
(v) files a petition in bankruptcy or answer or consent seeking reorganization or relief; or
(vi) consents to the filing of such a petition or the appointment of or taking possession by a Custodian;
(h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:
(i) is for relief against an Issuer or any Significant Subsidiary or any Subsidiaries of an Issuer which in the aggregate would constitute a Significant Subsidiary in an involuntary case or proceeding, or adjudicates an Issuer or any Significant Subsidiary or any Subsidiaries of an Issuer which in the aggregate would constitute a Significant Subsidiary insolvent or bankrupt;
(ii) appoints a Custodian of an Issuer or any Significant Subsidiary or any Subsidiaries of an Issuer which in the aggregate would constitute a Significant Subsidiary or for any substantial part of its or their properties; or
(iii) orders the winding up or liquidation of an Issuer or any Significant Subsidiary or any Subsidiaries of an Issuer which in the aggregate would constitute a Significant Subsidiary; and the order or decree remains unstayed and in effect for 60 days; and
(i) the Pledge Agreement shall cease to be in full force and effect or enforceable other than in accordance with its terms.
For purposes of Sections 6.01(g) and 6.01(h) above:
"Bankruptcy Law" means Title 11, United States Code, or any similar federal or state law for the relief of debtors.
"Custodian" means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law.
A Default under clause (e) or (f) above is not an Event of Default until the Trustee notifies the Issuers, or the Holders of at least 25% in aggregate principal amount of the Notes at the time outstanding notify the Issuers and the Trustee, of the Default and the Issuers do not cure such Default (and such Default is not waived) within the time specified in clause (e) or (f) above after actual receipt of such notice. Any such notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default."
The Issuers shall deliver to the Trustee, within five Business Days of becoming aware of the occurrence of an Event of Default, written notice thereof. In addition, the Issuers shall deliver to the Trustee, within 30 days after they become aware of the occurrence thereof, written notice of any event which with the lapse of time would become an Event of Default under clause (e) above, its status and what action the Issuers are taking or proposes to take with respect thereto.
Section 6.02. Acceleration. If an Event of Default (other
than an Event of Default specified in Section 6.01(g) or
(h)) occurs and is continuing, the Trustee by notice to the
Issuers, or the Holders of at least 25% in aggregate
principal amount of the Notes at the time outstanding by
notice to the Issuers and the Trustee, may declare the Notes
due and payable at their principal amount together with
accrued interest (including Liquidated Damages, if any).
Upon a declaration of acceleration, such principal and
accrued and unpaid interest to the date of payment shall be
immediately due and payable. If an Event of Default is
cured prior to any such declaration by the Trustee or the
Holders, the Trustee and the Holders shall not be entitled
to declare the Notes due and payable as provided herein as a
result of such cured Event of Default and any such cured
Event of Default shall be deemed waived by the Holders and
the Trustee.
If an Event of Default specified in Section 6.01(g) or (h) above occurs and is continuing, then the principal and the accrued interest (including Liquidated Damages, if any) on all the Notes shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Noteholders.
The Holders of a majority in aggregate principal amount of the Notes at the time outstanding, by notice to the Trustee (and without notice to any other Noteholder) may rescind or annul an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of the principal and any accrued cash interest (including Liquidated Damages, if any) that have become due solely as a result of acceleration and if all amounts due to the Trustee under Section 7.06 have been paid. No such rescission shall affect any subsequent Default or impair any right consequent thereto.
Section 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of the principal, the premium, if any, and any accrued cash interest (including Liquidated Damages, if any) on the Notes or to enforce the performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if the Trustee does not possess any of the Notes or produce any of the Notes in the proceeding. A delay or omission by the Trustee or any Noteholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of, or acquiescence in, the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative.
Section 6.04. Waiver of Past Defaults. The Holders of a majority in aggregate principal amount of the Notes at the time outstanding, by notice to the Trustee (and without notice to any other Noteholder), may waive an existing Event of Default and its consequences except (1) an Event of Default described in Section 6.01(a) or (b), (2) an Event of Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Noteholder affected or (3) an Event of Default which constitutes a failure to convert any Note in accordance with the terms of Article 11. When an Event of Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Event of Default or impair any consequent right.
Section 6.05. Control by Majority. The Holders of a majority in aggregate principal amount of the Notes at the time outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or that the Trustee determines in good faith is prejudicial to the rights of other Noteholders or would involve the Trustee in personal liability unless the Trustee is offered indemnity satisfactory to it against loss, liability or expense.
Section 6.06. Limitation on Suits. A Noteholder may not pursue any remedy with respect to this Indenture or the Notes unless:
(1) the Holder gives to the Trustee written notice stating that an Event of Default is continuing;
(2) the Holders of at least 25% in aggregate principal amount of the Notes at the time outstanding make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security or indemnity satisfactory to the Trustee against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after receipt of such notice, request and offer of security or indemnity; and
(5) the Holders of a majority in aggregate principal amount of the Notes at the time outstanding do not give the Trustee a direction inconsistent with the request during such 60-day period.
A Noteholder may not use this Indenture to prejudice the rights of any other Noteholder or to obtain a preference or priority over any other Noteholder.
Section 6.07. Rights of Holders To Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of the principal amount, premium, if any, plus Redemption Price, Change of Control Repurchase Price or any accrued cash interest (including Liquidated Damages, if any) in respect of the Notes held by such Holder, on or after the respective due dates expressed in the Notes or any Redemption Date, and to convert the Notes in accordance with Article 10, or to bring suit for the enforcement of any such payment on or after such respective dates or the right to convert, shall not be impaired or affected adversely without the consent of such Holder.
Section 6.08. Collection Suit by Trustee. If an Event of Default described in Section 6.01(a) or (b) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Issuers for the whole amount owing with respect to the Notes and the amounts provided for in Section 7.06.
Section 6.09. Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to an Issuer or any other obligor upon the Notes or the property of an Issuer or of such other obligor or their creditors, the Trustee (irrespective of whether the principal amount, Redemption Price, Change of Control Repurchase Price or any accrued cash interest in respect of the Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Issuers for the payment of any such amount) shall be entitled and empowered, by intervention in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount of the principal amount, Redemption Price, Change of Control Repurchase Price or any accrued cash interest and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel or any other amounts due the Trustee under Section 7.06) and of the Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.06.
Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.
Section 6.10. Priorities. If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order:
(1) to the Trustee for amounts due under Section 7.06;
(2) to Noteholders for amounts due and unpaid on the Notes for the principal amount, Redemption Price, Change of Control Purchase Price or any accrued cash interest (including Liquidated Damages, if any) as the case may be, ratably, without preference or priority of any kind, according to such amounts due and payable on the Notes; and
(3) the balance, if any, to the Issuers.
The Trustee may fix a record date and payment date for any payment to Noteholders pursuant to this Section 6.10. At least 15 days before such record date, the Trustee shall mail to each Noteholder and the Issuers a notice that states the record date, the payment date and the amount to be paid.
Section 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant (other than the Trustee) in the suit of an undertaking to pay the costs of the suit in the manner and to the extent provided in the TIA, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in aggregate principal amount of the Notes at the time outstanding.
Section 6.12. Waiver of Stay, Extension or Usury Laws. Each Issuer covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury or other law wherever enacted, now or at any time hereafter in force, which would prohibit or forgive such Issuer from paying all or any portion of the principal amount, Redemption Price, Change of Control Repurchase Price or any accrued cash interest (including Liquidated Damages, if any) in respect of Notes, or any interest on such amounts, as contemplated herein, or which may affect the covenants or the performance of this Indenture; and each Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.
ARTICLE 7
Trustee
Section 7.01. Duties and Responsibilities of the Trustee; During Default; Prior to Default. The Trustee, prior to the occurrence of an Event of Default hereunder and after the curing or waiving of all such Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Event of Default hereunder has occurred (which has not been cured or waived), the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.
No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that
(a) prior to the occurrence of an Event of Default hereunder and after the curing or waiving of all such Events of Default which may have occurred:
(i) the duties and obligations of the Trustee shall be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any statements, certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such statements, certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture;
(b) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and
(c) the Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith
in accordance with the direction of the Holders pursuant to
Section 6.05 relating to the time, method and place of
conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the
Trustee, under this Indenture.
None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers.
Section 7.02. Certain Rights of the Trustee. Subject to
Section 7.01:
(a) the Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, Officers' Certificate or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, note, coupon, Note or other paper or document (whether in its original or facsimile form) believed by it to be genuine and to have been signed or presented by the proper party or parties;
(b) any request, direction, order or demand of the Issuers mentioned herein shall be sufficiently evidenced by an Officers' Certificate (unless other evidence in respect thereof be herein specifically prescribed); and any resolution of the Board of Directors may be evidenced to the Trustee by a copy thereof certified by the secretary or an assistant secretary of the applicable Issuer;
(c) the Trustee may consult with counsel of its selection and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Indenture with the request, order or direction of any of the Noteholders pursuant to the provisions of this Indenture, unless such Noteholders shall have offered to the Trustee reasonable security or indemnity satisfactory to it against the costs, expenses and liabilities which might be incurred therein or thereby;
(e) the Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture;
(f) prior to the occurrence of an Event of Default hereunder and after the curing or waiving of all such Events of Default, the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, appraisal, bond, debenture, note, coupon, security, or other paper or document unless requested in writing to do so by the Holders of not less than a majority in aggregate principal amount of the Notes then outstanding; provided that, if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity against such expenses or liabilities as a condition to proceeding; the reasonable expenses of every such investigation shall be paid by the Issuers or, if paid by the Trustee or any predecessor trustee, shall be repaid by the Issuers upon demand;
(g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys not regularly in its employ and the Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder;
(h) the Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Securities and this Indenture; and
(i) the rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder.
Section 7.03. Trustee Not Responsible for Recitals, Dispositions of Notes or Application of Proceeds Thereof. The recitals contained herein and in the Notes, except the Trustee's certificates of authentication, shall be taken as the statements of the Issuers, and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representation as to the validity or sufficiency of this Indenture or of the Notes. The Trustee shall not be accountable for the use or application by the Issuers of any of the Notes or of the proceeds thereof.
Section 7.04. Trustee and Agents May Hold Notes; Collections, etc. The Trustee or any agent of the Issuers or the Trustee, in its individual or any other capacity, may become the owner or pledgee of Notes with the same rights it would have if it were not the Trustee or such agent and, subject to Sections 7.08 and 7.13, if operative, may otherwise deal with the Issuers and receive, collect, hold and retain collections from the Issuers with the same rights it would have if it were not the Trustee or such agent.
Section 7.05. Moneys Held by Trustee. Subject to the provisions of Section 8.04 hereof, all moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by mandatory provisions of law. Neither the Trustee nor any agent of the Issuers or the Trustee shall be under any liability for interest on any moneys received by it hereunder.
Section 7.06. Compensation and Indemnification of Trustee and its Prior Claim. Each Issuer, jointly and severally, covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to, such compensation (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) to be agreed to in writing by the Trustee and the Issuers, and each Issuer, jointly and severally, covenants and agrees to pay or reimburse the Trustee and each predecessor Trustee upon its request for all expenses, disbursements and advances incurred or made by or on behalf of it in accordance with any of the provisions of this Indenture (including (i) the reasonable compensation and the expenses and disbursements of its counsel and of all agents and other persons not regularly in its employ and (ii) interest at the prime rate on any disbursements and advances made by the Trustee and not paid by the Issuers within 5 days after receipt of an invoice for such disbursement or advance) except any such expense, disbursement or advance as shall be determined by a court of competent jurisdiction to have been caused by its own negligence or bad faith. Each Issuer, jointly and severally, also covenants to fully indemnify each of the Trustee, each predecessor Trustee, any Authenticating Agent and any officer, director, employee or agent of the Trustee, each such predecessor Trustee or any such Authenticating Agent for, and to hold it harmless against, any and all loss, liability, claim, damage or expense (including legal fees and expenses) incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this Indenture or the trusts hereunder and its duties hereunder, including the costs and expenses of defending itself against or investigating any claim of liability in the premises. The obligations of the Issuers under this Section 7.06 to compensate and indemnify the Trustee, each predecessor Trustee, any Authenticating Agent and any officer, director, employee or agent of the Trustee, each such predecessor Trustee or any such Authenticating Agent and to pay or reimburse the Trustee and each predecessor Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture. Such additional indebtedness shall be a senior claim to that of the Notes upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the Holders of particular Notes, and the Notes are hereby effectively subordinated to such senior claim to such extent. The provisions of this Section 7.06 shall survive the termination of this Indenture and the resignation or removal of the Trustee.
Section 7.07. Right of Trustee to Rely on Officers' Certificate, etc. Subject to Sections 7.01 and 7.02, whenever in the administration of the trusts of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering or omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or bad faith on the part of the Trustee, be deemed to be conclusively proved and established by an Officers' Certificate delivered to the Trustee, and such certificate, in the absence of negligence or bad faith on the part of the Trustee, shall be full warrant to the Trustee for any action taken, suffered or omitted by it under the provisions of this Indenture upon the faith thereof.
Section 7.08. Conflicting Interests. If the Trustee has or shall acquire a conflicting interest within the meaning of the TIA, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the TIA.
Section 7.09. Persons Eligible for Appointment as Trustee.
The Trustee shall at all times be a corporation or banking
association having a combined capital and surplus of at
least $50,000,000. If such corporation or banking
association publishes reports of condition at least
annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then, for the
purposes of this Section 7.09, the combined capital and
surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the
Trustee shall cease to be eligible in accordance with the
provisions of this Section 7.09, the Trustee shall resign
immediately in the manner and with the effect specified in
Section 7.10.
Section 7.10. Resignation and Removal; Appointment of Successor Trustee. (a) The Trustee, or any trustee or trustees hereafter appointed, may at any time resign with respect to one or more or all series of Notes by giving written notice of resignation to the Issuers and by mailing notice thereof by first class mail to the Holders of Notes at their last addresses as they shall appear on the Note Register. Upon receiving such notice of resignation, the Issuers shall promptly appoint a successor trustee or trustees by written instrument in duplicate, executed by authority of the Board of Directors of each Issuer, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor trustee or trustees. If no successor trustee shall have been so appointed and have accepted appointment within 30 days after the mailing of such notice of resignation, the resigning trustee may petition, at the expense of the Issuers, any court of competent jurisdiction for the appointment of a successor trustee, or any Noteholder who has been a bona fide Holder of a Note for at least six months may, subject to the provisions of Section 7.11, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor trustee.
(b) In case at any time any of the following shall occur:
(i) the Trustee shall fail to comply with the provisions of Section 7.08 with respect to any Notes after written request therefor by the Issuers or by any Noteholder who has been a bona fide Holder of a Note for at least six months; or
(ii) the Trustee shall cease to be eligible in accordance with the provisions of Section 7.09 and shall fail to resign after written request therefor by the Issuers or by any Noteholder; or
(iii) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent, or a receiver or liquidator of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; or
(iv) the Issuers shall determine that the Trustee has failed to perform its obligations under this Indenture in any material respect;
then, in any such case, the Issuers may remove the Trustee and appoint a successor trustee by written instrument, in duplicate, executed by order of the Board of Directors of each Issuer, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee, or, subject to the provisions of Section 7.11, any Noteholder who has been a bona fide Holder of a Note for at least six months may on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor trustee. If no successor trustee shall have been appointed and have accepted appointment within 30 days after a notice of removal has been given, the removed trustee may petition a court of competent jurisdiction for the appointment of a successor trustee.
(c) The Holders of a majority in aggregate principal amount of the Notes at the time outstanding may at any time remove the Trustee and appoint a successor trustee by delivering to the Trustee so removed, to the successor trustee so appointed and to the Issuers the evidence provided for in Section 1.05 of the action in that regard taken by the Noteholders.
(d) Any resignation or removal of the Trustee and any appointment of a successor trustee pursuant to any of the provisions of this Section 7.10 shall become effective upon acceptance of appointment by the successor trustee as provided in Section 7.11.
Section 7.11. Acceptance of Appointment by Successor
Trustee. Any successor trustee appointed as provided in
Section 7.10 shall execute and deliver to the Issuers and to
the predecessor trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or
removal of the predecessor trustee shall become effective
and such successor trustee, without any further act, deed or
conveyance, shall become vested with all rights, powers,
duties and obligations of its predecessor hereunder, with
like effect as if originally named as trustee hereunder;
but, nevertheless, on the written request of the Issuers or
of the successor trustee, upon payment of its charges then
unpaid, the trustee ceasing to act shall pay over to the
successor trustee all moneys at the time held by it
hereunder and shall execute and deliver an instrument
transferring to such successor trustee all such rights,
powers, duties and obligations. Upon request of any such
successor trustee, the Issuers shall execute any and all
instruments in writing for more fully and certainly vesting
in and confirming to such successor trustee all such rights
and powers. Any trustee ceasing to act shall, nevertheless,
retain a prior claim upon all property or funds held or
collected by such trustee to secure any amounts then due it
pursuant to the provisions of Section 7.06.
No successor trustee shall accept appointment as provided in
this Section 7.11 unless at the time of such acceptance such
successor trustee shall be qualified under the provisions of
Section 7.08 and eligible under the provisions of Section
7.09.
Upon acceptance of appointment by any successor trustee as provided in this Section 7.11, the Issuers shall mail notice thereof by first class mail to the Holders of Notes at their last addresses as they shall appear in the Note Register. If the acceptance of appointment is substantially contemporaneous with the resignation, then the notice called for by the preceding sentence may be combined with the notice called for by Section 7.10. If the Issuers fail to mail such notice within ten days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be mailed at the expense of the Issuers.
Section 7.12. Merger, Conversion, Consolidation or
Succession to Business of Trustee. Any corporation or
banking association into which the Trustee may be merged or
converted or with which it may be consolidated, or any
corporation or banking association resulting from any
merger, conversion or consolidation to which the Trustee
shall be a party, or any corporation or banking association
succeeding to all or substantially all of the corporate
trust business of the Trustee, shall be the successor of the
Trustee hereunder; provided that such corporation or banking
association shall be qualified under the provisions of
Section 7.08 and eligible under the provisions of Section
7.09, without the execution or filing of any paper or any
further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding. In case at
the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Notes shall have
been authenticated but not delivered, any such successor to
the Trustee may adopt the certificate of authentication of
any predecessor Trustee or Authenticating Agent and deliver
such Notes so authenticated; and, in case at that time any
of the Notes shall not have been authenticated, any
successor to the Trustee or any Authenticating Agent
appointed by such successor Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in
the name of the successor Trustee; and in all such cases
such certificate shall have the full force and effect that
this Indenture provides for the certificate of
authentication of the Trustee; provided that the right to
adopt the certificate of authentication of any predecessor
Trustee or to authenticate Notes in the name of any
predecessor Trustee shall apply only to its successor or
successors by merger, conversion or consolidation.
Section 7.13. Preferential Collection of Claims Against the Issuers. If and when the Trustee shall be or become a creditor of an Issuer (or any other obligor upon the Notes), the Trustee shall be subject to the provisions of the TIA regarding the collection of the claims against such Issuer (or any such other obligor).
Section 7.14. Reports by the Trustee. (a) Within sixty
(60) days after May 15 of each year commencing with the year
2002, the Trustee shall transmit to Holders and other
persons such reports dated as of May 15 of the year in which
such reports are made concerning the Trustee and its actions
under this Indenture as may be required pursuant to the TIA.
(b) A copy of each such report shall, at the time of such transmission to Noteholders, be furnished to the Issuers and be filed by the Trustee with each stock exchange upon which the Notes are listed and also with the SEC. The Issuers agree to notify the Trustee when and as the Notes become admitted to trading on any national securities exchange or become delisted therefrom.
Section 7.15. Trustee to Give Notice of Default, but May Withhold in Certain Circumstances. The Trustee shall transmit to the Noteholders, as the names and addresses of such Holders appear on the Note Register, notice by mail of all Defaults which have occurred, such notice to be transmitted within 90 days after the occurrence thereof, unless such defaults shall have been cured before the giving of such notice; provided that, except in the case of Default in the payment of the principal of, premium, if any, or interest (including Liquidated Damages, if any) on any of the Notes when due or in the payment of any redemption or repurchase obligation, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors or trustees and/or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the best interests of the Noteholders.
ARTICLE 8
Discharge of Indenture
Section 8.01. Discharge of Indenture. When the Issuers shall deliver to the Trustee for cancellation all Notes theretofore authenticated (other than any Notes that have been destroyed, lost or stolen and in lieu of or in substitution for which other Notes shall have been authenticated and delivered) and not theretofore canceled and if the Issuers shall also pay or cause to be paid all other sums payable hereunder by the Issuers, then this Indenture shall cease to be of further effect, and the Trustee, on written demand of the Issuers accompanied by an Officers' Certificate and an Opinion of Counsel as required by Section 12.04 and at the cost and expense of the Issuers, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture; the Issuers, however, hereby agree to reimburse the Trustee for any costs or expenses thereafter reasonably and properly incurred by the Trustee and to compensate the Trustee for any services thereafter reasonably and properly rendered by the Trustee in connection with this Indenture or the Notes.
Section 8.02. [Intentionally Omitted].
Section 8.03. Paying Agent to Repay Monies Held. Upon the discharge of this Indenture, all monies then held by any Paying Agent of the Notes (other than the Trustee) shall, upon written request of the Issuers, be repaid to it or paid to the Trustee, and thereupon such Paying Agent shall be released from all further liability with respect to such monies.
Section 8.04. Return of Unclaimed Monies. Subject to the requirements of applicable law, any monies deposited with or paid to the Trustee or the Paying Agent for payment of the principal of, premium, if any, or interest on Notes and not applied but remaining unclaimed by the holders of Notes for two years after the date upon which the principal of, premium, if any, or interest on such Notes, as the case may be, shall have become due and payable, shall be repaid to the Issuers by the Trustee or the Paying Agent on written demand and all liability of the Trustee or the Paying Agent shall thereupon cease with respect to such monies; and the holder of any of the Notes shall thereafter look only to the Issuers for any payment that such holder may be entitled to collect unless an applicable abandoned property law designates another Person.
ARTICLE 9
Supplemental Indentures
Section 9.01. Without Consent of Holders. The Issuers and the Trustee may, from time to time and at any time, enter into an indenture or indentures supplemental hereto without the consent of any Noteholder for one or more of the following purposes:
(a) adding to the Issuers' covenants for the benefit of the Holders;
(b) surrendering any right or power conferred upon the Issuers;
(c) providing for the assumption of the Issuers' obligations to the Holders in the case of a merger, consolidation, conveyance, transfer or lease in accordance with Article 5;
(d) reducing the Conversion Price; provided that the reduction will not adversely affect the interests of Holders in any material respect;
(e) complying with the requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA;
(f) making any changes or modifications to this Indenture necessary in connection with the registration of the Notes under the Securities Act as contemplated by the Registration Rights Agreement; provided that this action does not adversely affect the interests of the Holders in any material respect;
(g) curing any ambiguity or correcting or supplementing any defective provision contained in this Indenture; provided that such modification or amendment does not adversely affect the interests of the Holders in any material respect; or
(h) adding or modifying any other provisions which the Issuers and the Trustee may deem necessary or desirable and which will not adversely affect the interests of the Holders in any material respect.
Notwithstanding any other provision of the Indenture or the Notes, the Registration Rights Agreement and the obligation to pay Liquidated Damages thereunder may be amended, modified or waived in accordance with the provisions of the Registration Rights Agreement.
Section 9.02. With Consent of Holders. With the written consent of the Holders of at least a majority in aggregate principal amount of the Notes at the time outstanding, the Issuers and the Trustee may, from time to time and at any time, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or change in any manner or eliminating any of the provisions of this Indenture or any supplemental indenture or of modifying in any manner the rights of the Holders of the Notes. However, without the consent of each Noteholder so affected, a supplemental indenture may not:
(a) change the maturity of the principal of or any installment of interest on any Note (including any payment of Liquidated Damages);
(b) reduce the principal amount of, or any premium or interest on (including any payment of Liquidated Damages), any Note;
(c) change the currency of payment of such Note or interest thereon;
(d) impair the right to institute suit for the enforcement of any payment on or with respect to any Note;
(e) modify the Issuers' obligations to maintain an office or agency in New York City;
(f) except as otherwise permitted or contemplated by provisions concerning corporate reorganizations, adversely affect the repurchase option of Holders upon a Change of Control or the conversion rights of Holders;
(g) modify Article 11 in a manner that adversely affects the interest of the Holders in any material respect; or
(h) reduce the percentage in aggregate principal amount of Notes outstanding necessary to modify or amend this Indenture or to waive any past default.
It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent approves the substance thereof.
After a supplemental indenture under this Section 9.02 becomes effective, the Issuers shall mail to each Holder a notice briefly describing the supplemental indenture.
Section 9.03. Compliance with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall comply with the TIA; provided that this Section 9.03 shall not require such supplemental indenture or the Trustee to be qualified under the TIA prior to the time such qualification is in fact required under the terms of the TIA or the Indenture has been qualified under the TIA, nor shall it constitute any admission or acknowledgment by any party to such supplemental indenture that any such qualification is required prior to the time such qualification is in fact required under the terms of the TIA or the Indenture has been qualified under the TIA.
Section 9.04. Revocation and Effect of Consents, Waivers and Actions. Until a supplemental indenture, waiver or other action by Holders becomes effective, a consent thereto by a Holder of a Note hereunder is a continuing consent by the Holder and every subsequent Holder of that Note or portion of the Note that evidences the same obligation as the consenting Holder's Note, even if notation of the consent, waiver or action is not made on the Note. However, any such Holder or subsequent Holder may revoke the consent, waiver or action as to such Holder's Note or portion of the Note if the Trustee receives the notice of revocation before the date the supplemental indenture, waiver or action becomes effective. After a supplemental indenture, waiver or action becomes effective, it shall bind every Noteholder.
Section 9.05. Notation on or Exchange of Notes. Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Issuers shall so determine, new Notes so modified as to conform, in the opinion of the Trustee and the Board of Directors of each Issuer, to any such supplemental indenture may be prepared and executed by the Issuers and authenticated and delivered by the Trustee or an Authenticating Agent in exchange for outstanding Notes.
Section 9.06. Trustee to Sign Supplemental Indentures.
The Trustee shall sign any supplemental indenture authorized
pursuant to this Article 9 if the amendment contained
therein does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. If it does, the
Trustee may, but need not, sign such supplemental indenture.
In signing such supplemental indenture the Trustee shall be
entitled to receive, and (subject to the provisions of
Section 7.01) shall be fully protected in relying upon, an
Officers' Certificate and an Opinion of Counsel stating that
such amendment is authorized or permitted by this Indenture.
Section 9.07. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Notes theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.
ARTICLE 10
Conversion
Section 10.01. Conversion Right and Conversion Price. Subject to and upon compliance with the provisions of this Article, at the option of the Holder thereof, any Note or any portion of the principal amount thereof which is $1,000 or an integral multiple of $1,000 may be converted at the principal amount thereof, or of such portion thereof, into duly authorized, fully paid and nonassessable shares of, at the option of the Holder, Class A Common Stock or Class B Common Stock, at the Conversion Price, determined as hereinafter provided, in effect at the time of conversion. Such conversion right shall expire at the close of business on the final maturity date of the Notes.
In case a Note or portion thereof is called for redemption, such conversion right in respect of the Note or the portion so called, shall expire at the close of business on the Business Day preceding the Redemption Date, unless the Issuers default in making the payment due upon redemption. In the case of a Change of Control for which the Holder exercises its repurchase right with respect to a Note or portion thereof, such conversion right in respect of the Note or portion thereof shall expire at the close of business on the Business Day immediately preceding the Change of Control Repurchase Date.
The price at which shares of Common Stock shall be delivered
upon conversion (the "Conversion Price") shall be initially
equal to $14.30 per share of Common Stock. The Conversion
Price shall be adjusted in certain instances as provided in
paragraphs (a), (b), (c), (d), (e), (f), (h) and (i) of
Section 10.04 hereof.
Section 10.02. Exercise of Conversion Right. To exercise the conversion right, the Holder of any Note to be converted shall surrender such Note duly endorsed or assigned to the Issuers or in blank, at the office of any Conversion Agent, accompanied by a duly signed conversion notice substantially in the form attached to the Note to the Issuers stating that the Holder elects to convert such Note or, if less than the entire principal amount thereof is to be converted, the portion thereof to be converted.
Notes surrendered for conversion during the period from the close of business on any Regular Record Date to the opening of business on the next succeeding Interest Payment Date shall be accompanied by payment in New York Clearing House funds or other funds acceptable to the Issuers of an amount equal to the interest to be received on such Interest Payment Date on the principal amount of Notes being surrendered for conversion; provided, however, that if such Notes have been called for redemption on a Redemption Date that occurs after a Regular Record Date and on or prior to the third Business Day after the Interest Payment Date to which it relates, no such payment shall be required.
Notes shall be deemed to have been converted immediately prior to the close of business on the day of surrender of such Notes for conversion in accordance with the foregoing provisions, and at such time the rights of the Holders of such Notes as Holders shall cease, and the Person or Persons entitled to receive the Common Stock issuable upon conversion shall be treated for all purposes as the record holder or holders of such Common Stock at such time. As promptly as practicable on or after the conversion date, the Issuers shall cause to be issued and delivered to such Conversion Agent a certificate or certificates for the number of full shares of Common Stock issuable upon conversion, together with payment in lieu of any fraction of a share as provided in Section 10.03 hereof.
In the case of any Note which is converted in part only, upon such conversion the Issuers shall execute and the Trustee or an Authenticating Agent shall authenticate and deliver to the Holder thereof, at the expense of the Issuers, a new Note or Notes of authorized denominations in aggregate principal amount equal to the unconverted portion of the principal amount of such Notes.
If shares of Common Stock to be issued upon conversion of a Note that is a Restricted Security (a "Restricted Note"), or securities to be issued upon conversion of a Restricted Note in part only, are to be registered in a name other than that of the Holder of such Restricted Note, such Holder must deliver to the Conversion Agent a certificate in substantially the form of Exhibit B-1 hereto, dated the date of surrender of such Restricted Note and signed by such Holder, as to compliance with the restrictions on transfer applicable to such Restricted Note. Neither the Trustee nor any Conversion Agent, Note Registrar or transfer agent shall be required to register in a name other than that of the Holder of Notes or shares of Common Stock issued upon conversion of any such Restricted Note not so accompanied by a properly completed certificate.
Section 10.03. Fractions of Shares. No fractional shares of Common Stock shall be issued upon conversion of any Note or Notes. If more than one Note shall be surrendered for conversion at one time by the same Holder, the number of full shares which shall be issued upon conversion thereof shall be computed on the basis of the aggregate principal amount of the Notes (or specified portions thereof) so surrendered. Instead of any fractional share of Common Stock which would otherwise be issued upon conversion of any Note or Notes (or specified portions thereof), the Issuers shall pay a cash adjustment in respect of such fraction (calculated to the nearest one-100th of a share) in an amount equal to the same fraction of the quoted price of the Common Stock as of the Trading Day preceding the date of conversion.
Section 10.04. Adjustment of Conversion Price. The Conversion Price shall be subject to adjustments, calculated by the Issuers, from time to time as follows:
(a) In case the Company shall hereafter pay a dividend or make a distribution to all holders of the outstanding Common Stock in shares of Common Stock, the Conversion Price in effect at the opening of business on the date following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be reduced by multiplying such Conversion Price by a fraction:
(1) the numerator of which shall be the number of shares of Common Stock outstanding at the close of business on the Record Date (as defined in Section 10.04(g)) fixed for such determination, and
(2) the denominator of which shall be the sum of such number of shares and the total number of shares constituting such dividend or other distribution.
Such reduction shall become effective immediately after the
opening of business on the day following the Record Date.
For the purpose of this paragraph (a), the number of shares
of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company. The Company
will not pay any dividend or make any distribution on shares
of Common Stock held in the treasury of the Company. If any
dividend or distribution of the type described in this
Section 10.04(a) is declared but not so paid or made, the
Conversion Price shall again be adjusted to the Conversion
Price which would then be in effect if such dividend or
distribution had not been declared.
(b) In case the outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be proportionately reduced, and conversely, in case outstanding shares of Common Stock shall be combined into a smaller number of shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately increased, such reduction or increase, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective.
(c) In case the Company shall issue rights or warrants to all holders of its outstanding shares of Common Stock entitling them (for a period expiring within forty-five (45) days after the date fixed for determination of stockholders entitled to receive such rights or warrants) to subscribe for or purchase shares of Common Stock (or securities convertible into Common Stock) at a price per share (or having a conversion price per share) less than the Current Market Price (as defined in Section 10.04(g)) on the Record Date fixed for the determination of stockholders entitled to receive such rights or warrants, the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to such Record Date by a fraction:
(1) the numerator of which shall be the number of shares of Common Stock outstanding at the close of business on the Record Date plus the number of shares which the aggregate offering price of the total number of shares so offered for subscription or purchase (or the aggregate conversion price of the convertible securities so offered) would purchase at such Current Market Price, and
(2) the denominator of which shall be the number of shares of Common Stock outstanding on the close of business on the Record Date plus the total number of additional shares of Common Stock so offered for subscription or purchase (or into which the convertible securities so offered are convertible).
Such adjustment shall become effective immediately after the opening of business on the day following the Record Date fixed for determination of stockholders entitled to receive such rights or warrants. To the extent that shares of Common Stock (or securities convertible into Common Stock) are not delivered pursuant to such rights or warrants, upon the expiration or termination of such rights or warrants the Conversion Price shall be readjusted to the Conversion Price which would then be in effect had the adjustments made upon the issuance of such rights or warrants been made on the basis of the delivery of only the number of shares of Common Stock (or securities convertible into Common Stock) actually delivered. In the event that such rights or warrants are not so issued, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such Record Date had not been fixed. In determining whether any rights or warrants entitle the holders to subscribe for or purchase shares of Common Stock at less than such Current Market Price, and in determining the aggregate offering price of such shares of Common Stock, there shall be taken into account any consideration received for such rights or warrants and any amount payable on exercise or conversion thereof, the value of such consideration if other than cash, to be determined by the Board of Directors of the Company.
(d) In case the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock shares of any class of Capital Stock of the Company (other than any dividends or distributions to which Section 10.04(a) applies) or evidences of its indebtedness, cash or other assets, including securities, but excluding (1) any rights or warrants referred to in Section 10.04(c), (2) any stock, securities or other property or assets (including cash) distributed in connection with a reclassification, change, merger, consolidation, statutory share exchange, combination, sale or conveyance to which Section 10.11 hereof applies and (3) dividends and distributions paid exclusively in cash (the securities described in foregoing clauses (1), (2) and (3) hereinafter in this Section 10.04(d) called the "excluded securities"), then, in each such case (unless the Company elects to reserve such securities for distribution to the Noteholders upon the conversion of the Notes so that any such Holder converting Notes will receive upon such conversion, in addition to the shares of Common Stock to which such Holder is entitled, the amount and kind of such securities which such Holder would have received if such Holder had converted its Notes into Common Stock immediately prior to the Record Date), subject to the second succeeding paragraph of this Section 10.04(d), the Conversion Price shall be adjusted so that the same shall be equal to the price determined by multiplying the Conversion Price in effect immediately prior to the close of business on the Record Date (as defined in Section 10.04(g)) with respect to such distribution by a fraction:
(1) the numerator of which shall be the Current Market Price (determined as provided in Section 10.04(g)) on such Record Date less the fair market value (as determined by the Board of Directors of the Company, whose determination shall be conclusive and set forth in a Board Resolution) on such Record Date of the portion of the securities so distributed (other than excluded securities) applicable to one share of Common Stock (determined on the basis of the number of shares of the Common Stock outstanding on the Record Date), and
(2) the denominator of which shall be such Current Market Price.
Such reduction shall become effective immediately prior to the opening of business on the day following the Record Date. However, in the event that the then fair market value (as so determined) of the portion of the securities so distributed (other than excluded securities) applicable to one share of Common Stock is equal to or greater than the Current Market Price on the Record Date, in lieu of the foregoing adjustment, adequate provision shall be made so that each Holder shall have the right to receive upon conversion of a Note (or any portion thereof) the amount of securities so distributed (other than excluded securities) such Holder would have received had such Holder converted such Note (or portion thereof) immediately prior to such Record Date. In the event that such dividend or distribution is not so paid or made, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such dividend or distribution had not been declared.
If the Board of Directors of the Company determines the fair
market value of any distribution for purposes of this
Section 10.04(d) by reference to the actual or when issued
trading market for any securities comprising all or part of
such distribution (other than excluded securities), it must
in doing so consider the prices in such market over the same
period (the "Reference Period") used in computing the
Current Market Price pursuant to Section 10.04(g) to the
extent possible, unless the Board of Directors of the
Company in a Board Resolution determines in good faith that
determining the fair market value during the Reference
Period would not be in the best interest of the Holder.
Rights or warrants distributed by the Company to all holders of Common Stock entitling the holders thereof to subscribe for or purchase shares of the Company's Capital Stock (either initially or under certain circumstances), which rights or warrants, until the occurrence of a specified event or events ("Trigger Event"):
(i) are deemed to be transferred with such shares of Common Stock;
(ii) are not exercisable; and
(iii) are also issued in respect of future issuances of Common Stock,
shall be deemed not to have been distributed for
purposes of this Section 10.04(d) (and no adjustment to the
Conversion Price under this Section 10.04(d) will be
required) until the occurrence of the earliest Trigger
Event. If such right or warrant is subject to subsequent
events, upon the occurrence of which such right or warrant
shall become exercisable to purchase different securities,
evidences of indebtedness or other assets or entitle the
holder to purchase a different number or amount of the
foregoing or to purchase any of the foregoing at a different
purchase price, then the occurrence of each such event shall
be deemed to be the date of issuance and Record Date with
respect to a new right or warrant (and a termination or
expiration of the existing right or warrant without exercise
by the holder thereof). In addition, in the event of any
distribution (or deemed distribution) of rights or warrants,
or any Trigger Event or other event (of the type described
in the preceding sentence) with respect thereto, that
resulted in an adjustment to the Conversion Price under this
Section 10.04(d):
(1) in the case of any such rights or warrants which shall all have been redeemed or repurchased without exercise by any holders thereof, the Conversion Price shall be readjusted upon such final redemption or repurchase to give effect to such distribution or Trigger Event, as the case may be, as though it were a cash distribution, equal to the per share redemption or repurchase price received by a holder of Common Stock with respect to such rights or warrant (assuming such holder had retained such rights or warrants), made to all holders of Common Stock as of the date of such redemption or repurchase, and
(2) in the case of such rights or warrants all of which shall have expired or been terminated without exercise, the Conversion Price shall be readjusted as if such rights and warrants had never been issued.
No adjustment of the Conversion Price shall be made pursuant to this Section 10.04(d) in respect of rights or warrants distributed or deemed distributed on any Trigger Event to the extent that such rights or warrants are actually distributed, or reserved by the Company for distribution to holders of Notes upon conversion by such holders of Notes to Common Stock.
For purposes of this Section 10.04(d) and Sections 10.04(a), 10.04(b) and 10.04(c), any dividend or distribution to which this Section 10.04(d) is applicable that also includes shares of Common Stock, a subdivision or combination of Common Stock to which Section 10.04(b) applies, or rights or warrants to subscribe for or purchase shares of Common Stock to which Section 10.04(c) applies (or any combination thereof), shall be deemed instead to be:
(1) a dividend or distribution of the evidences of indebtedness, assets, shares of Capital Stock, rights or warrants other than such shares of Common Stock, such subdivision or combination or such rights or warrants to which Sections 10.04(a), 10.04(b) and 10.04(c) apply, respectively (and any Conversion Price reduction required by this Section 10.04(d) with respect to such dividend or distribution shall then be made), immediately followed by
(2) a dividend or distribution of such shares of Common Stock, such subdivision or combination or such rights or warrants (and any further Conversion Price reduction required by Sections 10.04(a), 10.04(b) and 10.04(c) with respect to such dividend or distribution shall then be made), except:
(A) the Record Date of such dividend or
distribution shall be substituted as (x) "the date fixed for
the determination of stockholders entitled to receive such
dividend or other distribution", "Record Date fixed for such
determinations" and "Record Date" within the meaning of
Section 10.04(a), (y) "the day upon which such subdivision
becomes effective" and "the day upon which such combination
becomes effective" within the meaning of Section 10.04(b),
and (z) as "the date fixed for the determination of
stockholders entitled to receive such rights or warrants",
"the Record Date fixed for the determination of the
stockholders entitled to receive such rights or warrants"
and such "Record Date" within the meaning of Section
10.04(c), and
(B) any shares of Common Stock included in such dividend or distribution shall not be deemed "outstanding at the close of business on the date fixed for such determination" within the meaning of Section 10.04(a) and any reduction or increase in the number of shares of Common Stock resulting from such subdivision or combination shall be disregarded in connection with such dividend or distribution.
(e) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock cash
(excluding any cash that is distributed upon a
reclassification, change, merger, consolidation, statutory
share exchange, combination, sale or conveyance to which
Section 10.11 hereof applies or as part of a distribution
referred to in Section 10.04(d) hereof), in an aggregate
amount that, combined together with: (1) the aggregate
amount of any other such distributions to all holders of
Common Stock made exclusively in cash within the 12 months
preceding the date of payment of such distribution, and in
respect of which no adjustment pursuant to this Section
10.04(e) has been made, and (2) the aggregate of any cash
plus the fair market value (as determined by the Board of
Directors of the Company, whose determination shall be
conclusive and set forth in a Board Resolution) of other
consideration payable in respect of any tender offer by the
Company or any of its Subsidiaries for all or any portion of
the Common Stock concluded within the 12 months preceding
the date of such distribution, and in respect of which no
adjustment pursuant to Section 10.04(f) hereof has been
made, exceeds 5% of the product of the Current Market Price
(determined as provided in Section 10.04(g)) on the Record
Date with respect to such distribution times the number of
shares of Common Stock outstanding on such date, then and in
each such case, immediately after the close of business on
such date, the Conversion Price shall be reduced so that the
same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the close of
business on such Record Date by a fraction:
(i) the numerator of which shall be equal to the Current Market Price on the Record Date less an amount equal to the quotient of (x) the excess of such combined amount over such 5% and (y) the number of shares of Common Stock outstanding on the Record Date, and
(ii) the denominator of which shall be equal to the Current Market Price on such date.
However, in the event that the then fair market value (as so determined) of the portion of the securities so distributed (other than excluded securities) applicable to one share of Common Stock is equal to or greater than the Current Market Price on the Record Date, in lieu of the foregoing adjustment, adequate provision shall be made so that each Holder shall have the right to receive upon conversion of a Note (or any portion thereof) the amount of cash such Holder would have received had such Holder converted such Note (or portion thereof) immediately prior to such Record Date. In the event that such dividend or distribution is not so paid or made, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such dividend or distribution had not been declared.
(f) In case a tender offer made by the Company or any of its Subsidiaries for all or any portion of the Common Stock shall expire and such tender offer (as amended upon the expiration thereof) shall require the payment to stockholders (based on the acceptance (up to any maximum specified in the terms of the tender offer) of Purchased Shares (as defined below)) of an aggregate consideration having a fair market value (as determined by the Board of Directors, whose determination shall be conclusive and set forth in a Board Resolution) that combined together with:
(1) the aggregate of the cash plus the fair market value (as determined by the Board of Directors of the Company, whose determination shall be conclusive and set forth in a Board Resolution), as of the expiration of such tender offer, of other consideration payable in respect of any other tender offers, by the Company or any of its Subsidiaries for all or any portion of the Common Stock expiring within the 12 months preceding the expiration of such tender offer and in respect of which no adjustment pursuant to this Section 10.04(f) has been made, and
(2) the aggregate amount of any distributions to
all holders of the Company's Common Stock made exclusively
in cash within 12 months preceding the expiration of such
tender offer and in respect of which no adjustment pursuant
to Section 10.04(e) has been made, exceeds 5% of the product
of the Current Market Price (determined as provided in
Section 10.04(g)) as of the last time (the "Expiration
Time") tenders could have been made pursuant to such tender
offer (as it may be amended) times the number of shares of
Common Stock outstanding (including any tendered shares) on
the Expiration Time, then, and in each such case,
immediately prior to the opening of business on the day
after the date of the Expiration Time, the Conversion Price
shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Price in effect
immediately prior to close of business on the date of the
Expiration Time by a fraction:
(i) the numerator of which shall be the number of shares of Common Stock outstanding (including any tendered shares) at the Expiration Time multiplied by the Current Market Price of the Common Stock on the Trading Day next succeeding the Expiration Time, and
(ii) the denominator of which shall be the sum of (x) the fair market value (determined as aforesaid) of the aggregate consideration payable to stockholders based on the acceptance (up to any maximum specified in the terms of the tender offer) of all shares validly tendered and not withdrawn as of the Expiration Time (the shares deemed so accepted, up to any such maximum, being referred to as the "Purchased Shares") and (y) the product of the number of shares of Common Stock outstanding (less any Purchased Shares) on the Expiration Time and the Current Market Price of the Common Stock on the Trading Day next succeeding the Expiration Time.
Such reduction (if any) shall become effective immediately
prior to the opening of business on the day following the
Expiration Time. In the event that the Company or any such
Subsidiary, as the case may be, is obligated to purchase
shares pursuant to any such tender offer, but the Company or
any such Subsidiary, as the case may be, is permanently
prevented by applicable law from effecting any such
purchases or all such purchases are rescinded, the
Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such
tender offer had not been made. If the application of this
Section 10.04(f) to any tender offer would result in an
increase in the Conversion Price, no adjustment shall be
made for such tender offer under this Section 10.04(f).
(g) For purposes of this Section 10.04, the following terms shall have the meanings indicated:
(1) "Current Market Price" shall mean the average of the daily Closing Prices per share of Common Stock for the ten consecutive Trading Days immediately prior to the date in question; provided, however, that if:
(i) the "ex" date (as hereinafter defined)
for any event (other than the issuance or distribution
requiring such computation) that requires an adjustment to
the Conversion Price pursuant to Section 10.04(a), (b), (c),
(d), (e) or (f) occurs during such ten consecutive Trading
Days, the Closing Price for each Trading Day prior to (ii)
the "ex" date for such other event shall be adjusted by
multiplying such Closing Price by the same fraction by which
the Conversion Price is so required to be adjusted as a
result of such other event;
(ii) the "ex" date for any event (other than the issuance or distribution requiring such computation) that requires an adjustment to the Conversion Price pursuant to Section 10.04(a), (b), (c), (d), (e) or (f) occurs on or after the "ex" date for the issuance or distribution requiring such computation and prior to the day in question, the Closing Price for each Trading Day on and after the "ex" date for such other event shall be adjusted by multiplying such Closing Price by the reciprocal of the fraction by which the Conversion Price is so required to be adjusted as a result of such other event; and
(iii) the "ex" date for the issuance or distribution requiring such computation is prior to the day in question, after taking into account any adjustment required pursuant to clause (i) or (ii) of this proviso, the Closing Price for each Trading Day on or after such "ex" date shall be adjusted by adding thereto the amount of any cash and the fair market value (as determined by the Board of Directors of the Company in a manner consistent with any determination of such value for purposes of Section 10.04(d) or (f), whose determination shall be conclusive and set forth in a Board Resolution) of the evidences of indebtedness, shares of Capital Stock or assets being distributed applicable to one share of Common Stock as of the close of business on the day before such "ex" date.
For purposes of any computation under Section 10.04(f),
the Current Market Price of the Common Stock on any date
shall be deemed to be the average of the daily Closing
Prices per share of Common Stock for such day and the next
two succeeding Trading Days; provided, however, that if the
"ex" date for any event (other than the tender offer
requiring such computation) that requires an adjustment to
the Conversion Price pursuant to Section 10.04(a), (b), (c),
(d), (e) or (f) occurs on or after the Expiration Time for
the tender offer requiring such computation and prior to the
day in question, the Closing Price for each Trading Day on
and after the "ex" date for such other event shall be
adjusted by multiplying such Closing Price by the reciprocal
of the fraction by which the Conversion Price is so required
to be adjusted as a result of such other event. For purposes
of this paragraph, the term "ex" date, when used:
(A) with respect to any issuance or distribution, means the first date on which the Common Stock trades regular way on the relevant exchange or in the relevant market from which the Closing Price was obtained without the right to receive such issuance or distribution;
(B) with respect to any subdivision or combination of shares of Common Stock, means the first date on which the Common Stock trades regular way on such exchange or in such market after the time at which such subdivision or combination becomes effective, and
(C) with respect to any tender offer, means the first date on which the Common Stock trades regular way on such exchange or in such market after the Expiration Time of such offer.
Notwithstanding the foregoing, whenever successive adjustments to the Conversion Price are called for pursuant to this Section 10.04, such adjustments shall be made to the Current Market Price as may be necessary or appropriate to effectuate the intent of this Section 10.04 and to avoid unjust or inequitable results as determined in good faith by the Board of Directors of the Company.
(2) "fair market value" shall mean the amount which a willing buyer would pay a willing seller in an arm's length transaction.
(3) "Record Date" shall mean, with respect to any dividend, distribution or other transaction or event in which the holders of Common Stock have the right to receive any cash, securities or other property or in which the Common Stock (or other applicable security) is exchanged for or converted into any combination of cash, securities or other property, the date fixed for determination of stockholders entitled to receive such cash, securities or other property (whether such date is fixed by the Board of Directors or by statute, contract or otherwise).
(h) The Issuers may make such reductions in the Conversion
Price, in addition to those required by Section 10.04(a),
(b), (c), (d), (e) or (f), as the Boards of Directors of the
Issuers consider to be advisable to avoid or diminish any
income tax to holders of Common Stock or rights to purchase
Common Stock resulting from any dividend or distribution of
stock (or rights to acquire stock) or from any event treated
as such for income tax purposes.
To the extent permitted by applicable law, the Issuers from time to time may reduce the Conversion Price by any amount for any period of time if the period is at least 20 days and the reduction is irrevocable during the period and the Board of Directors of each Issuer determines in good faith that such reduction would be in the best interests of the Issuers, which determination shall be conclusive and set forth in a Board Resolution. Whenever the Conversion Price is reduced pursuant to the preceding sentence, the Issuers shall mail to the Trustee and each Holder at the address of such Holder as it appears in the Note Register a notice of the reduction at least 15 days prior to the date the reduced Conversion Price takes effect, and such notice shall state the reduced Conversion Price and the period during which it will be in effect.
(i) No adjustment in the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least 1% in such price; provided, however, that any adjustments which by reason of this Section 10.04(i) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article 10 shall be made by the Issuers and shall be made to the nearest cent or to the nearest one hundredth of a share, as the case may be. No adjustment need be made for a change in the par value or no par value of the Common Stock.
(j) In any case in which this Section 10.04 provides that an adjustment shall become effective immediately after a Record Date for an event, the Company may defer until the occurrence of such event (i) issuing to the Holder of any Note converted after such Record Date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion by reason of the adjustment required by such event over and above the Common Stock issuable upon such conversion before giving effect to such adjustment and (ii) paying to such holder any amount in cash in lieu of any fraction pursuant to Section 10.03 hereof.
(k) For purposes of this Section 10.04, the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Company will not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Company.
Section 10.05. Notice of Adjustments of Conversion Price. Whenever the Conversion Price is adjusted as herein provided (other than in the case of an adjustment pursuant to the second paragraph of Section 10.04(h) for which the notice required by such paragraph has been provided), the Issuers shall promptly file with the Trustee and any Conversion Agent other than the Trustee an Officers' Certificate setting forth the adjusted Conversion Price and showing in reasonable detail the facts upon which such adjustment is based. Promptly after delivery of such Officers' Certificate, the Issuers shall prepare a notice stating that the Conversion Price has been adjusted and setting forth the adjusted Conversion Price and the date on which each adjustment becomes effective, and shall mail such notice to each Holder at the address of such Holder as it appears in the Note Register within 20 days of the effective date of such adjustment. Failure to deliver such notice shall not effect the legality or validity of any such adjustment.
Section 10.06. Notice Prior to Certain Actions. In case at any time after the date hereof:
(1) the Company shall declare a dividend (or any other distribution) on its Common Stock payable otherwise than in cash out of its capital surplus or its consolidated retained earnings;
(2) the Company shall authorize the granting to the holders of its Common Stock of rights or warrants to subscribe for or purchase any shares of Capital Stock of any class (or of securities convertible into shares of Capital Stock of any class) or of any other rights;
(3) there shall occur any reclassification of the Common Stock of the Company (other than a subdivision or combination of its outstanding Common Stock, a change in par value, a change from par value to no par value or a change from no par value to par value), or any merger, consolidation, statutory share exchange or combination to which the Company is a party and for which approval of any shareholders of the Company is required, or the sale, transfer or conveyance of all or substantially all of the assets of the Company; or
(4) there shall occur the voluntary or involuntary dissolution, liquidation or winding up of the Company;
the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of Notes pursuant to Section 4.03 hereof, and shall cause to be provided to the Trustee and all Holders in accordance with Section 12.02 hereof, at least 20 days (or 10 days in any case specified in clause (1) or (2) above) prior to the applicable record or effective date hereinafter specified, a notice stating:
(A) the date on which a record is to be taken for the purpose of such dividend, distribution, rights or warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, rights or warrants are to be determined, or
(B) the date on which such reclassification, merger, consolidation, statutory share exchange, combination, sale, transfer, conveyance, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, merger, consolidation, statutory share exchange, sale, transfer, dissolution, liquidation or winding up.
Neither the failure to give such notice nor any defect therein shall affect the legality or validity of the proceedings or actions described in clauses (1) through (4) of this Section 10.06.
Section 10.07. Company to Reserve Common Stock. The Company shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Stock, for the purpose of effecting the conversion of Notes, the full number of shares of fully paid and nonassessable Common Stock then issuable upon the conversion of all Notes outstanding.
Section 10.08. Taxes on Conversions. Except as provided in the next sentence, the Issuers will pay any and all taxes (other than taxes on income) and duties that may be payable in respect of the issue or delivery of shares of Common Stock on conversion of Notes pursuant hereto. A Holder delivering a Note for conversion shall be liable for and will be required to pay any tax or duty which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that of the Holder of the Note or Notes to be converted, and no such issue or delivery shall be made unless the Person requesting such issue has paid to the Issuers the amount of any such tax or duty, or has established to the satisfaction of the Issuers that such tax or duty has been paid.
Section 10.09. Covenant as to Common Stock. The Company covenants that all shares of Common Stock which may be issued upon conversion of Notes will upon issue be fully paid and nonassessable and, except as provided in Section 10.08, the Issuers will pay all taxes, liens and charges with respect to the issue thereof.
Section 10.10. Cancellation of Converted Notes. All Notes delivered for conversion shall be delivered to the Trustee to be canceled by or at the direction of the Trustee, which shall dispose of the same as provided in Section 2.11.
Section 10.11. Effect of Reclassification, Consolidation, Merger or Sale. If any of following events occur, namely:
(1) any reclassification or change of the outstanding shares of Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination),
(2) any merger, consolidation, statutory share exchange or combination of the Company with another corporation as a result of which holders of Common Stock shall be entitled to receive stock, securities or other property or assets (including cash) with respect to or in exchange for such Common Stock or
(3) any sale or conveyance of all or substantially all the properties and assets of the Company to any other corporation as a result of which holders of Common Stock shall be entitled to receive stock, securities or other property or assets (including cash) with respect to or in exchange for such Common Stock,
the Company or the successor or purchasing corporation, as the case may be, shall execute with the Trustee and the Co- Obligor a supplemental indenture (which shall comply with the TIA as in force at the date of execution of such supplemental indenture if such supplemental indenture is then required to so comply) providing that such Note shall be convertible into the kind and amount of shares of stock and other securities or property or assets (including cash) which such Holder would have been entitled to receive upon such reclassification, change, merger, consolidation, statutory share exchange, combination, sale or conveyance had such Notes been converted into Common Stock immediately prior to such reclassification, change, merger, consolidation, statutory share exchange, combination, sale or conveyance assuming such holder of Common Stock did not exercise its rights of election, if any, as to the kind or amount of securities, cash or other property receivable upon such reclassification, change, merger, consolidation, statutory share exchange, combination, sale or conveyance (provided that, if the kind or amount of securities, cash or other property receivable upon such reclassification, change, merger, consolidation, statutory share exchange, combination, sale or conveyance is not the same for each share of Common Stock in respect of which such rights of election shall not have been exercised ("Non-Electing Share"), then for the purposes of this Section 10.11 the kind and amount of securities, cash or other property receivable upon such reclassification, change, merger, consolidation, statutory share exchange, combination, sale or conveyance for each Non-Electing Share shall be deemed to be the kind and amount so receivable per share by a plurality of the Non-Electing Shares). Such supplemental indenture shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 10. If, in the case of any such reclassification, change, merger, consolidation, statutory share exchange, combination, sale or conveyance, the stock or other securities and assets receivable thereupon by a holder of shares of Common Stock includes shares of stock or other securities and assets of a corporation other than the successor or purchasing corporation, as the case may be, in such reclassification, change, merger, consolidation, statutory share exchange, combination, sale or conveyance, then such supplemental indenture shall also be executed by such other corporation and shall contain such additional provisions to protect the interests of the Holders of the Notes as the Boards of Directors of the Issuers shall reasonably consider necessary by reason of the foregoing, including to the extent practicable the provisions providing for the repurchase rights set forth in Section 3.08 hereof.
The Issuers shall cause notice of the execution of such supplemental indenture to be mailed to each Holder, at the address of such Holder as it appears on the Note Register, within 20 days after execution thereof. Failure to deliver such notice shall not affect the legality or validity of such supplemental indenture.
The above provisions of this Section 10.11 shall similarly apply to successive reclassifications, mergers, consolidations, statutory share exchanges, combinations, sales and conveyances.
If this Section 10.11 applies to any event or occurrence,
Section 10.04 hereof shall not apply.
Section 10.12. Responsibility of Trustee for Conversion
Provisions. The Trustee, subject to the provisions of
Section 7.01 hereof, and any Conversion Agent shall not at
any time be under any duty or responsibility to any Holder
of Notes to determine whether any facts exist which may
require any adjustment of the Conversion Price, or with
respect to the nature or intent of any such adjustments when
made, or with respect to the method employed, or herein or
in any supplemental indenture provided to be employed, in
making the same. Neither the Trustee, subject to the
provisions of Section 7.01 hereof, nor any Conversion Agent
shall be accountable with respect to the validity or value
(of the kind or amount) of any Common Stock, or of any other
securities or property, which may at any time be issued or
delivered upon the conversion of any Note; and it or they do
not make any representation with respect thereto. Neither
the Trustee, subject to the provisions of Section 7.01
hereof, nor any Conversion Agent shall be responsible for
any failure of the Issuers to make any cash payment or to
issue, transfer or deliver any shares of stock or share
certificates or other securities or property upon the
surrender of any Note for the purpose of conversion; and the
Trustee, subject to the provisions of Section 7.01 hereof,
and any Conversion Agent shall not be responsible or liable
for any failure of the Issuers to comply with any of the
covenants of the Issuers contained in this Article.
ARTICLE 11
Security
Section 11.01. Security. (a) At the Closing Time, the Co-Obligor shall (i) enter into the Pledge Agreement and comply with the terms and provisions thereof and (ii) purchase the Initial Pledged Securities to be pledged to the Collateral Agent for the benefit of the Trustee and the ratable benefit of the Holders in such amount as will be sufficient upon receipt of scheduled interest and principal payments of such Initial Pledged Securities, in the opinion of Arthur Andersen LLP, independent public accountants, or another nationally recognized firm of independent public accountants selected by the Co-Obligor, to provide for payment in full of the first six scheduled interest payments due on the Notes. The Initial Pledged Securities shall be pledged by the Co-Obligor to the Collateral Agent for the benefit of the Trustee and the ratable benefit of the Holders and shall be held by the Collateral Agent in the Collateral Account pending disposition pursuant to the Pledge Agreement.
(b) On each relevant Date of Delivery (if such Date of Delivery is different from the Closing Time), the Co-Obligor shall (i) enter into a Supplement to the Pledge Agreement and comply with the terms and provisions thereof and (ii) purchase the Additional Pledged Securities to be pledged to the Collateral Agent for the benefit of the Trustee and the ratable benefit of the Holders in such amount as will be sufficient upon receipt of scheduled interest and principal payments of such Additional Pledged Securities, in the opinion of Arthur Andersen LLP, independent public accountants, or another nationally recognized firm of independent public accountants selected by the Co-Obligor, to provide for payment in full of the first six scheduled interest payments due on the Notes issued in connection therewith. The Additional Pledged Securities shall be pledged by the Co-Obligor to the Collateral Agent for the benefit of the Trustee and the ratable benefit of the Holders and shall be held by the Collateral Agent in the Collateral Account pending disposition pursuant to the Pledge Agreement.
(c) Each Holder, by its acceptance of a Note, consents and agrees to the terms of the Pledge Agreement (including, without limitation, the provisions providing for foreclosure and release of the Pledged Securities) as the same may be in effect or may be amended from time to time in writing by the parties thereto (provided that no amendment that would materially adversely affect the rights of the Holders may be effected without the consent of each Holder affected thereby), and authorizes and directs the Trustee and the Collateral Agent to enter into the Pledge Agreement and to perform its respective obligations and exercise its respective rights thereunder in accordance therewith. The Co-Obligor will do or cause to be done all such acts and things as may be necessary or proper, or as may be required by the provisions of the Pledge Agreement, to assure and confirm to the Trustee and the Collateral Agent the security interest in the Pledged Securities contemplated hereby, by the Pledge Agreement or any part thereof, as from time to time constituted, so as to render the same available for the security and benefit of this Indenture and of the Notes secured hereby, according to the intent and purpose herein expressed. The Co-Obligor shall take, or shall cause to be taken, upon request of the Trustee or the Collateral Agent, any and all actions reasonably required to cause the Pledge Agreement to create and maintain, as security for the obligations of the Issuers under this Indenture and the Notes as provided in the Pledge Agreement, valid and enforceable first priority liens in and on all the Pledged Securities, in favor of the Collateral Agent for the benefit of the Trustee and the ratable benefit of the Holders, superior to and prior to the rights of third Persons and subject to no other Liens.
(d) The release of any Pledged Securities pursuant to the Pledge Agreement will not be deemed to impair the security under this Indenture in contravention of the provisions hereof if and to the extent the Pledged Securities are released pursuant to this Indenture and the Pledge Agreement. To the extent applicable, the Issuers shall cause Section 314(d) of the TIA relating to the release of property or securities from the Lien and security interest of the Pledge Agreement and relating to the substitution therefor of any property or securities to be subjected to the Lien and security interest of the Pledge Agreement to be complied with. Any certificate or opinion required by Section 314(d) of the TIA may be made by an Officer of the Issuers, except in cases where Section 314(d) of the TIA requires that such certificate or opinion be made by an independent Person, which Person shall be an independent engineer, appraiser or other expert selected by the Issuers.
(e) The Issuers shall cause Section 314(b) of the TIA, relating to Opinions of Counsel regarding the Lien under the Pledge Agreement, to be complied with. The Trustee may, to the extent permitted by Section 7.01 and 7.02 hereof, accept as conclusive evidence of compliance of the foregoing provisions the appropriate statements contained in such Opinions of Counsel.
(f) The Trustee and the Collateral Agent may, in their sole discretion and without the consent of the Holders, on behalf of the Holders, take all actions it deems necessary or appropriate in order to (i) enforce any of the terms of the Pledge Agreement and (ii) collect and receive any and all amounts payable in respect of the obligations of the Co- Obligor thereunder. The Trustee and the Collateral Agent shall have the authority necessary in order to institute and maintain such suits and proceedings as the Trustee and the Collateral Agent may deem expedient to preserve or protect its interests and the interests of the Holders in the Pledged Securities (including the authority to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the security interest hereunder or be prejudicial to the interests of the Holders, the Collateral Agent or the Trustee).
(g) Beyond the exercise of reasonable care in the custody and preservation thereof, the Trustee and the Collateral Agent shall have no duty as to any Pledged Securities in their possession or any income thereon or as to preservation of rights against prior parties or any other rights pertaining thereto, and the Trustee and the Collateral Agent shall not be responsible for filing any financing or continuation statements or recording any documents or instruments in any public office at any time or times or otherwise perfecting or maintaining the perfection of any security interest in the Pledged Securities. The Trustee and the Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Pledged Securities in its possession if the Pledged Securities are accorded treatment substantially equal to that which it accords its own property or property held in similar accounts and shall not be liable or responsible for any loss or diminution in the value of any of the Pledged Securities, by reason of the act or omission of the Collateral Agent, any carrier, forwarding agency or other agent or bailee selected by the Trustee in good faith.
(h) The Trustee shall not be responsible for the existence, genuineness or value of any of the Pledged Securities or for the validity, perfection, priority or enforceability of the Liens in any of the Pledged Securities, whether impaired by operation of law or otherwise, for the validity or sufficiency of the Pledged Securities or any agreement or assignment contained therein, for the validity of the title of the Co-Obligor to the Pledged Securities, for insuring the Pledged Securities or for the payment of taxes, charges, assessments or Liens upon the Pledged Securities or otherwise as to the maintenance of the Pledged Securities. The Trustee shall have no duty to ascertain or inquire as to the performance or observance of any of the terms of this Indenture or the Pledge Agreement by the Co-Obligor or the Collateral Agent.
ARTICLE 12
Miscellaneous
Section 12.01. Trust Indenture Act Controls. This Indenture is hereby made subject to, and shall be governed by, the provisions of the TIA required to be part of and to govern indentures qualified under the TIA; provided, however, that, unless otherwise required by law, notwithstanding the foregoing, this Indenture and the Notes issued hereunder shall not be subject to the provisions of subsections (a)(1), (a)(2), and (a)(3) of Section 314 of the TIA as now in effect or as hereafter amended or modified; provided further that this Section 12.01 shall not require this Indenture or the Trustee to be qualified under the TIA prior to the time such qualification is in fact required under the terms of the TIA, nor shall it constitute any admission or acknowledgment by any party to the Indenture that any such qualification is required prior to the time such qualification is in fact required under the terms of the TIA. If any provision of this Indenture limits, qualifies, or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control.
Section 12.02. Notices. Any request, demand, authorization, notice, waiver, consent or communication shall be in writing and delivered in person or mailed by first-class mail, postage prepaid, addressed as follows or transmitted by facsimile transmission (confirmed by guaranteed overnight courier) to the following facsimile numbers:
if to the Issuers:
Freeport-McMoRan Copper & Gold Inc.
FCX Investment Ltd.
c/o Freeport-McMoRan Copper & Gold Inc.
1615 Poydras Street
New Orleans, Louisiana 70112
Attention: Treasurer
Facsimile No. (504) 582-4511
if to the Trustee:
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Administration
Facsimile No. (212) 815-5915
The Issuers or the Trustee by notice given to the other in the manner provided above may designate additional or different addresses for subsequent notices or communications.
Any notice or communication given to a Noteholder shall be mailed to the Noteholder, by first-class mail, postage prepaid, at the Noteholder's address as it appears on the registration books of the Note Registrar and shall be sufficiently given if so mailed within the time prescribed.
Failure to mail a notice or communication to a Noteholder or any defect in it shall not affect its sufficiency with respect to other Noteholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not received by the addressee.
If the Issuers mail a notice or communication to the Noteholders, it shall mail a copy to the Trustee and each Note Registrar, Paying Agent, Conversion Agent or co- registrar.
Section 12.03. Communication by Holders with Other Holders. Noteholders may communicate pursuant to Section 312(b) of the TIA with other Noteholders with respect to their rights under this Indenture or the Notes. The Issuers, the Trustee, the Note Registrar, the Paying Agent, the Conversion Agent and anyone else shall have the protection of Section 312(c) of the TIA.
Section 12.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Issuers to the Trustee to take any action under this Indenture, the Issuers shall furnish to the Trustee:
(1) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with.
Section 12.05. Statements Required in Certificate or Opinion. Each Officers' Certificate or Opinion of Counsel with respect to compliance with a covenant or condition provided for in this Indenture shall include:
(1) a statement that each person making such Officers' Certificate or Opinion of Counsel has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such Officers' Certificate or Opinion of Counsel are based;
(3) a statement that, in the opinion of each such person, he has made such examination or investigation as is necessary to enable such person to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(4) a statement that, in the opinion of such person, such covenant or condition has been complied with.
Section 12.06. Separability Clause. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
Section 12.07. Rules by Trustee, Paying Agent, Conversion Agent and Note Registrar. The Trustee may make reasonable rules for action by or a meeting of Noteholders. The Note Registrar, Conversion Agent and the Paying Agent may make reasonable rules for their functions.
Section 12.08. Legal Holidays. A "Legal Holiday" is any day other than a Business Day. If any specified date (including a date for giving notice) is a Legal Holiday, the action shall be taken on the next succeeding day that is not a Legal Holiday, and, if the action to be taken on such date is a payment in respect of the Notes, no interest, if any, shall accrue for the intervening period.
Section 12.09. GOVERNING LAW. THIS INDENTURE AND THE NOTES WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Section 12.10. No Recourse Against Others. A director, officer, employee or stockholder, as such, of an Issuer shall not have any liability for any obligations of such Issuer under the Notes or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Note, each Noteholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Notes.
Section 12.11. Successors. All agreements of an Issuer in this Indenture and the Notes shall bind its successor. All agreements of the Trustee in this Indenture shall bind its successor.
Section 12.12. Benefits of Indenture. Nothing in this Indenture or in the Notes, express or implied, shall give to any Person, other than the parties hereto, any Paying Agent, any authenticating agent, any Note Registrar and their successors hereunder and the holders of Notes, any benefit or any legal or equitable right, remedy or claim under this Indenture.
Section 12.13. Table of Contents, Heading, Etc. The table of contents and the titles and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof.
Section 12.14. Authenticating Agent. The Trustee may appoint an authenticating agent (the "Authenticating Agent") that shall be authorized to act on its behalf, and subject to its direction, in the authentication and delivery of Notes in connection with the original issuance thereof and transfers and exchanges of Notes hereunder, including under Sections 2.03, 2.07, 2.08, 3.06, 3.11 and 10.02, as fully to all intents and purposes as though the authenticating agent had been expressly authorized by this Indenture and those Sections to authenticate and deliver Notes. For all purposes of this Indenture, the authentication and delivery of Notes by the Authenticating Agent shall be deemed to be authentication and delivery of such Notes "by the Trustee" and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent shall be deemed to satisfy any requirement hereunder or in the Notes for the Trustee's certificate of authentication. Such Authenticating Agent shall at all times be a Person eligible to serve as trustee hereunder pursuant to Section 7.09.
Any corporation into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which any Authenticating Agent shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of any Authenticating Agent, shall be the successor of the Authenticating Agent hereunder, if such successor corporation is otherwise eligible under this Section 12.14, without the execution or filing of any paper or any further act on the part of the parties hereto or the Authenticating Agent or such successor corporation.
Any Authenticating Agent may at any time resign by giving written notice of resignation to the Trustee and to the Issuers. The Trustee may at any time terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent and to the Issuers. Upon receiving such a notice of resignation or upon such a termination, or in case at any time any Authenticating Agent shall cease to be eligible under this Section , the Trustee shall either promptly appoint a successor Authenticating Agent or itself assume the duties and obligations of the former Authenticating Agent under this Indenture and, upon such appointment of a successor Authenticating Agent, if made, shall give written notice of such appointment of a successor Authenticating Agent to the Issuers and shall mail notice of such appointment of a successor Authenticating Agent to all holders of Notes as the names and addresses of such holders appear on the Note Register.
The Issuers agree to pay to the Authenticating Agent from time to time such reasonable compensation for its services as shall be agreed upon in writing between the Issuers and the Authenticating Agent.
The provisions of Sections 2.12, 7.03, 7.04, 7.07 and this
Section 12.14 shall be applicable to any Authenticating
Agent.
Section 12.15. Execution in Counterparts. This Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the undersigned, being duly authorized, have executed this Indenture on behalf of the respective parties hereto as of the date first above written.
FREEPORT-McMoRan COPPER & GOLD INC.
By:
Name:
Title:
FCX INVESTMENT LTD.
By:
Name:
Title:
THE BANK OF NEW YORK,
as Trustee
By:
Name:
Title:
EXHIBIT A
FOR GLOBAL NOTE ONLY: [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUERS OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY, OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE TWO OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.]
IF REQUIRED PURSUANT TO SECTION 2.07(d): [THIS SECURITY AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY, THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES THEREOF UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION) (THE "RESALE RESTRICTION PERIOD"), WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH FREEPORT-MCMORAN COPPER & GOLD OR ANY AFFILIATE OF FREEPORT-MCMORAN COPPER & GOLD WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) ONLY (A) TO FREEPORT-MCMORAN COPPER & GOLD OR ANY SUBSIDIARY THEREOF, (B) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHICH NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) OUTSIDE THE UNTIED STATES TO NON-U.S. PERSONS IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S, (D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) or (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, (E) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, INCLUDING UNDER RULE 144, IF AVAILABLE, SUBJECT IN EACH OF THE FOREGOING CASES TO ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF ITS PROPERTY OR THE PROPERTY OF SUCH INVESTOR ACCOUNT OR ACCOUNTS BE AT ALL TIME WITHIN ITS OR THEIR CONTROL. IF ANY RESALE OR OTHER TRANSFER OF THIS SECURITY OR SHARES OF COMMON STOCK ISSUED UPON CONVERSION OF THIS SECURITY IS PROPOSED TO BE MADE PURSUANT TO CLAUSE (D) ABOVE PRIOR TO THE EXPIRATION OF THE RESALE RESTRICTION PERIOD (OR THE DATE OF REGISTRATION THEREOF), THE TRANSFEROR SHALL BE REQUIRED TO DELIVER A LETTER FROM THE TRANSFEREE TO THE TRUSTEE WHICH SHALL PROVIDE, AMONG OTHER THINGS, THAT THE TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) or (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY OR THE SHARES OF COMMON STOCK ISSUED UPON CONVERSION OF THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT. PRIOR TO THE EXPIRATION OF THE RESALE RESTRICTION PERIOD, THE ISSUERS AND THE TRUSTEE RESERVE THE RIGHT TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE EXPIRATION OF THE RESALE RESTRICTION PERIOD.]
FREEPORT-MCMORAN COPPER & GOLD INC.
FCX INVESTMENT LTD.
8 1/4% Convertible Senior Notes due 2006
No. CUSIP: 35671DAD7
Issue Date:
FREEPORT-MCMORAN COPPER & GOLD INC., a Delaware corporation,
and FCX INVESTMENT LTD., a Cayman Islands limited liability
exempted company, jointly and severally, promise to pay to
___________ or registered assigns, the principal sum of
[_______________] DOLLARS ($[_____________]) on January 31,
2006.
This Note shall bear interest as specified on the other side of this Note. This Note is convertible as specified on the other side of this Note.
Additional provisions of this Note are set forth on the other side of this Note.
Dated:__________ FREEPORT-MCMORAN COPPER & GOLD INC.
By: ______________________________
Name:
|
Title:
FCX INVESTMENT LTD.
By: ______________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
This is one of the Notes referred to in the within- mentioned Indenture (as defined on the other side of this Note).
THE BANK OF NEW YORK, as Trustee
By:___________________________
Authorized Signatory
By:___________________________
As Authenticating Agent
(if different from Trustee)
Dated:________________________
[FORM OF REVERSE SIDE OF NOTE]
8 1/4% Convertible Senior Note due 2006
1. Cash Interest. The Issuers, jointly and severally, promise to pay interest in cash on the principal amount of this Note at the rate per annum of 8 1/4%. The Issuers will pay cash interest semiannually in arrears on January 31 and July 31 of each year (each an "Interest Payment Date") to Holders of record at the close of business on January 15 and July 15 (whether or not a business day) (each a "Regular Record Date"), as the case may be, immediately preceding such Interest Payment Date. Cash interest on the Notes will accrue from the most recent date to which interest has been paid or duly provided or, if no interest has been paid, from the Issue Date. Cash interest will be computed on the basis of a 360-day year of twelve 30-day months. The Issuers shall pay cash interest on overdue principal at the rate borne by the Notes plus 2% per annum, and it shall pay interest in cash on overdue installments of cash interest (including Liquidated Damages, if any) at the same rate to the extent lawful. All such overdue cash interest shall be payable on demand. The Issuers further promise to pay Liquidated Damages that it may from time to time be required to pay pursuant to Section 2(e) of the Registration Rights Agreement at the same time and in the same manner as payments of interest as specified herein.
2. Method of Payment. Subject to the terms and conditions of the Indenture, the Issuers will make payments in respect of the principal of, premium, if any, and cash interest on this Note and in respect of Redemption Prices and Change of Control Repurchase Prices to Holders who surrender Notes to a Paying Agent to collect such payments in respect of the Notes. The Issuers will pay cash amounts in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Issuers may make such cash payments by check payable in such money. A holder of Notes with an aggregate principal amount in excess of $5,000,000 will be paid by wire transfer in immediately available funds at the election of such holder. Any payment required to be made on any day that is not a Business Day will be made on the next succeeding Business Day.
3. Paying Agent, Conversion Agent and Note Registrar. Initially, The Bank of New York (the "Trustee"), will act as Paying Agent, Conversion Agent and Note Registrar. The Issuers may appoint and change any Paying Agent, Conversion Agent, Note Registrar or co-registrar without notice, other than notice to the Trustee except that the Issuers will maintain at least one Paying Agent in the State of New York, City of New York, Borough of Manhattan, which shall initially be an office or agency of the Trustee. The Issuers or any of their Subsidiaries or any of their Affiliates may act as Paying Agent, Conversion Agent, Note Registrar or co- registrar.
4. Indenture. The Issuers issued the Notes under an Indenture dated as of August 7, 2001 (the "Indenture"), between the Issuers and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as in effect from time to time (the "TIA"). Capitalized terms used herein and not defined herein have the meanings ascribed thereto in the Indenture. The Notes are subject to all such terms, and Noteholders are referred to the Indenture and the TIA for a statement of those terms.
The Notes are general unsecured obligations of the Issuers (except as provided in Paragraph 15 hereof) limited to $525,000,000 aggregate principal amount, or $603,750,000 aggregate principal amount of the Overallotment Option is exercised fully (subject to Section 2.08 of the Indenture). The Indenture does not limit other indebtedness of the Issuers, secured or unsecured.
5. Redemption at the Option of the Issuers. At any time on or after July 31, 2004, the Issuers may redeem as a whole, or from time to time in part, the Notes on at least 30 but not more than 60 days' notice, at the following prices (expressed in percentages of the principal amount), together with accrued and unpaid interest (including Liquidated Damages, if any) to, but excluding, the date fixed for redemption (the "Redemption Price").
During the Twelve Months Commencing Redemption Price July 31, 2004 102.75% July 31, 2005 100.92% |
If the Issuers do not redeem all the Notes, the Trustee will select the Notes to be redeemed in principal amounts of $1,000 or whole multiples of $1,000 by lot or on a pro rata basis. If any Notes are to be redeemed in part only, a new Note or Notes in principal amount equal to the unredeemed principal portion thereof will be issued. If a portion of a Holder's Notes is selected for partial redemption and the Holder converts a portion of its Notes, the converted portion will be deemed to be taken from the portion selected for redemption.
No sinking fund is provided for the Notes.
6. Repurchase by the Issuers at the Option of the Holder.
If a Change of Control of the Company occurs, the Holder, at the Holder's option, shall have the right, in accordance with the provisions of the Indenture, to require the Issuers to repurchase the Notes (or any portion of the principal amount hereof that is at least $1,000 or an integral multiple thereof, provided that the portion of the principal amount of this Note to be outstanding after such repurchase is at least equal to $1,000) at the Change of Control Repurchase Price in cash, plus any interest (including Liquidated Damages, if any) accrued and unpaid to the Change of Control Repurchase Date.
Subject to the conditions provided in the Indenture, the Issuers may elect to pay the Change of Control Repurchase Price in Common Stock by delivering a number of shares of, at the option of the Holder, Class A Common Stock or Class B Common Stock equal to (i) the Change of Control Repurchase Price divided by (ii) 95% of the average of the Closing Prices per share of the applicable Common Stock for the five consecutive Trading Days immediately preceding and including the third Trading Day prior to the Change of Control Repurchase Date.
No fractional shares of Common Stock will be issued upon repurchase of any Notes. Instead of any fractional share of Common Stock which would otherwise be issued upon conversion of such Notes, the Issuers shall pay a cash adjustment as provided in the Indenture.
A notice of a Change of Control will be given by the Issuers to the Holders as provided in the Indenture. To exercise a repurchase right, a Holder must deliver to the Trustee a written notice as provided in the Indenture.
Holders have the right to withdraw any Change of Control Repurchase Notice by delivering to the Paying Agent a written notice of withdrawal in accordance with the provisions of the Indenture.
7. Notice of Redemption. Notice of redemption will be mailed at least 30 days but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at the Holder's registered address. If money sufficient to pay the Redemption Price of all Notes (or portions thereof) to be redeemed on the Redemption Date is deposited with the Paying Agent prior to or on the Redemption Date, on and after such Redemption Date interest ceases to accrue on such Notes or portions thereof. Notes in denominations larger than $1,000 of principal amount may be redeemed in part but only in integral multiples of $1,000 of principal amount.
8. Conversion. Subject to the next two succeeding sentences, a Holder of a Note may convert it into, at the option of the Holder, Class A Common Stock or Class B Common Stock of the Company at any time before the close of business on the final maturity date of the Note. If the Note is called for redemption, the Holder may convert it at any time before the close of business on the Business Day preceding the Redemption Date. A Note in respect of which a Holder has delivered a Change of Control Repurchase Notice exercising the option of such Holder to require the Issuers to purchase such Note may be converted only if such notice of exercise is withdrawn in accordance with the terms of the Indenture.
The initial Conversion Price shall be initially equal to $14.30 per share of Common Stock, subject to adjustment in certain events described in the Indenture. The Issuers shall pay a cash adjustment as provided in the Indenture in lieu of any fractional share of Common Stock.
To convert a Note, a Holder must (1) complete and manually sign the conversion notice below (or complete and manually sign a facsimile of such notice) and deliver such notice to the Conversion Agent, (2) surrender the Note to the Conversion Agent, (3) furnish appropriate endorsements and transfer documents if required by the Conversion Agent, the Issuers or the Trustee and (4) pay any transfer or similar tax, if required.
9. Conversion Arrangement on Call for Redemption. Any Notes called for redemption, unless surrendered for conversion before the close of business on the Redemption Date, may be deemed to be purchased from the Holders of such Notes at an amount not less than the Redemption Price, by one or more investment bankers or other purchasers who may agree with the Issuers to purchase such Notes from the Holders, to convert them into Common Stock of the Company and to make payment for such Notes to the Trustee in trust for such Holders.
10. Denominations; Transfer; Exchange. The Notes are in fully registered form, without coupons, in denominations of $1,000 of principal amount and integral multiples of $1,000. A Holder may transfer or exchange Notes in accordance with the Indenture. The Note Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Note Registrar need not transfer or exchange any Notes selected for redemption (except, in the case of a Note to be redeemed in part, the portion of the Note not to be redeemed) or any Notes in respect of which a Change of Control Repurchase Notice has been given and not withdrawn (except, in the case of a Note to be purchased in part, the portion of the Note not to be purchased) or any Notes for a period of 15 days before the mailing of a notice of redemption of Notes to be redeemed.
11. Persons Deemed Owners. The registered Holder of this Note may be treated as the owner of this Note for all purposes.
12. Unclaimed Money or Notes. The Trustee and the Paying Agent shall return to the Issuers upon written request any money or Notes held by them for the payment of any amount with respect to the Notes that remains unclaimed for two years, subject to applicable unclaimed property law. After return to the Issuers, Holders entitled to the money or Notes must look to the Issuers for payment as general creditors unless an applicable abandoned property law designates another person.
13. Amendment; Waiver.
Subject to certain exceptions set forth in the Indenture,
(i) the Indenture or the Notes may be amended with the
written consent of the Holders of at least a majority in
aggregate principal amount of the Notes at the time
outstanding and (ii) certain Defaults or Events of Default
may be waived with the written consent of the Holders of a
majority in aggregate principal amount of the Notes at the
time outstanding. Subject to certain exceptions set forth in
the Indenture, without the consent of any Noteholder, the
Issuers and the Trustee may amend the Indenture or the
Notes, among other things, to cure any ambiguity, omission,
defect or inconsistency, or to comply with Article 5 of the
Indenture, or to make any change that does not adversely
affect the rights of any Noteholder, or to comply with any
requirement of the SEC in connection with the qualification
of the Indenture under the TIA.
14. Defaults and Remedies.
Under the Indenture, Events of Default include (1) the
Issuers fail to pay when due the principal of or premium, if
any, on any of the Notes at maturity, upon redemption or
exercise of a repurchase right or otherwise; (2) the Issuers
fail to pay an installment of interest (including Liquidated
Damages, if any) on any of the Notes that continues for 30
days after the date when due; provided that a failure to
make any of the first six scheduled interest payments on the
Notes on the applicable Interest Payment Date shall
constitute an Event of Default with no grace or cure period;
(3) the Issuers fail to deliver shares of Common Stock,
together with cash in lieu of fractional shares, when such
Common Stock or cash in lieu of fractional shares is
required to be delivered upon conversion of a Note and such
failure continues for 10 days after such delivery date; (4)
the Issuers fail to give notice regarding a Change of
Control within the time period specified in the Indenture;
(5) the Issuers fail to perform or observe any other term,
covenant or agreement contained in the Notes or the
Indenture for a period of 60 days after written notice of
such failure, requiring the Issuers to remedy the same,
shall have been given to the Issuers by the Trustee or to
the Issuers and the Trustee by the Holders of at least 25%
in aggregate principal amount of the Notes then outstanding;
(6) (A) the Issuers or any Significant Subsidiary fails to
make any payment by the end of the applicable grace period,
if any, after the final scheduled payment date for such
payment with respect to any indebtedness for borrowed money
in an aggregate amount in excess of $10 million or (B)
indebtedness for borrowed money of the Issuers or any
Significant Subsidiary in an aggregate amount in excess of
$10 million shall have been accelerated or otherwise
declared due and payable, or required to be prepaid or
repurchased (other than by regularly scheduled required
prepayment) prior to the scheduled maturity thereof as a
result of a default with respect to such indebtedness
referred to in subclause (A) or (B) hereof, in either case
without such having been discharged, cured, waived,
rescinded or annulled, for a period of 30 days after receipt
by the Issuers of a Notice of Default; (7) certain events of
bankruptcy, insolvency or reorganization with respect to the
Issuers or any Significant Subsidiary or any Subsidiaries of
the Issuers which in the aggregate would constitute a
Significant Subsidiary and (8) the Pledge Agreement shall
cease to be in full force and effect or enforceable other
than in accordance with its terms. If an Event of Default
(other than an Event of Default specified in clause (6) or
(7) above) occurs and is continuing, the Trustee, or the
Holders of at least 25% in aggregate principal amount of the
Notes at the time outstanding, may declare all the Notes to
be due and payable immediately. Certain events of bankruptcy
or insolvency are Events of Default which will result in the
Notes becoming due and payable immediately upon the
occurrence of such Events of Default.
Noteholders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Notes unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in aggregate principal amount of the Notes at the time outstanding may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Noteholders notice of any continuing Default (except a Default in payment of amounts specified in clause (1) or (2) above) if it determines that withholding notice is in their interests.
15. Security The Co-Obligor has entered into the Pledge Agreement and purchased and pledged to the Collateral Agent for the benefit of the Trustee and the ratable benefit of the Holders Pledged Securities in an amount sufficient upon receipt of scheduled interest and principal payments on such securities to provide for the payment in full of the first six scheduled interest payments due on the Notes. The Pledged Securities will be pledged by the Co-Obligor to the Collateral Agent for the benefit of the Trustee and the ratable benefit of the Holders and will be held by the Collateral Agent in the Collateral Account pending disbursement pursuant to the Pledge Agreement.
16. Trustee Dealings with the Issuers. Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with and collect obligations owed to it by the Issuers or their Affiliates and may otherwise deal with the Issuers or their Affiliates with the same rights it would have if it were not Trustee.
17. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the an Issuer shall not have any liability for any obligations of such Issuer under the Notes or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Note, each Noteholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Notes.
18. Authentication. This Note shall not be valid until an authorized signatory of the Trustee or an Authenticating Agent manually signs the Trustee's Certificate of Authentication on the other side of this Note.
19. Abbreviations. Customary abbreviations may be used in the name of a Noteholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with right of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act).
20. GOVERNING LAW.
THE INDENTURE AND THIS NOTE WILL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
The Issuers will furnish to any Noteholder upon written
request and without charge a copy of the Indenture which has
in it the text of this Note in larger type. Requests may be
made to:
Freeport-McMoRan Copper & Gold Inc.
FCX Investment Ltd.
c/o Freeport-McMoRan Copper & Gold Inc.
1615 Poydras Street
New Orleans, Louisiana 70112
CONVERSION NOTICE
TO: FREEPORT-MCMORAN COPPER & GOLD INC.
FCX INVESTMENT LTD.
THE BANK OF NEW YORK
The undersigned registered owner of this Note hereby
irrevocably exercises the option to convert this Note, or
the portion thereof (which is $1,000 or an integral multiple
thereof) below designated, into shares of Class [A /B]
Common Stock of Freeport-McMoRan Copper & Gold Inc. in
accordance with the terms of the Indenture referred to in
this Note, and directs that the shares issuable and
deliverable upon such conversion, together with any check in
payment for fractional shares and any Notes representing any
unconverted principal amount hereof, be issued and delivered
to the registered holder hereof unless a different name has
been indicated below. If shares or any portion of this Note
not converted are to be issued in the name of a person other
than the undersigned, the undersigned will provide the
appropriate information below and pay all transfer taxes
payable with respect thereto. Any amount required to be
paid by the undersigned on account of interest accompanies
this Note.
Dated: ___________________
Signature(s) must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
Fill in the registration of shares of Common Stock if to be issued, and Notes if to be delivered, other than to and in the name of the registered holder:
Principal amount to be converted
(if less than all):
$_______________________________
Social Security or Other Taxpayer
Identification Number:
TO: FREEPORT-MCMORAN COPPER & GOLD INC.
FCX INVESTMENT LTD.
THE BANK OF NEW YORK
The undersigned registered owner of this Note hereby
irrevocably acknowledges receipt of a notice from Freeport-
McMoRan Copper & Gold Inc. (the "Company") and FCX
Investment Ltd. (together with the Company, the "Issuers")
as to the occurrence of a Change of Control with respect to
the Company and requests and instructs the Issuers to repay
the entire principal amount of this Note (Certificate
No.____), or the portion thereof (which is $1,000 or an
integral multiple thereof) below designated, in accordance
with the terms of the Indenture referred to in this Note to
the registered holder hereof. If the Issuers have elected
to pay the Change of Control Repurchase Price in Common
Stock, the undersigned hereby elects to receive the Change
of Control Repurchase Price in [Class A Common Stock/Class B
Common Stock].
Dated: ___________________
NOTICE: The above signatures of the holder(s) hereof must correspond with the name as written upon the face of the Note in every particular without alteration or enlargement or any change whatever.
Principal amount to be repaid (if less than all):
$_____________________________
For value received
__________________________________________ hereby sell(s)
assign(s) and transfer(s) unto
____________________________________________ (Please insert
social security or other Taxpayer Identification Number of
assignee) the within Note, and hereby irrevocably
constitutes and appoints
____________________________________ attorney to transfer
said Note on the books of the Issuers, with full power of
substitution in the premises.
In connection with any transfer of the Note prior to the expiration of the holding period applicable to sales thereof under Rule 144(k) under the Securities Act (or any successor provision) (other than any transfer pursuant to a registration statement that has been declared effective under the Securities Act), the undersigned confirms that such Note is being transferred:
? To Freeport-McMoRan Copper & Gold Inc. or a subsidiary thereof; or
? Inside the United States pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended; or
? Inside the United States to an Institutional Accredited Investor pursuant to and in compliance with the Securities Act of 1933, as amended; or
? Outside the Unites States in compliance with Rule 904 under the Securities Act; or
? Pursuant to and in compliance with Rule 144 under the Securities Act of 1933, as amended;
and unless the box below is checked, the undersigned confirms that such Note is not being transferred to an "affiliate" of the Issuers as defined in Rule 144 under the Securities Act of 1933, as amended (an "Affiliate").
? The transferee is an Affiliate of the Issuers. Dated: ___________________
Signature(s) must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
NOTICE: The signature of the conversion notice, the Change of Control Repurchase Notice or the assignment must correspond with the name as written upon the face of the Note in every particular without alteration or enlargement or any change whatever.
EXHIBIT B-1
Transfer Certificate
In connection with any transfer of any of the Notes within the period prior to the expiration of the holding period applicable to the sales thereof under Rule 144(k) under the Securities Act of 1933, as amended (the "Securities Act") (or any successor provision), the undersigned registered owner of this Note hereby certifies with respect to $____________ principal amount of the above-captioned Notes presented or surrendered on the date hereof (the "Surrendered Notes") for registration of transfer, or for exchange or conversion where the Notes issuable upon such exchange or conversion are to be registered in a name other than that of the undersigned registered owner (each such transaction being a "transfer"), that such transfer complies with the restrictive legend set forth on the face of the Surrendered Notes for the reason checked below:
? A transfer of the Surrendered Notes is made to the Issuers or any subsidiaries; or
? The transfer of the Surrendered Notes complies with Rule 144A under the U.S. Securities Act of 1933, as amended (the "Securities Act"); or
? The transfer of the Surrendered Notes is to an
institutional accredited investor, as described in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act; or
? The transfer of the Surrendered Notes is pursuant to an effective registration statement under the Securities Act, or
? The transfer of the Surrendered Notes is pursuant to an offshore transaction in accordance with Rule 904 of Regulation S under the Securities Act; or
? The transfer of the Surrendered Notes is pursuant to another available exemption from the registration requirement of the Securities Act.
and unless the box below is checked, the undersigned confirms that, to the undersigned's knowledge, such Notes are not being transferred to an "affiliate" of the Issuers as defined in Rule 144 under the Securities Act (an "Affiliate").
? The transferee is an Affiliate of the Issuers.
(If the registered owner is a corporation, partnership or fiduciary, the title of the Person signing on behalf of such registered owner must be stated.)
EXHIBIT B-2
Form of Letter to Be Delivered by Institutional Accredited Investors
Freeport-McMoRan Copper & Gold Inc.
FCX Investment Ltd.
c/o Freeport-McMoRan Copper & Gold Inc.
1615 Poydras Street
New Orleans, Louisiana 70112
Attention: Treasurer
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Administration
Dear Sirs:
We are delivering this letter in connection with the proposed transfer of $_____________ principal amount of the 8 1/4% Convertible Senior Notes due 2006 (the "Notes") of Freeport-McMoRan Copper & Gold Inc. (the "Company") and FCX Investment Ltd. (together with the Company, the "Issuers").
We hereby confirm that:
(i) we are an "accredited investor" within the meaning of Rule 501(a)(1), (2) or (3) under the Securities Act of 1933, as amended (the "Securities Act"), or an entity in which all of the equity owners are accredited investors within the meaning of Rule 501(a)(1), (2) or (3) under the Securities Act (an "Institutional Accredited Investor");
(ii) the purchase of Notes by us is for our own account or for the account of one or more other Institutional Accredited Investors or as fiduciary for the account of one or more trusts, each of which is an "accredited investor" within the meaning of Rule 501(a)(7) under the Securities Act and for each of which we exercise sole investment discretion or (B) we are a "bank," within the meaning of Section 3(a)(2) of the Securities Act, or a "savings and loan association" or other institution described in Section 3(a)(5)(A) of the Securities Act that is acquiring Notes fiduciary for the account of one or more institutions for which we exercise sole investment discretion;
(iii) we have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks of purchasing Notes; and
(iv) we are not acquiring Notes with a view to distribution thereof or with any present intention of offering or selling Notes or the Common Stock issuable upon conversion thereof, except as permitted any accounts for which we are acting as fiduciary shall remain at all times within our control.
We understand that the Notes were originally offered and
sold in a transaction not involving any public offering
within the United States within the meaning of the
Securities Act and that the Notes and the shares of Common
Stock (the "Notes") issuable upon conversion thereof have
not been registered under the Securities Act, and we agree,
on our own behalf and on behalf of each account for which we
acquire any Notes, that if in the future we decide to resell
or otherwise transfer such Notes prior to the date (the
"Resale Restriction Termination Date") which is two years
after the later of the original issuance of the Notes and
the last date on which the Company or an affiliate of the
Company was the owner of the Note, such Notes may be resold
or otherwise transferred only (i) to the Company or any
subsidiary thereof, or (ii) for as long as the Notes are
eligible for resale pursuant to Rule 144A, to a person it
reasonably believes is a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act) that
purchases for its own account or for the account of a
qualified institutional buyer to which notice is given that
the transfer is being made in reliance on Rule 144A, or
(iii) to an Institutional Accredited Investor that is
acquiring the Note for its own account, or for the account
of such Institutional Accredited Investor for investment
purposes and not with a view to, or for offer or sale in
connection with, any distribution in violation of the
Securities Act, or (iv) outside the United States in a
transaction meeting the requirements of Rule 904 under the
Securities Act, or (v) pursuant to another available
exemption from registration under the Securities Act (if
applicable), or (vi) pursuant to a registration statement
which has been declared effective under the Securities Act
and, in each case, in accordance with any applicable
securities laws of any State of the United States or any
other applicable jurisdiction and in accordance with the
legends set forth on the Notes. We further agree to provide
any person purchasing any of the Notes other than pursuant
to clause (vi) above from us a notice advising such
purchaser that resales of such Notes are restricted as
stated herein. We understand that the trustee or the
transfer agent, as the case may be, for the Notes will not
be required to accept for registration of transfer any
Notes, except upon presentation of evidence satisfactory to
the Issuers that the foregoing restrictions on transfer have
been complied with. We further understand that any Notes
will be in the form of definitive physical certificates and
that such certificates will bear a legend reflecting the
substance of this paragraph other than certificates
representing Notes transferred pursuant to clause (vi)
above.
The Issuers and the Trustee and their respective counsel are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.
We acknowledge that the Issuers, others and you will rely upon our confirmations, acknowledgments and agreements set forth herein, and we agree to notify you promptly in writing if any of our representations or warranties herein ceases to be accurate and complete.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
Title:
Address:
REGISTRATION RIGHTS AGREEMENT
BY AND BETWEEN
FREEPORT-McMoRan COPPER & GOLD INC.
AND
FCX INVESTMENT LTD.
AS ISSUERS,
AND
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED,
AS INITIAL PURCHASER
DATED AS OF AUGUST 7, 2001
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered into as of August 7, 2001, by and between Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the "Company"), FCX Investment Ltd., a Cayman Islands exempted limited liability company (the "Co-Obligor," and together with the Company, the "Issuers," and each an "Issuer") and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Initial Purchaser") pursuant to that certain Purchase Agreement, dated August 1, 2001 (the "Purchase Agreement") between the Issuers and the Initial Purchaser.
In order to induce the Initial Purchaser to enter into the Purchase Agreement, the Issuers have agreed to provide the registration rights set forth in this Agreement. The execution of this Agreement is a condition to the closing under the Purchase Agreement.
Each Issuer, jointly and severally, agrees with the Initial Purchaser (i) for its benefit as Initial Purchaser and (ii) for the benefit of the beneficial owners (including the Initial Purchaser) from time to time of the Notes (as defined herein) and the beneficial owners from time to time of the Underlying Common Stock (as defined herein) issued upon conversion of the Notes (each of the foregoing a "Holder" and together the "Holders"), as follows:
Section 1. Definitions. Capitalized terms used herein without definition shall have their respective meanings set forth in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings:
"Affiliate" means with respect to any specified person, an "affiliate," as defined in Rule 144, of such person.
"Amendment Effectiveness Deadline Date" has the meaning set forth in Section 2(d) hereof.
"Applicable Conversion Price" as of any date of determination means the Conversion Price in effect as of such date of determination or, if no Notes are then outstanding, the Conversion Price that would be in effect were Notes then outstanding.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in The City of New York are authorized or obligated by law or executive order to close.
"Common Stock" means the shares of Class A Common Stock, par value $.10 per share, and Class B Common Stock, par value $.10 per share, of the Company and any other shares of common stock as may constitute "Common Stock" for purposes of the Indenture, including the Underlying Common Stock.
"Conversion Price" has the meaning assigned to such term in the Indenture.
"Damages Accrual Period" has the meaning set forth in Section 2(e) hereof.
"Damages Payment Date" means each interest payment date under the Indenture in the case of Notes, and each January 31 and July 31 in the case of the Underlying Common Stock.
"Deferral Notice" has the meaning set forth in
Section 3(i) hereof.
"Deferral Period" has the meaning set forth in
Section 3(i) hereof.
"Effectiveness Deadline Date" has the meaning set forth in Section 2(a) hereof.
"Effectiveness Period" means the period commencing on the last date of original issuance of the Notes and terminating upon the earliest of the following: (A) when all the Notes covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement or when all shares of Common Stock issued upon conversion of any such Notes that had not been sold pursuant to the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement and (B) when, in the written opinion of counsel to the Issuers, all outstanding Registrable Securities held by persons that are not Affiliates of the Issuers may be resold without registration under the Securities Act pursuant to Rule 144(k) under the Securities Act or any successor provision thereto.
"Event" has the meaning set forth in Section 2(e) hereof.
"Event Date" has the meaning set forth in Section 2(e) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.
"Filing Deadline Date" has the meaning set forth in Section 2(a) hereof.
"Holder" has the meaning set forth in the third paragraph of this Agreement.
"Indenture" means the Indenture, dated as of August 7, 2001, between the Issuers and The Bank of New York, as trustee, pursuant to which the Notes are being issued.
"Initial Purchaser" means Merrill Lynch, Pierce, Fenner & Smith Incorporated.
"Initial Shelf Registration Statement" has the meaning set forth in Section 2(a) hereof.
"Issue Date" means the first date of original issuance of the Notes.
"Liquidated Damages Amount" has the meaning set forth in Section 2(e) hereof.
"Material Event" has the meaning set forth in
Section 3(i) hereof.
"Notes" means the 8 1/4% Convertible Senior Notes due 2006 of the Issuers to be purchased pursuant to the Purchase Agreement.
"Notice and Questionnaire" means a written notice delivered to the Issuers containing substantially the information called for by the Selling Securityholder Notice and Questionnaire attached as Annex A to the Offering Memorandum of the Issuers dated August 1, 2001 relating to the Notes.
"Notice Holder" means, on any date, any Holder that has delivered a Notice and Questionnaire to the Issuers on or prior to such date, so long as all of their Registrable Securities that have been registered for resale pursuant to a Notice and Questionnaire have not been sold in accordance with a Registration Statement.
"Purchase Agreement" has the meaning set forth in the preamble hereof.
"Prospectus" means the prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 415 promulgated under the Securities Act), as amended or supplemented by any amendment or prospectus supplement, including post-effective amendments, and all materials incorporated by reference or explicitly deemed to be incorporated by reference in such Prospectus.
"Record Holder" means (i) with respect to any Damages Payment Date relating to any Notes as to which any such Liquidated Damages Amount has accrued, the holder of record of such Note on the record date with respect to the interest payment date under the Indenture on which such Damages Payment Date shall occur and (ii) with respect to any Damages Payment Date relating to the Underlying Common Stock as to which any such Liquidated Damages Amount has accrued, the registered holder of such Underlying Common Stock fifteen (15) days prior to such Damages Payment Date.
"Registrable Securities" means the Notes until such Notes have been converted into or exchanged for the Underlying Common Stock and, at all times the Underlying Common Stock and any securities into or for which such Underlying Common Stock has been converted or exchanged, and any security issued with respect thereto upon any stock dividend, split or similar event until, in the case of any such security, (A) the earliest of (i) its effective registration under the Securities Act and resale in accordance with the Registration Statement covering it, (ii) expiration of the holding period that would be applicable thereto under Rule 144(k) or (iii) its sale to the public pursuant to Rule 144 (or any similar provision then in force, but not Rule 144A) under the Securities Act, and (B) as a result of the event or circumstance described in any of the foregoing clauses (i) through (iii), the legend with respect to transfer restrictions required under the Indenture are removed or removable in accordance with the terms of the Indenture or such legend, as the case may be.
"Registration Expenses" has the meaning set forth in Section 5 hereof.
"Registration Statement" means any registration statement of the Issuers that covers any of the Registrable Securities pursuant to the provisions of this Agreement including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits, and all materials incorporated by reference or explicitly deemed to be incorporated by reference in such registration statement.
"Restricted Securities" has the meaning given such term in Rule 144.
"Rule 144" means Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC.
"Rule 144A" means Rule 144A under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated by the SEC thereunder.
"Shelf Registration Statement" has the meaning set forth in Section 2(a) hereof.
"Subsequent Shelf Registration Statement" has the meaning set forth in Section 2(b) hereof.
"TIA" means the Trust Indenture Act of 1939, as amended.
"Trustee" means The Bank of New York, the Trustee under the Indenture.
"Underlying Common Stock" means the Common Stock into which the Notes are convertible or issued upon any such conversion.
Section 2. Shelf Registration. (a) The Issuers shall prepare and file or cause to be prepared and filed with the SEC, as soon as practicable but in any event by the date (the "Filing Deadline Date") that is ninety (90) days after the Issue Date, a Registration Statement for an offering to be made on a delayed or continuous basis pursuant to Rule 415 of the Securities Act (a "Shelf Registration Statement") registering the resale from time to time by Holders thereof of all of the Registrable Securities (the "Initial Shelf Registration Statement"). The Initial Shelf Registration Statement shall be on Form S-3 or another appropriate form permitting registration of such Registrable Securities for resale by such Holders in accordance with the reasonable methods of distribution elected by the Holders, approved by the Issuers, and set forth in the Initial Shelf Registration Statement. The Issuers shall use their best efforts to cause the Initial Shelf Registration Statement to be declared effective under the Securities Act as promptly as is practicable but in any event by the date (the "Effectiveness Deadline Date") that is one hundred eighty (180) days after the Issue Date, and to keep the Initial Shelf Registration Statement (or any Subsequent Shelf Registration Statement) continuously effective under the Securities Act until the expiration of the Effectiveness Period. At the time the Initial Shelf Registration Statement is declared effective, each Holder that became a Notice Holder on or prior to the date that is ten (10) Business Days prior to such time of effectiveness shall be named as a selling securityholder in the Initial Shelf Registration Statement and the related Prospectus in such a manner as to permit such Holder to deliver such Prospectus to purchasers of Registrable Securities in accordance with applicable law.
(b) If the Initial Shelf Registration Statement or any Subsequent Shelf Registration Statement ceases to be effective for any reason at any time during the Effectiveness Period, the Issuers shall use their best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event shall within five (5) Business Days of such cessation of effectiveness amend the Shelf Registration Statement in a manner reasonably expected to obtain the withdrawal of the order suspending the effectiveness thereof, or file an additional Shelf Registration Statement covering all of the securities that as of the date of such filing are Registrable Securities (a "Subsequent Shelf Registration Statement"). If a Subsequent Shelf Registration Statement is filed, the Issuers shall use their best efforts to cause the Subsequent Shelf Registration Statement to become effective as promptly as is practicable after such filing and to keep such Registration Statement (or subsequent Shelf Registration Statement) continuously effective until the end of the Effectiveness Period.
(c) The Issuers shall supplement and amend the Shelf Registration Statement if required by the rules, regulations or instructions applicable to the registration form used by the Issuers for such Shelf Registration Statement, if required by the Securities Act or as reasonably requested by the Initial Purchaser or by the Trustee on behalf of the Holders of the Registrable Securities covered by such Shelf Registration Statement.
(d) Each Holder of Registrable Securities agrees
that if such Holder wishes to sell Registrable
Securities pursuant to a Shelf Registration Statement
and related Prospectus, it will do so only in
accordance with this Section 2(d) and Section 3(i).
Each Holder of Registrable Securities wishing to sell
Registrable Securities pursuant to a Shelf Registration
Statement and related Prospectus agrees to deliver a
Notice and Questionnaire to the Issuers at least three
(3) Business Days prior to any intended distribution of
Registrable Securities under the Shelf Registration
Statement; provided that Holders of Registrable
Securities shall have at least twenty (20) Business
Days from the date on which the Notice and
Questionnaire is first received by such Holders to
return a completed and signed Notice and Questionnaire
to the Issuers. From and after the date the Initial
Shelf Registration Statement is declared effective, the
Issuers shall, as promptly as practicable after the
date a Notice and Questionnaire is delivered, and in
any event within the later of (x) five (5) Business
Days after such date or (y) five (5) Business Days
after the expiration of any Deferral Period in effect
when the Notice and Questionnaire is delivered or put
into effect within five (5) Business Days of such
delivery date, (i) if required by applicable law, file
with the SEC a post-effective amendment to the Shelf
Registration Statement or, if required by applicable
law, prepare and file a supplement to the related
Prospectus or a supplement or amendment to any document
incorporated therein by reference or file any other
required document so that the Holder delivering such
Notice and Questionnaire is named as a selling
securityholder in the Shelf Registration Statement and
the related Prospectus in such a manner as to permit
such Holder to deliver such Prospectus to purchasers of
the Registrable Securities in accordance with
applicable law and, if the Issuers shall file a post-
effective amendment to the Shelf Registration
Statement, use their best efforts to cause such post-
effective amendment to be declared effective under the
Securities Act as promptly as is practicable, but in
any event by the date (the "Amendment Effectiveness
Deadline Date") that is thirty (30) days after the date
such post-effective amendment is required by this
clause to be filed; (ii) provide such Holder copies of
any documents filed pursuant to Section 2(d)(i); and
(iii) notify such Holder as promptly as practicable
after the effectiveness under the Securities Act of any
post-effective amendment filed pursuant to Section
2(d)(i); provided that if such Notice and Questionnaire
is delivered during a Deferral Period, or a Deferral
Period is put into effect within five (5) Business Days
after such delivery date, the Issuers shall so inform
the Holder delivering such Notice and Questionnaire and
shall take the actions set forth in clauses (i), (ii)
and (iii) above within five (5) Business Days after
expiration of the Deferral Period in accordance with
Section 3(i); provided further that if under applicable
law, the Issuers have more than one option as to the
type or manner of making any such filing, the Issuers
will make the required filing or filings in the manner
or of a type that is reasonably expected to result in
the earliest availability of the Prospectus for
effecting resales of Registrable Securities.
Notwithstanding anything contained herein to the
contrary, the Issuers shall be under no obligation to
name any Holder that is not a Notice Holder as a
selling securityholder in any Registration Statement or
related Prospectus; provided, however, that any Holder
that becomes a Notice Holder pursuant to the provisions
of this Section 2(d) (whether or not such Holder was a
Notice Holder at the time the Registration Statement
was declared effective) shall be named as a selling
securityholder in the Registration Statement or related
Prospectus in accordance with the requirements of this
Section 2(d).
(e) The parties hereto agree that the Holders of
Registrable Securities will suffer damages, and that it
would not be feasible to ascertain the extent of such
damages with precision, if (i) the Initial Shelf
Registration Statement has not been filed on or prior
to the Filing Deadline Date, (ii) the Initial Shelf
Registration Statement has not been declared effective
under the Securities Act on or prior to the
Effectiveness Deadline Date, (iii) the Issuers have
failed to perform their obligations set forth in
Section 2(b) within the time period required therein,
(iv) the Issuers have failed to perform their
obligations set forth in Section 2(d) within the time
periods required therein or (v) the aggregate duration
of Deferral Periods in any period exceeds the number of
days permitted in respect of such period pursuant to
Section 3(i) hereof (each of the events of a type
described in any of the foregoing clauses (i) through
(v) are individually referred to herein as an "Event,"
and the Filing Deadline Date in the case of clause (i),
the Effectiveness Deadline Date in the case of clause
(ii), the date by which the Issuers are required to
perform their obligations set forth in Section 2(b) in
the case of clause (iii), the date by which the Issuers
are required to perform their obligations set forth in
Section 2(d) in the case of clause (iv) (including the
filing of any post-effective amendment prior to the
Amendment Effectiveness Deadline Date), and the date on
which the aggregate duration of Deferral Periods in any
period exceeds the number of days permitted by Section
3(i) hereof in the case of clause (v), being referred
to herein as an "Event Date"). Events shall be deemed
to continue until the following dates with respect to
the respective types of Events: the date the Initial
Shelf Registration Statement is filed in the case of an
Event of the type described in clause (i), the date the
Initial Shelf Registration Statement is declared
effective under the Securities Act in the case of an
Event of the type described in clause (ii), the date
the Issuers perform their obligations set forth in
Section 2(b) in the case of an Event of the type
described in clause (iii), the date the Issuers perform
their obligations set forth in Section 2(d) in the case
of an Event of the type described in clause (iv)
(including, without limitation, the date the relevant
post-effective amendment to the Shelf Registration
Statement is declared effective under the Securities
Act), and termination of the Deferral Period that
caused the limit on the aggregate duration of Deferral
Periods in a period set forth in Section 3(i) to be
exceeded in the case of the commencement of an Event of
the type described in clause (v).
Accordingly, commencing on (and including) any
Event Date and ending on (but excluding) the next date
on which there are no Events that have occurred and are
continuing (a "Damages Accrual Period"), each Issuer,
jointly and severally, agrees to pay, as liquidated
damages and not as a penalty, an amount (the
"Liquidated Damages Amount"), payable on the Damages
Payment Dates to Record Holders of Notes that are
Registrable Securities and of shares of Underlying
Common Stock issued upon conversion of Notes that are
Registrable Securities, as the case may be, accruing,
for each portion of such Damages Accrual Period
beginning on and including a Damages Payment Date (or,
if the first date of any Damages Accrual Period for
which the Liquidated Damages Amount is to be paid to
Holders as a result of the occurrence of any particular
Event is other than a Damages Payment Date, then the
Event Date) and ending on but excluding the first to
occur of (A) the date of the end of the Damages Accrual
Period or (B) the next Damages Payment Date, at a rate
per annum equal to one-quarter of one percent (0.25%)
for the first 90-day period from the Event Date, and
thereafter at a rate per annum equal to one-half of one
percent (0.5%) of (i) the aggregate principal amount of
such Notes or, without duplication, (ii) in the case of
Notes that have been converted into or exchanged for
Underlying Common Stock, the Applicable Conversion
Price of such shares of Underlying Common Stock on the
date of conversion, as the case may be, in each case
determined as of the Business Day immediately preceding
the next Damages Payment Date; provided that in the
case of a Damages Accrual Period that is in effect
solely as a result of an Event of the type described in
clause (iv) of the immediately preceding paragraph,
such Liquidated Damages Amount shall be paid only to
the Holders that have delivered Notice and
Questionnaires that caused the Issuers to incur the
obligations set forth in Section 2(d) the non-
performance of which is the basis of such Event:
provided further that any Liquidated Damages Amount
accrued with respect to any Note or portion thereof
called for redemption on a redemption date or converted
into Underlying Common Stock on a conversion date prior
to the Damages Payment Date, shall, in any such event,
be paid instead to the Holder who submitted such Note
or portion thereof for redemption or conversion on the
applicable redemption date or conversion date, as the
case may be, on such date (or promptly following the
conversion date, in the case of conversion).
Notwithstanding the foregoing, no Liquidated Damages
Amounts shall accrue as to any Registrable Security
from and after the earlier of (x) the date such
security is no longer a Registrable Security and (y)
expiration of the Effectiveness Period. The rate of
accrual of the Liquidated Damages Amount with respect
to any period shall not exceed the rate provided for in
this paragraph notwithstanding the occurrence of
multiple concurrent Events. Following the cure of all
Events requiring the payment by the Issuers of
Liquidated Damages Amounts to the Holders of
Registrable Securities pursuant to this Section, the
accrual of Liquidated Damages Amounts will cease
(without in any way limiting the effect of any
subsequent Event requiring the payment of Liquidated
Damages Amount by the Issuers).
The Trustee shall be entitled, on behalf of Holders of Notes, to seek any available remedy for the enforcement of this Agreement, including for the payment of any Liquidated Damages Amount. Notwithstanding the foregoing, the parties agree that the sole damages payable for a violation of the terms of this Agreement with respect to which liquidated damages are expressly provided shall be such liquidated damages.
All of the Issuers' obligations set forth in this
Section 2(e) that are outstanding with respect to any
Registrable Security at the time such security ceases
to be a Registrable Security shall survive until such
time as all such obligations with respect to such
security have been satisfied in full (notwithstanding
termination of this Agreement pursuant to Section
8(k)).
The parties hereto agree that the liquidated damages provided for in this Section 2(e) constitute a reasonable estimate of the damages that may be incurred by Holders of Registrable Securities by reason of the failure of the Shelf Registration Statement to be filed or declared effective or available for effecting resales of Registrable Securities in accordance with the provisions hereof.
Section 3. Registration Procedures. In connection with the registration obligations of the Issuers under Section 2 hereof, the Issuers shall:
(a) Prepare and file with the SEC a Registration Statement or Registration Statements on any appropriate form under the Securities Act available for the sale of the Registrable Securities by the Holders thereof in accordance with the intended method or methods of distribution thereof, and use their best efforts to cause each such Registration Statement to become effective and remain effective as provided herein; provided that before filing any Registration Statement or Prospectus or any amendments or supplements thereto with the SEC, the Issuers shall furnish to the Initial Purchaser and counsel for the Holders and for the Initial Purchaser (or, if applicable, separate counsel for the Holders) copies of all such documents proposed to be filed and use their best efforts to reflect in each such document when so filed with the SEC such comments as the such counsel reasonably shall propose within three (3) Business Days of the delivery of such copies to the Initial Purchaser and such counsel.
(b) Prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement continuously effective until the expiration of the Effectiveness Period; cause the related Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act; and use their best efforts to comply with the provisions of the Securities Act applicable to them with respect to the disposition of all securities covered by such Registration Statement during the Effectiveness Period in accordance with the intended methods of disposition by the sellers thereof set forth in such Registration Statement as so amended or such Prospectus as so supplemented.
(c) As promptly as practicable give notice to the
Notice Holders, the Initial Purchaser and counsel for
the Holders and for the Initial Purchaser (or, if
applicable, separate counsel for the Holders) (i) when
any Prospectus, Prospectus supplement, Registration
Statement or post-effective amendment to a Registration
Statement has been filed with the SEC and, with respect
to a Registration Statement or any post-effective
amendment, when the same has been declared effective,
(ii) of any request, following the effectiveness of the
Initial Shelf Registration Statement under the
Securities Act, by the SEC or any other federal or
state governmental authority for amendments or
supplements to any Registration Statement or related
Prospectus or for additional information, (iii) of the
issuance by the SEC or any other federal or state
governmental authority of any stop order suspending the
effectiveness of any Registration Statement or the
initiation or threatening of any proceedings for that
purpose, (iv) of the receipt by the Issuers of any
notification with respect to the suspension of the
qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for
such purpose, (v) after the effective date of any
Registration Statement filed pursuant to this Agreement
of the occurrence of (but not the nature of or details
concerning) a Material Event and (vi) of the
determination by the Issuers that a post-effective
amendment to a Registration Statement will be filed
with the SEC, which notice may, at the discretion of
the Issuers (or as required pursuant to Section 3(i)),
state that it constitutes a Deferral Notice, in which
event the provisions of Section 3(i) shall apply.
(d) Use their best efforts to prevent the issuance of, and, if issued, to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement or the lifting of any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction in which they have been qualified for sale, in either case at the earliest possible moment, and provide prompt notice to each Notice Holder and the Initial Purchaser of the withdrawal of any such order.
(e) If reasonably requested by the Initial Purchaser or any Notice Holder, as promptly as practicable incorporate in a Prospectus supplement or post-effective amendment to a Registration Statement such information as the Initial Purchaser, such Notice Holder or counsel for the Holders and for the Initial Purchaser (or, if applicable, separate counsel for the Holders) shall, on the basis of a written opinion of nationally-recognized counsel experienced in such matters, determine to be required to be included therein by applicable law and make any required filings of such Prospectus supplement or such post-effective amendment provided that the Issuers shall not be required to take any actions under this Section 3(e) that, in the written opinion of counsel for the Issuers, are not in compliance with appliance law.
(f) As promptly as practicable furnish to each Notice Holder, counsel for the Holders and for the Initial Purchaser (or, if applicable, separate counsel for the Holders) and the Initial Purchaser, without charge, at least one (1) conformed copy of the Registration Statement and any amendment thereto, including financial statements but excluding schedules, all documents incorporated or deemed to be incorporated therein by reference and all exhibits (unless requested in writing to the Issuers by such Notice Holder, such counsel or the Initial Purchaser).
(g) During the Effectiveness Period, deliver to each Notice Holder, counsel for the Holders and for the Initial Purchaser (or, if applicable, separate counsel for the Holders) and the Initial Purchaser, in connection with any sale of Registrable Securities pursuant to a Registration Statement, without charge, as many copies of the Prospectus or Prospectuses relating to such Registrable Securities (including each preliminary prospectus) and any amendment or supplement thereto as such Notice Holder may reasonably request; and the Issuers hereby consent (except during such periods that a Deferral Notice is outstanding and has not been revoked) to the use of such Prospectus or each amendment or supplement thereto by each Notice Holder, in connection with any offering and sale of the Registrable Securities covered by such Prospectus or any amendment or supplement thereto in the manner set forth therein.
(h) Prior to any public offering of the Registrable Securities pursuant to the Shelf Registration Statement, use their best efforts to register or qualify or cooperate with the Notice Holders in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any Notice Holder reasonably requests in writing (which request may be included in the Notice and Questionnaire); prior to any public offering of the Registrable Securities pursuant to the Shelf Registration Statement, use their best efforts to keep each such registration or qualification (or exemption therefrom) effective during the Effectiveness Period in connection with such Notice Holder's offer and sale of Registrable Securities pursuant to such registration or qualification (or exemption therefrom) and do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of such Registrable Securities in the manner set forth in the relevant Registration Statement and the related Prospectus; provided that the Issuers will not be required to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where they would not otherwise be required to qualify but for this Agreement or (ii) take any action that would subject them to general service of process in suits or to taxation in any such jurisdiction where they are not then so subject.
(i) Upon (A) the issuance by the SEC of a stop
order suspending the effectiveness of the Shelf
Registration Statement or the initiation of proceedings
with respect to the Shelf Registration Statement under
Section 8(d) or 8(e) of the Securities Act, (B) the
occurrence of any event or the existence of any fact as
a result of which any Registration Statement shall
contain any untrue statement of a material fact or omit
to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading, or any Prospectus shall contain any untrue
statement of a material fact or omit to state any
material fact necessary in order to make the statements
therein, in the light of the circumstances under which
they were made, not misleading, or (C) the occurrence
or existence of any pending corporate development (a
"Material Event") that, in the reasonable discretion of
the Issuers, makes it appropriate to suspend the
availability of the Shelf Registration Statement and
the related Prospectus, (i) in the case of clause (B)
above, subject to the next sentence, as promptly as
practicable prepare and file, if necessary pursuant to
applicable law, a post-effective amendment to such
Registration Statement or a supplement to the related
Prospectus or any document incorporated therein by
reference or file any other required document that
would be incorporated by reference into such
Registration Statement and Prospectus so that such
Registration Statement does not contain any untrue
statement of a material fact or omit to state any
material fact required to be stated therein or
necessary to make the statements therein not
misleading, and such Prospectus does not contain any
untrue statement of a material fact or omit to state
any material fact necessary in order to make the
statements therein, in the light of the circumstances
under which they were made, not misleading (it being
understood that the Issuers may rely on information
provided by each Notice Holder with respect to such
Notice Holder), as thereafter delivered to the
purchasers of the Registrable Securities being sold
thereunder, and, in the case of a post-effective
amendment to a Registration Statement, subject to the
next sentence, use their best efforts to cause it to be
declared effective as promptly as is practicable, and
(ii) give notice to the Notice Holders and counsel for
the Holders and for the Initial Purchaser (or, if
applicable, separate counsel for the Holders) that the
availability of the Shelf Registration Statement is
suspended (a "Deferral Notice") and, upon receipt of
any Deferral Notice, each Notice Holder agrees not to
sell any Registrable Securities pursuant to the
Registration Statement until such Notice Holder's
receipt of copies of the supplemented or amended
Prospectus provided for in clause (i) above, or until
it is advised in writing by the Issuers that the
Prospectus may be used, and has received copies of any
additional or supplemental filings that are
incorporated or deemed incorporated by reference in
such Prospectus. The Issuers will use their best
efforts to ensure that the use of the Prospectus may be
resumed (x) in the case of clause (A) above, as
promptly as is practicable, (y) in the case of clause
(B) above, as soon as, in the reasonable judgment of
the Issuers, the Registration Statement does not
contain any untrue statement of a material fact or
omits to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading and the Prospectus does not contain any
untrue statement of a material fact or omits to state
any material fact necessary in order to make the
statements therein, in the light of the circumstances
under which they were made, not misleading, and (z) in
the case of clause (C) above, as soon as, in the
reasonable discretion of the Issuers, such suspension
is no longer appropriate. The period during which the
availability of the Registration Statement and any
Prospectus is suspended (the "Deferral Period") without
the Issuers incurring any obligation to pay liquidated
damages pursuant to Section 2(e), shall not exceed
thirty (30) days in any ninety- (90-) day period and
ninety (90) days in any twelve- (12-) month period.
(j) Make available for inspection during normal business hours by a representative for the Notice Holders of such Registrable Securities, and any broker- dealers, attorneys and accountants retained by such Notice Holders, all relevant financial and other records and pertinent corporate documents and properties of the Issuers and their subsidiaries, and cause the appropriate officers, directors and employees of the Issuers and their subsidiaries to make available for inspection during normal business hours all relevant information reasonably requested by such representative for the Notice Holders, or any such broker-dealers, attorneys or accountants in connection with such disposition, in each case as is customary for similar "due diligence" examinations; provided, however, that such persons shall first agree in writing with the Issuers that any information that is reasonably and in good faith designated by the Issuers in writing as confidential at the time of delivery of such information shall be kept confidential by such persons and shall be used solely for the purposes of exercising rights under this Agreement, unless (i) disclosure of such information is required by court or administrative order or is necessary to respond to inquiries of regulatory authorities, (ii) disclosure of such information is required by law (including any disclosure requirements pursuant to federal securities laws in connection with the filing of any Registration Statement or the use of any Prospectus referred to in this Agreement), (iii) such information becomes generally available to the public other than as a result of a disclosure or failure to safeguard by any such person or (iv) such information becomes available to any such person from a source other than the Issuers and such source is not bound by a confidentiality agreement or is not otherwise under a duty of trust to the Issuers, and provided that the foregoing inspection and information gathering shall, to the greatest extent possible, be coordinated on behalf of all the Notice Holders and the other parties entitled thereto by the counsel referred to in Section 5.
(k) Comply with all applicable rules and regulations of the SEC and make generally available to its securityholders earning statements (which need not be audited) satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) commencing on the first day of the first fiscal quarter of the Issuers commencing after the effective date of a Registration Statement, which statements shall cover said 12-month periods.
(l) Cooperate with each Notice Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities sold pursuant to a Registration Statement, which certificates shall not bear any restrictive legends, and cause such Registrable Securities to be in such denominations as are permitted by the Indenture and registered in such names as such Notice Holder may request in writing at least (2) Business Days prior to any sale of such Registrable Securities.
(m) Provide a CUSIP number for all Registrable Securities covered by each Registration Statement not later than the effective date of such Registration Statement and provide the Trustee and the transfer agent for the Common Stock with printed certificates for the Registrable Securities that are in a form eligible for deposit with The Depository Trust Company.
(n) Cooperate and assist in any filings required to be made with the National Association of Securities Dealers, Inc.
(o) Upon (i) the filing of the Initial Registration Statement and (ii) the effectiveness of the Initial Registration Statement, announce the same, in each case by release to Business Wire.
(p) Enter into such customary agreements and take all such other necessary actions in connection therewith (including those requested by the holders of a majority of the Registrable Securities being sold) in order to expedite or facilitate disposition of such Registrable Securities.
(q) Cause the Indenture to be qualified under the TIA not later than the effective date of any Registration Statement; and in connection therewith, cooperate with the Trustee to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the TIA and execute, and use its best efforts to cause the Trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable the Indenture to be so qualified in a timely manner.
Section 4. Holder's Obligations. Each Holder agrees, by acquisition of the Registrable Securities, that no Holder of Registrable Securities shall be entitled to sell any of such Registrable Securities pursuant to a Registration Statement or to receive a Prospectus relating thereto, unless such Holder has furnished the Issuers with a Notice and Questionnaire as required pursuant to Section 2(d) hereof (including the information required to be included in such Notice and Questionnaire) and the information set forth in the next sentence. Each Notice Holder agrees promptly to furnish to the Issuers all information required to be disclosed in order to make the information previously furnished to the Issuers by such Notice Holder not misleading and any other information regarding such Notice Holder and the distribution of such Registrable Securities as the Issuers may from time to time reasonably request. Any sale of any Registrable Securities by any Holder shall constitute a representation and warranty by such Holder that the information relating to such Holder and its plan of distribution is as set forth in the Prospectus delivered by such Holder in connection with such disposition, that such Prospectus does not as of the time of such sale contain any untrue statement of a material fact relating to or provided by such Holder or its plan of distribution and that such Prospectus does not as of the time of such sale omit to state any material fact relating to or provided by such Holder or its plan of distribution necessary in order to make the statements in such Prospectus, in the light of the circumstances under which they were made, not misleading.
Section 5. Registration Expenses. Each Issuer,
jointly and severally, shall bear all fees and expenses
incurred in connection with the performance by the
Issuers of their obligations under Sections 2 and 3 of
this Agreement whether or not any of the Registration
Statements are declared effective. Such fees and
expenses ("Registration Expenses") shall include,
without limitation, (i) all registration and filing
fees (including, without limitation, fees and expenses
(x) with respect to filings required to be made with
the National Association of Securities Dealers, Inc.
and (y) of compliance with federal and state securities
or Blue Sky laws (including, without limitation,
reasonable fees and disbursements of counsel for the
Holders in connection with Blue Sky qualifications of
the Registrable Securities under the laws of such
jurisdictions as the Notice Holders of a majority of
the Registrable Securities being sold pursuant to a
Registration Statement may designate), (ii) printing
expenses (including, without limitation, expenses of
printing certificates for Registrable Securities in a
form eligible for deposit with The Depository Trust
Company), (iii) duplication expenses relating to copies
of any Registration Statement or Prospectus delivered
to any Holders hereunder, (iv) fees and disbursements
of counsel for the Issuers and the fees and
disbursements of one counsel for the Holders in
connection with the Shelf Registration Statement, (v)
fees and disbursements of the Trustee and its counsel
and of the registrar and transfer agent for the Common
Stock and (vi) Securities Act liability insurance
obtained by the Issuers in their sole discretion. In
addition, the Issuers shall pay the internal expenses
of the Issuers (including, without limitation, all
salaries and expenses of officers and employees
performing legal or accounting duties), the expense of
any annual audit, the fees and expenses incurred in
connection with the listing by the Issuers of the
Registrable Securities on any securities exchange on
which similar securities of the Issuers are then listed
and the fees and expenses of any person, including
special experts, retained by the Issuers.
Section 6. Indemnification; Contribution.
(a) Each Issuer, jointly and severally, agrees to
indemnify and hold harmless the Initial Purchaser, each
Holder and each person, if any, who controls the
Initial Purchaser or any Holder within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934
Act as follows:
(i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment or supplement thereto) pursuant to which Registrable Securities were registered under the 1933 Act, including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading, or arising out of any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 6(d) below) any such settlement is effected with the written consent of the Issuers; and
(iii) against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by any indemnified party), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Issuers by the Initial Purchaser or such Holder expressly for use in a Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto).
(b) Each Holder severally, but not jointly, agrees
to indemnify and hold harmless the Issuers, the Initial
Purchaser, the other selling Holders, and each of their
respective directors and officers, and each person, if
any, who controls the any Issuer, the Initial Purchaser
or any other selling Holder within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934
Act, against any and all loss, liability, claim, damage
and expense described in the indemnity contained in
Section 6(a) hereof, as incurred, but only with respect
to untrue statements or omissions, or alleged untrue
statements or omissions, made in the Shelf Registration
Statement (or any amendment thereto) or any Prospectus
included therein (or any amendment or supplement
thereto) in reliance upon and in conformity with
written information with respect to such Holder
furnished to the Issuers by such Holder expressly for
use in the Shelf Registration Statement (or any
amendment thereto) or such Prospectus (or any amendment
or supplement thereto); provided, however, that no such
Holder shall be liable for any claims hereunder in
excess of the amount of net proceeds received by such
Holder from the sale of Registrable Securities pursuant
to such Shelf Registration Statement.
(c) Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action or proceeding commenced against it in respect of which indemnity may be sought hereunder, but failure so to notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. An indemnifying party may participate at its own expense in the defense of such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying party or parties be liable for the fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 6 (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.
(d) If at any time an indemnified party shall have
requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel,
such indemnifying party agrees that it shall be liable
for any settlement of the nature contemplated by
Section 6(a)(ii) effected without its written consent
if (i) such settlement is entered into more than 45
days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered
into and (iii) such indemnifying party shall not have
reimbursed such indemnified party in accordance with
such request prior to the date of such settlement.
(e) If the indemnification provided for in this
Section 6 is for any reason unavailable to or
insufficient to hold harmless an indemnified party in
respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying
party shall contribute to the aggregate amount of such
losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, in
such proportion as is appropriate to reflect the
relative fault of the indemnifying party or parties on
the one hand and the indemnified party on the other
hand in connection with the statements or omissions
that resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant
equitable considerations.
The relative fault of the Issuers on the one hand and the Holders and the Initial Purchaser on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Issuers, the Holders or the Initial Purchaser and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
The Issuers, the Holders and the Initial Purchaser
agree that it would not be just and equitable if
contribution pursuant to this Section 6(e) were
determined by pro rata allocation or by any other
method of allocation that does not take account of the
equitable considerations referred to above in this
Section 6(e). The aggregate amount of losses,
liabilities, claims, damages and expenses incurred by
an indemnified party and referred to above in this
Section 6(e) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against
any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or
alleged omission.
Notwithstanding the provisions of this Section 6, neither the Initial Purchaser nor any Holder shall be required to indemnify or contribute any amount in excess of the amount by which the total price at which the Registrable Securities sold by Holder or underwritten by the Initial Purchaser, as the case may be, and distributed to the public were offered to the public exceeds the amount of any damages that such Holder or Initial Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act)
shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
For purposes of this Section 6, each person, if
any, who controls the Initial Purchaser or any Holder
within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act shall have the
same rights to contribution as such Initial Purchaser
or Holder, and each director of the Issuers, and each
person, if any, who controls any Issuer within the
meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act shall have the same
rights to contribution as such Issuer.
Section 7. Information Requirements. (a) Each Issuer covenants that, if at any time before the end of the Effectiveness Period such Issuer is not subject to the reporting requirements of the Exchange Act, it will cooperate with any Holder of Registrable Securities and take such further reasonable action as any Holder of Registrable Securities may reasonably request in writing (including, without limitation, making such reasonable representations as any such Holder may reasonably request), all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 and Rule 144A under the Securities Act and customarily taken in connection with sales pursuant to such exemptions. Upon the written request of any Holder of Registrable Securities, each Issuer shall deliver to such Holder a written statement as to whether it has complied with such filing requirements, unless such a statement has been included in such Issuer's most recent report filed pursuant to Section 13 or Section 15(d) of Exchange Act. Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to require the Issuers to register any of its securities (other than the Common Stock) under any section of the Exchange Act.
(b) Each Issuer shall file the reports required to be filed by it under the Exchange Act and shall comply with all other requirements set forth in the instructions to Form S-3 in order to allow such Issuer to be eligible to file registration statements on Form S-3.
Section 8. Miscellaneous.
(a) No Conflicting Agreements. Each Issuer is not, as of the date hereof, a party to, nor shall it, on or after the date of this Agreement, enter into, any agreement with respect to its securities that conflicts with the rights granted to the Holders of Registrable Securities in this Agreement. Each Issuer represents and warrants that the rights granted to the Holders of Registrable Securities hereunder do not in any way conflict with the rights granted to the holders of such Issuer's securities under any other agreements. Notwithstanding the foregoing, the Initial Purchaser acknowledges that each Issuer is obligated, and may obligate itself from time to time in the future, to register its securities for other holders pursuant to separate registration statements.
(b) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Issuers have obtained the written consent of Holders of a majority of the then outstanding Underlying Common Stock constituting Registrable Securities (with Holders of Notes deemed to be the Holders, for purposes of this Section, of the number of outstanding shares of Underlying Common Stock into which such Notes are or would be convertible or exchangeable as of the date on which such consent is requested). Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders of Registrable Securities whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other Holders of Registrable Securities may be given by Holders of at least a majority of the Registrable Securities being sold by such Holders pursuant to such Registration Statement; provided that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately preceding sentence. Each Holder of Registrable Securities outstanding at the time of any such amendment, modification, supplement, waiver or consent or thereafter shall be bound by any such amendment, modification, supplement, waiver or consent effected pursuant to this Section 8(b), whether or not any notice, writing or marking indicating such amendment, modification, supplement, waiver or consent appears on the Registrable Securities or is delivered to such Holder.
(c) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, by telecopier, by courier guaranteeing overnight delivery or by first-class mail, return receipt requested, and shall be deemed given (i) when made, if made by hand delivery, (ii) upon confirmation, if made by telecopier, (iii) one (1) Business Day after being deposited with such courier, if made by overnight courier or (iv) on the date indicated on the notice of receipt, if made by first- class mail, to the parties as follows:
(x) if to a Holder of Registrable Securities, at the most current address given by such Holder to the Issuers in a Notice and Questionnaire or any amendment thereto;
(y) if to the Issuers, to:
Freeport-McMoRan Copper & Gold Inc.
FCX Investment Ltd.
c/o Freeport-McMoRan Copper & Gold Inc.
1615 Poydras Street
New Orleans, Louisiana 70112
Attention: Kathleen L. Quirk
Telecopy No.: (504) 582-4511
(z) if to the Initial Purchaser, to:
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281
Attention: Kevin J. Wilson
Telecopy No.: (212) 449-1393
or to such other address as such person may have
furnished to the other persons identified in this
Section 8(c) in writing in accordance herewith.
(d Approval of Holders. Whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Issuers or their affiliates (as such term is defined in Rule 405 under the Securities Act) (other than the Initial Purchaser or subsequent Holders of Registrable Securities if such subsequent Holders are deemed to be such affiliates solely by reason of their holdings of such Registrable Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage.
(e Successors and Assigns. Any person who purchases any Registrable Securities from the Initial Purchaser shall be deemed, for purposes of this Agreement, to be an assignee of the Initial Purchaser. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties and shall inure to the benefit of and be binding upon each Holder of any Registrable Securities.
(f Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be original and all of which taken together shall constitute one and the same agreement.
(g Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
(h Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.
(i Severability. If any term, provision, covenant or restriction of this Agreement is held to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law.
(j Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and the registration rights granted by the Issuers with respect to the Registrable Securities. Except as provided in the Purchase Agreement, there are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein, with respect to the registration rights granted by the Issuers with respect to the Registrable Securities. This Agreement supersedes all prior agreements and undertakings among the parties with respect to such registration rights. No party hereto shall have any rights, duties or obligations other than those specifically set forth in this Agreement. In no event will such methods of distribution take the form of an underwritten offering of the Registrable Securities without the prior agreement of the Issuers.
(k Termination. This Agreement and the obligations
of the parties hereunder shall terminate upon the end
of the Effectiveness Period, except for any liabilities
or obligations under Section 4, 5 or 6 hereof and the
obligations to make payments of and provide for
liquidated damages under Section 2(e) hereof to the
extent such damages accrue prior to the end of the
Effectiveness Period, each of which shall remain in
effect in accordance with its terms.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.
FREEPORT-McMoRan COPPER & GOLD INC.
By:____________________________
Name:
Title:
FCX INVESTMENT LTD.
By:____________________________
Name:
Title:
Confirmed and accepted as of the date
first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:______________________________________
Name:
Title:
COLLATERAL PLEDGE
AND SECURITY AGREEMENT
Dated as of August 7, 2001
among
FCX INVESTMENT LTD.
as Pledgor,
THE BANK OF NEW YORK
as Trustee, and
THE BANK OF NEW YORK
as Collateral Agent
This Collateral Pledge and Security Agreement (as supplemented from time to time, this "Pledge Agreement") is made and entered into as of August 7, 2001 among FCX INVESTMENT LTD., a Cayman Islands exempted company (the "Pledgor"), having its principal offices at Harbour Centre, 4th Floor, George Town, Grand Cayman, Cayman Islands, British West Indies, THE BANK OF NEW YORK, a New York banking corporation, having its principal corporate trust office at 101 Barclay Street, Floor 21 West, New York, New York 10286, as trustee (in such capacity, the "Trustee") for the holders (the "Holders") of the Notes (as defined herein) issued by the Pledgor under the Indenture referred to below, and THE BANK OF NEW YORK, as collateral agent for the Trustee and the holders from time to time of the Notes referred to below (in such capacity, the "Collateral Agent") and securities intermediary.
W I T N E S S E T H:
WHEREAS, the Pledgor, Freeport-McMoRan Copper & Gold Inc. (together with the Pledgor, the "Issuers") and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Initial Purchaser") are parties to a Purchase Agreement dated August 1, 2001 (the "Purchase Agreement"), pursuant to which the Issuers will issue and sell to the Initial Purchaser $525 million aggregate principal amount (or up to $603.75 million aggregate principal amount if the Initial Purchaser's overallotment option is exercised) of 8 1/4% Convertible Senior Notes due 2006 (the "Notes");
WHEREAS, the Issuers and The Bank of New York, as Trustee, have entered into that certain indenture dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the "Indenture"), pursuant to which the Issuers are issuing the Notes on the date hereof;
WHEREAS, pursuant to the Indenture, the Pledgor is required to purchase, or cause the purchase of, and pledge to the Collateral Agent for the benefit of the Trustee and the Holders, at the Closing Time (as defined in the Purchase Agreement) or the relevant Date of Delivery (as defined in the Purchase Agreement), U.S. Government Obligations (as defined in the Indenture) in an amount that will be sufficient upon receipt of scheduled interest and principal payments of such securities, in the written opinion of Arthur Andersen LLP or another nationally recognized firm of independent public accountants selected by the Pledgor and delivered to the Trustee, to provide for payment in full of the first six scheduled interest payments due on the Notes (such obligation, together with the obligation to repay the principal, premium, if any, interest (including Liquidated Damages, if any), fees, expenses or otherwise on the Notes and under the Indenture, this Agreement and any other transaction document related thereto in the event that the Notes become due and payable prior to such time as the first six scheduled interest payments thereon shall have been paid in full, being collectively referred to herein as the "Obligations");
WHEREAS, the Pledgor has established an account (the "Collateral Account") with The Bank of New York, at its office at 101 Barclay Street, Floor 21 West, New York, New York, Account No. 123791, in the name of The Bank of New York, as Collateral Agent for the benefit of the trustee and holders of the 8 1/4% Convertible Senior Notes Due 2006 of Freeport-McMoRan Copper & Gold Inc. and FCX Investments Ltd. and designated as "BNY COLL AGT UNDER AGREE DTD 8/7/01"; and
WHEREAS, it is a condition precedent to the purchase of the Notes by the Initial Purchaser pursuant to the Purchase Agreement that the Pledgor apply certain of the proceeds of the offering of the Notes to purchase the Pledged Securities (as defined below) and deposit such Pledged Securities into the Collateral Account to be held therein subject to the terms of this Pledge Agreement and shall have granted the assignment and security interest and made the pledge and assignment contemplated by this Pledge Agreement.
NOW, THEREFORE, in consideration of the premises herein contained, and in order to induce the Initial Purchaser to purchase the Notes, the Pledgor, the Trustee and the Collateral Agent hereby agree, for the benefit of the Initial Purchaser and for the ratable benefit of the Holders, as follows:
SECTION 1. Definitions; Appointment; Deposit and Investment.
1.1 Definitions.
(a) Unless otherwise defined in this Pledge Agreement, terms defined or referenced in the Indenture are used in this Pledge Agreement as such terms are defined or referenced therein.
(b) Unless otherwise defined in the Indenture or in this Pledge Agreement, terms defined in Article 8 or 9 of the Uniform Commercial Code in effect in the State of New York ("N.Y. Uniform Commercial Code") from time to time and/or in Section 357.2 of the Treasury Regulations (as defined in Section 1.1(c)) are used in this Pledge Agreement as such terms are defined in such Article 8 or 9 and/or such Section 357.2.
(c) In this Pledge Agreement, the following terms have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):
"Additional Pledged Securities" has the meaning specified in Section 1.3 hereof.
"Cash Equivalents" means, to the extent owned by the Pledgor free and clear of all Liens other than Liens created hereunder, U.S. Government Obligations.
"C.F.R." means U.S. Code of Federal Regulations.
"Closing Time" has the meaning specified in the Purchase Agreement.
"Collateral" has the meaning specified in Section 1.3 hereof.
"Collateral Account" has the meaning specified in the recitals of the parties hereof.
"Collateral Agent" has the meaning specified in the recitals of the parties hereto.
"Collateral Investments" has the meaning specified in Section 5 hereof.
"Date of Delivery" has the meaning specified in the Purchase Agreement.
"Entitlement holder" has the meaning specified in N.Y. Uniform Commercial Code Section 8-102(a)(7) or in respect of any Book-entry Security, the meaning specified for "Entitlement Holder" in 31 C.F.R. Section 357.2 or as applicable to such Book-entry Security, the corresponding federal book-entry regulations.
"FRBNY" means Federal Reserve Bank of New York.
"FRBNY Account" means the Participant's Securities Account maintained in the name of the Collateral Agent by the FRBNY.
"FRBNY Member" means any Person that is eligible to maintain (and that maintains) with the FRBNY one or more FRBNY Member Securities Accounts in such Person's name.
"FRBNY Member Securities Account" means, in respect of any Person, an account in the name of such Person at the FRBNY, to which account U.S. Government Obligations held for such Person are or may be credited.
"Holders" has the meaning specified in the recitals of the parties hereto.
"Initial Pledged Securities" has the meaning specified in Section 1.3 hereof.
"Issuer Order" has the meaning specified in
Section 6(a) hereof.
"Notes" has the meaning specified in the recitals of the parties hereof.
"N.Y. Uniform Commercial Code" has the meaning specified in Section 1.1(b).
"Obligations" has the meaning specified in the recitals of the parties hereof.
"Initial Purchaser" has the meaning specified in the recitals of the parties hereof.
"Purchase Agreement" has the meaning specified in the recitals of the parties hereof.
"Pledged Securities" has the meaning specified in
Section 1.3 hereof.
"Pledgor" has the meaning specified in the recitals of the parties hereto.
"Pledgor Funds" has the meaning specified in
Section 6(b) hereof.
"Pledgor's Designee" has the meaning specified in
Section 6(b) hereof.
"Securities intermediary" means a Person that is a "securities intermediary" (as defined in N.Y. Uniform Commercial Code Section 8-102(a)(14)) and, in respect of any Book-entry Security, a "Securities Intermediary" (as defined in 31 C.F.R. Section 357.2 or, as applicable to such Book-entry Security, as defined in the corresponding federal book-entry regulations).
"Security" has the meaning specified in Section 8-102(a)(15) of the N.Y. Uniform Commercial Code or, in respect of any Book-entry Security, has the meaning specified for "Security" in 31 C.F.R. Section 357.2 (or as applicable to such Book-entry Security, the corresponding federal book-entry regulations).
"Security entitlement" has the meaning specified in N.Y. Uniform Commercial Code Section 8-102(a)(17) or, in respect of any Book-entry Security, has the meaning specified for "Security Entitlement" in 31 C.F.R. Section 357.2 (or, as applicable to such Book-entry Security, the corresponding federal book-entry regulations).
"Settlement Date" means, as to any U.S. Government Obligations, the date on which the purchase of such U.S. Government Obligations shall have been settled.
"Supplement" has the meaning specified in Section 1.3 hereof, and shall substantially in the form of Exhibit B hereto.
"Termination Date" means the earlier of (a) the date of the payment in full in cash of each of the first six scheduled interest payments due on the Notes under the terms of the Indenture and (b) the date of the payment in full in cash of all obligations due and owing under this Pledge Agreement, the Indenture and the Notes, in the event such obligations become due and payable prior to the payment of the first six scheduled interest payments on the Notes.
"Treasury Regulations" means (a) the federal
regulations contained in 31 C.F.R. Part 357 (including,
without limitation, Section 357.2, Section 357.10
through Section 357.14 and Section 357.41 through
Section 357.44 of 31 C.F.R.) and (b) to the extent
substantially identical to the federal regulations
referred to in clause (a) above (as in effect from time
to time) the federal regulations governing other U.S.
Government Obligations.
"Trustee" has the meaning specified in the recitals of parties hereto.
"Uncertificated Security" has the meaning specified in Section 8-102(a)(18) of the N.Y. Uniform Commercial Code.
1.2 Appointment of the Collateral Agent. The Trustee hereby appoints the Collateral Agent as Collateral Agent in accordance with the terms and conditions set forth herein and the Collateral Agent hereby accepts such appointment.
1.3 Pledge and Grant of Security Interest. As
security for the prompt and complete payment and
performance when due (whether at the stated maturity,
by acceleration or otherwise) of the Obligations, the
Pledgor hereby assigns and pledges to the Collateral
Agent for the benefit of the Trustee and the ratable
benefit of the Holders and hereby grants to the
Collateral Agent for the benefit of the Trustee and for
the ratable benefit of the Holders, a lien on and
security interest in all of the Pledgor's right, title
and interest in, to and under the following property:
(a) (i) the U.S. Government Obligations identified by
CUSIP No. in Part I of Schedule I to this Pledge
Agreement (the "Initial Pledged Securities") and (ii)
the U.S. Government Obligations, if any, identified by
CUSIP No. in a supplement or supplements (each, a
"Supplement," the form of which is attached hereto as
Exhibit B) to the Pledge Agreement (the "Additional
Pledged Securities" and, together with the Initial
Pledged Securities, the "Pledged Securities") and the
certificates representing the Pledged Securities (if
any), the scheduled payments of principal and interest
thereon which will be sufficient to provide for payment
in full of the first six scheduled interest payments
due on the Notes, (b) the security entitlements
described in Part II of said Schedule I and in each
Supplement to the Pledge Agreement, if any, with
respect to the financial assets described, the
securities intermediary named, and the securities
account referred to therein, (c) the Collateral
Account, all security entitlements from time to time
carried in the Collateral Account, all funds held
therein and all certificates and instruments, if any,
from time to time representing or evidencing the
Collateral Account, (d) all Collateral Investments (as
hereinafter defined) from time to time and all
certificates and instruments, if any, representing or
evidencing the Collateral Investments, and any and all
security entitlements to the Collateral Investments,
and any and all related securities accounts in which
any security entitlements to the Collateral Investments
is carried, (e) all notes, certificates of deposit,
deposit accounts, checks and other instruments, if any,
from time to time hereafter delivered to or otherwise
possessed by the Collateral Agent for or on behalf of
the Pledgor and specifically designated by the Pledgor
to be in substitution for any or all of the then
existing Collateral, (f) all interest, dividends, cash,
instruments and other property, if any, from time to
time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the then
existing Collateral and (g) all proceeds of any and all
of the foregoing Collateral (including, without
limitation, proceeds that constitute property of the
types described in clauses (a)-(f) of this Section 1.3)
and, to the extent not otherwise included, all (i)
payments under insurance (whether or not the Trustee is
the loss payee thereof) or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing
Collateral and (ii) cash proceeds of any and all of the
foregoing Collateral (such property described in
clauses (a) through (g) of this Section 1.3 being
collectively referred to herein as the "Collateral").
Without limiting the generality of the foregoing, this
Pledge Agreement secures the payment of all amounts
that constitute part of the Obligations and would be
owed by the Pledgor to the Trustee under the Notes, the
Indenture, this Pledge Agreement and any other
transaction documents related thereto but for the fact
that they are unenforceable or not allowable due to the
existence of a bankruptcy, reorganization or similar
proceeding involving the Pledgor.
SECTION 2. Establishment and Maintenance of Collateral Accounts.
(a) Prior to or concurrently with the execution and delivery hereof, the Collateral Agent shall establish the Collateral Account on its books as a separate account segregated from all other custodial or collateral accounts at its office at The Bank of New York, 101 Barclay Street, 21 West, New York, New York. The Pledgor and the Collateral Agent will maintain the Collateral Account as a securities account with The Bank of New York in the State of New York.
The following provisions shall apply to the establishment and maintenance of the Collateral Account:
(i) The Collateral Agent shall cause the Collateral Account to be, and the Collateral Account shall be, separate from all other accounts maintained by the Collateral Agent.
(ii) The Collateral Agent shall, in accordance with all applicable laws, have sole dominion and control over the Collateral Account.
(iii) It shall be a term and condition of the Collateral Account and the Pledgor irrevocably instructs the Collateral Agent, notwithstanding any other term or condition to the contrary in any other agreement, that no amount (including interest on Collateral Investments) shall be released to or for the account of, or withdrawn by or for the account of, the Pledgor or any other Person except as expressly provided in this Pledge Agreement.
(b) On (i) the Closing Time and (ii) the relevant Date of Delivery, if any, the Pledgor shall transfer, or cause to be transferred, to the Collateral Agent, in the case of (i), an amount equal to $139,761,972.57 or, in the case of (ii), an additional amount in cash to be set forth in the relevant Supplement to the Pledge Agreement, which amount shall be sufficient for the Collateral Agent to purchase the Additional Pledged Securities, in each case by depositing all such funds into the Collateral Account. The Collateral Account shall be subject to such applicable laws, and such applicable regulations of the Board of Governors of the Federal Reserve System and of any other appropriate banking or governmental authority, as may now or hereafter be in effect.
(c) As soon as practicably possible after receipt of the amount referred to in Section 2(b) (and not later than the Business Day following (A) the Closing Time or (B) the relevant Date of Delivery, as the case may be), (i) the Collateral Agent shall apply such amount to purchase (1) in the case of (A) above, the U.S. Government Obligations (in the name of the Collateral Agent) listed on Schedule I hereto, or (2) in the case of (B) above, the U.S. Government Obligations (in the name of the Collateral Agent) listed on the relevant Supplement to the Pledge Agreement hereto, and, in each case, credit such U.S. Government Obligations to the Collateral Account as Collateral hereunder; and (ii) the Collateral Agent shall ensure that, on the Settlement Date of such U.S. Government Obligations, the FRBNY indicates by book-entry that those U.S. Government Obligations being settled on such date are credited to the FRBNY Account.
(d) The Collateral Agent will, from time to time, reinvest the proceeds of Collateral that may mature or be sold in such Collateral Investments (in the name of the Collateral Agent) as it may be directed in writing by the Pledgor, and cause such Collateral Investments to be credited to the Collateral Account as Collateral hereunder. Any such proceeds that the Pledgor directs the Collateral Agent in writing not to reinvest in Collateral Investments shall be held in the Collateral Account.
SECTION 3. Delivery and Control of Collateral. (a) All certificates or instruments representing or evidencing Collateral shall be delivered to and held by or on behalf of the Collateral Agent pursuant hereto and shall be in suitable form for transfer or delivery, or, at the request of the Collateral Agent, shall be accompanied by duly executed instruments of transfer or assignment in blank. In addition, the Collateral Agent shall have the right at any time to exchange certificates or instruments representing or evidencing Collateral for certificates or instruments of smaller or larger denominations.
(b) With respect to any Collateral that constitutes a security and is not represented or evidenced by a certificate or instrument, the Pledgor shall cause the issuer thereof either (i) to register the Collateral Agent as the registered owner of such security or (ii) to agree in writing with the Collateral Agent and the Pledgor that such issuer will comply with instructions with respect to such security originated by the Collateral Agent without further consent of the Pledgor, the terms of such agreement to be consistent with the terms of this Agreement (if applicable).
(c) With respect to any Collateral that constitutes a security entitlement, the Pledgor shall cause the securities intermediary with respect to such security entitlement either (i) to identify in its records the Collateral Agent as the entitlement holder of such security entitlement against such securities intermediary or (ii) to agree in writing with the Pledgor and the Collateral Agent that such securities intermediary will comply with entitlement orders (that is, notifications communicated to such securities intermediary directing transfer or redemption of the financial asset to which Pledgor has a security entitlement) originated by the Collateral Agent without further consent of the Pledgor, the terms of such agreement to be consistent with the terms of this Agreement (if applicable).
(d) With respect to any Collateral that constitutes a securities account, the Pledgor will comply with subsection (c) of this Section 3 with respect to all security entitlements carried in such securities account.
(e) Concurrently with the execution and delivery of this Pledge Agreement, the Collateral Agent is delivering, and concurrently with the execution and delivery of any Supplement to the Pledge Agreement, the Collateral Agent will deliver, to the Pledgor and the Initial Purchaser a duly executed certificate, in the form of Exhibit A hereto, of an officer of the Collateral Agent.
(f) [RESERVED]
(g) Concurrently with the execution and delivery of this Pledge Agreement, the Pledgor is delivering, and concurrently with the execution and delivery of any Supplement to the Pledge Agreement, the Pledgor will deliver, to the Collateral Agent financing statements in form acceptable for filing under the N.Y. Uniform Commercial Code and the Uniform Commercial Code of the District of Columbia, covering the Collateral described in this Pledge Agreement.
SECTION 4. Delivery of Collateral Other than U.S. Government Obligations. (a) Collateral consisting of cash will be deemed to be delivered to the Collateral Agent (such that the Collateral Agent will have an enforceable lien and security interest thereon and therein) when it has been (and for so long as it shall remain) deposited in or credited to the Collateral Account.
(b) Collateral consisting of Cash Equivalents (other than U.S. Government Obligations) will be deemed to be delivered to the Collateral Agent (such that the Collateral Agent will have an enforceable lien and security interest thereon and therein) when they have been (and for so long as they shall remain) deposited in or credited to the Collateral Account.
(c) Collateral consisting of uncertificated securities (other than U.S. Government Obligations) will be deemed delivered to the Collateral Agent when the Collateral Agent (A) shall indicate by book entry that such securities have been credited to the Collateral Account or (B) shall receive such security (or a financial asset based on such security) for the Collateral Account from or at the direction of the Pledgor, and shall accept such security (or such financial asset) for credit to the Collateral Account.
(d) Collateral consisting of securities, and
represented or evidenced by certificates or
instruments, will be deemed delivered to the Collateral
Agent when all such certificates or instruments
representing or evidencing the Collateral, including,
without limitation, amounts invested as provided in
Section 5, shall be delivered to the Collateral Agent
and held by or on behalf of the Collateral Agent
pursuant hereto and shall be in registered form and
specially indorsed to the Collateral Agent by an
effective indorsement, all in form and substance
sufficient to convey a valid security interest in such
Collateral to the Collateral Agent or shall be credited
to the Collateral Account.
SECTION 5. Investing of Amounts in the Collateral Accounts. The Collateral Agent shall advise the Pledgor if, at any time, any amounts shall exist in the Collateral Account uninvested, and if directed in writing by the Pledgor, the Collateral Agent will, subject to the provisions of Section 6 and Section 13,
(a) invest such amounts on deposit in the Collateral Accounts in such Cash Equivalents in the name of the Collateral Agent as the Pledgor may select and
(b) invest interest paid on the Cash Equivalents referred to in clause (a) above, and reinvest other proceeds of any such Cash Equivalents that may mature or be sold, in each case in such Cash Equivalents in the name of the Collateral Agent, as the Pledgor may select (the Cash Equivalents referred to in clauses (a) and (b) above, together with the Pledged Securities, being collectively referred to herein as "Collateral Investments"); provided, however, that the amount in cash and Pledged Securities on deposit in the Collateral Account, collectively, at any time during the term of this Pledge Agreement, is sufficient to provide for the payment in full of the remaining interest payments at such time on the Notes up to and including the sixth scheduled interest payment. Interest and proceeds that are not invested or reinvested in Collateral Investments as provided above shall be deposited and held in the Collateral Account. Except as otherwise provided in Sections 11 and 12, the Collateral Agent shall not be liable for any loss in the investment or reinvestment of amounts held in the Collateral Account. The Collateral Agent is not at any time under any duty to advise or make any recommendation for the purchase, sale, retention or disposition of the Collateral Investments.
SECTION 6. Disbursements. The Collateral Agent shall hold the Collateral in the Collateral Account and release the same, or a portion thereof, only as follows:
(a) Prior to each of the first six scheduled interest payments on the Notes, the Collateral Agent shall release from the Collateral Accounts an amount sufficient to pay the interest due on the Notes on such interest payment date and will take any action necessary to provide for the payment of the interest on the Notes to the Holders in accordance with the payment provisions of the Indenture from (and to the extent of) proceeds of the Collateral in the Collateral Account. Nothing in this Section 6 shall affect the Collateral Agent's rights to apply the Collateral to the payments of amounts due on the Notes upon acceleration thereof.
(b) If, prior to the date on which the sixth scheduled interest payment on the Notes is due:
(i) an Event of Default under the Notes occurs and is continuing and
(ii) the Trustee or the Holders of 25% in
aggregate principal amount of the Notes
accelerate the Notes by declaring the
principal amount of the Notes to be
immediately due and payable in
accordance with the provisions of the
Indenture, except for the occurrence and
continuance of an Event of Default under
Section 6.01(f) and (g) of the
Indenture, upon which the Notes will be
accelerated automatically pursuant to
the Indenture,
then the Collateral Agent shall promptly, subject to applicable bankruptcy laws, release the proceeds from the Collateral Account to the Holders of the Notes. Distributions from the Collateral Account shall be applied, for the ratable benefit of the Holders, as follows:
(x) first, to any accrued and unpaid interest on the Notes and
(y) second, to the extent available, to the repayment of the remaining Obligations, including the principal amount of the Notes.
Any surplus of such proceeds held by the Collateral Agent and remaining after payment in full of all of the Obligations shall be paid over to the Pledgor.
(c) [RESERVED]
(d) [RESERVED]
(e) In the event that the Collateral held in the Collateral Account exceeds 100% of the amount sufficient, in the opinion of Arthur Andersen LLP or another nationally recognized firm of independent public accountants selected by the Pledgor, to provide for payment in full of the first six scheduled interest payments due on the Notes (or, in the event an interest payment or payments have been made, an amount sufficient to provide for payment in full of all interest payments remaining, up to and including the sixth scheduled interest payment), the Collateral Agent shall release to the Pledgor, at the Pledgor's written request, accompanied by an opinion prepared by Arthur Andersen LLP or such other nationally recognized firm of independent public accountants, any such excess Collateral.
(f) Upon the release of any Collateral from the Collateral Account, in accordance with the terms of this Pledge Agreement, the security interest evidenced by this Pledge Agreement in such released Collateral will automatically terminate and be of no further force and effect.
(g) Except as expressly provided in this Section
6, nothing contained in this Pledge Agreement shall (i)
afford the Pledgor any right to issue entitlement
orders with respect to any security entitlement to the
Pledged Securities or Collateral Investments or any
securities account in which any such security
entitlement may be carried, or otherwise afford the
Pledgor control of any such security entitlement or
(ii) otherwise give rise to any rights of the Pledgor
with respect to the Collateral Investments, any
security entitlement thereto or any securities account
in which any such security entitlement may be carried,
other than the Pledgor's rights under this Pledge
Agreement as the beneficial owner of Collateral pledged
to and subject to the exclusive dominion and control
(including, without limitation, securities control) of
the Collateral Agent in its capacity as such (and not
as a securities intermediary). The Pledgor
acknowledges, confirms and agrees that the Collateral
Agent holds a security entitlement to the Collateral
Investments solely as collateral agent for the Trustee
and the Holders and not as a securities intermediary
for the Pledgor.
SECTION 7. Representations and Warranties. The Pledgor hereby represents and warrants, as of the date hereof, that:
(a) The execution and delivery by the Pledgor of,
and the performance by the Pledgor of its obligations
under, this Pledge Agreement will not contravene any
provision of applicable law or the certificate of
incorporation, bylaws or equivalent organizational
instruments of the Pledgor or any material agreement or
other material instrument binding upon the Pledgor or
any of its subsidiaries or any judgment, order or
decree of any governmental body, agency or court having
jurisdiction over the Pledgor or any of its
subsidiaries, or result in the creation or imposition
of any Lien on any assets of the Pledgor, except for
the lien and security interests granted under this
Pledge Agreement; no consent, approval, authorization
or order of, or qualification with, and no notice to or
filing with, any governmental body or agency or other
third party is required (i) for the performance by the
Pledgor of its obligations under this Pledge Agreement,
(ii) for the pledge by the Pledgor of the Collateral
pursuant to this Pledge Agreement or for the execution,
delivery or performance of this Agreement by the
Pledgor or (iii) for the perfection or maintenance of
the pledge, assignment and security interest created
hereby (including the first priority nature of such
pledge, assignment or security interest), except for
the filing of financing and continuation statements
under the Uniform Commercial Code of applicable
jurisdictions which financing statements have been
delivered pursuant to Section 3(g) hereof, or (iv)
except for any such consents, approvals, authorizations
or orders required to be obtained by the Collateral
Agent (or the Holders) for reasons other than the
consummation of this transaction, for the exercise by
the Collateral Agent of the rights provided for in this
Pledge Agreement or the remedies in respect of the
Collateral pursuant to this Pledge Agreement.
(b) The Pledgor is the legal and beneficial owner of the Collateral, free and clear of any Lien or claims of any Person (except for the lien and security interests granted under this Pledge Agreement). No effective financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any public office other than the financing statements, if any, to be filed pursuant to this Pledge Agreement.
(c) This Pledge Agreement has been duly authorized, validly executed and delivered by the Pledgor and (assuming the due authorization and valid execution and delivery of this Pledge Agreement by each of the Trustee and the Collateral Agent and enforceability of the Pledge Agreement against each of the Trustee and the Collateral Agent in accordance with its terms) constitutes a valid and binding agreement of the Pledgor, enforceable against the Pledgor in accordance with its terms, except as (i) the enforceability hereof may be limited by bankruptcy, insolvency, fraudulent conveyance, preference, reorganization, moratorium or similar laws now or hereafter in effect relating to or affecting the rights or remedies of creditors generally, (ii) the availability of equitable remedies may be limited by equitable principles of general applicability and the discretion of the court before which any proceeding therefor may be brought, (iii) the exculpation provisions and rights to indemnification hereunder may be limited by U.S. federal and state securities laws and public policy considerations and (iv) the waiver of rights and defenses contained in Section 13(b), Section 17.11 and Section 17.15 hereof may be limited by applicable law.
(d) Upon the delivery to the Collateral Agent of
the Collateral in accordance with the terms hereof and
the filing of the financing statements referred to in
Section 3(g) hereof, the pledge of and grant of a
security interest in the Collateral securing the
payment of the Obligations for the benefit of the
Trustee and the Holders will constitute a valid, first
priority, perfected security interest in such
Collateral (except, with respect to proceeds, only to
the extent permitted by Section 9-315 of the N.Y.
Uniform Commercial Code), enforceable as such against
all creditors of the Pledgor and any persons purporting
to purchase any of the Collateral from the Pledgor
other than as permitted by the Indenture. Upon filing
of the financing statements described in Section 3(g)
hereof, all filings and other actions necessary or
desirable to perfect and protect such security interest
will have been duly taken.
(e) There are no legal or governmental proceedings pending or, to the best of the Pledgor's knowledge, threatened to which the Pledgor or any of its subsidiaries is a party or to which any of the properties of the Pledgor or any of its subsidiaries is subject that would materially adversely affect the power or ability of the Pledgor to perform its obligations under this Pledge Agreement or to consummate the transactions contemplated hereby.
(f) The pledge of the Collateral pursuant to this Pledge Agreement is not prohibited by law or governmental regulation (including, without limitation, Regulations G, T, U and X of the Board of Governors of the Federal Reserve System) applicable to the Pledgor.
(g) No Event of Default exists.
(h) The chief place of business and chief executive office of the Pledgor are located at the address first specified above for the Pledgor.
SECTION 8. Further Assurances. The Pledgor will, promptly upon the request by the Collateral Agent (which request the Collateral Agent may submit at the direction of the Holders of a majority in aggregate principal amount of the Notes then outstanding), execute and deliver or cause to be executed and delivered, or use its reasonable best efforts to procure, all assignments, instruments and other documents, deliver any instruments to the Collateral Agent and take any other actions that are necessary or desirable to perfect, continue the perfection of, or protect the first priority of the Trustee's security interest in and to the Collateral, to protect the Collateral against the rights, claims or interests of third persons (other than any such rights, claims or interests created by or arising through the Collateral Agent) or to effect the purposes of this Pledge Agreement. Without limiting the generality of the foregoing, the Pledgor will, if any Collateral shall be evidenced by a promissory note or other instrument, deliver to the Collateral Agent in pledge hereunder such note or instrument duly indorsed and accompanied by duly executed instruments of transfer or assignment; and execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary, or as the Collateral Agent may reasonably request, in order to perfect and preserve the pledge, assignment and security interest granted or purported to be granted hereby. The Pledgor also hereby authorizes the Collateral Agent to file any financing or continuation statements, and amendments thereto, in the United States with respect to the Collateral without the signature of the Pledgor (to the extent permitted by applicable law). A photocopy or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. The Pledgor will promptly pay all costs incurred in connection with any of the foregoing within 45 days of receipt of an invoice therefor. The Pledgor also agrees, whether or not requested by the Collateral Agent, to use its reasonable best efforts to perfect or continue the perfection of, or to protect the first priority of, the Trustee's security interest in and to the Collateral, and to protect the Collateral against the rights, claims or interests of third persons (other than any such rights, claims or interests created by or arising through the Collateral Agent).
SECTION 9. Covenants. The Pledgor covenants and agrees with the Collateral Agent, Trustee and the Holders that from and after the date of this Pledge Agreement until the Termination Date:
(a) it will not (i) (and will not purport to) sell or otherwise dispose of, or grant any option or warrant with respect to, any of the Collateral nor (ii) create or permit to exist any Lien upon or with respect to any of the Collateral (except for the liens and security interests granted under this Pledge Agreement and any Lien created by or arising through the Collateral Agent) and at all times will be the sole beneficial owner of the Collateral;
(b) it will not (i) enter into any agreement or understanding that restricts or inhibits or purports to restrict or inhibit the Trustee's or the Collateral Agent's rights or remedies hereunder, including, without limitation, the Collateral Agent's right to sell or otherwise dispose of the Collateral or (ii) fail to pay or discharge any tax, assessment or levy of any nature with respect to its beneficial interest in the Collateral not later than three Business Days prior to the date of any proposed sale under any judgment, writ or warrant of attachment with respect to the Collateral;
(c) it will keep its chief place of business and chief executive office at the location therefor specified in Section 7(h), or upon 30 days' prior written notice to the Collateral Agent, at such other locations in a jurisdiction where all actions required by Section 8 have been taken with respect to the Collateral;
(d) it will, and will cause the Trustee and the Collateral Agent to, execute and deliver on or prior to any Date of Delivery, a Supplement to this Pledge Agreement substantially in the form of Exhibit B hereto, and take such other actions as shall be necessary to grant to the Collateral Agent, for the benefit of the Trustee and the ratable benefit of the Holders, a valid assignment of and security interest in the Additional Pledged Securities and the related security entitlements.
SECTION 10. Power of Attorney; Agent May Perform.
(a) Subject to the terms of this Pledge Agreement, the
Pledgor hereby appoints and constitutes the Collateral
Agent as the Pledgor's attorney-in-fact (with full
power of substitution) to exercise to the fullest
extent permitted by law all of the following powers
upon and at any time after the occurrence and during
the continuance of an Event of Default:
(a) collection of proceeds of any Collateral;
(b) conveyance of any item of Collateral to any purchaser thereof;
(c) giving of any notices or recording of any Liens hereof; and
(d) paying or discharging taxes or Liens levied
or placed upon the Collateral, the legality or validity
thereof and the amounts necessary to discharge the same
to be determined by the Collateral Agent in its sole
reasonable discretion, and such payments made by the
Collateral Agent to become part of the Obligations
secured hereby, due and payable immediately upon
demand. The Collateral Agent's authority under this
Section 10 shall include, without limitation, the
authority to endorse and negotiate any checks or
instruments representing proceeds of Collateral in the
name of the Pledgor, execute and give receipt for any
certificate of ownership or any document constituting
Collateral, transfer title to any item of Collateral,
sign the Pledgor's name on all financing statements (to
the extent permitted by applicable law) or any other
documents necessary or appropriate to preserve, protect
or perfect the security interest in the Collateral and
to file the same, prepare, file and sign the Pledgor's
name on any notice of Lien (to the extent permitted by
applicable law), and to take any other actions arising
from or necessarily incident to the powers granted to
the Trustee or the Collateral Agent in this Pledge
Agreement. This power of attorney is coupled with an
interest and is irrevocable by the Pledgor.
(b) If the Pledgor fails to perform any agreement contained herein, the Collateral Agent may, but is not obligated to, after providing to the Pledgor notice of such failure and five Business Days to effect such performance, itself perform, or cause performance of, such agreement, and the expenses of the Collateral Agent incurred in connection therewith shall be payable by the Pledgor under Section 14.
SECTION 11. No Assumption of Duties; Reasonable Care. The rights and powers granted to the Collateral Agent hereunder are being granted in order to preserve and protect the security interest of the Collateral Agent for the benefit of the Trustee and the Holders in and to the Collateral granted hereby and shall not be interpreted to, and shall not impose any duties on, the Collateral Agent in connection therewith other than those expressly provided herein or imposed under applicable law. Except as provided by applicable law or by the Indenture, the Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which the Collateral Agent accords similar property held by the Collateral Agent for similar accounts, it being understood that the Collateral Agent in its capacity as such
(a) may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon and
(b) shall not have any responsibility for
(i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities or other matters relative to any Collateral, whether or not the Collateral Agent has or is deemed to have knowledge of such matters,
(ii) taking any necessary steps for the existence, enforceability or perfection of any security interest of the Collateral Agent or to preserve rights against any parties with respect to any Collateral or
(iii) except as otherwise set forth in
Section 5, investing or reinvesting any
of the Collateral, provided, however,
that in the case of clause (a) and
clause (b) of this sentence, nothing
contained in this Pledge Agreement shall
relieve the Collateral Agent of any
responsibilities as a securities
intermediary under applicable law.
In no event shall the Collateral Agent be liable for the existence, validity, enforceability or perfection of any security interest of the Collateral Agent, or for special indirect or consequential damages or lost profits or loss of business, arising in connection with this Agreement.
SECTION 12. Indemnity. The Pledgor shall fully indemnify, hold harmless and defend the Collateral Agent and its directors and officers from and against any and all claims, losses, actions, obligations, liabilities and expenses, including reasonable defense costs, reasonable investigative fees and costs, and reasonable legal fees, expenses, and damages arising from the Collateral Agent's appointment and performance as Collateral Agent under this Pledge Agreement, except to the extent that such claim, action, obligation, liability or expense is directly caused by the bad faith, gross negligence or willful misconduct of such indemnified person. The provisions of this Section 12 shall survive termination of this Pledge Agreement and the resignation and removal of the Collateral Agent.
SECTION 13. Remedies upon Event of Default. Subject to Section 6(b), if any Event of Default under the Indenture shall have occurred and be continuing and the Notes shall have been accelerated in accordance with the provisions of the Indenture:
(a) The Trustee, the Collateral Agent and the Holders shall have, in addition to all other rights given by law or by this Pledge Agreement or the Indenture, all of the rights and remedies with respect to the Collateral of a secured party upon default under the N.Y. Uniform Commercial Code (whether or not the N.Y. Uniform Commercial Code applies to the affected Collateral) at that time. In addition, with respect to any Collateral that shall then be in or shall thereafter come into the possession or custody of the Collateral Agent, the Collateral Agent may and, at the written direction of the Trustee or the Holders of a majority in aggregate principal amount of the Notes then outstanding, shall appoint a broker or other expert to sell or cause the same to be sold at any broker's board or at public or private sale, in one or more sales or lots, at such price or prices such broker or other expert may deem commercially reasonable, for cash or on credit or for future delivery, without assumption of any credit risk. The purchaser of any or all Collateral so sold shall thereafter hold the same absolutely, free from any claim, encumbrance or right of any kind whatsoever created by or through the Pledgor. Unless any of the Collateral threatens, in the reasonable judgment of the Collateral Agent, to decline speedily in value, the Collateral Agent will give the Pledgor reasonable notice of the time and place of any public sale thereof, or of the time after which any private sale or other intended disposition is to be made. Any sale of the Collateral conducted in conformity with reasonable commercial practices of banks, insurance companies, commercial finance companies, or other financial institutions disposing of property similar to the Collateral shall be deemed to be commercially reasonable. Any requirements of reasonable notice shall be met if notice of the time and place of any public sale or the time after which any private sale is to be made is given to the Pledgor as provided in Section 17.1 hereof at least ten (10) days before the time of the sale or disposition. The Collateral Agent or any Holder may, in its own name or in the name of a designee or nominee, buy any of the Collateral at any public sale and, if permitted by applicable law, at any private sale. The Collateral Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. All expenses (including court costs and reasonable attorneys' fees, expenses and disbursements) of, or incident to, the enforcement of any of the provisions hereof shall be recoverable from the proceeds of the sale or other disposition of the Collateral.
(b) The Pledgor further agrees to use its
reasonable best efforts to do or cause to be done all
such other acts as may be necessary to make such sale
or sales of all or any portion of the Collateral
pursuant to this Section 13 valid and binding and in
compliance with any and all other applicable
requirements of law. The Pledgor further agrees that a
breach of any of the covenants contained in this
Section 13 will cause irreparable injury to the Trustee
and the Holders, that the Trustee and the Holders have
no adequate remedy at law in respect of such breach
and, as a consequence, that each and every covenant
contained in this Section 13 shall be specifically
enforceable against the Pledgor, and the Pledgor hereby
waives and agrees not to assert any defenses against an
action for specific performance of such covenants
except for a defense that no Event of Default has
occurred.
(c) All cash proceeds received by the Collateral Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral may, in the discretion of the Collateral Agent, be held by the Collateral Agent as collateral for, and/or then or at any time thereafter applied (after payment of any amounts payable to the Collateral Agent or the Trustee pursuant to Section 14) by the Collateral Agent for the ratable benefit of the Holders first against any accrued and unpaid interest on the Notes and thereafter against the remaining Obligations. Any surplus of such cash or cash proceeds held by the Collateral Agent and remaining after payment in full of all of the Obligations shall be paid over to the Pledgor.
(d) The Collateral Agent may, but is not obligated to, exercise any and all rights and remedies of the Pledgor in respect of the Collateral.
(e) Subject to and in accordance with the terms of this Pledge Agreement, all payments received by the Pledgor in respect of the Collateral shall be received in trust for the benefit of the Collateral Agent, shall be segregated from other funds of the Pledgor and shall be forthwith paid over to the Collateral Agent in the same form as so received (with any necessary indorsement).
(f) The Collateral Agent may, without notice to the Pledgor except as required by law and at any time or from time to time, charge, set-off and otherwise apply all or any part of the Obligations against the Collateral Account or any part thereof.
(g) The Pledgor shall cease to be entitled to direct the investment of amounts held in the Collateral Account under Section 5 hereof and the Collateral Agent shall not accept any direction from the Pledgor to invest amounts held in the Collateral Account.
SECTION 14. Fees and Expenses. Pledgor agrees to pay to Collateral Agent the fees as may be agreed upon from time to time in writing. The Pledgor will upon demand pay to the Trustee and the Collateral Agent the amount of any and all expenses, including, without limitation, the reasonable fees, expenses and disbursements of its counsel, experts and agents retained by the Trustee and the Collateral Agent, that the Trustee and the Collateral Agent may incur in connection with
(a) the review, negotiation and administration of this Pledge Agreement,
(b) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Collateral,
(c) the exercise or enforcement of any of the rights of the Collateral Agent, the Trustee and the Holders hereunder or
(d) the failure by the Pledgor to perform or observe any of the provisions hereof.
SECTION 15. Security Interest Absolute. All rights of the Collateral Agent, the Trustee and the Holders and security interests hereunder, and all obligations of the Pledgor hereunder, shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Indenture or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Indenture;
(c) any exchange, surrender, release or non-perfection of any Liens on any other collateral for all or any of the Obligations;
(d) any change, restructuring or termination of the corporate structure or the existence of the Pledgor or any of its subsidiaries;
(e) to the extent permitted by applicable law, any other circumstance which might otherwise constitute a defense available to, or a discharge of, the Pledgor in respect of the Obligations or of this Pledge Agreement; or
(f) any manner of application of other collateral, or proceeds thereof, to all or any item of the Obligations, or any manner of sale or other disposition of any item of Collateral for all or any of the Obligations.
SECTION 16. Collateral Agent's Representations, Warranties and Covenants. The Collateral Agent (in its capacity as securities intermediary) represents and warrants that it is as of the date hereof, and it agrees that for so long as it maintains the Collateral Accounts and acts as the securities intermediary pursuant to this Pledge Agreement it shall be a securities intermediary and a FRBNY Member. In furtherance of the foregoing, the Collateral Agent (in such capacity) hereby:
(a) represents and warrants that it is a commercial bank that in the ordinary course of its business maintains securities accounts for others and is acting in that capacity hereunder and with respect to the Collateral Account;
(b) represents and warrants that it maintains a FRBNY Member Securities Account with the FRBNY;
(c) agrees that the Collateral Account shall be an account to which financial assets may be credited, and undertakes to treat the Collateral Agent (in its capacity as such) as entitled to exercise rights that comprise (and entitled to the benefits of) such financial assets, and entitled to exercise the rights of an entitlement holder in the manner contemplated by the UCC;
(d) hereby represents that, subject to applicable law, it has not granted, and covenants that so long as it acts as a securities intermediary hereunder it shall not grant, control (including without limitation, securities control) over or with respect to any Collateral credited to any Collateral Account from time to time to any other Person other than the Collateral Agent (in its capacity as such);
(e) covenants that it shall not, subject to applicable law, knowingly take any action inconsistent with, and represents and covenants that it is not and so long as this Pledge Agreement remains in effect will not knowingly become, party to any agreement the terms of which are inconsistent with, the provisions of this Pledge Agreement;
(f) agrees that any item of property credited to the Collateral Account shall be treated as a financial asset;
(g) agrees that any item of Collateral credited to the Collateral Account shall not be subject to any security interest, Lien or right of set-off in favor of it as securities intermediary, except as may be expressly permitted under the Indenture (and in such capacity shall take such actions as shall be necessary and appropriate to cause such Collateral to remain free of any Lien or security interest of any underlying securities intermediary through which it holds such Collateral or any security entitlement thereto);
(h) agrees to maintain the Collateral Account and maintain appropriate books and records in respect thereof in accordance with its usual procedures and subject to the terms of this Pledge Agreement;
(i) hereby represents, that its jurisdiction as
securities intermediary, for purposes of Section
8-110(e) of the N.Y. Uniform Commercial Code and
Section 357.11 of the Treasury Regulations or the
corresponding U.S. federal regulations as they pertain
to this Pledge Agreement, the Collateral Account and
the security entitlements relating thereto, shall be
the State of New York;
(j) agrees that, with respect to any Collateral
that constitutes a security entitlement, it shall
comply with the provisions of Section 3(c)(i) or (ii)
of this Pledge Agreement and, with respect to any
Collateral that constitutes a securities account, it
shall comply with the provisions of Section 3(c)(i) or
(ii) of this Pledge Agreement with respect to all
security entitlements carried in such securities
account; and
(k) agrees that if its jurisdiction as securities intermediary shall change from that jurisdiction specified in Section 16(i), it will promptly notify the Collateral Agent and the Trustee of such change and of such new jurisdiction.
SECTION 17. Miscellaneous Provisions.
17.1. Notices. Any notice, approval, direction, consent or other communication shall be sufficiently given if in writing and delivered in person or mailed by first class mail, commercial courier service or telecopier communication, addressed as follows:
if to the Pledgor:
FCX Investment Ltd.
c/o Freeport-McMoRan Copper & Gold Inc.
1615 Poydras Street
New Orleans, Louisiana 70112
Attention: Treasurer
Telecopier No.: (504) 582-4511
if to the Collateral Agent:
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Administration
Telecopier No.: (212) 815-5915
if to the Trustee:
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Administration
Telecopier No.: (212) 815-5915
or, as to any such party, at such other address as
shall be designated by such party in a written notice
to each other party complying as to delivery with the
terms of this Section. All such notices and other
communications shall be deemed
to have been duly given: at the time delivered by hand,
if personally delivered;
three Business Days after being deposited in the mail,
postage prepaid, if
mailed; when receipt is confirmed, if telecopied; and
on the next Business Day
if timely delivered to an air courier guaranteeing
overnight delivery.
17.2. No Adverse Interpretation of Other Agreements. This Pledge Agreement may not be used to interpret another pledge, security or debt agreement of the Pledgor or any subsidiary thereof. No such pledge, security or debt agreement (other than the Indenture) may be used to interpret this Pledge Agreement.
17.3. Severability. The provisions of this Pledge Agreement are severable, and if any clause or provision shall be held invalid, illegal or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect in that jurisdiction only such clause or provision, or part thereof, and shall not in any manner affect such clause or provision in any other jurisdiction or any other clause or provision of this Pledge Agreement in any jurisdiction.
17.4. Headings. The headings in this Pledge Agreement have been inserted for convenience of reference only, are not to be considered a part hereof and shall in no way modify or restrict any of the terms or provisions hereof.
17.5. Counterpart Originals. This Pledge Agreement may be signed in two or more counterparts, each of which shall be deemed an original, but all of which shall together constitute one and the same agreement.
17.6. Benefits of Pledge Agreement. Nothing in this Pledge Agreement, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, and the Holders, any benefit or any legal or equitable right, remedy or claim under this Pledge Agreement.
17.7. Amendments, Waivers and Consents. Any amendment or waiver of any provision of this Pledge Agreement and any consent to any departure by the Pledgor, the Trustee or the Collateral Agent or from any provision of this Pledge Agreement shall be effective only if made or duly given in compliance with all of the terms and provisions of the Indenture, and none of the Trustee, the Collateral Agent, the Pledgor, or any Holder shall be deemed, by any act, delay, indulgence, omission or otherwise, to have waived any right or remedy hereunder or to have acquiesced in any default or Event of Default or in any breach of any of the terms and conditions hereof. Failure of the Trustee, the Pledgor, the Collateral Agent or any Holder to exercise, or delay in exercising, any right, power or privilege hereunder shall not preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Trustee, the Pledgor, the Collateral Agent or any Holder of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy that the Trustee, the Pledgor, the Collateral Agent or such Holder would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law.
17.8. [RESERVED]
17.9. Continuing Security Interest; Termination.
(a) This Pledge Agreement shall create a continuing security interest in and to the Collateral and shall, unless otherwise provided in the Indenture or in this Pledge Agreement, remain in full force and effect until the Termination Date. This Pledge Agreement shall be binding upon the parties hereto and their respective transferees, successors and assigns, and shall inure, together with the rights and remedies of the Trustee and the Collateral Agent hereunder, to the benefit of the Trustee, the Collateral Agent, the Pledgor, the Holders and their respective successors, transferees and assigns.
(b) Upon the Termination Date, the pledge, assignment and security interest granted hereby shall terminate and all rights to the Collateral shall revert to the Pledgor. At such time, the Collateral Agent shall, pursuant to an Issuer Order, promptly reassign and redeliver to the Pledgor all of the Collateral hereunder that has not been sold, disposed of, retained or applied by the Collateral Agent in accordance with the terms of this Pledge Agreement and the Indenture and execute and deliver to the Pledgor such documents as the Pledgor shall reasonably request to evidence such termination. Such reassignment and redelivery shall be without warranty by or recourse to the Collateral Agent or the Trustee in its capacity as such, except as to the absence of any Liens on the Collateral created by or arising through the Collateral Agent or the Trustee, and shall be at the reasonable expense of the Pledgor.
17.10. Survival Provisions. All representations, warranties and covenants contained herein shall survive the execution and delivery of this Pledge Agreement, and shall terminate only upon the termination of this Pledge Agreement. The obligations of the Pledgor under Sections 12 and 14 hereof and the obligations of the Collateral Agent under Section 17.9(b) hereof shall survive the termination of this Pledge Agreement.
17.11. Waivers. The Pledgor waives presentment and demand for payment of any of the Obligations, protest and notice of dishonor or default with respect to any of the Obligations, and all other notices to which the Pledgor might otherwise be entitled, except as otherwise expressly provided herein or in the Indenture.
17.12. Authority of the Collateral Agent.
(a) The Collateral Agent shall have and be entitled to exercise all powers hereunder that are specifically granted to the Collateral Agent by the terms hereof, together with such powers as are reasonably incident thereto. The Collateral Agent may perform any of its duties hereunder or in connection with the Collateral by or through agents or attorneys, shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder and shall be entitled to retain counsel and to act in reliance upon the advice of counsel concerning all such matters. Except as otherwise expressly provided in this Pledge Agreement or the Indenture, neither the Collateral Agent nor any director, officer, employee, attorney or agent of the Collateral Agent shall be liable to the Pledgor for any action taken or omitted to be taken by the Collateral Agent, in its capacity as Collateral Agent, hereunder, except for its own bad faith, gross negligence or willful misconduct, and the Collateral Agent shall not be responsible for the validity, effectiveness or sufficiency hereof or of any document or security furnished pursuant hereto. The Collateral Agent and its directors, officers, employees, attorneys and agents shall be entitled to rely conclusively on any communication, instrument or document believed by it or them to be genuine and correct and to have been signed or sent by the proper Person or Persons. The Collateral Agent shall have no duty to cause any financing statement or continuation statement to be filed in respect of the Collateral.
(b) The Pledgor acknowledges that the rights and responsibilities of the Collateral Agent under this Pledge Agreement with respect to any action taken by the Collateral Agent or the exercise or non-exercise by the Collateral Agent of any option, right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Pledge Agreement shall, as between the Collateral Agent and the Holders, be governed by the Indenture and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Collateral Agent and the Pledgor, the Collateral Agent shall be conclusively presumed to be acting as agent for the Trustee and the Holders with full and valid authority so to act or refrain from acting, and the Pledgor shall not be obligated or entitled to make any inquiry respecting such authority.
17.13. Final Expression. This Pledge Agreement, together with the Indenture and any other agreement executed in connection herewith, is intended by the parties as a final expression of this Pledge Agreement and is intended as a complete and exclusive statement of the terms and conditions thereof.
17.14. Rights of Holders. No Holder shall have any independent rights hereunder other than those rights granted to individual Holders pursuant to Sections 6.05, 6.06 and 6.07 of the Indenture; provided that nothing in this subsection shall limit any rights granted to the Trustee under the Notes or the Indenture.
17.15. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL; WAIVER OF DAMAGES. (a) THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK, AND, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK, ANY DISPUTE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE PLEDGOR, THE TRUSTEE, THE COLLATERAL AGENT AND THE HOLDERS IN CONNECTION WITH THIS PLEDGE AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. NOTWITHSTANDING THE FOREGOING, THE MATTERS IDENTIFIED IN 31 C.F.R. SECTIONS 357.10 AND 357.11 (AS IN EFFECT ON THE DATE OF THIS PLEDGE AGREEMENT) SHALL BE GOVERNED SOLELY BY THE LAWS SPECIFIED THEREIN.
(b) THE PLEDGOR HEREBY WAIVES PERSONAL SERVICE OF PROCESS IN ANY SUIT, ACTION OR PROCEEDING WITH RESPECT TO THIS PLEDGE AGREEMENT AND FOR ACTIONS BROUGHT UNDER THE U.S. FEDERAL OR STATE SECURITIES LAWS BROUGHT IN ANY FEDERAL OR STATE COURT LOCATED IN THE CITY OF NEW YORK (EACH A "NEW YORK COURT") AND CONSENTS THAT ALL SERVICE OF PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING SHALL BE MADE BY REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO THE PLEDGOR AT THE ADDRESS INDICATED IN SECTION 17.1. EACH OF THE PARTIES HERETO SUBMITS TO THE JURISDICTION OF ANY NEW YORK COURT AND TO THE COURTS OF ITS CORPORATE DOMICILE WITH RESPECT TO ANY ACTIONS BROUGHT AGAINST IT AS DEFENDANT IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THE PLEDGOR, THE TRUSTEE, THE COLLATERAL AGENT AND THE HOLDERS IN CONNECTION WITH THIS PLEDGE AGREEMENT, AND EACH OF THE PARTIES HERETO WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LAYING OF VENUE, INCLUDING ANY PLEADING OF FORUM NON CONVENIENS, WITH RESPECT TO ANY SUCH ACTION AND WAIVES ANY RIGHT TO WHICH IT MAY BE ENTITLED ON ACCOUNT OF PLACE OF RESIDENCE OR DOMICILE.
(c) THE PLEDGOR AGREES THAT THE TRUSTEE SHALL, IN ITS CAPACITY AS TRUSTEE OR IN THE NAME AND ON BEHALF OF ANY HOLDER, HAVE THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE PLEDGOR OR THE COLLATERAL IN A COURT IN ANY LOCATION REASONABLY SELECTED IN GOOD FAITH (AND HAVING PERSONAL OR IN REM JURISDICTION OVER THE PLEDGOR OR THE COLLATERAL, AS THE CASE MAY BE) TO ENABLE THE TRUSTEE TO REALIZE ON SUCH COLLATERAL, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE TRUSTEE. THE PLEDGOR AGREES THAT IT WILL NOT ASSERT ANY COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS IN ANY PROCEEDING BROUGHT BY THE TRUSTEE TO REALIZE ON SUCH PROPERTY OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE TRUSTEE, EXCEPT FOR SUCH COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS WHICH, IF NOT ASSERTED IN ANY SUCH PROCEEDING, COULD NOT OTHERWISE BE BROUGHT OR ASSERTED.
(d) THE PLEDGOR AGREES THAT NEITHER ANY HOLDER NOR (EXCEPT AS OTHERWISE PROVIDED IN THIS PLEDGE AGREEMENT OR THE INDENTURE) THE COLLATERAL AGENT IN ITS CAPACITY AS COLLATERAL AGENT SHALL HAVE ANY LIABILITY TO THE PLEDGOR (WHETHER ARISING IN TORT, CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED BY THE PLEDGOR IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO, THE TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP ESTABLISHED BY THIS PLEDGE AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OF A COURT THAT IS BINDING ON THE TRUSTEE OR SUCH HOLDER, AS THE CASE MAY BE, THAT SUCH LOSSES WERE THE RESULT OF ACTS OR OMISSIONS ON THE PART OF THE COLLATERAL AGENT OR SUCH HOLDERS, AS THE CASE MAY BE, CONSTITUTING BAD FAITH, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(e) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PLEDGOR WAIVES THE POSTING OF ANY BOND OTHERWISE REQUIRED OF THE TRUSTEE, THE COLLATERAL AGENT OR ANY HOLDER IN CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER PERTAINING TO THIS PLEDGE AGREEMENT OR ANY RELATED AGREEMENT OR DOCUMENT ENTERED IN FAVOR OF THE TRUSTEE, THE COLLATERAL AGENT OR ANY HOLDER, OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER OR PRELIMINARY OR PERMANENT INJUNCTION, THIS PLEDGE AGREEMENT OR ANY RELATED AGREEMENT OR DOCUMENT BETWEEN THE PLEDGOR, ON THE ONE HAND, AND THE TRUSTEE, THE COLLATERAL AGENT AND/OR THE HOLDERS, ON THE OTHER HAND.
17.16. Effectiveness. This Pledge Agreement shall become effective upon the effectiveness of the Indenture.
IN WITNESS WHEREOF, the Pledgor, the Trustee and the Collateral Agent have each caused this Pledge Agreement to be duly executed and delivered as of the date first above written.
Pledgor:
FCX INVESTMENT LTD.
By:______________________________
Name:
Title:
Trustee:
THE BANK OF NEW YORK,
as Trustee
By:_____________________________
Name:
Title:
Collateral Agent:
THE BANK OF NEW YORK,
as Collateral Agent
By:_____________________________
Name:
Title:
SCHEDULE I
PART I
PLEDGED SECURITIES
Original
Final Principal
Description CUSIP Maturity Amount Cost at
of Debt No(s). Closing Time
Treasury Bill 912795JE2 1/31/02 $24,075,00 $23,677,872.84
0.00
Treasury 912820BD8 5/15/02 $24,905,00 $24,259,960.50
Strip 0.00
Treasury 912820GB7 1/31/03 $24,904,00 $23,642,612.40
Strip 0.00
Treasury 912820DC8 6/30/03 $24,905,00 $23,193,030.30
Strip 0.00
Treasury 912820DJ3 11/15/03 $24,905,00 $22,782,346.85
Strip 0.00
Treasury 912820BJ5 5/15/04 $24,904,00 $22,206,149.68
Strip 0.00
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PART II
Issuer of Descriptio Securities Securities
Financial n of Intermediary Account (Number
Asset Financial (Name and and Location)
Asset Address)
U.S. Treasury The Bank of New The Bank of New
Government Bill York York,
121 Barclay Account No.
Street 123791
Floor 21 West
New York, New
York 10286
U.S. Treasury The Bank of New The Bank of New
Government Strip York York,
121 Barclay Account No.
Street 123791
Floor 21 West
New York, New
York 10286
U.S. Treasury The Bank of New The Bank of New
Government Strip York York,
121 Barclay Account No.
Street 123791
Floor 21 West
New York, New
York 10286
U.S. Treasury The Bank of New The Bank of New
Government Strip York York,
121 Barclay Account No.
Street 123791
Floor 21 West
New York, New
York 10286
U.S. Treasury The Bank of New The Bank of New
Government Strip York York,
121 Barclay Account No.
Street 123791
Floor 21 West
New York, New
York 10286
U.S. Treasury The Bank of New The Bank of New
Government Strip York York,
121 Barclay Account No.
Street 123791
Floor 21 West
New York, New
York 10286
EXHIBIT A
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THE BANK OF NEW YORK
OFFICER'S CERTIFICATE
Pursuant to Section 3(e) of the Collateral Pledge and Security Agreement (as supplemented from time to time, the "Pledge Agreement") dated as of August 7, 2001 among FCX Investment Ltd., a Cayman Islands exempted company (the "Pledgor"), The Bank of New York, as trustee (the "Trustee") for the holders of the $525 million aggregate principal amount (or up to $603.75 million aggregate principal amount if the Initial Purchaser's overallotment option is exercised) of 8 1/4% Convertible Senior Notes Due 2006 of the Pledgor and Freeport-McMoRan Copper & Gold Inc., and The Bank of New York, as collateral agent and securities intermediary (the "Collateral Agent"), the undersigned officer of the Collateral Agent, on behalf of the Collateral Agent, makes the following certifications to the Pledgor and the Initial Purchaser. Capitalized terms used and not defined in this Officer's Certificate have the meanings set forth or referred to in the Pledge Agreement.
1. Substantially contemporaneously with the execution and delivery of this Officer's Certificate, the Collateral Agent has acquired its security entitlement to the [Initial Pledged Securities] [the Additional Pledged Securities identified on Supplement No. __ to the Pledge Agreement] or through a "securities account" (as defined in Section 8-501(a) of the N.Y. Uniform Commercial Code) maintained by the Collateral Agent, for value and without notice of any adverse claim thereto. Without limiting the generality of the foregoing, the Collateral Account, the Pledged Securities and the other Collateral are not, and the Collateral Agent's security entitlement to the Collateral is not, to the actual knowledge of the corporate trust officer having responsibility for the administration of the Pledge Agreement on behalf of the Collateral Agent, subject to any Lien granted by or to or arising through or in favor of any securities intermediary (including, without limitation, the Bank of New York, or the FRBNY) through which the Collateral Agent derives its security entitlement to the Collateral.
2. The Collateral Agent has not knowingly caused or permitted the Collateral Account or its security entitlement thereto to become subject to any Lien created by or arising through the Collateral Agent.
IN WITNESS WHEREOF, the undersigned officer has executed this Officer's Certificate on behalf of The Bank of New York, as Collateral Agent this ___ day of _______, 2001.
THE BANK OF NEW YORK,
as Collateral Agent
By:_____________________
Name:
Title:
EXHIBIT B
[Form of Supplement to the Pledge Agreement]
SUPPLEMENT NO. __ dated as of _________, 2001, to the COLLATERAL PLEDGE AND SECURITY AGREEMENT dated as of August 7, 2001 (as supplemented from time to time, the "Pledge Agreement") among FCX Investment Ltd., a Cayman Islands exempted company (the "Pledgor"), The Bank of New York, a New York banking corporation, as trustee (in such capacity, the "Trustee") for the holders (the "Holders") of the Notes issued by the Pledgor under the Indenture referred to below, and The Bank of New York, as collateral agent and securities intermediary (in such capacity, the "Collateral Agent"). Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Pledge Agreement.
WHEREAS, the Pledgor and Freeport-McMoRan Copper & Gold Inc. (together with the Pledgor, the "Issuers") and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Initial Purchaser") are parties to a Purchase Agreement dated August 1, 2001 (the "Purchase Agreement"), pursuant to which the Issuers have granted the Initial Purchaser an overallotment option to purchase up to $78.75 million aggregate principal amount of the Pledgor's 8 1/4% Convertible Senior Notes due 2006 (the "Notes");
WHEREAS, the Issuers and the Trustee have entered into that certain indenture dated as of August 7, 2001 (as amended, restated, supplemented or otherwise modified from time to time, the "Indenture"), pursuant to which the Issuers are issuing the Notes on the date hereof;
WHEREAS, pursuant to the Indenture, the Pledgor is required to purchase, or cause the purchase of, and pledge to the Collateral Agent for the benefit of the Trustee and the Holders, on the relevant Date of Delivery (as defined in the Purchase Agreement), Pledged Securities in an amount that will be sufficient upon receipt of scheduled interest and principal payments of such securities, in the written opinion of Arthur Andersen LLP or another nationally recognized firm of independent public accountants selected by the Pledgor and delivered to the Trustee, to provide for payment in full of the first six scheduled interest payments due on the Notes;
WHEREAS, the Pledgor, the Trustee and the Collateral Agent have entered into the Pledge Agreement, pursuant to which the Pledgor has previously pledged certain Pledged Securities to the Collateral Agent for the benefit of the Holders in connection with the purchase by the Initial Purchaser of $525,000,000 million aggregate principal amount of Notes;
WHEREAS, the Initial Purchaser has exercised its overallotment option under the Purchase Agreement to purchase $__ million aggregate principal amount of Notes;
WHEREAS, it is a condition precedent to the purchase of the Notes by the Initial Purchaser pursuant to the overallotment option granted in the Purchase Agreement that the Pledgor apply certain of the proceeds of the offering of the Notes to purchase the Additional Pledged Securities and deposit such Additional Pledged Securities into the Collateral Account to be held therein subject to the terms of the Pledge Agreement and shall have granted the assignment and security interest and made the pledge and assignment contemplated by the Pledge Agreement;
NOW, THEREFORE, in consideration of the premises herein contained, and in order to induce the Initial Purchaser to purchase the Notes, the Pledgor, the Trustee and the Collateral Agent hereby agree, for the benefit of the Initial Purchaser and for the ratable benefit of the Holders, as follows:
Section 1. Pledge and Grant of Security Interest.
Pursuant to Section 1.3 of the Pledge Agreement, as
security for the prompt and complete payment and
performance when due (whether at the stated maturity,
by acceleration or otherwise) of the Obligations, the
Pledgor hereby assigns and pledges to the Collateral
Agent for the benefit of the Trustee and the ratable
benefit of the Holders and hereby grants to the
Collateral Agent for the benefit of the Trustee and for
the ratable benefit of the Holders, a lien on and
security interest in all of the Pledgor's right, title
and interest in, to and under the following property:
(a) the U.S. Government Obligations identified by CUSIP
No. in Part I of Schedule I hereto (the "Additional
Pledged Securities") and the certificates representing
the Additional Pledged Securities, the scheduled
payments of principal and interest thereon which will
be sufficient to provide for payment in full of the
first six scheduled interest payments due on the Notes
issued in connection herewith and (b) the security
entitlements described in Part II of Schedule I hereto,
with respect to the financial assets described, the
securities intermediary named, and the securities
account referred to therein. The Pledge Agreement is
hereby incorporated herein by reference.
Section 2. Supplement to Schedule I. The parties hereto agree that Schedule I to the Pledge Agreement shall be supplemented by Schedule I hereto.
Section 3. Deposit of Proceeds from the Offering. Pursuant to Section 2(b)(ii) of the Pledge Agreement, on the date hereof, the Pledgor agrees to transfer, or caused to be transferred, an amount equal to $___________, which amount shall be sufficient for the Collateral Agent to purchase the Additional Pledged Securities, by depositing such funds into the Collateral Account. The Collateral Agent agrees to apply such amount to purchase the Additional Pledged Securities as contemplated under Section 2(c) of the Pledge Agreement.
Section 4. Representations and Warranties of the Pledgor. The Pledgor hereby represents and warrants to the Trustee and the Collateral Agent that:
(a) Each of this Supplement and the Pledge
Agreement as supplemented hereby has been
duly authorized, validly executed and
delivered by the Pledgor and (assuming the
due authorization and valid execution and
delivery of this Supplement by each of the
Trustee and the Collateral Agent) constitutes
a valid and binding agreement of the Pledgor,
enforceable against the Pledgor in accordance
with its terms, except as (i) the
enforceability hereof and thereof may be
limited by bankruptcy, insolvency, fraudulent
conveyance, preference, reorganization,
moratorium or similar laws now or hereafter
in effect relating to or affecting the rights
or remedies of creditors generally, (ii) the
availability of equitable remedies may be
limited by equitable principles of general
applicability and the discretion of the court
before which any proceeding therefor may be
brought, (iii) the exculpation provisions and
rights to indemnification under the Pledge
Agreement may be limited by U.S. federal and
state securities laws and public policy
considerations and (iv) the waiver of rights
and defenses contained in Section 13(b),
Section 17.11 and Section 17.15 of the Pledge
Agreement may be limited by applicable law
and
(b the representations and warranties of the Pledgor set forth in Section 7 of the Pledge Agreement are true and correct in all material respects with the same effect as if made on and as of the date hereof.
Section 5. Execution in Counterparts. This Supplement may be signed in two or more counterparts, each of which shall be deemed an original, but all of which shall together constitute one and the same agreement. This Supplement shall become effective when the Collateral Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the Pledgor, the Trustee and the Collateral Agent.
Section 6. Effect of Supplement. Except as
expressly supplemented hereby, the Pledge Agreement
shall remain in full force and effect.
Section 7. Governing Law. This Supplement shall
governed by and construed in accordance with the laws
of the State of New York.
IN WITNESS WHEREOF, the Pledgor, the Trustee and the Collateral Agent have each caused this Supplement to be duly executed and delivered as of the date first above written.
Pledgor:
FCX INVESTMENT LTD.
By:______________________________
Name:
Title:
Trustee:
THE BANK OF NEW YORK,
as Trustee
By:_____________________________
Name:
Title:
Collateral Agent:
THE BANK OF NEW YORK,
as Collateral Agent
By:_____________________________
Name:
Title:
SCHEDULE I TO
SUPPLEMENT NO. __ TO
PLEDGE AGREEMENT
PART I
PLEDGED SECURITIES
Original
Final Principal Cost at
Description CUSIP Maturity Amount Date of
of Debt No(s). Delivery
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PART II
Issuer of Description Securities Securities Financial of Financial Intermediary Account (Number Asset Asset (Name and and Location) Address)
FREEPORT-McMoRAN COPPER & GOLD INC., Issuer
and
The Chase Manhattan Bank, Trustee
SENIOR
INDENTURE
Dated as of November 15, 1996
TABLE OF CONTENTS
Page
PARTIES 1
RECITALS 1
ARTICLE ONE - DEFINITIONS
SECTION 1.1
Certain Terms Defined 1
Authenticating Agent 1
Authorized Newspaper 2
Authorized Signatory 2
Board of Directors 2
Board Resolution 2
Business Day 2
Commission 2
Company Order 2
Corporate Trust Office 2
Coupon 2
Debt 2
Default 2
Defeasance 2
Depositary 3
Dollar 3
ECU 3
Event of Default 3
Exchange Act 3
Foreign Currency 3
Guarantee 3
Holder, Holder of Securities, Securityholder 3
Indenture 3
Insolvency Law 3
Interest 3
Interest Payment Date 3
Issuer 3
Judgment Currency 3
Officers' Certificate 4
Opinion of Counsel 4
original issue date 4
Original Issue Discount Security 4
Outstanding 4
Periodic Offering 5
Person 5
principal 5
Redemption Date 5
Redemption Price 5
Registered Global Security 5
Registered Security 5
Regular Record Date 5
Required Currency 5
Responsible Officer 5
SEC Reports 5
Securities Act 5
Security or Securities 6
Security Registrar 6
Stated Maturity 6
Trust Indenture Act of 1939 6
Trustee 6
Unregistered Security 6
U.S. Government Obligations 6
Yield to Maturity 6
ARTICLE TWO - ISSUE, EXECUTION, FORM AND REGISTRATION OF
SECURITIES
SECTION 2.1 Forms Generally 6
SECTION 2.2 Form of Trustee's Certificate of
Authentication 7
SECTION 2.3 Amount Unlimited; Issuable in Series 7
SECTION 2.4 Authentication and Delivery of
Securities 10
SECTION 2.5 Execution of Securities 12
SECTION 2.6 Certificate of Authentication 13
SECTION 2.7 Denomination and Date of Securities;
Payments of Interest 13
SECTION 2.8 Registration, Transfer and Exchange 14
SECTION 2.9 Mutilated, Defaced, Destroyed, Lost
and Stolen Securities 17
SECTION 2.10Cancellation of Securities;
Disposition Thereof 18
SECTION 2.11Temporary Securities 18
ARTICLE THREE - COVENANTS OF THE ISSUER
SECTION 3.1 Payment of Principal and Interest 19
SECTION 3.2 Offices for Payments, etc. 20
SECTION 3.3 Appointment to Fill a Vacancy in
Office of Trustee 21
SECTION 3.4 Paying Agents 21
SECTION 3.5 Written Statement to Trustee 22
SECTION 3.6 Corporate Existence 22
SECTION 3.7 Luxembourg Publications 22
ARTICLE FOUR - SECURITYHOLDERS' LISTS AND REPORTS BY THE ISSUER
AND THE TRUSTEE
SECTION 4.1 Issuer to Furnish Trustee
Information as to Names and
Addresses of Securityholders 22
SECTION 4.2 Preservation and Disclosure of
Securityholders' Lists 23
SECTION 4.3 Reports by the Issuer 23
SECTION 4.4 Reports by the Trustee 23
ARTICLE FIVE - REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON
EVENT OF DEFAULT
SECTION 5.1 Event of Default Defined;
Acceleration of Maturity; Waiver of
Default 24
SECTION 5.2 Collection of Debt by Trustee;
Trustee May Prove Debt 27
SECTION 5.3 Application of Proceeds 28
SECTION 5.4 Suits for Enforcement 29
SECTION 5.5 Restoration of Rights on Abandonment
of Proceedings 29
SECTION 5.6 Limitations on Suits by
Securityholders 30
SECTION 5.7 Unconditional Right of
Securityholders to Institute Certain
Suits 30
SECTION 5.8 Powers and Remedies Cumulative; Delay
or Omission Not Waiver of Default 30
SECTION 5.9 Control by Securityholders 31
SECTION 5.10Waiver of Past Defaults 31
SECTION 5.11Trustee to Give Notice of Default,
But May Withhold in Certain
Circumstances 32
SECTION 5.12Right of Court to Require Filing of
Undertaking to Pay Costs 32
ARTICLE SIX - CONCERNING THE TRUSTEE
SECTION 6.1 Duties and Responsibilities of the
Trustee; During Default; Prior to
Default 32
SECTION 6.2 Certain Rights of the Trustee 33
SECTION 6.3 Trustee Not Responsible for Recitals,
Disposition of Securities or
Application of Proceeds Thereof 34
SECTION 6.4 Trustee and Agents May Hold
Securities or Coupons; Collections,
etc. 35
SECTION 6.5 Monies Held by Trustee 35
SECTION 6.6 Compensation and Indemnification of
Trustee and Its Prior Claim 35
SECTION 6.7 Right of Trustee to Rely on Officers'
Certificate, etc. 36
SECTION 6.8 Persons Eligible for Appointment as
Trustee 36
SECTION 6.9 Resignation and Removal; Appointment
of Successor Trustee;
Conflicting Interests 36
SECTION 6.10Acceptance of Appointment by
Successor Trustee 38
SECTION 6.11Merger, Conversion, Consolidation or
Succession to Business of Trustee 39
SECTION 6.12Preferential Collection of Claims
Against the Issuer 39
SECTION 6.13Appointment of Authenticating Agent 39
ARTICLE SEVEN - CONCERNING THE SECURITYHOLDERS
SECTION 7.1 Evidence of Action Taken by
Securityholders 40
SECTION 7.2 Proof of Execution of Instruments and
of Holding of Securities 40
SECTION 7.3 Holders to be Treated as Owners 41
SECTION 7.4 Securities Owned by Issuer Deemed Not
Outstanding 42
SECTION 7.5 Right of Revocation of Action Taken 42
SECTION 7.6 Record Date for Consents and Waivers 42
ARTICLE EIGHT - SUPPLEMENTAL INDENTURES
SECTION 8.1 Supplemental Indentures Without
Consent of Securityholders 43
SECTION 8.2 Supplemental Indentures With Consent
of Securityholders 44
SECTION 8.3 Effect of Supplemental Indenture 46
SECTION 8.4 Documents to Be Given to Trustee 46
SECTION 8.5 Notation on Securities in Respect of
Supplemental Indentures 46
ARTICLE NINE - CONSOLIDATION, MERGER, SALE OR CONVEYANCE
SECTION 9.1 Covenant of the Issuer Not to Merge,
Consolidate, Sell or Convey Property
Except Under Certain Conditions 46
SECTION 9.2 Successor Corporation Substituted 47
SECTION 9.3 Opinion of Counsel to Trustee 47
ARTICLE TEN - SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED
MONIES
SECTION 10.1Satisfaction and Discharge of
Indenture 48
SECTION 10.2Application by Trustee of Funds
Deposited for Payment of Securities 52
SECTION 10.3Repayment of Monies Held by Paying
Agent 52
SECTION 10.4Return of Monies Held by Trustee and
Paying Agent Unclaimed for Two Years 52
SECTION 10.5Indemnity for U.S. Government
Obligations 53
ARTICLE ELEVEN - MISCELLANEOUS PROVISIONS
SECTION 11.1Incorporators, Stockholders, Officers
and Directors of Issuer Exempt from
Individual Liability 53
SECTION 11.2Provisions of Indenture for the Sole
Benefit of Parties and
Securityholders 53
SECTION 11.3Successors and Assigns of Issuer
Bound by Indenture 53
SECTION 11.4Notices and Demands on Issuer, the
Trustee and Securityholders 53
SECTION 11.5Officers' Certificates and Opinions
of Counsel, Statements to Be
Contained Therein 54
SECTION 11.6Payments Due on Saturdays, Sundays
and Legal Holidays 55
SECTION 11.7Conflict of Any Provision of
Indenture with Trust Indenture Act of
1939 55
SECTION 11.8New York Law to Govern; Separability 55
SECTION 11.9Counterparts 55
SECTION 11.10 Effect of Headings 56
SECTION 11.11 Securities in a Foreign Currency or in ECU 56
SECTION 11.12 Judgment Currency 56
ARTICLE TWELVE - REDEMPTION OF SECURITIES AND SINKING FUNDS
SECTION 12.1Application of Article 57
SECTION 12.2Notice of Redemption 57
SECTION 12.3Payment of Securities Called for
Redemption 58
SECTION 12.4Mandatory and Optional Sinking Funds 59
TESTIMONIUM 62
SIGNATURES AND SEALS 62
ACKNOWLEDGMENTS 63
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CROSS REFERENCE SHEET*
Between
Provisions of Trust Indenture Act of 1939, as amended, and the Indenture to be dated as of November 15, 1996 between Freeport- McMoRan Copper & Gold Inc. and The Chase Manhattan Bank, as Trustee:
Section of the Act Section of Indenture 310(a)(1), (2) and (5) 6.8 310(a)(3) and (4) Inapplicable 310(b) 6.9(a), (b) and (d) 310(c) Inapplicable 311(a) and (b) 6.12 311(c) Inapplicable 312(a) 4.1 and 4.2(a) 312(b) 4.2(b) 312(c) 4.2(c) 313(a) 4.4(a) 313(a)(5) 4.4(b) 313(b) 4.4(b) 313(c) 4.4(c) 313(d) 4.4(d) 314(a) 3.5 and 4.3 314(b) Inapplicable 314(c) 11.5 314(d) Inapplicable 314(e) 11.5 314(f) Inapplicable 315(a), (c) and (d) 6.1 315(b) 5.11 315(e) 5.12 316(a)(1) 5.9 316(a)(2) Not required 316(a) (last sentence) 7.4 316(b) 5.7 316(c) 7.6 317(a) 5.2 317(b) 3.4 318(a) 11.7 |
*This Cross Reference Sheet is not part of the Indenture.
THIS INDENTURE, dated as of November 15, 1996, by and
between Freeport-McMoRan Copper & Gold Inc. (the "Issuer"), a
Delaware corporation, and The Chase Manhattan Bank, a New York
corporation, as trustee (the "Trustee"),
WITNESSETH:
WHEREAS, the Issuer has duly authorized the issue from time to time of its unsecured debentures, notes or other evidences of indebtedness to be issued in one or more series (the "Securities") up to such principal amount or amounts as may from time to time be authorized by the terms of this Indenture;
WHEREAS, the Issuer has duly authorized the execution and delivery of this Indenture to provide, among other things, for the authentication, delivery and administration of the Securities; and
WHEREAS, all things necessary to make this Indenture a valid indenture and agreement of the Issuer according to its terms, have been done;
NOW, THEREFORE:
In consideration of the premises and the purchases of the Securities by the Holders thereof, the Issuer and the Trustee mutually covenant and agree for the equal and proportionate benefit of the respective Holders from time to time of the Securities and of the Coupons, if any appertaining thereto, as follows:
ARTICLE ONE
DEFINITIONS
SECTION 1.1 Certain Terms Defined. The following terms (except as otherwise expressly provided or unless the context otherwise clearly requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section. All other terms used in this Indenture that are defined in the Trust Indenture Act of 1939 or are defined in the Securities Act and referred to in the Trust Indenture Act of 1939 (except as herein otherwise expressly provided or unless the context otherwise requires), shall have the meanings assigned to such terms in the Trust Indenture Act of 1939 and in the Securities Act as in force at the date of this Indenture. All accounting terms used herein and not expressly defined shall have the meanings given to them in accordance with generally accepted accounting principles, and the term "generally accepted accounting principles" shall mean generally accepted accounting principles in the United States which are in effect on the date or time of any determination. The words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. The terms defined in this Article include the plural as well as the singular.
"Authenticating Agent" shall have the meaning set forth in Section 6.13.
"Authorized Newspaper" means a newspaper (which, in the case of The City of New York, will, if practicable, be The Wall Street Journal (Eastern Edition), in the case of London, will, if practicable, be the Financial Times (London Edition) and, in the case of Luxembourg, will, if practicable, be the Luxemburger Wort) published in an official language of the country of publication customarily published at least once a day for at least five days in each calendar week and of general circulation in the City of New York, London or Luxembourg as applicable. If it shall be impractical in the opinion of the Trustee to make any publication of any notice required hereby in an Authorized Newspaper, any publication or other notice in lieu thereof which is made or given with the approval of the Trustee shall constitute a sufficient publication of such notice.
"Authorized Signatory" means any of the chairman of the Board of Directors, the president, any vice president (whether or not designated by a number or numbers or a word or words added before or after the title "Vice President"), the treasurer or any assistant treasurer or the secretary or any assistant secretary of any Person.
"Board of Directors" of any Person means the Board of Directors of such Person or any committee of such Board duly formed and authorized to act on its behalf.
"Board Resolution" of any Person means a copy of one or more resolutions, certified by the secretary or an assistant secretary of such Person to have been duly adopted or consented to by the Board of Directors of such Person and to be in full force and effect, and delivered to the Trustee.
"Business Day" means, with respect to a Security, a day that in the city (or in any cities, if more than one) in which amounts are payable, as specified in the form of such Security, which is not a day on which banking institutions and trust companies are authorized by law or regulation or executive order to close.
"Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or if at any time after the execution and delivery of this Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, the body performing such duties on such date.
"Company Order" means a written statement, request or order of the Issuer which is signed in the Issuer's name by the chairman of the Board of Directors, the president, any executive vice president, any senior vice president or any vice president of the Issuer.
"Corporate Trust Office" means the office of the Trustee at which the corporate trust business of the Trustee shall, at any particular time, be principally administered, which office is, at the date as of which this Indenture is dated, located at 450 West 33rd Street, New York, New York 10001.
"Coupon" means any interest coupon appertaining to a Security.
"Debt" shall have the meaning set forth in Section 5.1.
"Default" means any event which is, or after notice or passage of time or both would be, an Event of Default.
"Defeasance" shall have the meaning set forth in
Section 10.1.
"Depositary" means, with respect to the Securities of any series issuable or issued in whole or in part in the form of one or more Registered Global Securities, the Person designated as the Depositary by the Issuer pursuant to Section 2.3 until a successor Depositary shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Depositary" shall mean or include each Person who is then a Depositary hereunder, and if at any time there is more than one such Person, "Depositary" as used with respect to the Securities of any such series shall mean the Depositary with respect to the Registered Global Securities of that series; provided that any Person that is a Depositary hereunder must be a clearing agency registered under the Exchange Act and any other applicable statute or regulation.
"Dollar" means the coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts.
"ECU" means The European Currency Unit as defined and revised from time to time by the Council of European Communities.
"Event of Default" means any event or condition specified as such in Section 5.1.
"Exchange Act" means the Securities and Exchange Act of 1934, as amended.
"Foreign Currency" means a currency issued by the government of a country other than the United States.
"guarantee" means any obligation, contingent or
otherwise, of any Person directly or indirectly guaranteeing any
indebtedness of any Person and any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase
or pay (or advance or supply funds for the purchase or payment
of) such indebtedness of such Person (whether arising by virtue
of partnership arrangements, or by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay,
or to maintain financial statement conditions or otherwise) or
(ii) entered into for purposes of assuring in any other manner
the obligee of such indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or
in part); provided, however, that the term "guarantee" shall not
include endorsements for collection or deposit in the ordinary
course of business. The term "guarantee" used as a verb has a
corresponding meaning.
"Holder", "Holder of Securities", "Securityholder" or other similar terms mean (a) in the case of any Registered Security, the Person in whose name such Security is registered in the Security register kept by the Issuer for that purpose in accordance with the terms hereof, and (b) in the case of any Unregistered Security, the bearer of such Security, or any Coupon appertaining thereto, as the case may be.
"Indenture" means this instrument as originally executed and delivered or, if amended or supplemented as herein provided, as so amended or supplemented or both, and shall include the forms and terms of particular series of Securities established as contemplated hereunder.
"Insolvency Law" means any applicable bankruptcy, insolvency, reorganization or similar law in any applicable jurisdiction.
"Interest" means, when used with respect to non- interest bearing Securities, interest payable after maturity.
"Interest Payment Date" when used with respect to any Security, means the Stated Maturity of an installment of interest on such Security.
"Issuer" means Freeport-McMoRan Copper & Gold Inc., a Delaware corporation, and, subject to Article Nine, its successors and assigns.
"Judgment Currency" shall have the meaning set forth in
Section 11.12.
"Officers' Certificate" means a certificate signed by the chairman of the board or the president or any vice president (whether or not designated by a number or numbers or a word or words added before or after the title "Vice President") and by the treasurer or any assistant treasurer or the secretary or any assistant secretary of the Issuer and delivered to the Trustee. Each such certificate shall include the statements provided for in Section 11.5, if and to the extent required hereby.
"Opinion of Counsel" means an opinion in writing signed by legal counsel, who may be an employee of or counsel to the Issuer or such other legal counsel who may be satisfactory to the Trustee. Each such opinion shall include the statements provided for in Section 11.5, if and to the extent required hereby.
"original issue date" of any Security (or portion thereof) means the earlier of (a) the Issue Date of such Security or (b) the Issue Date of any Security (or portion thereof) for which such Security was issued (directly or indirectly) on registration of transfer, exchange or substitution. For purposes of this definition, "Issue Date" means, with respect to a Security, the date of original issuance thereof.
"Original Issue Discount Security" means any Security that provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the maturity thereof pursuant to Section 5.1.
"Outstanding", when used with reference to Securities of any series issued hereunder, shall, subject to the provisions of Section 7.4, mean, as of any particular time, all Securities of such series authenticated and delivered by the Trustee under this Indenture, except:
(a) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation;
(b) Securities (other than Securities of any series as to which the provisions of Article 10 hereof shall not be applicable), or portions thereof, for the payment or redemption of which monies or U.S. Government Obligations (as provided for in Section 10.1) in the necessary amount shall have been deposited in trust with the Trustee or with any paying agent (other than the Issuer) or shall have been set aside, segregated and held in trust by the Issuer (if the Issuer shall act as its own paying agent), provided that if such Securities, or portions thereto, are to be redeemed prior to the Stated Maturity thereof, notice of such redemption shall have been given as herein provided, or provision satisfactory to the Trustee shall have been made for giving such notice; and
(c) Securities which shall have been paid or in
substitution for which other Securities shall have been
authenticated and delivered, pursuant to the terms of
Section 2.9 (unless proof satisfactory to the Trustee is
presented that any of such Securities is held by a Person in
whose hands such Security is a legal, valid and binding
obligation of the Issuer).
In determining whether the Holders of the requisite principal
amount of Outstanding Securities of any or all series have given
any request, demand, authorization, direction, notice, consent or
waiver hereunder, the principal amount of an Original Issue
Discount Security that shall be deemed to be Outstanding for such
purposes shall be the amount of the principal thereof that would
be due and payable as of the date of such determination upon a
declaration of acceleration of the maturity thereof pursuant to
Section 5.1.
"Periodic Offering" means an offering of Securities of a series from time to time, the specific terms of which Securities, including, without limitation, the rate or rates of interest, if any, thereon, the Stated Maturity or maturities thereof and the redemption provisions, if any, with respect thereto, are to be determined by the Issuer or its agents upon the issuance of such Securities.
"Person" means any individual, corporation, partnership, joint venture, association, trust, unincorporated organization or government or any agency or political subdivision thereof.
"principal" whenever used with reference to the Securities of any series or any portion thereof, shall be deemed to include "and premium, if any".
"Redemption Date", when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price", when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture.
"Registered Global Security" means a Security
evidencing all or a part of a series of Registered Securities,
issued to the Depositary for such series in accordance with
Section 2.4, and bearing the legend prescribed in Section 2.4.
"Registered Security" means any Security registered on the Security register of the Issuer, which Security shall be without Coupons.
"Regular Record Date" for interest payable on any
Interest Payment Date on the Registered Securities of any series
means the date specified for that purpose as contemplated by
Section 2.3, or if no such date is established, if such Interest
Payment Date is the first day of a calendar month, the fifteenth
day of the next preceding calendar month or, if such Interest
Payment Date is the fifteenth day of a calendar month, the first
day of such calendar month, whether or not such Regular Record
Date is a Business Day.
"Required Currency" shall have the meaning set forth in
Section 11.12.
"Responsible Officer", when used with respect to the Trustee means any officer in the Corporate Trustee Administration Department (or any successor group) of the Trustee, including any vice president, assistant vice president, senior trust officer, trust officer, secretary or any assistant secretary or any other officer or assistant officer of the Trustee customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred at the Corporate Trust Office because of his knowledge of and familiarity with the particular subject.
"SEC Reports" shall have the meaning set forth in
Section 4.3.
"Securities Act" means the Securities Act of 1933, as amended.
"Security" or "Securities" has the meaning stated in the first recital of this Indenture and more particularly means any Securities of any series, authenticated and delivered under this Indenture.
"Security Registrar" means the Trustee or any successor Security Registrar appointed by the Issuer.
"Stated Maturity" means, with respect to any Security, the date specified in such Security as the fixed date on which the principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the Holder thereof upon the happening of any contingency unless such contingency has occurred) and with respect to any installment of interest upon such Security, the date specified in such Security, or Coupon appertaining thereto, if applicable as the fixed date on which such installment of interest is due and payable.
"Trust Indenture Act of 1939" (except as otherwise provided in Sections 8.1 and 8.2) means the Trust Indenture Act of 1939 as in force at the date as of which this Indenture was originally executed.
"Trustee" means the Person identified as "Trustee" in the first paragraph hereof and, subject to the provisions of Article Six, shall also include any successor trustee. "Trustee" shall also mean or include each person who is then a trustee hereunder and if at any time there is more than one such Person, "Trustee" as used with respect to the Securities of any series shall mean the trustee with respect to the Securities of such series.
"Unregistered Security" means any Security other than a Registered Security.
"U.S. Government Obligations" shall have the meaning set forth in Section 10.1(A).
"Yield to Maturity" means the yield to maturity on a series of Securities, calculated at the time of the issuance of such series, or, if applicable, at the most recent redetermination of interest on such series, and calculated in accordance with generally accepted financial practice.
ARTICLE TWO
ISSUE, EXECUTION, FORM AND REGISTRATION OF SECURITIES
SECTION 2.1 Forms Generally. The Securities of each series and the Coupons, if any, issued hereunder shall be substantially in such form and bear such legends (not inconsistent with this Indenture) as shall be established by or pursuant to one or more Board Resolutions of the Issuer (as set forth in a Board Resolution of the Issuer or, to the extent established pursuant to rather than set forth in a Board Resolution of the Issuer, an Officers' Certificate of the Issuer detailing such establishment) or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have imprinted or otherwise reproduced thereon such legend or legends or endorsements, not inconsistent with the provisions of this Indenture, as may be required to comply with any law or with any rules or regulations pursuant thereto, or with any rules of any securities exchange or to conform to general usage, all as may be determined by the officers of the Issuer executing such Securities and Coupons, if any, as evidenced by their execution of such Securities and Coupons, if any. If temporary Securities are issued as permitted by Section 2.11, the form thereof also shall be established as provided in the preceding sentence.
The definitive Securities and Coupons, if any, shall be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Securities and Coupons, if any, as evidenced by their execution of such Securities and Coupons, if any.
SECTION 2.2 Form of Trustee's Certificate of Authentication. The Trustee's certificate of authentication on all Securities shall be in substantially the following form:
"This is one of the Securities of the series designated herein referred to in the within-mentioned Indenture.
The Chase Manhattan Bank, Trustee
By:
Authorized Officer
If at any time there shall be an Authenticating Agent appointed with respect to any series of Securities, the Securities of such series may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternate certificate of authentication in substantially the following form:
"This is one of the Securities of the series designated herein referred to in the within-mentioned Indenture.
The Chase Manhattan Bank, Trustee
By:
As Authenticating Agent
By:
Authorized Officer
SECTION 2.3 Amount Unlimited; Issuable in Series. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series and each such series shall rank equally and pari passu with all other unsecured and unsubordinated Debt of the Issuer. There shall be established in or pursuant to one or more Board Resolutions of the Issuer (and to the extent established pursuant to rather than set forth in a Board Resolution, in an Officers' Certificate detailing such establishment) or in one or more indentures supplemental hereto, prior to the initial issuance of Securities of any series,
(1) the designation of the Securities of the series, which shall distinguish the Securities of the series from the Securities of all other series;
(2) any limit upon the aggregate principal amount of the Securities of the series that may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Section 2.8, 2.9, 2.11, 8.5 or 12.3);
(3) if other than Dollars, the coin or currency in which the Securities of that series are denominated (including, but not limited to, any Foreign Currency or ECU);
(4) the date or dates on which the principal of the Securities of the series is payable;
(5) the rate or rates at which the Securities of the series shall bear interest, if any, the date or dates from which such interest shall accrue, the Interest Payment Date on which any such interest shall be payable and (in the case of Registered Securities) the Regular Record Date for any interest payable on any Interest Payment Date and/or the method by which such rate or rates or Regular Record Date or Dates shall be computed or determined;
(6) the place or places where the principal of and any interest on Securities of the series shall be payable (if other than as provided in Section 3.2);
(7) the right, if any, of the Issuer or any Holder to redeem or cause to be redeemed Securities of the series, in whole or in part, at its option and the period or periods within which, the price or prices at which, and the manner in which (if different from the provisions of Article Twelve hereof), and any terms and conditions upon which Securities of the series may be so redeemed, pursuant to any sinking fund or otherwise and/or the method by which such price or prices shall be determined;
(8) the obligation, if any, of the Issuer to redeem, purchase or repay Securities of the series, in whole or in part, pursuant to any mandatory redemption, sinking fund or analogous provisions or at the option of a Holder thereof and the price or prices (and/or the method by which such price or prices shall be determined) at which and the period or periods within which and the manner in which (if different from the provisions of Article Twelve hereof) Securities of the series shall be redeemed, purchased or repaid, in whole or in part, pursuant to such obligation;
(9) if other than denominations of $1,000 and any integral multiple thereof in the case of Registered Securities, or $1,000 and $5,000 in the case of Unregistered Securities, the denominations in which Securities of the series shall be issuable;
(10) if other than the principal amount thereof, the portion of the principal amount of Securities of the series which shall be payable upon declaration of acceleration of the maturity thereof;
(11) if other than the coin or currency in which the Securities of that series are denominated, the coin or currency in which payment of the principal of or interest on the Securities of such series shall be payable;
(12) if the principal of or interest on the Securities of such series are to be payable, at the election of the Issuer or a Holder thereof, in a coin or currency other than that in which the Securities are denominated, the period or periods within which, and the terms and conditions upon which, such election may be made and the manner in which the exchange rate with respect to such payments shall be determined;
(13) if the amount of payments of principal of and/or interest on the Securities of the series may be determined with reference to the value or price of any one or more commodities, currencies or indices, the manner in which such amounts will be determined;
(14) whether the Securities of the series will be issuable as Registered Securities (and if so, whether such Securities will be issuable as Registered Global Securities and, if so, the Depositary therefor and the form of any legend in addition or in lieu of that provided in Section 2.4 to be borne by such Registered Global Security) or Unregistered Securities (with or without Coupons), or any combination of the foregoing, any restrictions and procedures applicable to the offer, sale or delivery of Unregistered Securities or the payment of interest thereon, if other than as provided in Section 2.8, and the terms upon which Unregistered Securities of any series may be exchanged for Registered Securities of such series and vice versa if other than provided in Section 2.8;
(15) whether and under what circumstances the Issuer will pay additional amounts on the Securities of the series to Holders or certain Holders thereof in respect of any tax, assessment or governmental charge withheld or deducted and, if so, whether the Issuer will have the option to redeem such Securities rather than pay such additional amounts (and the terms of any such option);
(16) if the Securities of such series are to be issuable in definitive form (whether upon original issue or upon exchange of a temporary Security of such series) only upon receipt of certain certificates or other documents or satisfaction of other conditions, the form and terms of such certificates, documents or conditions;
(17) any trustees, depositaries authenticating or paying agents, transfer agents or registrars or any other agents with respect to the Securities of such series;
(18) provisions, if any, granting specific rights to the Holders of Securities of such series upon the occurrence of such events as may be specified;
(19) any deletions from, modifications of or additions to the Events of Default or covenants set forth herein (including any defined terms relating thereto);
(20) the term and condition upon which and the manner in which Securities of the series may be defeased or defeasible if different from the provisions of Article Ten;
(21) whether the Securities will be issued as global Securities and, if other than as provided in Section 2.8, the terms upon which such global Securities may be exchanged for definitive Securities;
(22) offices at which presentation and demands may be made and notices be served, if other than the Corporate Trust Office; and
(23) any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture).
All Securities of any one series and Coupons appertaining thereto, if any, shall be substantially identical, except in the case of Registered Securities as to denomination and except as may otherwise be provided by or pursuant to the Board Resolution or Officers' Certificate referred to above or as set forth in any such indenture supplemental hereto. All Securities of any one series need not be issued at the same time and may be issued from time to time, consistent with the terms of this Indenture, if so provided by or pursuant to such Board Resolution, such Officers' Certificate or in any such indenture supplemental hereto.
SECTION 2.4 Authentication and Delivery of Securities. Upon the execution and delivery of this Indenture, or from time to time thereafter, Securities, including Coupons appertaining thereto, if any, may be executed by the Issuer and delivered to the Trustee for authentication together with the applicable documents referred to below in this section, and the Trustee shall thereupon authenticate and deliver such Securities and Coupons appertaining thereto, if any, to or upon the order of the Issuer (contained in the Company Order referred to below in this section) or pursuant to such procedures acceptable to the Trustee and to such recipients as may be specified from time to time by a Company Order, without any further action by the Issuer. The maturity date, original issue date, interest rate and any other terms of the Securities of such series and Coupons, if any, appertaining thereto shall be determined by or pursuant to such Company Order or procedures authorized by such Company Order. If provided for in such procedures, such Company Order may authorize authentication and delivery of Securities pursuant to oral instructions from the Issuer or its duly authorized agent, which instructions shall be promptly confirmed in writing. In authenticating such Securities and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive (in the case of subparagraphs 2, 3 and 4 below only at or before the time of the first request of the Issuer to the Trustee to authenticate Securities of such series) and (subject to Section 6.1) shall be fully protected in relying upon, unless and until such documents have been superseded or revoked:
(1) a Company Order requesting such authentication and setting forth delivery instructions if the Securities and Coupons, if any, are not to be delivered to the Issuer, provided that, with respect to Securities of a series subject to a Periodic Offering, (a) such Company Order may be delivered by the Issuer to the Trustee prior to the delivery to the Trustee of such Securities for authentication and delivery, (b) the Trustee shall authenticate and deliver Securities of such series for original issue from time to time, in an aggregate principal amount not exceeding the aggregate principal amount established for such series, pursuant to a Company Order or pursuant to procedures acceptable to the Trustee as may be specified from time to time by such Company Order, (c) the maturity date or dates, original issue date or dates or interest rate or rates and any other terms of Securities of such series shall be determined by a Company Order or pursuant to such procedures and (d) if provided for in such procedures, such Company Order may authorize authentication and delivery of Securities pursuant to oral or electronic instructions from the Issuer or its duly authorized agent or agents, which oral or electronic instructions shall be promptly confirmed in writing, and (e) after the original issuance of the first Security of such series to be issued, any separate request by the Issuer that the Trustee authenticate Securities of such series for original issuance will be deemed to be a certification by the Issuer that it is in compliance with all conditions precedent provided for in this Indenture relating to the authentication and delivery of such Securities;
(2) any Board Resolution, Officers' Certificate and/or executed supplemental indenture referred to in Sections 2.1 and 2.3 by or pursuant to which the forms and terms of the Securities and Coupons, if any, were established;
(3) an Officers' Certificate setting forth the form or forms and terms of the Securities and stating that the form or forms and terms of the Securities and Coupons, if any, have been established pursuant to Sections 2.1 and 2.3 and comply with this Indenture, and covering such other matters as the Trustee may reasonably request; and
(4) At the option of the Issuer, either an Opinion of Counsel of the Issuer, or a letter addressed to the Trustee permitting it to rely on an Opinion of Counsel of the Issuer, substantially to the effect that:
(a) the forms of the Securities and Coupons, if any, have been duly authorized and established in conformity with the provisions of this Indenture;
(b) in the case of an underwritten offering, the terms of the Securities have been duly authorized and established in conformity with the provisions of this Indenture, and, in the case of a Periodic Offering, certain terms of the Securities have been established pursuant to a Board Resolution of the Issuer, an Officers' Certificate or a supplemental indenture in accordance with this Indenture, and when such other terms as are to be established pursuant to procedures set forth in a Company Order shall have been established, all such terms will have been duly authorized by the Issuer and will have been established in conformity with the provisions of this Indenture;
(c) when the Securities and Coupons, if any, have been executed by the Issuer and authenticated by the Trustee in accordance with the provisions of this Indenture and delivered to and duly paid for by the pur chasers thereof, they will have been duly issued under this Indenture and will be valid and legally binding obligations of the Issuer, enforceable in accordance with their respective terms, and will be entitled to the benefits of this Indenture; and
(d) the execution and delivery by the Issuer of, and the performance by the Issuer of its obligations under the Securities and the Coupons, if any, will not contravene any provision of applicable law or the certificate of incorporation or by-laws of the Issuer or any agreement or other instrument binding upon the Issuer or any of the subsidiaries of the Issuer that is material to the Issuer, considered as one enterprise with its subsidiaries, or, to the best of such counsel's knowledge but without independent investigation, any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Issuer or any of its subsidiaries, and no consent, approval or authorization of any governmental body or agency is required for the performance by the Issuer of its obligations under the Securities and Coupons, if any, except such as are specified and have been obtained and such as may be required by the securities or blue sky laws of the various states in connection with the offer and sale of the Securities and Coupons, if any.
In rendering such opinions, such counsel may qualify any opinions as to enforceability by stating that such enforceability may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, liquidation, moratorium and other similar laws affecting the rights and remedies of creditors and is subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). Such counsel may rely upon opinions of other counsel (copies of which shall be delivered to the Trustee), who shall be counsel reasonably satisfactory to the Trustee, in which case the opinion shall state that such counsel believes he and the Trustee are entitled so to rely. Such counsel may also state that, insofar as such opinion involves factual matters, he has relied, to the extent he deems proper, upon certificates of officers of the Issuer and any of its subsidiaries and certificates of public officials.
The Trustee shall have the right to decline to authenticate and deliver any Securities under this Section if the Trustee, being advised by counsel, determines that such action may not lawfully be taken by the Issuer or if the Trustee in good faith by its Board of Directors or board of trustees, executive committee, or a trust committee of directors or trustees or Responsible Officers shall determine that such action would expose the Trustee to personal liability to existing Holders or would affect the Trustee's own rights, duties or immunities under the Securities, this Indenture or otherwise.
If the Issuer shall establish pursuant to Section 2.3 that all or a portion of the Securities of a series are to be issued in the form of one or more Registered Global Securities, then the Issuer shall execute and the Trustee shall, in accordance with this Section 2.4 and the Company Order with respect to such series, authenticate and deliver one or more Registered Global Securities that (i) shall represent and shall be denominated in an amount equal to the aggregate principal amount of all or a portion of the Securities of such series issued and not yet cancelled or exchanged to be represented by such Registered Global Securities, (ii) shall be registered in the name of the Depositary for such Registered Global Security or Securities or the nominee of such Depositary, (iii) shall be delivered by the Trustee to such Depositary or a nominee thereof or a custodian therefor or pursuant to such Depositary's instructions and (iv) shall bear a legend substantially to the following effect: This Security is a Registered Global Security within the meaning of the Indenture hereinafter referred to and is registered in the name of a Depositary or a nominee thereof. This Security may not be exchanged in whole or in part for a Security registered, and no transfer of this Security in whole or in part may be registered in the name of any Person other than such Depositary or a nominee thereof, except in the limited circumstances described in the Indenture."
SECTION 2.5 Execution of Securities. The Securities and, if applicable, each Coupon appertaining thereto shall be signed on behalf of the Issuer by the chairman of the Board of Directors, the president, any vice president (whether or not designated by a number or numbers or a word or words added before or after the title "Vice President") or the Treasurer of the Issuer, under its corporate seal (except in the case of Coupons) which may, but need not be, attested. Such signature may be the manual or facsimile signature of the present or any future such chairman or officers. The corporate seal of the Issuer may be in the form of a facsimile thereof and may be impressed, affixed, imprinted or otherwise reproduced on the Securities. Typographical and other minor errors or defects in any such reproduction of any such signature shall not affect the validity or enforceability of any Security that has been duly authenticated and delivered by the Trustee.
In case any officer of the Issuer who shall have signed any of the Securities or Coupons, if any, shall cease to be such officer before the Security or Coupon so signed shall be authenticated and delivered by the Trustee or disposed of by the Issuer, such Security or Coupon nevertheless may be authenticated and delivered or disposed of as though the Person who signed such Security or Coupon had not ceased to be such officer of the Issuer; and any Security or Coupon may be signed on behalf of the Issuer by such Person as, at the actual date of the execution of such Security or Coupon, shall be the proper officer of the Issuer, although at the date of the execution and delivery of this Indenture any such Person was not such officer.
SECTION 2.6 Certificate of Authentication. Only such Securities as shall bear thereon a certificate of authentication substantially in the form set forth in Section 2.2, executed by the Trustee by the manual signature of one of its authorized officers, shall be entitled to the benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Trustee upon any Security executed by the Issuer shall be conclusive evidence that the Security and Coupons, if any, appertaining thereto so authenticated have been duly authenticated and delivered hereunder and that the Holder is entitled to the benefits of this Indenture.
SECTION 2.7 Denomination and Date of Securities; Payments of Interest. The Securities of each series shall be issuable as Registered Securities or Unregistered Securities in denominations established as contemplated by Section 2.3 or, with respect to the Registered Securities of any series, if not so established, in denominations of $1,000 and any integral multiple thereof. If denominations of Unregistered Securities of any series are not so established, such Securities shall be issuable in denominations of $1,000 and $5,000. The Securities of each series shall be numbered, lettered or otherwise distinguished in such manner or in accordance with such plan as the chairman or the officers of the Issuer executing the same may determine with the approval of the Trustee, as evidenced by the execution and authentication thereof.
Each Registered Security shall be dated the date of its authentication. Each Unregistered Security shall be dated as provided in or pursuant to the Board Resolution or Resolutions or indenture supplemental hereto referred to in Section 2.3 or, if not so specified, each such Unregistered Security shall be dated as of the date of issuance of the first Unregistered Security of such series to be issued. The Securities of each series shall bear interest, if any, from the date, and such interest shall be payable on the Interest Payment Dates, established as contemplated by Section 2.3.
The Person in whose name any Registered Security of any series is registered at the close of business on any Regular Record Date applicable to such series with respect to any Interest Payment Date for such series shall be entitled to receive the interest, if any, payable on such Interest Payment Date notwithstanding any transfer or exchange of such Registered Security subsequent to such Regular Record Date and prior to such Interest Payment Date, except if and to the extent the Issuer shall default in the payment of the interest due on such Interest Payment Date for such series, in which case such defaulted interest shall then cease to be payable to the Holder on such Regular Record Date by virtue of having been such Holder and shall be paid to the Persons in whose names Outstanding Registered Securities for such series are registered at the close of business on a subsequent record date (which shall be not less than five Business Days prior to the date of payment of such defaulted interest) established by notice given by mail by or on behalf of the Issuer to the Holders of Registered Securities not less than 15 days preceding such subsequent record date. Interest on any Unregistered Securities which is due on any Interest Payment Date shall be paid to the Holder of the applicable Coupon appertaining to such Unregistered Security.
SECTION 2.8 Registration, Transfer and Exchange. The Issuer will cause to be kept at each office or agency to be maintained for the purpose as provided in Section 3.2 for each series of Securities a register in which, subject to such reasonable regulations as it may prescribe, it will provide for the registration of Registered Securities of each series and the registration of transfer of Registered Securities of such series. Such register shall be in written form in the English language or in any other form capable of being converted into such form within a reasonable time. At all reasonable times such register or registers shall be open for inspection by the Trustee. There may not be more than one register for each series of Securities.
Upon due presentation for registration of transfer of any Registered Security of any series at any such office or agency to be maintained for the purpose provided in Section 3.2, the Issuer shall execute and the Trustee shall authenticate and deliver in the name of the transferee or transferees a new Registered Security or Registered Securities of such series, Stated Maturity, interest rate and original issue date in any authorized denominations and of a like aggregate principal amount and tenor.
Unregistered Securities (except for any temporary global Unregistered Securities) and Coupons (except for Coupons attached to any temporary global Unregistered Securities) shall be transferable by delivery.
At the option of the Holder thereof, any Security may be
exchanged for a Security of the same series, of like tenor, in
authorized denominations and in an equal aggregate principal
amount upon surrender of such Security at an office or agency to
be maintained for such purpose in accordance with Section 3.2 or
as specified pursuant to Section 2.3, and the Issuer shall
execute, and the Trustee shall authenticate and deliver in
exchange therefor, the Security or Securities which the Holder
making the exchange shall be entitled to receive bearing a number
or other distinguishing symbol not contemporaneously outstanding.
Subject to the foregoing, (i) a Registered Security of any series
(other than a Registered Global Security, except as set forth
below) may be exchanged for a Registered Security or Securities
of the same series; (ii) if the Securities of any series are
issued in both registered and unregistered form, except as
otherwise specified pursuant to Section 2.3, Unregistered
Securities may be exchanged for a Registered Security or
Securities of the same series, but a Registered Security may not
be exchanged for an Unregistered Security or Securities; and
(iii) if Unregistered Securities of any series are issued in more
than one authorized denomination, except as otherwise specified
pursuant to Section 2.3, any such Unregistered Security or
Securities may be exchanged for an Unregistered Security or
Securities of the same series; provided that in connection with
the surrender of any Unregistered Securities that have Coupons
attached, all unmatured Coupons and all matured Coupons in
default must be surrendered with the Securities being exchanged.
If the Holder of an Unregistered Security is unable to produce
any such unmatured Coupon or Coupons or matured Coupon or Coupons
in default, such exchange may be effected if the Unregistered
Securities are accompanied by payment in funds acceptable to the
Issuer in an amount equal to the face amount of such missing
Coupon or Coupons, or the surrender of such missing Coupon or
Coupons may be waived by the Issuer and the Trustee if there is
furnished to them such security or indemnity as they may require
to save each of them and any paying agent harmless. If
thereafter the Holder of such Security shall surrender to any
paying agent any such missing Coupon in respect of which such a
payment shall have been made, such Holder shall be entitled to
receive from the Issuer the amount of such payment; provided,
however, that, except as otherwise provided in Section 3.2,
interest represented by Coupons shall be payable only upon the
presentation and surrender of those Coupons at an office or
agency located outside the United States. Notwithstanding the
foregoing, in case an Unregistered Security of any series is
surrendered at any such office or agency in exchange for a
Registered Security of the same series of like tenor after the
close of business at such officer agency on (i) any Regular
Record Date and before the opening of business at such office or
agency on the relevant Interest Payment Date, or (ii) any
subsequent record date and the before the opening of business at
such office or agency on such subsequent date for the payment of
interest in default, such Unregistered Security shall be
surrendered without the Coupon relating to such Interest Payment
Date or subsequent date for payment, as the case may be, and
interest or interest in default, as the case may be, will not be
payable on such Interest Payment Date or subsequent date for
payment, as the case may be, in respect of the Registered
Security issued in exchange for such Unregistered Security, but
will be payable only to the Holder of such Coupon when due in
accordance with the provisions of this Indenture. All Securities
and Coupons surrendered upon any exchange or transfer provided
for in this Indenture shall be promptly cancelled and disposed of
by the Trustee and the Trustee will deliver a certificate of dis
position thereof to the Issuer.
All Registered Securities presented for registration of transfer, exchange, redemption, repurchase or payment shall (if so required by the Issuer or the Trustee) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Issuer and the Trustee, duly executed by the Holder or his attorney duly authorized in writing.
Each Registered Global Security authenticated under this Indenture shall be registered in the name of the Depositary designated for such Registered Global Security or a nominee thereof, and each such Registered Global Security shall constitute a single security for all purposes of this Indenture.
The Issuer may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any exchange or registration of transfer of Securities. No service charge shall be made for any such transaction.
The Issuer shall not be required to exchange or register a transfer of (a) any Securities of any series for a period of 15 days next preceding the first mailing of notice of redemption of Securities of such series to be redeemed, (b) any Securities selected, called or being called for redemption in whole or in part, except in the case of any Security to be redeemed in part, the portion thereof not so to be redeemed, (c) any Security if the Holder thereof has exercised his right, if any, to require the Issuer to repurchase such Security in whole or in part, except the portion of such Security not required to be repurchased or (d) to exchange any Unregistered Security so selected for redemption, except that such Unregistered Security may be exchanged for a Registered Security of that series and like tenor, provided that such Registered Security shall be simultaneously surrendered for redemption.
Notwithstanding any other provision of this Section 2.8, unless and until it is exchanged in whole or in part for Securities in definitive registered form, a Registered Global Security representing all or a portion of the Securities of a series may not be transferred except as a whole by the Depositary for such series to a nominee of such Depositary or by a nominee of such Depositary to such Depositary or another nominee of such Depositary or by such Depositary or any such nominee to a successor Depositary for such series or a nominee of such successor Depositary.
If at any time the Depositary for any Registered Securities of a series represented by one or more Registered Global Securities notifies the Issuer that it is unwilling or unable to continue as Depositary for such Registered Securities or is no longer eligible because it ceased to be a clearing agency registered under the Exchange Act or any other applicable statute or regulation, the Issuer shall appoint a successor Depositary with respect to such Registered Securities. If a successor Depositary for such Registered Securities is not appointed by the Issuer within 90 days after the Issuer receives such notice or becomes aware of such ineligibility, the Issuer's election pursuant to Section 2.3 that such Registered Securities be represented by one or more Registered Global Securities shall no longer be effective and the Issuer will execute, and the Trustee, upon receipt of an Officers' Certificate of the Issuer for the authentication and delivery of definitive Securities of such series, will authenticate and deliver, Securities of such series in definitive registered form without Coupons, of like tenor in any authorized denominations, in an aggregate principal amount equal to the principal amount of the Registered Global Security or Securities representing such Registered Securities in exchange for such Registered Global Security or Securities.
The Issuer may at any time and in its sole discretion determine that the Registered Securities of any series issued in the form of one or more Registered Global Securities shall no longer be represented by a Registered Global Security or Securities. In such event the Issuer will execute, and the Trustee, upon receipt of an Officers' Certificate for the authentication and delivery of definitive Securities of such series, will authenticate and deliver, Securities of such series in definitive registered form without Coupons, in any authorized denominations, in an aggregate principal amount equal to the principal amount of the Registered Global Security or Securities representing such Registered Securities in exchange for such Registered Global Security or Securities.
If specified by the Issuer pursuant to Section 2.3 with respect to Securities represented by a Registered Global Security, the Depositary for such Registered Global Security may surrender such Registered Global Security in exchange in whole or in part for Securities of the same series in definitive registered form on such terms as are acceptable to the Issuer and such Depositary. Thereupon, the Issuer shall execute, and the Trustee shall authenticate and deliver, without service charge,
(i) to the Person specified by such Depositary a new Registered Security or Securities of the same series, of any authorized denominations as requested by such Person, in an aggregate principal amount equal to and in exchange for such Person's beneficial interest in the Registered Global Security; and
(ii) to such Depositary a new Registered Global Security in a denomination equal to the difference, if any, between the principal amount of the surrendered Registered Global Security and the aggregate principal amount of Registered Securities authenticated and delivered pursuant to clause (i) above.
Upon the exchange of a Registered Global Security for Securities in definitive registered form without Coupons, in authorized denominations, such Registered Global Security shall be cancelled by the Trustee or an agent of the Issuer or the Trustee. Securities in definitive registered form without Coupons issued in exchange for a Registered Global Security pursuant to this Section 2.8 shall be registered in such names and in such authorized denominations as the Depositary for such Registered Global Security, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee or an agent of the Issuer or the Trustee. The Trustee or such agent shall deliver such Securities to or as directed by the Persons in whose names such Securities are so registered.
None of the Issuer, the Trustee, any paying agent or the Security Registrar will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a global Security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.
All Securities issued upon any transfer or exchange of Securities shall be valid and legally binding obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such transfer or exchange.
Notwithstanding anything herein or in the terms of any series of Securities to the contrary, none of the Issuer, the Trustee or any agent of the foregoing (any of which, other than the Issuer, shall rely on an Officers' Certificate and an Opinion of Counsel) shall be required to exchange any Unregistered Security for a Registered Security if such exchange would result in adverse federal income tax consequences to the Issuer (such as, for example, the inability of the Issuer to deduct from its income, as computed for federal income tax purposes, the interest payable on the Unregistered Securities) under then applicable United States federal income tax laws.
SECTION 2.9 Mutilated, Defaced, Destroyed, Lost and Stolen Securities. In case any temporary or definitive Security or any Coupon appertaining to any Security shall become mutilated, defaced or be apparently destroyed, lost or stolen, the Issuer in its discretion may execute, and upon the written request of any officer of the Issuer, the Trustee shall authenticate and deliver a new Security of the same series, of like tenor and in equal aggregate principal amount, bearing a number or other distinguishing symbol not contemporaneously outstanding, in exchange and substitution for the mutilated or defaced Security, or in lieu of and in substitution for the Security so apparently destroyed, lost or stolen with Coupons corresponding to the Coupons appertaining to the Securities so mutilated, defaced, destroyed, lost or stolen, or in exchange for the Security to which a mutilated, defaced, destroyed, lost or stolen Coupon appertained with Coupons appertaining thereto corresponding to the Coupons so mutilated, defaced, destroyed, lost or stolen. In every case the applicant for a substitute Security or Coupon shall furnish to the Issuer and to the Trustee and any agent of the Issuer or the Trustee such security or indemnity as may be required by them to indemnify and defend and to save each of them harmless and, in every case of apparent destruction, loss or theft, evidence to their satisfaction of the apparent destruction, loss or theft of such Security or Coupon and of the ownership thereof. In the case of a mutilated or defaced Security or Coupon, the applicant for a substitute Security or Coupon shall surrender such mutilated or defaced Security or Coupon to the Trustee or such agent.
Upon the issuance of any substitute Security or Coupon, the Issuer may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee or its agent) connected therewith. In case any Security or Coupon which has matured or is about to mature or has been called for redemption in full shall become mutilated or defaced or be apparently destroyed, lost or stolen, the Issuer may, instead of issuing a substitute Security or Coupon, pay or authorize the payment of the same or the relevant Coupon (without surrender thereof except in the case of a mutilated or defaced Security or Coupon), if the applicant for such payment shall furnish to the Issuer and to the Trustee and any agent of the Issuer or the Trustee such security or indemnity as any of them may require to save each of them harmless from all risks, however remote, arising as a result of such payment and, in every case of apparent destruction, loss or theft, the applicant shall also furnish to the Issuer and the Trustee and any agent of the Issuer or the Trustee evidence to their satisfaction of the apparent destruction, loss or theft of such Security and of the ownership thereof.
Every substitute Security or Coupon of any series issued pursuant to the provisions of this Section by virtue of the fact that any such Security or Coupon is apparently destroyed, lost or stolen shall constitute an additional contractual obligation of the Issuer, whether or not the apparently destroyed, lost or stolen Security or Coupon shall be at any time enforceable by anyone and shall be entitled to all the benefits of (but shall be subject to all the limitations of rights set forth in) this Indenture equally and proportionately with any and all other Securities or Coupons of such series duly authenticated and delivered hereunder. All Securities or Coupons shall be held and owned upon the express condition that, to the extent permitted by law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, defaced, or apparently destroyed, lost or stolen Securities and Coupon and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender.
SECTION 2.10 Cancellation of Securities; Disposition Thereof. All Securities and Coupons surrendered for payment, repurchase, redemption, registration of transfer or exchange, or for credit against any payment in respect of a sinking or analogous fund, if surrendered to the Issuer or any agent of the Issuer or the Trustee or any agent of the Trustee, shall be delivered to the Trustee or its agent for cancellation or, if surrendered to the Trustee, shall be cancelled by it; and no Securities shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. The Trustee or its agent shall dispose of cancelled Securities and Coupons held by it and deliver a certificate of disposition to the Issuer unless the Issuer shall direct that cancelled Securities be returned to it. If the Issuer shall acquire any of the Securities or Coupons, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Securities or Coupons unless and until the same are delivered to the Trustee for cancellation.
SECTION 2.11 Temporary Securities. Pending the preparation of definitive Securities for any series, the Issuer may execute and the Trustee shall authenticate and deliver temporary Securities for such series (printed, lithographed, typewritten or otherwise reproduced, in each case in form satisfactory to the Trustee). Temporary Securities of any series shall be issuable as Registered Securities without Coupons, or as Unregistered Securities with or without Coupons attached thereto, of any authorized denomination, and substantially in the form of the definitive Securities of such series but with such omissions, insertions and variations as may be appropriate for temporary Securities, all as may be determined by the Issuer with the concurrence of the Trustee as evidenced by the execution and authentication thereof. Temporary Securities may contain such references to any provisions of this Indenture as may be appropriate. Every temporary Security shall be executed by the Issuer and be authenticated by the Trustee upon the same conditions and in substantially the same manner, and with like effect, as the definitive Securities. Without unreasonable delay the Issuer shall execute and shall furnish definitive Securities of such series and thereupon temporary Registered Securities of such series may be surrendered in exchange therefor without charge at each office or agency to be maintained by the Issuer for that purpose pursuant to Section 3.2 and, in the case of Unregistered Securities, at any agency maintained by the Issuer for such purpose as specified pursuant to Section 3.2, and the Trustee shall authenticate and deliver in exchange for such temporary Securities of such series an equal aggregate principal amount of definitive Securities of the same series having authorized denominations and, in the case of Unregistered Securities, having attached thereto any appropriate Coupons. Until so exchanged, the temporary Securities of any series shall be entitled to the same benefits under this Indenture as defini tive Securities of such series, unless otherwise established pursuant to Section 2.3. The provisions of this Section are subject to any restrictions or limitations on the issue and delivery of temporary Unregistered Securities of any series that may be established pursuant to Section 2.3 (including any provision that Unregistered Securities of such series initially be issued in the form of a single global Unregistered Security to be delivered to a depositary or agency located outside the United States and the procedures pursuant to which definitive or global Unregistered Securities of such series would be issued in exchange for such temporary global Unregistered Security).
ARTICLE THREE
COVENANTS OF THE ISSUER
SECTION 3.1 Payment of Principal and Interest. The Issuer covenants and agrees for the benefit of each series of Securities issued hereunder that it will duly and punctually pay or cause to be paid the principal of and interest on, each of the Securities of such series (together with any additional amounts payable with respect to and pursuant to the terms of such Securities) at the place or places, at the respective times and in the manner provided in the Securities of such series and in the Coupons, if any, appertaining thereto and in this Indenture. The interest on Securities with Coupons attached (together with any additional amounts payable with respect to such Securities) shall be payable only upon presentation and surrender of the several Coupons for such interest installments as are evidenced thereby as they severally mature. If any temporary Unregistered Security provides that interest thereon may be paid while such Security is in temporary form, the interest on any such temporary Unregistered Security (together with any additional amounts payable with respect to such Security) shall be paid, as to the installments of interest evidenced by Coupons attached thereto, if any, only upon presentation of such Securities for notation thereon of the payment of such interest, in each case subject to any restrictions that may be established pursuant to Section 2.3. The interest on Registered Securities (together with any additional amounts payable with respect to such Securities ) shall be payable only to or upon the written order of the Holders thereof entitled thereto and, at the option of the Issuer, may be paid by wire transfer (subject to the procedures of the paying agent) or by mailing checks for such interest payable to or upon the written order of such Holders at their last addresses as they appear on the registry books of the Issuer.
SECTION 3.2 Offices for Payments, etc. So long as any Registered Securities are authorized for issuance pursuant to this Indenture or remain Outstanding, the Issuer will maintain in the Borough of Manhattan, The City of New York, an office or agency where the Registered Securities of each series may be surrendered for payment and where the Registered Securities of each series may be surrendered for registration of transfer or exchange as is provided in this Indenture.
The Issuer will maintain one or more offices or agencies in a city or cities located outside the United States (including any city in which such an office or agency is required to be maintained under the rules of any stock exchange on which the Securities of such series are listed) where the Unregistered Securities, if any, of each series and Coupons, if any, appertaining thereto may be surrendered for payment or exchange. No payment on or exchange of any Unregistered Security or Coupon will be made upon surrender of such Unregistered Security or Coupon at an office or agency of the Issuer within the United States nor will any payment be made by transfer to an account in, or by mail to an address in, the United States unless pursuant to applicable United States laws and regulations then in effect such payment can be made without adverse tax consequences to the Issuer. Notwithstanding the foregoing, payments in Dollars of Unregistered Securities of any series and Coupons appertaining thereto which are payable in Dollars may be made at an agency of the Issuer maintained in The City of New York if such payment in Dollars at each agency maintained by the Issuer outside the United States for payment on such Unregistered Securities is illegal or effectively precluded by exchange controls or other similar restrictions.
The Issuer will maintain in the Borough of Manhattan, the City of New York, an office or agency where notices and demands to or upon the Issuer in respect of the Securities of any series, the Coupons appertaining thereto, or this Indenture may be served.
The Issuer will give to the Trustee prompt written notice of the location of any such office or agency and of any change of location thereof. The Issuer hereby initially designates the Corporate Trust Office of the Trustee maintained in the City of New York as the office or agency for each such purpose to be carried out in New York. The Issuer shall designate an office or agency outside the United States for each such purpose relating to Unregistered Securities prior to the issuance of any Unregistered Securities. In case the Issuer shall fail to maintain any such office or agency or shall fail to provide such notice of the location or of any change in the location thereof, presentations and demands may be made and notices may be served at the Corporate Trust Office.
The Issuer will cause to be kept a register at the office of the Security Registrar in which, subject to such reasonable regulations as it may prescribe, the Issuer will provide for the registration of Securities and of transfers of Securities. The Trustee is hereby initially appointed Security Registrar for the purpose of registering Securities and transferring Securities as herein provided.
The Issuer may from time to time designate one or more
additional offices or agencies where the Securities of any series
and any Coupons appertaining thereto may be presented for
payment, where the Securities of that series may be presented for
exchange as provided in this Indenture and pursuant to Section
2.3 and where the Registered Securities of that series may be
presented for registration of transfer as in this Indenture
provided, and the Issuer may from time to time rescind any such
designation, as the Issuer may deem desirable or expedient;
provided, however, that no such designation or rescission shall
in any manner relieve the Issuer of its obligation to maintain
the agencies provided for in the first three paragraphs of this
Section 3.2. The Issuer will give to the Trustee prompt written
notice of any such designation or rescission thereof.
SECTION 3.3 Appointment to Fill a Vacancy in Office of Trustee. The Issuer, whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 6.9, a Trustee, so that there shall at all times be a Trustee with respect to each series of Securities hereunder.
SECTION 3.4 Paying Agents. Whenever the Issuer shall appoint a paying agent other than the Trustee with respect to the Securities of any series, it will cause such paying agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provisions of this Section,
(a) that it will hold all sums received by it as such agent for the payment of the principal of or interest on the Securities of such series (whether such sums have been paid to it by the Issuer or by any other obligor on the Securities of such series) in trust for the benefit of the Holders of the Securities of such series or of the Trustee;
(b) that it will give the Trustee notice of any failure by the Issuer (or by any other obligor on the Securities of such series) to make any payment of the principal of or interest on the Securities of such series when the same shall be due and payable;
(c) that it will, at any time during the continuance of any such failure, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such paying agent; and
(d) that it will in all respects comply with the provisions of the Trust Indenture Act of 1939 applicable to such paying agent.
The Issuer will, on or prior to each due date of the principal of or interest on the Securities of such series, deposit with the paying agent a sum sufficient to pay such principal or interest so becoming due, such sum to be held as provided in the Trust Indenture Act of 1939, and (unless such paying agent is the Trustee) the Issuer will promptly notify the Trustee of any failure to take such action.
If the Issuer shall act as its own paying agent with respect to the Securities of any series, it will, on or before each due date of the principal of or interest on the Securities of such series, set aside, segregate and hold in trust for the benefit of the Holders of the Securities of such series or the Coupons appertaining thereto a sum sufficient to pay such principal or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided. The Issuer will promptly notify the Trustee of any failure to take such action.
Anything in this Section to the contrary notwithstanding, but subject to Section 10.1, the Issuer may at any time, for the purpose of obtaining a satisfaction and discharge with respect to one or more or all series of Securities hereunder or with respect to this Indenture or for any other reason, pay or cause to be paid to the Trustee all sums held in trust for any such series by the Issuer or any paying agent hereunder, as required by this Section, such sums to be held by the Trustee upon the trusts herein contained.
Anything in this Section to the contrary notwithstanding, the agreement to hold sums in trust as provided in this Section is subject to the provisions of Sections 10.3 and 10.4.
SECTION 3.5 Written Statement to Trustee. The Issuer will deliver to the Trustee on or before March 31 in each year (beginning with March 31, 1997) a brief certificate (which need not comply with Section 11.5) from the Issuer, signed by its principal executive officer, principal financial officer, or principal accounting officer, stating that in the course of the performance by the signer of his duties as an officer of the Issuer, he would normally have knowledge of any Default or non- compliance by the Issuer in the performance or fulfillment of any covenant, agreement or condition of the Issuer, contained in this Indenture, stating whether or not he has knowledge of any such Default or non-compliance and, if so, specifying each such Default or non-compliance of which the signer has knowledge and the nature thereof.
SECTION 3.6 Corporate Existence. Subject to Article Nine, the Issuer will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights and franchises; provided that the Issuer shall not be required to preserve any such right or franchise if the Issuer shall determine that the preservation thereof is no longer desirable in the conduct of its business and that the loss thereof is not disadvantageous in any material respect to the Holders of any series of Securities.
SECTION 3.7 Luxembourg Publications. In the event of the publication of any notice pursuant to Section 5.11, 6.9, 6.10, 8.2, 10.4, 12.2 or 12.4, the party making such publication in the City of New York and London shall also, to the extent that notice is required to be given to Holders of Securities of any series by applicable Luxembourg law or stock exchange regulation, as evidenced by any Officers' Certificate delivered to such party, make a similar publication in Luxembourg.
ARTICLE FOUR
SECURITYHOLDERS' LISTS AND
REPORTS BY THE ISSUER AND THE TRUSTEE
SECTION 4.1 Issuer to Furnish Trustee Information as to Names and Addresses of Securityholders. The Issuer and any other obligor on the Securities each covenants and agrees that it will furnish or cause to be furnished to the Trustee a list in such form as the Trustee may reasonably require of the names and addresses of the Holders of the Securities of each series:
(a) semiannually and not more than 15 days after each Regular Record Date, and
(b) at such other times as the Trustee may request in writing, within 30 days after receipt by the Issuer of any such request as of a date not more than 15 days prior to the time such information is furnished,
provided that if and so long as the Trustee shall be the Security Registrar for such series and all of the Securities of any series are Registered Securities, such list shall not be required to be furnished for such series.
SECTION 4.2 Preservation and Disclosure of Securityholders' Lists.
(a) The Trustee shall preserve, in as current a form
as is reasonably practicable, all information as to the names and
addresses of the Holders of each series of Securities (i)
contained in the most recent list furnished to the Trustee as
provided in Section 4.1, (ii) received by the Trustee in its
capacity as Security Registrar for such series, if so acting, and
(iii) filed with it within two preceding years pursuant to
Section 313(c)(2) of the Trust Indenture Act of 1939. The
Trustee may destroy any list furnished to it as provided in
Section 4.1 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other
Holders with respect to their rights under this Indenture or
under any series of the Securities, and the corresponding rights
and duties of the Trustee, shall be as provided by the Trust
Indenture Act.
(c) Every Holder of Securities, by receiving and
holding the same, agrees with the Issuer and the Trustee that
none of the Issuer, the Trustee or any agent of any of the Issuer
or the Trustee shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders
made pursuant to the Trust Indenture Act of 1939.
SECTION 4.3 Reports by the Issuer. The Issuer shall file with the Trustee and the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act of 1939 at the times and in the manner provided pursuant to such Act, provided that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act ("SEC Reports") shall be filed with the Trustee within 15 days after the same is so required to be filed with the Commission.
SECTION 4.4 Reports by the Trustee. (a) Within 60 days
after May 15 of each year, commencing with the first May 15
following the first issuance of Securities pursuant to Section
2.4, if required by Section 313(a) of the Trust Indenture Act of
1939, the Trustee shall transmit, pursuant to Section 313(c) of
the Trust Indenture Act of 1939, a brief report dated as of such
May 15 with respect to any of the events specified in said
Section 313(a) which may have occurred since the later of the
immediately preceding May 15 and the date of this Indenture.
(b) The Trustee shall transmit the reports required by
Section 313(b) of the Trust Indenture Act and Section 5.11 hereof
at the times specified therein.
(c) Reports pursuant to this Section shall be transmitted in the manner and to the Persons required by Section 313(c) of the Trust Indenture Act of 1939.
(d) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which the Securities of any series are listed, with the Commission and with the Issuer. The Issuer will promptly notify the Trustee when the Securities of any series are listed on any stock exchange.
ARTICLE FIVE
REMEDIES OF THE TRUSTEE AND
SECURITYHOLDERS ON EVENT OF DEFAULT
SECTION 5.1 Event of Default Defined; Acceleration of Maturity; Waiver of Default. "Event of Default," with respect to Securities of any series wherever used herein, means one of the following events which shall have occurred and be continuing (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):
(a) default in the payment of any installment of interest upon any of the Securities of such series or any Coupon appertaining thereto (together with any additional amounts payable with respect to such Securities) as and when the same shall become due and payable, and continuance of such default for a period of 30 days; or
(b) default in the payment of all or any part of the principal of any of the Securities of such series as and when the same shall become due and payable either at their Stated Maturity, upon any redemption by declaration or otherwise; provided that, if such default is the result of an optional redemption by the Holders of such Securities, the amount thereof shall be in excess of $50,000,000 or the equivalent thereof in any currency or composite currency; or
(c) failure on the part of the Issuer duly to comply with, observe or perform any of the other covenants or agreements on the part of the Issuer contained in, or provisions of, the Securities of any series or this Indenture (other than a covenant or agreement which is not applicable to the Securities of such series), but only if such default shall not have been remedied for a period of 60 days after the date on which written notice specifying such failure, stating that such notice is a "Notice of Default" hereunder and demanding that the Issuer remedy the same, shall have been given by registered or certified mail, return receipt requested, to the Issuer by the Trustee, or to the Issuer and the Trustee by the Holders of at least 25% in aggregate principal amount of the Outstanding Securities of such series of Securities; or
(d) the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the Issuer in an involuntary case or proceeding under any applicable Insolvency Law or (B) a decree or order adjudging the Issuer a bankrupt or insolvent under an applicable Insolvency Law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Issuer or of any substantial part of the property of the Issuer or ordering the winding up or liquidation of the affairs of the Issuer and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or
(e) the commencement by the Issuer of a voluntary case or proceeding under any applicable Insolvency Law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by the Issuer to the entry of a decree or order for relief in respect of the Issuer in an involuntary case or proceeding under any applicable Insolvency Law or to the commencement of any bankruptcy or insolvency case or proceeding against the Issuer or the filing by the Issuer of a petition, answer or consent seeking reorganization or relief under any applicable Insolvency Law, or the consent by the Issuer to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Issuer or of any substantial part of the property of the Issuer or the making by the Issuer of an assignment for the benefit of creditors, or the admission by the Issuer in writing of its inability to pay its debts generally as they become due, or the taking of corporate action (which shall involve the passing of one or more Board Resolutions by the Issuer) in furtherance of any such action,
(f) failure by the Issuer to make any payment at maturity (or upon any redemption), including any applicable grace period, in respect of indebtedness, which term as used herein means obligations (other than the Securities of such series or nonrecourse obligations) of, or guaranteed or assumed by, the Issuer for borrowed money or evidenced by bonds, debentures, notes or other similar instruments ("Debt") in an amount in excess of $50,000,000 or the equivalent thereof in any other currency or composite currency and such failure shall have continued for a period of thirty days after written notice thereof shall have been given by registered or certified mail, return receipt requested, to the Issuer by the Trustee, or to the Issuer and the Trustee by the Holders of not less than 25% in aggregate principal amount of the Outstanding Securities of such series affected thereby;
(g) a default with respect to any Debt, which default results in the acceleration of Debt in an amount in excess of $50,000,000 or the equivalent thereof in any other currency or composite currency without such Debt having been discharged or such acceleration having been cured, waived, rescinded or annulled for a period of thirty days after written notice thereof shall have been given by registered or certified mail, return receipt requested, to the Issuer by the Trustee, or to the Issuer and the Trustee by the Holders of not less than 25% in aggregate principal amount of the Outstanding Securities of such series affected thereby; or
(h) any other Event of Default provided for with respect to Securities of that series in the supplemental indenture under which such series is issued or in the terms of Securities of such series;
provided that if any such failure, default or acceleration
referred to in clauses (f), (g) and (h) shall cease or be cured,
waived, rescinded or annulled, then the Event of Default
hereunder by reason thereof, and any acceleration under this
Section 5.1 resulting solely therefrom, shall be deemed likewise
to have been thereupon cured, waived, rescinded or annulled
without further action on the part of either the Trustee or any
of the Securityholders.
If an Event of Default (other than those specified in
Section 5.1(d) or (e)) with respect to less than all series of
Securities then Outstanding occurs and is continuing, then, and
in each and every such case, except for any series of Securities
the principal of which shall have already become due and payable,
either the Trustee or the Holders of not less than 25% in
aggregate principal amount of the Securities of each such
affected series then Outstanding hereunder (voting as a single
class) by notice in writing to the Issuer (and to the Trustee if
given by Securityholders), may declare the entire principal (or,
if the Securities of any such affected series are Original Issue
Discount Securities, such portion of the principal amount as may
be specified in the terms of such series) of all Securities of
all such affected series, and the interest accrued thereon, if
any (together with any additional amounts payable with respect to
such Securities), to be due and payable immediately, and upon any
such declaration, the same shall become immediately due and
payable. If an Event of Default (other than those specified in
Section 5.1(d) or (e)) with respect to all series of Securities
then Outstanding, occurs and is continuing, then and in each and
every such case, unless the principal of all the Securities shall
have already become due and payable, either the Trustee or the
Holders of not less than 25% in aggregate principal amount of all
the Securities then Outstanding hereunder (treated as one class),
by notice in writing to the Issuer (and to the Trustee if given
by Securityholders), may declare the entire principal (or, if any
Securities are Original Issue Discount Securities, such portion
of the principal as may be specified in the terms thereof) of all
the Securities then Outstanding, and interest accrued thereon, if
any (together with any additional amounts payable with respect to
such Securities) to be due and payable immediately, and upon any
such declaration the same shall become immediately due and
payable. If an Event of Default specified in Section 5.1(d) or
(e) occurs, the entire principal (or, if any Securities are
Original Issue Discount Securities, such portion of the principal
as may be specified in terms thereof) of all the Securities then
Outstanding, and interest accrued thereon, if any, (together with
any additional amounts payable with respect to such Securities)
shall become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any
Securityholder.
The foregoing provisions, however, are subject to the condition that if, at any time after the principal (or, if the Securities of such series are Original Issue Discount Securities, such portion of the principal as may be specified in the terms thereof) of the Securities of any series shall have been so declared due and payable, and before any judgment or decree for the payment of the monies due shall have been obtained or entered as hereinafter provided, the Issuer shall pay or shall deposit with the Trustee a sum sufficient to pay all matured installments of interest (together with any additional amounts payable with respect to such Securities) upon all the Securities of such series and the principal of any and all Securities of each such series which shall have become due otherwise than by acceleration (with interest upon such principal and, to the extent that payment of such interest is enforceable under applicable law, on overdue installments of interest, (together with any additional amounts payable with respect to such Securities) at the same rate as the rate of interest or Yield to Maturity (in the case of Original Issue Discount Securities) specified in the Securities of each such series (or the respective rates of interest or Yields to Maturity of all the Securities, as the case may be, to the date of such payment or deposit) and such amount as shall be sufficient to cover reasonable compensation to the Trustee and each predecessor Trustee, its agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee except as a result of negligence or bad faith, and if any and all Events of Default under the Indenture, other than the non-payment of the principal of Securities which shall have become due by acceleration, shall have been cured, waived or otherwise remedied as provided herein -- then and in every such case the Holders of a majority in aggregate principal amount of all the Securities of each such series or of all the Securities, as the case may be, in each case voting as a single class, then Outstanding, by written notice to the Issuer and the Trustee, may waive all defaults with respect to such series and rescind and annul such declaration and its consequences, but no such waiver or rescission and annulment shall extend to or shall affect any subsequent default or shall impair any right consequent thereon.
For all purposes under this Indenture, if a portion of the principal of any Original Issue Discount Securities shall have been accelerated and declared due and payable pursuant to the provisions hereof, then, from and after such declaration, unless such declaration has been rescinded and annulled, the principal amount of such Original Issue Discount Securities shall be deemed, for all purposes hereunder, to be such portion of the principal thereof as shall be due and payable as a result of such acceleration, and payment of such portion of the principal thereof as shall be due and payable as a result of such acceleration, together with accrued interest, if any, thereon and all other amounts owing thereunder, shall constitute payment in full of such Original Issue Discount Securities.
SECTION 5.2 Collection of Debt by Trustee; Trustee May Prove Debt. The Issuer covenants that (a) in case Default shall be made in the payment of any installment of interest on any of the Securities of any series when such interest shall have become due and payable and such Default shall have continued for a period of 30 days or (b) in case Default shall be made in the payment of all or any part of the principal of any of the Securities of any series when the same shall have become due and payable, whether upon the Stated Maturity of the Securities of such series or upon any redemption or by declaration or otherwise, other than a Default that is the result of an optional redemption by the Holders of Securities of any series, the amount of which is not in excess of $50,000,000 or the equivalent thereof in any currency or composite currency, unless such Default shall have continued for a period of 60 days after giving a notice with respect thereto under Section 5.1(c), then upon demand of the Trustee, the Issuer will pay to the Trustee for the benefit of the Holders of the Securities of such series the whole amount that then shall have become due and payable on all such Securities of such series, and such Coupons, if any, for principal, or interest, as the case may be (with interest to the date of such payment upon the overdue principal and, to the extent that payment of such interest is enforceable under applicable law, on overdue installments of interest at the same rate as the rate of interest or Yield to Maturity (in the case of Original Issue Discount Securities) specified in the Securities of such series); and in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including reasonable compensation to the Trustee and each predecessor Trustee, their respective agents, attorneys and counsel, and any expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee except as a result of its negligence or bad faith.
Until such demand is made by the Trustee, the Issuer may pay the principal of and interest on the Securities of any series to the Holders, whether or not the principal of and interest on Securities of such series be overdue.
If an Event of Default occurs and is continuing, the Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any action or proceedings at law or in equity to protect and enforce its rights and the rights of the Holders by such appropriate judicial proceeding as the Trustee may deem most effectual to protect and enforce any such rights, and may prosecute any such action or proceedings to judgment or final decree, and may enforce any such judgment or final decree against the Issuer or any other obligor upon the Securities of such series and collect in the manner provided by law out of the property of the Issuer or any other obligor upon the Securities of such series, wherever situated the monies adjudged or decreed to be payable.
In the case of any judicial proceeding relating to the Issuer or any other obligor upon the Securities of such series, or the property or creditors of the Issuer or any such obligor, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized under the Trust Indenture Act of 1939 in order to have claims of the Holders and the Trustee allowed in any such proceeding. In addition, unless prohibited by applicable law and regulations, the Trustee shall be entitled and empowered to vote on behalf of the Holders of Securities of any series in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency proceeding or a Person providing similar functions in comparable proceedings.
The Trustee shall be authorized to collect and receive any monies or other property payable or deliverable on any such claims, and to distribute all amounts received with respect to the claims of the Securityholders and of the Trustee on their behalf, and any trustee, receiver, or liquidator, custodian or other similar official is hereby authorized by each of the Securityholders to make payments to the Trustee, and, in the event that the Trustee shall consent to the making of payments directly to the Securityholders, to pay to the Trustee such amounts as shall be sufficient to cover reasonable compensation to the Trustee, each predecessor Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee except as a result of negligence or bad faith and all other amounts due to the Trustee or any predecessor Trustee pursuant to Section 6.6.
Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Securityholder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar Person.
All rights of action and of asserting claims under this Indenture, or under any of the Securities of any series or Coupons appertaining to such series, may be prosecuted and enforced by the Trustee without the possession of any of the Securities of such series or Coupons appertaining to such series or the production thereof on any trial or other proceedings relative thereto, and any such action or proceedings instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements, advances and compensation of the Trustee, each predecessor Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders of the Securities of such series or Coupons appertaining thereto in respect of which action was taken.
In any proceedings brought by the Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Trustee shall be a party) the Trustee shall be held to represent all the Holders of the Securities or Coupons appertaining to such Securities in respect of which such action was taken, and it shall not be necessary to make any Holders of such Securities or Coupons appertaining to such Securities, parties to any such proceedings.
SECTION 5.3 Application of Proceeds. Any monies collected by the Trustee pursuant to this Article in respect of any series shall be applied in the following order at the date or dates fixed by the Trustee and, in case of the distribution of such monies on account of principal or interest, upon presentation of the several Securities and Coupons appertaining thereto in respect of which monies have been collected and stamping (or otherwise noting) thereon the payment, or issuing Securities of the same series, of like tenor, in reduced principal amounts in exchange for the presented Securities of like series if only partially paid, or upon surrender thereof if fully paid:
FIRST: To the payment of costs and expenses applicable to the Securities of such series in respect of which monies have been collected, including any and all amounts due the Trustee under Section 6.6;
SECOND: In case the principal of the Securities of such series in respect of which monies have been collected shall not have become and be then due and payable, to the payment of interest on the Securities of such series in default in the order of the maturity of the installments of such interest, with interest (to the extent that such interest has been collected by the Trustee) upon the overdue installments of interest at the same rate as the rate of interest or Yield to Maturity (in the case of Original Issue Discount Securities) specified in such Securities, such payments to be made ratably to the Persons entitled thereto, without discrimination or preference;
THIRD: In case the principal of the Securities of such series in respect of which monies have been collected shall have become and shall be then due and payable, to the payment of the whole amount then owing and unpaid upon all the Securities of such series for principal and interest, with interest upon the overdue principal; and (to the extent that such interest has been collected by the Trustee) upon overdue installments of interest at the same rate as the rate of interest or Yield to Maturity (in the case of Original Issue Discount Securities) specified in the Securities of such series; and in case such monies shall be insufficient to pay in full the whole amount so due and unpaid upon the Securities of such series, then to the payment of such principal and interest or Yield to Maturity, without preference or priority of principal over interest or Yield to Maturity, or of interest or Yield to Maturity over principal, or of any installment of interest over any other installment of interest, or of any Security of such series over any other Security of such series ratably to the aggregate of such principal and accrued and unpaid interest or Yield to Maturity; and
FOURTH: To the payment of the remainder, if any, to the Issuer or any other Person lawfully entitled thereto.
SECTION 5.4 Suits for Enforcement. In case an Event of Default has occurred, has not been waived and is continuing, the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of such rights, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law.
SECTION 5.5 Restoration of Rights on Abandonment of Proceedings. In case the Trustee or any Securityholder shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely to the Trustee or to such Securityholder, then and in every such case, subject to any determination in such proceeding, the Issuer, the Trustee and the Securityholders shall be restored severally and respectively to their former positions and rights hereunder, and thereafter all rights, remedies and powers of the Issuer, the Trustee and the Securityholders shall continue as though no such proceedings had been taken.
SECTION 5.6 Limitations on Suits by Securityholders. No Holder of any Security of any series or of any Coupon appertaining thereto shall have any right by virtue or by availing of any provision of this Indenture to institute any action or proceeding, judicial or otherwise, at law or in equity or in bankruptcy or otherwise upon or under or with respect to this Indenture, or for the appointment of a trustee, receiver, liquidator, custodian or other similar official or for any other remedy hereunder, unless (i) such Holder previously shall have given to the Trustee written notice of a continuing Event of Default as hereinbefore provided, (ii) the Holders of not less than 25% in aggregate principal amount of the Securities of such affected series then Outstanding, treated as a single class, shall have made written request upon the Trustee to institute such action or proceedings in its own name as trustee hereunder and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby; (iii) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action or proceedings; and (iv) no direction inconsistent with such written request shall have been given to the Trustee pursuant to Section 5.9; it being understood and intended, and being expressly covenanted by the Holder of every Security or Coupon with every other Holder of the Securities of such series or Coupons and the Trustee, that no one or more Holders of Securities of such series shall have any right in any manner whatever by virtue or by availing of any provision of this Indenture to affect, disturb or prejudice the rights of any other Holder of Securities or Coupons appertaining to such Securities, or to obtain or seek to obtain priority over or preference to any other such Holder or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all Holders of Securities of the applicable series and Coupons appertaining to such Securities. For the protection and enforcement of the provisions of this Section, each and every Securityholder and the Trustee shall be entitled to such relief as can be given either at law or in equity.
SECTION 5.7 Unconditional Right of Securityholders to Institute Certain Suits. Notwithstanding any other provision in this Indenture and any provision of any Security, the right of any Holder of any Security or Coupon to receive payment of the principal of and interest on (together with any additional amounts payable with respect to and pursuant to the terms of such Securities) such Security or Coupon and any interest in respect of a Default in the payment of any such amounts, on or after the respective due dates expressed in such Security or Coupon or Redemption Dates provided for therein or to institute suit for the enforcement of any such payment rights on or after such respective dates shall not be impaired or affected without the consent of such Holder.
SECTION 5.8 Powers and Remedies Cumulative; Delay or
Omission Not Waiver of Default. Except as provided in Section
2.9 and 5.6, no right or remedy herein conferred upon or reserved
to the Trustee or to the Holders of Securities or Coupons is
intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
No delay or omission of the Trustee or of any Holder of any
of the Securities or Coupons to exercise any right or power
accruing upon any Event of Default occurring and continuing as
aforesaid shall impair any such right or power or shall be
construed to be a waiver of any such Event of Default or an
acquiescence therein; and, subject to Section 5.6, every power
and remedy given by this Indenture or by law to the Trustee or to
the Holders of Securities or Coupons may be exercised from time
to time, and as often as shall be deemed expedient, by the
Trustee or by the Holders of Securities or Coupons.
SECTION 5.9 Control by Securityholders. The Holders of a majority in aggregate principal amount of the Securities of any series affected at the time Outstanding shall have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee by this Indenture with respect to or for the benefit of such Securities of such series; provided that such direction shall not be otherwise than in accordance with applicable law and the provisions of this Indenture and provided further that (subject to the provisions of Section 6. 1) the Trustee shall have the right to decline to follow any such direction if the Trustee, being advised by counsel, shall determine that the action or proceeding so directed may not be lawfully taken or that the action or proceeding so directed may expose the Trustee to personal liability or if the Trustee in good faith by its board of directors or the executive committee thereof shall so determine that the actions or forbearances specified in or pursuant to such direction would be unduly prejudicial to the interests of Holders of the Securities of all series so affected not joining in the giving of said direction, it being understood that (subject to Section 6.1) the Trustee shall have no duty to ascertain whether or not such actions or forbearances are unduly prejudicial to such Holders.
Nothing in this Indenture shall impair the right of the Trustee in its discretion to take any action deemed proper by the Trustee and which is not inconsistent with such direction by Securityholders.
SECTION 5.10 Waiver of Past Defaults. Prior to the
declaration of the acceleration of the maturity of the Securities
of any series as provided in Section 5.1, the Holders of a
majority in aggregate principal amount of the Securities of any
series at the time Outstanding with respect to which an Event of
Default shall have occurred and be continuing may on behalf of
the Holders of all the Securities of such series waive any past
Default or Event of Default hereunder with respect to the
Securities of such series and its consequences, except a Default
(a) in the payment of principal or interest on any Security of
such series or (b) in respect of a covenant or provision hereof
which cannot be modified or amended without the consent of the
Holder of each Security affected.
Upon any such waiver, such Default shall cease to exist and be deemed to have been cured and not to have occurred, and any Event of Default arising therefrom shall be deemed to have been cured, and not to have occurred for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. In the case of any such waiver, the Issuer, the Trustee and the Holders of all such Securities shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.
SECTION 5.11 Trustee to Give Notice of Default, But May
Withhold in Certain Circumstances. The Trustee shall, within
ninety days after the occurrence of a default with respect to the
Securities of any series, give notice of all defaults with
respect to that series known to the Trustee (i) if any
Unregistered Securities of that series are then Outstanding, to
the Holders thereof, by publication at least once in an
Authorized Newspaper in the Borough of Manhattan, The City of New
York and at least once in an Authorized Newspaper in London (and,
if required by Section 3.7, at least once in an Authorized
Newspaper in Luxembourg) and (ii) to all Holders of Securities of
such affected series in the manner and to the extent provided in
Section 4.4(c), unless such defaults shall have been cured before
the mailing or publication of such notice (the term "default" or
"defaults" for the purposes of this Section 5.11 being hereby
defined to mean any event or condition which is, or with notice
or lapse of time or both would become, an Event of Default);
provided that, except in the case of default in the payment of
the principal of or interest on any of the Securities of such
series, or in the payment of any sinking or purchase fund
installment on such series, the Trustee shall be protected in
withholding such notice if and so long as the Board of Directors,
the executive committee, or a trust committee of directors or
trustees and/or Responsible Officers of the Trustee in good faith
determines that the withholding of such notice is in the
interests of the Securityholders.
SECTION 5.12 Right of Court to Require Filing of Undertaking to Pay Costs. All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit other than the Trustee of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit including the Trustee, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Trustee, to any suit instituted by any Securityholder or group of Securityholders of any series holding in the aggregate more than 10% in aggregate principal amount of the Securities of such series Outstanding, or to any suit instituted by any Securityholder for the enforcement of the payment of the principal of or interest on any Security on or after the due date expressed in such Security or any date fixed for redemption.
ARTICLE SIX
CONCERNING THE TRUSTEE
SECTION 6.1 Duties and Responsibilities of the Trustee;
During Default; Prior to Default. With respect to the Holders of
any series of Securities issued hereunder, the Trustee, prior to
the occurrence of an Event of Default with respect to the
Securities of a particular series, and after the curing or
waiving of all Events of Default which may have occurred with
respect to such series, undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture.
In case an Event of Default with respect to the Securities of a
particular series has occurred (which has not been cured or
waived) the Trustee shall exercise such of the rights and powers
vested in it by this Indenture, and use the same degree of care
and skill in their exercise, as a prudent man would exercise or
use under the circumstances in the conduct of his own affairs.
No provision of this Indenture shall be construed to relieve
the Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct, except
that
(a) prior to the occurrence of an Event of Default with respect to the Securities of any series and after the curing or waiving of all such Events of Default with respect to such series which may have occurred:
(i) the duties and obligations of the Trustee with respect to the Securities of any series shall be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any statements, certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such statements, certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture;
(b) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and
(c) the Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith
in accordance with the direction of Holders pursuant to
Section 5.9 relating to the time, method and place of
conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the
Trustee, under this Indenture.
None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if there shall be reasonable ground for believing that the repayment of such funds or adequate indemnity from the Issuer against such liability is not reasonably assured to it.
SECTION 6.2 Certain Rights of the Trustee. Subject to
Section 6.1:
(a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, Officers' Certificate or any other certificate, statement, instrument, opinion, report, notice, request, direction. consent, order, bond, debenture, note, coupon, security or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;
(b) any request, direction, order or demand of the Issuer mentioned herein shall be sufficiently evidenced by an Officers' Certificate (unless other evidence in respect thereof be herein specifically prescribed), and any Board Resolution of the Issuer may be evidenced to the Trustee by a copy thereof certified by the secretary or assistant secretary of the Issuer;
(c) the Trustee may consult with counsel and any written advice or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in reliance thereon in accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Indenture at the request, order or direction of any of the Securityholders pursuant to the provisions of this Indenture, unless such Securityholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred therein or thereby;
(e) the Trustee shall not be liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture;
(f) prior to the occurrence of an Event of Default hereunder and after the curing or waiving of all Events of Default, the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, appraisal, bond, debenture, note, coupon, security, or other paper or document unless requested in writing so to do by the Holders of not less than a majority in aggregate principal amount of the Securities of all series affected; provided that, if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity against such expenses or liabilities as a condition to proceeding; the reasonable expenses of every such examination shall be paid by the Issuer or, if paid by the Trustee or any predecessor trustee, shall be repaid by the Issuer upon demand; and
(g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys not regularly in its employ and the Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder.
SECTION 6.3 Trustee Not Responsible for Recitals,
Disposition of Securities or Application of Proceeds Thereof.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the
statements of the Issuer and the Trustee assumes no
responsibility for the correctness of the same. The Trustee
makes no representation as to the validity or sufficiency of this
Indenture or of the Securities. The Trustee shall not be
accountable for the use or application by the Issuer of any of
the Securities or of the proceeds thereof.
SECTION 6.4 Trustee and Agents May Hold Securities or
Coupons; Collections, etc, The Trustee or any agent of the Issuer
or the Trustee, in its individual or any other capacity, may
become the owner or pledgee of Securities or Coupons with the
same rights it would have if it were not the Trustee or such
agent and, subject to Section 6.12 and Section 310(b) of the
Trust Indenture Act of 1939 may otherwise deal with the Issuer
and receive, collect, hold and retain collections from the Issuer
with the same rights it would have if it were not the Trustee or
such agent.
SECTION 6.5 Monies Held by Trustee. Subject to the provisions of Section 10.4 hereof, all monies received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by mandatory provisions of law. Neither the Trustee nor any agent of the Issuer or the Trustee shall be under any liability for interest on any monies received by it hereunder.
SECTION 6.6 Compensation and Indemnification of Trustee and
Its Prior Claim. The Issuer covenants and agrees to pay to the
Trustee from time to time, and the Trustee shall be entitled to,
reasonable compensation (which shall not be limited by any
provision of law in regard to the compensation of a trustee of an
express trust) and the Issuer covenants and agrees to pay or
reimburse the Trustee and each predecessor Trustee upon its
request for all reasonable expenses, disbursements and advances
incurred or made by or on behalf of it in accordance with any of
the provisions of this Indenture (including the reasonable
compensation and the expenses and disbursements of its counsel
and of all agents and other Persons not regularly in its employ)
except any such expense, disbursement or advance as may arise
from its negligence or bad faith. The Issuer also covenants to
indemnify the Trustee and each predecessor Trustee for, and to
hold it harmless against, any loss, liability or expense incurred
without negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of this
Indenture or the trusts hereunder and its duties hereunder,
including but not limited to the costs and expenses of defending
itself against or investigating any claim or liability in
connection with the exercise or performance of any of its powers
or duties hereunder. The obligations of the Issuer under this
Section to compensate and indemnify the Trustee and each
predecessor Trustee and to pay or reimburse the Trustee and each
predecessor Trustee for expenses, disbursements and advances
shall constitute additional indebtedness hereunder and shall
survive the satisfaction and discharge of this Indenture. Such
additional indebtedness shall be a senior claim to that of the
Securities upon all property and funds held or collected by the
Trustee as such, except funds held in trust for the payment of
principal of or interest on particular Securities or Coupons, and
the Securities are hereby subordinated to such senior claim.
Without prejudice to any other rights available to the Trustee
under applicable law, when the Trustee incurs expenses or renders
services in connection with an Event of Default specified in
Section 5.1 or in connection with Article Five hereof, the
expenses (including the reasonable fees and expenses of its
counsel) and the compensation for the services in connection
therewith are intended to constitute expenses of administration
under any bankruptcy law.
SECTION 6.7 Right of Trustee to Rely on Officers' Certificate, etc. Subject to Sections 6.1 and 6.2, whenever in the administration of the trusts of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering or omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or bad faith on the part of the Trustee, be deemed to be conclusively proved and established by an Officers' Certificate delivered to the Trustee, and such certificate, in the absence of negligence or bad faith on the part of the Trustee, shall be full warrant to the Trustee for any action taken, suffered or omitted by it under the provisions of this Indenture upon the faith thereof.
SECTION 6.8 Persons Eligible for Appointment as Trustee ; Conflict Interests. The Trustee for each series of Securities hereunder shall at all times be a corporation organized and doing business under the laws of the United States of America or of any State or the District of Columbia having a combined capital and surplus of at least $50,000,000, and which is authorized under such laws to exercise corporate trust powers and is subject to supervision or examination by Federal, State or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. At no time shall the Trustee be an obligor, or directly or indirectly, control, be controlled by, or under the common control with any obligor upon any Securities issued hereunder. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, the Trustee shall resign immediately in the manner and with the effect specified in Section 6.9.
The provisions of this Section 6.8 are in furtherance of and subject to Section 310(a) of the Trust Indenture Act of 1939.
If the Trustee has or shall acquire a conflicting interest
within the meaning of the Trust Indenture Act of 1939, the
Trustee shall either eliminate such interest or resign, to the
extent and in the manner provided by, and subject to the
provisions of the Trust Indenture Act of 1939 and this Indenture.
To the extent permitted by such Act, the Trustee shall not be
deemed to have a conflicting interest by virtue of being a
trustee under this Indenture with respect to Securities of more
than one series or a trustee under the Indenture dated as of
April 15, 1994, among P. T. ALatief Freeport Finance Company B.
V., as issuer, Freeport-McMoRan Copper & Gold Inc., as guarantor,
and The Chase Manhattan Bank (formerly known as Chemical Bank),
as Trustee.
SECTION 6.9 Resignation and Removal; Appointment of
Successor Trustee. (a) The Trustee, or any trustee or trustees
hereafter appointed, may at any time resign with respect to one
or more or all series of Securities by giving written notice of
resignation to the Issuer. Upon receiving such notice of
resignation, the Issuer shall promptly appoint a successor
trustee or trustees with respect to the applicable series by
written instrument in duplicate, executed by authority of the
Board of Directors of the Issuer, one copy of which instrument
shall be delivered to the resigning Trustee and one copy to the
successor trustee or trustees. If no successor trustee shall
have been so appointed with respect to any series and have
accepted appointment within 30 days after the giving of such
notice of resignation, the resigning trustee may petition any
court of competent jurisdiction for the appointment of a
successor trustee, or any Securityholder who has been a bona fide
Holder of a Security or Securities of the applicable series for
at least six months may, subject to the provisions of Section
5.12, on behalf of himself and all others similarly situated,
petition any such court for the appointment of a successor
trustee. Such court may thereupon, after such notice, if any, as
it may deem proper and prescribe, appoint a successor trustee.
(b) In case at any time any of the following shall
occur:
(i) the Trustee shall fail to comply with the provisions of Section 310(b) of the Trust Indenture Act of 1939 with respect to any series of Securities after written request therefor by the Issuer or by any Securityholder who has been a bona fide Holder of a Security or Securities for at least six months; or
(ii) the Trustee shall cease to be eligible in accordance with the provisions of Section 6.8 or Section 310(a) of the Trust Indenture Act of 1939 and shall fail to resign after written request therefor by the Issuer or by any such Securityholder; or
(iii) the Trustee shall become incapable of acting with respect to any series of Securities, or shall be adjudged a bankrupt or insolvent, or a receiver or liquidator of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation;
then, in any such case, the Issuer may remove the Trustee with respect to the applicable series of Securities and appoint a successor trustee for such series by written instrument, in duplicate, executed by order of the Board of Directors of the Issuer, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee, or, subject to the provisions of Section 5.12, any Securityholder who has been a bona fide Holder of a Security or Securities for at least six months may on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor trustee with respect to such series. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor trustee.
(c) The Holders of a majority in aggregate principal
amount of the Securities of each series at the time outstanding
may at any time remove the Trustee with respect to such series
and appoint a successor trustee with respect to such series by
delivering to the Trustee so removed, to the successor trustee so
appointed and to the Issuer the evidence provided for in Section
7. 1 of the action in that regard taken by the Securityholders.
(d) Any resignation or removal of the Trustee with respect to any series and any appointment of a successor trustee with respect to such series pursuant to any of the provisions of this Section 6.9 shall become effective upon acceptance of appointment by the successor trustee as provided in Section 6.10.
(e) The Issuer shall give notice of each resignation and each removal of the Trustee of each series of Securities by mailing written notice of such an event by first-class mail, postage prepaid, to the Holders of Registered Securities of such series as their names and addresses appear in the Security register. If any Unregistered Securities of a series affected are then Outstanding, notice of such resignation shall be given to the Holders thereof, (i) by publication at least once in an Authorized Newspaper in the Borough of Manhattan, the City of New York, and at least once in an Authorized Newspaper in London (and, if required by Section 3.7, at least once in an Authorized Newspaper in Luxembourg) and (ii) by mailing notice to those Holders of Unregistered Securities who have furnished their names and addresses to the Trustee for such purpose within the two years preceding the giving of such notice.
SECTION 6.10 Acceptance of Appointment by Successor Trustee. Any successor trustee appointed as provided in Section 6.9 shall execute and deliver to the Issuer and to its predecessor trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all rights, powers, duties and obligations of its predecessor hereunder with respect to such series, with like effect as if originally named as trustee for such series hereunder; but, nevertheless, on the written request of the Issuer or of the successor trustee, upon payment of its charges then unpaid, the trustee ceasing to act shall, subject to Section 10.4, pay over to the successor trustee all monies at the time held by it hereunder and shall execute and deliver an instrument transferring to such successor trustee all such rights, powers, duties and obligations. Upon request of any such successor trustee, the Issuer shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers. Any trustee ceasing to act as such shall, nevertheless, retain a prior claim upon all property or funds held or collected by it to secure any amounts then due to it pursuant to the provisions of Section 6.6.
If a successor trustee is appointed with respect to the Securities of one or more (but not all) series, the Issuer, the predecessor Trustee and each successor trustee with respect to the Securities of any applicable series shall execute and deliver an indenture supplemental hereto which shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the predecessor Trustee with respect to the Securities of any series as to which the predecessor Trustee is not retiring shall continue to be vested in the predecessor Trustee, and shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such trustees co-trustees of the same trust and that each such trustee shall be trustee of a trust or trusts under separate indentures.
No successor trustee with respect to any series of
Securities shall accept appointment as provided in this Section
6. 10 unless at the time of such acceptance such successor
trustee shall be qualified under the provisions of Section 310(b)
of the Trust Indenture Act of 1939 and eligible under the
provisions of Section 6.8 and Section 310(a) of the Trust
Indenture Act of 1939.
Upon acceptance of appointment by a successor trustee for a series of Securities as provided in this Section 6. 10, the Issuer shall (i) mail notice thereof by first-class mail to the Holders of Registered Securities of such series at their last addresses as they shall appear in the Security register, or (ii) in the case of Holders of Unregistered Securities of such series, publish such notice once in an Authorized Newspaper in the Borough of Manhattan, The City of New York, and at least once in an Authorized Newspaper in London (and, if required by Section 3.7, at least once in an Authorized Newspaper in Luxembourg) and mail such notice to those Holders of Unregistered Securities of such series who have filed their names and addresses with the Trustee for such purpose within two years preceding the giving of such notice. Each such notice shall include the name of the successor trustee for such series and the address of its Corporate Trust Office. If the acceptance of appointment is substantially contemporaneous with the resignation, then the notice called for by the preceding sentence may be combined with the notice called for by Section 6.9. If the Issuer fails to provide such notice within 10 days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be provided at the expense of the Issuer.
SECTION 6.11 Merger, Conversion, Consolidation or Succession to Business of Trustee. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided that such corporation shall be qualified under the provisions of Section 310(b) of the Trust Indenture Act of 1939 and eligible under the provisions of Section 6.8 and Section 310(a) of the Trust Indenture Act of 1939, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding.
In case at the time such successor to the Trustee shall succeed to the trusts created by this Indenture any of the Securities of any series shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor Trustee and deliver such Securities so authenticated; and, in case at that time any of the Securities of any series shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor trustee; and in all such cases such certificate shall have the full force which it is anywhere in the Securities of such series or in this Indenture provided that the certificate of the Trustee shall have; provided, that the right to adopt the certificate of authentication of any predecessor Trustee or to authenticate Securities of any series in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation.
SECTION 6.12 Preferential Collection of Claims Against the Issuer. If and when the Trustee shall be or become a creditor of the Issuer (or any other obligor upon the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act of 1939 regarding the collection of claims against the Issuer (or any such other obligor).
SECTION 6.13 Appointment of Authenticating Agent. As long as any Securities of a series remain Outstanding, the Trustee may, by an instrument in writing, appoint with the approval of the Issuer an authenticating agent (the "Authenticating Agent") which shall be authorized to act on behalf of the Trustee to authenticate Securities issued upon exchange, registration of transfer, partial redemption or pursuant to Section 2.9. Securities of each such series authenticated by such Authenticating Agent shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee. Whenever reference is made in this Indenture to the authentication and delivery of Securities of any series by the Trustee or to the Trustee's Certificate of Authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent for such series and a Certificate of Authentication executed on behalf of the Trustee by such Authenticating Agent. Such Authenticating Agent shall at all times be a corporation organized and doing business under the laws of the United States of America or of any State, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $5,000,000 (determined as provided in Section 6.9 with respect to the Trustee) and subject to supervision or examination by Federal or State authority.
Any corporation into which any Authenticating Agent may be merged or converted, or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which any Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency business of any Authenticating Agent, shall continue to be the Authenticating Agent with respect to all series of Securities for which it served as Authenticating Agent without the execution or filing of any paper or any further act on the part of the Trustee or such Authenticating Agent. Any Authenticating Agent may at any time, and if it shall cease to be eligible shall, resign by giving written notice of resignation to the Trustee and to the Issuer.
The Trustee may at any time terminate the agency of any Authenticating Agent by giving written notice thereof to the Authenticating Agent and to the Issuer. Upon receiving such a notice of resignation or upon such a termination, or in case at any time any Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 6.13 with respect to one or more series of Securities, the Trustee may upon receipt of a Company Order appoint a successor Authenticating Agent and the Issuer shall provide notice of such appointment to all Holders of Securities of such series in the manner and to the extent provided in Section 11.4. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all rights, powers, duties and responsibilities of its predecessor hereunder, with like effect as if originally named as Authenticating Agent. The Issuer agrees to pay to the Authenticating Agent for such series from time to time reasonable compensation. The Authenticating Agent for the Securities of any series shall have no responsibility or liability for any action taken by it as such at the direction of the Trustee.
Sections 6.2, 6.3, 6.4 and, as agent of the Trustee, 7.3 shall be applicable to any Authenticating Agent.
ARTICLE SEVEN
CONCERNING THE SECURITYHOLDERS
SECTION 7.1 Evidence of Action Taken by Securityholders.
Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or
taken by Securityholders of any or all series may be embodied in
and evidenced by one or more instruments of substantially similar
tenor signed by such Securityholders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument
or instruments are delivered to the Trustee. Proof of execution
of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Indenture and
(subject to Sections 6.1 and 6.2) conclusive in favor of the
Trustee and the Issuer, if made in the manner provided in this
Article.
SECTION 7.2 Proof of Execution of Instruments and of Holding
of Securities. Subject to Sections 6.1 and 6.2, the execution of
any instrument by a Securityholder or his agent or proxy may be
proved in the following manner:
(a) The fact and date of the execution by any Holder or his agent or proxy of any instrument, or the authority of such an agent or proxy to execute such instrument, may be proved by the certificate of any notary public or other officer of any jurisdiction authorized to take acknowledgments of deeds or administer oaths that the Person executing such instruments acknowledged to him the execution thereof, or by an affidavit of a witness to such execution sworn to before any such notary or other such officer. Where such execution is by or on behalf of any legal entity other than an individual, such certificate or affidavit shall also constitute sufficient proof of the authority of the Person executing the same. The fact of the holding by any Holder of an Unregistered Security of any series, and the identifying number of such Security and the date of his holding the same, may be proved by the production of such Security or by a certificate executed by any trust company, bank, or recognized securities dealer wherever situated satisfactory to the Trustee, if such certificate shall be deemed by the Trustee to be satisfactory. Each such certificate shall be dated and shall state that on the date thereof a Security of such series bearing a specified identifying number was deposited with or exhibited to such trust company, bank, or recognized securities dealer by the Person named in such certificate. Any such certificate may be issued in respect of one or more Unregistered Securities of one or more series specified therein. The holding by the Person named in any such certificate of any Unregistered Securities of any series specified therein shall be presumed to continue for a period of one year from the date of such certificate unless at the time of any determination of such holding (1) another certificate bearing a later date issued in respect of the same Securities shall be produced, or (2) the Security of such series specified in such certificate shall be produced by some other Person, or (3) the Security of such series specified in such certificate shall have ceased to be Outstanding. Subject to Sections 6.1 and 6.2, the fact and date of the execution of any such instrument and the amount and numbers of Securities of any series held by the Person so executing such instrument and the amount and numbers of any Security or Securities for such series may also be proven in accordance with such reasonable rules and regulations as may be prescribed by the Trustee for such series or in any other manner which the Trustee for such series may deem sufficient.
(b) In the case of Registered Securities, the ownership of such Securities shall be proved by the Security register or by a certificate of the Security Registrar.
SECTION 7.3 Holders to be Treated as Owners. Prior to surrender of a Security for registration of transfer, the Issuer, the Trustee and any agent of the Issuer, or the Trustee may deem and treat the Person in whose name any Registered Security shall be registered upon the Security register as the absolute owner of such Security (whether or not such Security shall be overdue and notwithstanding any notation of ownership or other writing thereon) for the purpose of receiving payment of or on account of the principal of and, subject to the provisions of this Indenture, interest on such Security and for all other purposes; and neither the Issuer, the Trustee nor any agent of the Issuer or the Trustee shall be affected by any notice to the contrary. The Issuer, the Trustee and any agent of the Issuer, or the Trustee may treat the Holder of any Unregistered Security and the Holder of any Coupon as the absolute owner of such Unregistered Security or Coupon (whether or not such Unregistered Security or Coupon shall be overdue) for the purpose of receiving payment thereof or on account thereof and for all other purposes and neither the Issuer, the Trustee nor any agent of the Issuer, or the Trustee shall be affected by notice to the contrary. All such payments so made to any such Person, or upon his order, shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for monies payable upon any such Unregistered Security or Coupon.
SECTION 7.4 Securities Owned by Issuer Deemed Not Outstanding. In determining whether the Holders of the requisite aggregate principal amount of Outstanding Securities have concurred in any direction, consent or waiver under this Indenture, Securities which are owned by the Issuer or any other obligor on the Securities or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuer or any other obligor on the Securities shall be disregarded and deemed not to be Outstanding for the purpose of any such determination, except that for the purpose of determining whether the Trustee shall be protected in relying on any such direction, consent or waiver only Securities which the Trustee knows are so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Issuer or any other obligor upon the Securities or any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuer or any other obligor on the Securities. In case of a dispute as to such right, the advice of counsel shall be full protection in respect of any decision made by the Trustee in accordance with such advice. Upon request of the Trustee, the Issuer shall furnish to the Trustee promptly an Officers' Certificate listing and identifying all Securities, if any, known by the Issuer to be owned or held by or for the account of any of the above-described Persons; and, subject to Sections 6.1 and 6.2, the Trustee shall be entitled to accept such Officers' Certificate as conclusive evidence of the facts therein set forth and of the fact that all Securities not listed therein are Outstanding for the purpose of any such determination.
SECTION 7.5 Right of Revocation of Action Taken. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 7.1, of the taking of any action by the Holders of the percentage in aggregate principal amount of the Securities of any or all series, as the case may be, specified in this Indenture in connection with such action, any Holder of a Security the serial number of which is shown by the evidence to be included among the serial numbers of the Securities the Holders of which have consented to such action may, by filing written notice at the Corporate Trust Office and upon proof of holding as provided in this Article, revoke such action so far as concerns such Security. Except as aforesaid any such action taken by the Holder of any Security shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Security and of any Securities issued in exchange or substitution therefor or on registration or transfer thereof, irrespective of whether or not any notation in regard thereto is made upon any such Security. Any action taken by the Holders of the percentage in aggregate principal amount of the Securities of any or all series, as the case may be, specified in this Indenture in connection with such action shall be conclusively binding upon the Issuer, the Trustee and the Holders of all the Securities.
SECTION 7.6 Record Date for Consents and Waivers. The
Issuer may, but shall not be obligated to, direct the Trustee to
establish a record date for the purpose of determining the
Persons entitled to (i) waive any past Default with respect to
the Securities of such series in accordance with Section 5.10,
(ii) consent to any supplemental indenture in accordance with
Section 8.2 of this Indenture or (iii) waive compliance with any
term, condition or provision of any covenant hereunder (if this
Indenture should expressly provide for such waiver). If a record
date is fixed, the Holders on such record date, or their duly
designated proxies, and any such Persons, shall be entitled to
waive any such past Default, consent to any such supplemental
indenture or waive compliance with any such term, condition or
provision or revoke any such waiver or consent, whether or not
such Holder remains a Holder after such record date; provided,
however, that unless such waiver or consent is obtained from the
Holders, or duly designated proxies, of the requisite principal
amount of Outstanding Securities of such series prior to the date
which is the 90th day after such record date, any such waiver or
consent previously given shall automatically and without further
action by any Holder be cancelled and of no further effect.
The Trustee may set any day as a record date for the purpose
of determining the Holders of Outstanding Securities of any
series entitled to join in the giving or making of (i) any notice
of Default, (ii) declaration under Section 5.1, (iii) any request
to institute proceedings referred to in Section 5.6 or (iv) any
direction referred to in Section 5.9, in each case with respect
to Securities of such series. If any record date is set pursuant
to this paragraph, the Holders of Outstanding Securities of such
series on such record date, and no other Holders, shall be
entitled to join in such notice, declaration, request or
direction or to revoke the same, whether or not such Holders
remain Holders after such record date; provided that no such
action shall be effective hereunder unless taken on or prior to
the applicable expiration date by Holders of the requisite
principal amount of Outstanding Securities of such series on such
record date. Nothing in this paragraph shall be construed to
prevent the Trustee from setting a new record date for any action
for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall
automatically and with no action by any Person be cancelled and
of no effect), and nothing in this paragraph shall be construed
to render ineffective any action taken by Holders of the
requisite principal amount of Outstanding Securities of the
relevant series on the date such action is taken. Promptly after
any record date is set pursuant to this paragraph, the Trustee,
at the Issuer's expense, shall cause notice of such record date,
the proposed action by Holders and the applicable expiration date
to be given to the Issuer in writing and to each Holder of
Securities of the relevant series in the manner set forth in
Section 11.4.
ARTICLE EIGHT
SUPPLEMENTAL INDENTURES
SECTION 8.1 Supplemental Indentures Without Consent of Securityholders. The Issuer when authorized by a Board Resolution (which resolution may provide general terms or parameters for such action and may provide that the specific terms of such action may be determined in accordance with or pursuant to a Company Order) and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act of 1939 as in force at the date of the execution thereof) for one or more of the following purposes:
(a) to convey, transfer, assign, mortgage or pledge to the Trustee as security for the Securities of one or more series any property or assets;
(b) to evidence the succession of another entity to the Issuer or successive successions, and the assumption by the successor entity of the respective covenants, agreements and obligations of the Issuer under this Indenture or any supplemental indenture;
(c) to add to the covenants of the Issuer such further covenants, restrictions, conditions or provisions or to surrender any right, power or option conferred by this Indenture on the Issuer as its Board of Directors and the Trustee shall consider to be for the protection or benefit of the Holders of all or any series of Securities or Coupons of any series (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are being added solely for the benefit of such series), and to make the occurrence, or the occurrence and continuance, of a Default in any such additional covenants, restrictions, conditions or provisions an Event of Default permitting the enforcement of all or any of the several remedies provided in this Indenture as herein set forth; provided, that in respect of any such additional covenant, restriction, condition or provision such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such an Event of Default or may limit the remedies available to the Trustee upon such an Event of Default or may limit the right of the Holders of a majority in aggregate principal amount of the Securities of such series to waive such an Event of Default;
(d) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture, or to make any other provisions in regard to matters or questions under this Indenture or any supplemental indenture as the Issuer may deem necessary or desirable, provided, that no action under this clause (d) shall adversely affect the interests of the Holders of the Securities or Coupons;
(e) to establish the form or terms of Securities of any series or of the Coupons appertaining to such Securities as permitted by Sections 2.1 and 2.3;
(f) to make any change to comply with any requirement of the Commission in connection with the qualification of the Indenture under the Trust Indenture Act of 1939, as amended;
(g) to evidence and provide for the acceptance of appointment hereunder by a successor trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one trustee, pursuant to the requirements of Section 6.10; and
(h) to provide for uncertificated Securities in addition to certificated Securities, so long as such uncertificated Securities are in registered form for United States federal income tax purposes.
The Trustee is hereby authorized to join with the Issuer in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer, assignment, mortgage or pledge of any property thereunder, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects the Trustee's own rights, duties, immunities or liabilities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section may be executed without the consent of the Holders of any of the Securities at the time Outstanding, notwithstanding any of the provisions of Section 8.2.
SECTION 8.2 Supplemental Indentures With Consent of
Securityholders. With the consent (evidenced as provided in
Article Seven) of the Holders of not less than a majority in
aggregate principal amount of the Securities at the time
Outstanding of any series affected by such supplemental
indenture, the Issuer, when authorized by a Board Resolution
(which Resolution may provide general terms or parameters for
such action and may provide that the specific terms of such
action may be determined in accordance with or pursuant to a
Company Order) and the Trustee may, from time to time and at any
time, enter into an indenture or indentures supplemental hereto
(which shall conform to the provisions of the Trust Indenture Act
of 1939 as in force at the date of execution thereof) for the
purpose of adding, any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or of any
supplemental indenture or of modifying in any manner the rights
of the Holders of the Securities of such series or of the Coupons
appertaining to such Securities; provided, that no such
supplemental indenture shall (a) change the final maturity of any
Security or change the time for payment of any installment of
interest thereon, or reduce the principal amount thereof, or
reduce the rate (or alter the method of computation) of interest
thereon, or reduce (or alter the method of computation) any
amount payable on redemption or repayment thereof or change the
time for payment thereof, or make the principal thereof
(including any amount in respect of original issue discount), or
interest (together with any additional amounts payable with
respect to, and pursuant to the terms of, such Security) thereon
payable in any coin or currency other than that provided in the
Securities and Coupons or in accordance with the terms thereof,
or reduce the amount of the principal of an Original Issue
Discount Security that would be due and payable upon an
acceleration of the maturity thereof pursuant to Section 5.1 or
the amount thereof provable in bankruptcy pursuant to Section
5.2, or alter the provisions of Section 11.11 or 11.12 or impair
or affect the right of any Securityholder to institute suit for
the payment thereof or, if the Securities provide therefor, any
right of repayment at the option of the Securityholder, in each
case without the consent of the Holder of each Security so
affected, provided, no consent of any Holder of any Security
shall be necessary under this Section 8.2 to permit the Trustee
and the Issuer to execute supplemental indentures pursuant to
Section 8.1(e) of this Indenture, or (b) reduce the aforesaid
percentage of principal amount of Securities of any series the
consent of the Holders of which is required for any such
supplemental indenture to less than a majority, or reduce the
percentage of Securities of such series necessary to consent to
waive any past Default under this Indenture to less than a
majority, or modify any of the provisions of this Section or
Section 5.10, except to increase any such percentage or to
provide that certain other provisions of this Indenture cannot be
modified or waived without the consent of the Holder of each
Security so affected, in each case, without the consent of the
Holder of each Security so affected.
A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or of Coupons appertaining to such Securities, or which modifies the rights of Holders of Securities of such series with respect to such covenant or provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series or of the Coupons appertaining to such Securities.
Upon the request of the Issuer, accompanied by a copy of a Board Resolution of the Issuer (which resolution may provide general terms or parameters for such action and may provide that the specific terms of such action may be determined in accordance with or pursuant to a Company Order) authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Securityholders and other documents, if any, required by Section 7.1 the Trustee shall join with the Issuer in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee's own rights, duties, immunities or liabilities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture.
It shall not be necessary for the consent of the Securityholders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof.
Promptly after the execution by the Issuer and the Trustee of any supplemental indenture pursuant to the provisions of this Section, the Issuer shall give notice thereof setting forth in general terms the substance of such supplemental indenture, (i) to the Holders of the Outstanding Registered Securities of each series affected thereby, by mailing a notice thereof by first- class mail to such Holders at their addresses as they shall appear on the security register, (ii) if any Unregistered Securities of a series affected thereby are then Outstanding, to the Holders thereof who have filed their names and addresses with the Trustee for such purpose within two years preceding the giving of such notice, by mailing a notice thereof by first-class mail to such Holders at such addresses as were so furnished to the Trustee and (iii) if any Unregistered Securities of a series affected thereby are then Outstanding, to all Holders thereof, by publication of a notice thereof at least once in an Authorized Newspaper in the Borough of Manhattan, The City of New York and at least once in an Authorized Newspaper in London (and, if required by Section 3.7, at least once in an Authorized Newspaper in Luxembourg). Any failure of the Issuer to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.
SECTION 8.3 Effect of Supplemental Indenture. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Issuer, and the Holders of Securities of each series affected thereby shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments. and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes.
SECTION 8.4 Documents to Be Given to Trustee. The Trustee, subject to the provisions of Sections 6.1 and 6.2, may receive an Officers' Certificate and an Opinion of Counsel as conclusive evidence that any such supplemental indenture executed pursuant to this Article Eight complies with the applicable provisions of this Indenture and that the execution of such supplemental indenture is authorized or permitted by this Indenture.
SECTION 8.5 Notation on Securities in Respect of Supplemental Indentures. Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article may bear a notation in form approved by the Trustee for such series as to any matter provided for by such supplemental indenture or as to any action taken by Securityholders. If the Issuer or the Trustee shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Issuer, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Issuer, authenticated by the Trustee and delivered in exchange for the Securities of such series then Outstanding.
ARTICLE NINE
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
SECTION 9.1 Covenant of the Issuer Not to Merge, Consolidate, Sell or Convey Property Except Under Certain Conditions. The Issuer covenants that it will not merge with or into or consolidate with any Person or sell, convey, transfer, lease or otherwise dispose of all or substantially all of its assets to any Person and the Issuer shall not permit any Person to consolidate with or merge into the Issuer or sell, convey, transfer, lease or otherwise dispose of all or substantially all of its assets to the Issuer, unless (i) either the Issuer (in the case of a merger) shall be the continuing corporation, or the successor corporation or the Person which acquires by sale, conveyance, transfer, lease or disposition all or substantially all of the assets of the Issuer (if other than the Issuer) shall be a corporation organized under the laws of the United States of America or any State thereof or the District of Columbia, and shall expressly assume, by supplemental indenture, in form satisfactory to the Trustee, executed and delivered to the Trustee by such corporation pursuant to Article Eight hereof, all of the payment obligations of the Issuer pursuant to this Indenture and the Securities of all series and Coupons, if any, appertaining thereto and the due and punctual performance of every covenant of this Indenture on the part of the Issuer to be performed or observed; (ii) immediately after giving effect to such merger, consolidation, sale, conveyance, transfer, lease or disposition and treating any Debt which becomes an obligation of the Issuer as a result of such transaction as having been incurred by the Issuer at the time of such transaction, no Default or Event of Default shall have occurred and be continuing.
SECTION 9.2 Successor Corporation Substituted. In case of any such consolidation, merger, sale, conveyance, transfer, lease or disposition, and following such an assumption by the successor corporation, such successor corporation shall succeed to and be substituted for the Issuer, with the same effect as if it had been named herein. Except in the case of conveyance by way of lease, when the successor entity assumes all obligations of the Issuer hereunder and the provisions of Section 9.1 have been complied with, all obligations and covenants of the Issuer hereunder or under the Securities shall terminate.
Such successor corporation may cause to be signed, and may issue either in its own name or in the name of the Issuer prior to such succession any or all of the Securities issuable hereunder which theretofore shall not have been signed by the Issuer and delivered to the Trustee; and, upon the order of such successor corporation, instead of the Issuer, and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Securities and Coupons appertaining thereto, if any, which previously shall have been signed and delivered by the officers of the Issuer to the Trustee for authentication, and any Securities together with any Coupons appertaining thereto which such successor corporation thereafter shall cause to be signed and delivered to the Trustee for that purpose. All of the Securities so issued together with any Coupons appertaining thereto shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Securities had been issued at the date of the execution hereof.
In case of any such consolidation, merger, sale, conveyance, transfer, lease or disposition such changes in phraseology and form (but not in substance) may be made in the Securities and Coupons thereafter to be issued as may be appropriate.
In the event of any sale, conveyance, transfer or disposition (other than a conveyance by way of lease) covered by this Section 9.2, the Issuer (or any successor corporation which shall theretofore have become such in the manner described in this Article) shall be discharged from all obligations and covenants under this Indenture and the Securities and may be liquidated and dissolved.
SECTION 9.3 Opinion of Counsel to Trustee. The Trustee, subject to the provisions of Sections 6.1 and 6.2, may receive an Opinion of Counsel prepared in accordance with Section 11.5 as conclusive evidence that any such consolidation, merger, sale, transfer, lease, disposition or conveyance, and any such assumption, and any such liquidation or dissolution complies with the applicable provisions of this Indenture.
ARTICLE TEN
SATISFACTION AND DISCHARGE
OF INDENTURE; UNCLAIMED MONIES
SECTION 10.1 Satisfaction and Discharge of Indenture. (A)
If at any time (a) the Issuer shall have paid or caused to be
paid the principal of and interest on all the Securities of any
series Outstanding hereunder and all unmatured Coupons
appertaining thereto (other than any Securities of such series
and Coupons appertaining thereto which shall have been destroyed,
lost or stolen and which shall have been replaced or paid as
provided in Section 2.9), as and when the same shall have become
due and payable, or (b) the Issuer shall have delivered to the
Trustee for cancellation all Securities of such series
theretofore authenticated and all unmatured Coupons appertaining
thereto (other than any Securities and Coupons appertaining
thereto of such series which shall have been destroyed, lost or
stolen and which shall have been replaced or paid as provided in
Section 2.9) or (c) in the case of any series of Securities where
the exact or maximum amount (including the currency of payment)
of principal of and interest due on which can be determined at
the time of making the deposit referred to in clause (ii) below,
(i) all the Securities of such series and all unmatured Coupons
appertaining thereto not theretofore delivered to the Trustee for
cancellation (x) shall have become due and payable or (y) are by
their terms to become due and payable within one year or are to
be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of
redemption, and (ii) the Issuer shall have irrevocably deposited
or caused to be deposited with the Trustee as trust funds the
entire amount in cash (other than monies repaid by the Trustee or
any paying agent to the Issuer in accordance with Section 10.4),
specifically pledged as security for, and dedicated solely to the
benefit of the Holders of the Securities of such series and
Coupons appertaining thereto, (x) cash in an amount, or (y) in
the case of any series of Securities the payments on which may
only be made in Dollars, direct obligations of the United States
of America, backed by its full faith and credit ("U.S. Government
Obligations"), maturing as to principal and interest at such
times and in such amounts as will insure the availability of cash
not later than one day before the due date of payments in respect
of the Securities, or (z) a combination thereof, sufficient
(without investment of such cash or reinvestment of any interest
or proceeds from such U.S. Government Obligations) in the opinion
of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the
Trustee, to pay the principal of and interest on all Securities
of such series and Coupons appertaining thereto on each date that
such principal or interest is due and payable (whether at
maturity or upon redemption (through operation of a mandatory
sinking fund or otherwise) including any redemption or repayment
at the option of the Holder); and if, in any such case, the
Issuer shall also pay or cause to be paid all other sums payable
hereunder by the Issuer, all of the Securities of such series and
any Coupons appertaining thereto shall be deemed paid and
discharged and the provisions of this Indenture with respect to
such Securities and Coupons shall cease to be of further effect
(except as to (i) rights of registration of transfer, and
exchange of Securities of such series or Coupons appertaining
thereto, the Issuer's right of optional redemption, if any, and
the Holder's right to redemption or repayment at its option, if
any, (ii) substitution of mutilated, defaced or apparently
destroyed, lost or stolen Securities or Coupons, (iii) rights of
the Holders of Securities and Coupons appertaining thereto to
receive from the property so deposited payments of principal
thereof and interest on the original stated due dates therefor
(but not upon acceleration) or the Redemption Date or repayment
date therefor, as the case may be and remaining rights of
Holders to receive mandatory sinking fund payments, if any, (iv)
the rights, obligations and immunities of the Trustee hereunder,
including any right to compensation, reimbursement of expenses
and indemnification under Section 6.6, (v) the rights of the
Holders of Securities of such series and Coupons appertaining
thereto as beneficiaries hereof with respect to the property so
deposited with the Trustee payable to all or any of them and (vi)
the obligations of the Issuer under Sections 3.2, 3.3 and 3.4,
Article Ten and Article Twelve), and the Trustee, on demand of
the Issuer accompanied by an Officers' Certificate and an Opinion
of Counsel, which complies with Section 11.5, stating that the
provisions of this Section have been complied with and at the
cost and expense of the Issuer, shall execute proper instruments
acknowledging such satisfaction of and discharging this
Indenture; provided, that the rights of Holders of the Securities
and Coupons to receive amounts in respect of principal of and
interest on the Securities and Coupons held by them shall not be
delayed longer than required by then-applicable mandatory rules
or policies of any securities exchange upon which the Securities
are listed. In addition, in connection with the satisfaction and
discharge pursuant to clause (c)(i)(y) above, the Trustee shall
give notice to the Holders of Securities of such satisfaction and
discharge. The Issuer agrees to reimburse the Trustee for any
costs or expenses thereafter reasonably and properly incurred and
to compensate the Trustee for any services thereafter reasonably
and properly rendered by the Trustee in connection with this
Indenture or the Securities.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Issuer to the Trustee under
Section 6.6 shall survive.
(B) The following provisions shall apply to the
Securities of each series unless specifically otherwise provided
in a Board Resolution of the Issuer, Officers' Certificate or
indenture supplemental hereto provided pursuant to Section 2.3.
In addition to discharge of the Indenture pursuant to Section
10.1(A), in the case of any such series of Securities the exact
or maximum amounts (including the currency of payment) of
principal and interest due on which can be determined at the time
of making the deposit referred to in Clause 10.1(B)(x)(a) below:
(x) the Issuer shall be deemed to have paid and discharged the
entire indebtedness on all Securities of such a series and the
Coupons appertaining thereto on the 91st day after the date of
the deposit referred to in Clause 10.1(B)(x)(a) below, and the
provisions of this Indenture with respect to the Securities of
such series and Coupons appertaining thereto shall no longer be
in effect (except as to (i) rights of registration of transfer
and exchange of Securities of such series and Coupons
appertaining thereto, the Issuer's right of optional redemption,
if any, and the Holder's right to redemption or repayment at its
option, if any, (ii) substitution of mutilated, defaced or
apparently destroyed, lost or stolen Securities or Coupons, (iii)
rights of Holders of Securities or Coupons appertaining thereto
to receive from the property so deposited payments of principal
thereof and interest thereon on the original stated due dates
therefor (but not on acceleration) or the Redemption Date or
repayment date therefor, as the case may be, and remaining rights
of the Holders to receive mandatory sinking fund payments, if
any, (iv) the rights, obligations, duties and immunities of the
Trustee hereunder, including any right to compensation,
reimbursement of expenses and indemnification under Section 6.6,
(v) the rights of the Holders of Securities of such series and
Coupons appertaining thereto as beneficiaries hereof with respect
to the property so deposited with the Trustee payable to all or
any of them and (vi) the obligations of the Issuer and the rights
of the Holders of the Securities under Sections 3.2, 3.3 and 3.4,
Article Ten and Article Twelve), (hereinafter "defeasance"), and
the Trustee, at the expense of the Issuer, shall at the Issuer's
request, execute proper instruments acknowledging the same, if
the Issuer notifies the Trustee that the provisions of this
Section 10.1(B) are being complied with solely to effect a
defeasance and if
(a) with reference to this provision the Issuer has irrevocably deposited or caused to be irrevocably deposited with the Trustee as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Securities of such series and Coupons appertaining thereto, (i) cash in an amount, or (ii) in the case of any series of Securities the payments on which may only be in Dollars, U.S. Government Obligations, maturing as to principal and interest at such times and in such amounts as will insure (without investment of such cash or reinvestment of any interest or proceeds from such U.S. Government Obligations) the availability of cash or (iii) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay the principal of and interest on all Securities of such series and Coupons appertaining thereto on each date that such principal and interest is due and payable (whether at maturity or upon redemption (through operation of a mandatory sinking fund or otherwise, including any redemption or repayment at the option of the Holder), provided, that, in connection with any such redemption at the option of the Issuer, the Issuer shall have made arrangements satisfactory to the Trustee for the giving of notice of redemption and, in connection with any redemption or repayment at the option of the Holder, for the optional redemption or repayment of all of the Securities of such series on such redemption or repayment date);
(b) no Default or Event of Default with respect to the Securities of such series shall have occurred and be continuing on the date of such deposit or, insofar as Sections 5.1(d) and (e) are concerned, at any time during the period ending on and including the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period);
(c) such defeasance shall not cause the Trustee to have a conflicting interest for purposes of the Trust Indenture Act of 1939 with respect to any securities of the Issuer;
(d) such defeasance shall not result in a breach or violation of, or constitute a Default under, this Indenture or any Securities of such series or any other agreement or instrument to which the Issuer is a party or by which it is bound;
(e) the Issuer has delivered to the Trustee an Opinion
of Counsel to the effect, and such opinion shall confirm,
(i) that, based on the fact that (x) the Issuer has received
from, or there has been published by, the Internal Revenue
Service a ruling or (y) since the date hereof, there has
been a change in the applicable federal income tax law, in
either case, Holders of the Securities of such series and
the Coupons appertaining thereto will not recognize income,
gain or loss for federal income tax purposes as a result of
such deposit, defeasance and discharge and will be subject
to federal income tax on the same amount and in the same
manner and at the same times as would have been the case if
such deposit, defeasance and discharge had not occurred; and
(ii) that the trust arising from such deposit shall not
constitute an "investment company" or an entity "controlled"
by an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended; and
(f) the Issuer has paid or caused to be paid all other sums then payable hereunder by the Issuer and the Issuer has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to the defeasance contemplated by this provision have been complied with.
(C) The Issuer shall be released from its obligations
under Article Nine and any other covenants specified pursuant to
Section 2.3 with respect to the Securities of any series and any
Coupons appertaining thereto, other than the obligation to
provide that any successor to the Issuer, as a condition to such
succession, assume the performance of any covenant of this
Indenture of the Issuer relating to the compensation,
reimbursement of expenses and indemnities of the Trustee and any
predecessor Trustee, on and after the date the conditions set
forth below are satisfied (hereinafter, "covenant defeasance").
For this purpose, such covenant defeasance means that, with
respect to the outstanding Securities of the applicable series,
the Issuer may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in such
Article or any such covenant, whether directly or indirectly by
reason of any reference elsewhere herein to such Article or any
such covenant or by reason of any reference in such Article to
any other provision herein or in any other document and such
omission to comply shall not constitute an Event of Default under
Section 5.1, but the remainder of this Indenture and such
Securities and Coupons shall be unaffected thereby. The
following shall be the conditions to application of this
subsection (C) of this Section 10.1:
(a) the Issuer has irrevocably deposited or caused to be irrevocably deposited with the Trustee as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Securities of such series and Coupons appertaining thereto, (i) cash in an amount, or (ii) in the case of any series of Securities the payment on which may only be made in Dollars, U.S. Government Obligations maturing as to principal and interest at such times and in such amounts as will insure (without investment of such cash or reinvestment of any interest or proceeds from such U.S. Government Obligations) the availability of cash in an amount or (iii) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay the principal and interest on all Securities of such series and Coupons appertaining thereto on each date that such principal or interest is due and payable (whether at maturity or upon redemption (through operation of a mandatory sinking fund or otherwise, including any redemption or repayment at the option of the Holder) provided, that, in connection with any such redemption at the option of the Issuer, the Issuer shall have made arrangements satisfactory to the Trustee for the giving of notice of redemption and, in connection with any redemption or repayment at the option of the Holder, for the optional redemption or repayment of such series on such redemption or repayment date);
(b) no Default or Event of Default or event which with notice or lapse of time or both would become an Event of Default with respect to the Securities shall have occurred and be continuing on the date of such deposit or, insofar as subsections 5.1(d) and (e) are concerned, at any time during the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period);
(c) such covenant defeasance will not result in a breach or violation of, or constitute a default under, this Indenture, or any Securities issued hereunder or any agreement or instrument to which the Issuer is a party or by which it is bound;
(d) such covenant defeasance shall not cause the Trustee to have a conflicting interest as defined in Section 310(b) of the Trust Indenture Act of 1939;
(e) such covenant defeasance shall not cause any Securities then listed on any registered national securities exchange to be delisted;
(f) the Issuer shall have delivered to the Trustee an
Opinion of Counsel to the effect (i) that the Holders of the
Securities of such series and Coupons appertaining thereto
will not recognize income, gain or loss for Federal income
tax purposes as a result of such covenant defeasance and
will be subject to Federal income tax on the same amounts,
in the same manner and at the same times as would have been
the case if such covenant defeasance had not occurred; and
(ii) that the trust arising from such deposit shall not
constitute an "investment company" or an entity "controlled"
by an "investment company" as such terms are defined in The
Investment Company Act of 1940, as amended; and
(g) the Issuer shall have paid or caused to be paid all other sums then payable hereunder by the Issuer and the Issuer shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent relating to the covenant defeasance contemplated by this provision have been complied with.
SECTION 10.2 Application by Trustee of Funds Deposited for Payment of Securities. Subject to Section 10.4 all monies and securities deposited with the Trustee pursuant to Section 10.1 shall be held in trust and applied by it to the payment, either directly or through any paying agent (including the Issuer acting as its own paying agent), to the Holders of the particular Securities of such series and of Coupons appertaining thereto for the payment or redemption of which such monies or securities have been deposited with the Trustee, of all sums due and to become due thereon for principal and interest; but such monies or securities need not be segregated from other funds except to the extent required by law.
SECTION 10.3 Repayment of Monies Held by Paying Agent. In
connection with the satisfaction and discharge of this Indenture
with respect to the Securities of any series or the defeasance
thereof, all monies then held by any paying agent under the
provisions of this Indenture with respect to such series shall,
upon demand of the Issuer, be repaid to it or paid to the Trustee
and thereupon such paying agent shall be released from all
further liability with respect to such monies.
SECTION 10.4 Return of Monies Held by Trustee and Paying
Agent Unclaimed for Two Years. Any monies or U.S. Government
Obligations deposited with or paid to the Trustee or any paying
agent for the payment of the principal of and interest on any
Security of any series or Coupons attached thereto and not
applied but remaining unclaimed for two years after the date upon
which such principal and interest shall have become due and
payable, shall, upon the written request of the Issuer and unless
otherwise required by mandatory provisions of applicable escheat
or abandoned or unclaimed property law, be repaid to the Issuer
by the Trustee for such series or such paying agent, and the
Holder of the Securities of such series and of any Coupons
appertaining thereto shall, unless otherwise required by
mandatory provisions of applicable escheat or abandoned or
unclaimed property laws, thereafter look only to the Issuer for
any payment which such Holder may be entitled to collect, and all
liability of the Trustee or any paying agent with respect to such
monies shall thereupon cease; provided, however, that the Trustee
or such paying agent, before being required to make any such
repayment with respect to monies deposited with it for any
payment (a) in respect of Registered Securities of any series,
shall at the expense of the Issuer, mail by first class mail to
Holders of such Securities at their addresses as they shall
appear on the Security register, and (b) in respect of
Unregistered Securities of any series the Holders of which have
filed their names and addresses with the Trustee for such purpose
within two years preceding the giving of such notice, shall at
the expense of the Issuer, mail by first class mail to such
Holders at such addresses, and (c) in respect of Unregistered
Securities of any series, shall at the expense of the Issuer
cause to be published once, in an Authorized Newspaper in the
City of New York and once in an Authorized Newspaper in London
(and, if required by Section 3.7, at least once in an Authorized
Newspaper in Luxembourg) notice, that such monies remain unpaid
and that, after a date specified therein, which shall not be less
than thirty days from the date of such mailing or publication,
any unclaimed balance of such money then remaining will be repaid
to the Issuer.
SECTION 10.5 Indemnity for U.S. Government Obligations. The Issuer shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 10.1 or the principal or interest received in respect of such obligations.
ARTICLE ELEVEN
MISCELLANEOUS PROVISIONS
SECTION 11.1 Incorporators, Stockholders, Officers and Directors of Issuer Exempt from Individual Liability. No recourse shall be had for the payment of the principal of, or interest on any Security or any Coupon appertaining thereto, for any claim based thereon, or otherwise in respect thereof, or based on or in respect of this Indenture or any indenture supplement thereto, against any incorporator, stockholder, officer or director, as such, past, present or future, of the Issuer or any successor corporation, either directly or through the Issuer, or any successor corporation, whether by virtue of constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance of such Security and any Coupons appertaining thereto and as part of the consideration for the issue thereof, expressly waived and released.
SECTION 11.2 Provisions of Indenture for the Sole Benefit of Parties and Securityholders. Nothing in this Indenture or in the Securities or in Coupons appertaining thereto, expressed or implied, shall give or be construed to give to any Person, other than the parties hereto and their successors and the Holders of the Securities or Coupons, if any, any legal or equitable right, remedy or claim under this Indenture or under any covenant or provision herein contained, all such covenants and provisions being for the sole benefit of the parties hereto and their successors and the Holders of the Securities or Coupons, if any.
SECTION 11.3 Successors and Assigns of Issuer Bound by Indenture. All covenants and agreements in this Indenture by the Issuer shall bind its successors and assigns (whether by merger, consolidation or otherwise), whether so expressed or not.
SECTION 11.4 Notices and Demands on Issuer, the Trustee and Securityholders. Any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the Holders of Securities or Coupons to or on the Issuer may be given or served by being deposited postage prepaid, first-class mail (except as otherwise specifically provided herein) addressed (until another address of the Issuer is filed by the Issuer with the Trustee) to Freeport-McMoRan Copper & Gold Inc., 1615 Poydras Street, New Orleans, Louisiana 70112, Attention: Corporate Secretary. Any notice, direction, request or demand by the Issuer or any Securityholder to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if in writing and given or made at the Corporate Trust Office, Attention: Corporate Trustee Administration Department.
Where this Indenture provides for notice to Holders of
Registered Securities, such notice shall be sufficiently given
(unless otherwise herein expressly provided) if in writing and
mailed, first-class postage prepaid, to each Holder entitled
thereto, at his last address as it appears in the Security
register. Where this Indenture provides for notice to Holders of
Unregistered Securities, notice shall be (i) mailed to those
Holders of Unregistered Securities who have filed their names and
addresses for this purpose with the Trustee within two preceding
years of giving such notice, with such notice being sufficiently
given (unless otherwise herein expressly provided) if in writing
and mailed, first-class postage prepaid, to each Holder entitled
thereto, at his last address as it appears in such filing and
(ii) published at least once in an Authorized Newspaper in the
City of New York, and at least once in an Authorized Newspaper in
London (and, if required by Section 3.7, at least once in an
Authorized Newspaper in Luxembourg). In any case where notice to
such Holders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular
Holder shall affect the sufficiency of such notice with respect
to other Holders. Where this Indenture provides for notice in
any manner, such notice may be waived in writing by the Person
entitled to receive such notice, either before or after the
event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Holders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
In case, by reason of the suspension of or irregularities in regular mail service, it shall be impracticable to mail notice to the Issuer and Securityholders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice.
SECTION 11.5 Officers' Certificate and Opinions of Counsel, Statements to Be Contained Therein. Upon any application or demand by the Issuer to the Trustee to take any action under any of the provisions of this Indenture, the Issuer shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent have been complied with, except that in the case of any such application or demand as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished.
Except as provided in Sections 3.5 and 12.4, each certificate or opinion provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture shall include (a) a statement that the Person making such certificate or providing such opinion has read such covenant or condition and the definitions relating thereto, (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based, (c) a statement that, in the opinion of such Person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with.
Any certificate, statement or opinion of an officer of the Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of counsel may be based, insofar as it relates to factual matters, information with respect to which is in the possession of the Issuer upon the certificate, statement or opinion of or representations by an officer or officers of the Issuer unless such counsel knows that the certificate, statement or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous.
Any certificate, statement or opinion of an officer of the Issuer or of counsel may be based, insofar as it relates to accounting matters, upon a certificate or opinion of or representations by an accountant or firm of accountants in the employ of the Issuer unless such officer or counsel, as the case may be, knows that the certificate or opinion or representations with respect to the accounting matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous.
Any certificate or opinion of any independent firm of public
accountants filed with and directed to the Trustee shall contain
a statement that such firm is independent.
SECTION 11.6 Payments Due on Saturdays, Sundays and
Holidays. If the date of maturity of interest on or principal of
the Securities of any series or any Coupons appertaining thereto
or the date fixed for redemption or repayment of any Security
shall not be a Business Day, then payment of interest or
principal need not be made on such date, but may be made on the
next succeeding Business Day with the same force and effect as if
made on the date of maturity or the date fixed for redemption or
repayment, and no interest shall accrue for the period after such
date.
SECTION 11.7 Conflict of Any Provision of Indenture with
Trust Indenture Act of 1939. If any provision hereof limits,
qualifies or conflicts with the duties imposed by any of Sections
310 through 317, inclusive, of the Trust Indenture Act of 1939 or
with another provision hereof which is required to be included by
any of Section 310 through 317, inclusive, by operation of
Section 318(c) thereof, such duties and required provision shall
control except as, and to the extent, such provision is expressly
excluded from this Indenture, as permitted by the Trust Indenture
Act of 1939.
SECTION 11.8 New York Law to Govern; Separability. This Indenture and each Security shall each be deemed to be a contract under the laws of the State of New York, and for all purposes shall be construed in accordance with the laws of said State, except as may otherwise be required by mandatory provisions of law.
In case any provision of this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected thereby.
SECTION 11.9 Counterparts. This Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument.
SECTION 11.10 Effect of Headings. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.
SECTION 11.11 Securities in a Foreign Currency or in ECU. Unless otherwise specified in an Officers' Certificate delivered pursuant to Section 2.3 of this Indenture with respect to a particular series of Securities, whenever for purposes of this Indenture any action may be taken by the Holders of a specified percentage in aggregate principal amount of Securities of all series or all series affected by a particular action at the time outstanding and, at such time, there are Outstanding Securities of any series which are denominated in a coin or currency other than Dollars (including ECUs), then the principal amount of Securities of such series which shall be deemed to be Outstanding for the purpose of taking such action shall be that amount of Dollars that could be obtained for such amount at the Market Exchange Rate. For purposes of this Section 11.11, Market Exchange Rate shall mean the noon Dollar buying rate in New York City for cable transfers of that currency as published by the Federal Reserve Bank of New York; provided, however, in the case of ECUs, Market Exchange Rate shall mean the rate of exchange determined by the Commission of the European Communities (or any successor thereto) as published in the Official Journal of the European Communities (such publication or any successor publication, the "Journal"). If such Market Exchange Rate is not available for any reason with respect to such currency, the Trustee shall use, in its sole discretion and without liability on its part, such quotation of the Federal Reserve Bank of New York or, in the case of ECUs, the rate of exchange as published in the Journal, as of the most recent available date, or quotations or, in the case of ECUs, rates of exchange from one or more major banks in The City of New York or in the country of issue of the currency in question, which for purposes of the ECU shall be Brussels, Belgium, or such other quotations or, in the case of ECU, rates of exchange as the Trustee shall deem appropriate. The provisions of this paragraph shall apply in determining the equivalent principal amount in respect of Securities of a series denominated in a currency other than Dollars in connection with any action taken by Holders of Securities pursuant to the terms of this Indenture including without limitation any determination contemplated in Section 5.1(f) or (g).
All decisions and determinations of the Trustee regarding the Market Exchange Rate or any alternative determination provided for in the preceding paragraph shall be in its sole discretion and shall, in the absence of manifest error, be conclusive to the extent permitted by law for all purposes and irrevocably binding upon the Issuer and all Holders.
SECTION 11.12 Judgment Currency. The Issuer agrees, to the fullest extent it may effectively do so under applicable law, that (a) if for the purpose of obtaining judgment in any court it is necessary to convert the sum due in respect of the principal of or interest on the Securities of any series (the "Required Currency") into a currency in which a judgment will be rendered (the "Judgment Currency"), the rate of exchange used shall be the rate at which in accordance with normal banking procedures the Trustee could purchase in The City of New York the Required Currency with the Judgment Currency on the day on which final unappealable judgment is entered, unless such day is not a New York Banking Day, then, to the extent permitted by applicable law, the rate of exchange used shall be the rate at which in accordance with normal banking procedures the Trustee could purchase in The City of New York the Required Currency with the Judgment Currency on the New York Banking Day preceding the day on which final unappealable judgment is entered and (b) its obligations under this Indenture to make payments in the Required Currency (i) shall not be discharged or satisfied by any tender, or any recovery pursuant to any judgment (whether or not entered in accordance with subsection (a)), in any currency other than the Required Currency, except to the extent that such tender or recovery shall result in the actual receipt, by the payee, of the full amount of the Required Currency expressed to be payable in respect of such payments, (ii) shall be enforceable as an alternative or additional cause of action for the purpose of recovering in the Required Currency the amount, if any, by which such actual receipt shall fall short of the full amount of the Required Currency so expressed to be payable and (iii) shall not be affected by judgment being obtained for any other sum due under this Indenture. For purposes of the foregoing, "New York Banking Day" means any day except a Saturday, Sunday or a legal holiday in The City of New York or a day on which banking institutions in The City of New York are authorized or required by law or executive order to close.
ARTICLE TWELVE
REDEMPTION OF SECURITIES AND SINKING FUNDS
SECTION 12.1 Applicability of Article. The provisions of this Article shall be applicable to the Securities of any series which are redeemable before their maturity or to any sinking fund for the retirement of Securities of a series except as otherwise specified as contemplated by Section 2.3 for Securities of such series.
SECTION 12.2 Notice of Redemption. Notice of redemption to the Holders of Registered Securities to be redeemed as a whole or in part at the option of the Issuer shall be given in the manner provided in Section 11.4, at least 30 days and not more than 60 days prior to the date fixed for redemption to such Holders of Securities. Notice of redemption to all Holders of Unregistered Securities shall be published in an Authorized Newspaper in the Borough of Manhattan, the City of New York and in an Authorized Newspaper in London (and, if required by Section 3.7, in an Authorized Newspaper in Luxembourg), in each case, once in each of three successive calendar weeks, the first publication to be not less than 30 nor more than 60 days prior to the date fixed for redemption. Any notice which is mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the Holder receives the notice. Failure to give notice by mail, or any defect in the notice to the Holder of any Security of a series designated for redemption as a whole or in part, shall not affect the validity of the proceedings for the redemption of any other Security of such series.
The notice of redemption to each such Holder shall specify the principal amount of each Security of such series held by such Holder to be redeemed, the Redemption Date, the applicable Redemption Price, and, if the Redemption Price was required to be calculated according, or pursuant to a formula or by reference to the value or price of any one or more commodities, currencies, indices, instruments or other securities, the method for such calculation and the basis for such Redemption Price, the place or places of payment, that payment will be made upon presentation and surrender of such Securities and, in the case of Securities with Coupons attached thereto, of all Coupons appertaining thereto maturing after the date fixed for redemption, that such redemption is pursuant to a mandatory or optional sinking fund, or both, if such be the case, that interest accrued to the Redemption Date will be paid as specified in said notice and that on and after said Redemption Date interest thereon or on the portions thereof to be redeemed will cease to accrue. In case any Security of a series is to be redeemed in part only the notice of redemption shall state the portion of the principal amount thereof to be redeemed and shall state that on and after the date fixed for redemption, upon surrender of such Security, a new Security or Securities of such series in principal amount equal to the unredeemed portion thereof will be issued.
The notice of redemption of Securities of any series to be redeemed at the option of the Issuer shall be given by the Issuer or, at the Issuer's request, by the Trustee in the name and at the expense of the Issuer.
On or before the Redemption Date specified in the notice of redemption given as provided in this Section, the Issuer will deposit with the Trustee or with one or more paying agents (or, if the Issuer is acting as its own paying agent, set aside, segregate and hold in trust as provided in Section 3.4) an amount of money sufficient to redeem on the Redemption Date all the Securities of such series to be redeemed at the appropriate Redemption Price, together with accrued interest to the Redemption Date. The Issuer will deliver to the Trustee at least 70 days prior to the date fixed for redemption an Officers' Certificate stating the aggregate principal amount of Securities to be redeemed. In case of a redemption at the election of the Issuer prior to the expiration of any restriction on such redemption or subject to compliance with conditions precedent, the Issuer shall deliver to the Trustee, prior to the giving of any notice of redemption to Holders pursuant to this Section, an Officers' Certificate stating that such restriction or condition has been complied with.
If less than all the Securities of a series are to be redeemed, the Trustee shall select, in such manner as it shall deem appropriate and fair, Securities of such series to be redeemed in whole or in part. Securities may be redeemed in part in multiples equal to the minimum authorized denomination for Securities of such series or any multiple thereof. The Trustee shall promptly notify the Issuer in writing of the Securities of such series selected for redemption and, in the case of any Securities of such series selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities of any series shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed.
SECTION 12.3 Payment of Securities Called for Redemption. If notice of redemption has been given as above provided, the Securities or portions of Securities specified in such notice shall become due and payable on the Redemption Date and at the place stated in such notice at the applicable Redemption Price, together with interest accrued to the Redemption Date, and on and after said Redemption Date (unless the Issuer shall default in the payment of such Securities at the Redemption Price, together with interest accrued to said Redemption Date) interest on the Securities or portions of Securities so called for redemption shall cease to accrue, and the unmatured Coupons, if any, appertaining thereto shall be void, and such Securities shall cease from and after the Redemption Date to be entitled to any benefit or security under this Indenture, and the Holders thereof shall have no right in respect of such Securities to be redeemed except the right to receive the applicable Redemption Price thereof and unpaid interest to the Redemption Date. On surrender of such Securities at a place of payment specified in said notice, together with all Coupons, if any, appertaining thereto maturing after the Redemption Date, such Securities or the specified portions thereof shall be paid and redeemed by the Issuer at the applicable Redemption Price, together with interest accrued thereon to the Redemption Date; provided that any payment of interest becoming due on or prior to the Redemption Date shall be payable in the case of Securities with Coupons attached thereto, to the Holders of the Coupons for such interest upon surrender thereof, and in the case of Registered Securities, registered as such on the relevant Regular Record Date subject to the terms and provisions of Sections 2.3 and 2.7 hereof.
If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the principal shall, until
paid or duly provided for, bear interest from the Redemption Date
at the rate of interest or Yield to Maturity (in the case of
Original Issue Discount Securities) specified in such Security.
If any Security with Coupons attached thereto is surrendered
for redemption and is not accompanied by all appurtenant Coupons
maturing after the date fixed for redemption, the surrender of
such missing Coupon or Coupons may be waived by the Issuer and
the Trustee, if there be furnished to each of them such security
or indemnity as they may require to save each of them harmless.
Upon surrender of any Security redeemed in part only, the Issuer shall execute and the Trustee shall authenticate and deliver to or on the order of the Holder thereof, at the expense of the Issuer, a new Security or Securities for such series, of authorized denominations, in principal amount equal to the unredeemed portion of the Security so presented.
SECTION 12.4 Mandatory and Optional Sinking Funds. The minimum amount of any sinking fund payment provided for by the terms of the Securities of any series is herein referred to as a "mandatory sinking fund payment", and any payment in excess of such minimum amount provided for by the terms of the Securities of any series is herein referred to as an "optional sinking fund payment". The date on which a sinking fund payment is to be made is herein referred to as the "sinking fund payment date".
In lieu of making all or any part of any mandatory sinking fund payment with respect to any series of Securities in cash, the Issuer may at its option (a) deliver to the Trustee Securities of such series theretofore purchased or otherwise acquired (except upon redemption pursuant to the mandatory sinking fund) by the Issuer or receive credit for Securities of such series (not previously so credited) theretofore purchased or otherwise acquired (except as aforesaid) by the Issuer and delivered to the Trustee for cancellation pursuant to Section 2.10, (b) receive credit for optional sinking fund payments (not previously so credited) made pursuant to this Section, or (c) receive credit for Securities of such series (not previously so credited) redeemed by the Issuer through any optional redemption provision contained in the terms of such series. Securities so delivered or credited shall be received or credited by the Trustee at the sinking fund redemption price specified in such Securities.
On or before the 60th day next preceding each sinking fund payment date for any series, the Issuer will deliver to the Trustee an Officers' Certificate (which need not contain the statements required by Section 11.5) (a) specifying the portion of the mandatory sinking fund payment to be satisfied by payment of cash and the portion to be satisfied by credit of Securities of such series and the basis for such credit, (b) stating that none of the Securities of such series to be so credited has theretofore been so credited, (c) stating that no defaults in the payment of interest or Events of Default with respect to such series have occurred (which have not been waived or cured) and are continuing and (d) stating whether or not the Issuer intends to exercise its right to make an optional sinking fund payment with respect to such series and, if so, specifying the amount of such optional sinking fund payment which the Issuer intends to pay on or before the next succeeding sinking fund payment date. Any Securities of such series to be credited and required to be delivered to the Trustee in order for the Issuer to be entitled to credit therefor as aforesaid which have not theretofore been delivered to the Trustee shall be delivered for cancellation pursuant to Section 2.10 to the Trustee with such Officers' Certificate (or reasonably promptly thereafter if acceptable to the Trustee). Such Officers' Certificate shall be irrevocable and upon its receipt by the Trustee the Issuer shall become unconditionally obligated to make all the cash payments or payments therein referred to, if any, on or before the next succeeding sinking fund payment date. Failure of the Issuer, on or before any such 60th day, to deliver or cause to be delivered such Officers' Certificate and Securities (subject to the parenthetical clause in the second preceding sentence) specified in this paragraph, if any, shall not constitute a default but shall constitute, on and as of such date, the irrevocable election of the Issuer (i) that the mandatory sinking fund payment for such series due on the next succeeding sinking fund payment date shall be paid entirely in cash without the option to deliver or credit Securities of such series in respect thereof and (ii) that the Issuer will make no optional sinking fund payment with respect to such series as provided in this Section.
If the sinking fund payment or payments (mandatory or optional or both) to be made in cash on the next succeeding sinking fund payment date plus any unused balance of any preceding sinking fund payments made in cash shall exceed $50,000 (or the equivalent thereof in any Foreign Currency or ECU) or a lesser sum in Dollars (or the equivalent thereof in any Foreign Currency or ECU) if the Issuer shall so request with respect to the Securities of any particular series, such cash shall be applied on the next succeeding sinking fund payment date to the redemption of Securities of such series at the sinking fund redemption price together with accrued interest to the date fixed for redemption. If such amount shall be $50,000 (or the equivalent thereof in any Foreign Currency or ECU) or less and the Issuer makes no such request then it shall be carried over until a sum in excess of $50,000 (or the equivalent thereof in any Foreign Currency or ECU) is available. The Trustee shall select, in the manner provided in Section 12.2 and subject to the limitations in Section 12.4, for redemption on such sinking fund payment date a sufficient principal amount of Securities of such series to absorb said cash, as nearly as may be practicable, and shall (if requested in writing by the Issuer) inform the Issuer of the serial numbers of the Securities of such series (or por tions thereof) so selected. The Trustee, in the name and at the expense of the Issuer (or the Issuer, if it shall so request the Trustee in writing) shall cause notice of redemption of the Securities of such series to be given in substantially the manner provided in Section 12.2 (and with the effect provided in Section 12.3) for the redemption of Securities of such series in part at the option of the Issuer. The amount of any sinking fund payments not so applied or allocated to the redemption of Securities of such series shall be added to the next cash sinking fund payment for such series and, together with such payment, shall be applied in accordance with the provisions of this Section. Any and all sinking fund monies held on the stated maturity date of the Securities of any particular series (or earlier, if such maturity is accelerated), which are not held for the payment or redemption of particular Securities of such series shall be applied, together with other monies, if necessary, sufficient for the purpose, to the payment of the principal of, and interest on, the Securities of such series at maturity.
On or before each sinking fund payment date, the Issuer shall pay to the Trustee in cash or shall otherwise provide for the payment of all interest accrued to the date fixed for redemption on Securities to be redeemed on the next following sinking fund payment date.
The Trustee shall not redeem or cause to be redeemed any
Securities of a series with sinking fund monies or give any
notice of redemption of Securities for such series by operation
of the sinking fund during the continuance of a default in
payment of interest on such Securities or of any Event of Default
except that, where the giving of notice of redemption of any
Securities shall theretofore have been made, the Trustee shall
redeem or cause to be redeemed such Securities, provided that it
shall have received from the Issuer a sum sufficient for such
redemption. Except as aforesaid, any monies in the sinking fund
for such series at the time when any such default or Event of
Default shall occur, and any monies thereafter paid into the
sinking fund, shall, during the continuance of such default or
Event of Default, be deemed to have been collected under Article
Five and held for the payment of all such Securities. In case
such Event of Default shall have been waived as provided in
Section 5.10 or the default cured on or before the sixtieth day
preceding the sinking fund payment date in any year, such monies
shall thereafter be applied on the next succeeding sinking fund
payment date in accordance with this Section to the redemption of
such Securities.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of November 15, 1996.
FREEPORT-McMoRan Copper & Gold Inc.
By: \s\ R. Foster Duncan
R. Foster Duncan
Vice President and Treasurer
[CORPORATE SEAL]
Attest:
By: \s\ Michael C. Kilanowski, Jr.
Michael C. Kilanowski, Jr.
Secretary
|
The Chase Manhattan Bank, as Trustee
By: \s\ P. Morabito
P. Morabito
Vice President
[CORPORATE SEAL OF TRUSTEE]
Attest:
By: \s\ Gregory P. Shea
Gregory P. Shea
Assistant Vice President
|
STATE OF LOUISIANA
PARISH OF ORLEANS
On this 15th day of November, 1996 before me personally came
R. Foster Duncan, to me personally known, who, being by me duly
sworn, did depose and say that he resides at 1442 Webster, New
Orleans, Louisiana, that he is a Vice President and Treasurer of
Freeport-McMoRan Copper & Gold Inc., one of the corporations
described in and which executed the above instrument; that he
knows the corporate seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so
affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like
authority.
[NOTARIAL SEAL]
\s\ Douglas N. Currault, II
Notary Public
STATE OF NEW YORK
|
COUNTY OF NEW YORK
On this 15th day of November, 1996, before me personally came P. Morabito, to me personally known, who, being by me duly sworn, did depose and say that she resides at 60 Kinglet Drive South, Cranbury, New Jersey; that she is a Vice President of The Chase Manhattan Bank, one of the corporations described in and which executed the above instrument; that she knows the corporate seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that she signed her name thereto by like authority.
[NOTARIAL SEAL]
\s\ Annabelle DeLuca
Notary Public
|
FREEPORT-McMoRan COPPER & GOLD INC.
and
THE CHASE MANHATTAN BANK,
as Trustee
FIRST SUPPLEMENTAL INDENTURE
Dated as of November 18, 1996
to
SENIOR INDENTURE
Dated as of November 15, 1996
$200,000,000
7.50% Senior Notes due 2006
and
$250,000,000
7.20% Senior Notes due 2026
FIRST SUPPLEMENTAL INDENTURE
THIS FIRST SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of November 18, 1996, is by and between Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the "Issuer"), and The Chase Manhattan Bank, a New York corporation, as trustee (the "Trustee"), and to the Senior Indenture, dated as of November 15, 1996 (the "Original Indenture"), between the Issuer and the Trustee (the Original Indenture, as supplemented by this First Supplemental Indenture being referred to herein as the "Indenture").
W I T N E S S E T H :
WHEREAS, the Issuer has heretofore executed and delivered to the Trustee the Original Indenture providing, among other things, for the issuance from time to time of the Issuer's Securities;
WHEREAS, the Issuer has duly authorized (i) the creation of the first and second series of securities under the Indenture, to be known as its 7.50% Senior Notes due 2006 (the "2006 Notes") and its 7.20% Senior Notes due 2026 (the "2026 Notes," and together with the 2006 Notes, the "Senior Notes") and (ii) the execution and delivery of this Supplemental Indenture to establish the Senior Notes as two series of Securities under the Indenture and to provide for, among other things, the issuance of and the respective forms and terms of the Senior Notes and certain additional covenants;
WHEREAS, Section 8.1(e) of the Original Indenture provides for the Issuer and the Trustee to enter into an indenture supplemental to the Original Indenture to establish the form and terms of Securities of any series as provided by Sections 2.1 and 2.3 of the Original Indenture;
WHEREAS, Section 2.3 of the Original Indenture provides for various matters with respect to any series of Securities issued under the Indenture to be established in an indenture supplemental to the Original Indenture; and
WHEREAS, all things necessary to make the Senior Notes, when executed by the Issuer and authenticated and delivered by the Trustee as provided in the Indenture, the valid, binding and legal obligations of the Issuer, and to constitute this First Supplemental Indenture a valid agreement of the Issuer according to its terms have been done;
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises and the purchases of the Securities of the two series provided for herein by the Holders thereof, the Issuer and the Trustee mutually covenant and agree, for the equal and proportionate benefit of the respective Holders from time to time of each such series as follows:
ARTICLE ONE
DEFINITIONS
1.1 Certain Terms Defined. Unless otherwise defined herein or unless the context of this First Supplemental Indenture otherwise requires, all terms used in this First Supplemental Indenture which are defined in the Original Indenture shall have the meanings assigned to them in the Original Indenture. The following terms, which are in addition to those defined in Section 1.1 of the Original Indenture, shall have the respective meanings specified in this Section. Such terms shall apply only to the Senior Notes except to the extent specifically made applicable to any other series of Securities by the Board Resolutions, Officers' Certificate or supplemental indenture establishing such series of Securities as provided for in Section 2.3 of the Original Indenture. All references herein to Articles and Sections, unless otherwise specified, refer to the corresponding Articles and Sections of this First Supplemental Indenture. The terms "herein," "hereof," "hereunder" and other words of similar import refer to this First Supplemental Indenture.
"Attributable Debt" when used in connection with a Sale/Leaseback Transaction means, at the time of determination, the lesser of: (a) the fair value of the property subject thereto (as determined in good faith by the Issuer); or (b) the then present value of the total net amount of rent required to be paid under the lease in respect of such Sale/Leaseback Transaction during the remaining term thereof (including any renewal term or period for which such lease has been extended) or until the earlier date on which the lessee may terminate such lease upon payment of a penalty or a lump-sum termination payment (in which case the total net rent shall include such penalty or termination payment), computed by discounting from the respective due dates to such dates such total net amount of rent at the actual interest factor included in such rent or implicit in the terms of the applicable Sale/Leaseback Transaction, as determined in good faith by the Issuer. For purposes of the foregoing definition, rent shall not include amounts required to be paid by the lessee, whether or not designated as rent or additional rent, on account of or contingent upon maintenance and repair, insurance, taxes, assessments, water rates and similar charges.
"Business Day" means a day which, in the City and State of New York, is neither a Saturday, Sunday or legal holiday nor a day on which banking institutions and trust companies are authorized by law or regulation or executive order to close.
"Capital Stock" means any and all shares, interests, rights to purchase, options, participations or other equivalents of or interests in (however designated) corporate stock or any security issued in exchange therefor or distributed in respect thereof.
"Capitalized Lease Obligation" of any Person means any obligation that is required to be classified and accounted for as a capital lease on a balance sheet of such Person in accordance with generally accepted accounting principles.
"Comparable Treasury Issue" means, with respect to any series of Senior Notes, the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Senior Notes of such series that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such series of Senior Notes.
"Comparable Treasury Price" means, with respect to any series of Senior Notes, with respect to any redemption date, (i) the average of the bid and asked prices for the Comparable Treasury Issue for such series (expressed in each case as a percentage of its principal amount) on the third Business Day preceding such redemption date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or (ii) if such release (or any successor release) is not published or does not contain such prices on such Business Day, (A) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (B) if the Trustee obtains fewer than three such Reference Treasury Dealer Quotations, the average of all such Quotations.
"Consolidated Total Assets" means at any date the consolidated assets of a Person and its consolidated Subsidiaries, including all investments by such Person or its consolidated Subsidiaries in other Persons, all as reflected on the most recent consolidated balance sheet of such Person and its consolidated Subsidiaries.
"COW Area Block A" means the geographic area designated as Contract Block A in the Contract of Work between the Government of the Republic of Indonesia and PT-FI, dated December 30, 1991, as the same has been renewed, replaced, extended, amended, supplemented or modified to the date hereof, containing, as of the date hereof, all proved and probable reserves of PT-FI.
"Debt" means (without duplication), with respect to any Person, (i) all obligations of such Person for borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof), (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred and unpaid purchase price of property or services (including conditional sale obligations and title retention arrangements), except accounts payable and accrued expenses incurred in the ordinary course of business, (iv) all Capitalized Lease Obligations of such Person, (v) all obligations of such Person for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction securing obligations described in the foregoing clauses (i) through (iv), (vi) any obligations of such Person with respect to the redemption, repayment or other purchase of any preferred stock (but excluding any obligation due within the following six months, the payment of which is secured by a deposit of cash or U.S. Government Obligations), (vii) all Debt of others secured by a Lien on any asset of such Person, whether or not such Debt is assumed by such Person, and (viii) all Debt of others guaranteed by such Person to the extent of such guarantee.
"Event of Default" means any event or condition specified in Section 5.1 of the Original Indenture, as amended, modified and supplemented by Article Four hereof.
"First Supplemental Indenture" means this First Supplemental Indenture dated as of November 18, 1996 by and between the Issuer and the Trustee.
"Independent Investment Banker" means one of the Reference Treasury Dealers appointed by the Issuer as Independent Investment Banker for purposes of this First Supplemental Indenture.
"issue" means issue, assume, guarantee, incur or otherwise become liable for; provided, however, that any Debt or Capital Stock of a Person existing at the time such Person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be issued by such Subsidiary at the time it becomes a Subsidiary.
"Lien" means, with respect to any property or assets, any mortgage or deed of trust, pledge, charge, security interest, assignment, encumbrance, conditional sale or other title retention agreement; provided, however, that Lien shall not include a trust established for the purpose of defeasing any Debt pursuant to the terms evidencing or providing for the issuance of such Debt if the assets of such trust are limited to cash and U.S. Government Obligations.
"Non-Recourse Obligation" means, at any date, Debt substantially related to (i) the acquisition of property or assets not owned by the Issuer or any of its Subsidiaries as of the date of original issuance of the Senior Notes or (ii) the financing of a project involving the acquisition or development of any property or assets of the Issuer or any of its Subsidiaries, as to which in the case of clause (i) or (ii) the obligee with respect to such Debt has no recourse to the general corporate funds or the property or assets, in general, of the Issuer.
"PT-FI" means P. T. Freeport Indonesia Company, a limited liability company organized under the laws of Indonesia and also domesticated in Delaware, and its successors and assigns.
"PT-FI Bank Credit Facility" means the credit facility evidenced by that certain $550 million Credit Agreement, dated as of October 27, 1989, as amended, modified, supplemented or restated from time to time, by and among PT-FI, the Issuer, the financial institutions from time to time parties thereto, First Trust of New York, National Association, as PT-FI Trustee, and The Chase Manhattan Bank as Administrative Agent, Security Agent, JAA Security Agent and Documentary Agent.
"Reference Treasury Dealer" means each of UBS Securities LLC, Chase Securities Inc. and CS First Boston Corporation and their respective successors; provided however, that if any of the foregoing cease to be a primary U.S. Government Securities dealer in New York City (a "Primary Treasury Dealer"), the Issuer shall substitute therefor another Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to any series of Senior Notes, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue for such series (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the third Business Day preceding such redemption date.
"Regular Record Dates" means the dates set forth as such in Section 2.4(4).
"Sale/Leaseback Transaction" means any arrangement with any Person providing for the leasing by the Issuer, for a period of more than three years, of any property or assets, which property or assets have been or are to be sold or transferred by the Issuer to such Person in contemplation of such leasing.
"Senior Notes" has the meaning stated in the second recital of this First Supplemental Indenture.
"Senior Secured Indebtedness" means Debt of the Issuer secured by a Lien on any property or assets of the Issuer.
"Significant Subsidiary" means any Subsidiary of the Issuer the Consolidated Total Assets of which equal or exceed an amount equal to 20% of the Issuer's Consolidated Total Assets.
"Subsidiary" of a Person means any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or any of its Subsidiaries, and any partnership of which more than 50% of the partnership interests are owned or controlled, directly or indirectly, by such Person or any of its Subsidiaries.
"Treasury Rate" means, with respect to any series of Senior Notes, with respect to any redemption date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue for such series, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.
"2006 Notes" or "2006 Note" has the meaning stated in the second recital of this First Supplemental Indenture.
"2026 Notes" or "2026 Note" has the meaning stated in the second recital of this First Supplemental Indenture.
ARTICLE TWO
TERMS AND ISSUANCE OF 7.50% SENIOR NOTES DUE 2006
AND 7.20% SENIOR NOTES DUE 2026
SECTION 2.1. Issue of Senior Notes. The first and second series
of Securities to be issued under the Indenture, which shall be designated
the "7.50 % Senior Notes due 2006" and the "7.20% Senior Notes due 2026,"
respectively, shall be executed, authenticated and delivered in
accordance with the provisions of, and shall in all respects be subject
to, the terms, conditions and covenants of the Indenture (including the
forms of Senior Notes set forth in Exhibits A and B hereto). The
aggregate principal amount of 2006 and 2026 Notes which may be
authenticated and delivered under the Indenture shall not exceed
$200,000,000 and $250,000,000, respectively (except for Senior Notes
authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Senior Notes pursuant to Sections 2.8,
2.9, 2.11, 8.5 or 12.3 of the Original Indenture). The entire amount of
Senior Notes may forthwith be executed by the Issuer and delivered to the
Trustee and shall be authenticated by the Trustee and delivered to or
upon the order of the Issuer (contained in a Company order) pursuant to
Section 2.4 of the Original Indenture.
SECTION 2.2 Forms. The 2006 Notes and the 2026 Notes shall each be issued in whole in the form of one or more Registered Global Securities and shall be substantially in the respective forms set forth in Exhibits A and B hereto, each of which is hereby incorporated by reference and made a part of the Indenture. The Depositary for such Registered Global Securities shall be The Depository Trust Company, 55 Water Street, New York, New York 10041.
SECTION 2.3 Stated Maturity. The 2006 Notes shall have a Stated Maturity with respect to the principal of (and any accrued and unpaid interest or premium on) such Securities of November 15, 2006, and the 2026 Notes shall have a Stated Maturity with respect to the principal of (and any accrued and unpaid interest or premium on) such Securities of November 15, 2026.
SECTION 2.4 Interest. Subject to the terms of the Senior Notes set forth in Exhibits A and B hereto, the following shall apply to the Senior Notes:
(1) The 2006 Notes shall bear interest at the rate of 7.50% per annum and the 2026 Notes shall bear interest at the rate of 7.20% per annum.
(2) Interest in respect of the Senior Notes shall accrue from November 18, 1996 or from the most recent Interest Payment Date to which interest has been paid or duly provided for.
(3) The Interest Payment Dates on which interest shall be payable in respect of the Senior Notes shall be May 15 and November 15 in each year, commencing May 15, 1997.
(4) The Regular Record Dates for interest in respect of the Senior Notes shall be April 30 and October 31 (whether or not a Business Day) in respect of the interest payable on May 15 and November 15, respectively.
(5) Interest on the Senior Notes shall be calculated on the basis of a 360-day year consisting of twelve 30-day months.
SECTION 2.5 Redemption. The Senior Notes will be redeemable and the provisions of Article Twelve of the Original Indenture will be applicable to the Senior Notes, to the extent and in the manner provided in Article Seven hereof.
SECTION 2.6 Additional Covenants. The covenants contained in Article Three of this First Supplemental Indenture shall apply to the Senior Notes in addition to the covenants contained in the Original Indenture.
SECTION 2.7 Amendments to Events of Default. The amendments to
Section 5.1 of the Original Indenture contained in Article Four of this
First Supplemental Indenture shall apply to the Senior Notes.
SECTION 2.8 Amendments to Article Nine. The amendments to Section 9.1 of the Original Indenture contained in Article Six of this First Supplemental Indenture shall apply to the Senior Notes.
SECTION 2.9 Repayment Option. The 2026 Notes may be repaid, at the option of the holders thereof on November 15, 2003, in accordance with and pursuant to the terms of Sections 11.13 and 11.14 of the Original Indenture as added thereto by Article Eight of this First Supplemental Indenture.
ARTICLE THREE
ADDITIONAL COVENANTS
For purposes of the Senior Notes, and solely for the benefit of the Holders thereof, Article Three of the Original Indenture shall be amended by adding thereto the following additional covenants of the Issuer. Such covenants shall apply only to the Senior Notes except to the extent specifically made applicable to any other series of Securities by the Board Resolutions, Officers' Certificate or supplemental indenture establishing such series of Securities as provided for in Section 2.3 of the Original Indenture.
"SECTION 3.8 Limitation on Liens. Except as provided in this
Section 3.8, the Issuer will not issue, create, incur, assume or suffer
to exist any Debt secured by any Lien upon (i) any property or assets,
now owned or hereafter acquired by the Issuer or (ii) any Capital Stock
of PT-FI or a Restricted PT-FI Transferee (as defined below) now owned or
hereafter acquired by the Issuer or any Subsidiary of the Issuer without
making effective provision whereby any and all Senior Notes then or
thereafter Outstanding will be secured by a Lien equally and ratably with
(or, at the Issuer's option, prior to) any and all obligations thereby
secured for so long as any such obligations shall be so secured. The
foregoing restriction, however, will not, however, apply to:
(a) Liens on the Capital Stock of any Subsidiary, including any Restricted PT-FI Transferee, to secure the Issuer's guarantee of any Debt of such Subsidiary in an aggregate principal amount for all such Debt of all such Subsidiaries (including any extension, refinancing, renewal, replacement or refunding of such Debt) not to exceed the existing committed amount under the PT-FI Bank Credit Facility on November 13, 1996, provided that in the case of a Lien on the Capital Stock of PT-FI in no event shall Capital Stock representing more than a 50.1% ownership interest in PT-FI on a fully-diluted basis be subject to any such Lien;
(b) Liens to secure any Debt of the Issuer (including any guarantee by the Issuer of any Debt of a Subsidiary of the Issuer) in an aggregate principal amount (including any extension, refinancing, renewal, replacement or refunding of such Debt) not to exceed the principal amount of the Debt (excluding for this purpose the amount committed or outstanding under the PT-FI Bank Credit Facility on November 13, 1996 and the aggregate amount of Debt of FM Properties Inc. and its subsidiaries guaranteed or committed to be guaranteed by the Issuer on November 13, 1996) committed or outstanding on November 13, 1996, which amount does not exceed $630 million;
(c) Liens incurred on real or personal property, including the Capital Stock of any Subsidiary acquiring or owning such property, for the purpose of (i) financing all or any part of the purchase price of such property by the Issuer or such Subsidiary and incurred prior to, at the time of, or within 180 days after, the acquisition of such property or (ii) financing all or any part of the cost of construction, improvement, development or expansion of any such property, provided that in the case of clause (i) or (ii) the amount of such financing shall not exceed the amount expended in the acquisition of, or construction, improvement or development of, such property; provided further, that the Lien permitted by this clause (c) shall not include any Lien on the Capital Stock of (x) PT-FI or (y) any other Subsidiary of the Issuer to which PT-FI has transferred, directly or indirectly, assets with a value in excess of $10 million and which are within or constitute a part of COW Area Block A, other than (A) machinery, equipment, fixtures, infrastructure and real property (excluding any and all mineral rights appertaining thereto) that is not directly involved in the mining of COW Area Block A and (B) assets that are transferred by PT-FI on terms that are no less favorable to PT-FI than those that could have been obtained by PT-FI in a comparable transaction with an unrelated party (any such Subsidiary described in clause (y) being referred to herein as a "Restricted PT-FI Transferee");
(d) Liens on property or other assets existing at the time of acquisition thereof by the Issuer, including acquisition through merger, consolidation or the purchase of property or other assets; provided that such Liens do not extend to other property or assets of the Issuer;
(e) Liens created in connection with a project financed with, and created to secure a Non-Recourse Obligation, provided that such Liens are limited (i) to the property or assets acquired, constructed or improved with the proceeds of such Non-Recourse Obligation and (ii) to the Capital Stock of a special purpose Subsidiary of the Issuer created to issue or incur such Non-Recourse Obligation;
(f) Liens arising from or in connection with the conveyance of any production payment or similar obligation or instrument with respect to any mineral or natural resource that is not in production on November 13, 1996;
(g) Liens to secure Debt incurred in connection with the construction, installation or financing of pollution control or abatement facilities or other forms of industrial revenue or development bond financing, which Liens extend solely to the property which is the subject thereof;
(h) Liens to secure Debt issued or guaranteed by the United States or any state or any department, agency or instrumentality of the United States, incurred in connection with the financing of the construction, refurbishment or operation of any property or assets of the Issuer, which Liens extend solely to the property which is the subject thereof;
(i) Liens arising by reason of deposits necessary to obtain standby letters of credit and surety bonds in the ordinary course of business;
(j) Liens in favor of governmental bodies to secure progress, advance and other payments required in connection with the acquisition, possession or use of any property or assets of the Issuer;
(k) Liens in favor of customs and revenue authorities or incurred upon any property or assets in accordance with customary banking practice to secure any indebtedness incurred in connection with the exporting of goods to, or between, or the marketing of goods, or the importing of goods from, foreign countries, which Liens extend only to the property or asset being so exported or imported;
(l) Liens upon property or assets sold by the Issuer resulting from the exercise of any rights or arising out of defaults on receivables to secure Debt relating to the sale of such property or assets; and
(m) Liens to secure Debt incurred to extend, refinance, renew, replace or refund (or successive extensions, refinancings, renewals, replacements or refundings) of any Debt secured by any Lien referred to in the foregoing clauses (c) through (l) so long as such Lien does not extend to any other property and the amount of such Debt so secured is not increased above the amount outstanding immediately prior to such refinancing.
Notwithstanding the foregoing, the Issuer may create or assume Liens in addition to those permitted by the preceding sentence of this Section 3.8 and renew, extend or replace such Liens, provided that at the time of such creation, assumption, renewal, extension or replacement, and after giving effect thereto, the Debt so secured by any such Lien plus any Attributable Debt does not exceed 10% of Consolidated Total Assets as shown on the balance sheet of the Issuer as of the end of the most recent fiscal quarter prior to the incurrence of the Debt for which a balance sheet is available."
"SECTION 3.9 Limitation on Sale/Leaseback Transactions. Except as otherwise provided in this Section 3.9, the Issuer will not enter into any Sale/Leaseback Transaction unless (a) the Issuer would be entitled to incur Debt, in a principal amount equal to the Attributable Debt with respect to such Sale/Leaseback Transaction secured by a Lien on the property subject to such Sale/Leaseback Transaction pursuant to Section 3.8 above, without equally and ratably securing the Outstanding Senior Notes pursuant to Section 3.8 above; (b) since the date of the original issuance of the Senior Notes and within a period commencing six months prior to the effective date of such Sale/Leaseback Transaction and ending six months thereafter, the Issuer has expended or will expend for any property (including amounts expended for the acquisition, and for additions, alterations, improvements and repairs thereto) an amount equal to all or a portion of the net proceeds received from such transaction and the Issuer elects to designate such amount as a credit against the application of the restrictions set forth in Section 3.8 above to such transaction (with any such amount not being so designated to be applied as set forth in (c) below); or (c) the Issuer, during or immediately after the expiration of the 12 months after the effective date of any
such Sale/Leaseback Transaction, applies to the voluntary defeasance or retirement of the Senior Notes and any of its other Senior Secured Indebtedness an amount equal to the greater of the net proceeds of the sale or transfer of the property leased in such transaction or the Attributable Debt as determined by the Issuer in an Officers' Certificate delivered to the Trustee at the time of entering into such transaction (in either case adjusted to reflect the remaining term of the lease and any amount utilized by the Issuer as set forth in (b) above), less an amount equal to the principal amount of the Senior Notes delivered within 12 months after the date of such arrangement to the Trustee for retirement and cancellation and excluding retirements of Senior Notes and any Senior Secured Indebtedness as a result of conversions or pursuant to mandatory sinking fund or mandatory prepayment provisions or by payment at maturity."
"SECTION 3.10 Payment of Taxes and Other Claims. The Issuer will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) taxes, assessments and governmental charges levied or imposed upon the Issuer or upon the income, profits or property of the Issuer, and (2) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a Lien upon the property of the Issuer; provided, however, that the Issuer shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith in appropriate proceedings."
ARTICLE FOUR
EVENTS OF DEFAULT
For purposes of the Senior Notes, and for the benefit of the Holders
thereof, Section 5.1 of the Original Indenture shall be amended (i) by
amending and restating clause (b) of the definition of "Event of Default"
as set forth below, (ii) by adding to such definition a new clause (c) as
set forth below and renumbering clause (c) of such definition as clause
(d), (iii) by substituting clauses (e), (f), (g) and (h) set forth below
for clauses (d), (e), (f) and (g), respectively, of the definition of
"Events of Default" in the Original Indenture, (iv) by renumbering clause
(h) of such definition as clause (i) and (v) by substituting the material
set forth under "Insert" below for the balance of the first full
paragraph and the second full paragraph of Section 5.1 of the Original
Indenture. Such amended and additional Events of Default shall apply
only to the Senior Notes except to the extent specifically made
applicable to any other series of Securities by the Board Resolutions,
Officers' Certificate or supplemental indenture establishing such series
of Securities as provided for in Section 2.3 of the Original Indenture.
"(b) default in the payment of all or any part of the principal of any of the Securities of such series of Senior Notes as and when the same shall become due and payable at their Stated Maturities, upon redemption, or, in the case of the 2026 Notes, upon exercise by a holder of any such 2026 Note of the repayment option described in and pursuant to Section 11.13 hereof, or otherwise; or"
"(c) failure on the part of the Issuer to comply with the covenants contained in Section 9.1 of the Indenture; or"
"(e) the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the Issuer or any Significant Subsidiary in an involuntary case or proceeding under any applicable Insolvency Law or (B) a decree or order adjudging the Issuer or any Significant Subsidiary a bankrupt or insolvent under any applicable Insolvency Law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Issuer or any Significant Subsidiary or of any substantial part of the property of the Issuer or any Significant Subsidiary or ordering the winding up or liquidation of the affairs of the Issuer or any Significant Subsidiary, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or"
"(f) the commencement by the Issuer or any Significant Subsidiary of a voluntary case or proceeding under any applicable Insolvency Law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by the Issuer or any Significant Subsidiary to the entry of a decree or order for relief in respect of the Issuer or any Significant Subsidiary in an involuntary case or proceeding under any applicable Insolvency Law or to the commencement of any bankruptcy or insolvency case or proceeding against the Issuer or any Significant Subsidiary, or the filing by the Issuer or any Significant Subsidiary of a petition, answer or consent seeking reorganization or relief under any applicable Insolvency Law, or the consent by the Issuer or any Significant Subsidiary to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Issuer or any Significant Subsidiary, or of any substantial part of the property of the Issuer or any Significant Subsidiary, or the making by the Issuer or any Significant Subsidiary of an assignment for the benefit of creditors, or the admission by the Issuer or any Significant Subsidiary in writing of its inability to pay its debts generally as they become due, or the taking of corporate action (which shall involve the passing of one or more Board Resolutions by the Issuer or any Significant Subsidiary) in furtherance of any such action; or"
"(g) the acceleration of the maturity or non-payment within any applicable grace period after final maturity of any Debt (other than the Senior Notes or any Non-Recourse Obligation) of the Issuer or any Significant Subsidiary having an outstanding principal amount of $40,000,000 or more individually or in the aggregate (or the equivalent thereof in any other currency or composite currency) if, in the case of an acceleration, such acceleration has not been rescinded or annulled within a period of 30 days; or"
"(h) the rendering of one or more judgments or orders for the payment of money in the aggregate in excess of $40,000,000 (calculated net of any insurance coverage that the insurer has irrevocably acknowledged to the Issuer or any Significant Subsidiary as covering such judgment in whole or in part) against the Issuer or any Significant Subsidiary and such judgment or order shall continue unsatisfied and unstayed for a period of 60 days,"
Insert: "provided that if any such failure or acceleration referred to in clause (g) above shall cease or be cured, waived, rescinded or annulled then the Event of Default hereunder by reason thereof, and any acceleration under this Section 5.1 resulting solely therefrom, shall be deemed likewise to have been thereupon cured, waived, rescinded or annulled without further action on the part of either the Trustee or any of the Holders of the Securities of such series."
"If an Event of Default occurs with respect to the Securities of a series of Senior Notes and is continuing (other than an Event of Default specified in clause (e) or (f) above), then, and in each and every such case, unless the principal of all of the Securities of such series of Senior Notes shall have already become due and payable, either the Trustee or the Holders of not less than 25% in aggregate principal amount of the Securities of such series then Outstanding hereunder, by notice in writing to the Issuer (and to the Trustee if given by Securityholders), may declare the entire principal, plus accrued and unpaid interest, if any, through the date of the declaration of acceleration of all the Securities of such series, to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable. If an Event of Default specified in clause (e) or (f) of this Section occurs, the principal amount of all the Securities of such series shall automatically, and without any declaration or other action on the part of the Trustee or any Holder, become immediately due and payable. The amount due and payable on the acceleration of any Security will be equal to 100% of the principal amount of such Security, plus accrued interest, if any, to the date of payment. The foregoing provisions, however, are subject to the condition that if, at any time after the principal of the Securities of such series shall have been so declared due and payable, and before any judgment or decree for the payment of the monies due shall have been obtained or entered as hereinafter provided, the Issuer shall pay or shall deposit with the Trustee a sum sufficient to pay all matured installments of interest, if any, upon all the Securities of such series, and the principal of any and all Securities of such series which shall have become due otherwise than by acceleration (with interest upon such principal and, to the extent that payment of such interest is enforceable under applicable law, on overdue installments of interest, if any, at the same rate as the rate of interest specified in the Securities of such series, to the date of such payment or deposit) and such amount as shall be sufficient to cover reasonable compensation to the Trustee and each predecessor Trustee, their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee except as a result of negligence or bad faith, and if any and all Events of Default with respect to such series under this Indenture, other than the non-payment of the principal of Securities which shall have become due by acceleration, shall have been cured, waived or otherwise remedied as provided herein--then and in every such case the Holders of a majority in aggregate principal amount of the Securities of such series then Outstanding, by written notice to the Issuer and to the Trustee, may waive all defaults with respect to such series and rescind and annul such declaration and its consequences, but no such waiver or rescission and annulment shall extend to or shall affect any subsequent Default or shall impair any right consequent thereon."
For purposes of the Senior Notes, and for the benefit of the Holders thereof, Section 5.2 of the Original Indenture shall be amended by deleting the following words from clause (b) thereof: "other than a Default that is the result of an optional redemption by the Holders of Securities of any series, the amount of which is not in excess of $50,000,000 or the equivalent thereof in any currency or composite currency, unless such Default shall have continued for a period of 60 days after giving a notice with respect thereto under Section 5.1(c),". Such deletion shall apply only to the Senior Notes except to the extent specifically made applicable to any other series of Securities by Board Resolutions, Officers' Certificates or supplemental indentures establishing such series of Securities as provided for in Section 2.3 of the Original Indenture.
ARTICLE FIVE
CONCERNING THE TRUSTEE
For purposes of the Senior Notes, the following paragraph shall be added to the end of Section 6.1 of the Original Indenture. Such amended paragraph shall apply to the Senior Notes and to any other series of Securities to which the foregoing amended and additional Events of Default are made applicable as aforesaid.
"The Trustee should not be charged with knowledge of any Event of Default under Section 5.1(c), (g) or (h) or of the identity of any Significant Subsidiary unless a Responsible Officer of the Trustee shall have actual knowledge thereof or the Trustee shall have received written notice thereof in accordance with Section 11.4 hereof from the Issuer or any Securityholder."
ARTICLE SIX
CONSOLIDATION, MERGER AND SALE OF ASSETS
For purposes of the Senior Notes, and solely for the benefit of the Holders thereof, Article Nine of the Original Indenture shall be amended by deleting Section 9.1 of the Original Indenture and substituting therefor the following provisions. Such amended provisions shall apply only to the Senior Notes except to the extent specifically made applicable to any other series of Securities by the Board Resolutions, Officers' Certificate or supplemental indenture establishing such series of Securities as provided for in Section 2.3 of the Original Indenture.
"SECTION 9.1 Covenant of the Issuer Not to Merge, Consolidate, Sell or Convey Property Except Under Certain Conditions. The Issuer covenants that it will not merge with or into or consolidate with any Person or sell, convey, transfer, lease or otherwise dispose of all or substantially all of its assets to any Person and the Issuer shall not permit any Person to consolidate with or merge into the Issuer or sell, convey, transfer, lease or otherwise dispose of all or substantially all of its assets to the Issuer unless (i) either the Issuer (in the case of a merger) shall be the continuing corporation, or the successor corporation or Person that acquires by sale, conveyance, transfer, lease or disposition all or substantially all of the assets of the Issuer shall be a corporation organized under the laws of the United States of America or any State thereof or the District of Columbia, and shall expressly assume, by supplemental indenture, in form satisfactory to the Trustee, executed and delivered to the Trustee by such corporation pursuant to Article Eight hereof, all of the obligations of the Issuer pursuant to this Indenture and the Senior Notes and the due and punctual performance of any covenant of this Indenture on the part of the Issuer to be performed or observed; (ii) immediately after giving effect to such transaction and treating any Debt which becomes an obligation of the Issuer or any Subsidiary of the Issuer as a result thereof as having been incurred by the Issuer or such Subsidiary at the time of such transaction, no Default or Event of Default shall have occurred and be continuing; (iii) if, as a result of any such transaction, property or assets of the Issuer or Capital Stock of PT-FI or a Restricted PT-FI Transferee would become subject to a Lien prohibited by Section 3.8 hereof, the Issuer shall have secured the Senior Notes as required by said Section 3.8; and (iv) the Issuer has delivered to the Trustee an Officers' Certificate and Opinion of Counsel, each stating that such transaction and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, complies with this Indenture and that all conditions precedent provided for herein relating to such transaction have been complied with."
ARTICLE SEVEN
REDEMPTION OF SENIOR NOTES
For purposes of the Senior Notes, and solely for the benefit of the Holders thereof, Article Twelve of the Original Indenture will be amended by the replacement of Section 12.1 in its entirety with the provisions set forth below. Such amended and additional provisions shall apply only to the Senior Notes except to the extent specifically made applicable to any other series of Securities by the Board Resolution, Officers' Certificate or supplemental indenture establishing such series of Securities as provided for in Section 2.3 of the Original Indenture.
"SECTION 12.1 Right of Optional Redemption. Any series of Senior
Notes may be redeemed at the option of the Issuer, at any time, as a
whole or in part, upon not less than 30 nor more than 60 days' notice by
mail in accordance with Section 12.2, at a Redemption Price determined
separately for the Securities of each such series equal to the greater of
(i) 100% of the principal amount of the Securities to be redeemed and
(ii) the sum of the present values of the remaining scheduled payments of
principal and interest thereon discounted to the Redemption Date on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day
months) at the Treasury Rate for such series plus 30 basis points, plus
in each case accrued interest thereon, if any, to the Redemption Date.
The Redemption Price calculated as aforesaid, shall be set forth in an
Officers' Certificate delivered to the Trustee no later than two Business
Days prior to the Redemption Date. Any notice of redemption given
pursuant to Section 12.2 with respect to the foregoing redemption need
not set forth the Redemption Price but need only set forth the manner of
calculation thereof."
ARTICLE EIGHT
RIGHT OF REPAYMENT
For purposes of the 2026 Notes, and solely for the benefit of the Holders thereof, Article Eleven of the Original Indenture shall be amended by adding thereto the following additional provisions set forth below. Such provisions shall apply only to the 2026 Notes except to the extent specifically made applicable to any other series of Securities by the Board Resolutions, Officers' Certificate or supplemental indenture establishing such series of Securities as provided for in Section 2.3 of the Original Indenture.
"SECTION 11.13 Right of Repayment. Any 2026 Note shall be repaid at
the option of the Holder thereof on November 15, 2003 (the "Repurchase
Date") at 100% of its principal amount plus accrued interest to November
15, 2003. In order for a 2026 Note to be repaid on the Repurchase Date
pursuant to this Section 11.13, the Issuer must receive, at its office or
agency in New York, New York maintained for such purpose pursuant to
Section 3.2 hereof, no earlier than September 15, 2003 and no later than
5:00 p.m. (New York City Time) on October 15, 2003 (or if October 15,
2003 is not a Business Day, the next succeeding Business Day), (a)
appropriate wire instructions directing a wire transfer to an account
with a banking institution located in the United States of America (which
may be included in the form entitled "Option to Elect Repayment on
November 15, 2003") and (b) either (i) the 2026 Note with the form
entitled "Option to Elect Repayment on November 15, 2003" (a form of
which is set forth in Section 11.14 hereof) attached to the 2026 Note
duly completed or (ii) a telegram, telex, facsimile transmission or
letter from a member of a national securities exchange or the National
Association of Securities Dealers, Inc. or a commercial bank or trust
company in the United States setting forth the name of the Holder of such
2026 Note, the principal amount of such 2026 Note, the portion of the
principal amount of such 2026 Note to be repaid, the certificate number
or a description of the tenor and terms of such 2026 Note, a statement
that the option to elect repayment is being exercised thereby and a
guarantee that such 2026 Note to be repaid with the form entitled "Option
to Elect Repayment on November 15, 2003" attached to such 2026 Note duly
completed will be received by the Issuer not later than five Business
Days after the date of such telegram, telex, facsimile transmission or
letter, and such 2026 Note and form duly completed must be received by
the Issuer by such fifth Business Day. Any notice of exercise of the
repayment option by the Holder of such 2026 Note received by the Issuer
after September 15, 2003 and before 5:00 p.m. (New York City Time)
October 15, 2003 shall be irrevocable.
The repayment option may be exercised by the Holder of such 2026 Note for less than the entire principal amount of the 2026 Note held by such Holder provided that the principal amount of the 2026 Note remaining Outstanding after repayment pursuant to this Section 11.13 is an authorized denomination. No registration of, transfer or exchange of such 2026 Note (or, in the event that such 2026 Note is to be repaid in part, the portion of the 2026 Note to be repaid) will be permitted after exercise of a repayment option. All questions as to the validity, form, eligibility (including time of receipt) and acceptance of any 2026 Note for repayment will be determined by the Issuer, whose determination will be final, binding and non-appealable.
As long as the 2026 Notes are represented by a Registered Global Security, the Depositary or the Depositary's nominee will be the only entity that can exercise a right to repayment pursuant to this Section 11.13 and thereby give sufficient notice of such an exercise to the Issuer as provided in this Section 11.13. Participants or owners of beneficial interests in the 2026 Notes represented by such Registered Global Security must give notice of their desire to exercise the option to elect repayment with respect to all or a portion of beneficial interests owned by such participant or beneficial owner in the 2026 Notes represented by such Registered Global Security to the Depositary in accordance with the Depositary's procedures on a form required by the Depositary and provided by the Depositary to its participants. Neither the Issuer nor the Trustee shall be liable for any delay in delivering of notice to the Depositary by the participants or owners of beneficial interests in the 2026 Notes represented by the Registered Global Security."
"SECTION 11.14 Form of Option to Elect Repayment
The following text shall be attached to each 2026 Note:
FORM OF OPTION TO ELECT REPAYMENT ON NOVEMBER 15, 2003
I or we hereby irrevocably elect to exercise the option to have the principal sum of $________, together with accrued interest thereon to November 15, 2003 repaid by the Issuer on November 15, 2003. (If less than the entire principal amount of this Security is to be repaid, specify the denomination or denominations (which shall be in authorized denominations) of the Securities to be issued to the Holder for the portion of the within Security not being repaid (in the absence of any such specification, one such Security will be issued for the portion not being repaid)).
Dated: ______________________
Signed:______________________ Signature Guarantee:_____________________
(Signature must be
guaranteed by an
eligible institution
within the meaning of
Rule 17A(d)-15 under
the Securities
Exchange Act of 1934,
as amended)
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ARTICLE NINE
MISCELLANEOUS
SECTION 9.1. The Indenture, as supplemented and amended by this First Supplemental Indenture, is in all respects hereby adopted, ratified and confirmed.
SECTION 9.2. Paying Agent, Transfer Agent and Registrar. The Issuer hereby appoints the Trustee as paying agent, transfer agent and registrar for the Senior Notes and designates the Corporate Trust Office of the Trustee as the agency where notices and demands to or upon the Issuer in respect of the Senior Notes or the Indenture may be served.
SECTION 9.3. Governing Law. This First Supplemental Indenture and each Senior Note shall be deemed to be a contract under the laws of the State of New York, and for all purposes shall be construed in accordance with the laws of such state without regard to conflicts of laws principles thereof, except as may otherwise be required by mandatory provisions of law.
SECTION 9.4. Counterparts. This First Supplemental Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument.
SECTION 9.5. Trustee Disclaimer. The recitals contained herein shall be taken as the statements of the Issuer, and the Trustee assumes no responsibility for the correctness of same. The Trustee makes no representations as to the validity of this First Supplemental Indenture.
IN WITNESS WHEREOF the parties hereto have caused this First Supplemental Indenture to be duly executed, and the appropriate corporate seals to be hereunto affixed and attested, all as of November 18, 1996.
FREEPORT-McMoRan COPPER & GOLD INC.
By: /s/ R. Foster Duncan
____________________________________
R. Foster Duncan
[CORPORATE SEAL] Vice President and Treasurer
Attest:
By: /s/ Michael C. Kilanowski, Jr.
_______________________________
Michael C. Kilanowski, Jr.
Secretary
|
THE CHASE MANHATTAN BANK, as Trustee
By: /s/ P. Morabito
____________________________________
P. Morabito
[CORPORATE SEAL] Vice President
Attest:
By: /s/ Gregory P. Shea
_______________________________
Gregory P. Shea
Assistant Vice President
|
STATE OF LOUISIANA )
) ss:
PARISH OF ORLEANS )
|
On this 18th day of November, 1996, before me personally came R. Foster Duncan, to me personally known, who, being by me duly sworn, did depose and say that he resides at 1442 Webster, New Orleans, Louisiana, that he is a Vice President and Treasurer of Freeport-McMoRan Copper & Gold Inc., one of the corporations which executed the above instrument; that he knows the corporate seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority.
[NOTARIAL SEAL]
/s/ Douglas N. Currault II
______________________________
Notary Public
|
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
|
On this 18th day of November, 1996 before me personally came P. Morabito, to me personally known, who, being by me duly sworn, did depose and say that she resides at 60 Kinglet Drive South, Cranbury, New Jersey, that she is a Vice President of The Chase Manhattan Bank, one of the corporations which executed the above instrument; that she knows the seal of said corporation; that the seal affixed to said instrument is such seal; that it was so affixed by authority of the Board of Directors of said corporation, and that she signed his name thereto by like authority.
[NOTARIAL SEAL]
/s/ Annabelle DeLuca
______________________________
Notary Public
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EXHIBIT A
[FORM OF FACE OF 2006 NOTE]
This Security is a Registered Global Security within the meaning of the Indenture hereinafter referred to and is registered in the name of The Depository Trust Company, a New York corporation ("DTC") or a nominee thereof. This Security may not be exchanged in whole or in part for a Security in definitive registered form, and no transfer of this Security in whole or in part may be registered in the name of any Person other than DTC or its nominee, except in the limited circumstances described in the Indenture.
Unless this Senior Note is presented by an authorized representative of DTC to the Issuer (as defined below) or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.
FREEPORT-McMoRan COPPER & GOLD INC.
7.50% Senior Note Due 2006
No. _____________ $__________ CUSIP No.: _______
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (hereinafter called the "Issuer," which term shall include any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to Cede & Co. or registered assigns, the principal sum of $200,000,000 Dollars at the Issuer's office or agency for said purpose in the Borough of Manhattan, the City of New York on November 15, 2006, in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts, and to pay the interest thereon in like coin or currency semi-annually on May 15 and November 15 of each year, commencing with May 15, 1997, on said principal sum at the rate of 7.50% per annum at said office or agency from November 18, 1996 or from the most recent interest payment date to which interest on this Senior Note has been paid or duly provided for until payment of said principal sum has been made or duly provided for. The interest so payable on any May 15 or November 15 will, except as otherwise provided in the Indenture referred to on the reverse hereof, be paid to the Person in whose name this Senior Note is registered at the close of business on the April 30 or October 31 preceding such May 15 or November 15, whether or not such day is a Business Day; provided that interest may be paid, at the option of the Issuer, if this Senior Note is no longer in the form of a Registered Global Security, by mailing a check therefor payable to the registered holder entitled thereto at his last address as it appears on the Security register. Interest on this Senior Note shall be computed on the basis of a 360-day year consisting of twelve 30-day months.
ADDITIONAL PROVISIONS OF THIS SECURITY ARE CONTAINED ON THE REVERSE HEREOF AND SUCH PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH AT THIS PLACE.
This Security shall not be entitled to any benefit under the Indenture hereinafter referred to, or become valid or obligatory for any purpose, until the Trustee under the Indenture shall have signed the form of certificate of authentication endorsed hereon.
In Witness Whereof, Freeport-McMoRan Copper & Gold Inc. has caused this Instrument to be duly executed.
Dated:
FREEPORT-McMoRan COPPER & GOLD INC.
By:____________________________________
[CORPORATE SEAL]
Name:__________________________________
Title:_________________________________
This is one of the Securities of the series
designated herein referred to in the
within-mentioned Indenture.
THE CHASE MANHATTAN BANK, Trustee
By:____________________________________
Authorized Officer
[FORM OF REVERSE OF 2006 NOTE]
FREEPORT-McMoRan COPPER & GOLD INC.
7.50% Senior Note due 2006
This Security is one of a duly authorized issue of debt securities of the Issuer designated as its 7.50% Senior Notes Due 2006 (the "Securities"), limited to the aggregate principal amount of $200,000,000 (except as otherwise provided in the Indenture mentioned below), issued or to be issued pursuant to an indenture dated as of November 15, 1996, duly executed and delivered by the Issuer to The Chase Manhattan Bank, as trustee (herein called the "Trustee") as the same has been amended and supplemented by the First Supplemental Indenture, dated as of November 18, 1996, between the Issuer and the Trustee, and as the same shall be further amended and supplemented from time to time as provided in the Indenture (as so amended and supplemented, the "Indenture"). The terms of the Securities include those in the Indenture. Reference is hereby made to the Indenture, the First Supplemental Indenture and all other indentures supplemental thereto for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Issuer and the Holders (the words "Holders" or "Holder" meaning the registered holders or registered holder) of the Securities. Capitalized terms used but not defined herein which are defined in the Indenture have the meanings assigned to them in the Indenture.
In case an Event of Default, as defined in the Indenture with respect to the Securities, shall have occurred and be continuing, the principal of and accrued and unpaid interest, if any, through the date of the declaration of acceleration on, all the Securities, may be declared due and payable in the manner and with the effect, and subject to the conditions, provided in the Indenture. The Indenture provides that in certain events such declaration and its consequences may be waived by the Holders of a majority in aggregate principal amount of the Securities then Outstanding and that, prior to any such declaration, such Holders may waive any past default under the Indenture and its consequences except a default in the payment of principal of or interest on any of the Securities and except a default in respect of certain covenants or other provisions of the Indenture which may not be modified without the consent of each Holder of an outstanding Security. Any such consent or waiver by the Holder of this Security (unless revoked as provided in the Indenture) shall be conclusive and binding upon such Holder and upon all future Holders and owners of this Security and any Security which may be issued in exchange or substitution hereof or upon registration of transfer hereof, whether or not any notation thereof is made upon this Security or such other Securities. Holders may not enforce the Indenture or the Securities except as provided in the Indenture.
The Indenture permits the Issuer and the Trustee, with the consent of the Holders of not less than a majority in aggregate principal amount of the Securities, at the time Outstanding, evidenced as in the Indenture provided, to execute supplemental indentures adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or modifying in any manner the rights of the Holders of the Securities; provided, that no such supplemental indenture shall: (a) change the final maturity of any Security or change the time for payment of any installment of interest thereon, or reduce the principal amount thereof, or reduce the rate (or
alter the method of computation) of interest thereon, or reduce (or alter
the method of computation) any amount payable on redemption or repayment
thereof or change the time of payment thereof, or make the principal
thereof or interest thereon payable in any coin or currency other than
that provided in such Security or in accordance with the terms thereof,
or reduce the amount of principal that would be due or payable upon an
acceleration of the maturity thereof pursuant to Section 5.1 of the
Indenture or the amount thereof provable in bankruptcy pursuant to
Section 5.2 of the Indenture, or alter the provisions of Section 11.1 or
11.12 of the Indenture, or impair or affect the right of any Holder to
institute suit for the payment thereof, in each case without the consent
of the Holder of each Security so affected, provided no consent of any
Holder shall be necessary to permit the Trustee and the Issuer to execute
supplemental indentures pursuant to Section 8.1(e) of the Indenture; or
(b) reduce the percentage of principal amount of Securities the consent
of the Holders of which is required for any such supplemental indenture
to less than a majority, or reduce the percentage of principal amount of
Securities necessary to consent to waive any past Default under this
Indenture to less than a majority, or modify any of the provisions of
Section 8.2 or Section 5.10 of the Indenture, except to increase any such
percentage or to provide that certain other provisions of the Indenture
cannot be modified or waived, without the consent of the Holder of each
Security so affected, in each case, without the consent of the Holder of
each Security so affected.
The Securities do not have the benefit of any sinking fund obligation.
No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Security at the place, times, and rate, and in the currency, herein prescribed.
The Securities are issuable only as registered Securities without coupons in denominations of $1,000 and any integral multiple of $1,000.
At the office or agency of the Issuer referred to on the face hereof and in the manner and subject to the limitations provided in the Indenture, the Securities may be exchanged for a like aggregate principal amount of Securities of other authorized denominations.
Upon surrender for registration of transfer of this Security at the above-mentioned office or agency of the Issuer, a new Security or Securities of other authorized denominations, for a like aggregate principal amount, will be issued to the transferee as provided in the Indenture. No service charge shall be made for any such transfer, but the Issuer may require payment of a sum sufficient to cover any tax, assessment or other governmental charge that may be imposed in relation thereto.
The Securities of this series are subject to redemption, as a whole or in part, at any time, at the option of the Issuer, upon not less than 30 nor more than 60 days' notice by mail, at a redemption price equal to the greater of (i) 100% of the principal amount of the Securities to be redeemed and (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 30 basis points, plus accrued interest thereon to the date of redemption.
Subject to payment by the Issuer of a sum sufficient to pay the amount due on redemption, interest on this Security shall cease to accrue upon the date duly fixed for redemption of this Security.
In the event of redemption under the circumstances permitted by the Indenture of this Security in part only, a new Security or Securities for the unredeemed portion thereof will be issued in the name of the Holder hereof upon the cancellation hereof.
Prior to surrender of this Security for registration of transfer, the Issuer, the Trustee and any agent of the Issuer or the Trustee, may deem and treat the registered Holder hereof as the absolute owner of this Security (whether or not this Security shall be overdue and notwithstanding any notation of ownership or other writing hereon), for the purpose of receiving payment of, or on account of, the principal hereof and interest hereon and for all other purposes, and neither the Issuer nor the Trustee nor any agent of the Issuer or the Trustee shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or interest on this Security, for any claim based hereon or thereon, or otherwise in respect hereof or thereof, or based on or in respect of the Indenture or any indenture supplemental thereto, against any incorporator, shareholder, officer or director, as such, past, present or future, of the Issuer or any successor corporation, either directly or through the Issuer or any successor corporation, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released.
The Indenture and this Security shall be governed by and construed in accordance with the laws of the State of New York.
EXHIBIT B
[FORM OF FACE OF 2026 NOTE]
This Security is a Registered Global Security within the meaning of the Indenture hereinafter referred to and is registered in the name of The Depository Trust Company, a New York corporation ("DTC") or a nominee thereof. This Security may not be exchanged in whole or in part for a Security in definitive registered form, and no transfer of this Security in whole or in part may be registered in the name of any Person other than DTC or its nominee, except in the limited circumstances described in the Indenture.
Unless this Senior Note is presented by an authorized representative of DTC to the Issuer (as defined below) or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.
FREEPORT-McMoRan COPPER & GOLD INC.
7.20% Senior Note Due 2026
No. _____________ $__________ CUSIP No.: _______
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (hereinafter called the "Issuer," which term shall include any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to Cede & Co. or registered assigns, the principal sum of $250,000,000 Dollars at the Issuer's office or agency for said purpose in the Borough of Manhattan, the City of New York on November 15, 2026, in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts, and to pay the interest thereon in like coin or currency semi-annually on May 15 and November 15 of each year, commencing with May 15, 1997, on said principal sum at the rate of 7.20% per annum at said office or agency from November 18, 1996 or from the most recent interest payment date to which interest on this Senior Note has been paid or duly provided for until payment of said principal sum has been made or duly provided for. The interest so payable on any May 15 or November 15 will, except as otherwise provided in the Indenture referred to on the reverse hereof, be paid to the Person in whose name this Senior Note is registered at the close of business on the April 30 or October 31 preceding such May 15 or November 15, whether or not such day is a Business Day; provided that interest may be paid, at the option of the Issuer, if this Senior Note is no longer in the form of a Registered Global Security, by mailing a check therefor payable to the registered holder entitled thereto at his last address as it appears on the Security register. Interest on this Senior Note shall be computed on the basis of a 360-day year consisting of twelve 30-day months.
ADDITIONAL PROVISIONS OF THIS SECURITY ARE CONTAINED ON THE REVERSE HEREOF AND SUCH PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH AT THIS PLACE.
This Security shall not be entitled to any benefit under the Indenture hereinafter referred to, or become valid or obligatory for any purpose, until the Trustee under the Indenture shall have signed the form of certificate of authentication endorsed hereon.
In Witness Whereof, Freeport-McMoRan Copper & Gold Inc. has caused this Instrument to be duly executed.
Dated:
FREEPORT-McMoRan COPPER & GOLD INC.
By:____________________________________
[CORPORATE SEAL]
Name:__________________________________
Title:_________________________________
This is one of the Securities of the series
designated herein referred to in the
within-mentioned Indenture.
THE CHASE MANHATTAN BANK, Trustee
By:____________________________________
Authorized Officer
[FORM OF REVERSE OF 2026 NOTE]
FREEPORT-McMoRan COPPER & GOLD INC.
7.20% Senior Note due 2026
This Security is one of a duly authorized issue of debt securities of the Issuer designated as its 7.20% Senior Notes Due 2026 (the "Securities"), limited to the aggregate principal amount of $250,000,000 (except as otherwise provided in the Indenture mentioned below), issued or to be issued pursuant to an indenture dated as of November 15, 1996, duly executed and delivered by the Issuer to The Chase Manhattan Bank, as trustee (herein called the "Trustee") as the same has been amended and supplemented by the First Supplemental Indenture, dated as of November 18, 1996, between the Issuer and the Trustee, and as the same shall be further amended and supplemented from time to time as provided in the Indenture (as so amended and supplemented, the "Indenture"). The terms of the Securities include those in the Indenture. Reference is hereby made to the Indenture, the First Supplemental Indenture and all other indentures supplemental thereto for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Issuer and the Holders (the words "Holders" or "Holder" meaning the registered holders or registered holder) of the Securities. Capitalized terms used but not defined herein which are defined in the Indenture have the meanings assigned to them in the Indenture.
In case an Event of Default, as defined in the Indenture with respect to the Securities, shall have occurred and be continuing, the principal of and accrued and unpaid interest, if any, through the date of the declaration of acceleration on, all the Securities, may be declared due and payable in the manner and with the effect, and subject to the conditions, provided in the Indenture. The Indenture provides that in certain events such declaration and its consequences may be waived by the Holders of a majority in aggregate principal amount of the Securities then Outstanding and that, prior to any such declaration, such Holders may waive any past default under the Indenture and its consequences except a default in the payment of principal of or interest on any of the Securities and except a default in respect of certain covenants or other provisions of the Indenture which may not be modified without the consent of each Holder of an outstanding Security. Any such consent or waiver by the Holder of this Security (unless revoked as provided in the Indenture) shall be conclusive and binding upon such Holder and upon all future Holders and owners of this Security and any Security which may be issued in exchange or substitution hereof or upon registration of transfer hereof, whether or not any notation thereof is made upon this Security or such other Securities. Holders may not enforce the Indenture or the Securities except as provided in the Indenture.
The Indenture permits the Issuer and the Trustee, with the consent of the Holders of not less than a majority in aggregate principal amount of the Securities, at the time Outstanding, evidenced as in the Indenture provided, to execute supplemental indentures adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or modifying in any manner the rights of the Holders of the Securities; provided, that no such supplemental indenture shall: (a) change the final maturity of any Security or change the time for payment of any installment of interest thereon, or reduce the principal amount thereof, or reduce the rate (or
alter the method of computation) of interest thereon, or reduce (or alter
the method of computation) any amount payable on redemption or repayment
thereof or change the time of payment thereof, or make the principal
thereof or interest thereon payable in any coin or currency other than
that provided in such Security or in accordance with the terms thereof,
or reduce the amount of principal that would be due or payable upon an
acceleration of the maturity thereof pursuant to Section 5.1 of the
Indenture or the amount thereof provable in bankruptcy pursuant to
Section 5.2 of the Indenture, or alter the provisions of Section 11.1 or
11.12 of the Indenture, or impair or affect the right of any Holder to
institute suit for the payment thereof or the repayment thereof at the
option of the Holder, in each case without the consent of the Holder of
each Security so affected, provided no consent of any Holder shall be
necessary to permit the Trustee and the Issuer to execute supplemental
indentures pursuant to section 8.1(e) of the Indenture; or (b) reduce the
percentage of principal amount of Securities the consent of the Holders
of which is required for any such supplemental indenture to less than a
majority, or reduce the percentage of principal amount of Securities
necessary to consent to waive any past Default under this Indenture to
less than a majority, or modify any of the provisions of Section 8.2 or
Section 5.10 of the Indenture, except to increase any such percentage or
to provide that certain other provisions of the Indenture cannot be
modified or waived, without the consent of the Holder of each Security so
affected, in each case, without the consent of the Holder of each
Security so affected.
The Securities do not have the benefit of any sinking fund obligation.
No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Security at the place, times, and rate, and in the currency, herein prescribed.
The Securities are issuable only as registered Securities without coupons in denominations of $1,000 and any integral multiple of $1,000.
At the office or agency of the Issuer referred to on the face hereof and in the manner and subject to the limitations provided in the Indenture, the Securities may be exchanged for a like aggregate principal amount of Securities of other authorized denominations.
Upon surrender for registration of transfer of this Security at the above-mentioned office or agency of the Issuer, a new Security or Securities of other authorized denominations, for a like aggregate principal amount, will be issued to the transferee as provided in the Indenture. No service charge shall be made for any such transfer, but the Issuer may require payment of a sum sufficient to cover any tax, assessment or other governmental charge that may be imposed in relation thereto.
The Securities of this series are subject to redemption, as a whole or in part, at any time, at the option of the Issuer, upon not less than 30 nor more than 60 days' notice by mail, at a redemption price equal to the greater of (i) 100% of the principal amount of the Securities to be redeemed and (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 30 basis points, plus accrued interest thereon to the date of redemption.
Subject to payment by the Issuer of a sum sufficient to pay the amount due on redemption, interest on this Security shall cease to accrue upon the date duly fixed for redemption of this Security.
In the event of redemption under the circumstances permitted by the Indenture of this Security in part only, a new Security or Securities for the unredeemed portion thereof will be issued in the name of the Holder hereof upon the cancellation hereof.
This Security may be repaid on November 15, 2003, at the option of
the Holder of this Security, at 100% of the principal amount, together
with accrued interest thereon to November 15, 2003. In order for a
Holder to exercise this option, the Issuer must receive at its office or
agency in New York, New York maintained for such purpose pursuant to
Section 3.2 of the Indenture, during the period beginning on September
15, 2003 and ending at 5:00 p.m. (New York City time) on October 15, 2003
(or if October 15, 2003 is not a Business Day, the next succeeding
Business Day), (a) appropriate wire instructions directing a wire
transfer to an account with a banking institution located in the United
States of America (which may be included in the form entitled "Option to
Elect Repayment on November 15, 2003") and (b) either (i) this Security
with the form entitled "Option to Elect Repayment on November 15, 2003"
set forth below duly completed or (ii) a telegram, telex, facsimile
transmission or letter from a member of a national securities exchange or
the National Association of Securities Dealers, Inc. or a commercial bank
or trust company in the United States setting forth the name of the
Holder of this Security, the principal amount of this Security, the
portion of the principal amount of this Security to be repaid, the
certificate number or a description of the tenor and terms of this
Security, a statement that the option to elect repayment is being
exercised thereby and a guarantee that this Security to be repaid with
the form entitled "Option to Elect Repayment on November 15, 2003"
attached to this Security duly completed will be received by the Issuer
not later than five Business Days after the date of such telegram, telex,
facsimile transmission or letter, and this Security and form duly
completed must be received by the Issuer by such fifth Business Day. Any
such notice received by the Issuer during the period beginning on
September 15, 2003 and ending at 5:00 p.m. (New York City Time) on
October 15, 2003 shall be irrevocable. The repayment option may be
exercised by the Holder of this Security for less than the entire amount
of the Securities held by such Holder, as long as the principal amount
that is to be repaid is equal to $1,000 or an integral multiple of
$1,000. All questions as to validity, form, eligibility (including time
of receipt) and acceptance of any Security for repayment will be
determined by the Issuer, whose determination will be final and binding.
Prior to surrender of this Security for registration of transfer, the Issuer, the Trustee and any agent of the Issuer or the Trustee, may deem and treat the registered Holder hereof as the absolute owner of this Security (whether or not this Security shall be overdue and notwithstanding any notation of ownership or other writing hereon), for the purpose of receiving payment of, or on account of, the principal hereof and interest hereon and for all other purposes, and neither the Issuer nor the Trustee nor any agent of the Issuer or the Trustee shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or interest on this Security, for any claim based hereon or thereon, or otherwise in respect hereof or thereof, or based on or in respect of the Indenture or any indenture supplemental thereto, against any incorporator, shareholder, officer or director, as such, past, present or future, of the Issuer or any successor corporation, either directly or through the Issuer or any successor corporation, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released.
The Indenture and this Security shall be governed by and construed in accordance with the laws of the State of New York.
FORM OF OPTION TO ELECT REPAYMENT ON NOVEMBER 15, 2003
I or we hereby irrevocably elect to exercise the option to have the principal sum of $________, together with accrued interest thereon to November 15, 2003 repaid by the Issuer on November 15, 2003. (If less than the entire principal amount of this Security is to be repaid, specify the denomination or denominations (which shall be in authorized denominations) of the Securities to be issued to the Holder for the portion of the within Security not being repaid (in the absence of any such specification, one such Security will be issued for the portion not being repaid)).
Dated:_______________________
Signed:______________________ Signature Guarantee:_______________________
(Signature must be
guaranteed by an
eligible institution
within the meaning of
Rule 17A(d)-15 under
the Securities
Exchange Act of 1934,
as amended)
|
November 2, 2001
Freeport-McMoRan Copper & Gold Inc.
FCX Investment Ltd.
1615 Poydras Street
New Orleans, Louisiana 70112
Re: Registration Statement on Form S-3 Freeport-McMoRan Copper & Gold Inc. and FCX Investment Ltd.
Ladies and Gentlemen:
We have acted as counsel to Freeport-McMoRan Copper & Gold Inc. ("FCX"), a Delaware corporation, and to FCX Investment Ltd., a Cayman Islands exempted limited liability company and wholly owned subsidiary of FCX, in connection with the preparation of a registration statement on Form S-3 (the "Registration Statement") filed by FCX with the Securities and Exchange Commission (the "Commission"). The Registration Statement relates to the registration of the following securities:
1. $603,750,000 8 1/4% convertible senior notes due 2006 (the
"Notes") issued by FCX and FCX Investment;
2. shares of class A common stock that FCX may issue upon
conversion of the notes at the option of the holders (the
"Class A Shares"); and
3. shares of class B common stock that FCX may issue upon
conversion of the notes at the option of the holders (the
"Class B Shares").
The Class A Shares and Class B Shares are referred to as the "Conversion Shares." The Notes and the Conversion Shares are to be offered and sold by certain securityholders of FCX and FCX Investment.
In rendering the opinions expressed below, we have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments as we have deemed necessary or advisable for purposes of this opinion. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies and the authenticity of the originals of such documents.
Based upon the foregoing and subject to/ the following qualifications and comments, we are of the opinion that:
1. The Notes are valid and binding obligations of FCX and FCX Investment entitled to the benefits of the Indenture, dated August 7, 2001 by and among FCX, FCX Investment and The Bank of New York, as trustee.
2. The Conversion Shares have been duly authorized, and, if and when issued by FCX upon conversion of the Notes in accordance with the terms of the Notes and the Indenture, will be validly issued, fully paid and nonassessable.
The opinion in paragraph 1 hereof is subject to the qualification that enforceability may be limited by (a) applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or similar laws of general applicability relating to or affecting the enforcement of creditors' rights; (b) public policy considerations that may limit the rights of parties to obtain certain remedies; (c) the fact that specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought; and (d) general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law).
In connection with the opinions expressed above, we have assumed that, at or prior to the time of the delivery of any Note or Conversion Share: (a) the Registration Statement, as finally amended, shall have been declared effective under the Securities Act of 1933 and such effectiveness shall not have been terminated or rescinded and (b) there will not have occurred any change in law affecting the validity or enforceability of such Note or Conversion Share.
We are members of the Bar of the State of Louisiana and the foregoing opinion is limited to the laws of the State of Louisiana, the federal laws of the United States of America and the General Corporation Law of the State of Delaware. We assume no obligation to revise or supplement this opinion should such currently applicable laws be changed by legislative action, judicial decision or otherwise.
This opinion is furnished to you in connection with the filing of the Registration Statement and is not to be used, circulated, quoted or otherwise relied upon for any other purpose.
We hereby consent to the use of this opinion as an exhibit to the Registration Statement of FCX relating to the Securities and to the reference to our name in the Prospectus contained therein. In giving this consent, we do not admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act of 1933 or the general rules and regulations of the Commission.
Very truly yours,
/s/ Jones, Walker, Waechter, Poitevent, Carrere & Denegre L.L.P. JONES, WALKER, WAECHTER, POITEVENT, CARRERE & DENEGRE L.L.P. |
CONTRACT OF WORK
BETWEEN
THE GOVERNMENT OF THE
REPUBLIK OF INDONESIA
AND
PT. FREEPORT INDONESIA COMPANY
CONTENTS
ARTICLE Page
INTRODUCTION 1
1. DEFINITIONS 3
2. APPOINTMENT AND RESPONSIBILITY OF THE COMPANY 8
3. MODUS OPERANDI 10
4. CONTRACT AREA 12
5. GENERAL SURVEY PERIOD 15
6. EXPLORATION PERIOD 17
7. REPORTS AND SECURITY DEPOSIT 20
8. FEASIBILITY STUDIES PERIOD 24
9. CONSTRUCTION PERIOD 27
10. OPERATING PERIOD 29
11. MARKETING 35
12. IMPORT AND RE-EXPORT FACILITIES 39
13. TAXES AND OTHER FINANCIAL OBLIGATIONS OF THE COMPANY 42
14. RECORDS, INSPECTION AND WORK PROGRAM 56
15. CURRENCY EXCHANGE 59
16. SPECIAL RIGHTS OF THE GOVERNMENT 62
17. EMPLOYMENT AND TRAINING OF INDONESIAN NATIONALS 63
18. ENABLING PROVISIONS 66
19. FORCE MAJEURE 70
20. DEFAULT 71
ARTICLE Page
21. SETTLEMENT OF DISPUTES 73
22. TERMINATION 75
23. COOPERATION OF THE PARTIES 77
24. PROMOTION OF NATIONAL INTEREST 78
25. REGIONAL COOPERATION IN REGARD TO
ADDITIONAL INFRASTRUCTURE 81
26. ENVIRONMENTAL MANAGEMENT AND PROTECTION 84
27. LOCAL BUSINESS DEVELOPMENT 85
28. MISCELLANEOUS PROVISIONS 88
29. ASSIGNMENT 90
30. FINANCING 91
31. TERM 92
32. GOVERNING LAW 93
ANNEX "A" - CONTRACT AREA 94
ANNEX "B" - MAP OF CONTRACT AREA 96
ANNEX "C" - LIST OF OUTSTANDING MINING RIGHTS AND
NATURE RESERVES 97
ANNEX "D" - DEADRENT FOR VARIOUS
STAGES OF ACTIVITIES 98
ANNEX "E" - FEASIBILITY STUDY REPORT 99
ANNEX "F" - RULES FOR COMPUTATION OF INCOME TAX 101
ANNEX "G" - ADDITIONAL ROYALTY ON MINERAL
EXPORTED AS UNBENEFICIATED ORE 107
|
CONTRACT OF WORK
This Agreement, made and entered into in Jakarta, in the Republic of Indonesia, on the 30th day of December 1991, by and between the Government of the Republic of Indonesia, represented herein by the Minister of Mines and Energy of the Government of the Republic of Indonesia (hereinafter called the "Government") and PT Freeport Indonesia Company (a judicial body incorporated in Indonesia by Notarial Deed Numbered 102 dated 26 December 1991, Decree of Minister of Justice Numbered C2-8171.HT.01.01.TH.91 dated 27 December 1991) (hereinafter called the "Company"), the shares of the Common Stock of which are owned by:
1. Freeport-McMoRan Copper & Gold Inc., a Delaware corporation ("FCX"); and
2. The Government.
WITNESSETH THAT:
A. All Mineral resources contained in the territories of the Republic of Indonesia, including the offshore areas, are the national wealth of the Indonesian Nation.
B. The Government desires to encourage and promote the exploration and development of the Mineral resources of Indonesia. The Government is also desirous of facilitating the development of ore deposits if commercial quantities are found to exist and the operation of Mining enterprises in connection therewith.
C. The Government, through the operation of Mining enterprises, is desirous of creating growth centers for regional development, creating more employment opportunities, encouraging and developing local business and ensuring that skills, know-how and technology are transferred to Indonesian nationals, acquiring basic data regarding and related to the country's Mineral resources and preserving and rehabilitating the natural Environment for further development of Indonesia.
D. The Company itself and as an indirect Subsidiary of Freeport- McMoRan Inc., a Delaware corporation, and a Subsidiary of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation, has and has access to the information, knowledge, experience and proven technical and financial capability and other resources to undertake a program of General Survey, Exploration, development, construction, Mining, Processing and marketing with respect to the Contract Area, and is ready and willing to proceed thereto under the terms and subject to the conditions set forth in this Agreement.
E. The Government and the Company recognize that the Contract Area (as hereinafter defined) is located in an extremely remote area with a difficult environment and that, accordingly, the Company has been and will continue to be required to develop special facilities and to carry out special functions for the fulfillment of this Agreement.
F. The Government and the Company are willing to cooperate in developing the Mineral resources hereinafter described on the basis of the provisions hereof and of the laws and regulations of the Republic of Indonesia, specifically Law No. 11 of 1967 on the Basic Provisions of Mining (Undang- Undang Pokok Pertambangan) and Law No. 1 of 1967 on Foreign Capital Investment (Undang-Undang Penanaman Modal Asing), as in effect on the date of the signing of this Agreement, and the relevant laws and regulations pertaining thereto.
G. The Company is the corporate successor to Freeport Indonesia, Incorporated, a Delaware corporation, which was a party to the Prior Contract (as hereinafter defined). This Agreement shall supersede the Prior Contract.
NOW, THEREFORE, in consideration of the mutual promises, covenants and conditions hereinafter set out to be performed and kept by the Parties hereto, and intending to be legally bound hereby, it is stipulated and agreed between the Parties hereto as follows:
ARTICLE 1
DEFINITIONS
The terms set forth below shall have the meanings therein set forth, respectively, wherever the same shall appear in this Agreement and whether or not the same shall be capitalized.
1. "Affiliate" of any Person means any other Person that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with, such Person.
2. "Associated Minerals" with respect to a particular Mineral means Minerals which geologically occur together with, are inseparable by Mining from and must necessarily be Mined and Processed together with such Mineral.
3. "Beneficial Use" means a use of the Environment or any element or segment of the Environment that is conducive to public benefit, welfare, safety or health and which requires protection from the effects of waste discharges, emissions and deposits.
4. "Company" means PT Freeport Indonesia Company, the corporate successor to FII, and any approved corporate successor; and, when used in reference to expenditures made or other action taken under the Prior Contract or the SIPP, also means FII.
5. "Contract Area" means the Contract Area Block A and the Contract Area Block B.
6. "Contract Area Block A" means the area defined in Annex "A" to this Agreement as "Contract Area Block A".
7. "Contract Area Block B" means the area defined in Annex "A" to this Agreement as "Contract Area Block B", as changed by reductions and extensions, as the case may be, in accordance with this Agreement.
8. "Contract Properties", with respect to any Mining Area, means, for the purposes of Article 22, the property of the Company in Indonesia which is located in such Mining Area or any Project Area related to such Mining Area.
9. "Control" (including the terms "controlled by" and "under common control with" and "controls") means the possession, directly or indirectly, of the ability to direct the management and policies of a Person. Without limiting the generality of the above, such ability is presumed to exist in a Person if it holds, directly or indirectly, 25% or more of the outstanding voting shares of another Person.
10. "Covered Employee" means any person, including an Expatriate Individual, who is employed or engaged by the Company or one of its Subsidiaries or Affiliates.
11. "Department", unless the context otherwise indicates, means that Government agency charged with the administration of the Indonesian Mining laws and regulations.
12. "Enterprise" means all activities of the Company provided for in or contemplated by this Agreement, including (i) the General Survey, Exploration, evaluation, development, construction, Mining, operating, Processing and selling activities with respect to the Contract Area and Project Areas related thereto, and Products therefrom; and (ii) construction and operation of the Smelter referred to in paragraph 4 of Article 10, all as provided herein.
13. "Environment" means physical factors of the surroundings of human beings, including land, water, atmosphere, climate, sound, odors, tastes and biological factors of animals and plants and the social factors of aesthetics.
14. "Expatriate Individuals" or "Expatriates" means individuals who are non-Indonesian nationals.
15. "Exploration" means the search for Minerals using geological, geophysical and geochemical methods, including the use of boreholes, test pits, trenches, surface or underground headings, drifts or tunnels in order to locate the presence of economic Mineral deposits and to find out their nature, shape and grade, and "Explore" has a corresponding meaning.
16. "Exploration Areas" means the portions of the Contract Area Block B which are selected for Exploration as a result of the General Survey of the Contract Area Block B by the Company during the General Survey Period provided for in paragraph 2 of Article 3.
17. "FII" means Freeport Indonesia, Incorporated, a company incorporated in Delaware, U.S.A.
18. "Foreign Currency" means any currency other than Rupiah.
19. "General Survey" means an investigation or a preliminary Exploration carried out along certain broad features of an area for indications of mineralization.
20. "Government" means the Government of the Republic of Indonesia, its Ministers, Ministries, Departments, Agencies and Instrumentalities, and all Regional, Provincial or District Authorities.
21. "Minerals" means all natural deposits and natural accumulations containing chemical elements of all kinds, either in elemental form or in association or chemical combination with other metallic or non-metallic elements.
22. "Mining" means recovery activities aimed at the economic exploitation of one or more identified deposits of Minerals, and "Mine" has a corresponding meaning.
23. "Mining Areas" means the Contract Area Block A and all New Mining Areas.
24. "Minister", unless the context otherwise indicates, means that person who is acting at any given time as the Minister of the Department of Mines and Energy.
25. "New Mining Area" means a portion of the Contract Area Block B which has been identified by the Company as containing potentially economic Mineral deposit or deposits, which has been described by latitude and longitude on maps and by description delivered by the Company to the Department, and which has been designated by the Company, on or before the last day of the Feasibility Studies Period with respect to an Exploration Area, as one in which the Company intends to commence Mining; provided that a New Mining Area may be expanded by agreement of the Government and the Company if as a result of further Exploration and Mining it becomes apparent that inclusion of adjacent lands would advance the purposes of this Agreement by permitting the Mining of the Minerals identified with respect to such deposits or Associated Minerals.
26. "Person" means any individual, partnership, corporation, wherever organized or incorporated, and all other judicially distinct entities and associations, whether or not incorporated.
27. "Pollution" means any direct or indirect alteration of the physical, thermal, chemical, biological or radioactive properties of any part of the Environment by the discharge, emission or deposit of Wastes so as to affect any Beneficial Use materially and adversely, or to cause a condition which is hazardous or potentially hazardous to public health, safety or welfare, or to animals, birds, wildlife, fish or aquatic life, or to plants, and "Pollute" has a corresponding meaning.
28. "Precious Metal" means gold, silver, platinum or palladium.
29. "Prior Contract" means the Contract of Work dated 7 April 1967 between FII and the Government, as amended and implemented, which Contract is superseded hereby.
30. "Processing" means treatment of Mineral ore after it has been Mined to produce a marketable Mineral concentrate or a further refined Mineral Product, and "Process" has a corresponding meaning.
31. "Products" means all ores, Minerals, concentrates, precipitates and metals, including refined products, obtained as a result of Mining or Processing, after deducting any quantities thereof which are lost, discarded, destroyed or used in research, testing, Mining, Processing or transportation.
32. "Project Area" means, with respect to any Mining Area, an area outside such Mining Area heretofore designated as a Project Area or any such area hereafter designated as a Project Area and delineated in a feasibility study report for Mining development by the Company as necessary or desirable for the Processing facilities and other infrastructure facilities related to such Mining development, including any additions to any such area required for Mining, development or Processing.
33. "Rupiah" means the currency that constitutes legal tender in Indonesia.
34. "SIPP" means the Preliminary Survey License(s) granted by the Directorate General of Mines on behalf of the Minister to FII related to preliminary Exploration in Irian Jaya.
35. "Subsidiary" of any Person means any corporation controlled by such Person through the direct or indirect ownership of fifty percent or more of the issued shares having power to vote or any partnership or joint venture controlled by such Person.
36. "Waste" includes any matter whether liquid, solid, gaseous or radioactive, which is discharged, emitted, or deposited in the Environment in such volume, consistency or manner as to cause a material and adverse alteration of the Environment.
ARTICLE 2
APPOINTMENT AND RESPONSIBILITY OF THE COMPANY
1. The Company is hereby appointed the sole contractor for the Government with respect to the Contract Area. In particular, the Government hereby grants to the Company the sole rights to Explore for Minerals in the Contract Area, to Mine any deposit of Minerals found in any Mining Area, to Process, store, and transport by any means all Minerals extracted therefrom, to market, sell or dispose of all the Products of such Mining and Processing, inside and outside Indonesia, and to perform all other operations and activities which may be necessary or convenient in connection therewith, with due observance of the requirements of this Agreement. In consideration for the grant of such rights, the Company agrees to perform the work and carry out the obligations imposed on it by this Agreement, including, without limitation, the obligation to make investments as provided in paragraph 2 of Article 5, in paragraph 5 of Article 6 and in paragraph 5 of Article 7, the obligation to pay taxes and other charges to the Government as provided in Articles 12 and 13 and the obligation to adhere to the Mining standards described in paragraph 9 of Article 10 and to the Environmental, safety and health standards described in Article 26.
2. Notwithstanding paragraph 1 of this Article 2, the Company shall not Mine any radioactive minerals, hydrocarbon compounds, nickel, tin or coal without first obtaining the approval of the Government.
3. The Company shall have sole control and management of all of its activities under this Agreement and shall have full responsibility therefor and shall assume all risk with respect thereto in accordance with the terms and conditions of this Agreement. Without in any way detracting from the Company's responsibilities and obligations hereunder, the Company may engage subcontractors, whether or not Affiliates of the Company, for the execution of such phases of its operations as the Company deems appropriate, including contracting for construction of facilities and for necessary technical, management and administrative services. In the event that such services are contracted from Affiliates, the charges therefor, to the extent they affect any amounts payable to the Government pursuant to the terms of this Agreement, shall comply with the provisions of Article 13 and of Annex "F" to this Agreement.
4. The Company shall take all reasonable measures to prevent damage to the rights and property of the Government or third parties. In the event of negligence on the part of the Company or its agents or of any Registered subcontractor carrying on operations or activities for the Company under this Agreement, the Company or such subcontractor, as the case may be, shall be liable for such negligence in accordance with the laws of Indonesia.
ARTICLE 3
MODUS OPERANDI
1. The Company is incorporated under the laws of the Republic of Indonesia and domiciled in Indonesia, and shall be subject to the laws and the jurisdiction of courts in Indonesia which normally have jurisdiction over corporations doing business or incorporated therein. The Company shall maintain in Jakarta a principal office for receipt of any notification or other official or legal communication.
2. As part of the Enterprise, the Company will continue its activities with respect to the Contract Area Block A and contemplates a program with respect to the Contract Area Block B commencing with a General Survey of the Contract Area Block B during a "General Survey Period" as a result of which certain Exploration Areas will be selected for Exploration during the period or stage hereinafter referred to as the "Exploration Period". The remaining program with respect to each Exploration Area will be divided into three additional periods or stages hereinafter referred to as the "Feasibility Studies Period", the "Construction Period" and the "Operating Period", respectively, with respect to such Exploration Area. These Periods are further defined in the following Articles hereof. The Contract Area Block A is in its Operating Period and, therefore, the foregoing provisions with respect to other periods or stages are not applicable to it. It is understood that, as a consequence of the foregoing, different parts of the Contract Area may be treated as separate projects which become subject to different provisions of this Agreement and of the Mining Laws and Regulation at different times because of the different periods of activities applicable to the individual Exploration and Mining Areas.
3. The Company undertakes to conduct all activities hereunder in the manner and subject to the conditions of Article 2 of this Agreement and to continue such activities, without suspension or interruption of all of the Company's activities, unless with the concurrence of the Government (which shall be deemed to have been given if the Department does not object thereto in writing within three months after it has received written notice from the Company of its desire to so suspend or interrupt) or as otherwise provided in Article 19 or Article 22. Any such suspension or interruption of all of the Company's activities with the concurrence of the Government shall extend the time periods otherwise applicable with respect to any of the affected Periods specified in this Agreement. If such interruption or suspension of all of the Company's activities continues for more than 365 days and is due to reasons other than force majeure as provided in Article 19 and the Government has not concurred regarding such interruption and suspension, then the Government shall be entitled to declare a default under Article 20. The Company agrees to keep the Government informed of any interruption or suspension. Any such interruption or suspension shall not affect the mutual rights and obligations of the Parties under this Agreement.
ARTICLE 4
CONTRACT AREA
1. The Contract Area consists of the Contract Area Block A and the Contract Area Block B.
2. Contract Area Block A is an area, in the mainland of the island of Irian, consisting of approximately 100 (one hundred) square kilometers, as defined in Annex "A" to this Agreement and delineated in Annex "B" to this Agreement.
3. Contract Area Block B is the area defined in Annex "A" to this Agreement as "Contract Area Block B", as changed by extensions and reductions in accordance with this Agreement, excluding therefrom, except as otherwise provided in paragraph 4 of this Article 4, all
(i) Mining Authorizations granted by the Government for Category "A" and "B" Minerals (as defined in Annex "C"), and
(ii) Mining Authorizations granted by the Government for Category "C" Minerals (as defined in Annex "C"),
(iii) other Mining Rights granted by the Government (as defined in Annex "C"), and
(iv) the areas shown on Annex "B" as constituting Nature Reserves.
which are existing as of the date of this Agreement and which are listed or described in Annex "C" to this Agreement.
4. In the event that any areas which were excluded from the Contract Area Block B by the definition thereof or which on the date of the SIPP had a common boundary with the Contract Area lapse, are cancelled or are relinquished, or by any means any such area becomes vacant, or otherwise become available, then the Company shall have the priority right upon application to have such area included in the Contract Area Block B unless the Government grants a People's Mining Right for such area. Once an area is included in the Contract Area the Government agrees not to grant a People's Mining Right thereto. Any area so included shall fall into the earliest Period which then applies to any part of Contract Area Block B.
5. The Company may by written application to the Department relinquish all or any part of the Contract Area at any time and from time to time during the term of this Agreement. Any such application shall be submitted with a relinquishment report stating any technical and geological finding the Company has made with respect to the relinquished areas and the reasons for the relinquishment, supported by field data of activities undertaken in those areas. All basic data with respect to the relinquished areas shall be submitted to the Department and become the property of the Government. The Company through relinquishment (including relinquishment pursuant to this paragraph, paragraph 5 of Article 5 and paragraph 2 of Article 6), shall except as otherwise agreed by the Government, reduce the Contract Area Block B:
(i) on or before the end of the General Survey Period, to not more than seventy-five percent (75%) of the original Contract Area Block B;
(ii) on or before the second anniversary of the end of the General Survey Period, to not more than fifty percent (50%) of the original Contract Area Block B; and
(iii)on or before the end of the Exploration Period, to not more than twenty-five percent (25%) of the original Contract Area Block B.
Except as provided in paragraph 7 of this Article 4, the Company shall not be required by the terms of this Agreement to relinquish more than 75% of the original Contract Area Block B. Any such relinquishment shall be without prejudice to any obligation or liability imposed by or incurred under this Agreement prior to the effective date of such relinquishment.
6. The Company will continue to carry on Exploration on all prospective parts of the Contract Area with the objective of delineating new deposits within the Contract Area for development during the full term of this Agreement. The Company's development plans shall include the intended capacity of each Mining and Processing activity and any further evaluation work required as provided in the related feasibility study and other Exploration activities.
7. If the Company has no future plan to conduct Exploration or development activities with respect to an area of Contract Area Block B, or to use such area in connection with other development activities, or if the Company discovers a deposit of a Mineral as to which it has no current or contingent plans to develop (and such area may be used or such deposit developed by other Persons in a manner which does not interfere with the rights of the Company under this Agreement or the activities of the Company permitted hereby), then, if so required by the Government, the Company shall relinquish such area or deposit, together with all the basic geological, exploration, metallurgical and other data related thereto.
ARTICLE 5
GENERAL SURVEY PERIOD
1. The Company shall commence, as soon as possible after the signing of this Agreement, a General Survey of the Contract Area Block B to determine in what parts of the Contract Area Block B deposits of Minerals are most likely to occur. The "General Survey Period" shall end twelve months after such commencement. The Government, upon request by the Company will grant an extension of 12 (twelve) months for the General Survey Period for the purpose of completing the activities to be carried out by it during such Period.
2. By the end of the General Survey Period, including the SIPP period, the Company shall have spent, with respect to the Contract Area Block B, not less than US$ 5,000,000 (Five Million United States Dollars). Such expenditures may include general organization overhead and administrative expenses directly connected with field activities under this Agreement.
3. If at the expiration of twelve months from the date of the signing of this Agreement or any time thereafter, it appears to the Department that the Company has seriously neglected its obligations with respect to minimum expenditures as provided in paragraph 2 of this Article, the Department may require the Company to deliver to the Department a guarantee in the form of a bond or banker's guarantee to a sum which shall not exceed the total outstanding expenditure obligations remaining unfulfilled. Such guarantee may at the end of the three year period commencing on the date of the signing of this Agreement be forfeited to the Government to the extent that the Company shall have failed to fulfill such expenditure obligations. Except to the extent of any such forfeiture, such guarantee shall be released at the end of such three year period.
4. In connection with the Company's obligations under this Article, the Company shall submit to the Department within two months after the end of the General Survey Period, a report setting forth the items and amounts of expenditure during such Period. The Company shall prepare to support such report with reasonable documentation of expenditures as requested by the Department.
5. The Company may at any time discontinue the General Survey with respect to any part or parts of the Contract Area Block B on the ground that the continuation of such General Survey is no longer commercially feasible or practical and shall apply in writing to the Department in accordance with paragraph 5 of Article 4 for the relinquishment of such part or parts of the Contract Area Block B. The Contract Area Block B shall thereby be reduced to the area which remains after such relinquishment.
6. If, at any time or times during the General Survey Period, after the Company has discovered deposits of Minerals in any part or parts of the Contract Area Block B and has decided to proceed into the Exploration Period with respect to one or more of such deposits, it shall submit a written notice and explanation to such effect to the Department and shall establish one or more Exploration Areas with respect to such deposit or deposits and begin the Exploration thereof without affecting its rights and obligations under this Agreement in respect of other portions of the Contract Area.
ARTICLE 6
EXPLORATION PERIOD
1. Upon completion of the General Survey, the Company shall commence within the most promising Exploration Areas a program of Exploration based on the results of such General Survey. The program of Exploration shall include, as appropriate, without limitation, detailed geological, geophysical and geochemical investigation, including sampling, pitting, dredging and drilling. The Period during which such Exploration is undertaken constitutes the "Exploration Period".
2. The Company may at any time discontinue Exploration in any Exploration Area on the ground that the continuation of such Exploration is no longer commercially feasible or practical and shall apply in writing to the Department in accordance with paragraph 5 of Article 4 for the relinquishment of such Exploration Area from the Contract Area Block B. The Contract Area Block B shall thereby be reduced to the area which remains after such relinquishment.
3. If at any time prior to the end of the Exploration Period the Company discovers one or more deposits of Minerals of apparent commercial grade and quantity in any Exploration Area and decides to proceed with further evaluation thereof, it shall submit a written notice to such effect to the Department and enter into the Feasibility Studies Period with respect to such Exploration Area without affecting its rights and obligations under this Agreement in respect of the balance of the Contract Area Block B. Accordingly, the Exploration Period:
(i) shall commence immediately following the end of the General Survey Period; and
(ii) shall end 36 months thereafter; provided that, with respect to any Exploration Area, it shall end at such earlier date as the Feasibility Studies Period shall have begun with respect to such Exploration Area; and
(iii) the Government upon request by the Company, will twice grant an extension of twelve months each for the Exploration Period, subject to the Company's performing its obligations satisfactorily in accordance with this Agreement.
4. Prior to the end of the Exploration Period, the Company shall give notice to the Department stating whether or not the Company desires to proceed into the Feasibility Studies Period with respect to any Exploration Areas. If the Company should give notice to the Department that it does not wish to proceed into the Feasibility Studies Period with respect to any Exploration Area, such notice shall constitute an application in writing to the Department in accordance with paragraph 5 of Article 4 for the relinquishment of such Exploration Area from the Contract Area Block B. In such a case, the Company shall turn over to the Department:
(i) maps indicating all places in such Exploration Area in which the Company shall have drilled holes or sunk pits,
(ii) copies of logs of such drill holes and pits and of assay results with respect to any analyzed samples recovered therefrom, and
(iii) copies of any geological or geophysical maps of the Exploration Area which shall have been prepared by the Company.
Any such relinquishment shall be without prejudice to any obligation or liability imposed by or incurred under this Agreement prior to the effective date of such relinquishment.
5. During the Exploration Period, the Company shall spend not less than US$ 15,000,000 (Fifteen Million United States Dollars) on further Exploration activities with respect to the Contract Area Block B. Any expenditure incurred by the end of the General Survey Period (including the SIPP Period) in excess of US$5,000,000 shall be considered to be, part of such US$15,000,000. If at the expiration of twenty-four months from the date of the commencement of the Exploration Period or any time thereafter, it appears to the Department that the Company has seriously neglected its obligations with respect to minimum expenditures as provided in this paragraph, the Company shall deliver to the Department a guarantee, if required by the Government, in the form of a bond or banker's guarantee to a sum which shall not exceed the total outstanding expenditure obligations remaining unfulfilled. Such guarantee may at the and of the Exploration Period be forfeited to the Government to the extent that the Company shall have failed to fulfill such expenditure obligations. Except to the extent of any such forfeiture, such guarantee shall be released at the end of the Exploration Period.
ARTICLE 7
REPORTS AND SECURITY DEPOSIT
1. The Company shall keep the Government informed through the Department concerning the Enterprise through submission of quarterly progress reports as to the Company's plans for and results of its Exploration and development operations and activities relating to all areas not in the Operating Period, beginning with a report as to the first full calendar quarter following the date of the signing of this Agreement. These progress reports shall be submitted within 30 days after the end of each calendar quarter and be in such form as the Department may from time to time reasonably prescribe. These quarterly progress reports relating to Exploration activities shall include:
(i) the results of geological and geophysical investigation and proving of deposits of Minerals in the Contract Area Block B and the sampling of such deposits;
(ii) the results of any general reconnaissance of the various sites of proposed operations and activities under this Agreement;
(iii) information concerning the selection of routes from any New Mining Area to a suitable harbor for the transport of Product;
(iv) information concerning the planning of suitable permanent settlements, including information on suitable water supplies for permanent settlements and other facilities; and
(v) such other plans and information as to the progress of the Company's activities in the Contract Area Block B as the Department may from time to time reasonably require.
2. Within one year after the beginning of the Feasibility Studies Period with respect to any Exploration Area, the Company shall also file with the Department a summary of its geological and metallurgical investigations and all geological, geophysical, topographic and hydrographic data obtained from the General Survey and Exploration with respect to such Exploration Area and a sample representative of each principal type of Mineralization encountered in its investigation of such Exploration Area.
3. No later than the fifth anniversary of the date of the
signing of this Agreement, the Company shall submit to the
Department a general geological map of the whole Contract
Area Block B (as then constituted) on the scale of 1 :
250,000 with attendant reports based on the Company's
geological observations; such geological map shall contain
the observations of rock types and their distribution and
structure which have been made by the Company during the
General Survey and Exploration Periods.
4. On or before the delivery of the geological map referred to in paragraph 3 of this Article, the Company shall also turn over to the Department:
(i) maps indicating all places in the Contract Area Block B in which the Company shall have drilled holes or sunk pits,
(ii) copies of logs of such drill holes and pits and of assay results with respect to any analyzed samples recovered from them,
(iii) copies of any geophysical maps of the Contract Area Block B which shall have been prepared by the Company, and
(iv) all other information directly relevant to the Company's Exploration activities under this Agreement which the Department may reasonably request and which is, or with the exercise of reasonable efforts by the Company would be, within the Company's control in order to appraise the Company's investigation activities under this Agreement.
5. The Company shall within thirty days after the date of the signing of this Agreement establish for the benefit of the Government in a Bank in Indonesia approved by the Department an interest bearing escrow account in the amount of One Million United States Dollars (US$ 1,000,000). This amount, together with the security deposit heretofore made by the Company in accordance with the SIPP, is hereinafter collectively called the "Security Deposit".
The Security Deposit shall be released by the Government as to fifty percent thereof after:
(i) the expiration of the General Survey Period;
(ii) the submission as specified in paragraph 1 of this Article 7 of four consecutive quarterly progress reports to the Department or, if the General Survey Period is completed in less than twelve months, of quarterly progress reports covering such lesser period; and
(iii) either:
(a) satisfactory performance (according to the Minister's judgment) for such twelve-month period, or
(b) the expenditure by the Company in such General Survey Period of Five Million United States Dollars (US$ 5,000,000) on the Contract Area Block B.
The remaining fifty percent of the Security Deposit will be released on behalf of the Company when the Geological map referred to in paragraph 3 of this Article has been submitted to and approved by the Department, which approval shall not be unreasonably withheld or delayed. In the event that the Company does not satisfy the above mentioned requirement within six years after the date of the signing of this Agreement, the balance of the said Security Deposit shall automatically be forwarded to the Government Treasury and the Company shall have no further claim thereon. Interest on the Security Deposit shall accrue for the benefit of the Company.
6. a. Except as otherwise provided in this paragraph 6, the Government has title to all data and reports submitted by the Company to the Department or the Government pursuant to the provisions of this Agreement. Such data and reports will be treated as strictly confidential by the Government to the extent that the Company shall so request; provided, however, that data in the public domain (because of having been published in generally accessible literature or of their mainly scientific rather than commercial value, such as geological and geophysical data) and data which have been published pursuant to laws and regulations of Indonesia or of a foreign country in which a shareholder may be domiciled (such as the annual report of public bodies or companies) shall not be subject to the foregoing restrictions; provided further that the term "data" as used in this paragraph shall include, without limitation, any and all documents, maps, plans, work sheets and other technical data and information, as well as data and information concerning financial and commercial matters.
b. In respect of data relating solely to areas relinquished by the Company from the Contract Area Block B pursuant to Article 4, the foregoing restrictions shall cease to apply as from the date of relinquishment of such areas. In addition, where this Agreement has been terminated pursuant to Article 20 or Article 22, the foregoing restrictions shall cease to apply.
c. Notwithstanding the foregoing, exclusive know-how of the Company, its sub-contractors or Affiliates contained in data or reports submitted by the Company to the Department or the Government pursuant to the provisions of this Agreement and which shall have been identified as such by the Company shall only be used by the Government in relation to the administration of this Agreement and shall not be disclosed by the Government to third parties without the prior written consent of the Company. Such exclusive know-how, as long as it remains exclusive know-how of the Company, its sub-contractors or Affiliates as the case may be, remains the sole property of the Company, its sub-contractors or Affiliates, as the case may be. The provisions of this subparagraph (c) shall survive the termination of this Agreement in accordance with laws and regulations from time to time in effect relating to intellectual properties. In the case any such exclusive know-how is not patentable in accordance with such laws, the Company may request the Government not to disclose such know-how for a period of not less than three years after termination of this Agreement.
ARTICLE 8
FEASIBILITY STUDIES PERIOD
1. The Feasibility Studies Period with respect to any Exploration Area shall commence on the date the Company submits the written request to the Department provided for in paragraph 3 of Article 6 with respect to such Exploration Area and shall end upon the commencement of the Construction Period with respect to such Exploration Area as hereinafter provided.
2. As soon as the Feasibility Studies Period has begun with
respect to any Exploration Area, the Company shall commence
studies to determine the feasibility of commercially
developing the deposit or deposits of Minerals within such
Exploration Area. The Company will be allowed a period of
twelve months to complete such studies and to select and
delineate and determine the size of one or more New Mining
Areas. Each such New Mining Area shall include at least one
deposit with respect to which the Company plans to commence
construction and Mining operations. The Department may, for
one of the reasons specified in paragraph 2 of Article 16,
object to the area proposed as a New Mining Area within
three months of the Company's designation of such New Mining
Area. The Government and the Company agree to consult in
good faith in an attempt to overcome any such objections. If
after a period of three months from the date of notification
of such objection by the Government there has been no
resolution of the matter, then either Party may proceed to
resolve the matter in accordance with paragraph 1 of Article
21. In the event that the objection by the Department to any
area designated by the Company as a New Mining Area is
upheld, and thereafter during the term of this Agreement it
is determined that Mining is permissible within such area,
the Company shall have the right to carry on such Mining in
preference to any other Person.
3. After the completion of the Feasibility Studies with respect to a New Mining Area within an Exploration Area, the Company shall submit a Feasibility Study Report in the form set out in Annex "E", which shall contain calculations and reasons for the technical and economical feasibility of conducting Mining operations within such New Mining Area, supported by data, as specified in Annex "E", calculations, drawings, maps and other information relevant to the decision whether or not to proceed with such Mining operations. The Feasibility Study with respect to any New Mining Area shall include the then intended capacity of each Mining and Processing operation within such New Mining Area and any further evaluation work or further Exploration then deemed to be required. If the Company considers that the data required and other necessary matters are not sufficiently available to come to a final decision within the initial Feasibility Studies Period with respect to any Exploration Area or if the Department has raised objections with respect to any proposed New Mining Area within such Exploration Area as set out above, the Company may seek the approval of the Government to the extension for twelve months of such Feasibility Studies Period, provided that such request for extension of the Feasibility Studies Period is submitted to the Government no later than the eighth anniversary of the date of the signing of this Agreement.
4. At any time during the Feasibility Studies Period with
respect to any New Mining Area, the Company may submit a
written application to the Department that it desires to
proceed with the construction of a Mine within such New
Mining Area and facilities to be used by the Company in its
operation thereof. The Department shall be deemed to have
approved any such application if it does not, in writing,
object to the same within three months of receipt of such
application. After approval of such application, the
Company shall promptly commence and with reasonable
diligence execute to completion the design of the Mine and
related facilities. Upon completion of such design, the
Company shall submit the design and Mining plan to the
Department for approval, together with an estimate of the
cost of such Mine and related facilities and a time schedule
for the construction thereof. Such time schedule shall, to
the extent economically and practically feasible, provide
for completing the construction of such Mine and related
facilities within thirty-six months after the approval of
the design, Mining plan and time schedule. Within three
months after submission of the design, Mining plan and time
schedule, the Department shall notify the Company of its
approval thereof or its disapproval thereof, for one of the
reasons specified in paragraph 2 of Article 16. In the event
of disapproval, the Department shall notify the Company of
the cause for disapproval and the Government and the Company
shall consult in a good faith attempt to remove the cause
for such disapproval. If after a period of three months from
the notification of such disapproval there has been no
resolution of the matter, then either party may proceed to
resolve the matter in accordance with paragraph 1 of Article
21. If within three months of any such submission, the
Company has not received any objection in writing, the
Company may consider that such submission has been approved.
5. The Feasibility Study Report as described in Annex "E" with respect to a New Mining Area shall include environmental impact studies into the effects on the Environment of the operations of the Enterprise within such New Mining Area and shall be prepared in accordance with the terms of reference set out in Article 26. Such studies may be carried out in consultation with appropriately qualified independent consultants retained by the Company and approved by the Government in accordance with the rules and procedures then in force in Indonesia.
6. The quarterly reports provided pursuant to paragraph 1 Article 7 will include data as to the progress and results of and costs incurred in respect of the investigations and studies carried on during the Feasibility Studies Periods with respect to the various Exploration Areas.
7. With respect to any Exploration Area as to which no Feasibility Study Report has theretofore been submitted pursuant to paragraph 3 of this Article, the Company shall submit to the Government a final report stating the results of and the costs incurred in respect of the investigations and studies thereof and the Company's analysis of and its conclusions in respect of those results.
8. All reports and information supplied to the Government under this Article shall be subject to the provisions of paragraph 6 of Article 7 relating to confidentiality.
ARTICLE 9
CONSTRUCTION PERIOD
1. Following receipt from the Department of approval with respect to the design, Mining plan and time schedule provided for in paragraph 4 of Article 8 with respect to any New Mining Area, the Company shall, in accordance with such time schedule, commence construction of the facilities and use its best efforts, subject to the provisions of Article 19, to complete such facilities within such time schedule. If such time schedule proves unworkable, the Company may submit to the Department a revised time schedule for the Department's approval. If within three months of such submission, the Company has not received any objection in writing, the Company may consider that such revised time schedule has been approved.
2. The facilities to be constructed during the Construction Period with respect to any New Mining Area may include such of the following as are appropriate:
(i) Mining facilities and equipment;
(ii) facilities and equipment to treat and beneficiate the Mineral ore coming from the Mine so as to produce saleable Products;
(iii) port facilities, which may include docks, harbors, piers, jetties, dredges, breakwaters, terminal facilities, workshops, storage areas, warehouses and loading and unloading equipment;
(iv) transportation and communication facilities, which may include roads, bridges, vessels, ferries, airports, railroads, landing strips and landing pads for aircraft, hangars, garages, canals, aerial tramways, pipelines, pumping stations, radio and telecommunication facilities, and telegraph and telephone facilities and lines;
(v) townsites, which may include dwellings, stores, schools, hospitals, theaters and other buildings, facilities and equipment for personnel of the Enterprise, including dependents of such personnel;
(vi) power, water and sewage facilities, which may include power plants (which may be hydroelectric, steam, gas or diesel), power lines, dams, watercourses, drains, water supply systems and systems for disposing of tailings, plant wastes and sewage;
(vii) miscellaneous facilities, which may include machine shops, foundries and repair shops; and
(viii) all such additional or other facilities, plant and equipment as the Company may consider necessary or convenient for the operations of the Enterprise related to such New Mining Area or for providing services or carrying on activities ancillary or incidental thereto.
3. The Company anticipates that, with respect to one or more of the New Mining Areas, it will employ facilities which have been created by the Company pursuant to the provisions of the Prior Contract. The Company shall be authorized to continue to employ such facilities for all purposes of this Agreement during the full term hereof, including any extensions of such term.
4. In carrying out its activities with respect to the Construction Periods related to the New Mining Areas, the Company shall comply with and be subject to the provisions of paragraph 9 of Article 10.
ARTICLE 10
OPERATING PERIOD
1. After completion of the construction of the facilities provided for in Article 9 with respect to a New Mining Area or an operable portion thereof, the Company shall promptly commence operation of such New Mining Area or part thereof for which such facilities have been constructed.
2. The Company shall conduct Mining operations and any activity
of the Enterprise with respect to any Mining Area during the
Operating Period. Contract Area Block A is in the Operating
Period. The Contract Area Block B shall enter into the
Operating Period on the earliest of (i) the first day of the
calendar month following the first calendar month during
which the aggregate average daily throughput is at least
seventy percent of the design capacity of all facilities
constructed or to be constructed pursuant to all Feasibility
Studies providing for the Mining and Processing of deposits
in the Contract Area Block B, (ii) the date which is six
months after the date of completion of such facilities, and
(iii) the end of eight years (or such longer period as may
result from extensions granted by the Department for the
completion of earlier stages under this Agreement) from the
date of the signing of this Agreement. The Operating Period
shall continue for a period measured by the initial term of
this Agreement and any extensions thereof pursuant to
paragraph 2 of Article 31.
3. If, at any time prior to the time when the Contract Area Block B shall have entered into the Operating Period as provided in paragraph 2 of this Article 10, the Company has commenced Mining in any New Mining Area and the average daily throughput from Mining with respect to such New Mining Area is at least seventy percent of the design capacity of all facilities constructed or to be constructed pursuant to the Feasibility Study providing for the Mining and Processing of the deposit or deposits in such Mining Area, the Company shall submit a written notice to the Department to such effect and, as of the first day of the following month, but in no event later than the date which is six months after the date of completion of such facilities, such New Mining Area shall be deemed to have entered into the Operating Period, without affecting the Company's rights and obligations hereunder with respect to the balance of the Contract Area Block B.
4. The Company shall Process ore to produce metal or other marketable Product. For that purpose, the Company shall prepare or cause to be prepared a feasibility study with respect to a possible smelter in Indonesia, which shall be subject to the Government's review and to a mutual determination by the Government and the Company as to the economic viability of such a smelter. Such smelter would be located at such place within Indonesia as would be most advantageous to its economic viability. Should such a smelter be built by the Company or a wholly-owned Subsidiary, it would constitute a part of the Enterprise hereunder.
5. The Company acknowledges the Government's policy to encourage the domestic processing of all of its natural resources into final products where feasible. The Company further acknowledges the Government's desire that a copper smelter and refinery be established in Indonesia and agrees that it will make available copper concentrates derived from the Contract Area for such smelter and refinery so established in Indonesia as provided below.
During any period during which smelting and refining facilities with respect to any Mined Product of the Company have not been established in Indonesia by or on behalf of the Company, or any wholly-owned Subsidiary, but have been established in Indonesia by any other Person, the Company shall, if so requested by the Government, sell such Mined Products to such other Person at prices and terms no less favorable to such Person than those that could be obtained by the Company from other purchasers of the same quantity and quality and at the same time and the same or equivalent places and times of delivery, provided that the respective contractual terms and conditions given by the Company to such other Person shall be no less favorable to the Company.
With respect to the first copper smelter established in Indonesia by anyone other than the Company or a wholly-owned Subsidiary of the Company, the quantity of copper concentrates derived from the Contract Area which the Company shall make available on the terms set out above shall be sufficient to satisfy the domestic demand in Indonesia for refined copper and to permit economic scale of such project assuming that such project is otherwise feasible, and further subject to the limitation that the quantity required shall not be so great as to jeopardize the sound financial, operating or marketing requirements of the Company. In making sales to a smelter or refining facility in Indonesia, the Company will not be treated more adversely, from the standpoint of Governmental laws and regulations, than if it had sold such Mined Products as export goods. The obligation of the Company to sell its Products to another Person pursuant to this paragraph 5 is subject to any financing agreements, sales contracts or any smelting and refining contracts entered into by the Company prior to the establishment of such facilities by such other Person or any financing agreements entered into pursuant to paragraph 2 of Article 30.
In the event that during the five year period commencing on the signing of this Agreement, a copper smelter and refinery facility to be located in Indonesia has not been established or is not in the process of being constructed by any Person, then, subject to the mutual determination by the Government and the Company as to the economic viability of such smelter and refinery, the Company shall undertake or cause to be undertaken the establishment of a copper smelter and refinery in Indonesia to comply with the policy of the Government.
6. The Company is, subject to the rights of third parties, hereby granted all necessary licenses and permits to construct and operate the smelter referred to in paragraph 4 of this Article 10 and the facilities described in paragraph 2 of Article 9 in accordance with applicable laws and regulations from time to time in effect, including such reasonable safety regulations relating to design, construction and operation as may from time to time be in effect and of general applicability in Indonesia.
7. The Company shall submit to the Department the following reports as to operations within each Mining Areas:
(i) a biweekly statistical report beginning with the first two weeks following the commencement of the Operating Period, which shall set forth the amount of material Mined, Processed, shipped and exported;
(ii) a monthly report beginning with the first month following the commencement of the Operating Period, which shall set forth the number and describe the location of the active operations during the preceding month and a brief description of the work in progress at the end of the month and of the work contemplated during the following month;
(iii) a quarterly report beginning with the first quarter following the date of the signing of this Agreement with respect to the Contract Area Block A and beginning with the first quarter following the commencement of the Operating Period with respect to each New Mining Area concerning the progress of its operations in such Mining Area, which report shall describe in reasonable detail the Mining activities carried on in such Mining Area, including the number of workmen employed in such Mining Area as of the end of the quarter in question and a description of the work in progress at the end of the quarter in question and of the work contemplated during the ensuing quarter; and
(iv) an annual report beginning with the year which includes the date of the signing of this Agreement with respect to the Contract Area Block A and beginning with the first full year following the commencement of the Operating Period with respect to each New Mining Area which shall:
a. describe in reasonable detail the Mining activities carried on in such Mining Area;
b. include the total volume of ores, kind-by-kind, broken down between volumes Mined, volumes transported from the Mines and their corresponding destination, volumes stockpiled at the Mines or elsewhere in Indonesia, volumes sold or committed for export (whether actually shipped from Indonesia or not), volumes actually shipped from Indonesia (with information as to purchaser, destination and terms of sale); and
c. include work accomplished and work in progress at the end of the year in question with respect to all of the installations and facilities related to such Mining Area, together with a full description of all work programmed for the ensuing year with respect to such installations and facilities, including a detailed report of all investment actually made or committed during the year in question and all investment committed for the ensuing year or years.
Biweekly reports shall be submitted in eightfold within two weeks after the end of the two weeks in question. Monthly reports shall be submitted in eightfold within two weeks after the end of the month in question. Quarterly reports shall be submitted in eightfold within thirty days after the end of the quarter in question. Annual reports shall be submitted in eightfold within ninety days after the end of the year in question.
8. The Company shall have full and effective control and management of all matters relating to the operation of the Enterprise including the production and marketing of its Products. The Company may make expansions, modifications, improvements and replacements of the Enterprises's facilities, and may add new facilities as the Company shall consider necessary for the operation of the Enterprise or to provide services or to carry on activities ancillary or incidental to the Enterprise. All such expansions, modifications, improvements, replacements and additions shall be considered part of the project facilities.
9. The Company accepts the rights and obligations to conduct operations and activities in accordance with the terms of this Agreement. The Company shall conduct all such operations and activities in a good technical manner in accordance with such good and acceptable international Mining engineering standards and practices as are economically and technically feasible, and in accordance with modern and accepted scientific and technical principles. In accordance with such standards, the Company undertakes to use its best efforts to optimize the Mining recovery of ore from proven reserves and metallurgical recovery of Minerals from the ore to the extent it is economically and technically feasible to do so, using appropriate modern and effective techniques, materials and methods designed to achieve minimum wastage and maximum safety as provided in the applicable laws and regulations of Indonesia from time to time in effect. The Company shall use its best efforts to conduct all operations and activities under this Agreement so as to minimize loss of natural resources, and to protect natural resources against unnecessary damage.
10. The Government will authorize the Company to freely select the vessels and other transportation facilities to be used in connection with imports and exports of articles under this Agreement. In addition, the Company shall have the right at all such times to purchase from vendors of its choice all equipment, materials and supplies necessary for the operations of the Company hereunder, and to enter into arrangements to make use of any facilities belonging to other Persons (whether or not Affiliates of the Company) upon such terms and subject to such conditions, including terms of payment, as to ownership and otherwise, as it deems appropriate; provided that the Department shall have the right to object to specific vendors or specific arrangements on the basis of national security or foreign policy concerns of the Government. In any case where the Government is the sole economic source of supply for any article or commodity necessary for the Enterprise, adequate supplies of such article or commodity shall be made available for sale to the Company at prices not greater than the fair market value thereof.
ARTICLE 11
MARKETING
1. The Company shall have the right to export the Products obtained from its operations under this Agreement, subject to the obligations set forth in paragraph 5 of Article 10. Any such export shall be on such credit terms as the Company deems appropriate for marketing its Products, and neither the Company nor any of the purchasers of such Products shall be required by the Government to obtain letters of credit or other credit documents at any bank or other institutions in Indonesia or elsewhere in connection with marketing such Products, or otherwise. Without in any way limiting the Company's basic right to export its Products, such export will be subject to the reporting and other non-monetary provisions of the export laws and regulations of Indonesia from time to time in effect and to the provisions of paragraph 2 of this Article. Subject to any preexisting contracts for the sale of Products to others, and the obligation to make available concentrates in order to satisfy the Company's obligations under paragraph 5 of Article 10, the Company shall give priority to satisfying domestic Indonesian requirements for use of its Products in Indonesia. Sales to Indonesian customers will be on terms and at prices which are competitive with those provided to non-Indonesian customers.
2. The Company shall sell the Products in accordance with generally accepted international business practices, and use its best efforts to do so at prices and on terms of sale which will maximize the economic return from the operations hereunder, giving effect to world market conditions and other circumstances prevailing at the time of sale or contract; provided that the Government shall have the right, on a basis which is of general applicability and non- discriminatory as to the Company, to prohibit the sale or export of Minerals or Products if such sale or export would be contrary to the international obligations of the Government or to external political considerations affecting the national interest of Indonesia. In the event of such prohibition (other than a quota requirement imposed pursuant to an International Commodity Marketing Agreement), if the Company is unable to find alternative markets on equivalent terms and conditions, the Company shall be given assistance and cooperation by the Government to overcome the possible consequences of such prohibition.
3. To the extent deemed necessary by the Company to secure financing for the Enterprise hereunder or to comply with its obligations to the lenders thereunder, however, the Company shall have the right to enter into long-term contracts for the sale of its Products hereunder subject to the obligations set forth in paragraph 5 of Article l0 and in paragraph 1 of this Article 11.
4. In the event that sales are made or contracted to be made to Affiliates, the prices to be paid therefor, to the extent they affect any amounts payable to the Government pursuant to the terms of this Agreement, shall comply with the provisions of Article 13 and, to the extent applicable, of Annex "F" to this Agreement. The Company shall submit to the Government any proposed contract of sale to an Affiliate for approval as complying with the foregoing provisions. If it does so, and the Government either so approves the contract or fails to respond within three months of such submission, the contract shall be deemed for purposes hereof to comply with the foregoing provisions. In any event sales commitments with Affiliates shall be made only at prices based on or equivalent to arm's length sales and in accordance with such terms and conditions at which such agreement would be made if the parties had not been Affiliates, with due allowance for normal selling discounts or commissions. Such discounts or commissions allowed the Affiliates must be no greater than the prevailing rates so that such discounts or commissions will not reduce the net proceeds of sales to the Company below those which it would have received if the parties had not been Affiliates. No selling discounts or commissions shall be allowed an Affiliate in respect of sales for consumption by it. Within ninety days after the end of each calendar year, the Company will deliver to the Department a report describing in such reasonable detail as the Department may reasonably request all sales contracts entered into during the preceding calendar year with Affiliates in accordance with the provisions of this paragraph 4.
5. If the Government believes that any figures related to sales to Affiliates and used in computing any amounts payable to the Government hereunder are not in accordance with the provisions of paragraph 4 of this Article (or, if such sales were pursuant to a contract, theretofore approved pursuant to the provisions of such paragraph 4, are not in accordance with such contract), the Government may within twelve months after the calendar quarter in which such Products were sold, but not thereafter, so advise the Company in writing. The Company shall submit evidence of the correctness of the figures within forty-five days after receipt of such advice. Within forty-five days after receipt of such evidence, the Government may give notice to the Company in writing that it is still not satisfied with the correctness of the figures and, within ten days after receipt of such notice by the Company, a Committee, consisting of one representative of and appointed by the Government and one representative of and appointed by the Company, shall be constituted to review the issue. The Committee shall meet as soon as convenient at a mutually agreeable place in Indonesia and if the members of the Committee do not reach agreement within twenty days after their appointment or such longer period as the Government and the Company mutually agree, the representatives shall appoint a third member of the Committee, who shall be a person of international standing in jurisprudence and shall be familiar with the international Mineral industry. The Committee, after reviewing all the evidence, shall determine whether the figures used by the Company or any other figures are in accordance with paragraph 4 of this Article (or an approved contract, as the case may be). The decision of two members of the Committee shall be binding upon the Parties. Failure of two representatives to appoint a third member of the Committee shall require the issue to be submitted to arbitration pursuant to Article 21 of this Agreement. Within ninety days after the issue has been finally decided pursuant to this paragraph, appropriate retroactive adjustment shall be made in conformity with the Committee's decision. The Company and the Government each shall pay the expenses of its own member on the Committee and one half of all other expenses of the Committee's proceedings.
6. In the event that the Company produces a concentrate containing any Precious Metals which are easily recoverable, the Company shall, if it is economically feasible, make maximum efforts to recover such Precious Metals.
7. In the event of a sale of copper concentrates, gold or silver to an Affiliate or to the domestic market or to the Government's designated agency, it is understood that, unless otherwise agreed by the Parties, the price of such Products shall be determined on the basis of a formula price which is generally employed in the sale of comparable products among unrelated parties.
8. If at any stage in the course of its marketing arrangement, the Company refines, or takes delivery of gold or silver refined from its Products, then such gold and silver will be in a form and bear marks which will make it acceptable in the international precious metals markets. For gold, this means the London Gold Market; for silver this means the London Silver Market.
ARTICLE 12
IMPORT AND RE-EXPORT FACILITIES
1. The Company may import into Indonesia capital goods, equipment, machinery (including spare parts), vehicles (except for sedan cars and station wagons), aircraft, vessels, other means of transport, consumables (including safety equipment, chemicals and explosives) and raw materials being items needed for use in the Mining, Exploration, feasibility study, construction, production and supporting technical activities of the Enterprise.
2. For the period beginning on the date of the signing of this Agreement and ending on the eighteenth anniversary of such date, and except as otherwise provided in paragraph 4 of this Article, the imports permitted by paragraph 1 of this Article (other than foodstuffs, wearing apparel and other vital necessities for the personal needs of the Company's employees and their dependents) shall be exempted from import duties and shall obtain full relief from and postponement of value added tax ("VAT") otherwise payable as provided by the laws and regulations from time to time in effect.
3. The provisions of this Article shall also be applicable to Persons engaged as registered subcontractors of the Company to carry on work or perform services with respect to the Enterprise, and to any equipment directly used to support the technical operations of the Company or any such subcontractor such as laboratory and computer equipment located outside its field operations.
4. The exemption from import duties and relief from and postponement of VAT as referred to in paragraph 2 of this Article shall apply only to the extent that the imported goods are not produced or manufactured in Indonesia and available on a competitive time, cost and quality basis, without duty or tax except that for the purposes of comparing the costs of imports and the cost of goods manufactured or produced in Indonesia a premium (not in excess of twelve and a half percent) shall be applied to the cost of imports.
5. Any equipment (which must be clearly identified) and unconsumed material imported by the Company or registered subcontractors of the Company for the exclusive purpose of providing services to the Company and intended to be re- exported will be exempt from import duties and entitled to relief from VAT and other levies. If such equipment and material shall not have been re-exported by the time for re- export (as established at the time of import), the Company or the subcontractors of the Company, as the case may be, shall, unless such re-export time has been extended or exempted for reasons acceptable to the Government, pay import duties, VAT and other levies not paid upon entry. The Company shall be responsible for proper implementation of its sub-contractors' obligations under this Article.
6. Any item imported by the Company or its registered sub- contractors pursuant to this Article and no longer needed for the Exploration, Mining and Processing activities of the Company may be sold outside Indonesia and re-exported free from export taxes and other customs duties (excluding capital gains tax) and from VAT tax after compliance with laws and regulations which shall at the time of such sale be in effect and of general application in Indonesia. No imported item shall be sold domestically or used otherwise than in connection with the Enterprise except after compliance with import laws and regulations which are at the time of such import in effect and of general application in Indonesia.
7. In view of the fact that goods and services will have to be imported from abroad and that the Contract Area Block B is remote, for all practical purposes, from presently existing sea ports and other ports of entry for customs purposes, the Government will consider establishing such sea port or port of entry and the requisite customs office thereat as the Company shall reasonably request from time to time; in consideration thereof, each such customs office so established at the request of the Company shall be furnished and maintained by the Company at its expense and according to the laws and regulations from time to time in effect.
8. During the Operating Period, the Company shall submit to the Government, not later than November 15 of each year, a list of equipment and material to be imported during the next calendar year to enable the Government to review and to approve the various items to be imported for the Enterprise. Notwithstanding the foregoing, the Company may request (stating the cause) the Government to amend the list of equipment and material as required during the year.
9. Personal effects (including household and living equipment and goods) belonging to a Covered Employee who is an Expatriate shall be exempt from import or re-export licenses, fees and duties.
10. Except as otherwise specifically provided in this Article or in Article 13, the Company shall duly observe import restrictions and prohibitions and rules and procedures of general application.
ARTICLE 13
TAXES AND OTHER FINANCIAL OBLIGATIONS
OF THE COMPANY
Subject to the terms of this Agreement, the Company shall pay to the Government and fulfill its tax liabilities as hereinafter provided:
(i) Deadrent in respect of the Contract Area or any Mining Area.
(ii) Royalties in respect of the Company's production of Minerals.
(iii) Income taxes with respect to the Taxable Income of the Company.
(iv) Personal income tax.
(v) Withholding taxes on dividends, interest and royalties, rental, technical service, management service and other service.
(vi) Value Added Tax on purchases and sales of taxable goods, except as otherwise provided herein.
(vii) Stamp duty on legal documents.
(viii) Import duty on goods imported into Indonesia, except as otherwise provided herein.
(ix) Land and Building Tax (PBB).
(x) Levies, taxes, charges and duties imposed by Regional Government in Indonesia which have been approved by the Central Government.
(xi) General administrative fees and charges for facilities or services rendered and special rights granted by the Government to the extent that such fees and charges have been approved by the Central Government.
(xii) Tax on the transfer of ownership of motorized vehicles and ships in Indonesia.
(xiii) Tax compliance.
The Company shall not be subject to any other taxes, duties,
levies, contributions, charges or fees now or hereafter levied or
imposed or approved by the Government other than those expressly
provided for in this Article and elsewhere in this Agreement.
1. Deadrent in respect of the Contract Area or any Mining Area.
The Company shall pay, in Rupiah, in United States Dollars or in such other currencies as may be mutually agreed, an annual amount as deadrent to be measured by the number of hectares included in the Contract Area or any Mining Area as the case may be, calculated on January 1st and July 1st of each year, such payments to be made in advance and in two installments each payable within thirty days after the said dates during the term of this Agreement and payable as stipulated in Annex "D" attached hereto.
2. Royalties in respect of the Company's production of Minerals.
The Company shall pay royalties in respect of the Mineral content of Products from the Mining Areas, to the extent that any Mineral in such Products shall be a Mineral for which value according to general practice is paid to the Company by a buyer. Royalties shall be paid in Rupiah, in United States Dollars or in such other currencies as may be mutually agreed, and shall be paid within sixty days following the end of each calendar quarter. Each payment shall be accompanied by a statement in reasonable detail showing the basis of computation of royalties due in respect of shipments or sales made during the preceding calendar quarter.
Royalties will be computed as follows:
a. With respect to copper sold as concentrates (together with Precious Metals which constitute Associated Minerals with such copper) or smelted or refined by or on behalf of the Company:
(i) In the case of copper so sold as concentrates, the amount of the royalty to be paid in respect of the payable copper content of the concentrates sold by the Company during any calendar quarter shall be an amount equal to the value of CR in the following formula:
CR = [(P x ACP) - SRFS] x PCT
where,
P = the number of pounds of payable
copper contained in the concentrates
sold during any calendar quarter;
ACP = the Applicable Copper Price
determined as provided in (b) below;
SRFS = the smelting and refining charges,
and freight and other selling costs,
incurred by the Company in respect of
such concentrates; and
PCT = the following applicable percentage;
(1) if the Applicable Copper price is
US $ 0.9000 per pound or less; PCT
= 1.50%
(2) if the Applicable Copper Price is
more than US $ 1.1000 per pound;
PCT = 3.50%
(3) if the Applicable Copper Price is
|
: 1.50 + _________ :
PCT = : :
: 10 :
:_____ _____:
where PCT = royalty rate in
percent, and
ACP = the
Applicable Copper
Price in US cents
per pound.
|
(ii) In the case of copper smelted or refined by or on behalf of the Company, the royalty shall be based on the payable copper content of the concentrates smelted or refined by the Company during any calendar quarter and shall be determined by the foregoing formula with SRFS being the smelting and refining charges, and freight and other selling costs, which would have been incurred by the Company in respect of such concentrates had such concentrates been party (which, if the Company has sold any copper concentrates during such calendar quarter, shall be the average SRFS applicable thereto); and
(iii) The applicable royalty rate with respect to the Precious Metals which constitute Associated Minerals with such copper shall be 1% of the sales price, based on the Applicable Gold Price or the Applicable Silver Price.
b. The following definitions are applicable to the provisions of this Agreement with respect to Royalties:
(i) The term "Applicable Copper Price" shall mean, with respect to the copper contained in the concentrates sold by the Company during any calendar quarter, a price equal to the official London Metal Exchange cash seller's price for copper-higher grade as published by "Metals Week" averaged over such calendar quarter.
(ii) The term "Applicable Gold Price" shall mean, with respect to the gold contained as an Associated Mineral in the concentrates sold by the Company during any calendar quarter, a price equal to the mean of the London bullion market spot morning ("initial") and afternoon ("final") price for gold in United States currency as published in "Metals Week" averaged over such calendar quarter.
(iii) The term "Applicable Silver Price" shall mean, with respect to the silver contained as an Associated Mineral in the concentrates sold by the Company during any calendar quarter, a price equal to the London bullion brokers spot price in United States currency as published in "Metals Week" averaged over such calendar quarter.
(iv) The term "payable", when used in connection with the copper, gold and silver content of concentrates sold by the Company, shall mean that portion of such content for which a price is paid to the Company.
(v) The term "pound" shall mean, with respect to copper, sixteen ounces (avoirdupois).
(vi) The term "ounce" shall mean, with respect to gold and silver, a troy ounce of 31.1035 grams.
(vii) The term "smelting and refining charges, freight and other selling costs" shall mean with respect to concentrates sold by the Company, the aggregate amount of costs in respect of such concentrates that are deductible from gross sales in determining Net Sales.
c. The prices of copper, gold and silver, if quoted in pounds sterling (or other foreign currency) rather than in United States Dollars by "Metals Week" (or any other publication substituted for "Metals Week" by mutual agreement of the Company and the Department), shall be converted daily during any calendar quarter into United States Dollars by using the noon buying rate for sterling (or other foreign currency) for cable transfers as certified by the Federal Reserve Bank of New York for customs purposes. The average price for any such calendar quarter shall be calculated by totalling the United States Dollar equivalents of the daily prices (or daily mean prices, in the case of gold) and dividing such total by the number of market days in such quarter.
d. In the event that either the Company or the Department believes that the market price of copper, gold or silver price specified in this Article 13 is no longer quotable or determinable from reliable published sources, then, upon written notice by the Company or the Department to the other, the Company and the Department shall promptly consult with a view toward determining a new published market price for copper, gold or silver, as the case may be, such new published market price to be the same, so far as practicable, as that specified above. If the Company or the Department shall give such notice, the Company shall continue to pay royalties on the basis of a published market price determined by the Company in good faith for the metal concerned, in the case of all concentrates shipped during the period commencing with the date of such notice and ending with the date on which the Company and the Department shall reach agreement with respect to a new published market price for the metal concerned.
e. The computation of the amount of the copper royalty payment in respect of the concentrates sold by the Company during a given calendar quarter shall be made on the basis of the final dry weight, assay, and smelting and refining charges, freight and other selling costs determined in accordance with the applicable sales, transportation, insurance and other contracts as evidenced by final invoices, cargo and freight bills, and other documents related to shipping and handling. To the extent that the final dry weight, assay, and smelting and refining charges, freight and other selling costs have not been determined, such computation shall be made on the basis of the provisional dry weight, assay, or smelting and refining charges, freight and other selling costs as determined in accordance with the applicable sales, transportation, insurance and other contracts as evidenced by provisional invoices, freight bills and other documents, subject to upward or downward adjustment on the basis of the final dry weight, assay, or smelting and refining charges, freight or other selling costs. If the amount of the royalty payment made in respect of any cargo of concentrates on the basis of the provisional dry weight, assay, or smelting and refining charges, freight or other selling costs is more or less than the amount thereof computed on the basis of the final dry weight, assay, or smelting and refining charges, freight and other selling costs, the amount of the excess or deficiency shall be subtracted from or added to, as the case may be, the amount of the royalty payment due on the quarterly payment date next following the determination of such final dry weight, assay or smelting and refining charges, freight or other selling costs.
Each payment shall be accompanied by a certificate signed by an executive director of the Company showing in reasonable detail the computation of the amount of the royalty payment due, including the amount of any adjustment in royalty payments made in respect of any prior quarter.
f. Concentrates shall be deemed to be sold when title passes to the purchaser pursuant to the applicable contract of sale.
g. In the ease of Precious Metals and other Minerals not covered by the provisions of paragraph (a), the applicable royalty rate shall be computed on the basis of the market value of the contained Mineral refining charges, and freight and other selling costs, with the royalty rates (which may vary with the applicable market prices) being determined by negotiation between the Company and the Government, based on the general economic principles reflected in the royalty rates established in this paragraph for copper and Precious Metals which are Associated Minerals; provided, however, that in no event will such royalty rates be less than 1% nor more than 3.5%. Such negotiation shall be completed, with respect to any Mineral, prior to the time the Company first begins construction of any Mining facilities with respect to such Mineral as permitted by this Agreement. The actual computation of the royalties will be based on the provisions and principles contained in the foregoing paragraphs (b) through (f).
h. The Company shall pay any applicable Additional Royalty in Respect of Minerals Exported as Unbeneficiated Ore from Indonesia ("Additional Royalty"). Additional Royalty shall be payable only to the extent that any Mineral in the Company's Products exported from Indonesia shall be a Mineral for which value according to general practise is paid to the Company by a buyer. The rate of Additional Royalty to be paid shall be as stipulated in Annex "G" attached hereto. The Additional Royalty shall be increased or decreased in the same proportion that the currant price shall be different from those prices set out in Annex "G" for each Mineral sold. Additional Royalty shall not be payable on:
(i) The export of Precious Metals in the form of Associated Minerals, dore bullion bars or concentrates or
(ii) Any Mineral exported in a form listed as exempt in column 6 of Annex "G".
The rules applicable to Additional Royalty shall be,
with necessary adjustment, those rules of computation
and payment of royalty set out above in this paragraph
2 (exclusive of the limitations on rate specified in
paragraph (g) above). The Government will (upon written
request from the Company) determine the stage of
Products exempt from Additional Royalty or any Mineral
for which no stage is specified in column 6 of Annex
"G", such stage to be consistent with the stages
specified in column 6 of Annex "G" for similar
Minerals. For any Minerals or ore for which no
international price is given on or ore for which no
international price is given on Annex "G" the
Government will (upon written request from the Company)
determine such price based upon general economic
principles applicable to the determination of royalty
for copper and Precious Metals specified above in this
paragraph 2.
3. Incomes taxes with respect to the Taxable Income of the Company.
The Company will pay corporate income tax (calculated in accordance with Annex "F") on income, meaning any increase in economic prosperity received or accrued by the Company, whether originating from within or without Indonesia, in whatever name and form, including but not limited to gross profit from business, dividends, interest and royalties; the tax rates which shall be applied throughout the term of this Agreement shall be as follows:
(a) 15% tax rate for taxable income up to Rp 10.000.000 (ten million Rupiah);
(b) 25% tax rate for taxable income from Rp 10.000.000 (ten million Rupiah) to Rp 50.000.000 (fifty million Rupiah); and
(c) 35% tax rate for taxable income above Rp 50.000.000 (fifty million Rupiah).
For the purposes of calculation of taxable income, the rules for computation of corporate income tax as provided for in Annex "F" attached to and made part of this Agreement shall apply and except as otherwise stipulated in this Agreement and the said Annex "F", the rules as provided in Income Tax Law 1984, Law No. 7 of 1983 and the regulations thereunder, shall apply.
4. Personal income tax.
(i) The Company shall withhold and remit income taxes on remuneration of the Company's employees according to Article 21 of Income Tax Law 1984, Law No. 7 of 1983.
(ii) Remuneration of Covered Employees whose work situs is in a remote area shall not include the following in kind or other benefits provided by the Company:
(a) medical services provided to Covered Employees (including their dependents), including services provided pursuant to paragraph 7 of outside the Contract Area or any Project Area to executive directors of the Company at the Vice President level or higher shall be reviewed on a case-by- case basis to determine if such services are remuneration;
(b) annual leave for Covered Employees (including their dependents) who reside in a remote area;
(c) the cost of education within the Contract Area or related Project Area of dependents of Covered Employees (including their dependents), including education provided pursuant to paragraph 8 of Article 17;
(d) housing in a remote area provided to Covered Employees (including their dependents); and
(e) food provided to Covered Employees at any remote area location.
(iii) Expatriate Individuals who are employed or engaged by the Company or its Subsidiaries or its sub- contractors and who are present in Indonesia for 183 or less days in any twelve month period shall be subject to withholding of tax at the rate of 20% (or such lesser percentage as shall apply under any relevant Double Tax Agreement) on the gross remuneration for services rendered in Indonesia based an Article 26 Income Tax Law 1984, Law No. 7 of 1983. The income of such Expatriate Individuals which is taxable in Indonesia shall include only remuneration paid to them for services rendered in Indonesia.
(iv) Expatriate Individuals who are employed or engaged by the Company or its Subsidiaries or its subcontractors and who are present in Indonesia for more than 183 days in any twelve month period or intend to reside in Indonesia, shall be liable for Indonesian personal income tax. The Company shall deduct personal income tax based on Article 21 Income Tax Law 1984, Law No. 7 of 1983 from the income received by the employee from the Company with consideration being given to the regulations relating to deductible income. The income of such Expatriate Individuals shall include all kinds of remuneration paid to them by their employer but shall exclude employee benefits which either are not deductible in calculating the taxable income of the Company or are set out in clause (ii) of this paragraph 4.
5. Withholding taxes on dividends, interest and royalties.
(a) The Company shall, in accordance with the Income Tax Law 1984 and the laws and regulations prevailing at the date of the signing of this Agreement, withhold and remit to the Government withholding taxes on the payment of royalties, rent and other compensation related to the use of property and compensation paid for technical assistance or management services performed in Indonesia, at the following rates (or such lesser rates as shall be applicable from time to time under any relevant Double Tax Agreement): fifteen percent to the case of payments to a resident taxpayer and twenty percent in the case of payments to a nonresident taxpayer.
(b) The Company (and its Subsidiaries and Affiliates to the extent carrying out functions hereunder) shall, in accordance with the Income Tax Law 1984 and the laws and regulations prevailing at the date of the signing of this Agreement, withhold and remit to the Government withholding taxes on the payment of dividends at the rate of fifteen percent (or such lesser rate as shall be applicable from time to time under any relevant Double Tax Agreement).
(c) The Company shall, in accordance with the Income Tax Law 1984 and the laws and regulations prevailing at the date of the signing of this Agreement, withhold and remit to the Government withholding taxes on the payment of interest at the following rates (or such lesser rates as shall be applicable from time to time under any relevant Double Tax Agreement): fifteen percent in the case of payments to a resident taxpayer and twenty percent in the case of payments to a nonresident taxpayer; provided that, during the term of this Agreement, the Company (and its Subsidiaries and Affiliates to the extent carrying out functions hereunder) shall be exempt from any Government withholding taxes on any interest in whatever form which is payable on any indebtedness of the Company (and such Subsidiaries and Affiliates) pursuant to loan agreements entered into prior to the date of the signing of this Agreement. For such purpose, interest includes payments for loan guarantees and other payments which are characterized as interest for purposes of Indonesian law and loan agreements include all debt agreements providing for the payment of such interest.
6. Value Added Tax and Sales Tax on Luxury Goods imposed on import and delivery of taxable goods and services.
With regard to the obligation contemplated by the Value Added Tax on Goods and Services and Sales Tax on Luxury Goods, Value Added Tax Law 1984, Law No. 8 of 1983 and its implementing regulations as in effect on the date of the signing of this Agreement (the "VAT Law") the Company (for itself and its Subsidiaries and Affiliates to the extent carrying out functions hereunder) agrees, except as otherwise provided in this Agreement, as follows:
(i) It shall register its business as a taxable firm for Value Added Tax Purposes;
(ii) It shall withhold and remit upon sale and delivery of Mined Products tax (output tax) at the applicable rate or rates under the VAT Law;
(iii) It shall withhold and remit tax under the VAT Law in accordance with the Decree of the President of the Republic of Indonesia No. 56 of Year 1988 or decrees having similar effect;
(iv) The Company shall be subject to the obligation to pay tax under the VAT Law on the import or purchase of taxable goods or procurement of taxable services;
(v) Tax under the VAT Law, especially on the import or purchase of taxable goods in the form of machinery and other equipment, may be deferred pursuant to the regulations in effect from time to time.
(vi) Payments under the VAT Law on import and domestic purchasing of taxable goods and services (input tax) are creditable against payments of output tax under the VAT Law.
(vii) If the input tax is more than the output tax, the excess may be either applied against the output tax for the next taxable period or refunded to the Company, as requested by the Company. Any such refund shall be made within one month after the date of the letter requesting such refund.
7. Stamp duty on legal documents.
As provided in Law No. 13 of 1985 dated December 27, 1985 re Stamp Duty.
8. Import duty on goods imported into Indonesia.
(i) Exemption and tax reliefs on import of capital goods, equipment, machinery (including spare parts), vehicles (except for sedan cars and station wagons), aircraft, vessels, other means of transport, consumables (including chemicals and explosives, but excluding dry goods and foodstuffs) and raw materials are accorded to the Company, as provided in Article 12 above, by virtue of Law No. l of 1967 concerning Foreign Capital Investment as amended in Law No. 1 of 1967.
(ii) Other goods including personal effects are subject to import duty laws and regulations from time to time in effect, except as otherwise provided in Article 12.
(iii) Tobacco and liquor are subject to excise tax in accordance with the prevailing law.
9. Land and Building Tax (PBB). The Company shall pay Land and Building Tax (PBB), in Rupiah, as follows:
(i) During the General Survey, Exploration, Feasibility Studies and Construction Periods, an amount equal to the amount of deadrent. During the Operating Period, an amount equal to the amount of deadrent, plus an additional annual land tax equal to 0.5% times 20% of gross revenues from Mining operations. Such payments shall be made in accordance with the provisions set forth in paragraph 1 of this Article.
(ii) An amount to be measured by the number of square meters of land area and floor space used by the Company for its facilities which are closed to the public, such payment to be made during the term of this Agreement in accordance with the laws and regulations from time to time in effect; provided, that the tariffs imposed on the Company shall be only those of general applicability in the Mining industry in Indonesia.
10. Levies, taxes, charges and duties imposed by Regional Governments in Indonesia which have been approved by the Central Government and are at rates no higher than the fees and charges prevailing as at the date of the signing of this Agreement and calculated in a manner no more onerous to the Company than that prevailing as at the date of the signing of this Agreement.
11. Except as otherwise provided in this Agreement, general administrative fees and charges for facilities or services rendered and special rights granted by the Government to the extent that such fees and charges have been approved by the Central Government and are at rates no higher than the fees and charges prevailing as at the date of the signing of this Agreement and calculated in a manner no more onerous to the Company than that prevailing as at the date of the signing of this Agreement.
12. Tax on the transfer of ownership shall be payable on motorized vehicles (the tax levied by the Regional Government where the vehicles are registered at rates according to the relevant Regional Government regulations from time to time in effect) and on ships or vessels working in Indonesia (the tax levied by the Directorate General of Sea Communication, Ministry of Communication, where the ships or vessels are registered).
13. Tax Compliance.
(i) The Company shall maintain appropriate tax books and records and otherwise comply with the tax filing and payment requirements of the Republic of Indonesia and any other taxing jurisdictions which may lawfully impose any tax on the Company.
(ii) The Company and its Subsidiaries and Affiliates are subject to the provisions of Income Tax Law 1984, Law No. 7 of 1983 and Law No. 6 of 1983 concerning General Tax Provisions and Procedures and of this Agreement in connection with such formal and procedural tax matters as Tax Identification Number, Tax Return, tax payment, reporting and rights as to taxation such as tax objection, refund, tax credit, compensation and penalties.
(iii) The Company shall maintain tax records for the Government, in a manner consistent with Article 14 and may compute and pay all tax payments in United States Dollars.
(iv) In determining the Company's net taxable income, sound, consistent and generally accepted accounting principles used in the Mining industry shall be employed, provided, however, that where more than one accounting practice is found to prevail, the Government shall consult with the Company with regard to the particular item. Without limiting the generality of the foregoing, the Government shall in no event be bound by the Company's characterization of any transaction with an Affiliate for accounting purposes. In the event that the Government establishes that any payment, deduction, charges or expenses or other transaction with an Affiliate is not fair, reasonable and consistent with the general practice that would have been followed by independent parties in connection with a transaction of a similar nature, the Government may, for the purposes of determining the Company's income tax liability, substitute the payment, deduction, charges or expenses or other transaction which would have prevailed had the transaction occurred between independent parties.
ARTICLE 14
RECORDS, INSPECTION AND WORK PROGRAM
1. The Company shall maintain in Indonesia technical, financial and tax records relating to its operations hereunder which are comparable in detail and type to those being maintained on the date of the signing of this Agreement with respect to its current operations in Indonesia. Such financial and tax records may be maintained in Rupiahs or United States dollars as selected by the Company, and in English. The Company shall furnish to the Government annual financial statements consisting of a balance sheet and related statement of income and all such other financial information concerning the Enterprise and its operations hereunder in accordance with generally accepted accounting principles in Indonesia and all such other information concerning its operations in such detail as the Government may reasonably request.
2. The Government and its authorized representatives have the right to review and audit such financial statement and tax returns within five years after the end of the latest period covered thereby. The failure by the Government to make a claim for additional payment on account of deadrent, royalties, tax or other payments to the Government within such five year period shall preclude any such claim by the Government thereafter.
3. The Government and its authorized representatives may enter the Contract Area and any other place of business of the Company to inspect the operations at any time and from time to time during regular business hours. The Company shall render necessary assistance to enable such representatives to inspect technical, financial and tax records relating to the Company's operations and shall give such representatives such information as such representatives may reasonably request. The representatives shall conduct such inspections at their own risk and shall avoid interference with normal operations of the Company.
4. The Company shall submit to the Department no later than November 15 in each year during the term of this Agreement its work program, budget plan, sales contract and marketing/sales plan for the following year in sufficient detail to permit the Department to review such physical, financial and marketing/sales program and determine whether they are in accordance with the Company's obligations under this Agreement. A work program and budget for the first year of this Agreement with respect to the Contract Area Block B shall be submitted as soon as possible after the signing of this Agreement.
5. (a) The Company shall also furnish to the Department the reports called for by Article 7, by paragraph 7 of Article 10 and by Article 11.
(b) The Company shall furnish to the Government such other information of whatever kind relative to the Enterprise and not otherwise being delivered to the Government or the Department as the Government may reasonably request, which is, or with the exercise of reasonable efforts by the Company would be, within the control of the Company in order that the Government may be fully appraised of the Company's Exploration and exploitation activities.
6. All information mentioned in paragraph 5 of this Article furnished to the Department may be in English and all financial data will be recorded in United States Dollars. All such information shall be subject to the provisions of paragraph 6 of Article 7 relating to confidentiality.
7. The Company shall maintain original records and reports relating to its activities and operations under this Agreement including documents relating to financial and commercial transactions with independent parties and Affiliates in its principal office in Indonesia. These records and reports shall be open to inspection by the Government through an authorized representative. Such reports and records shall be maintained in Indonesia and all financial data shall be recorded in Rupiah currency or United States Dollars and records shall also be kept of conversion rates applied to the original currency.
8. The Company shall require its Subsidiaries, Affiliates and subcontractors, to the extent that such Subsidiaries, Affiliates and subcontractors are acting on the Company's behalf with respect to the Company's obligations, activities and operations under this Agreement, to keep all financial statements, records, data and information necessary to enable the Company to observe the provisions of this Article 14.
9. All records, reports, plans, maps, charts, accounts and information which the Company is or may from time to time be required to supply under the provisions of this Agreement shall be supplied at the expense of the Company.
ARTICLE 15
CURRENCY EXCHANGE
1. All investment remittances into Indonesia for the purpose of any expenditures to be made in Indonesia (including but not limited to equity capital and loan capital) shall be deposited into a foreign investment account (the "PMA Account") established at one or more foreign exchange banks in Indonesia. All such investment remittances shall be used in accordance with the investment regulations from time to time in effect applicable to foreign investment law companies established under the Foreign Investment Law, Law No. 1 of 1967, as amended. The conversion or sale of foreign exchange originating from PMA foreign currency accounts is to be done with foreign exchange banks and not necessarily with Bank Indonesia.
2. The Company shall be granted the right to transfer abroad, in any currency it may desire, funds in the PMA Account or received by the Company in Rupiah in respect of the following items, provided that such transfers are effected in accordance with the laws and regulations then in effect and at prevailing rates of exchange generally applicable to commercial transactions:
(i) Net operating profits of the Company in proportion to the shareholding of any non-Indonesian investor;
(ii) Repayment of loan principal and the interest thereon, insofar as it is a part of the Company's capital investment which has been approved by the Government;
(iii) Allowance for depreciation of capital assets generally applicable to foreign investment companies established under the Foreign Investment Law, Law No. 1 of 1967, as amended;
(iv) Proceeds from sales of shares sold pursuant to paragraph 2 of Article 24;
(v) Expenses for Expatriates employed by the Company and their families and for training of Indonesian personnel abroad;
(vi) Debts of the Company denominated in foreign currency, including debts owed to contractors and sellers of equipment and raw materials, or for commissions;
(vii) Technical assistance fees;
(viii) License fees;
(ix) Agency commissions payable to third parties abroad;
(x) Payments to foreign suppliers of the Company, to the extent that the purchases of foreign goods and services, including management and related services, are necessary for the operation of the Company or the Enterprise;
(xi) Repatriation of capital on the liquidation of the Company;
(xii) Any other foreign exchange facilities provided from time to time to foreign investment companies established under the Foreign Investment Law, Law No. 1 of 1967, as amended or provided by any regulations adopted pursuant thereto or by any other laws or regulations.
3. The proceeds of sales of Minerals and any Products derived from them can be used as the Company sees fit. Without prejudice to the foregoing rights of the Company, the Company agrees that with regard to the proceeds of the Company's export sales it shall comply with laws and regulations from time to time in force to the extent not inconsistent with the preceding sentence, except as Bank Indonesia and the Company may otherwise agree. The terms and conditions of any such agreement between Bank Indonesia and the Company shall not be less favorable to the Company than those contained in any other similar agreements by Bank Indonesia and other mining companies now or hereafter in effect.
4. The Company in the exercise and performance of its rights and obligations set forth in this Agreement shall be authorized to pay abroad, in any currency it may desire, without conversion into Rupiah, for the goods and services it may require and to defray abroad, in any currency it may desire, any other expenses incurred for mining operations under this Agreement.
5. All Expatriates who are Covered Employees in any capacity shall have the right to freely retain or dispose of any of their funds or assets outside Indonesia and shall be entitled to import into Indonesia such foreign currencies as may be required for their needs.
6. In respect of other matters of foreign currency arising in any way out of or in connection with this Agreement, the Company shall be entitled to receive treatment no less favorable to the Company than that accorded to any other Mining company carrying on operations in Indonesia.
7. Subject to the foregoing paragraphs of this Article 15, the Company shall comply with all financial reporting and approval requirements applicable to foreign investment law companies established under the Foreign Investment Law, Law No. 1 of 1967.
8. The Company shall forward financial reports in accordance with the procedures required by Bank Indonesia.
ARTICLE 16
SPECIAL RIGHTS OF THE GOVERNMENT
1. The Company and its shareholders agree that they will not without the Government's prior approval:
(i) amend the Articles of Incorporation of the Company in any material respect;
(ii) change the basic nature of the business of the Company;
(iii) voluntarily liquidate or wind up the Company;
(iv) merge or consolidate the Company with any other company; or
(v) pledge or otherwise use as security the Minerals in the Contract Area.
2. The Government reserves the right to withhold its approval of plans and designs relating to construction, operation, expansion, modification and replacement of facilities of the Enterprise in the Contract Area Block B which may disproportionately and unreasonably damage the surrounding Environment or limit its further development potential or significantly disrupt the socio-political stability in the area or be adverse to the interests of national security. As more fully described in paragraph 4 of Article 8, such approval shall not unreasonably be withheld or delayed; and, if within three months after submission of such plans or designs the Government does not raise any objection, then such plans or design will be considered approved.
3. The Government shall have the right of access to the Contract Area as provided in paragraph 3 of Article 14.
ARTICLE 17
EMPLOYMENT AND TRAINING OF INDONESIAN NATIONALS
1. The Company shall continue to employ Indonesian personnel to the maximum extent practicable consistent with efficient operations, subject to the provisions of the laws and regulation which may from time to time be in force in Indonesia.
2. The Company shall not be restricted in its assignment or discharge of personnel; provided however that subject to the foregoing requirements the terms and conditions of such assignment and discharge or disciplining of Indonesian personnel shall be carried out in compliance with the laws and regulations of Indonesia which at the time are generally applied.
3. The Company shall continue to seek to provide direct Indonesian participation in the Enterprise through the inclusion of Indonesian nationals in the management of the Company. The Company will also train Indonesian nationals to occupy other responsible positions.
4. The Company shall continue to conduct a comprehensive training program for Indonesian personnel in Indonesia and, subject to the approval of the Government, in other countries and shall carry out such program for training and education in order to meet the requirement for various classifications of full time employment for its operations in Indonesia. With respect to any New Mining Area, such program shall be carried out as soon as practicable after the beginning of the Construction Period with respect to such New Mining Area. The Company shall also conduct a program to acquaint all Expatriate employees and registered subcontractors with the laws and customs of Indonesia.
5. The Company and its registered subcontractors may bring into Indonesia such Expatriate Individuals as in the Company's judgment are required to carry out efficiently the operations of the Company hereunder; provided however, that the Department may make known to the Company, and the Company shall duly observe, objections based on grounds of national security or foreign policy of the Government. At the Company's request (which shall be accompanied by information concerning the education, experience and other qualifications of the individuals concerned) and in compliance with the laws and regulations in effect from time to time, the Government will facilitate the issuance of all necessary permits, visas and such other permits as may be required; in this connection the Company shall periodically submit its manpower requirement plans, manpower report, training program and training report in the framework of the Indonesianization process to the Government.
6. The Company agrees that there shall at all times be equal treatment, facilities and opportunities among employees in the same job classification with respect to salaries, facilities and opportunities within the Mining industry regardless of nationality and the Company shall duly observe the manpower laws and regulations from time to time in effect in Indonesia. Notwithstanding the foregoing, it shall not be a violation of the foregoing provision to give preference as to opportunity to Indonesians in light of the policy of the Government to increase the employment of Indonesians to the maximum extent possible, nor to continue to pay Expatriates brought into Indonesia pursuant to paragraph 5 of this Article at a higher rate than local employees in situations where, with respect to a given job classification, there is a need to employ such Expatriates.
7. The Company shall furnish such free medical care and attention to all its employees working in any Mining Area or in any Project Area related to such Mining Area as is reasonable and shall maintain or have available adequate medical services at least commensurate with such services provided in similar circumstances in Indonesia. With respect to a Company established permanent settlement with respect to a Mining Area, the Company shall furnish such free medical care and attention to all its employees and all Government officials requested by the Company working in such Mining Area or in any Project Area related to such Mining Area as is reasonable and shall maintain a staff and a dispensary, clinic or hospital which shall be reasonably adequate under the circumstances according to the laws and regulations of Indonesia from time to time in effect.
8. With respect to any Mining Area as to which the Company has established a permanent settlement incorporating families for the employees associated with the Enterprise, the Company shall provide, free of charge, primary and secondary education facilities for the children living in any Project Area related to such Mining Area of employees working in such Mining Area or in any Project Area related to such Mining Area. Rules, regulations and standards of general application for comparable education facilities in Indonesia established by the Department of Education and Culture shall be followed.
9. The Company acknowledges that pursuant to Law No. 14 of 1969, employees of the Company have the right to form a trade union for purposes of collective bargaining with the Company. Certain of the Company's employees are members of a trade union which has been recognized by the Company as well as by the Government, and a collective labor agreement with such union is currently in effect. The Company acknowledges that it may be required from time to time to enter into collective bargaining with such trade union.
ARTICLE 18
ENABLING PROVISIONS
1. The Government will grant the Company the necessary rights and will take such other action as may be desirable to achieve the mutual objectives of this Agreement. The Company shall have the following rights:
(i) the sole right to enter the Contract Area or any Mining Area for the purposes of this Agreement, to make drill holes, test pits and excavations, and to take and remove, without royalty or other charge, samples for assays and for metallurgical, pilot plant and laboratory research purposes, including bulk samples for such purposes, provided that the Company shall have received the approval of the Government prior to the export of any such samples, to be given prospectively on a quarterly basis and shall pay any royalties applicable thereto.
(ii) to enter upon and remain within the Contract Area and
the Project Areas related to the Contract Area
(including portions of the air space and shore line),
subject to the right of the Department to object to any
New Mining Area as provided in paragraph 2 of Article
8. The Company shall recognize the items referred to in
Article 16 of Law No. 11 of 1967, subject to the
provision of paragraph 2 of the said Article 16.
2. In carrying out its activities under this Agreement, the Company, subject to the laws and regulations from time to time in effect in Indonesia, shall have the right to construct facilities as it deems necessary; provided that:
(i) In connection with the use of land by the Company for construction of facilities as provided in this Agreement, the Company shall pay the usual surveying and registration fees charged by the Land Registration Office. In acquiring titles to land outside any New Mining Area, the Company shall comply with laws and regulations of general application from time to time in effect.
(ii) In connection with the activities of the Company, but subject to the provisions of Article 13, the Company shall pay generally applicable fees and charges for services performed, facilities provided and special rights granted by the Government; provided that such services, facilities and rights are requested by the Company.
3. Subject to laws and regulations from time to time be in force in Indonesia, and subject also to the provisions of paragraph 2 of Article 25 and paragraph 2 of Article 16, the Company may at any time file with the Department a plan or plans, and may thereafter file additional or amended plans, covering:
(i) the New Mining Area or Areas in which the Company proposes to construct facilities related to production from the Contract Area Block B;
(ii) all other areas within the Contract Area Block B in which the Company proposes to construct any other facilities necessary for the Enterprise, and the location of all such rights in and over land, including easements, rights of way and rights to lay or pass on, over and under land, any roads, railways, pipes, pipelines, sewers, drains, wires, lines or similar facilities as may be necessary for the Enterprise; and
(iii) all other areas in which the Company shall have the right to construct such additional facilities as the Company deems necessary or convenient for the Enterprise, including Project Areas related to the Contract Area Block A.
The Government shall thereupon make arrangements for the Company to utilize and remain within all such areas and such land covered by such plans (or such comparable areas as may be agreed between the Government and the Company) and to exercise the other rights specified above with respect to each such area. The use and occupancy of any areas covered by such plans shall not be subject to payment by the Company of any charges or fees other than those specified elsewhere in this Agreement. The plans filed pursuant to this paragraph shall, to the extent practicable, give descriptions in sufficient detail to permit precise identification of the designated areas. The Government shall assist the Company in arrangements for any necessary resettlement of local inhabitants whose resettlement from any part of the Contract Area Block B or the Protect Areas is necessary and the Company shall pay for the resettlement and give reasonable compensation for any dwelling, privately owned lands (including such landownership based on any Indonesian customs or customary laws, generally or locally applicable) or other improvements in existence on any such parts which are taken or damaged by the Company in connection with its activities under this Agreement.
4. Subject to the non-monetary provisions of generally applicable Central Government, Regional Government and Provincial laws and regulations from time to time in effect, and to the payments provided for in Article 13 of this Agreement but to no other payments to the Government, and with due recognition of the rights of private parties created prior to the beginning of the Construction Period and subject to payments of such reasonable compensation to any such private party with rights thereto created prior to the beginning of the Construction Period as may be customary in the Contract Area Block B, the Company may take and use from the Contract Area or any Project Area such timber (for construction purposes), soil, stone, sand, gravel, lime, water and other products and materials as are necessary for or are to be used by the Enterprise. In connection with the foregoing and except as otherwise provided in this Agreement, the Company shall observe the laws and regulations in effect on the date of the signing of this Agreement governing the exploitation and use of such natural resources.
5. The Company shall also have the right, in compliance with laws and regulations in effect on the date of the signing of this Agreement, to clear away and remove such timber, overburden and other obstructions as may be necessary or desirable for the Mining, construction of facilities and any other operations of the Company under this Agreement, provided that the Company shall take into account other rights granted by the Government such as grazing, timber cutting and cultivation rights, and rights of way, by conducting its operations under this Agreement so as to interfere as little an possible with such rights.
6. The Company may, at its own expense, also take and use any of such products and materials from other areas outside the Contract Area or any Project Area subject to the rights of other parties, to the approval of the Government, and to the payment of such compensation as may be agreed between the Company and such other parties or Government and in accordance with the laws and regulations in effect on the date of the signing of this Agreement.
7. At the request of the Company, the Government shall cooperate in a joint endeavour to alleviate any interference which may arise from others operating under conflicting rights.
8. The Company and the Government recognize that the existing and proposed operations hereunder are to be carried out in an extremely remote area with a difficult environment and that, accordingly, the Company has been and will be required to develop special facilities and carry out special functions for the fulfillment of this Agreement. In recognition of the added burdens and expenses to be borne by the Company and the additional services to be performed by the Company as a result of the location of its activities in a difficult environment, the Government recognizes that appropriate arrangement may be required to minimize the adverse economic and operational costs resulting from the administration of the laws and regulations of the Government from time to time in effect, and in construing the Company's obligations to comply with such laws and regulations.
ARTICLE 19
FORCE MAJEURE
1. Any failure by the Government or by the Company to carry out
any of its obligations under this Agreement shall not be
deemed a breach of contract or default if such failure is
caused by force majeure, that party having taken all
appropriate precaution, due care and reasonable alternative
measures with the objectives of avoiding such failure and of
carrying out its obligations under this Agreement. If any
activity is delayed, curtailed or prevented by force
majeure, then anything in this Agreement to the contrary
notwithstanding, the time for carrying out the activity
thereby affected and the term of this Agreement specified in
Article 31 shall each be extended for a period equal to the
total of the periods during which such causes or their
effects were operative, and for such further periods, if
any, as shall be necessary to make good the time lost as a
result of such force majeure. For the purposes of this
Agreement, force majeure shall include among other things:
war, insurrection, civil disturbance, blockade, sabotage,
embargo, strike and other labor conflict, riot, epidemic,
earthquake, storm, flood, or other adverse weather
conditions, explosion, fire, lightning, adverse order or
direction of any Government de jure or de facto or any
instrumentality or subdivision thereof, act of God or the
public enemy, breakdown of machinery having a major effect
on the operation of the Enterprise and any cause (whether or
not of the kind hereinbefore described) over which the
affected party has no reasonable control and which is of
such a nature as to delay, curtail or prevent timely action
by the party affected.
2. The Party whose ability to perform its obligations is affected by force majeure shall notify as soon as practicable the other party thereof in writing, stating the cause, and the parties shall endeavour to do all reasonable acts and things within their power to remove such cause; provided, however, that neither party shall be obligated to resolve or terminate any disagreement with third parties, including labor disputes, except under conditions acceptable to it or pursuant to the final decision of any arbitral, judicial or statutory agencies having jurisdiction to finally resolve the disagreement. As to labor disputes, the Company may request the Government to cooperate in a joint endeavour to alleviate any conflict which may arise.
ARTICLE 20
DEFAULT
1. Subject to the provisions of Article 19 of this Agreement, in the event that the Company is found to be in default in the performance of any provision of this Agreement, the Government, as its remedy under this Agreement, shall give the Company written notice thereof (which notice must state that it is pursuant to this Article) and the Company shall have a reasonable period specified in such notice, not in excess of one hundred and eighty days after receipt of such notice, to correct such default. In the event the Company corrects such default within such period, this Agreement shall remain in full force and effect without prejudice to any future right of the Government in respect of any future default. In the event the Company does not correct such default within the time stipulated in the notice, the Government shall have the right to terminate this Agreement in accordance with the provisions of Article 22.
Any failure by the Company to comply with any provisions of this Agreement relating to one or more Mining Areas, and not to all Mining Areas or to the Enterprise as a whole, shall not be considered to be a default under this Article 20. In the event of such failure, after notice to the Company in accordance with the preceding paragraph and failure by the Company to correct such failure in accordance therewith, the Government shall have the right to close such Mining Areas or any part thereof and to require the Company to relinquish such Mining Areas or such parts.
2. Notwithstanding the provision of paragraph 1 of this Article, in the event the Company shall be found to be in default in the making of any payment of money to the Government which the Company is required to make pursuant to Article 12 or Article 13, the period within which the Company must correct such default shall be thirty days after the receipt of notice thereof. The penalty for late payment shall be an interest charge on the amount in default from the date the payment was due, at the rate of the New York prime interest rate in effect at the date of default plus 4%. This and other penalties provided for in this Article may not be taken as deduction in the calculation of taxable income.
3. The Company shall not be deemed to be in default in the performance of any provision of this Agreement concerning which there is any dispute between the Parties until such time as all disputes concerning such provision, including any contention that the Company is in default in the performance thereof or any dispute as to whether the Company was provided a reasonable opportunity to correct a default, have been settled as provided in Article 21.
ARTICLE 21
SETTLEMENT OF DISPUTES
1. The Government and the Company hereby consent to submit all disputes between the Parties hereto arising, before or after termination hereof, out of this Agreement or the application hereof or the operations hereunder, including contentions that a Party is in default in the performance of its obligations hereunder, for final settlement, either by conciliation, if the Parties wish to seek an amicable settlement by conciliation, or to arbitration. Where the Parties seek an amicable settlement of a dispute by conciliation, the conciliation shall take place in accordance with the UNCITRAL Conciliation Rules contained in resolution 35/52 adopted by the United Nations General Assembly on 4 December, 1980 and entitled "Conciliation Rules of the United Nations Commission on International Trade Law" as at present in force. Where the Parties arbitrate, the dispute shall be settled by arbitration in accordance with the UNCITRAL Arbitration Rules contained in resolution 31/98 adopted by the United Nations General Assembly on 15 December, 1976 and entitled "Arbitration Rules of the United Nations Commission on International Trade Law" as at present in force. The foregoing provisions of this paragraph do not apply to tax matters which are subject to the jurisdiction of Majelis Pertimbangan Pajak (The Consultative Board of Taxes). The language to be used in conciliation and arbitration proceedings shall be the English language, unless the Parties otherwise agree.
2. Before the Government or the Company institutes an arbitration proceeding under the UNCITRAL Arbitration Rules, it will use its best endeavors to resolve the dispute through consultation and use of administrative remedies; provided that the Company shall not be obligated to pursue any such remedies for more than one hundred and twenty days after it has notified the Government of an impending dispute if such remedies involve a request or application to the Government or any of its departments or instrumentalities.
3. Conciliation or arbitration proceedings conducted pursuant to this Article shall, if appropriate arrangements can be made, be held in Jakarta, Indonesia, unless the Parties agree upon another location or unless the aforesaid rules or the procedures thereunder otherwise require. The provisions of this Article shall continue in force notwithstanding the termination of this Agreement. An award pursuant to any such arbitration proceedings shall be enforceable against and binding upon the Parties hereto, and shall be specifically enforceable in Indonesia, whether or not the proceedings have been held in Indonesia.
ARTICLE 22
TERMINATION
1. At any time during the term of this Agreement, after having used all reasonable diligence in its endeavour to conduct its activities under this Agreement, if in the Company's opinion the Enterprise is not workable, the Company shall consult with the Department and may thereafter submit a written notice to terminate this Agreement and to be relieved of its obligations hereunder. At the time of the submission of such notice, the Company shall make available to the Department, to the extent requested by the Department, all relevant data and information related to the Company's activities under this Agreement which have not theretofore been delivered to the Department. Such data and information shall include but not be limited to documents, maps, plans, work sheets and other technical data and information. Upon confirmation of termination by the Department or within a period of six months from the date of the giving of such written notice by the Company, whichever shall first occur, this Agreement shall automatically terminate and the Company shall be relieved of its obligations under this Agreement except as hereinafter specifically provided in this Article.
2. Upon termination of this Agreement pursuant to this Article 22 or termination of this Agreement by reason of the expiration of the term of this Agreement, all Contract Properties, movable and immovable, of the Company within the Project Areas and Mining shall be offered for sale to the Government at cost or market value, whichever is the lower, but in no event lower than the depreciated book value. The Government shall have an option, valid for thirty days from the date of such offer, to buy, within ninety days after acceptance by the Government of such offer, all such property at the agreed value payable in United States Dollars and through a bank to be agreed upon by both Parties. If the Government does not accept such offer within the said thirty day period, the Company may sell, remove or otherwise dispose of any or all of such property during a period of twelve months after the expiration of such offer. The Government will use its best efforts to facilitate the disposition by the Company of any of such Contract Properties that the Company desires to dispose of. Any of such Contract Properties not so sold, removed or otherwise disposed of shall become the property of the Government without any compensation to the Company.
3. It is agreed, however, that any Contract Properties, movable and immovable, which shall at time of any such termination be in use for a public purpose such as roads, schools and hospitals, with the equipment therein, within Indonesia shall immediately become the property of the Government without any compensation to the Company; and the Company shall recognize the items referred to in paragraph (c) of sub-paragraph 1 of Article 24 of Law No. 11 of 1967 relating to safety, and paragraphs 3, 4 and 5 of Article 46 of Government Regulations No. 32 of 1969.
4. All sales, removals or disposals of the Company's property pursuant to any such termination shall be effected according to the laws and regulations from time to time in effect; any gain or loss from sale or disposal as related to the written down book value shall be determined in accordance with Article 13 of this Agreement. All values shall be based on generally accepted accounting principles.
5. Rights and obligations which have come into effect prior to any such termination and rights and obligations relating to transfer of currencies and properties which have not yet been completed at the time of such termination shall continue in effect for the time necessary or appropriate fully to exercise such rights and discharge such obligations. Additionally, the Company shall be granted the right to transfer abroad all or any proceeds of sale received under this Article 22 subject to the requirements of Article 15.
ARTICLE 23
COOPERATION OF THE PARTIES
1. The Parties to this Agreement agree that they will at all times use their best efforts to carry out the provisions of this Agreement to the end that the Enterprise may at all times be conducted with efficiency and for the optimum benefit of the Parties.
2. The Company agrees to plan and conduct all operations under this Agreement in accordance with the standards and requirements imposed elsewhere in this Agreement for the sound and progressive development of the Mining industry in Indonesia, to give at all times full consideration to the aspirations and welfare of the people of the Republic of Indonesia and to the development of the Nation, and to cooperate with the Government in promoting the growth and development of Indonesian economic and social structure, and subject to the provisions of this Agreement, at all times to comply with the laws and regulations of Indonesia from time to time in effect.
3. The Department on behalf of the Government agrees that during the term of this Agreement the Government, consistent with Law No. 1 of 1967 on Foreign Capital Investment, (i) will take no action which is inconsistent with the provisions of this Agreement so as to adversely affect the conduct of the Enterprise hereunder, including, without limitation, any action of condemnation or nationalization of the Enterprise or any part thereof, and (ii) will at all times cooperate with the Company in handling all administrative actions and determinations relating to the Enterprise in the most expeditious manner consistent with orderly procedures.
ARTICLE 24
PROMOTION OF NATIONAL INTEREST
1. In the conduct of its activities under the Agreement, the Company shall, consistent with its rights and obligations elsewhere under this Agreement, give preference to Indonesian consumers' requirements for its Products and the Company and its Affiliates and subcontractors shall in good faith and to the fullest practicable extent utilize Indonesian manpower, services and raw materials produced from Indonesian sources and products manufactured in Indonesia to the extent such services and products are available on a competitive time, cost and quality basis, provided that in comparing prices of goods produced or manufactured in Indonesia to the price of imported goods there shall be added a premium (not in excess of twelve and a half percent) and other expenses (excluding VAT) incurred up to the time the imported goods are landed in Indonesia.
2. From time to time during the periods herein specified, the Company will offer for sale or cause to be offered for sale shares of the capital stock of the Company in furtherance of the policy of Indonesia to encourage ownership in Indonesian companies by Indonesian Nationals, in the manner provided in this paragraph 2 of Article 24. For purposes of this paragraph 2 of Article 24, the term "Indonesian National" means an Indonesian citizen, an Indonesian legal entity controlled by Indonesian citizens, or the Government of the Republic of Indonesia.
a. As soon as practicable after the date of the signing of this Agreement, but in any event commencing no later than the fifth anniversary of the date of the signing of this Agreement and concluding no later than the tenth anniversary of the date of the signing of this Agreement, the Company will offer for sale in public offerings on the Jakarta Stock Exchange or otherwise to Indonesian Nationals, to the extent requested by the Government to meet the requirements of then existing laws and regulations and to the extent the financial market conditions in Indonesia at the time permit the shares to be sold in an orderly market at a fair price, sufficient shares to equal, after giving effect of such sale, directly or indirectly, 10% of the outstanding issued share capital of the Company.
b. During the first twelve-month period following the tenth anniversary of the date of the signing of this Agreement, and in each twelve-month period thereafter for a total of ten such periods, to the extent requested by the Government to meet the requirements of then existing Indonesian law and to the extent the financial market conditions in Indonesia at the time permit the shares to be sold in an orderly market at a fair price, the Company will offer for sale in public offerings on the Jakarta Stock Exchange, or otherwise to Indonesian Nationals, sufficient shares to equal, after giving effect to such sales, directly or indirectly, 2.5% of the outstanding issued share capital of the Company, until such time as the aggregate number of shares sold pursuant to this paragraph 2 of this Article 24 shall be sufficient to equal, directly or indirectly, after giving effect to all such sales and any shares now or hereafter owned by the Government, 45% of the outstanding issued share capital of the Company; provided that at least 20% of such outstanding issued share capital shall have been sold on the Jakarta Stock Exchange, and provided, further, that if at least 20% of such outstanding issued share capital is not so sold on the Jakarta Stock Exchange, the Company shall be required to sell or cause to be sold in public offerings on the Jakarta Stock Exchange, or otherwise to Indonesian Nationals, sufficient shares to equal a total of 51% of the issued share capital of the Company not later than the twentieth anniversary of the date of the signing of this Agreement, to the extent requested by the Government to meet the requirements of then existing laws and regulations and to the extent the financial market conditions in Indonesia at the time permit the shares to be sold in an orderly market at a fair price.
c. The Government and the Company agree that any sales of shares in excess of those required to be made in any period shall reduce the number of shares required to be offered in the next succeeding period or periods, and that any shares required to be offered in one period but not sold during such period shall be added to the number of shares so offered for sale in the next succeeding period or periods.
d. If after the signing of this Agreement then effective laws and regulations or Government policies or actions impose less burdensome divestiture requirements than set forth herein, such less burdensome divestiture requirements shall be applicable to the parties to this Agreement.
e. The shares to be sold will be either newly issued shares or shares held by foreign shareholders.
f. The proceeds from sales pursuant to this paragraph will not be subject to tax in the hands of the Company or to its shareholders, provided such shareholders do not have a permanent establishment in Indonesia.
g. Sales pursuant to this paragraph shall satisfy all requirements of Indonesian law with respect to the required sale of stock interests in the Company to Indonesian Nationals.
3. The Company shall continue to seek to include Indonesian citizens among the members of its Board of Commissioners (Dewan Komisaris). To this end at least one seat on the Board of Commissioners will continuously be occupied by an Indonesian citizen who shall be designated by the Company with the approval of the Government.
ARTICLE 25
REGIONAL COOPERATION IN REGARD TO
ADDITIONAL INFRASTRUCTURE
1. The Company will at all times cooperate with the Government in utilizing its best efforts to plan and coordinate its activities, and proposed future projects in the Contract Area or the Project Areas. Living accommodation and facilities and working conditions provided by the Company for its operations shall be of a Government standard commensurate with those of good employers operating in Indonesia.
2. In relation to the region, the Company will endeavour to assist in maximizing the economic and social benefits generated by the Enterprise in the Contract Area in respect to:
(i) coordinating such benefits with local and regional infrastructure studies limitations by the Government together with any benefits generated by other interested local, foreign and international public and private entities; and
(ii) assisting and advising the Government, when requested, in its planning of the infrastructure and regional development which the Company may deem useful to the Enterprise and to existing and future industries and activities in the area of the Enterprise.
3. The Company shall allow the public and the Government to use any wharf and harbor installations, air strips or roads which have been constructed by the Company pursuant to this Agreement and which are located outside the Mining Areas and the related Project Areas provided that;
(i) any such use shall be subject to such regulations and limitations as the Company shall reasonably impose, and shall in no event adversely affect or interfere with the Company's operations hereunder and
(ii) the Company shall be entitled to impose such charges therefor as shall be appropriate to reflect the cost of maintaining such facilities and, with respect to any commercial use of such facilities, the capital cost thereof.
4. The Company shall maintain and be responsible for the maintenance of all roads in the Mining Areas.
5. All roads constructed by the Company outside the Mining Areas, to the extent used by the public, shall be public roads for the purposes of the provisions of the traffic laws and regulations from time to time in effect in Indonesia. To the extent that the plans and designs for the Enterprise as approved by the Government so provide and thereafter from time to time, the Government shall make such special regulations under the traffic laws as it considers necessary or desirable for the proper safety of the users of the said roads.
6. If the Company's use of the existing public roads results in or is likely to result in significant damage or deterioration, the Company shall pay to the Government or other authority having control over the roads the cost (or an equitable proportion thereof having regard to the use of such roads by others) of preventing or making good such damages or deterioration or of upgrading to a standard necessary having regard to the increased traffic. In addition, the Government or other authority having control over any such road may require the Company to pay a maintenance user charge based upon what is fair and reasonable having regard to the continuing cost (excluding any profit to the Government or such other authority) of operation and maintenance of that road and the use of that road by others; provided, that, in lieu of making such payments, the Company shall have the right to elect to maintain at its own expense any such road needed by it for its operations hereunder.
7. In the event that the Government is unable to provide adequate telecommunications facilities, the Company may, in accordance with rules and regulations from time to time in effect in Indonesia, install and operate such telecommunications facilities; provided that it shall allow the Government and the public to use such facilities on the following terms: (i) any such use shall be subject to such regulations and limitations as the Company shall reasonably impose, and shall in no event adversely affect or interfere with the Company's operations hereunder and (ii) the Company shall be entitled to impose such charges therefor as shall be appropriate to reflect the cost of maintaining and operating such facilities and, with respect to any commercial use of such facilities, the capital cost thereof. In the event that, prior to any such installation by the Company, adequate telecommunications facilities of the type needed by the Enterprise can be provided by the Government, the Company shall be obliged to use the Government's network and pay reasonable standard charges for telecommunications services.
8. The Company may at its own cost, in accordance with the laws and regulations from time to time in effect in Indonesia, construct and establish and develop camps or permanent facilities sufficient to service the needs of the Enterprise.
ARTICLE 26
ENVIRONMENTAL MANAGEMENT AND PROTECTION
1. The Company shall, in accordance with prevailing Environmental and natural preservation laws and regulations of Indonesia from time to time in effect, use its best efforts to conduct its operations under this Agreement so as to minimize harm to the Environment and utilize recognized modern Mining industry practices to protect natural resources against unnecessary damage, to minimize Pollution and harmful emissions into the Environment, to dispose of Waste in a manner consistent with good Waste disposal practices, and in general to provide for the health and safety of its employees and the local community. The Company shall not take any acts which may unnecessarily and unreasonably block or limit the further development of the resources of the area in which it operates.
2. The Company shall install and utilize such internationally recognized modern safety devices and shall observe such internationally recognized modern safety precautions as are provided and observed under conditions and operations comparable to those undertaken by the Company under this Agreement, including measures designed to prevent and control fires.
3. The Company shall include in the Feasibility Study for each New Mining Area an Environmental Impact Study which analyzes the potential impact of its operations on land, water, air, biological resources and human settlements. The Environmental study will also outline measures which the Company intends to use to mitigate adverse impacts.
ARTICLE 27
LOCAL BUSINESS DEVELOPMENT
1. The Company shall to the extent reasonably and economically practicable, having regard to the nature of the particular goods and services, promote, support, encourage and lend assistance to Indonesian nationals desirous of establishing enterprises and businesses providing goods and services for the Enterprise and for any permanent settlements constructed by the Company and the residents thereof, and shall generally promote, support, encourage and assist the establishment and operation of local enterprises outside the Mining Areas and any related Project Areas.
2. The Company shall make maximum use of Indonesian subcontractors where services are available from them at competitive prices and of comparable standards with those obtainable from other third party suppliers, whether inside or outside Indonesia.
3. Insofar as it is practicable, the Company shall give first preference in its assistance hereunder to landowners in and other people originating from the area of the Enterprise.
4. Except as otherwise agreed by the Government, the Company shall, at the commencement of the Feasibility Studies Period with respect to an Exploration Area, appoint for such period as is reasonably necessary, a member of its staff who has had experience within Indonesia with respect to the establishment, control and day-to-day running of enterprises controlled and run by Indonesians and who shall:
(i) identify activities related to the Enterprise including the provision of goods and services as described above which can be carried on by Indonesian nationals or local enterprise on a basis which is competitive as to time, cost and quality to the goods and services otherwise available to the Company;
(ii) advise and assist Indonesian nationals desirous of carrying on those activities or of establishing enterprises to do the same; and
(iii) implement, or assist in the implementation of, the Business and Community Development Program as hereinafter described on behalf of the Company.
The staff member appointed for this purpose shall be a full time employee of the Company.
5. The Company will, directly or indirectly, provide funds for, and assist in the development of, a Business and Community Development Program designed to assist Indonesian nationals in the province in which the Enterprise is located. The Company and the Government have agreed to cooperate closely in carrying out such program.
6. Except as otherwise agreed by the Government, the Business and Community Development Program will make provision insofar as is practicable for the following (except to the extent of activities to be carried out directly by the Company):
(i) enterprises involved in the supply and maintenance of Mining equipment and the provision of consumable supplies;
(ii) subcontracting to self-employed equipment operators for road construction and maintenance work;
(iii) subcontracting of site preparation, construction and maintenance of houses, Government buildings, industrial facilities and other works and buildings and facilities to be established, including concreting, welding, tank constructions, steel fabrication, plumbing, electrical work and timberwork;
(iv) enterprises involved in town services such as sewer and garbage collection, treatment and disposal, passenger transport, freight carriage of consumer items and stevedoring (except in relation to the shipping of the Products of the Mine).
(v) enterprises involved in trade stores, supermarkets, other retail outlets, canteens, restaurants, taverns, cinemas, social clubs, cleaning and laundry, and vehicle maintenance and repair facilities;
(vi) enterprises involved in the supply of fresh fruits, vegetables, meat and fish; and
(vii) other activities agreed to by the Company and the Government;
in each case on a basis which is competitive as to time, cost and quality to the goods and services otherwise available to the Company.
7. Except as otherwise agreed by the Government, the Business and Community Development Program shall also include details of:
(i) the time schedule for its implementations;
(ii) those additional activities which could be established by Indonesian nationals;
(iii) those activities in which the Company intends to commence operating but which will be transferred to Indonesian nationals at a later date, on a commercial basis; and
(iv) any facilities by way of training, technical or financial assistance which can be made available to facilitate the smooth transition of ownership and operation to Indonesian nationals.
8. Except as otherwise agreed by the Government, the Business and Community Development program shall be reviewed annually by the Company, in consultation with the Government, and may be altered by mutual consent between the Company and the Government with a view to securing the maximum benefit to Indonesian nationals and local enterprises from the operations of the Company and the carrying out of the Enterprise.
9. Except as otherwise agreed by the Government, the Company shall consult from time to time with representatives of the Government and furnish the Government annually with a report concerning the following:
(i) the implementation of the training and manpower aspects of the Business and Community Development Program;
(ii) the implementation of provisions relating to local purchasing of supplies; and
(iii) the implementation of provisions relating to local business development.
ARTICLE 28
MISCELLANEOUS PROVISIONS
1. Each of the Parties agrees to execute and deliver all such further instruments, and to do and perform all such further acts and things, as shall be necessary or convenient to carry out the provisions of this Agreement.
2. Any notice, request, waiver, consent approval and other communication required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable or radiogram, with postage or transmission charges fully prepaid, to the Party to which it is required or permitted to be given or made at such Party's address hereinafter specified, or at such other addresses as such Party shall have designated by notice to the Party giving such notice or making such request:
To the Government addressed to:
The Ministry of Mines and Energy of the Republic
of Indonesia
c/o The Director General of Mines
Jalan Jenderal Gatot Subroto Kav. 49
Jakarta 10001, Indonesia
To the Company at its principal office in Jakarta with one copy by airmail telegram, telex, cable or radiogram, with postage or transmission charges fully prepaid to:
P.T. Freeport Indonesia Company
P.O. Box 3148
Jakarta 10001, Indonesia
Sampoerna Building, 5th floor
Jalan H. R. Rasuna Said X-7 No. 6
Jakarta 12940, Indonesia,
With a copy to:
Freeport-McMoRan Copper & Gold Inc.
1615 Poydras Street
New Orleans, LA 70112
United States of America
3. The Minister or his designee may take any action or give any consent on behalf of the Government which may be necessary or convenient under or in connection with this Agreement for its better implementation and any action so taken or consent so given shall be binding upon the Government and any instrumentality or subdivision thereof.
4. This Agreement shall have the force and effect of law. This Agreement shall supersede the Prior Contract. The Government and the Company have entered into a Memorandum of Understanding which sets forth certain matters necessary to the supersession of the Prior Contract and the continuation by the Company under this Agreement of the operations previously conducted under the Prior Contract. By its approval of this Agreement the Government acknowledges its responsibility for this Agreement and the Memorandum of Understanding.
5. When required by context of this Agreement, each number (singular or plural) shall include all numbers and each gender shall include all genders. The headings appearing in this Agreement are not to be construed as interpretations of the text or provisions hereof, but are intended only for convenience of reference.
6. The terms of this Agreement (including the Annexes hereto and the Memorandum of Understanding referred to in paragraph 4 of this Article) constitute the entire agreement between the Parties hereto and no previous communications, representations or agreements, either oral or written between the Parties hereto with respect to the subject matter thereof shall vary the terms of this Agreement.
7. Unless the context otherwise expressly requires, where reference is made in this Agreement to the laws or regulations of Indonesia such reference shall be to the laws and regulations of Indonesia generally applicable to foreign Mining companies in Indonesia in effect from time to time.
8. Where an approval or consent or concurrence of a Ministry or the Government of Indonesia or any subdivision or instrumentality thereof is required, and where an application is made by the Company to the Government of Indonesia under this Agreement, such approval or consent will not be unreasonably withheld or delayed.
ARTICLE 29
ASSIGNMENT
1. This Agreement may not be transferred or assigned (including for the purpose of financing) in whole or in part, without the prior written approval of the Minister; provided, that, in the event of any such transfer or assignment, the Company shall not be relieved from any of its obligations hereunder except to the extent that the transferee or assignee shall assume such obligations.
2. The shareholders in the Company shall not transfer shares in the Company without the prior written consent of the Minister which shall not be unreasonably withheld or delayed; provided that the written consent of the Minister shall not be required in the case of:
a. a transfer of shares pursuant to Article 24 or, with respect to shares listed on the Jakarta Stock Exchange, subsequent transfers thereof; or
b. a transfer by a shareholder of all or some its shares to FCX or an Affiliate thereof.
ARTICLE 30
FINANCING
1. The Company shall have sole responsibility for financing the Enterprise and shall maintain sufficient capital to carry out its obligations under this agreement. The Company may determine the extent to which the financing shall be accomplished through issuance of shares of the Company or through borrowings by the Company; provided, that, the Company shall at all times maintain a ratio of shareholders capital to indebtedness which is sufficient to reasonably assure its solvency for the benefit of the Government and its creditors and shareholders.
2. Any long term borrowing by the Company pursuant to agreements entered into after the date of signing of this Agreement shall be on such repayment terms and at such effective rates of interest (including discounts, compensating balances and other costs of obtaining such borrowings) as are reasonable and appropriate for Mining companies in circumstances then prevailing in the international money markets, after complying with existing procedures for obtaining foreign loans.
3. For the purpose of securing financing, the Company may mortgage, pledge or otherwise encumber its assets, subject to paragraph 1 of Article 29.
ARTICLE 31
TERM
1. This Agreement shall become effective on the date of the signing of this Agreement.
2. Subject to the provisions herein contained, this Agreement shall have an initial term of 30 years from the date of the signing of this Agreement; provided that the Company shall be entitled to apply for two successive ten year extensions of such term, subject to Government approval. The Government will not unreasonably withhold or delay such approval. Such application by the Company may be made at any time during the term of this Agreement, including any prior extension.
ARTICLE 32
GOVERNING LAW
1. Except as otherwise expressly provided herein, this Agreement, its implementation and operation shall be governed and construed and interpreted in accordance with the laws of the Republic of Indonesia which are presently in force.
2. This Agreement has been drawn up in both the Indonesian and English languages and both texts are valid. In the event of any divergency between the two texts, however, the English text shall prevail and shall be considered the official text.
In witness whereof, the Parties hereto have caused this Agreement to be duly executed as of the date appearing at the beginning of this Agreement.
FOR THE GOVERNMENT OF THE
REPUBLIC OF INDONESIA
/s/GINANDJAR KARTASASMITA --------------------------------------------- MINISTER OF MINES AND ENERGY |
FOR P.T. FREEPORT INDONESIA COMPANY
BY: /s/HOEDIATMO HOED
---------------------------------------------
President Director
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EXHIBIT 10.2
CONTRACT OF WORK
BETWEEN
THE GOVERNMENT OF THE REPUBLIC OF INDONESIA
AND
PT IRJA EASTERN MINERALS CORPORATION
CONTENTS
ARTICLE Page
INTRODUCTION 1
1. DEFINITIONS 4
2. APPOINTMENT AND RESPONSIBILITY OF THE COMPANY 9
3. MODUS OPERANDI 11
4. CONTRACT AREA 13
5. GENERAL SURVEY PERIOD 16
6. EXPLORATION PERIOD 18
7. REPORTS AND SECURITY DEPOSIT 21
8. FEASIBILITY STUDIES PERIOD 26
9. CONSTRUCTION PERIOD 30
10. OPERATING PERIOD 32
11. MARKETING 39
12. IMPORT AND RE-EXPORT FACILITIES 43
13. TAXES AND OTHER FINANCIAL OBLIGATIONS OF THE COMPANY 46
14. RECORDS, INSPECTION AND WORK PROGRAM 57
15. CURRENCY EXCHANGE 60
16. SPECIAL RIGHTS OF THE GOVERNMENT 63
17. EMPLOYMENT AND TRAINING OF INDONESIAN NATIONALS 64
18. ENABLING PROVISIONS 67
19. FORCE MAJEURE 72
20. DEFAULT 74
21. SETTLEMENT OF DISPUTES 76
22. TERMINATION 78
23. COOPERATION OF THE PARTIES 83
24. PROMOTION OF NATIONAL INTEREST 86
25. REGIONAL COOPERATION IN REGARD TO
ADDITIONAL INFRASTRUCTURE 88
26. ENVIRONMENTAL MANAGEMENT AND PROTECTION 92
27. LOCAL BUSINESS DEVELOPMENT 94
28. MISCELLANEOUS PROVISIONS 99
29. ASSIGNMENT 102
30. FINANCING 103
31. TERM 104
32. GOVERNING LAW 105
ANNEX "A" - CONTRACT AREA 106
ANNEX "B" - MAP OF CONTRACT AREA 108
ANNEX "C" - LIST OF OUTSTANDING MINING AUTHORIZATIONS
AND NATURE RESERVES 109
ANNEX "D" - DEADRENT FOR VARIOUS STAGES OF ACTIVITIES 110
ANNEX "E" - FEASIBILITY STUDY REPORT 111
ANNEX "F" - ROYALTY TARIFF 113
ANNEX "G" - IMPLEMENTATION OF ROYALTY TARIFF 118
ANNEX "H"- RULES FOR COMPUTATION OF INCOME TAX 120
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CONTRACT OF WORK
This Agreement, made and entered into in Jakarta, in the Republic of Indonesia, on the 15th day of August 1994 by and between the Government of the Republic of Indonesia, represented herein by the Minister of Mines and Energy of the Government of the Republic of Indonesia (hereinafter called the "Government") and PT. IRJA EASTERN MINERALS CORPORATION (a judicial body incorporated in Indonesia by Notarial Deed Numbered 14 dated August 1st 1994, Decree of Minister of Justice Numbered C2.12.165.HT.01.01.TH.04 dated 1994) (hereinafter called the "Company"), all of the shares of which at the time of its incorporation are owned by:
1. With respect to 80% (eighty) percent of the shares:
EASTERN MINING COMPANY, INC., a company incorporated by
virtue of the law of the State of Delaware, United States
of America, whose address in the United States of America
is at 1615 Poydras Street, New Orleans, LA 70012, with
mailing address in Indonesia is at Plaza 89, 5th Floor,
Jl. H.R. Rasuna Said Kav. X-7 No. 6, Jakarta 12940
(hereinafter called "Eastern");
2. With respect to 10% (ten percent) of the shares:
PT. INDOCOPPER INVESTAMA CORPORATION, a judicial body
incorporated in Indonesia by Notarial Deed Numbered: 89
dated December 23, 1991, made before Muhani Salim, Notary
in Jakarta, which the latest amendment made before S.P.
Henry Shidki, Notary in Jakarta, under No. 113 dated
November 12, 1992, approved by Decree of Minister of
Justice No. C2- 9468.HT.01.04.TH.92 dated November 19,
1992 whose address is at Wisma Bakrie, 6th Floor, Jl. HR
Rasuna Said Kav. B-1, Jakarta 12920 (hereinafter called
"Indocopper");
3. With respect to 10% (ten) percent of the shares:
PT. SEDTCO GANESHA, a judicial body incorporated in
Indonesia by Notarial Deed Numbered 56 dated March 21, 1984
made before Anna Sunarhadi, Notary in Jakarta, which the
latest amendment made before R.N. Sinulingga, Notary in
Jakarta, under No. 483, dated October 1991, approved
by Decree of Minister of Justice No. C2-
6723.HT.01.01.Th. 91 dated November 16, 1991 whose
address is at Lippo Plaza, 3rd Floor, Jl. Jend.
Sudirman Kav. 25, Jakarta 12920 (hereinafter called
"Setdco").
WITNESSETH THAT:
A. All Mineral resources contained in the territories of the Republic of Indonesia, including the offshore areas, are the national wealth of the Indonesian Nation.
B. The Government desires to encourage and promote the exploration and development of the Mineral resources of Indonesia. The Government is also desirous of facilitating the development of ore deposits if commercial quantities are found to exist and the operation of Mining enterprises in connection therewith.
C. The Government, through the operation of Mining enterprises, is desirous of creating growth centers for regional development, creating more employment opportunities, encouraging and developing local business and ensuring that skills, know-how and technology are transferred to Indonesian nationals, acquiring basic data regarding and related to the country's Mineral resources and preserving and rehabilitating the natural Environment for further development of Indonesia.
D. The Company as an indirect Subsidiary of Freeport-McMoRan Inc., a Delaware corporation, and a Subsidiary of Freeport- McMoRan Copper & Gold Inc., a Delaware corporation, has and has access to the information, knowledge, experience and proven technical and financial capability and other resources to undertake a program of General Survey, Exploration, Feasibility Study, Development, Construction, Mining, Processing and Marketing with respect to the Contract Area, and is ready and willing to proceed thereto under the terms and subject to the conditions set forth in this Agreement.
E. The Government and the Company recognize that the Contract Area (as hereinafter defined) is located in an extremely remote area with a difficult environment and that, accordingly, the Company may be required to develop special facilities and to carry out special functions for the fulfillment of this Agreement.
F. The Government and the Company are willing to cooperate in developing the Mineral resources hereinafter described on the basic provisions hereof and of the laws and regulations of the Republic of Indonesia, specifically Law No. 11 of 1967 on the Basic Provisions of Mining (Undang-Undang Pokok Pertambangan) and Law No. 1 of 1967 on Foreign Capital Investment (Undang-Undang Penanaman Modal Asing) and its amendment Law No. 11 of 1970 and the relevant laws and regulations pertaining thereto.
NOW, THEREFORE, in consideration of the mutual promises, covenants and conditions hereinafter set out to be performed and kept by the Parties hereto, and intending to be legally bound hereby, it is stipulated and agreed between the Parties hereto as follows:
ARTICLE 1
DEFINITIONS
The terms set forth below shall have the meanings therein set forth, respectively, wherever the same shall appear in this Agreement and whether or not the same shall be capitalized.
1. "Affiliate" of any Person means any other Person that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with, such Person. "Control" (including the terms "controlled by" and "under common control with" and "controls") means the possession, directly or indirectly, of the ability to direct the management and policies of a Person. Without limiting the generality of the above, such ability is presumed to exist in a Person if it holds, directly or indirectly, 25% or more of the outstanding voting shares of another Person.
2. "Associated Minerals" with respect to a particular Mineral means Minerals which geologically occur together with, are inseparable by Mining from and must necessarily be Mined and Processed together with such Mineral.
3. "Beneficial Use" means a use of the Environment or any element or segment of the Environment that is conducive to public benefit, welfare, safety or health and which requires protection from the effects of waste discharges, emissions and deposits.
4. "Contract Area" means that area described in Annex "A", Annex "B", and Article 4.1 of this Agreement.
5. "Contract Properties" with respect to any Mining Area, means, for the purposes of Article 22, the property of the Company in Indonesia which is located in such Mining Area or any Project Area related to such Mining Area.
6. "Covered Employee" means any person, including an Expatriate Individual, who is employed or engaged by the Company or one of its Subsidiaries or Affiliates or subcontractors.
7. "Department", unless the context otherwise indicates, means that Government agency charged from time to time with the administration of the Indonesian Mining laws and regulations.
8. "Enterprise" means all activities of the Company provided for in this Agreement or contemplated by this Agreement, including the General Survey, Exploration, evaluation, development, construction, Mining, operating, Processing, selling and all other activities by the Company for the purposes of or in connection with this Agreement.
9. "Environment" means physical and chemical factors of the surroundings of human beings, including land, water, atmosphere, climate, sound, odors, tastes and biological factors of animals and plants and the social factors of aesthetics.
10. "Expatriate Individuals" or "Expatriates" means individuals who are non-Indonesian nationals.
11. "Exploration" means the search for Minerals using geological, geophysical and geochemical methods, including the use of boreholes, test pits, trenches, surface or underground headings, drifts or tunnels in order to locate the presence of economic Mineral deposits and to find out their nature, shape and grade, and "Explore" has a corresponding meaning.
12. "Exploration Areas" means the portions of the Contract Area which are selected for Exploration as a result of the General Survey of the Contract Area by the Company during the General Survey Period provided for in paragraph 2 of Article 3, or the entire retained area after the completion of the General Survey Period and any extension thereto.
13. "Foreign Currency" means any currency other than Rupiah.
14. "General Survey" means an investigation or a preliminary Exploration carried out along certain broad features of an area for surface indications of mineralization.
15. "Government" means the Government of the Republic of Indonesia, its Ministers, Ministries, Departments, Agencies and Instrumentalities, and all Regional, Provincial or District Authorities.
16. "Indonesian Participant" means an Indonesian citizen, an Indonesian legal entity controlled by Indonesian citizens or such other Indonesian legal entity as qualifies as an Indonesian participant under applicable regulations, or the Government of the Republic of Indonesia.
17. "Minerals" means all natural deposits and natural accumulations containing chemical elements of all kinds, either in elemental form or in association or chemical combination with other metallic or non-metallic elements.
18. "Mining" means recovery activities aimed at the economic exploitation of one or more identified deposits of Minerals, and "Mine" has a corresponding meaning.
19. "Mining Areas" means all those territories within the Contract Area which have been identified by the Company as containing a potentially economic mineral deposit or deposits which the Company selects for Mining development and designates by latitude and longitude on maps and by description upon or before the expiration of the Feasibility Studies Period with respect to an Exploration Area, as one in which the Company shall propose to commence Mining, subject to paragraph 2 of Article 16, provided that a Mining Area may be expanded by agreement of the Department and the Company if as a result of further Exploration and Mining it becomes apparent that inclusion of adjacent lands would advance the purposes of this Agreement by permitting the Mining of the Minerals identified with respect to such deposits or Associated Minerals.
20. "Minister", unless the context otherwise indicates, means that person who is acting at any given time as the Minister of the Department of Mines and Energy.
21. "Person" means any individual, partnership, corporation, wherever organized or incorporated, and all other judicially distinct entities and associations, whether or not incorporated.
22. "Pollution" means any direct or indirect alteration of the physical, thermal, chemical, biological or radioactive properties of any part of the Environment by the discharge, emission or deposit of Wastes so as to affect any Beneficial Use materially and adversely, or to cause a condition which is hazardous or potentially hazardous to public health, safety or welfare, or to animals, birds, wildlife, fish or aquatic life, or to plants, and "Pollute" has a corresponding meaning.
23. "Precious Metal" means gold, silver, platinum or palladium.
24. "Processing" means treatment of Mineral ore after it has been Mined to produce a marketable Mineral concentrate or a further refined Mineral Product, and "Process" has a corresponding meaning.
25. "Products" means all ores, Minerals, concentrates, precipitates and metals, including refined products, obtained as a result of Mining or Processing, after deducting any quantities thereof which are lost, discarded, destroyed or used in research, testing, Mining, Processing or transportation.
26. "Project Area" means, with respect to any Mining Area, an area outside such Mining Area designated as a Project Area and delineated in a feasibility study report for Mining development by the Company as necessary or desirable for the Processing facilities and other infrastructure facilities related to such Mining development, including any additions to any such area required for Mining development or Processing.
27. "Rupiah" means the currency that constitutes legal tender in Indonesia.
28. "SIPP" ( A Preliminary Survey License ) means the license granted by the Department which allows the applicants to the Contract of Work to carry out a Preliminary Survey prior to the formal signing of the Contract of Work. The "SIPP" license is awarded by the Department upon written request by the applicants.
29. "Subsidiary" of any Person means any corporation controlled by such Person through the direct or indirect ownership of fifty percent or more of the issued shares having power to vote or any partnership or joint venture controlled by such Person.
30. "Waste" includes any matter whether liquid, solid, gaseous or radioactive, which is discharged, emitted, or deposited in the Environment in such volume, consistency or manner as to cause a material and adverse alteration of the Environment.
ARTICLE 2
APPOINTMENT AND RESPONSIBILITY OF THE COMPANY
1. The Company is hereby appointed the sole contractor for the Government with respect to the Contract Area. In particular, the Company shall be granted the sole rights to Explore for Minerals in the Contract Area, to Mine any deposit of Minerals found in the Mining Area, to Process, store, and transport by any means certain Minerals extracted therefrom, to market, sell or dispose of all the Products of such Mining and Processing, inside and outside Indonesia, and to perform all other operations and activities which may be necessary or convenient in connection therewith, with due observance of the requirements of this Agreement. In consideration for the grant of such rights, the Company shall perform the work and carry out the obligations imposed on it by this Agreement, including, without limitation, the obligation to make expenditures as provided in paragraph 2 of Article 5, in paragraph 5 of Article 6 and in paragraph 5 of Article 7, the obligation to pay taxes and other charges to the Government as provided in Article 12 and 13 and the obligation to adhere to the Mining standards described in Article 10 and to the Environmental, safety and health standards described in Article 26.
2. Notwithstanding paragraph 1 of this Article 2, the Company shall not Mine any radioactive minerals, hydrocarbon compounds, nickel, tin or coal without first obtaining the approval of the Department, and industrial minerals without first obtaining the approval of the Government.
3. The Company shall have the sole control and management of all of the Company's activities under this Agreement and the Company shall have full responsibility therefor and shall assume all risk with respect thereto in accordance with the terms and conditions of this Agreement. Without in any way detracting from the Company's responsibilities and obligations hereunder, the Company may engage registered subcontractors, whether or not Affiliates of the Company, for the execution
of such phases of its operation as the Company deems appropriate, including contracting for construction of facilities and for necessary technical, management and administrative services. In the event that such services are contracted from Affiliates, the charges therefor, to the extent they affect any amounts payable to the Government pursuant to the terms of this Agreement, shall comply with the provisions of Article 13 and of Annex "H" to this Agreement.
4. The Company shall take all reasonable measures to prevent damage to the rights and property of the Government or third parties. In the event of negligence on the part of the Company or its agents or of any registered subcontractor carrying on operations or activities for the Company under this Agreement, the Company or such registered subcontractor, as the case may be, shall be liable for such negligence in accordance with the laws of Indonesia.
ARTICLE 3
MODUS OPERANDI
1. The Company is incorporated under the laws of the Republic of Indonesia and domiciled in Indonesia, and shall be subject to the laws and the jurisdiction of courts in Indonesia which normally have jurisdiction over corporations doing business or incorporated therein. The Company shall maintain in Jakarta a principal office for receipt of any notification or other official or legal communication.
2. The Company contemplates a program for the Enterprise,
divided into five periods:
i) the "General Survey Period";
ii) the "Exploration Period";
iii) the "Feasibility Studies Period";
iv) the "Construction Period"; and
v) the "Operating Period";,
as such terms are defined in this Agreement.
It is understood that different parts of the Contract Area may be treated as separate projects which become subject to different provisions of this Agreement at different times because of the different periods of activities applicable to the individual Exploration and Mining Areas.
3. The Company may contract for necessary technical, management and administrative services, provided that it shall not be released from any of its obligations hereunder. In the event that such services are contracted from Affiliates, such services shall be obtained only at a charge not more than a non-affiliated party with equivalent qualifications to perform such services would charge for provision of such services to equivalent standards. All such charges should be fair and reasonable and accounted for in accordance with generally accepted accounting principles consistently applied. The Company shall produce on request by the Department evidence verifying all such charges.
4. The Company undertakes to conduct all activities hereunder in the manner and subject to the conditions of Article 2 of this Agreement and to continue such activities, during the General Survey, Exploration, Feasibility Study and Construction Periods of this Agreement without suspension or interruption of all of the Company's activities, subject to Article 19 and Article 22, during the term of this Agreement, provided that such activities may be interrupted or suspended with the concurrence of the Department. Any such suspension or interruption of all of the Company's activities with the concurrence of the Department shall extend the time periods otherwise applicable with respect to any of the affected Periods specified in this Agreement. If such interruption or suspension of all of the Company's activities continues for more than 365 days and is due to reasons other than force majeure as provided in Article 19 and the Department has not concurred regarding such interruption or suspension, then the Government shall be entitled to declare a default under Article 20. The Company agrees to keep the Department informed of any interruption or suspension. Any such interruption or suspension shall not affect the mutual rights and obligations of the Parties hereto under this Agreement.
ARTICLE 4
CONTRACT AREA
1. Contract Area is the area defined in Annex "A" to this Agreement as changed by reductions and extensions as the case may be in accordance with this Agreement, excluding therefrom,
(i) Mining Authorizations granted by the Department for Category "A" and "B" Minerals (as defined in Annex "C"), and
(ii) Mining Authorizations granted by the Government for Category "C" Minerals (as defined in Annex "C"),
(iii) People Mining's right,
declared before the date of the letter of approval in principle by the Department of the award of the Contract Area, and as set forth in Annex "C" attached to and hereby made part of this Agreement.
2. In the event that any areas covered by Mining Authorization which were excluded from the Contract Area by the definition thereof or which on the date of the letter of approval in principle by the Department of the award of the Contract Area had a common boundary with the Contract Area lapse, are cancelled or are relinquished, or by any means the area of such Authorizations becomes vacant, or any such area otherwise becomes available, then the Company shall have, upon application, the right of first refusal to have such area included in the Contract Area, unless the Government to grants People's Mining Rights on such area. Any area so included shall fall into the earliest Period which then applies to any part of the then existing Contract Area.
3. The Company may, by written application to the Department, relinquish all or any part of the Contract Area at any time and from time to time during the term of this Agreement. Any such application shall be submitted with a relinquishment
report stating all technical and geological findings the Company has made with respect to the relinquished areas and the reasons for the relinquishment, supported by field data of activities undertaken in those areas. All basic data with respect to the relinquished areas shall be submitted to the Department and become the property of the Government. The Company through relinquishment (including relinquishment pursuant to this paragraph, paragraph 5 of Article 5 and paragraph 2 of Article 6), shall reduce the Contract Area:
(i) on or before the end of the General Survey Period, to not more than seventy-five percent (75%) of the original Contract Area;
(ii) on or before the second anniversary of the end of the General Survey Period, to not more than fifty percent (50%) of the original Contract Area; and
(iii) on or before the end of the Exploration Period, to not more than twenty-five percent (25%) of the original Contract Area.
Except as provided in paragraph 5 of this Article 4, the Company shall not be required by the terms of this Agreement to relinquish more than 75% of the original Contract Area. Any such relinquishment shall be without prejudice to any obligation or liability imposed by or incurred under this Agreement prior to the effective date of such relinquishment.
4. The Company shall conduct work within the Contract Area with the objective of delineating new deposits within the Contract Area for development during the full term of this Contract. The Company's development plans shall include the intended capacity of each mining and processing operation and any further evaluation work required as provided in the Feasibility Study and other Exploration activities.
5. If the Company has no future plan to conduct Exploration or development activities with respect to an area within the Contract Area, or to use such area in connection with other development activities, or if the Company discovers a deposit of a Mineral as to which it has no current or contingent plans to develop (and such area may be used or such deposit developed by other Persons in a manner which does not interfere with the rights of the Company under this Agreement or the activities of the Company permitted hereby), then, if so required by the Government, the Company shall relinquish such area or deposit, together with all the basic geological, exploration, metallurgical and other data related thereto.
ARTICLE 5
GENERAL SURVEY PERIOD
1. The Company shall commence, as soon as possible and not later than six months after the signing of this Agreement, a General Survey of the Contract Area to determine in what parts of the Contract Area deposits of Minerals are most likely to occur. The "General Survey Period" shall end on that date which shall be 12 (twelve) months after such commencement. The Department, upon request by the Company, will grant an extension of 12 (twelve) months for the General Survey Period for the purpose of completing the activities to be carried out by it during such Period.
2. By the end of the General Survey Period, including the SIPP Period, the Company shall have spent, with respect to the Contract Area, not less than two million United States Dollars (US$ 2,000,000.00) on field expenditure. Such expenditures may include general organizational overhead and administrative expenses directly connected with field activities under this Agreement.
3. If at the expiration of eighteen months from the date of the signing of this Agreement or any time there after, it appears to the Department that the Company has seriously neglected its obligations with respect to minimum expenditures as provided in paragraph 2 of this Article, the Department may require the Company to deliver to the Department a guarantee to a sum which shall not exceed the total outstanding expenditure obligations remaining unfulfilled. Such guarantee in the form of a bond or a Banker's Guarantee may at the end of the three year period commencing on the date of the signing of this Agreement be forfeited to the Government to the extent that the Company shall have failed to fulfill such expenditure obligations. Except to the extent of any such forfeiture, such guarantee shall be released at the end of such three year period.
4. In connection with the Company's obligations under this Article, the Company shall submit to the Department, within two months after the end of the General Survey Period, a report setting forth the items and amounts of expenditure during such Period. The Company shall be prepared to support such report with reasonable documentation of expenditures should the Department so request.
5. The Company may at any time discontinue the General Survey with respect to any part or parts of the Contract Area on the grounds that the continuation of such General Survey is no longer commercially feasible or practical and shall apply in writing to the Department in accordance with paragraph 3 of Article 4 for the relinquishment of such part or parts of the Contract Area. The Contract Area shall thereby be reduced to the area which remains after such relinquishment.
6. If, at any time or times during the General Survey Period, after the Company has discovered deposits of Minerals in any part or parts of the Contract Area and has decided to proceed into the Exploration Period with respect to one or more of such deposits, it shall submit a written notice and explanation to such effect to the Department and shall establish one or more Exploration Areas with respect to such deposit or deposits and begin the Exploration thereof without affecting its rights and obligations under this Agreement in respect of other portions of the Contract Area.
ARTICLE 6
EXPLORATION PERIOD
1. Upon completion of the General Survey, the Company shall commence the "Exploration Period". During the Exploration Period, the Company shall carry out an Exploration program. The Exploration program shall include, without limitation, such detailed geology, geophysics and geochemistry and such sampling, pitting, and drilling activities as the Company considers appropriate.
2. The Company may at any time discontinue Exploration in any Exploration Area on the grounds that the continuation of such Exploration is no longer commercially feasible or practical and shall apply in writing to the Department in accordance with paragraph 3 of Article 4 for the relinquishment of such Exploration Area from the Contract Area. The Contract Area shall thereby be reduced to the area which remains after such relinquishment.
3. If at any time prior to the end of the Exploration Period the Company discovers one or more deposits of Minerals of apparent commercial grade and quantity in any Exploration Area and decides to proceed with further evaluation thereof, it shall submit a written notice to such effect to the Department and enter into the Feasibility Studies Period with respect to such Exploration Area without affecting its rights and obligations under this Agreement in respect of the balance of the Contract Area. Accordingly, the Exploration Period:
(i) shall commence immediately following the end of the General Survey Period; and
(ii) shall end 36 (thirty-six) months thereafter; provided that, with respect to any Exploration Area, it shall end at such earlier date as the Feasibility Studies Period shall have begun with respect to such Exploration Area; and
(iii) The Department upon request by the Company, will twice grant an extension of 12 (twelve) months each for the Exploration Period, subject to the Company's performing its obligations satisfactorily in accordance with this Agreement.
4. Prior to the end of the Exploration Period, the Company shall give notice to the Department stating whether or not the Company desires to proceed into the Feasibility Study Period with respect to any Exploration Area. Should the Company give notice to the Department that it does not wish to proceed into the Feasibility Studies Period with respect to any Exploration Area, such notice shall constitute an application in writing to the Department in accordance with paragraph 3 of Article 4 for the relinquishment of such Exploration Area from the Contract Area. In such a case, the Company shall turn over to the Department:
(i) maps indicating all places in such Exploration Area in which the Company shall have drilled holes or sunk pits,
(ii) copies of logs of such drill holes and pits and of assay results with respect to any analyzed samples recovered therefrom, and
(iii) copies of any geological or geophysical and geochemical maps of the Exploration Area which shall have been prepared by the Company.
Any such relinquishment shall be without prejudice to any obligation or liability imposed by or incurred under this Agreement prior to the effective date of such relinquishment.
5. During the Exploration Period, the Company shall spend not less than six million United States Dollars (US$ 6,000,000.00) on further Exploration activities with respect to the Contract Area. Any expenditure incurred by the Company during the General Survey Period (including the SIPP Period) which is greater than the minimum amount required pursuant to paragraph 2 of Article 5 shall be credited against and reduce the
minimum amount which the Company is required to spend during the Exploration Period. Such expenses may include general organizational overhead and administrative expenses directly connected with field activities under this Agreement. If at the expiration of 24 (twenty-four) months from the date of the commencement of the Exploration Period or any time thereafter, it appears to the Department that the Company has seriously neglected its obligation with respect to minimum expenditures as provided in this paragraph, the Department may require the Company to deliver to the Department a guarantee in the form of a bond or a banker's guarantee to a sum which shall not exceed the total outstanding expenditure obligations remaining unfulfilled. Such guarantee may, at the end of the Exploration Period, be forfeited to the Government to the extent that the Company shall have failed to fulfill such expenditure obligations. Except to the extent of any such forfeiture, such guarantee shall be released at the end of the Exploration Period.
ARTICLE 7
REPORTS AND SECURITY DEPOSIT
1. The Company shall keep the Government informed through the Department by submitting quarterly progress reports on the Enterprise and other related activities subject to this Agreement. The quarterly progress reports shall include comprehensive data on General Survey, Exploration, Employment and Expenditures. These progress reports shall be submitted within 30 (thirty) days after the end of each calendar quarter plus any part of a calendar quarter that remains following the date of signing of this Agreement, and be in such form as the Department may from time to time prescribe. These quarterly progress reports relating to Exploration activities shall include:
(i) the results of geological and geophysical investigation and proving of deposits of Minerals in the Contract Area and the sampling of such deposits;
(ii) the results of any general reconnaissance of the various sites of proposed operations and activities under this Agreement;
(iii) information concerning the selection of routes from any Mining Area to a suitable harbor for the export of Product;
(iv) information concerning the planning of suitable permanent settlements, including information on suitable water supplies for permanent settlements and other facilities;
(v) such other plans and information as to the progress of the Company's activities in the Contract Area as the Department may from time to time require;
(vi) statements of expenditures during the General Survey, Exploration, Feasibility Studies, and Construction Periods; and
(vii) lists of employment and training conducted.
2. Within one year after the beginning of the Feasibility Studies Period with respect to any Exploration Area, the Company will also file with the Department a summary of its geological and metallurgical investigations and all geological, geophysical, topographic and hydrographic data obtained from the General Survey and Exploration and a sample representative of each principal type of Mineralization encountered in its investigations of such Exploration Area.
3. No later than the eighth anniversary of the date of the signing of this Agreement, the Company shall submit to Department a general geological map of the whole Contract Area (as then constituted) on the scale of 1:250,000 with attendant reports based on the Company's geological observations; such geological map need only contain the observations of rock types and their distribution and structure which have been made by the Company during the General Survey and Exploration Periods.
4. On or before the delivery of the geological map referred to in paragraph 3 of this Article, the Company shall also submit to the Department :
(i) maps indicating all places in the Contract Area in which the Company shall have drilled holes or sunk pits,
(ii) copies of logs of such drill holes and pits and of assay results with respect to any analyzed samples recovered therefrom ,
(iii) copies of any geophysical maps of the Contract Area which shall have been prepared by the Company, and
(iv) all other information directly relevant to the Company's Exploration activities under this Agreement which the Department may reasonably request and which is, or with the exercise of reasonable efforts by the Company would be, within the Company's control in order to appraise the Company's investigation activities under this Agreement.
5. The Company shall within 30 (thirty) days after the date of signing of this Agreement establish for the benefit of the Government in a bank in Indonesia approved by the Department an interest-bearing escrow account in the amount of three hundred thousand United States Dollars (US $ 300,000.00) less any amount already deposited on the granting of SIPP, plus a Banker's Guarantee in the amount of seven hundred thousand United States Dollars (US $ 700,000.00), is hereinafter called the "Security Deposit". The Security Deposit shall be released by the Government as to 50% (fifty percent) thereof after:
(i) the expiration of the General Survey Period;
(ii) the submission as specified in paragraph 1 of this Article of four consecutive quarterly progress reports to the Department or where the General Survey Period is completed in less than one year, quarterly reports covering such lesser period, provided that where the General Survey Period has been agreed to have commenced prior to the date of signing of this Agreement, report(s) covering this earlier period shall count towards satisfaction of this obligation ; and
(iii) either:
(a) satisfactory performance (according to the Minister's judgment) for such General Survey Period, or
(b) the expenditure by the Company in such General Survey Period of five hundred thousand United States Dollars (US$ 500,000.00) on the Contract Area.
The remaining fifty percent (50%) of this Security Deposit will be released by the Government when the geological map referred to in paragraph 3 of this Article has been submitted to and approved by the Department which approval the Department shall not unreasonably withhold or delay. In the event that the Company does not satisfy the above mentioned requirement within eight (8) years after the date of signing of this Agreement, the balance of the said Security Deposit shall automatically be forwarded to the Government Treasury and the Company shall have no further claim thereon. Interest on the Security Deposit shall accrue for the benefit of the Company.
6. Except as otherwise provided in this paragraph 6, the Government has title to all data and reports submitted by the Company to the Department or the Government pursuant to the provisions of this Agreement. Such data and reports will be treated as strictly confidential by the Government to the extent that the Company shall so request; provided, however, that data belonging to the public domain (because of having been published in generally accessible literature or of its mainly scientific rather than commercial value, such as geological and geophysical data) and data which has been published pursuant to laws and regulations of Indonesia or of a foreign country in which a shareholder may be domiciled (such as the yearly report of public bodies or companies) shall not be subject to the foregoing restrictions; provided further that the term "data" as used in this paragraph shall include (without limitation) any and all documents, maps, plans, worksheets and other technical data and information, as well as data and information concerning financial and commercial matters.
In respect of data relating solely to the areas relinquished by the Company from the Contract Area pursuant to Article 4, the foregoing restrictions shall cease to apply as from the
date of relinquishment of such areas. In addition, where this Agreement has been terminated pursuant to Article 20 or Article 22, the foregoing restrictions shall cease to apply.
Notwithstanding the foregoing, exclusive know-how of the Company, its registered subcontractors or Affiliates contained in data or reports submitted by the Company to the Department or the Government pursuant to the provisions of this Agreement and which shall have been identified as such by the Company, shall only be used by the Government in relation to the administration of this Agreement and shall not be disclosed by the Government to third parties without the prior written consent of the Company. Such exclusive know-how, as long as it remains exclusive know-how of the Company, its registered subcontractors or Affiliates as the case may be, remains the sole property of the Company, its registered subcontractors or Affiliates as the case may be. The provisions of this paragraph shall survive the termination of this Agreement in accordance with laws and regulations from time to time in effect relating to intellectual property. If any such exclusive know-how is not patentable in accordance with such laws, the Company may request the Government not to disclose such know-how for a period of not less than 3 (three) years after termination of this Agreement.
ARTICLE 8
FEASIBILITY STUDIES PERIOD
1. The Feasibility Studies Period with respect to any Exploration Area shall commence on the date the Company submits a written request to the Department as provided in paragraph 3 of Article 6 with respect to such Exploration Area and shall end upon the commencement of the Construction Period with respect to such Exploration Area as hereinafter provided.
2. As soon as the Feasibility Studies Period has begun with
respect to any Exploration Area, the Company shall commence
studies to determine the feasibility of commercially
developing the deposit or the deposits of minerals within
such Exploration Area. The Company will be allowed a period
of 12 (twelve) months to complete such studies and to
select and delineate and determine the size of 1 (one) or
more Mining Areas. Each such Mining Area shall include at
least 1 (one) deposit with respect to which the Company
plans to commence construction and Mining operations. The
Government may for one of the reasons specified in
paragraph 2 of Article 16, object to the area proposed as
a Mining Area within three (3) months of the Company's
designation of such Mining Area. The Government and the
Company agree to consult in good faith in an attempt to
overcome any such objections. If after a period of three
(3) months from the date of notification of such objection
by the Government, there has been no resolution of the
matter, then either party may proceed to resolve the matter
in accordance with Article 21 paragraph 1. In the event
that the objection by the Government to any area designed
by the Company as a Mining Area is upheld, and thereafter
during the term of this Agreement it is determined that
Mining is permissible within such area, the Company shall
have the right to carry on such Mining in preference to any
other Person.
After the completion of such Feasibility Studies with respect to a proposed Mining Area, the Company shall submit a Feasibility Study Report in the form set out in Annex
"E",
which shall contain calculations and reasons for the technical and economical feasibility of conducting Mining operations within such proposed Mining Area supported by data, as specified in Annex "E", calculations, drawings, maps and other relevant information leading toward the decision whether or not to proceed with such Mining operations. The Feasibility Study Report with respect to any proposed Mining Area shall include the then intended capacity of each proposed Mining and Processing operation within such Mining Area and any further evaluation work or further Exploration then deemed to be required.
If the Company considers that the data required and other necessary matters are not sufficiently available to come to a final decision within the initial Feasibility Studies Period with respect to any Exploration Area or if the Department raises objections to any proposed Mining Area as set out above, the Company may seek the approval of the Department to the extension for twelve months of such Feasibility Studies Period, provided that such request for extension of the Feasibility Studies Period is submitted to the Department no later than the eighth anniversary of the date of the signing of this Agreement.
3. At any time during the Feasibility Studies Period with respect to any proposed Mining Area, the Company may submit a written application to the Department that it desires to proceed with the construction of a Mine within such proposed Mining Area and facilities to be used by the Company in its operation.
Upon approval of that application, the Company shall commence and, with reasonable diligence, execute to completion the design of the Mine and related facilities and, subject to completion of the design of the Mine and related facilities, shall submit supply the same for the approval of the Department together with an estimate of the cost of such Mine and related facilities and a time schedule for the construction thereof which time schedule shall, to the extent economically and practically feasible, provide for completing the construction of such Mine and related facilities within thirty-six (36) months after the approval of the designs and
time schedule for construction of such Mine and related facilities. Within three (3) months after submission of the design and time schedule, the Department shall notify the Company of its approval (which will not be unreasonably withheld) or disapproval thereof, for one of the reasons specified in paragraph 2 of Article 16. In the event of disapproval, the Company shall be notified by the Department of the cause for disapproval and the Department and the Company shall consult in a good faith to attempt to remove the cause for such disapproval. If, after a period of three (3) months from the notification of such disapproval, there has been no resolution of the matter then either party may proceed to resolve the matter in accordance with Article 21 paragraph 1.
4. The Feasibility Study Report as described in Annex "E" with respect to a proposed Mining Area shall include Environmental impact studies into the effects of the operation of the Enterprise on the Environment and shall be prepared in accordance with the terms of reference set out in Article 26. Such studies shall be carried out in consultation with appropriately qualified independent consultants retained by the Company and approved by the Government, which approval will not be unreasonably withheld.
5. The Company shall collaborate with and keep the Department informed by regular reports as to the progress and results of and costs incurred in respect of the investigations and studies and shall as and when the Department may reasonably require furnish the Department with the investigations and studies referred to in paragraph 4 above and with copies of all relevant findings made and reports prepared by the Company.
6. The Company shall, at the completion of all the investigations and studies, submit to the Department a final report stating the results of and the costs incurred in respect of the investigations and studies and the Company's analysis of and its conclusions and projections in respect of those results, and such other information relating to the Enterprise or the
Mining Area which is in the possession of the Company and which the Department may reasonably request.
7. Subject to the provisions of paragraph 6 of Article 7, all reports and information supplied to the Government under this Article shall be treated as confidential, with the exception of those required for use by the Government for the national interest, provided that (and subject as aforesaid), if this Agreement is terminated pursuant to Article 22 hereof, the reports and information shall become the property of the Government and may be used by the Government in such manner as it thinks fit.
ARTICLE 9
CONSTRUCTION PERIOD
1. Following receipt from the Department of approval with respect to the design and time schedule provided for in paragraph 3 Article 8 with respect to any Mining Area, the Company shall, in accordance with such time schedule, commence construction of the Mine and related facilities and use its best efforts, subject to the provisions of Article 19, to execute the same to completion in accordance with the time schedule referred to in the said paragraph 3. If such time schedule proves unworkable, the Company may submit to the Department a revised time schedule for the Department's approval.
2. The facilities to be constructed during the Construction Period with respect to any Mining Area may include such of the following as are appropriate:
(i) Mining facilities and equipment;
(ii) facilities and equipment to treat and beneficiate the Mineral ore coming from the Mine so as to produce saleable Products;
(iii) port facilities, which may include docks, harbors, piers, jetties, dredges, breakwaters, terminal facilities, workshops, storage areas, warehouses and loading and unloading equipment;
(iv) transportation and communication facilities, which may include roads, bridges, vessels, ferries, airports, landing strips and landing pads for aircraft, hangars, garages, canals, aerial tramways, pipelines, pumping stations, radio and telecommunications facilities, telegraph and telephone facilities and lines;
(v) townsites, which may include dwellings, stores, schools, hospitals, theaters and other buildings, facilities and equipment for personnel of the Enterprise, including dependents of such personnel;
(vi) power, water and sewage facilities, which may include power plants (which may be hydroelectric, steam, gas or diesel), power lines, dams, watercourses, drains, water supply systems and systems for disposing of tailings, plant wastes and sewage;
(vii) miscellaneous facilities, which may include machine shops, foundries and repair shops; and
(viii) all such additional or other facilities, plant and equipment as the Company may consider necessary or convenient for the operations of the Enterprise related to such new Mining Area or for providing services or carrying on activities ancillary or incidental thereto.
ARTICLE 10
OPERATING PERIOD
1. Upon completion of the construction of the Mine and related facilities provided for in Article 9 with respect to any Mining Area , the Company shall commence operation of such Mining Area for which such facilities have been constructed.
2. The Company shall conduct Mining operations and any activity of the Enterprise with respect to a Mining Area, for the duration of the Operating Period of such Mining Area. The Operating Period for such Mining Area shall be deemed to commence on the first day of the calendar month following the first calendar month during which the average daily throughput is at least seventy percent (70%) of the design capacity of the facilities constructed for the purpose of Mining the deposit or deposits in such Mining Area, but not later than the date falling six (6) months after the date of completion of such facilities. The Operating Period for each Mining Area shall continue for 30 (thirty) years beginning at the commencement of the Operating Period for the first Mining operation, or such longer period as the Department, on the written application of the Company, may approve. The commencement of the Operating Period shall not occur more than eight (8) years (or such longer period as may result from extensions granted by the Department for the completion of succeeding stages under this Agreement) from the commencement of the General Survey Period allowed for the whole Contract Area.
3. The Company shall process ore to produce a marketable concentrate. The Company will work towards and assist the Government in achieving the policy of the establishment of downstream metals processing facilities in Indonesia in relation to smelting, refining and/or associated processing if, according to recognized economic, technical and scientific standards, the Minerals to be mined by the Company are of sufficient tonnages and are Minerals amenable to smelting, refining or associated processing, and provided it is
economically and practically feasible to do so. If and when any such processing facilities (other than a copper processing facility) are constructed, the Parties agree to discuss thereafter and consider, in good faith, the feasibility of subsequent additional processing facilities which may be in the form of increases in the capacity of the existing facilities or the establishment of facilities previously not in existence.
In the event that there is no copper smelter operating or under construction in Indonesia on or before the fifth anniversary of the date that the first Mining Area under this Agreement has entered the Operating Period, then the Company shall prepare or cause to be prepared a feasibility study with respect to a possible copper smelter in Indonesia. The feasibility study so prepared shall be subject to the Government's review and to a mutual determination by the Government and the Company as to the economic viability of such a smelter. Such smelter would be located at such place within Indonesia as would be most advantageous to its economic viability. Should such a smelter be built by the Company or a wholly-owned Subsidiary, it would constitute a part of the Enterprise hereunder.
4. The Company shall submit to the Department copies of studies relating to the feasibility of establishing those facilities (as described in paragraph 3 of this Article) in Indonesia prepared by the Company in consultation with an agency acceptable to the Government.
5. The Company acknowledges the Government's policy to encourage the domestic processing of all of its natural resources into final products where feasible. The Company further acknowledges the Government's desire that a copper smelter and refinery be established in Indonesia and agrees that it will make available copper concentrates derived from the Contract Area for such smelter and refinery so established in Indonesia as provided below.
During any period during which Processing and refining facilities have not been established in Indonesia by or on
behalf of the Company, or any wholly-owned Subsidiary, but have been established in Indonesia by any other Person, the Company shall, if it is then producing Products from the Contract Area and if it is requested to do so by the Department, sell such Products to such other Person at prices and terms no less favorable to such Person than those that could be obtained by the Company from other purchasers of the same quantity and quality and at the same time and the same or equivalent places and times of delivery, provided that the respective contractual terms and conditions given by the Company to such other Person shall be no less favorable to the Company.
With respect to the first copper smelter established in Indonesia by anyone other than the Company or a wholly- owned Subsidiary of the Company, the quantity of copper concentrates derived from the Contract Area which the Company shall make available on the terms set out above shall be a portion (such portion to be determined by prorating the quantity of copper concentrates produced by the Company to the total quantity of copper concentrates produced in Indonesia) of the quantity of copper concentrates necessary to satisfy the domestic demand in Indonesia for refined copper and to permit economic scale of such project assuming that such project is otherwise feasible, and further subject to the limitation that the quantity required shall not be so great as to jeopardize the sound financial, operating or marketing requirements of the Company. In making sales to a copper smelter or refining facility in Indonesia, the Company will not be treated more adversely, from the standpoint of Governmental laws and regulations, than if it had sold such Mined Products as export goods. The obligation of the Company to sell its Products to another Person pursuant to this paragraph 5 is subject to any financing agreements, sales contracts or any smelting and refining contracts entered into by the Company prior to the establishment of such facilities by such other Person or any financing agreements entered into pursuant to paragraph 2 of Article 30.
In the event that during the five year period following the fifth anniversary of the date that the first Mining Area in
the Contract Area has entered the Operating Period, a copper smelter and refinery facility to be located in Indonesia has not been established or is not in the process of being constructed by any Person, then, subject to the mutual determination by the Government and the Company as to the economic viability of such smelter and refinery, the Company shall undertake or cause to be undertaken the establishment of a copper smelter and refinery in Indonesia to comply with the policy of the Government.
6. The Company is, subject to the rights of third parties, hereby granted all necessary licenses and permits to construct and operate the facilities contemplated by this Agreement in accordance with laws and regulations and such reasonable safety regulations relating to design, construction and operation as may from time to time be in force and of general applicability in Indonesia.
7. The Company shall submit to the Department the following Reports as to operations within each Mining Area :
(i) a biweekly statistical report beginning with the first two weeks following the commencement of the Operating Period, which shall set forth the amount of material Mined, Processed and exported;
(ii) a monthly report beginning with the first month following the commencement of the Operating Period, which shall set forth the number and describe the location of the active operations during the preceding month and a brief description of the work in progress at the end of the month and of the work contemplated during the following month.
(iii) a quarterly report beginning with the first quarter following the commencement of the Operating Period with respect to each Mining Area concerning the progress of its operations in such Mining Area, which report shall describe in reasonable detail the Mining activities carried on in such Mining
Area, including the number of workmen employed in such Mining Area as of the end of the quarter in question and a description of the work in progress at the end of the quarter in question and of work contemplated during the following quarter; and
(iv) an annual report beginning with the first complete year following the commencement of the Operating Period with respect to each Mining Area which shall include:
(a) a description in reasonable detail of the Mining activities carried on in such Mining Area;
(b) the total volume of ores, kind-by-kind, broken down into volumes Mined, volumes transported from the Mines and their corresponding destination, volumes stockpiled at the Mines or elsewhere in Indonesia, volumes sold or committed for export (whether actually shipped from Indonesia or not), volumes actually shipped from Indonesia (with full details as to purchaser, destination and terms of sale); and
(c) work accomplished and work in progress at the end of the year in question with respect to all of the installations and facilities related to such Mining Area, together with a full description of all work programmed for the ensuing year with respect to such installations and facilities, including a detailed report of all investment actually made or committed during the year in question and all investment committed for the ensuing year or years.
(v) the Company shall also furnish the Department all other information related to the Company's activities under this Agreement of whatever kind and which is or could, by the exercise of reasonable efforts by the Company, have been within the control of the Company which the Department may request in order that the Department may be fully appraised of the Company's activities.
Biweekly reports shall be submitted in eightfold within two weeks after the end of the two week period in question. Monthly and quarterly reports shall be submitted in eightfold within thirty (30) days of the end of the month or quarter in question. Annual reports shall be submitted in eightfold within ninety (90) days of the end of the year in question.
8. The Company shall be in full and effective control and management of all matters relating to the operation of the Enterprise including the production and marketing of its Products. The Company may make expansions, modifications, improvements and replacements of the Enterprise's facilities, and may add additional new facilities, as the Company shall consider necessary for the operation of the Enterprise or for the provision of services or activities ancillary or incidental to the Enterprise. All such expansions, modifications, improvements, replacements and new additional facilities shall be considered part of the project facilities.
9. The Company accepts the rights and obligations to conduct operations and activities in accordance with the terms of this Agreement. The Company shall conduct all such operations and activities in a good technical manner in accordance with such good and acceptable international Mining engineering standards and practices as are economically and technically feasible, and in accordance with the modern and accepted scientific and technical principles. In accordance with such standards, the Company undertakes to use its best efforts to optimize the Mining recovery of ore from proven reserves and metallurgical recovery of Minerals from the ore to the extent it is economically and technically feasible to do so, using
appropriate modern and effective techniques, materials and methods designed to achieve minimum wastage and maximum safety as provided in the applicable laws and regulations of Indonesia from time to time in effect. The Company shall use its best efforts to conduct all operations and activities under this Agreement so as to minimize loss of natural resources, and to protect natural resources against unnecessary damage.
10. The Government will authorize the Company to freely select the vessels and other transportation facilities to be used in connection with imports and exports of articles under this Agreement. In addition, the Company shall have the right at all times to purchase from vendors of its choice all equipment, materials and supplies necessary for the operations of the Company hereunder, and to enter into arrangements to make use of any facilities belonging to other Persons(whether or not Affiliates of the Company) upon such terms and subject to such conditions, including terms of payment, as to ownership and otherwise, as it deems appropriate; provided that the Department shall have the right to object to specific vendors or specific arrangements on the basis of national security or foreign policy concerns of the Government. In any case where the Government is the sole economic source of supply for any article or commodity necessary for the Enterprise, adequate supplies of such article or commodity shall be made available for sale to the Company at prices not greater than the fair market value thereof.
ARTICLE 11
M A R K E T I N G
1. The Company shall have the right to export the Products obtained from its operations under this Agreement, subject to the obligations set forth in paragraph 5 of Article 10. Any such export shall be on such credit terms as the Company deems appropriate for marketing its Products, and neither the Company nor any of the purchasers of such Products shall be required by the Government to obtain letters of credit or other credit documents at any bank or other institutions in Indonesia or elsewhere in connection with marketing such Products, or otherwise. Without in any way limiting the Company's basic right to export its Products, such export will be subject to the reporting and other non-monetary provisions of the export laws and regulations of Indonesia from time to time in effect and to the provisions of paragraph 2 of this Article. Subject to any pre-existing contracts for the sale of Products to others, and the obligation to make available concentrates in order to satisfy the Company's obligations under paragraph 5 of Article 10, the Company shall give priority to satisfying domestic Indonesian requirements for use of its Products in Indonesia. Sales to Indonesian customers will be on terms and at prices which are competitive with those provided to non-Indonesian customers.
2. The Company shall sell the Products in accordance with generally accepted international business practices, and use its best efforts to do so at prices and on terms of sale which will maximize the economic return from the operations hereunder, giving effect to world market conditions and other circumstances prevailing at the time of sale or contract; provided that the Government shall have the right, on a basis which is of general applicability and non-discriminatory as to the Company, to prohibit the sale or export of Minerals or Products if such sale or export would be contrary to the international obligations of the Government or to external political considerations affecting the national interest of Indonesia. In the event of such prohibition (other than a
quota requirement imposed pursuant to an International Commodity Marketing Agreement), if the Company is unable to find alternative markets on equivalent terms and conditions, the Company shall be given assistance and cooperation by the Government to overcome the possible consequences of such prohibition.
3. To the extent deemed necessary by the Company to secure financing for the Enterprise hereunder or to comply with its obligations to the lenders thereunder, however, the Company shall have the right , subject to paragraph 2 of this Article 11, to enter into long-term contracts for the sale of its Products hereunder subject to the obligations set forth in paragraph 5 of Article 10 and in paragraph 1 of this Article 11.
4. In the event that sales are made or contracted to be made to Affiliates, the prices to be paid therefor, to the extent they affect any amounts payable to the Government pursuant to the terms of this Agreement, shall comply with the provisions of Article 13 and, to the extent applicable, of Annex "H" to this Agreement. The Company shall submit to the Government any proposed contract of sale to an Affiliate for approval as complying with the foregoing provisions. If it does so, and the Government approves the contract, the contract shall be deemed for purposes hereof to comply with the foregoing provisions. In any event sales commitments with Affiliates shall be made only at prices based on or equivalent to arm's length sales and in accordance with such terms and conditions at which such agreement would be made if the parties had not been Affiliates, with due allowance for normal selling discounts or commissions. Such discounts or commissions allowed the Affiliates must be no greater than the prevailing rates so that such discounts or commissions will not reduce the net proceeds of sales to the Company below those which it would have received if the parties had not been Affiliates. No selling discounts or commissions shall be allowed an Affiliate in respect of sales for consumption by it. Within ninety days after the end of each calendar year, the Company will deliver to the Department a report describing in such reasonable detail as the Department may reasonably request all
sales contracts entered into during the preceding calendar year with Affiliates in accordance with the provisions of this paragraph 4.
5. If the Government believes that any figures related to sales to Affiliates and used in computing any amounts payable to the Government hereunder are not in accordance with the provisions of paragraph 4 of this Article (or, if such sales were pursuant to a contract, theretofore approved pursuant to the provisions of such paragraph 4, are not in accordance with such contract), the Government may within twenty - four months after the calendar quarter in which such Products were sold, but not thereafter, so advise the Company in writing. The Company shall submit evidence of the correctness of the figures within forty-five days after receipt of such advice. Within forty-five days after receipt of such evidence, the Department may give notice to the Company in writing that it is still not satisfied with the correctness of the figures and, within ten days after receipt of such notice by the Company, a Committee, consisting of one representative of and appointed by the Government and one representative of and appointed by the Company, shall be constituted to review the issue. The Committee shall meet as soon as convenient at a mutually agreeable place in Indonesia and if the members of the Committee do not reach agreement within twenty days after their appointment or such longer period as the Government and the Company mutually agree, the representatives shall appoint a third member of the Committee, who shall be a person of international standing in jurisprudence and shall be familiar with the international Mineral industry. The Committee, after reviewing all the evidence, shall determine whether the figures used by the Company or any other figures are in accordance with paragraph 4 of this Article (or an approved contract, as the case may be). The decision of two members of the Committee shall be binding upon the Parties. Failure of two representatives to appoint a third member of the Committee shall require the issue to be submitted to arbitration pursuant to this paragraph, appropriate retroactive adjustment shall be made in conformity with the Committee's decision. The Company and the Government each shall pay the expenses of
its own member on the Committee and one half of all other expenses of the Committee's proceedings.
6. In the event that the Company produces a concentrate containing any Precious Metals which are easily recoverable, the Company shall, if it is economically feasible, make maximum efforts to recover such Precious Metals.
7. In the event of a sale of copper concentrates, gold or silver to an Affiliate or to the domestic market or to the Government's designated agency, it is understood that, unless otherwise agreed by the Parties, the price of such Products shall be determined on the basis of a formula price which is generally used in the sale of comparable products among unrelated parties.
8. If at any stage in the course of its marketing arrangement, the Company refines, or takes delivery of gold or silver refined from its Products, then such gold and silver will be in a form and bear marks which will make it acceptable in the international precious metals markets. For gold, this means the London Gold Market; for silver this means the London Silver Market.
ARTICLE 12
IMPORT AND RE-EXPORT FACILITIES
1. The Company may import into Indonesia capital goods, equipment (including but not limited to laboratory and computer equipment located outside its field operations), machinery (including spare parts), vehicles (except for sedan cars and station wagons), aircraft, vessels, other means of transport, supplies, safety equipment, explosives (in accordance with prevailing laws and regulations), raw materials, and chemicals being items needed for use in the Mining, Exploration, Feasibility Study, construction, production and supporting technical activities of the Enterprise. All such imports (excluding foodstuffs, wearing apparel and other vital necessities for the personal needs of the Company's employees and their dependents) shall be exempt from import duties and obtain full relief from and postponement of payment of value added tax (VAT) (excluding VAT on spare parts) payable in accordance with the prevailing laws and regulations for the duration of the period commencing as from the date of signing of this Agreement up to and including the tenth year of the Operating Period. For any equipment directly used to support its technical operations, such as laboratory and computer equipment located outside its field operations, the tax exemptions or tax reliefs shall be the same as above. In case the Company is operating more than one Mining Area, this tenth year of the Operating Period shall be computed from the date of the commencement of operation of the first Mining Area.
2. The provisions of this Article shall also be applicable to Persons engaged as registered subcontractors of the Company to carry on work or perform services with respect to the Enterprise.
3. The exemption from import duties and relief from and postponement of value added tax (VAT) as referred to in paragraph 1 of this Article shall apply only to the extent that the imported goods are not produced or manufactured in Indonesia or that locally produced or manufactured products
are not available on a competitive time, cost and quality basis without duty or tax, provided that for the purpose of comparing the costs of imports and the cost of goods manufactured or produced in Indonesia a premium (not in excess of twelve and one-half percent) shall be applied to the cost of imports.
4. Any equipment and materials (which must be clearly identified) imported by the Company or registered subcontractor(s) of the Company for the exclusive purpose of providing services to the Company and intended to be re-exported will be exempted from import duties, value added tax and other levies. If such equipment and materials shall not have been re-exported by the time for re-export (as established at the time of import), the Company or the registered subcontractor(s) of the Company, as the case may be, shall, unless extended or exempted for reasons acceptable to the Government, pay import duties, value added tax and other levies not paid upon entry in accordance with then existing law. The Company shall be responsible for proper implementation of its registered subcontractor(s) obligations under this Article.
5. Any item imported by the Company or its registered sub- contractor(s) pursuant to this Article which is no longer needed for the Exploration, Mining and Processing activities of the Company may be sold outside Indonesia and re-exported free from export taxes and other customs duties (excluding income tax/capital gains tax) and value added tax after compliance with laws and regulations which shall at the time of such sale be in force and of general application in Indonesia. No imported item shall be sold domestically or used otherwise than in connection with the Enterprise except after compliance with import laws and regulations which are at the time of such import in force and of general application in Indonesia.
6. In view of the fact that goods and services will have to be imported from abroad and that various parts of the Contract Area are remote, for all practical purposes, from presently existing seaports and other ports of entry for customs purposes, the Government will consider establishing such
seaport or port of entry and the requisite customs office thereat as the Company shall reasonably request from time to time; in consideration thereof, each such customs office so established at the request of the Company shall be furnished and maintained by the Company at its expense and according to the existing rules and regulations.
7. During the period within which the Company is allowed to import free from duties and value added tax, the Company shall submit to the Department, not later than November 15 of each year, a list of equipment and material to be imported during the next calendar year to enable the Department to review and to approve the various items to be imported for the Enterprise. Notwithstanding the foregoing, the Company may request (stating the cause) the Department to amend the list of equipment and material as required during the year.
8. Personal effects (including household and living equipment and goods) belonging to a Covered Employee who is an Expatriate shall be freely exportable and shall be exempt from import or re-export licenses, fees and duties, in accordance with prevailing laws and regulations.
9. Except as otherwise specifically provided in this Article, the Company shall duly observe import restrictions and prohibitions and rules and procedures of general application.
ARTICLE 13
TAXES AND OTHER FINANCIAL OBLIGATIONS OF THE COMPANY
Subject to the terms of this Agreement, the Company shall pay to the Government and fulfill its tax liabilities, including its obligation as tax collector, as hereinafter provided:
(i) Deadrent in respect of the Contract Area or the Mining Area;
(ii) Royalties in respect of the Company's production of Minerals;
(iii) Income taxes in respect of income received or accrued by the Company;
(iv) Personal income tax (PPh. Article 21);
(v) Obligation to withhold income taxes in respect of payment of dividend, interest, including remuneration, due to loans payment warranty, rents, royalties, and other income related to the utilization of property, remuneration on technical and management services as well as other service;
(vi) Value Added Tax (PPN) and Sales Tax on Luxury Goods (PPn BM) on import and delivery of taxable goods and or services;
(vii) Stamp duty on the documents;
(viii) Import duty on goods imported into Indonesia;
(ix) Land and Building Tax (PBB) in respect of:
(a) the Contract Area or the Mining Area; and
(b) the utilization of land area and buildings in where the Company constructs facilities for its Mining operations.
(x) Levies, taxes, charges and duties imposed by Local Government in Indonesia which have been approved by the Central Government;
(xi) General administrative fees and charges for facilities or services rendered and special rights granted by the Government to the extent that such fees and charges have been approved by the Central Government.
(xii) Duty on register and transfer of ownership certificate on ships, as well as motor vehicles in Indonesia.
The Company shall not be subject to any other taxes, duties, levies, contributions, charges or fees now or hereafter levied or imposed or approved by the Government other than those provided for in this Article and elsewhere in this Agreement.
1. Deadrent in respect of the Contract Area or the Mining Area.
The Company shall pay, in Rupiah, or in such other currencies as may be mutually agreed, an annual amount of money as deadrent to be measured by the number of hectares included in the Contract Area or Mining Area respectively, calculated on January 1st and July 1st of each Year, such payments to be made in advance and in two installments each payable within thirty (30) days after the said dates during the term of this Agreement and payable as stipulated in Annex "D" attached hereto.
2. Royalties in respect of the Company's production of Minerals.
(i) The Company shall pay royalties in respect of the products (as defined in Annex "F" and detailed in Annex "G") from the Mining Area, to the extent that such products are products for which value according to general practice is paid or payable to the Company by a buyer. Royalties shall be paid in Rupiah or such other currency as may be mutually agreed and shall be paid on or before the last day of the month following each calendar quarter. Each payment shall be accompanied by a statement showing in reasonable detail the basis of computation of royalties due in respect of the production of the Company during the preceding calendar quarter.
Royalties will be computed from the rates specified in Annex "F" as follows:
a) the tonnage or quantity by weight used in the computation shall be based on final product produced by the Company. In the case of concentrates or ore bullion, the quantity by weight of each mineral, and or metal subject to royalty shall be properly determined by internationally accepted assay methods.
b) the Government shall (upon written request by the Company) specify the royalty tariff in column 5 of Annex "F" for those minerals which no tariff reference is given.
(ii) The Company undertakes that any mining, processing or treatment of ore prior to domestic sale or export shipment by the Company shall be conducted in accordance with such generally accepted international standards as are economically and technically feasible, and in accordance with such standards the Company undertakes to use all reasonable efforts to optimize the mining recovery of ore from proven reserves and metallurgical recovery of products from the ore provided it is economically and technically feasible to do so, and shall submit evidence to the Department of compliance with this undertaking. Royalty shall be payable annually in lump sum on any industrial minerals derived from the Enterprise and used for the Company's construction purposes such as but not limited to roads, bridges, railways, port facilities, airports, community buildings, housing or any other infrastructure used in relation to the Enterprise the amount of which will be negotiated between the Company and the regional Government
(iii) If, in the opinion of the Government, the Company is failing without good cause to recover products at the recovery rate indicated in the feasibility study, it may give notice in writing to the Company. Within three (3) months of the receipt of this notice the Company shall either:
a) Commence work to improve its mining method, treatment and processing facilities to the reasonable satisfaction of the Government, provided that the Company shall in no event be obliged to conduct mining, processing or treatment activities otherwise than as provided in Article 13.2 (ii);
b) submit to the Government evidence in justification of its performance in accordance with sub-paragraph (ii) of this Article 13 paragraph 2. In the event that the Government remains unsatisfied with the Company's performance in mining ore from the proven reserve and recovering products from the ore, the Government shall have the right to commission independent technical studies to determine a fair average recovery rate taking into account the nature of the proven reserve and the ore and the economic and technical feasibility of achieving increased recovery by the Company in accordance with sub-paragraph (ii) of this Article 13 paragraph 2. Such studies shall be carried out by internationally recognized consultants appointed by the Government and agreed to by the Company. The Government and the Company shall have the right to prepare submissions to the consultants. If the said consultants find that the performance of the Company's operations is not satisfactory, then the cost shall be borne by the Company. If it is found that the performance of the Company's obligations is satisfactory, then the cost shall be borne by the Government. If following the completion of such studies, the Company fails within a reasonable period to achieve the recovery rate indicated by such studies, the Government shall have the right, if the Company is not then observing its undertaking in sub-paragraph (ii) of this Article 13 paragraph 2, to increase the royalty applicable to such products in proportion to the extent that the recovery of such products by the Company falls short of the fair average rate indicated by such studies. But at no time shall the payment of
such increased royalty free the Company from the obligation to observe its undertaking in sub-paragraph (ii) of this Article 13 paragraph 2.
3. Income taxes with respect to the Taxable Income of the Company:
(i) The Company shall pay Income Tax on income, that is any increase in economic ability received or accrued by the Company, whether originating from within or outside Indonesia, in whatever name and form, including but not limited to gross profit from business, dividends, interest and royalties; and the tax rates to be charged for the duration of this Agreement shall be as follows:
(a) Fifteen percent (15%) for taxable income up to Rp 10,000,000 (ten million Rupiah);
(b) Twenty five percent (25%) for taxable income exceeding Rp 10,000,000 (ten million Rupiah), up to Rp 50,000,000 (fifty million Rupiah);
(c) Thirty five percent (35%) for taxable income exceeding Rp 50,000,000 (fifty million Rupiah).
(ii) To calculate taxable income, the rules for computation of income tax as provided for in Annex "H" attached to and made part of this Agreement shall apply. Except as otherwise stipulated in this Agreement, the rules provided in Income Tax Law 1984, Law No. 6 Year 1983, and its implementation regulations, shall apply.
4. Personal income tax (PPh Article 21)
(i) The Company has liability to withhold and remit income tax on income related to work, including remuneration and pension paid to employees of the Company as Domestic tax payers according to Article 21 of the Income Tax Law 1984.
(ii) Expatriate Individuals who are employed or engaged by
the Company who are present in Indonesia for less than
183 (one hundred eighty three) days in any twelve
month period shall be subject to income tax through
withholding tax by the Company based on Article 26 of
the Income Tax Law 1984, with a rate of 20% (twenty
percent) or such lower percentage due to the
enforcement of any relevant Tax Treaty on the gross
income, for services conducted in Indonesia. The
income tax of such Expatriate Individuals which is
taxable in Indonesia include all kind of remuneration
paid to them for services rendered in Indonesia.
(iii) Expatriate individuals who are employed or engaged by the Company and who are present in Indonesia for more than 183 (one hudnred and eighty three) days in any twelve month period or intending to reside in Indonesia, shall be subject to income tax through withholding tax by the Company based on Article 21 of the Income Tax Law 1984, from the income paid to the Company's employees with consideration being given to the regulations relating to deductible income. The income of such Expatriate Individuals shall include all kinds of remuneration paid to them by the Company, due regard to the intended agreement in paragraph 7 of Annex "H".
5. Income taxes on dividends, interest, rents, royalties, and other income related to the utilization of property and compensation paid for technical services, management services and other services.
The Company in accordance with the Income Tax Law 1994 and regulation prevailing at the date of the signing of this Agreement is obliged to withhold and remit to the Government income taxes at a rate specified in this Article or such lower rate due to the enforcement of relevant Tax Treaty as follows:
(i) Dividends, interest in whatever form including loan payment warranty;
(ii) Rents, royalties and other income related to the utilization of property;
(iii) Compensation paid for technical services or managerial services and other services performed in Indonesia.
The rate of such withholding tax in force as from the date of signing of this Agreement are:
(a) fifteen percent (15%) in the case of payments of dividends, interest, rents, royalties, and other income related to the use of property paid to the domestic tax payer.
(b) nine percent (9%) on compensation paid for technical and managerial services performed in Indonesia in the case of payment performed to the domestic tax payer.
(c) twenty percent (20%) or any lower due to the enforcement of relevant Tax Treaty in the case of such income paid to foreign tax payer.
6. Value Added Tax (VAT) and/or Sales Tax for Luxury Goods according to the Value Added Tax Law 1984 and its implementation regulations either which have been passed or shall be passed after this Agreement.
Due regard to the general liability aimed in Value Added Tax Law 1984 and all of its implementation regulations, the Company has liabilities:
(i) To report its business to be solidified as Taxable firm.
(ii) As a taxable firm to collect and remit Value Added Tax on delivery of Products (Output Tax) at a rate of ten percents (10%) or other rates in accordance with Value Added Tax Law 1984 and its implementation regulations.
(iii) As tax collector to collect and remit Value Added Tax and/or Sales on Luxury Goods based on Decree of the President of the Republic of Indonesia Number 56 Year 1988 or other similar decree.
(iv) The Company is subject to the Value Added Tax and/or Sales Tax on Luxury Goods, on import, or purchasing taxable goods or obtaining taxable services which is based on Value Added Tax Law 1984 and its implementation regulations subject to Value Added Tax and/or Sales Tax on Luxury Goods.
(v) Limited to the importing or obtaining taxable goods in the form of machinery, equipment, and factory equipment, are granted postponement of payment on Value Added Tax and/or Sales Tax on Luxury Goods in accordance with the prevailing regulation.
(vi) Value Added Tax paid on import or domestic obtianing of taxable goods or services (Input Tax) are creditable to Output Tax in accordance with provided Value Added Tax Law 1984 and its implementation regulations.
(vii) In case of Input Tax is greater than Output Tax
for a certain tax period, overpayment of the
Input Tax can be compensated with the Output Tax
for the following tax period or a refund may be
requested. The refund will be made within the
latest time period of one (1) month since the
refund request accepted in the Notification
Letter.
7. Stamp Duty on Documents.
|
The Company is levied to Stamp Duty in accordance with the provisions stipulated in the Law No. 13 Year 1985 regarding Stamp Duty.
8. Import Duty on goods imported into Indonesia.
(i) Exemption and tax reliefs on import of capital goods, equipment and machinery and supplies are granted to the Company based on Law No. 1 Year 1967 concerning Foreign Capital Investment as amended by Law No. 11 Year 1970 as provided in Article 12 above.
(ii) Import of other goods into Indonesian customs including personal effects shall be subject to the prevailing law and regulation.
(iii) Excise Tax on tobacco and liquor are subject to taxation in accordance with the rules of prevailing legislation.
9. Land and Building Tax (PBB).
The Company shall pay Land and Building Tax (PBB), in Rupiah or in such other currencies as may be mutually agreed, as follows:
(i) During pre-production Periods (General Survey, Exploration, Feasibility Studies and Construction), the Company shall pay Land and Building Tax an amount equal to the amount of deadrent as stated in Article 13 paragraph (1) of this Agreement.
(ii) During the operation/production Period, the Company shall pay Land and Building Tax an amount equal to the amount of deadrent plus an amount of 0.5% X 30% of gross revenues from mining operation.
(iii) During the Contract Period, the Company shall also pay Land and Building Tax on land/water and building outside or inside the Contract Area/Mining Area used by the Company for its facilities which are closed to the public, an amount to be measured by the number of square metres of land/water and floor space and type of the building in accordance with the provisions of Law No. 12 Year 1985 and the classification and the amount of NJOP stipulated by the District Head Office of the Directorate General of Taxation.
(iv) Imposition and payment of Land and Building Tax for Contract Area/Mining Area during pre-production Period as stipulated in sub paragraph (i) above, follows the rules regulated for deadrent.
(v) Imposition and payment of Land and Building Tax for Contract Area/Mining Area during the operation/production Period and for land/water and building used by the Company, follows the imposition rules stipulated in sub paragraph (i) and sub paragraph (ii) above, and prevailing rules for Land and Building Tax payment generally in force.
10. The Company shall pay levies and taxes, charges, and duties imposed by Regional Government in Indonesia which have been approved by the Central Government in accordance with the prevailing laws and regulations at rates and calculated in a manner not greater than the amount calculated based on laws and regulations in force at the date of signing of this Agreement.
11. The Company shall pay general administrative fees and charges for facilities or services and special rights granted by the Regional Government to the extent that such fees and charges have been approved by the Central Government.
12. Tax on the transfer of ownership right.
The Company shall pay tax on transfer of ownership rights for:
(i) Motor vehicles levied by the Local Government where the vehicles are registered at a rate accordance with the relevant Regional Government regulations.
(ii) Registration certificate and transfer of ships or sea transportation means operating in Indonesia.
Tax compliance of the Company and its subsidiaries or its Affiliates in connection with formal and material tax obligations such as Tax Identification Number, Tax Return, Tax payment, reporting, etc. and rights on taxation namely tax objection to amount of tax, refund, tax credit, compensation and penalties are subject to provisions provided in Law Number 6 Year 1983 concerning General Tax Provisions and Procedures, Income Tax Law 1984, Value Added Tax Law 1984, Law Number 12 Year 1985 concerning Land and Building Tax, Law Number 13 Year 1985 on Stamp Duty and all of its implementation regulations.
In determining the Company's net taxable income, sound, consistent and generally accepted accounting principles as usually used in the mining industry shall be employed, provided, however, that where more than one accounting practice is found by the Government to prevail with regard to the particular item, the Government shall consult with the Company in relation to such particular item. Without limiting the generally of the foregoing, for accounting purposes, the Government shall in no event be bound by the Company's characterization of any transaction with an Affiliate as stated by the Company. In the event that the Government has determined an unreasonable situation or not in accordance with general practice followed by independent parties in similar transactions on a certain payment, deduction, charges for expenses or other transaction with an Affiliate for the purposes of determining the Company's income tax, the Government shall substitute the payment, deduction, charges for expenses or other transactions which would have prevailed had the transaction occurred between independent parties.
ARTICLE 14
RECORDS, INSPECTION AND WORK PROGRAM
1. The Company shall always conduct and maintain in Indonesia, precise, complete, and systematic technical records and compose financial records showing a true and fair view of all of its operations and the status of proven, probable and possible ore reserves, including mining, processing, transportation and marketing records in accordance with generally accepted accounting principles, stated in Rupiah or in equivalent United States Dollars. The financial and other records may be presented in English and US Dollar contiguous with its conversion in Rupiah. Tax Return (SPT) with its appendices and tax payment liability shall be maintained in Indonesian language and Rupiah currency. The Company is obliged to keep its book and records, and its principle document and other document relating to their operation for ten (10) years. The Company shall furnish to the Government annual financial statements consisting of a balance sheet and a statement of income and all such other financial information in accordance with generally accepted accounting principles in Indonesia and all such other information concerning its operations in reasonable detail and such detail as the Government may reasonably request.
2. The Government and its authorized representatives have the right to review and audit such financial statement within five (5) years after the end of such fiscal year. In the event of the Government does not issue any assessment for additional tax payment within such five (5) year period, the right of Government shall be expired (invalidated), except the tax payer is condemned for criminal act as referred to in Article 13 paragraph (7) and Article 15 paragraph (4) Law No. 6 Year 1983.
3. The Government and its authorized representatives may enter upon the Contract Area and any other place of business of the Company to inspect its operation at any time from time to time during regular business hours. The Company shall render necessary assistance to enable the representatives to inspect such technical and financial records relating to the Company's
operation and shall give said representatives such information as the said representatives may reasonably request. The representatives shall conduct such inspection on their own risk and shall avoid interference to the normal operations of the Company.
4. The Company shall submit to the Government not later than November fifteenth (15th) or February fifteenth (15th) of each year during the term of this Agreement its work program, budget plan, sales contract and marketing/sales plan for the following year in sufficient detail to permit the Government to review such physical, financial and marketing/sales program and determine whether they are in accordance with the Company's obligations under this Agreement. A work program and budget for the first year of this Agreement shall be submitted as soon as possible after the signing of this Agreement.
5. In addition, the following shall be delivered to the Ministry:
(i) Conformed copies of all sales, management, commercial and financial agreements concluded with Affiliates and independent parties and all other agreements concluded with Affiliates, to be submitted within one month after conclusion;
(ii) Monthly reports setting forth the quantities and qualities of ore produced, shipped, sold, utilized or otherwise disposed of and the prices obtained.
The Company shall furnish to the Government all other information of whatever kind relative to the Enterprise which the latter may request, which is, or could by the exercise of reasonable efforts by the Company have been, within the control of the Company in order that the Government may be fully appraised of the Company's exploration and exploitation activities.
6. All information mentioned in paragraph 5 of this Article furnished to the Government shall be either in English or Indonesian and all financial data shall be recorded in Rupiah or United States of America currency and records shall also be kept of conversion rates applied to the original currency.
7. The Company shall maintain all original records and reports relating to its activities and operations under this Agreement including all documents relating to financial and commercial transactions with independent parties and Affiliates in its principal office in Indonesia. These records and reports shall be open to inspection by the Government through an authorized representative. Such reports and records shall be maintained in Indonesian or English and all financial data shall be recorded in Rupiah or United States of America currency and the records shall also be kept of conversion rates applied to the original currency.
8. The Company shall require the Company's co-participants, Affiliates and sub-contractors to the extent that such co- participant, Affiliate, or subcontractor carries out operations and activities in furtherance of the Company's obligations, activities and operations under this Agreement, to keep all financial statements, records, data and information necessary to enable the Company to observe the provisions of this Article 14.
9. Without prejudice to paragraph 6 of Article 7, any information supplied by the Company shall (except with the written consent of the Company which shall not be unreasonably withheld) be treated by all persons in the service of the Government of the Republic of Indonesia as confidential, but the Government shall nevertheless be entitled at any time to make use of any information received from the Company for the purpose of preparing and publishing aggregated returns and general reports on the extent of ore prospecting or ore mining operations in Indonesia and for the purpose of any arbitration or litigation between the Government and the Company.
10. All records, reports, plans, maps, charts, accounts and information which the Company is or may from time to time be required to supply under the provisions of this Agreement shall be supplied at the expense of the Company.
ARTICLE 15
CURRENCY EXCHANGE
1. All investment remittances into Indonesia for the purpose of any expenditures to be made in Indonesia shall be deposited into a foreign investment account (the "PMA Account") established at one or more foreign exchange banks in Indonesia. All such investment remittances shall be used in accordance with the prevailing investment regulations applicable to foreign investment law companies established under the Foreign Investment Law, Law No. 1 of 1967, and its amendment Law No. 11 of 1970. The conversion or sale of foreign exchange originating from the PMA foreign currency account is to be done with foreign exchange banks and not necessarily so with Bank Indonesia.
2. The Company shall be granted the right to transfer abroad, in any currency it may desire, funds in respect of the following items, provided that such transfers are effected in accordance with the prevailing laws and regulations and at prevailing rates of exchange generally applicable to commercial transactions:
(i) Net operating profits of the Company in proportion to the shareholding of any non-Indonesian investor;
(ii) Repayment of loan principal and the interest thereon, insofar as it is a part of the Company's investment which has been approved by the Government;
(iii) Allowance for depreciation of the capital assets generally applicable to foreign investment companies established under the Foreign Investment Law, Law No. 1 of 1967, as amended;
(iv) Proceeds from sales of shares sold pursuant to paragraph 3 of Article 24;
(v) Expenses for Expatriates employed by the Company and their families and for training of Indonesian personnel abroad;
(vi) Debts of the Company denominated in foreign currency, including debts owed to contractors and sellers of equipment and raw materials, or for commissions;
(vii) Technical assistance fees;
(viii) License fees;
(ix) Agency commissions payable to third parties abroad;
(x) Payments to foreign suppliers of the Company, to the extent that the purchases of foreign goods and services, including management and related services, are necessary for the operation of the Company or the Enterprise;
(xi) Repatriation of capital on the liquidation of the Company, or resulting from capital restructuring approved by the Government; and
(xii) Any other foreign exchange facilities provided from time to time to foreign investment companies established under the Foreign Investment Law, Law No. 1 of 1967, as amended or provided by any regulations adopted pursuant thereto or by any other laws or regulations.
3. The proceeds of sales of Minerals and any Products derived from them can be used as the Company sees fit. Without prejudicing the foregoing rights of the Company, the Company agrees that with regard to the proceeds of the Company's export sales it shall comply with laws and regulations from time to time in force, except as Bank Indonesia and the company may otherwise agree. The terms and conditions of any such agreement between Bank Indonesia and the Company shall not be less favorable than those contained in any other similar agreements by Bank Indonesia and other Mining companies now or hereafter in effect.
4. The Company in the exercise and performance of its rights and obligations set forth in this Agreement shall be authorized to pay abroad, in any currency it may desire, without conversion into Rupiah, for the goods and services it may require and to defray abroad, in any currency it may desire, any other expenses incurred for operations under this Agreement.
5. All Expatriates who are Covered Employees in any capacity shall have the right to freely retain or dispose of outside of Indonesia any of their funds located outside Indonesia; freely transfer outside of Indonesia any of their personal funds located in Indonesia and shall be entitled to import into Indonesia such foreign currencies as may be required for their needs.
6. In respect of other matters of foreign currency arising in any way out of or in connection with this Agreement, the Company shall be entitled to receive treatment no less favorable to the Company than that accorded to any other Mining Company carrying on operations in Indonesia.
7. Subject to the foregoing paragraphs of this Article 15, the Company shall comply with all financial reporting and approval requirements applicable to foreign investment law companies established under the Foreign Investment Law, Law No. 1 of 1967.
8. The Company shall forward financial reports in accordance with the procedures required by Bank Indonesia.
ARTICLE 16
SPECIAL RIGHTS OF THE GOVERNMENT
1. The Company and its shareholders agree that they will not, without the Goverment's prior approval :
(i) amend the Articles of Association of the Company;
(ii) change the basic nature of the business of the Company;
(iii) voluntarily liquidate or wind up the Company;
(iv) merge or consolidate the Company with any other
Company;
(v) pledge or otherwise use as security the Minerals in
the Contract Area.
2. The Government reserves the right to withhold its approval of plans and designs relating to construction, operation, expansion, modification and replacement of facilities of the Enterprise in the Contract Area which may disproportionately and unreasonably damage the surrounding Environment or limit its further development potential or significantly disrupt the socio-political stability in the area or be adverse to the interests of national security.
3. The Government shall have the right of access to the Contract Area as provided in paragraph 3 of Article 14.
ARTICLE 17
EMPLOYMENT AND TRAINING
OF INDONESIAN PARTICIPANTS
1. The Company shall employ Indonesian personnel, giving preference to local residents, to the maximum extent practicable consistent with efficient operations, subject to the provisions of the laws and regulations which may from time to time be in force in Indonesia.
2. The Company shall not be restricted in its assignment or discharge of personnel; provided, however, that subject to the foregoing requirements, the terms and conditions of such assignment and discharge or disciplining of Indonesian personnel shall be carried out in compliance with the laws and regulations of Indonesia which at the time are generally applied.
3. The Company shall seek to provide direct Indonesian participation in the Enterprise through the inclusion of Indonesian nationals in the management of the Company and among the members of its Board of Directors. To this end at least one seat on the Board of Directors will continuously be occupied by an Indonesian national from the date of incorporation of the Company. The Company will also train Indonesian nationals to occupy other responsible positions.
4. The Company shall conduct a comprehensive training program for Indonesian personnel in Indonesia and, subject to the approval of the Government, in other countries and carry out such program for training and education in order to meet the requirement for various classifications of full time employment for its operations in Indonesia within the shortest practicable period of time. The Company shall also conduct a program to acquaint all Expatriate employees and registered subcontractors with the laws and customs of Indonesia.
5. The Company and its registered subcontractors may bring into Indonesia such Expatriate Individuals as in the Company's judgement are required to carry out its operations efficiently; provided however, that the Minister may make known to the Company, and the Company shall duly observe, objections based on grounds of national security or foreign policy of the Government. At the Company's request (which shall be accompanied by information concerning the education, experience and other qualifications of the individuals concerned) and in compliance with the rules and regulations in effect from time to time, the Government will make arrangement for the acquisition of all necessary permits, (including entry and exit permits, work permits, visas and such other permits, as may be required); in this connection the Company shall periodically submit its manpower requirement plans, manpower report, training program and training report in the framework the Indonesianization process to the Department.
6. The Company agrees that there shall at all times be equal treatment, facilities and opportunities among employees in the same job classification with respect to salaries, facilities and opportunities within the Mining industry regardless of nationality and the Company shall duly observe the existing manpower laws and regulations which may from time to time be in force in Indonesia. Notwithstanding the foregoing, it shall not be a violation to give preference as to opportunity to Indonesians in light of the policy of the Government to increase the employment of Indonesians to the maximum extent possible, nor to pay Expatriates brought into Indonesia pursuant to paragraph 5 of this Article at a higher rate than local employees in situations where, with respect to a given job classification, there is a need to employ such Expatriates.
7. The Company acknowledges that pursuant to Law No. 14 of 1969, employees of the Company have the right to form a trade union for purposes of collective bargaining with the Company. The
Company. The Company acknowledges that it may be required from time to time to enter into collective bargaining with such trade union. Therefore the Company is obliged to morally support the employees to form the union and to liaise with
8. Prior to the establishment of a permanent settlement,the Company shall furnish free medical care and attention to all its employees working in the Contract Area as is reasonable and shall maintain or have available adequate medical services at least commensurate with such services provided in similar circumstances in Indonesia. If the Company establishes a permanent settlement in connection with a Mining Area or a Project Area related to such Mining Area, the Company shall furnish such free medical care and attention to all its employees and all Government officials requested by the Company working in such Mining Area or Project Area as is reasonable and shall establish a staff and maintain a dispensary, clinic or hospital which shall be reasonably adequate under the circumstances according to the prevailing laws and regulations of Indonesia.
9. If in connection with a Mining Area or a Project Area related to such Mining Area, the Company establishes a permanent settlement incorporating families for the employees associated with the Enterprise, the Company shall provide, free of charge, primary and secondary education facilities for the children of all employees working in such Mining Area or Project Area. Rules, regulations and standards of general application for comparable education facilities in Indonesia established by the Department of Education and Culture shall be followed.
ARTICLE 18
ENABLING PROVISIONS
1. The Government will grant the Company the necessary rights and will take such other action as may be desirable to achieve the mutual objectives of this Agreement. The Company shall have the following rights:
(i) the sole right to enter the Contract Area or any Mining Area for the purposes of this Agreement, to make drill holes, test pits and excavations, and to take and remove, without royalty or other charge, samples for assays and for metallurgical, pilot plant and laboratory research purposes, including bulk samples for such purposes; provided that the Company shall have received the approval by the Department prior to the export of any such samples, to be given in advance on a yearly basis, and shall pay any royalties applicable thereto.
(ii) to enter upon and remain within the Contract Area and
the Project Areas (related to the Contract Area
(including portions of the air space and shore line),
subject to the right of the Department to object to
any Mining Area as provided in paragraph 2 of Article
8. The Company shall recognize the items referred to
in Article 16 of Law No. 11 of 1967, subject to the
provision of paragraph 2 of the said Article 16.
2. In carrying out its activities under this Agreement, the Company, subject to the laws and regulations from time to time in effect in Indonesia, shall have the right to construct facilities as it deems necessary, provided that:
(i) in connection with the use of land by the Company for construction of facilities as provided in this
Agreement, the Company shall pay the usual surveying and registration fees charged by the Land Registration Office. In acquiring titles to land outside any Mining Area, the Company shall comply with laws and regulations of general application from time to time in effect.
(ii) in connection with the activities of the Company, but subject to the provisions of Article 13, the Company shall pay generally applicable fees and charges for services performed, facilities provided and special rights granted by the Government; provided that such services, facilities and rights are requested by the Company.
3. Subject to laws and regulations which may from time to time be in force in Indonesia, and subject also to the provisions of paragraph 2 of Article 25 and paragraph 2 of Article 16, the Company may at any time file with the Department a plan or plans and may thereafter file additional or amended plans covering:
(i) the Mining Area or Areas in which the Company proposes to construct facilities related to production;
(ii) all other areas in which the Company proposes to construct any other facilities necessary for the Enterprise and the location of all such rights in and over land including easements, right of way and rights to lay or pass on, over or under land, any roads, railways, pipes, pipelines, sewers, drains, wires, lines or similar facilities as may be necessary for the Enterprise; and
(iii) all other areas in which the Company shall have the right to construct such additional facilities as the Company deems necessary or convenient for the Enterprise.
The Government shall thereupon make arrangements for the Company to utilize and remain within all such areas and such land covered by such plans (or such comparable areas as may be agreed between the Government and the Company) and to exercise the other rights specified above with respect to each such area. The use and occupancy of any areas covered by such plans shall not be subject to payment by the Company of any charges or fees other than those specified elsewhere in this Agreement. The plans filed pursuant to this paragraph shall, to the extent practicable, give description in sufficient detail to permit precise identification of the designated areas. The Government shall assist the Company in arrangements for any necessary resettlement of local inhabitants whose resettlement from any part of the Contract Area or the Project Areas is necessary and the Company shall pay for the resettlement and give reasonable compensation for any dwelling, privately owned lands (including such land ownership based on any Indonesian customs or customary laws, generally or locally applicable), privately owned crops and flora or other improvements in existence on any such parts which are taken or damaged by the Company in connection with its activities under this Agreement.
4. Subject to the non-monetary provisions laid down in generally applicable central Government, regional Government and Provincial laws and regulations from time to time in effect, and to the payments provided for in Article 13 of this Agreement but to no other payments to the Government, and without prejudice to the rights of private parties created prior to the beginning of the Construction Period and to payments of reasonable compensation to any such private party holding rights created prior to the beginning of the Construction Period as may be customary in the Contract Area, the Company at its own expense may take and use from the Contract Area or Project Area such timber (for construction purposes), soil, stone, sand, gravel, lime, water, other products and materials as are necessary for or are to be used
by the Enterprise. In doing so, and except as otherwise provided in this Agreement, the Company shall observe the existing regulations in effect on the date of the signing of this Agreement governing the exploitation and use of said natural resources.
5. The Company shall also have the right, in compliance with existing rules and regulations in effect on the date of the signing of this Agreement, to clear away and remove such timber, overburden and other obstructions as may be necessary or desirable for the Mining, construction of facilities and any other operations of the Company under this Agreement, provided that the Company shall take into account other rights granted by the Government such as grazing, timber cutting and cultivation rights, and rights of way, by conducting its operations under this Agreement so as to interfere as little as possible with such rights.
6. The Company may, at its own expense, also take and use any of such products and materials from other areas outside the Contract Area or any Project Area subject to the rights of other parties, to the approval of the Government, and to the payment of such compensation as may be agreed between the Company and such other parties or the Government and in accordance with the prevailing laws and regulations in effect on the date of the signing of this Agreement.
7. At the request of the Company, the Government shall co- operate in a joint endeavor to alleviate any interference which may arise from others operating under conflicting rights.
8. The Company and the Government recognize that the existing and proposed operations hereunder are to be carried out in an extremely remote area with a difficult environment and that, accordingly, the Company may be required to develop special facilities and carry out special functions for the fulfillment
of this Agreement. In recognition of the added burdens and expenses to be borne by the Company and the additional services to be performed by the Company as a result of the location of its activities in a difficult environment, the Government recognizes that appropriate arrangement may be required to minimize the adverse economic and operational costs resulting from the administration of the laws and regulations of the Government from time to time in effect, and in construing the Company's obligations to comply with such laws and regulations.
ARTICLE 19
FORCE MAJEURE
1. Any failure by the Government or by the Company to carry out any of its obligations under this Agreement shall not be deemed a breach of contract or default if such failure is caused by force majeure, that party having taken all appropriate precautions, due care and reasonable alternative measures with the objectives of avoiding such failure and of carrying out its obligations under this Agreement. If any activity is delayed, curtailed or prevented by force majeure, then anything in this Agreement to the contrary notwithstanding, the time for carrying out the activity thereby affected and the term of this Agreement specified in Article 31 shall each be extended for a period equal to the total of the periods during which such causes or their effects were operative, and for such further periods, if any, as shall be necessary to make good the time lost as a result of such force majeure. For the purposes of this Agreement, force majeure shall include among other things: war, insurrection, civil disturbance, blockade, sabotage, embargo, strike and other labor conflict, riot, epidemic, earthquake, storm, flood, or other adverse weather conditions, explosion, fire, lightning, adverse order or direction of any government de jure or de facto or any instrumentality or subdivision thereof, act of God or the public enemy, breakdown of machinery having a major effect on the operation of the Enterprise and any cause (whether or not of the kind
hereinbefore described) over which the affected party has no reasonable control and which is of such a nature as to delay, curtail or prevent timely action by the party affected.
2. The party whose ability to perform its obligations is affected by force majeure shall notify as soon as practicable the other party thereof in writing, stating the cause, and the parties shall endeavor to do all reasonable acts and things within their power to remove such cause; provided, however, that neither party shall be obligated to resolve or terminate any disagreement with third parties, including labor disputes, except under conditions acceptable to it or pursuant to the final decision of any arbitral, judicial or statutory agencies having jurisdiction to finally resolve the disagreement. As to labor disputes, the Company may request the Government to co-operate in a joint endeavor to alleviate any conflict which may arise.
ARTICLE 20
D E F A U L T
1. Subject to provisions of Article 19 of this Agreement, in the event that the Company is found to be in default in the performance of any provision of this Agreement, the Government, as its remedy under this Agreement, shall give the Company written notice thereof (which notice must state that it is pursuant to this Article) and the Company shall have a period of a maximum 180 (one hundred and eighty) days after receipt of such notice to correct such default. The actual time within which to correct such default shall be stipulated in the said written notice in each individual case as may be reasonable under the circumstances considering the nature of the default. In the event the Company corrects such default within such period, this Agreement shall remain in full force and effect without prejudice to any future right of the Government in respect of any future default. In the event the Company does not correct such default within the time stipulated in the notice, the Government shall have the right to terminate this Agreement in accordance with the provisions of Article 22 as the case may be.
A failure by the Company to comply with a non-material or non- substantive provision of this Agreement relating to one or more Mining Areas, and not to all Mining Areas or to the Enterprise as a whole, shall not be considered to be a default under this Article 20. In the event of such failure, after
notice to the Company in accordance with the preceding paragraph and failure by the Company to correct such failure in accordance therewith, the Government shall have the right to close such Mining Areas or any part thereof and to require the Company to relinquish such Mining Areas or such parts.
2. Notwithstanding the provision of paragraph 1 of this Article, in the event the Company shall be found to be in default in the making of any payment of money to the Government which the Company is required to make pursuant to Article 12 or Article 13, the period within which the Company must correct such default shall be 30 (thirty) days after the receipt of notice thereof. The penalty for late payment shall be an interest charge on the amount in default from the date the payment was due, at the rate of the New York prime interest rate in effect at the date of default plus 4% (four percent). This or other penalties provided for in this Article may not be taken as deductions in the calculation of taxable income.
3. The Company shall not be deemed to be in default in the performance of any provision of this Agreement concerning which there is any dispute between the parties until such time as all disputes concerning such provision, including any contention that the Company is in default in the performance thereof or any dispute as to whether the Company was provided a reasonable opportunity to correct a default, have been settled as provided in Article 21.
ARTICLE 21
SETTLEMENT OF DISPUTES
1. The Government and the Company hereby consent to submit all disputes between the parties hereto arising, before or after termination hereof, out of this Agreement or the application hereof or the operations hereunder, including contentions that a party is in default in the performance of its obligations hereunder, for final settlement, either by conciliation, if the parties wish to seek an amicable settlement by conciliation, or to arbitration. Where the parties seek an amicable settlement of a dispute by conciliation, the conciliation shall take place in accordance with the UNCITRAL Conciliation Rules contained in resolution 35/52 adopted by the United Nations General Assembly on 4 December, 1980 and entitled "Conciliation Rules of the United Nations Commission on International Trade Law" as at present in force. Where the Parties arbitrate, the dispute shall be settled by arbitration in accordance with the UNCITRAL Arbitration Rules contained in resolution 31/98 adopted by the United Nations General Assembly on 15 December, 1976 and entitled "Arbitration Rules of the United Nations Commission on International Trade Law" as at present in force. The foregoing provisions of this paragraph do not apply to tax matters which are subject to the jurisdiction of Majelis Pertimbangan Pajak (The Consultative Board of Taxes). The language to be used in conciliation and arbitration proceedings shall be the English language, unless the parties otherwise agree.
2. Before the Government or the Company institutes an arbitration proceeding under the UNCITRAL Arbitration Rules, it will use its best endeavors to resolve the dispute through consultation and use of administrative remedies; provided that the Company shall not be obligated to pursue any such remedies for more than 90 (ninety) days after it has notified the Government of an impending dispute if such remedies involve a request or application to the Government or any of its departments or instrumentalities.
3. Conciliation or arbitration proceedings conducted pursuant to this Article shall, if appropriate arrangements can be made, be held in Jakarta, Indonesia, unless the parties agree upon another location or unless the aforesaid rules or the procedures thereunder otherwise require. The provisions of this Article shall continue in force notwithstanding the termination of this Agreement. An award pursuant to any such arbitration proceedings shall be enforceable against and binding upon the parties hereto, and shall be specifically enforceable in Indonesia, whether or not the proceedings have been held in Indonesia.
ARTICLE 22
TERMINATION
1. At any time during the term of this Agreement, after having used all reasonable diligence in its endeavor to conduct its activities under this Agreement, if in the Company's opinion the Enterprise is not workable, the Company shall consult with the Department and may thereafter submit a written notice to terminate this Agreement. Such notice shall be accompanied with all relevant data and information related to the Company's activities under this Agreement which have not been previously submitted to the Department, including but not limited to documents, maps, plans, worksheets and other technical data and information. Within a period not later than 6 (six) months from the date the Company submits the notice to terminate, the Department shall by written notice to the Company either (i) confirm such termination, or (ii) specify the particular data and/or information required by this paragraph which the Company has not furnished and which the Department has determined must be furnished prior to termination of this Agreement.
This Agreement shall terminate and the Company shall be relieved of all further obligations under this Agreement upon the earlier to occur of (a) the date of the Department's written confirmation of termination; (b) 90 (ninety) days after the date on which the Company submits to the Department the data and/or information required by the Department as
provided in subsection (ii) of the preceding paragraph; or
(c) the date which is 6 (six) months after the Company
submitted its notice of termination to the Department if
the Department does not give any written notice regarding
termination within such 6 (six) months period.
2. If termination occurs during the General Survey or
Exploration Periods, the Company shall have a period of 6
(six) months within which to sell, remove or otherwise
dispose of its property in Indonesia and to furnish the
Government with the information to be turned over to it in
respect of the work which the Company has performed to the
date of the giving of the aforementioned notice. Any
property not so removed or otherwise disposed of shall
become the property of the Government without any
compensation to the Company.
3. If termination occurs during the Feasibility Studies Period, all property of the Company, movable and immovable, located in the Contract Area shall be offered for sale to the Government, which shall have an option, valid for 30 (thirty) days from the date of such offer, to buy all such property at a fair and reasonable market price from the Company payable in United States Dollars or in any currency freely convertible in Indonesia and through a bank to be agreed upon by both parties within 90 (ninety) days after acceptance by the Government of such offer. If the Government does not accept such offer within the said 30 (thirty) day period, the Company may sell, remove or otherwise dispose of any or all of such property during a period of 6 (six) months after the expiration of such offer. Any property not so sold, removed
or otherwise disposed of shall become the property of the Government without any compensation to the Company.
4. If termination occurs during the Construction Period, all
property of the Company, both movable and immovable,
located in the Contract Area shall in the first instance be
offered for sale to the Government which shall have an
option, valid for 30 (thirty) days from the date of such
offer, to buy all such property at a fair and reasonable
market price from the Company payable in United States
Dollars or in any currency freely convertible in Indonesia
and through a bank to be agreed upon by both Parties within
90 (ninety) days after acceptance by the Government of such
offer. If the Government does not accept such offer within
the said 30 (thirty) day period, the Company may sell,
remove or otherwise dispose of any or all of such property
during a period of 12 (twelve) months after the expiration
of such offer. Any property not so sold, removed or
otherwise disposed of shall become the property of the
Government without any compensation to the Company.
5. If termination occurs during the Operating Period, or by reason of the expiration of the term of this Agreement, all property of the Company, both movable and immovable, located in the Contract Area shall be offered for sale to the Government at cost or market value whichever is the lower, but in no event lower than the depreciated book value. The Government shall have an option, valid for 30 (thirty) days from the date of such offer, to buy all such property at the agreed value payable in United States Dollars or in any
currency freely convertible in Indonesia
and through a bank to be agreed upon by both Parties within
90 (ninety) days after acceptance by the Government of such
offer. If the Government does not accept such offer within
the said 30 (thirty) day period, the Company may sell,
remove or otherwise dispose of any or all of such property
during a period of 12 (twelve) months after the expiration
of such offer. Any property not so sold removed or
otherwise disposed of shall become the property of the
Government without any compensation to the Company.
6. It is agreed, however, that any property of the Company in
Indonesia, movable or immovable, as shall at the
termination of this Agreement be in use for public purposes
such as roads, schools and/or hospitals, with their
equipment, shall immediately become the property of the
Government without any compensation to the Company; and the
Company shall recognize the items referred to in paragraph
(c) of sub-paragraph 1 of Article 24 of Law No. 11, 1967
relating to safety and the right to excavate, and
paragraphs 3, 4, 5 of Article 46 of Government Regulations
No. 32 of 1969.
7. All sales, removals or disposals of the Company's property pursuant to the termination of this Agreement shall be effected according to the prevailing laws, and regulations; any gain or loss from sale or disposal as relating to the written down book value shall be determined in accordance with Article 13 of this Agreement. All values shall be based on generally accepted accounting principles.
8. Rights and obligations which have come into effect prior to the termination of this Agreement and rights and obligations relating to transfer of currencies and properties which have not yet been completed at the time of such termination shall continue in effect for the time necessary or appropriate fully to exercise such rights and discharge such obligations. Additionally, the Company shall be granted the right to transfer abroad all or any proceeds of sale received under this Article 22 subject to the requirement of paragraph 2 of Article 15.
ARTICLE 23
COOPERATION OF THE PARTIES
1. The Parties to this Agreement agree that they will at all times use their best efforts to carry out the provisions of this Agreement to the end that the Enterprise may at all times be conducted with efficiency and for the optimum benefit of the Parties.
2. The Company agrees to plan and conduct all operations under this Agreement in accordance with the standards and requirements imposed elsewhere in this Agreement for the sound and progressive development of the Mining industry in Indonesia, to give at all times full consideration to the aspirations and welfare of the people of the Republic of Indonesia and to the development of the Nation, and to cooperate with the Government in promoting the growth and development of the Indonesian economic and social structure, and subject to the provisions of this Agreement, at all times to comply with the laws and regulations of Indonesia.
3. At any time during the term of this Agreement, upon request by either party, the Government and the Company may consult with each other:
(a) to determine whether in the light of all relevant circumstances, the financial or other provisions of this Agreement need revision in order to ensure the continued viability of the Enterprise. Such circumstances shall include the conditions under which the mineral,
production is carried out such as the size, location and overburden of mineral deposits, the quality of the mineral, the market conditions for the mineral, the prevailing purchasing power of money and the terms and conditions prevailing for comparable mineral ventures. In reaching agreement on any revision of this Agreement pursuant to this paragraph 3, both parties shall ensure that no revision of this Agreement shall prejudice the Company's ability to retain financial credibility abroad and to raise finance by borrowing internationally in a manner and on terms normal to the mining industry, and
(b) Such consultation shall be carried out in a spirit of cooperation with due regard to the intent and objectives of the respective parties. Both parties desire to realize the success of the Enterprise for the benefit of its shareholders and the people of the Republic of Indonesia, the development of the Nation, the growth and development of the economic and social structure, the continued operation of the Company and the development of the mineral resources of the Republic of Indonesia.
4. The Department, on behalf of the Government agrees that during the term of this Agreement the Government, consistent with Law No. 1 of 1967 on Foreign Capital Investment, (i) will take no action which is inconsistent with the provisions of this Agreement so as to adversely affect the conduct of the Enterprise hereunder, including, without limitation, any
action of condemnation or nationalization of the Enterprise or any part thereof, and (ii) will at all times cooperate with the Company in handling all administrative actions and determinations relating to the Enterprise in the most expeditious manner consistent with orderly procedures.
ARTICLE 24
PROMOTION OF NATIONAL INTEREST
1. In the conduct of its activities under this Agreement the Company shall, consistent with its rights and obligations elsewhere under this Agreement, give preference to Indonesian consumers' requirements for its Products and the Company and its Affiliates and subcontractors shall, in good faith to the fullest practicable extent, utilize Indonesian manpower, services and raw materials produced from Indonesian sources and products manufactured in Indonesia to the extent such services and products are available on a competitive time, cost and quality basis, provided that in comparing prices of goods produced or manufactured in Indonesia to the price of imported goods there shall be added a premium (not in excess of twelve and a half percent) and other expenses (excluding VAT) incurred up to the time the imported goods are landed in Indonesia.
2. The Company shall offer for sale to Indonesian Participants, on the basis of the fair market value thereof, an amount of shares which, after giving effect to such sale, directly or indirectly, will result in the Company being in compliance with the requirements of Government Regulation No. 20 of 1994 as such requirements apply from time to time to share ownership in Foreign Capital Investment Companies.
3. If the Company requires additional equity capital for the enterprise, the Company may obtain such capital by sales to any person even though such sales may increase the proportionate ownership of the Company's capital stock by person who are not Indonesians Participants; provided that the Company shall at all times thereafter be in compliance with the requirements of Government Regulation No. 20 of 1994.
4. In the event of an increase in the share capital of the Company, the Indonesian Participants shall be entitled to subscribe for new shares in proportion to their existing shareholding so as to give them the opportunity to maintain their existing proportionate shareholding in the Company; provided that the foregoing shall not apply to shares which the Company lists on any Indonesian stock exchange.
5. In no event shall shares held by Indonesian Participants be treated less favorably than those held by any others.
6. The Indonesian Participants shall be entitled to appoint members of the Board of Commissioners of the Company in proportion to their shareholding in the Company, but the Company shall not be required to increase the number of members of its Board of Commissioners beyond 10 (ten) simply to maintain absolute proportionality of the members of the Board of Commissioners appointed by the foreign participant(s) and by the Indonesian Participants.
ARTICLE 25
REGIONAL COOPERATION IN REGARD TO
ADDITIONAL INFRASTRUCTURE
1. The Company shall at all times cooperate with the Government in utilizing its best efforts to plan and coordinate its activities, and proposed future projects in the Contract Area or the Project Areas in conjunction with regional development either provincial or in the villages. Living accommodation and facilities and working conditions provided by the Company for its operations shall be of a Government standard commensurate with those of good employers operating in Indonesia.
2. In relation to the region, the Company shall endeavor to assist the Government in maximizing the economic and social benefits generated by the Enterprise in the Contract Area in respect to:
(i) coordinating such benefits with local and regional infrastructure studies undertaken by the Government together with any benefits generated by other interested local, foreign and international public and private entities; and
(ii) assisting and advising the Government, when requested, in its planning of the infrastructure and regional development which the Company may deem useful to the Enterprise and to existing and future industries and activities in the area of the Enterprise.
3. The Company shall allow the public and the Government to use any wharf and harbor installations, air strips or roads which have been constructed by the Company pursuant to this Agreement and which are located outside the Mining Areas and the related Project Areas provided that;
(i) any such use shall be subject to such regulations and limitations as the Company will reasonably impose, and shall in no event adversely affect or interfere with the Company's operations hereunder and
(ii) the Company shall be entitled to impose such charges therefor as shall be appropriate to reflect the cost of maintaining such facilities and, with respect to any commercial use of such facilities, the capital cost thereof.
4. The Company shall maintain and be responsible for the maintenance of all roads in the Mining Areas.
5. All roads constructed by the Company outside the Mining Areas, to the extent used by the public, and in accordance with paragraph 1 of this Article 25, shall be public roads for the purposes of the provisions of the traffic laws and regulations which may be from time to time in effect in Indonesia. To the extent that the plans and designs for the Enterprise as approved by the Government so provide and thereafter from time to time, the Government will make such special regulations under the traffic laws as it considers necessary or desirable for the proper safety of the users of the said roads.
6. If the Company's use of the existing public roads results in or is likely to result in significant damage or deterioration, the Company shall pay to the Government or other authority having control over the roads the cost (or an equitable proportion thereof having regard to the use of such roads by others) of preventing or making good such damages or deterioration or of upgrading to a standard necessary having regard to the increased traffic. In addition, the Government or other authority having control over any such road may require the Company to pay a maintenance user charge based upon what is fair and reasonable having regard to the continuing cost (excluding any profit to the Government or such other authority) of operation and maintenance of that road and the use of that road by others. In lieu of making such payments, the Company will have the right to elect to maintain at its own expense any such road needed by it for its operations hereunder.
7. In the event that the Government is unable to provide adequate telecommunications facilities, the Company may, in accordance with rules and regulations from time to time in effect in Indonesia, install and operate such telecommunications facilities; provided that it shall allow the Government and the public to use such facilities on the following terms: (i) any such use shall be subject to such regulations and limitations as the Company will reasonably impose, and shall in no event adversely affect or interfere with the Company's operations hereunder and (ii) the Company shall be entitled to impose such charges therefor as will be appropriate to reflect the cost of maintaining and operating such facilities and, with respect to any commercial use of such facilities, the capital cost thereof.
8. In the event that prior to any such installation by the Company, adequate telecommunications facilities can be provided by the Government, the Company shall be obliged to use the Government's network and pay reasonable standard charges for telecommunications services.
9. The Company may at its own cost, in accordance with the laws and regulations from time to time in effect in Indonesia, construct and establish and develop camps or permanent facilities sufficient to service the needs of the Enterprise.
ARTICLE 26
ENVIRONMENTAL MANAGEMENT AND PROTECTION
1. The Company shall, in accordance with prevailing Environmental protection and natural preservation laws and regulations of Indonesia from time to time in effect, use its best efforts to conduct its operations under this Agreement so as to minimize harm to the Environment and utilize recognized modern Mining industry practices to protect natural resources against unnecessary damage, to minimize Pollution and harmful emissions into the Environment, to dispose of Waste in a manner consistent with good Waste disposal practices, and in general to provide for the health and safety of its employees and the local community. The Company shall not take any acts which may unnecessarily and unreasonably block or limit the further development of the resources of the area in which it operates.
2. The Company shall, according to laws and regulations existing from time to time, install and utilize such internationally recognized modern safety devices, and shall observe such internationally recognized modern safety precautions as are provided and observed under conditions and operations comparable to those undertaken by the Company under this Agreement, including measures designed to prevent and control fires.
3. The Company shall, in accordance with prevailing laws and regulations, include in the Feasibility Study for each Mining Area an Environmental impact study which analyzes
the
potential impact of its operations on land, water, air, biological resources and human settlements. The Environmental impact statement will also outline measures which the Company intends to use to mitigate adverse impacts.
ARTICLE 27
LOCAL BUSINESS DEVELOPMENT
1. The Company shall, to the extent reasonably and economically practicable, having regard to the nature of the particular goods and services, promote, support, encourage and lend assistance to Indonesian nationals desirous of establishing enterprises and businesses providing goods and services for the Enterprise and for the permanent settlement(s) (if any) constructed by the Company and the residents thereof, and shall generally promote, support, encourage and assist the establishment and operation of local enterprises outside any Mining Area.
2. The Company shall make maximum use of Indonesian sub- contractors where services are available from them at competitive prices and of comparable standards with those obtainable from elsewhere, whether inside or outside Indonesia.
3. Insofar as it is practicable the Company shall give first preference in its assistance hereunder to landowners in and other people originating from the area of the Enterprise.
4. Except as otherwise agreed by the Department, the Company shall, at the commencement of the Feasibility Studies Period with respect to an Exploration Area, appoint, for such period as is reasonably necessary, a member of its staff who has had experience within Indonesia of the establishment, control and
day-to-day running of enterprises controlled and run by Indonesians who shall:
(i) identify activities related to the Enterprise including the provision of goods and services as described above which can be carried on by Indonesian nationals or local enterprises ;
(ii) advise and assist Indonesian nationals desirous of carrying on those activities or of establishing enterprises to do the same; and
(iii) implement, or assist in the implementation of, the Business Development Program as hereinafter described on behalf of the Company.
The staff member appointed for this purpose shall be a full time employee of the Company.
5. The Company shall, directly or indirectly, provide funds for, and assist in the development of a Business and Community Development Program designed to assist Indonesian Participants in the province in which the Enterprise is located, which Program shall be submitted to the Government as part of the Company's feasibility study report as described in Annex "E".
6. Except as otherwise agreed by the Government, the Business Development Program will make provision as far as is practicable for the following (except to the extent of activities to be carried out directly by the Company):
(i) enterprises involved in the supply and maintenance of Mining equipment and the provision of consumable supplies;
(ii) subcontracting to self - employed equipment operators for road construction and maintenance;
(iii) subcontracting of site preparation, construction and maintenance of houses, Government buildings, industrial facilities and other works and buildings and facilities to be established, including concreting, welding, tank constructions, steel fabrication, plumbing, electrical work and timberwork;
(iv) enterprises involved in town services such as sewerage and garbage collection, treatment and disposal, passenger transport, freight carriage of consumer items and stevedoring (except in relation to the shipping of the Products of the Mine);
(v) enterprises involved in trade stores, supermarkets, other retail outlets, canteens, restaurants, taverns, cinemas, social clubs, cleaning and laundry, and vehicle maintenance and repair facilities;
(vi) enterprises involved in the supply of fresh fruits, vegetables, meat and fish; and
(vii) other activities agreed to by the Company and the Government;
7. Except as otherwise agreed by the, Government the Business Development Program shall also include details of:
(i) the time schedule for its implementation;
(ii) those additional activities which could be established
by Indonesian nationals;
(iii) those activities in which the Company intends to commence operating but which will be transferred to Indonesian nationals at a later date, on a commercial basis; and
(iv) any facilities by way of training, technical or financial assistance which can be made available to facilitate the smooth transition of ownership and operation to Indonesian nationals.
8. Except as otherwise agreed by the Government, the Business Development Program shall be reviewed annually by the Company, in consultation with the Government, and may be altered by mutual consent between the Company and the Government with a view to securing the maximum benefit to Indonesian nationals and local enterprises from the operations of the Company and the carrying out of the Enterprise.
9. Except as otherwise agreed by the Department, the Company shall consult from time to time with representatives of the Government and furnish the Government at quarterly intervals with a report concerning the following:
(i) the implementation of the training and manpower aspects of the Business Development Program;
(ii) the implementation of provisions relating to local purchasing of supplies; and
(iii) the implementation of provisions relating to local business development.
10. The Government agrees to assist the Company in securing appropriate land rights to allow the Company to accomplish the foregoing.
ARTICLE 28
MISCELLANEOUS PROVISIONS
1. Each of the parties agrees to execute and deliver all such further instruments, and to do and perform all such further acts and things, as shall be necessary or convenient to carry out the provisions of this Agreement.
2. Any notice, request, waiver, consent, approval and other communication required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable or radiogram, with postage or transmission charges fully prepaid, to the party to which it is required or permitted to be given or made at such party's address hereinafter specified, or at such other addresses as such party shall have designated by notice to the party giving such notice or making such request:
To the Government addressed to :
The Ministry of Mines and Energy of the
Republic of Indonesia
c/o. The Director General of Mines
Jalan Jenderal Gatot Subroto Kav. 49
JAKARTA - INDONESIA
To the Company at its principal office in Jakarta with one copy by airmail, telegram, telex, cable, radiogram, or facsimile with postage or transmission charges fully prepaid to:
P.T. Irja Eastern Minerals Corporation.
Plaza, 5th floor
Jl.H.R.Rasuna Said Kav.X-7 No.6
Jakarta 12940
with a copy to:
Eastern Mining Company, Inc.
c/o Freeport-McMoRan Copper & Gold Inc.
1615 Poydras Street
New Orleans, LA 70112
or such other address as the Company may notify from time to time.
3. The Minister or his designee may take any action or give any consent on behalf of the Government which may be necessary or convenient under or in connection with this Agreement for its better implementation and any action so taken or consent so given shall be binding upon the Government and any instrumentality or subdivision thereof.
4. When required by the context of this Agreement, each number (singular or plural) shall include all numbers and each gender shall include all genders. The headings appearing in this Agreement are not to be construed as
interpretations of the text or provisions herof, but are intended only for convinience of reference.
5. The terms of this Agreement (including the Annexes hereto) constitute the entire agreement between the Parties hereto and no previous communications, representations or agreements, either oral or written between the Parties hereto with respect to the subject matter therof shall vary the terms of this Agreement.
6. Unless the context otherwise expressly requires, where reference is made in this Agreement to the laws or regulations of Indonesia such reference shall be to the laws and regulations of Indonesia generally applicable to foreign Mining companies in Indonesia in force from time to time.
7. Where an approval or consent or concurrence of the Department or the Government of Indonesia or any subdivision or instrumentality thereof is required, and where an application is made by the Company to the Government of Indonesia under this Agreement such approval or consent will not be unreasonably withheld or delayed. Furthermore, if within 3 (three) months after a written application or request, the Company has not received any objection in writing from the Government, such application or request shall be deemed to be approved or accepted.
ARTICLE 29
A S S I G N M E N T
1. This Agreement may not be transferred or assigned (including for the purpose of financing) in whole or in part, without the prior written consent of the Department; provided, however that where the Department consents to a transfer or assignment, the Company shall not be relieved from any of its obligations hereunder except to the extent that the transferee or assignee shall assume such obligations.
2. The shareholders in the Company shall not transfer shares in the Company without the prior written consent of the Department which decision will not be unreasonably withheld or delayed; provided that the written consent of the Department shall not be required in the case of:
(a) a transfer of shares pursuant to Article 24;
(b) shares listed on an Indonesian stock exchange; or
(c) a transfer by a shareholder of all or some of its shares to Freeport-McMoRan Copper & Gold Inc. or an Affiliate thereof.
ARTICLE 30
FINANCING
1. The Company shall have sole responsibility for financing the Enterprise and shall maintain sufficient capital to carry out its obligations under this Agreement. The Company may determine the extent to which the financing shall be accomplished through issuance of shares of the Company or through borrowings by the Company, provided that from the start of the Construction Period the Company shall endeavor to maintain a ratio of shareholder's capital to third party borrowings so as to reasonably assure the continuing solvency of the Company for the benefit of the Government, the lenders and the shareholders.
2. Any long term borrowing by the Company under this Agreement shall be on such repayment terms and at such effective rates of interest (including discounts, compensating balances and other costs of obtaining such borrowings) as are reasonable and appropriate for Mining companies in circumstances then prevailing in the international money markets after complying with existing procedures for obtaining foreign loans.
3. For the purpose of securing financing, the Company may mortgage, pledge or otherwise encumber its assets, subject to paragraph 1 of Article 29.
ARTICLE 31
T E R M
1. This Agreement shall become effective on the date set out at the beginning of this Agreement.
2. Subject to the provisions herein contained, this Agreement shall continue in force until the expiration of the last Operating Period for a Mining Area and for such additional period, if any, for which this Agreement shall be renewed or otherwise extended. The Company shall be entitled to apply for two successive ten year extensions subject to Department approval. The Department will not unreasonably withhold or delay such approval. Such application by the Company may be made at any time during the term of this Agreement, including any prior extension.
ARTICLE 32
GOVERNING LAW
1. Except as otherwise expressly provided herein, this Agreement, its implementation and operation shall be governed and construed and interpreted in accordance with the laws of the Republic of Indonesia which are presently in force. This Agreement shall have the force and effect of law for both the Company and the Government.
2. This Agreement has been drawn up in both the Indonesian and English languages and both texts are valid. In the event of any divergency between the two texts, however, the English text shall prevail and shall be considered the official text.
In witness whereof, the Parties hereto have caused this Agreement to be duly executed as of the date appearing at the beginning of this Agreement.
FOR THE GOVERNMENT OF THE
REPUBLIC OF INDONESIA,
By : ____________________________
Minister of Mines and Energy
FOR P.T. EASTERN MINING COMPANY
By : ___________________________
EXECUTION COPY
CONCENTRATE PURCHASE AND SALES AGREEMENT
BETWEEN
P.T. FREEPORT INDONESIA COMPANY
AND
P.T. SMELTING CO.
CONTRACT NO. 98-1
TABLE OF CONTENTS
Page
ARTICLE 1 3
Definitions and Interpretation 3
1.1 Definitions 3
1.2 Interpretation 3
ARTICLE 2 3
Product 3
2.1 Expected Analysis 3
2.2 Product Review 5
2.3 Non-Conforming Concentrates 6
(a) Excess Impurities 6
(1) First Ten Contract Years 6
(2) Subsequent Contract Years 7
(b) Adjustments to Smelting and Refining Charges Due
to Copper, Gold and Silver Outside Specified Range 10
(c) Deviation of the Copper Content of the
Concentrates 10
2.4 Shipping Code 12
2.5 Moisture 12
2.6 Title 12
2.7 Implied Warranty Disclaimer 12
ARTICLE 3 12
Quantity 12
3.1 Obligations to Purchase and Sell Contractual Tonnage
and Initial Inventory Period Tonnage 12
3.2 Process for Determination of Contractual Tonnage Figure 13
A. The Rolling Five Year Concentrates Requirements
Forecast and the One Year in Advance Forecasted
Quantity Requirement 13
B. Annual Shipping Schedule Quantity 16
C. Contractual Tonnage Declarations 16
D. Contractual Tonnage Cap 17
3.3 Inventory Allowance 18
3.4 Buyer's Inability to Receive Concentrates 18
3.5 Seller's Inability to Deliver Concentrates 22
3.6 Additional Quantities 23
3.7 Contract Year to Contract Year Adjustments 23
(a) Advance Shipment 23
(b) Delayed Shipment 24
3.8 Seller's Qualified Right to Vary Quantity for Remainder
of Year 24
3.9 Reduction of Contractual Tonnage due to Reduction of
Seller's Ability to Produce 24
3.10 Adjustments Resulting From Quality-Related Reductions
of the Contractual Tonnage Figure 25
3.11 Simplification of Determination of Contractual Tonnage
Figure in the Event of Reduction of Contractual Tonnage 26
ARTICLE 4 26
Term and Termination 26
4.1 Term of Agreement; Conditions Precedent 26
4.2 Termination Prior to Mechanical Completion Due to Delay
or Inactivity 27
ARTICLE 5 28
Delivery of Concentrates 28
5.1 Delivery CIF Port of Discharge 28
5.2 Discharging Berth 28
5.3 Rate of Discharge 28
5.4 Notice of Readiness 29
5.5 Lay Time 29
5.6 Demurrage and Dispatch 30
(a) Bulk Carriers 30
(b) Hopper Barges 30
(c) Payment 31
5.7 Vessel Characteristics 31
(a) Bulk Carriers 31
(b) Hopper Barges and SPV's 32
(c) Vessel Requirements of General Applicability 32
5.8 Overtime 32
5.9 Port Charges 33
5.10 Title and Risk of Loss 33
5.11 Alternate Port 33
5.12 Stevedore Damages 33
5.13 Jetty Damages 34
5.14 Use of Bulk Carrier's Discharging Gear 34
ARTICLE 6 34
Scheduling and Shipments 34
6.1 Initial Inventory Period 34
6.2 First Contract Year 34
6.3 Second Contract Year 35
6.4 Third Contract Year 36
6.5 Fourth and Subsequent Contract Years 37
6.6 General 38
6.7 Buyer's Shipping Instructions and Documentation, Vessel
Information and Further Shipment Confirmation 38
ARTICLE 7 38
Insurance 38
7.1 Insured Value 39
7.2 Insurance Coverage 39
7.3 Claims 39
7.4 Insolvency Exclusion Clause 39
7.5 Seller's Assistance 39
7.6 War Risk Premiums 40
ARTICLE 8 40
Price 40
8.1 Payable Copper 40
8.2 Payable Gold 40
8.3 Payable Silver 40
8.4 Quotational Period 41
8.5 Determination of Price 41
8.6 Copper Price 41
8.7 Gold Price 41
8.8 Silver Price 41
8.9 Conversion to Dollars 41
8.10 Alternate Pricing 42
(a) Pricing Basis No Longer Published or No Longer
Representative 42
(b) Interim Invoicing 42
(c) Referral to Referees 42
ARTICLE 9 43
Deductions for Smelting and Refining Charges and for Impurities 43
9.1 Smelting and Refining Charges for Part A Tonnage 43
(i) Initial Negotiation 43
(ii) Subsequent Negotiations 46
(iii) Agreements Required if Permanent Holiday
Reduction Effected 48
9.2 Smelting and Refining Charges for Part B Tonnage 49
(i) Smelting Charge, Payable Copper Refining Charge
and Price Participation Terms for Part B Tonnage 49
(a) Determination on Basis of Weighted Average of
Eligible Reference Contracts 49
(b) Selection of Auditor 50
(c) Determination of Eligibility for Designated
Reference Contracts 50
(d) Calculation of Weighted Average Figures for
Each Party's Eligible Reference Contracts 53
(e) Calculation of Weighted Average Figures for
the Ertsberg Concentrate Agreement and MMC
Concentrate Agreement. 54
(f) The Auditor's Preliminary and Final
Determinations 55
(g) Effect of Final Report and Retroactive
Adjustment 56
(h) Interim Terms Governing the Period Prior to
Final Report Issuance 56
(ii) Payable Gold and Payable Silver Refining
Charges for Part B Tonnage 56
9.3 Minimum Smelting and Refining Charges; Possible
Recoupment of Lost Revenues 57
9.4 Deductions for Impurities 58
9.5 Exclusive Remedy 59
9.6 General Provisions Applicable to Smelting and Refining
Charges 59
9.7 Special Provisions Applicable to Concentrates with
Copper, Gold and/or Silver Outside the Five-Year
Expected Analysis 60
ARTICLE 10 61
Periodic Review of Commercial Terms 61
10.1 Provision Governing Part A Tonnage Smelting and
Refining Charges and Minimum Smelting and Refining
Charges 61
10.2 Periodic Review of Certain Commercial Terms 61
ARTICLE 11 62
Payments 62
11.1 Manner of Payment 62
11.2 Provisional Price 63
11.3 Provisional Payment 63
11.4 Final Payment 64
11.5 Final Price Determination in the Event of Loss 64
11.6 Interest 65
ARTICLE 12 65
Weighing, Sampling and Determination of Moisture 65
12.1 General Procedures 65
12.2 Determination of Dry Weight 66
12.3 Sample Lots 66
12.4 Number and Handling of Samples 66
12.5 Composite Samples 66
ARTICLE 13 66
Assay 66
13.1 Method for Determining Final Analysis. 66
13.2 Determination of Final Analysis if Shipment Diverted 67
13.3 Designation of Umpire 67
13.4 Determination of Final Analysis Using Umpire's Assay 67
13.5 Analysis of Composite Samples for Impurities 67
ARTICLE 14 68
Taxes 68
14.1 Value Added Tax 68
14.2 Payment of Value Added Tax 68
ARTICLE 15 68
Exemption from Liability and Obligation 68
ARTICLE 16 70
Relief from Economic Hardship 70
16.1 Consultation in the Event of Hardship 70
16.2 Limitations on Right to Request Consultation 70
ARTICLE 17 70
Notices 70
ARTICLE 18 71
Assignment 71
18.1 Binding Effect 71
18.2 Seller's Assignment to the Trustee 71
18.3 Buyer's Assignment to a Trustee 72
18.4 Other Assignments 72
ARTICLE 19 73
Referees 73
19.1 General 73
19.2 Selection of Referees 73
19.3 Proceedings 73
19.4 The Decision 74
ARTICLE 20 74
Arbitration 74
20.1 Amicable Settlement 74
20.2 Arbitration Rules 74
20.3 Arbitrators 75
20.4 Arbitration Award 75
20.5 Award to be Final and Conclusive 76
20.6 Performance of Obligations Pending Decision 76
20.7 Waiver of Right to Terminate Board of Arbitration 76
ARTICLE 21 76
Governing Law 76
ARTICLE 22 77
Force Majeure 77
22.1 Definition 77
22.2 Effect of Force Majeure 77
22.3 Parties to Use Reasonable Efforts 78
ARTICLE 23 79
Default 79
23.1 Events of Default 79
23.2 Notice of Default 79
23.3 Liability for Default 79
ARTICLE 24 79
Non-Waiver of Defaults 79
ARTICLE 25 80
Miscellaneous 80
25.1 Opinion of Buyer's Counsel 80
25.2 Opinion of Seller's Counsel 80
25.3 Entire Agreement 81
25.4 Counterparts 81
25.5 Headings 81
25.6 Publication of Articles 81
LIST OF APPENDICES
Appendix "A" Definitions
Appendix "B" Sample Calculation of MMC's
Receipt of 13% Simple Return
Appendix "C" Price Participation Weighted
Average Calculation - Example
Appendix "D" Price Participation - Weighted
Average Base - Part B
|
CONCENTRATE PURCHASE AND SALES AGREEMENT
AGREEMENT, effective as of December 11, 1996 between P.T.
FREEPORT INDONESIA COMPANY, an Indonesian limited liability company
which is also domesticated in Delaware, U.S.A. ("Seller"), and P.T.
SMELTING CO., an Indonesian limited liability company ("Buyer").
WHEREAS, Seller operates copper mines in Indonesia pursuant to
the December 30, 1991 Contract of Work between Seller and the
Government, and any subsequent modifications, supplements or
amendments thereto (the "COW") which grants mining rights in a
specified geographic area within the Province of Irian Jaya (the
"Contract Area") to Seller until the year 2021 with two ten-year
extension periods permitted under certain circumstances;
WHEREAS, in furtherance of Seller's obligation under the COW
to build, or cause to be built, a copper smelter and refinery in
Indonesia under certain circumstances, Seller has, in concert with
others and independently, studied the feasibility of the
development, construction, ownership and operation of a 200,000
metric ton per annum copper smelter and refinery to be located at
Gresik, East Java, Indonesia (the "Project");
WHEREAS, at a meeting between Freeport-McMoRan Copper & Gold
Inc., a company organized and existing under the laws of Delaware,
U.S.A. and the parent company of Seller ("FCX") and Mitsubishi
Materials Corporation, a company organized and existing under the
laws of Japan ("MMC") on September 19, 1994, FCX solicited MMC to
construct, own and operate the Project with Seller and Fluor Daniel
Wright Ltd., a company organized and existing under the laws of
British Columbia, Canada ("FLUOR"), and thereafter FCX, Seller and
MMC had several meetings to discuss the concept of a joint venture
to proceed with the Project;
WHEREAS, MMC, FCX and FLUOR, each having decided to
participate in the Project subject to certain terms and conditions,
executed an Agreement in Principle, dated as of January 6, 1995
(the "AIP");
WHEREAS, following execution of the AIP FCX assigned its
interest thereunder to Seller and FLUOR assigned its interest
thereunder to Fluor Daniel Engineers & Constructors, Ltd., a
company organized and existing under the laws of the State of
California ("FDEC");
WHEREAS, following execution of the AIP Seller, MMC and FDEC
have executed a Project Planning Agreement, dated as of May 12,
1995 (the "Project Planning Agreement") which supersedes and
replaces the AIP as to the subject matter of such Project Planning
Agreement;
WHEREAS, among other things, the Project Planning Agreement
provides that the Project will be operated using only Concentrates
as feed material and in this connection:
(a) Seller is agreeable to selling a quantity of
Concentrates equal to one hundred percent (100%) of the copper
concentrates required by Buyer for the Project for so long as
Seller's mining and milling activities shall be operating at an
annual rate sufficient to produce such quantity of Concentrates, in
respect of which Seller shall grant the first and exclusive
priority to Buyer for the delivery of Concentrates produced by
Seller; and
(b) Subject to the required approval by the Government of
Indonesia (which approval Seller shall seek to procure), Seller is
agreeable to selling Concentrates to Buyer and Buyer is agreeable
to buying Concentrates from Seller, on a basis which is fair,
reasonable and reflective of then current market conditions, and
which incorporates the terms and conditions specified in the
Project Planning Agreement for this Agreement;
WHEREAS, following execution of the Project Planning Agreement
FDEC assigned its interest thereunder to Fluor Daniel Asia, Inc.,
a company organized and existing under the laws of the State of
California ("FDA");
WHEREAS, in furtherance of the objectives set forth and agreed
in the AIP and the Project Planning Agreement, MMC, Seller and FDA
entered into a Joint Venture and Shareholders Agreement dated as of
October 25, 1995 as amended by instrument dated May 24, 1996 (the
"Shareholders Agreement"), which Shareholders Agreement provides,
among other things, for the incorporation and management of P.T.
Smelting Co. as an Indonesian limited liability company for the
development, construction, ownership and operation of the Project,
and which amendment provides, among other things, for the
withdrawal of FDA from the Project; and
WHEREAS, under the Project Planning Agreement and the Shareholders Agreement, the execution by Seller and Buyer of this Agreement is a condition precedent to the implementation and operation of the Project in accordance with those agreements; and Seller and Buyer desire to enter into this Agreement in order to satisfy that condition and proceed to implement the Project. NOW, THEREFORE, Seller agrees to sell and deliver, and Buyer agrees to purchase, pay for and accept delivery of, copper concentrates on the terms and conditions hereinafter set forth.
ARTICLE 1
Definitions and Interpretation
1.1 Definitions. Unless the context otherwise requires,
all capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned thereto in Appendix "A" hereto.
1.2 Interpretation. Unless the context otherwise requires,
words importing the singular number shall include the plural and
vice versa; the headings are for convenience only and shall not
affect the construction hereof, and references herein to any
enactment shall be deemed to include such enactment as reenacted,
amended or extended.
ARTICLE 2
Product
2.1 Expected Analysis. Seller expects that for the first five (5) Contract Years of the term of this Agreement the Concentrates will assay, as an average for each calendar month and Contract Year, on a dry basis, within the following ranges:
Cu - 26% to 38% Au - 15 grams to 38 grams per DMT Ag - 35 grams to 90 grams per DMT Al - 0.5% to 1.7% As - 0.01% - 0.15% Bi - 0.002% - 0.02% Ca - 0.12855%-0.85% Co - less than 0.02% Cd - 0.002% - 0.01% Cl - 0.005% - 0.02% F - 0.005% - 0.035% Fe - 18% - 26% Hg - 0.1 - 0.6 g/t Mg - 0.1% - .3% Mo - 0.01% - 0.03% Ni - less than 0.005% Pb - 0.01% - 0.1% S - 26% - 36% Sb - 0.001% - 0.008% Se - .01% - 0.03% SiO2 - 3.0% - 10.0% Te - 0.001% - 0.02% Zn - 0.15% - 0.8% |
Seller expects that for the second five (5) Contract Years of the term of this Agreement the Concentrates will assay, as an average for each calendar month and Contract Year, on a dry basis, within the following ranges:
Cu - 26% to 46% Au - 9 grams to 38 grams per DMT Ag - 35 grams to 200 grams per DMT Al - 0.3% to 1.7% As - 0.01% - 0.15% Bi - 0.002% - 0.05% Ca - 0.15%-4% Co - less than 0.020% Cd - 0.001% - 0.01% Cl - less than 0.02% F - 0.005% - 0.04% Fe - 13% - 27% Hg - not more than 1 ppm Mg - 0.1% - 1% Mo - 0.01% - 0.04% Ni - less than 0.008% Pb - 0.01% - 0.3% S - 25% - 36% Sb - 0.001% - 0.005% Se - .02% - 0.05% SiO2 - 2.0% - 12.0% Te - 0.001% - 0.02% Zn - 0.15% - 2.0% |
Seller expects that the Concentrates will be free from
deleterious impurities that would prevent the Concentrates from
being treated with processes normally and customarily employed by
major copper smelters. As Seller acquires additional knowledge or
information regarding the chemical and physical characteristics of
(or expected for) the Concentrates, Seller shall make such
knowledge available to Buyer as soon as possible.
2.2 Product Review. Seller shall inform Buyer by October
1 of each year (commencing with October 1 of the second calendar
year preceding the estimated commencement of the first Contract
Year) of the expected approximate analysis of copper (which
expected approximate analysis of copper shall constitute the Annual
Budgeted Copper Grade), gold, silver, alumina (Al x 1.8889), iron,
sulphur, arsenic, bismuth, antimony, chlorine, lead, zinc, nickel
plus cobalt, fluorine and mercury for the Concentrates to be
delivered in the first succeeding Contract Year, plus a preliminary
estimated analysis of such elements or compounds for the succeeding
four (4) Contract Years (the "Preliminary Estimated Analysis").
Seller shall also inform Buyer at least 30 days prior
to the date of the meeting which is held every five (5) years in
accordance with the provisions of Article 10 to review certain
commercial terms, of the chemical analysis of the Concentrates
(including all of the same elements listed in the analysis recited
in Section 2.1) which Seller expects the Concentrates will assay on
a dry basis for the ensuing five (5) Contract Years of the term of
this Agreement (each such analysis, as well as the analysis for the
first five (5) Contract Years set forth in Section 2.01, is
hereinafter referred to as a "Five-Year Expected Analysis").
Such estimates shall be based on the geological and
engineering information and data available to Seller at the time of
the production of such estimates, and shall be as accurate as is
reasonably practicable.
In the event Buyer desires additional information to
clarify or better understand the annual estimate which has been
produced (or any other estimate provided under Sections 2.1 or
2.2), upon request by Buyer, Seller will make available to Buyer's
technical representatives in Seller's offices on a strictly
confidential basis all data and information reasonably requested by
Buyer and shall meet with Buyer's representatives to provide such
explanations or clarifications as Buyer's representatives may
desire (again, on a strictly confidential basis). Due to the
proprietary or confidential nature of such data and information,
Buyer may copy and retain such data or information only with
Seller's prior approval, and Buyer shall not disclose it to third
parties except as required by law or for purposes of evaluation by
Buyer's consultants or by a representative of any lenders to Buyer
in connection with the financing of the Project, who have a need to
have access to such information and who shall agree in writing to
maintain the confidentiality of such data and information.
If during the period following Seller's production of
its annual estimate for one year and prior to its production of its
estimate for the following year Seller develops or obtains
knowledge or information which significantly differs from Seller's
current estimate for the current year, Seller shall furnish Buyer
as soon as practicable with its revised estimate.
2.3 Non-Conforming Concentrates.
(a) Excess Impurities.
(1) First Ten Contract Years. In the event
that the Concentrates delivered hereunder shall at any time during
the first ten (10) Contract Years: (i) have levels of impurities in
excess of the applicable range specified in Section 2.1 (i.e.
either the specified range applicable to the first five (5)
Contract Years or the specified range applicable to the second five
(5) Contract Years) for which the deductions specified in Section
9.4 do not appropriately compensate Buyer, and (ii) such
Concentrates cannot be economically or practically treated at the
then existing Facilities because of the presence of deleterious
elements in harmful quantities (it being understood that condition
(ii) may result from impurities which have a material adverse
effect on the quality of copper cathodes or by-products produced by
the Facilities or from other physical and/or chemical
characteristics of the Concentrates that materially adversely
affect processing by the Facilities), then Buyer shall specify such
objections with particularity to Seller and Buyer and Seller shall
seek in good faith to negotiate an appropriate remedy for any
significant Financial Disadvantage and technical disadvantage which
Buyer may suffer, it being understood that Buyer has a duty to
mitigate its damages. If Buyer and Seller cannot agree on a way to
resolve Buyer's objections within 45 days after Buyer shall have
specified its objections to Seller pursuant to this Section 2.3,
Buyer or Seller may, at its option, exercisable by written notice
to the other party, refer the matter to the referee(s) as provided
in Article 19 for the following purposes: (a) if in dispute, a
determination of whether the conditions specified in clause (i) and
clause (ii) of this Section exist, and, if both of such conditions
exist or are determined to exist, (b) a determination of the
appropriate remedy to compensate Buyer for the Financial
Disadvantage resulting from such conditions, which have not been
and will not be compensated to Buyer pursuant to the other
provisions of this Agreement (including the penalties to which
Seller may be subject), and taking into account the mitigating
measures which Buyer may implement at a reasonable cost and without
undue interruption of its smelter operations (the costs of
mitigating measures to be calculated as part of Buyer's Financial
Disadvantage to the extent that such costs are necessary and
appropriate). Such appropriate remedy may include (i) that Seller
can substitute concentrates originating from other mines (whether
Seller's or a third party's) for Concentrates produced by Seller,
or (ii) the revision of the penalty schedule for impurities, or
(iii) a revision to the smelting and refining charges then in
effect, or (iv) any other appropriate remedy. Any adjustments or
remedies which have been mutually agreed (or determined by
referee(s)) shall be taken into account when the Commercial Terms
for the following Contract Years are determined at the time of each
five year review of Commercial Terms so that the price to be paid
to Seller will not be reduced twice (first, in reaching a remedy
for non-conforming Concentrates, and second, when the Commercial
Terms for subsequent Contract Years are determined).
(2) Subsequent Contract Years. Following the tenth Contract Year Seller will deliver to Buyer hereunder whatever quality of Concentrates Seller produces from its then existing mining and concentration facilities, subject to the condition that Seller will not ship to Buyer any worse quality Concentrates (with normal, reasonable variations permitted) than it ships to Seller's other significant customers (i.e. customers purchasing from Seller a quantity of 30,000 DMT's or more per year of copper concentrates) during the year in question. Upon the request of Buyer, which shall not be made more frequently than once per calendar year commencing with the year in which the eleventh Contract Year commences, Buyer and Seller shall select a mutually agreed upon independent accounting firm, whose costs shall be paid by Buyer, and Seller shall disclose to such independent accounting firm on Seller's premises on a confidential basis appropriate data and information to enable such firm to verify to Buyer whether or not Seller is in compliance with the above condition. If Seller is determined to not be in compliance with this obligation at any time, Seller shall take such measures as are necessary to correct such situation and reimburse Buyer for all of the relevant costs of the accounting firm which have been paid by Buyer. Notwithstanding anything to the contrary recited in the foregoing language of this Section 2.3(a)(2), if at any time during this period Buyer is of the good faith belief that the Concentrates delivered by Seller hereunder cannot be economically or practically treated at the then existing Facilities because of the presence of deleterious elements in harmful quantities Buyer shall so notify Seller. The above described condition may result from impurities which have a material adverse effect on the quality of copper cathodes or by-products produced by the Facilities or from other physical and/or chemical characteristics that materially adversely affect processing by the Facilities.
In the event of such notification by Buyer,
Buyer and Seller shall immediately consider and discuss possible
solutions to such condition, and each of Buyer and Seller shall
promptly take such actions as it determines to be appropriate to
help alleviate the condition, and notify the other party of the
actions, if any, which it is taking. If following the timely
implementation of the measures which each party has decided to take
to help alleviate such condition, Buyer remains of the good faith
belief that the condition which Buyer has provided notice of to
Seller is continuing to exist and that such condition constitutes
the condition which is described above, namely that the
Concentrates delivered by Seller hereunder cannot be economically
or practically treated at the then existing Facilities because of
the presence of deleterious elements in harmful quantities, then
Buyer may either continue to purchase, pay for and accept delivery
of the Contractual Tonnage of Concentrates but with no Financial
Disadvantage payment by Seller, or exercise a right and option
which Buyer may exercise at any time during the continuance of such
condition to reduce the Contractual Tonnage hereunder up to a
maximum Contractual Tonnage reduction equal to the quantity of
copper concentrates which is reasonably necessary for Buyer to
purchase from other sources in order for Buyer to be able to treat
in an economical or practical manner Seller's Concentrates together
with the copper concentrates which Buyer shall purchase from third
parties. In order to exercise such right and option, Buyer shall
provide written notice to Seller of its good faith determination
that the above specified condition exists together with a statement
of the quantity reduction of the Contractual Tonnage which Buyer
has elected to put into effect. Such written notice shall also be
accompanied by written evidence which reasonably demonstrates: (x)
the basis for Buyer's determination that Seller's Concentrates
cannot be economically or practically treated and (y) the basis for
Buyer's determination that the amount of the reduction does not
exceed the maximum allowable reduction as described above.
Buyer shall consult with Seller with respect to
the timing of any such reduction and use all reasonable efforts to
implement such reduction in a manner which minimizes the disruption
of Buyer's and Seller's operations. Any such reduction shall cease
at such time as is mutually agreed or, absent mutual agreement, at
such time as all of the following have occurred: (i) the condition
which gave rise to the reduction no longer exists and Seller has
notified Buyer of such fact, (ii) Seller or Buyer has provided
notice to the other party hereto of the effective date for the
resumption of delivery of the previously reduced quantities which
date must be at least three years following the notice date, (iii)
the period recited in such notice has expired, and (iv) at the
expiration of such period, the condition which gave rise to the
reduction no longer exists. Subject to the four (4) foregoing
conditions (particularly the minimum three year advance notice), if
both Buyer and Seller provide a notice in accordance with condition
(ii) having different effective dates, an earlier effective
resumption date shall take precedence over a later effective
resumption date. Neither Seller nor Buyer shall have any
obligation to retroactively make-up any such portion of the
quantities of reduced Contractual Tonnage.
Seller reserves the right to contest the basis
for and/or the amount of the reduction of Contractual Tonnage
pursuant to this subsection on the grounds that such reduction does
not conform to the provisions of this subsection of this Agreement.
If Seller objects to any such reduction on this basis, Seller
shall promptly notify Buyer of Seller's objection(s) and the
basis(es) for such objection(s), and Buyer and Seller shall then
use their best efforts to resolve any such differences amicably.
If such an amicable resolution is not agreed upon within thirty
(30) days following notice by Seller of its objection, the dispute
shall be conclusively settled by the referee(s) under Article 19 of
this Agreement. Pending such settlement by the referee(s), Buyer
may request, and Seller will not unreasonably deny suspension of
shipments of Concentrates hereunder.
(b) Adjustments to Smelting and Refining Charges Due
to Copper, Gold and Silver Outside Specified Range. In addition to
the foregoing language regarding the consequences of excess levels
of impurities in the Concentrates, Section 9.7 of this Agreement
sets forth certain adjustments to the smelting and refining charges
which will be made in the event the content of copper, gold or
silver in delivered Concentrates is outside the range of the then
current Five-Year Expected Analysis.
(c) Deviation of the Copper Content of the Concentrates. If the average analysis of copper contained in the total quantity of Concentrates delivered hereunder with respect to any calendar month is not within a 5.0% variance of 31.0% (i.e. 29.45% to 32.55%) at any time during the first five (5) Contract Years, is not within a 7.5% variance of 31.0% (i.e. 28.675% to 33.325%) at any time during the second five (5) Contract Years, or is not within a mutually agreed upon percentage variance of 31.0% at any time thereafter during the term of this Agreement (which percentage figure shall be mutually agreed upon by Buyer and Seller prior to the end of the tenth Contract Year to directly reflect the percentage copper grade variance from 31.0% within which the Facilities are capable of producing 200,000 metric tons per annum of copper cathodes or, failing mutual agreement, such percentage variation shall be decided by the referee(s) under Article 19), then Buyer shall have the right and option but not the obligation to change the Port of Discharge from Gresik to one or more of the Approved Japanese Ports for the quantity of Concentrates specified below which exceed the applicable above specified copper content variance (i.e. above the upper limit or below the lower limit), and any additional freight costs for delivery of such Concentrates to any such Approved Japanese Port shall be for Seller's account. For any such shipments which are shipped to an Approved Japanese Port in accordance with the provisions of this paragraph, such Approved Japanese Port to which such Concentrates are shipped shall be considered to be the Port of Discharge for all purposes hereunder and Seller shall invoice Buyer for the same amount and in the same manner as if such shipment had been made to Gresik, with the exception that Buyer will take all such actions as are necessary to assure that: (i) the purchaser or recipient of the Concentrates in Japan will not obtain any economic benefits of the Floor TC's and RC's provided for in Section 9.3 of this Agreement, and (ii) the Floor TC's and RC's will be accounted for in such a manner so as to preserve the economic benefits thereof exclusively to Buyer and Seller as provided for in Section 9.3 of this Agreement. Buyer shall assure that all switched sales or product exchanges of Concentrates to Approved Japanese Ports shall be in accordance with generally accepted international business practices and on competitive world market terms and conditions at the time of sale or contract, and Buyer shall provide to Seller either a summary of all significant commercial terms and conditions governing such sales or a copy of the concentrate sales agreement governing each such sale, to evidence its compliance with such obligation to Seller. In the event the Government of Indonesia requests additional information regarding any such switched sale, Buyer shall provide such information with a copy to Seller. Seller shall have the right, which right may not be exercised more frequently than once per calendar year, to retain a mutually acceptable independent accounting firm to be compensated solely by Seller, to audit Buyer's records of such switched sales or product exchanges to verify to Seller whether or not Buyer is in compliance with its undertakings hereunder with respect to such sales or exchanges. The maximum quantity of Concentrates which Buyer may switch from Gresik to an Approved Japanese Port shall not exceed the quantity of Concentrates which are necessary to enable Buyer through purchases of copper concentrates from third parties to bring the percentage copper content of the average feed stock of copper concentrates at the Facilities within the then applicable above specified percentage variance of 31.0%, except that the switched quantities may be rounded to the nearest shipping size configuration.
Prior to implementing the switching of the delivery of
any shipment(s) of Concentrates from Gresik to an Approved Japanese
Port, Buyer and Seller shall consult with each other in good faith
and mutually agree upon a shipping schedule for such switched
shipment(s) which takes into account the operational requirements
of both Seller and Buyer. The minimum cargo size for any cargo
delivered to an Approved Japanese Port shall be approximately
10,000 DMT's and Seller reserves the right to combine switched
shipments with Seller's other shipments to Japan.
In the event that the conditions which permit Buyer to
switch Concentrates from Gresik to an Approved Japanese Port exist
or are threatened, Seller reserves the right to ship to Buyer
hereunder Concentrates produced from Seller's mines and processing
facilities which exceed the permissible percentage variance at the
opposite end of the range from the analysis of the Concentrates
which are creating or threatening to create such conditions, in
order that Seller may reduce or eliminate the quantity of
Concentrates which need to be switched under this Section 2.3(c).
In the event the copper content of the Concentrates
exceeds the variances specified above and Buyer is unable to switch
such Concentrates to an Approved Japanese Port, Buyer shall take
deliveries of such Concentrates at Gresik.
2.4 Shipping Code. The Concentrates will be suitable for
ocean transportation in bulk in accordance with the International
Maritime Organization (IMO) Code and the relevant regulation
applicable to Concentrates in Indonesia (if any).
2.5 Moisture. The moisture content of the Concentrates at
the Port of Loading shall be equal to or more than 6% and less than
9%.
2.6 Title. Seller warrants that it will convey to Buyer
good and marketable title to the Concentrates sold hereunder.
Seller warrants that the Concentrates will be free of all liens,
security interests and other encumbrances at the time title passes
to Buyer.
2.7 Implied Warranty Disclaimer. IMPLIED WARRANTIES OF
FITNESS FOR A PARTICULAR PURPOSE AND OF MERCHANTABILITY ARE HEREBY
DISCLAIMED.
ARTICLE 3
Quantity
3.1 Obligations to Purchase and Sell Contractual Tonnage
and Initial Inventory Period Tonnage. Except as otherwise
specifically provided in this Agreement, Seller agrees to sell and
deliver on a first and exclusive priority basis (which basis shall
not imply any additional obligations of Seller other than as
expressly set out in this Agreement), and Buyer agrees to purchase,
pay for and accept delivery of, the Contractual Tonnage of
Concentrates in each Contract Year. Except as otherwise provided in
this Agreement, the Contractual Tonnage shall be produced from
Seller's mines in the Contract Area from time to time.
For purposes of determining the Contractual Tonnage for
each Contract Year of the term of this Agreement, Seller and Buyer
recognize that certain preliminary steps must be taken to
facilitate such determination and, accordingly, each of Buyer and
Seller shall fully cooperate to assure that such steps are properly
taken and shall provide all notices, information and documents
called for in this Agreement (including but not limited to the
provision of the information necessary to give meaning to the
relevant defined terms including Annual Budgeted Copper Grade,
Rolling Five Year Concentrates Requirements Forecast, One Year in
Advance Forecasted Quantity Requirement, Annual Shipping Schedule
Quantity and Contractual Tonnage).
Seller also agrees to sell and deliver, and Buyer
agrees to purchase, pay for and accept delivery of, during the
Initial Inventory Period, a certain quantity of Concentrates which
Buyer shall specify to Seller in writing on or before January 1,
1997. Unless otherwise mutually agreed, such quantity shall not
exceed 30,000 DMT's.
3.2 Process for Determination of Contractual Tonnage
Figure. The steps which Buyer and Seller shall comply with in
order to determine the number of tons of Concentrates which shall
constitute the Contractual Tonnage for each Contract Year are as
follows:
A. The Rolling Five Year Concentrates Requirements Forecast
and the One Year in Advance Forecasted Quantity Requirement.
Utilizing the Annual Budgeted Copper Grade and the Preliminary
Estimated Analysis for copper which are furnished by Seller to
Buyer on or before October 1 of each year in accordance with the
provisions of Section 2.2, Buyer shall prepare and furnish to
Seller on or before November 1 of each year (commencing with
November 1 of the second calendar year preceding the expected
commencement of the first Contract Year) with a Rolling Five Year
Concentrates Requirements Forecast reflecting Buyer's forecast of
the Concentrates requirements of the Project for the production of
copper anode for the five (5) ensuing 12 month periods starting
from the estimated commencement of the first Contract Year (which
shall be changed to five (5) Contract Years immediately following
the occurrence of the Mechanical Completion date). Because the
first twelve month period of the first such Forecast covers a
period of time prior to the commencement of production, no figures
are necessary for such 12 month period.
Based on the information available to Buyer as of the date of
execution of this Agreement, Buyer's preliminary first Rolling Five
Year Concentrates Requirements Forecast is as follows:
ROLLING FIVE YEAR CONCENTRATES REQUIREMENTS FORECAST
MAJOR ASSUMPTIONS:
Assumed Date of Commencement of First Contract Year: December 1, 1998
% Cu in conc/(1) 31.0% Production Rate
% Cu in anode 99.4% 1st year 75.0% of nominal year (2)
Smelter Cu
recovery rate 98.5% 2nd year 90.0% of nominal year
3rd+ year 100.0%
|
FORECAST:
Projected Smelter Concen-
12 Month Furnace Copper Ope. Smelter trates Smelter Cu
Periods Repair Grade Days On-Line Smelted(5) Output(3)
-------- ------------ --------- ------- ------- ---------- ----------
1 Boiler
inspection 31.0%(1) 350 69.0% 498,858 152,326
2 Boiler
inspection 31.0%(4) 350 82.8% 598,629 182,791
3 Minor repair 31.0%(4) 345 92% 655,642 200,200
4 Boiler
inspection 31.0%(4) 350 92% 665,144 203,102
5 Boiler
inspection 31.0%(4) 350 92% 665,144 203,102
|
(1) Means estimated Annual Budgeted Copper Grade
(2) 65% 1st half and 85% 2nd half
(3) Means contained copper in anode, and shall not exceed 205,000 metric tons
(4) Means projected copper grade
(5) For clarification this figure is derived as follows: Smelter Cu output
+ Projected Cu Grade + Smelter Cu Recovery Rate
Each Rolling Five Year Concentrates Requirements Forecast
provided by Buyer shall contain all of the assumptions and
forecasted items recited above, and each such item shall reflect
Buyer's diligent, good faith estimate based on the information
which is available to it at the time such Forecast is issued.
The figure recited in each such Forecast (excluding the above
preliminary Forecast) under the "Concentrates Smelted" column for
the 2nd twelve month period (or Contract Year, whichever is
applicable) shall represent Buyer's best estimate of the quantity
of Concentrates which the Facilities will require during such 12
month period (or Contract Year, whichever is applicable), and shall
constitute and be referred to herein as the "One Year in Advance
Forecasted Quantity Requirement".
B. Annual Shipping Schedule Quantity. On or before November
1 of the calendar year preceding the year in which each Contract
Year begins Buyer shall furnish to Seller written notice of the
Annual Shipping Schedule Quantity which shall be its best estimate
of the total quantity of Concentrates which Buyer requires for the
production of copper anodes during such Contract Year. However,
such Annual Shipping Schedule Quantity may not exceed 105% nor be
less than 90% of the DMT quantity of Concentrates which constituted
the One Year in Advance Forecasted Quantity Requirement for such
Contract Year.
Notwithstanding the above recited limitations on the maximum
percentage variances from the One Year in Advance Forecasted
Quantity Requirement, if the Annual Budgeted Copper Grade provided
by Seller on or before October 1 one month prior to the due date of
Buyer's notice to Seller of the Annual Shipping Schedule Quantity
varies by more than one percent (1%) contained copper from the
projected copper grade which was utilized by Buyer in preparing the
Rolling Five Year Concentrates Requirements Forecast containing the
One Year in Advance Forecasted Quantity Requirement for such
Contract Year (e.g. 31% versus 29.9%), then Buyer may in
calculating such Annual Shipping Schedule Quantity exceed such
maximum percentage variations in order to offset such change in the
estimated copper grade.
C. Contractual Tonnage Declarations. The Contractual Tonnage quantity for each Contract Year shall be that certain quantity of Concentrates declared by Buyer in accordance with the provisions of this Section 3.2 which must be a quantity which is between 90% and 100% of the Annual Shipping Schedule Quantity, except that: (i) with respect to the first six months of the first Contract Year Buyer shall be obligated to purchase a quantity of Concentrates which is between 85% and 110% of the total quantity designated by Buyer for delivery during the first six months of the first Contract Year in Buyer's preliminary monthly shipping schedule under Section 6.2, (ii) with respect to the second six months of the first Contract Year Buyer shall be obligated to purchase a quantity of Concentrates which is between 90% and 110% of the total quantity designated by Buyer for delivery during the second six months of the first Contract Year in Buyer's preliminary monthly shipping schedule under Section 6.2, and (iii) with respect to the second Contract Year the Contractual Tonnage quantity must be a quantity which is between 90% and 105% of the Annual Shipping Schedule Quantity. The Annual Shipping Schedule Quantity shall be subject to adjustment as provided in Section 3.3 to take into account the Inventory Allowance which Buyer may elect to utilize.
With respect to the first Contract Year, such Contractual
Tonnage shall be declared by Buyer not later than 30 days prior to
the beginning of the 12th month of the first Contract Year. With
respect to the second Contract Year such Contractual Tonnage shall
be declared by Buyer no later than 30 days prior to the beginning
of the 10th month of the second Contract Year. With respect to the
third Contract Year such Contractual Tonnage shall be declared by
Buyer no later than the mid-point day of the third Contract Year.
With respect to the fourth Contract Year and each succeeding
Contract Year such Contractual Tonnage shall be declared by Buyer
no later than July 1 within and for the fourth Contract Year and
within and for each succeeding Contract Year.
Notwithstanding anything to the contrary recited in this
Agreement, the Contractual Tonnage for each Contract Year shall be
modified to the extent that the provisions of Section 3.9
(Reduction of Contractual Tonnage due to Reduction in Seller's
Ability to Produce), Section 7.6 (War Risk Premiums) and Articles
15 (Exemption from Liability and Obligation) and 22 (Force Majeure)
become applicable.
D. Contractual Tonnage Cap. Notwithstanding anything to the
contrary recited in this Agreement (except Section 3.7), in no
event shall the Contractual Tonnage of Concentrates for any
Contract Year exceed the quantity of Concentrates required for the
Facilities to produce 205,000 metric tons of copper anodes during
such Contract Year or such proportionately lesser amount in the
case of the third Contract Year, unless otherwise mutually agreed,
and no notice, declaration or forecast provided under this Article
3 (including the Rolling Five Year Concentrates Requirements
Forecast, the One Year in Advance Forecasted Quantity Requirement,
the Annual Shipping Schedule Quantity and the Contractual Tonnage
declaration figures) shall reflect any quantities exceeding such
tonnage cap, unless otherwise mutually agreed.
3.3 Inventory Allowance. In order to assist Buyer in
controlling the levels of supplies of Concentrates in inventory
beginning with the second Contract Year and continuing each
Contract Year thereafter, an Inventory Allowance is established.
Within 30 days following the beginning of the third Contract Year
and within 30 days following the beginning of each Contract Year
thereafter Buyer shall have the right to declare any quantity of
Concentrates between -20,000 DMT's and +30,000 DMT's as the
Inventory Allowance quantity; provided, however, such Inventory
Allowance quantity figure shall be reduced for the third Contract
Year by a fraction thereof the numerator of which is 365 minus the
number of days in such third Contract Year and the denominator of
which is 365. The effect of declaring an Inventory Allowance
quantity is that the Annual Shipping Schedule Quantity for each
year in which such declaration is made shall be automatically
increased or reduced by the quantity of the positive or negative
Inventory Allowance, respectively. Buyer shall submit to Seller at
the time that it submits its Inventory Allowance declaration to
Seller an adjusted annual shipping schedule. The changes to the
shipping schedule resulting from such declaration shall be
allowable notwithstanding any other shipping schedule limitations.
3.4 Buyer's Inability to Receive Concentrates. Buyer shall
use its best efforts to consume or hold in inventory at the
Facilities all quantities of Concentrates which Buyer is obligated
to purchase from Seller hereunder. If, notwithstanding such
efforts, Buyer determines that it will not be able to use or store
at the Facilities the full quantity of Concentrates which it is
obligated to purchase pursuant to this Agreement during a Contract
Year, Buyer shall so notify Seller as early as possible and furnish
Seller with Buyer's best estimate of the quantity of Concentrates
which it will be unable to receive. In such event Buyer and Seller
shall discuss alternative solutions which will minimize adverse
impacts on both parties to the extent feasible. Without in any way
eliminating the possibility of alternative solutions which may be
mutually agreed upon by Buyer and Seller, Buyer and Seller agree to
discuss and implement the following solutions as expeditiously as
possible:
(i) Seller shall temporarily store such Concentrates in its
inventory in Irian Jaya until other measures can be
arranged to the extent such storage is technically and
economically feasible in the good faith opinion of
Seller;
(ii) Seller shall utilize all reasonable efforts to
rearrange its existing shipping schedules with Buyer
and with Seller's other customers (including MMC)
pursuant to the then existing concentrate sales
agreements with such customers, and to reach mutual
agreement with Buyer on an alternative shipping
schedule with respect to such tonnage;
(iii) Buyer shall cause MMC to use its best efforts to
purchase such Concentrates for processing only at its
smelting facilities at Naoshima and/or Onahama through
one or more concentrate sales agreement(s) entered into
between MMC and Buyer, in accordance with terms
mutually agreed upon between Seller and MMC at the time
the sale is made, but which terms shall in any event
generally conform to the terms and conditions then
currently prevailing in the spot market for the sale of
copper concentrates, with Seller making shipping
arrangements and, to the extent that Floor TC's and
RC's would be applicable if such Concentrates were
delivered to the Facilities, such Floor TC's and RC's
will remain payable to Buyer on such quantities of
Concentrates sold to MMC by Buyer. Except as expressly
provided in this subparagraph (iii) and in Section
2.3(c), Buyer shall not, without Seller's prior written
consent, sell or export any Concentrates covered by
this Agreement. Any quantities of Concentrates sold to
MMC in accordance with the provisions of this
subparagraph (iii) shall be credited toward
satisfaction of Buyer's Contractual Tonnage purchase
obligation; and
(iv) Seller shall use its best efforts to sell such Concentrates to third parties on the most favorable terms and conditions for Buyer reasonably obtainable by Seller at the time such sale is entered into. In this situation Seller and Buyer shall consult with each other on a continuous basis regarding concentrate sales opportunities which are available, and Seller shall provide to Buyer such facts as may be reasonably requested by Buyer with respect to the terms and conditions of any contemplated sale which may result in Buyer making a reimbursement payment to Seller in accordance with the following language of this subparagraph (iv), including any offers, counteroffers and/or rejections Seller obtains with respect to such contemplated sales, and shall provide Buyer with a reasonable opportunity to make comments and suggestions on such proposed terms and conditions before concluding any such sale. Seller shall be fully reimbursed by Buyer within 15 days following receipt of Seller's invoice (including appropriate supporting documentation) for any additional costs of such sales on a netback to the discharge port basis (limited to differences in smelting and refining charges, differences in penalty deducts, differences in price participation and differences in payable metals percentages) compared with the sale of Concentrates hereunder had they been delivered to Buyer at the Facilities. Any profits from such sale, calculated on a netback to the discharge port basis, shall be for Seller's account. The Floor TC's and RC's applicable hereunder shall not be applicable to any such sales to third parties. Any quantities of Concentrates sold by Seller to third parties in accordance with the provisions of this subparagraph (iv) shall be credited toward satisfaction of Buyer's Contractual Tonnage purchase obligation.
If such Concentrates have not been taken by Buyer at the
Facilities or at an approved Japanese Port if authorized in
accordance with Section 2.3(c), or sold by Buyer to MMC or by
Seller to a third party following efforts to implement the above
measures (i) through (iv) and Seller requires that such quantity be
shipped, Seller will relocate such Concentrates to a mutually
agreed upon alternative storage site and Buyer will fully reimburse
Seller for all costs and expenses and hold harmless and indemnify
Seller for all liabilities associated with such relocation and
storage of such Concentrates (including but not limited to freight,
insurance and warehousing costs). In addition, Buyer shall pay
Seller interest on the fair market value of such Concentrates
(which shall, for purposes of calculating interest under this
paragraph, be determined on a per ton basis using the purchase
price paid by Buyer hereunder for the shipment to Gresik which
immediately preceded the shipment to alternative storage) beginning
90 days following the end of the Contract Year in which Buyer was
obligated to purchase such Concentrates and ending on the date of
re-shipment from storage in the case of the sale of such
Concentrates to a third party or the date payment is due by Buyer
in all other cases. The rate of interest shall be as set forth in
the following paragraph of this Section 3.4. In the event of such
alternative storage, Seller will continue to use its best efforts
to sell such Concentrates to third parties on the most favorable
terms and conditions reasonably obtainable consistent with
subparagraph (iv) above.
Except for interest on the quantities of Concentrates shipped
to alternative storage which shall be governed by the immediately
preceding paragraph of this Section 3.4, Buyer shall pay Seller
interest on the amount due for any quantity of Concentrates
constituting the Contractual Tonnage which is not shipped to Buyer
or to a third party by December 31 of a Contract Year due to
Buyer's inability to receive Concentrates. Such interest shall be
paid by Buyer when payment is made to Seller for such quantity,
either by Buyer or by a third party purchaser of such Concentrates.
Such interest shall be calculated on a per ton basis for the total
number of tons involved using the purchase price per ton paid by
Buyer hereunder for the final shipment of Concentrates to the
Gresik smelter during the immediately preceding Contract Year.
Such interest shall accrue beginning 90 days from the end of the
Contract Year in which Buyer was obligated to purchase such
Concentrates and ending on the date payment is due. The rate of
interest shall be the published prime commercial lending rate of
The Chase Manhattan Bank (National Association) or its successor
for loans in New York in effect from time to time (such rate to be
adjusted simultaneously with each change in such prime commercial
lending rate) and calculated on the basis of a 365-day year.
Notwithstanding anything to the contrary recited in this
Section 3.4, any quantity of Concentrates which Buyer is obligated
to purchase during any Contract Year which is not shipped to Buyer
at Gresik or contractually committed for shipment to a third party
purchaser in accordance with the provisions of this Section 3.4 by
the end of the third month following the end of such Contract Year
shall be paid for by Buyer in accordance with the payment
provisions of this Agreement and including the interest provided
for in this Article 3, except that (i) the Quotational Period for
Payable Copper, Payable Gold and Payable Silver shall be the fourth
month following the end of such Contract Year, (ii) the provisional
invoice for such quantity may be issued by Seller at any time after
the end of such third month following the end of such Contract Year
with provisional payment due on the fifth Business Day following
receipt, and (iii) the final invoice for such quantity may be
issued by Seller at any time after the end of the fourth month
following the end of such Contract Year with final payment due on
the second Business Day following receipt. Passage of title and
risk of loss with respect to such quantity of Concentrates shall
occur upon payment by Buyer of Seller's provisional invoice. To
evidence that title has passed to Buyer Seller shall furnish to
Buyer at the same time that it submits its provisional invoice a
holding certificate in a form which is mutually agreed upon by the
parties. Such holding certificate shall be in lieu of a bill of
lading.
3.5 Seller's Inability to Deliver Concentrates. In the
event Seller is unable to deliver Concentrates in a timely manner
in accordance with Buyer's shipping schedule, Seller shall so
notify Buyer as early as possible and furnish Buyer with Seller's
best estimate of the quantity of which it will be unable to deliver
in a timely manner. In such event Buyer and Seller shall discuss
alternative solutions which will minimize adverse impacts on both
parties to the extent feasible. Without in any way eliminating the
possibility of alternative solutions which may be mutually agreed
upon by Buyer and Seller, if Seller is unable to deliver the
Contractual Tonnage in a timely manner for any Contract Year and a
mutually agreeable solution is not timely found to alleviate such
failure by Seller, Buyer shall have the right to purchase from
third parties on the most favorable terms and conditions for Buyer
reasonably obtainable at the time such sale is entered into a
quantity of Concentrates as close as practicable to the quantity
which Seller is unable to deliver in a timely manner in accordance
with Buyer's shipping schedule established under Article 6. In
this situation Seller and Buyer shall consult with each other on a
continuous basis regarding concentrate purchase opportunities which
are available, and Buyer shall provide to Seller such facts as may
be reasonably requested by Seller with respect to the terms and
conditions of any contemplated purchase and the offers,
counteroffers and/or rejections Buyer obtains, and shall provide
Seller with a reasonable opportunity to make comments and
suggestions on the proposed terms and conditions before concluding
such purchase. Buyer shall be fully reimbursed by Seller within 15
days following receipt of Buyer's invoice (including appropriate
supporting documentation) for any additional costs of such
purchases on a netback to the Port of Discharge basis (limited to
differences in smelting and refining charges, differences in
penalty deducts, differences in price participation and differences
in payable metals percentages) compared with the purchase of
Concentrates hereunder had they been delivered at the Facilities.
Any profits from such purchase, calculated on a netback to the
discharge port basis, shall be for Buyer's account. Subject to
Section 3.9 or unless Seller has failed to act in good faith in the
discharge of its obligation to comply with Buyer's shipping
schedule established under Article 6, Buyer's rights as described
above in this Section 3.5 shall be Buyer's exclusive remedy (but
without limiting Buyer's rights under Section 22.2(c)) for any
failure by Seller to deliver the Contractual Tonnage. Any
quantities of copper concentrates purchased by Buyer from third
parties in accordance with the provisions of this Section 3.5 shall
be credited toward satisfaction of Seller's Contractual Tonnage
sales obligation.
3.6 Additional Quantities. Upon mutual agreement of Buyer
and Seller, Seller may sell and deliver, and Buyer may purchase,
pay for and accept delivery of quantities of Concentrates in excess
of the Contractual Tonnage during any Contract Year(s) on terms and
conditions to be established at the time of such agreement.
3.7 Contract Year to Contract Year Adjustments.
Notwithstanding Section 3.2.D, Seller shall have the right to ship
quantities of Concentrates in excess of or less than the
Contractual Tonnage in order to avoid shipments of less than a full
cargo or because of vessel availability at the end of each Contract
Year.
(a) Advance Shipment. Each Contract Year Seller may
request, and Buyer shall not unreasonably deny Seller's request, to
ship up to 25,000 DMT's in excess of the Contractual Tonnage during
the final month of such Contract Year, in which event the price for
such tonnage in excess of the Contractual Tonnage shall be
determined based on the commercial terms in effect for the
subsequent Contract Year as if shipped out from the Port of Loading
on the first working day of the subsequent Contract Year and
assuming a Date of Arrival six days thereafter for payment and
Quotational Period purposes. Such excess tonnage shall be regarded
as part of the Contractual Tonnage for the subsequent Contract Year
(if there is no succeeding Contract Year, all payment and other
terms and conditions applicable to shipments in such Contract Year
shall be applicable to such excess tonnage); provided, however, if
the weight of the final shipment of Concentrates in any Contract
Year causes the total delivery weight of Concentrates in such
Contract Year to be in excess of the Contractual Tonnage for such
Contract Year by less than 10% of the weight of such final
shipment, such excess tonnage shall be regarded as Contractual
Tonnage for such Contract Year and all payment and other terms and
conditions applicable to shipments in such Contract Year shall be
applicable to such excess tonnage.
(b) Delayed Shipment. If the Contractual Tonnage
for a Contract Year is not delivered by the end of such Contract
Year, Seller may request, and Buyer shall not unreasonably deny
such request (provided that any such denial shall be deemed to be
reasonable if Buyer has made arrangements to purchase substitute
concentrates from a third party or third parties in accordance with
Section 3.5), to ship such delayed tonnage to Buyer in the first
shipment of the succeeding Contract Year or as soon thereafter as
is practicable. Such delayed tonnage shall be regarded as part of
the Contractual Tonnage of the preceding Contract Year and all
terms and conditions of the preceding Contract Year shall apply to
such tonnage. In no event shall such delayed tonnage in respect of
any Contract Year be more than 25,000 DMT's.
3.8 Seller's Qualified Right to Vary Quantity for Remainder
of Year. If due to unexpected operational or production problems or
conditions which arise during the course of any Contract Year and
which do not constitute an event of Force Majeure, Seller
determines that it requires relief from Buyer as to the delivery of
up to 10% of the remaining undelivered balance of the Contractual
Tonnage for such Contract Year, Seller may reduce the Contractual
Tonnage for such Contract Year by up to 10% of the then undelivered
balance subject to obtaining the prior written approval of Buyer.
3.9 Reduction of Contractual Tonnage due to Reduction of
Seller's Ability to Produce. If at any time during the term of
this Agreement, Seller shall be unable after having used all
reasonable efforts, to produce from its mines and processing
facilities in the Contract Area, the full Contractual Tonnage of
Concentrates provided for in this Agreement as the result of the
depletion of ore reserves, either Seller or Buyer may, after
providing notice to the other party, reduce the annual Contractual
Tonnage of Concentrates to be purchased and sold under this
Agreement to 100% of the annual quantity of Concentrates which
Seller is capable of producing from such mines and processing
facilities, in respect of which Seller grants the first and
exclusive priority to Buyer for the production and delivery of such
Concentrates produced by Seller. The party providing the above
notice shall use its best efforts to provide such notice at least
twenty-four (24) months in advance of the effective date of the
reduction, but in no event may such notice be given less than
twelve (12) months in advance of such effective reduction date.
In the event that the Contractual Tonnage quantity is
reduced pursuant to this Section 3.9 and Seller's capability to
produce a larger quantity hereunder is thereafter restored, Seller
shall notify Buyer in writing of such occurrence, and Buyer and
Seller shall discuss in good faith and shall use all reasonable
efforts to mutually agree on an increase of the then existing
Contractual Tonnage of Concentrates to be sold hereunder. No
retroactive make-up of the quantities of reduced Contractual
Tonnage is implied or intended.
3.10 Adjustments Resulting From Quality-Related Reductions
of the Contractual Tonnage Figure. In the event of any reduction
by Buyer of the Contractual Tonnage in accordance with the
provisions of Section 2.3, unless otherwise mutually agreed
pursuant to Section 3.11, Buyer and Seller will continue to provide
the notices and implement the procedures provided for in this
Article 3 to determine the Rolling Five Year Concentrates
Requirements Forecast, the One Year in Advance Forecasted Quantity
Requirement, the Annual Shipping Schedule Quantity, the Contractual
Tonnage and any other relevant terms. Such figures shall be
provided during each Contract Year when such reductions are in
effect in a form which reflects the quantity information without
any reduction and also with the reduction. The difference between
the two quantities shall constitute Buyer's best, good faith
estimate of the quantity of Concentrates which Buyer will attempt
in good faith to purchase from third parties for such Contract Year
as a result of the reduction instituted by Buyer pursuant to
Section 2.3.
A reduction (or subsequent increase) in the Contractual
Tonnage pursuant to Section 2.3 shall automatically result in a
corresponding proportionate reduction (or increase) of the
Contractual Tonnage cap provided for in Section 3.2 D.
3.11 Simplification of Determination of Contractual Tonnage
Figure in the Event of Reduction of Contractual Tonnage. Buyer and
Seller acknowledge that the determination of the Contractual
Tonnage figure for each Contract Year under this Agreement is
complex due to the nature of the agreement which was originally
contemplated between Buyer and Seller, namely a full requirements-
type of concentrate purchase and sales agreement with respect to
the Project. In the event of a reduction in the Contractual
Tonnage in accordance with the provisions of Section 2.3 or Section
3.9, upon the written request of either party, Buyer and Seller
will use their best efforts to agree upon a simplified procedure to
determine the Contractual Tonnage figure which is fair and
reasonable to both parties for each Contract Year following the
institution of such reduction. In the event of a reduction of the
Part A Tonnage under Section 9.1, the provisions of Section
9.1(iii) shall govern.
ARTICLE 4
Term and Termination
4.1 Term of Agreement; Conditions Precedent. Except as
otherwise provided herein, this Agreement shall be valid and
effective as of the Effective Date and shall continue in full force
and effect so long thereafter as Seller's mining and milling
facilities are producing at an annual rate sufficient to produce
one hundred percent (100%) of the copper concentrates required for
the Project in respect of which Seller has granted the first and
exclusive priority to Buyer for the delivery of such Concentrates
produced by Seller; provided, however, that at such time as
Seller's mining and milling facilities are no longer producing one
hundred percent (100%) of the copper concentrates required for the
Project, this Agreement shall nevertheless remain in full force and
effect for the duration of Seller's Contract of Work (including any
extensions or renewals thereof) as to such lesser quantities of
Concentrates which Seller does produce and which Buyer requires for
the operation of the Project in respect of which Seller has granted
the first and exclusive priority to Buyer for the delivery of such
lesser quantities of Concentrates produced by Seller. Seller
agrees to provide Buyer with as much advance notice of the date of
termination or reduced quantity as is reasonably practicable
(without diminishing the applicable notice requirements expressly
provided in this Agreement).
Notwithstanding the passage of the Effective Date,
Buyer's duty to purchase and Seller's obligation to sell the
Concentrates as set forth herein shall not accrue and become
binding until each of the following conditions precedent are
fulfilled:
(a) The occurrence of Mechanical Completion of the
Facilities;
(b) Signature by all parties to all Major Contracts;
and
(c) Receipt by each of Buyer and Seller of all
Government licenses and authorizations necessary to perform its
respective material obligations hereunder.
Notwithstanding the foregoing, lack of satisfaction of
all of the foregoing conditions shall not relieve either Buyer or
Seller of any of their respective obligations set forth in this
Agreement which are to be performed prior to the date when such
conditions are satisfied.
4.2 Termination Prior to Mechanical Completion Due to Delay
or Inactivity. Either party may terminate this Agreement on 90
days prior written notice, if construction of the Facilities is not
commenced prior to December 31, 1996, or thereafter if the
Facilities are no longer under active construction for any period
of 90 consecutive days unless extended by mutual agreement of Buyer
and Seller; it being understood that such extensions will be
provided to the extent reasonably necessary to permit Buyer's
lenders to exercise any cure rights they may have under the Major
Contracts, provided that, without Seller's approval, such
extensions shall not delay termination for more than six (6)
months. In the event this Agreement is terminated pursuant to this
Section 4.2, neither party shall have any liability or obligation
whatsoever to the other party arising out of such termination,
except that if Buyer terminates this Agreement pursuant to this
Section 4.2 after Buyer has committed to purchase certain
quantities of Concentrates hereunder, then Seller shall be
authorized to sell such Concentrates in accordance with the same
terms and conditions as set forth in subparagraph (iv) of Section
3.4.
ARTICLE 5
Delivery of Concentrates
5.1 Delivery CIF Port of Discharge. Seller shall deliver
each shipment of Concentrates CIF Port of Discharge in lots of
approximately 5,000 - 25,000 WMT's as determined by Seller, unless
otherwise mutually agreed, by vessels which are either bulk
carriers or hopper barges carried aboard special purpose vessels
(SPV's) (collectively "vessels").
5.2 Discharging Berth. Buyer's dedicated discharging berth
shall be capable of discharging vessels with a maximum LOA of 193
meters, a maximum beam of 30 meters, a maximum draft of 9.7 meters
and a maximum air draft of 15 meters. Seller shall ship
Concentrates to Buyer in vessels which are within the
characteristics of Buyer's dedicated berth as described above.
Buyer shall designate one (1) safe discharging berth which is
suitable for vessels to discharge always afloat and Buyer shall be
responsible for all arrangements (including, without limitation,
the nomination of stevedores) and expenses (including without
limitation, stevedoring expenses) for discharging each cargo
shipped hereunder. Vessels which either discharge or load their
cargo at their berth shall be discharged in turn with Buyer having
the sole discretion to determine which of such vessels shall be
given preference, provided that Buyer will cooperate with Seller in
its efforts to comply with Buyer's shipping schedule.
5.3 Rate of Discharge.
(a) Buyer shall discharge each cargo from bulk carriers at
an average rate of 3,500 WMT's per weather working day of 24
consecutive hours, excluding Sundays, legal holidays, and customary
local and smelter holidays unless: (i) the bulk carrier is worked
on such days in which event actual time used shall count as lay
time used, or (ii) the bulk carrier is already on demurrage.
(b) Buyer shall discharge the total cargo contained in four
(4) hopper barges in a period not to exceed six (6) days from the
time the SPV tenders Notice of Readiness. Seller shall be
responsible to shift the hopper barges from the fleeting area to
Buyer's berth. Time lost in moving hopper barges from fleeting
area to berth and from berth to fleeting area shall not count as
lay time used. The above recited rate of discharge for hopper
barges may be reviewed upon the request of either party after one
(1) year from the first shipment and, if such a review is conducted
and the actual discharging rate differs substantially from 350
WMT's per hour, Buyer and Seller shall discuss and agree on an
appropriate increase or decrease in the discharging rate.
5.4 Notice of Readiness. Notice of Readiness to discharge
("Notice of Readiness") shall be tendered to Buyer or Buyer's
nominated agent at the Port of Discharge at any time during Normal
Office Hours, whether in berth or not, provided the vessel is in
free pratique and is in all respects ready to discharge. In the
case of hopper barges aboard the SPV's, Notice of Readiness shall
be tendered at any time during Normal Office Hours, provided the
hopper barges have been unloaded from the SPV's and are in the
fleeting area.
5.5 Lay Time. Lay time for vessels at Port of Discharge or
alternate port shall commence:
(i) at 1:00 p.m. the same working day if Notice of
Readiness is tendered during Normal Office
Hours before 12:00 noon, unless discharge of
cargo is sooner commenced, in which event the
time actually used shall count as lay time
used; and
(ii) at 8:00 a.m. the next working day, if Notice of
Readiness is tendered during Normal Office
Hours at or after 12:00 noon, unless discharge
of cargo is sooner commenced, in which event
the time actually used shall count as lay time used.
The bill of lading weight in wet metric tons shall be
used when calculating time allowable for discharge of vessels.
Time lost in waiting for a berth or at the request of
the relevant port authority, moving on or off a berth or from one
berth to another shall count as lay time used. However, if such
request is due to any reason whatsoever attributable to the vessel,
time lost in moving on or off a berth or from one berth to another
shall not count as lay time used.
Any time lost in discharging due to repairing a
vessel's equipment or by the fault of the vessel, its owner, master
or their agents shall not count as lay time used.
Each bulk carrier shall have all necessary onboard
lights for night discharging and the bulk carrier's crews shall
open and close hatches and remove and replace beams at the bulk
carrier's risk and expense, and the time used for such purpose
shall not count as lay time used at the Port of Discharge;
provided, however, if the custom of the port does not permit the
bulk carrier's crew to open and close hatches and remove and
replace any beams, then such activities shall be performed by shore
labor for Buyer's account, and time used for such purpose shall not
count as lay time used. Buyer shall open and close hatches on each
hopper barge at Buyer's risk and expense and the time used for such
purpose shall count as lay time used at the Port of Discharge.
To alleviate any additional costs which Buyer may incur
in opening and closing hatches and performing any other services
related to the handling of hopper barges including tugs needed to
move the barges (after the first movement) to and from the fleeting
area, Seller shall pay Buyer a "Hopper Barge Service Fee" of $0.25
per WMT. The amount of this Service Fee may be reviewed at the
request of either party after one (1) year from the first shipment.
If the documented actual cost of opening and closing hatches and
performing any other services specifically related to the normal
handling of hopper barges including tugs needed to move the barges
to and from the fleeting area varies substantially from $0.25 per
WMT, Buyer and Seller shall discuss and agree on an appropriate
increase or decrease in the Hopper Barge Service Fee.
5.6 Demurrage and Dispatch.
(a) Bulk Carriers. With respect to any cargo which
is not discharged from a bulk carrier within the allowed lay time,
demurrage shall be payable by Buyer to Seller as per the applicable
charter party or other ocean shipping arrangement, subject to a
maximum of $7,500, calculated per running day of 24 hours
(fractions pro rata). Seller shall pay Buyer dispatch money for
lay time saved at the Port of Discharge as per the applicable
charter party or other ocean shipping arrangement, subject to a
maximum of $3,750, calculated per running day of 24 hours
(fractions pro rata).
(b) Hopper Barges. With respect to any cargo which
is not discharged from the hopper barges within the allowed lay
time, demurrage shall be payable by Buyer to Seller calculated per
running day of 24 hours (fractions pro rata) at $0.50 per WMT based
on the total bill of lading weight for each four barge shipment for
the seventh and eighth day after tender of the Notice of Readiness.
If the delay extends beyond the eighth day, then beginning on the
ninth day demurrage shall be payable by Buyer to Seller calculated
per running day of 24 hours (fractions pro rata) at $1.00 per WMT
based on the total bill of lading weight for each four barge
shipment. In the event that Buyer discharges the four barge cargo
in less than six days after the Notice of Readiness, Seller shall
pay Buyer dispatch money for lay time saved at the Port of
Discharge calculated per running day of 24 hours (fractions pro
rata) at $0.25 per WMT based on the total bill of lading weight for
each four barge shipment. The amount of demurrage and dispatch on
hopper barges as recited above may be reviewed at the request of
either party after one (1) year from the first shipment.
(c) Payment. Any payments in respect of demurrage
or dispatch to be made by Buyer or Seller, as the case may be,
pursuant to this Section shall be made promptly after the
presentation of demurrage or dispatch calculations and supporting
shipping documents, such as time sheets and statements of fact.
5.7 Vessel Characteristics.
(a) Bulk Carriers. Bulk carriers will be single
deck ore carriers (no tween deckers), having no shaft tunnels or
center bulkheads in the holds, and with holds sufficiently wide to
be opened for normal grab discharge to avoid abnormal trimming and
Seller shall use all reasonable efforts to assure that Concentrates
are not loaded in spaces which are not accessible for normal grab
discharge; provided that, if Seller uses its best efforts to
charter a bulk carrier having the characteristics described above
but is unable to do so, Seller shall reimburse Buyer for any addi-
tional discharging expense, demurrage incurred, or loss of dispatch
resulting from such bulk carrier having different characteristics.
In no event shall Seller enter into a long term charter party for
a bulk carrier not having the characteristics described above.
Buyer and Seller shall have the right to appoint a mutually
acceptable qualified independent marine surveyor to survey any bulk
carrier at the Port of Discharge in order to determine the extent
to which such bulk carrier may be unsuitable for normal grab
discharging and the amount, if any, of additional discharging
expenses resulting from unsuitability, and such determination shall
be final and binding on the parties hereto. If an independent
marine surveyor is requested to survey any bulk carrier, (i) Seller
shall pay the expenses of the independent marine surveyor if the
independent marine surveyor determines that the bulk carrier is
unsuitable for normal grab discharging and that additional
discharging expenses will be incurred, and (ii) Buyer shall pay the
expenses of the independent marine surveyor if the independent
marine surveyor determines that the bulk carrier is suitable for
normal grab discharging.
(b) Hopper Barges and SPV's. Hopper barges will be
single deck (without tween decks) and with holds sufficiently wide
to be open for normal grab discharge to avoid abnormal trimming.
Four hopper barges will be carried aboard the special purpose
vessel and the total so carried will be considered a single
shipment. Each hopper barge will carry between approximately 1,300
DMT's and 1,500 DMT's of Concentrates for a total shipment of
between approximately 5,200 DMT's and 6,000 DMT's each voyage.
(c) Vessel Requirements of General Applicability.
Such bulk carriers, SPV's and hopper barges shall (i) carry all
necessary certificates which are required to trade within
Indonesian waters, and (ii) comply with all Government regulations,
and, unless otherwise agreed, be classed +100A1 at Lloyds or
equivalent, and shall be no more than 20 years of age (subject to
Seller's compliance with the provisions of Section 7.1 setting
forth Seller's responsibility for the payment of any overage
premium for cargo insurance), and be insurable in the New York,
London, or other internationally recognized insurance market.
Such vessels shall have specifications which conform to
the berth conditions set forth in Section 5.2 of this Agreement,
unless otherwise mutually agreed. Such specifications shall be
automatically updated during the term of this Agreement if Buyer's
dedicated berth at the Port of Discharge is improved so as to be
able to accept larger vessels.
Seller shall not charter or load Concentrates into
vessels from any shipping company as to which, because of its
financial condition, there exists reasonable grounds for insecurity
about the ability of such shipping company to carry out the normal
execution of its shipping obligations.
5.8 Overtime. Any overtime payable for discharging outside
normal working hours shall be paid by the party ordering such
overtime, except that officer's and crew's overtime shall always be
for Seller's account.
5.9 Port Charges. Seller shall hold Buyer free and
harmless from all port charges, harbor dues, pilotage, crew's
expense, light dues, the first movement of hopper barges to and
from the fleeting area, and all other charges and dues customarily
paid by a vessel at any Port of Discharge or alternate port as
provided in Section 5.11.
Port charges associated with second and any subsequent
movement of hopper barges to and from Buyer's dedicated berth shall
be for Buyer's account.
5.10 Title and Risk of Loss. Title and all risks of loss
shall pass to Buyer as cargo progressively crosses the rail of the
vessel at the Port of Loading. Except as provided in Section 7.4
(Insolvency Exclusion Clause) and except for sales made to MMC or
to third parties as provided in Section 3.4 (Buyer's Inability to
Receive Concentrates), Buyer agrees that throughout the term of
this Agreement Buyer shall be absolutely and unconditionally
committed to purchase, pay for and accept delivery of, all
Concentrates as to which title and risk of loss have passed to
Buyer. This provision is not intended to affect Buyer's
Contractual Tonnage purchase obligation.
5.11 Alternate Port. If the discharge of a cargo of
Concentrates at the Port of Discharge is affected by a strike or
walk-out or by damage, whether from natural or other causes, to
such Port of Discharge and the same has not been settled or
repaired within 48 hours, Buyer shall notify Seller within 12 hours
after the expiration of such 48 hour period, as to whether Buyer
desires that (i) such vessel wait until such strike or walk-out is
at an end or such damage is repaired, or (ii) such vessel proceed
to an alternate safe port where it can safely unload the
Concentrates. Promptly upon receipt of such notice from Buyer,
Seller shall direct the vessel to comply with Buyer's notice
provided that the Master of the vessel judges such port to be safe.
If the vessel proceeds to wait at the Port of Discharge and
discharging is delayed beyond the expiration of lay time, demurrage
shall be payable by Buyer to Seller at one-half the rate specified
in Section 5.6. If the vessel proceeds to an alternate safe port,
there shall be no additional freight charge payable by Buyer unless
the distance between the original Port of Discharge and the
alternate port exceeds 100 nautical miles, in which event the
additional freight in respect of the distance in excess of 100
nautical miles shall be payable by Buyer.
5.12 Stevedore Damages. Damages caused by stevedores
nominated and/or appointed by Buyer shall be settled directly
between the stevedores and the vessel owners; provided, however,
Buyer shall remain financially responsible for such damages in the
event the stevedores and the vessel owners fail to reach an
agreement or the stevedores fail for any other reason to pay the
vessel owner for such damages.
5.13 Jetty Damages. Damages to the jetty caused by vessels
chartered by Seller shall be settled directly between Buyer and the
vessel owner; provided, however, Seller shall remain financially
responsible for such damage in the event Buyer and the vessel owner
fail to reach an agreement or the vessel owner fails for any other
reason to pay Buyer for such damages.
5.14 Use of Bulk Carrier's Discharging Gear. Seller shall
have the right in its discretion to furnish bulk carriers (i)
having discharging gear on board or (ii) having no discharging gear
on board; provided, however, that such bulk carrier's discharging
gear shall not hinder discharging operations by Buyer's shore
cranes. Notwithstanding the above, should the bulk carrier's on
board discharging gear hinder discharging operations, then Section
5.7(a) shall apply. In the event that Buyer desires to utilize the
bulk carrier's discharging gear for discharging any cargo, Seller
shall use its best efforts to obtain the ship owner's consent for
such use. Buyer shall hold Seller harmless from all charges for or
in connection with each cargo or portion thereof of Concentrates so
discharged.
ARTICLE 6
Scheduling and Shipments
6.1 Initial Inventory Period. On or before November 1 of the calendar year preceding the year in which Mechanical Completion is expected to occur, Buyer and Seller shall mutually agree upon the schedule of shipments of the quantities of Concentrates specified in Section 3.1 which are to be shipped during the Initial Inventory Period. Revisions to the schedule of shipments for the Initial Inventory Period shall be as mutually agreed upon by the parties.
6.2 First Contract Year. Buyer shall provide to Seller on
or before November 1 of the calendar year preceding the year in
which the first Contract Year is expected to begin, a preliminary
monthly shipping schedule for the first Contract Year based on
Buyer's then current projections for such period. The sum of the
quantities reflected for all 12 months in such preliminary monthly
shipping schedule for the first Contract Year shall not exceed the
Annual Shipping Schedule Quantity for such Contract Year.
With respect to the first six months of the first
Contract Year, at least 60 days prior to the beginning of each
month Buyer shall advise Seller in writing of its anticipated
quantity requirements for such month. For the first six month
period of the first Contract Year Buyer may change its monthly
quantity requirements without any limit in the percentage change
from one month to the next; provided, however, at least 30 days
prior to the beginning of each month during the first six months of
the first Contract Year Buyer shall furnish to Seller its final
written declaration of its quantity requirements for such month.
The month identified in such final written declaration for the
shipment of particular cargoes shall be considered to be the Month
of Scheduled Shipment with respect to such cargoes. In addition,
the quantity recited in each such final declaration shall
constitute the quantity of Concentrates which Buyer is obligated to
purchase and which Seller is obligated to deliver during such
monthly period.
With respect to the second six months of the first
Contract Year, at least 90 days prior to the beginning of each
month Buyer shall advise Seller in writing of its anticipated
requirements for such month. In providing such notice of
anticipated requirements, Buyer shall limit the quantity variation
for each such month so that it does not exceed plus 25% or minus
50% of the quantity which is set out with respect to the same month
in the shipping schedule which Buyer furnishes to Seller on or
before November 1 pursuant to the first paragraph of this Section
6.2. At least 60 days prior to the beginning of each month during
the second six months of the first Contract Year Buyer shall
furnish to Seller its final written declaration of its quantity
requirements for such month so long as such declaration is within
the variances specified above. The month identified in such final
written declaration for the shipment of particular cargoes shall be
considered to be the Month of Scheduled Shipment with respect to
such cargoes. In addition, the quantity recited in each such final
declaration shall constitute the quantity of Concentrates which
Buyer is obligated to purchase and which Seller is obligated to
deliver during such monthly period.
6.3 Second Contract Year. Buyer shall provide to Seller on
or before November 1 of the calendar year preceding the year in
which the second Contract Year begins, a preliminary monthly
shipping schedule for the second Contract Year based on Buyer's
then current projections for such period. The sum of the quantities
reflected for all 12 months in such preliminary monthly shipping
schedule for the second Contract Year shall not exceed the Annual
Shipping Schedule Quantity for such Contract Year.
At least 30 days prior to the beginning of each
consecutive three month period of the second Contract Year, Buyer
shall furnish to Seller in writing the final declaration of its
quantity requirements for each of such three calendar months. In
providing such final declaration, Buyer shall limit the quantity
variation for each such month so that it does not exceed plus 25%
or minus 50% of the quantity which is set out with respect to the
same month in the shipping schedule which Buyer furnishes to Seller
on or before November 1 pursuant to the first paragraph of this
Section 6.3, and Buyer shall limit the quantity variation for each
three month period so that it does not exceed plus 10% or minus 25%
of the quantity which is set out with respect to the same three-
month period in the shipping schedule which Buyer furnishes to
Seller on or before November 1 pursuant to the first paragraph of
this Section 6.3. The month identified in such final written
declaration for the shipment of particular cargoes shall be
considered to be the Month of Scheduled Shipment with respect to
such cargoes. In addition, the quantity recited in each such final
declaration shall constitute the quantity of Concentrates which
Buyer is obligated to purchase and which Seller is obligated to
deliver during such three month period.
6.4 Third Contract Year. Buyer shall, if requested by
Seller, provide to Seller on or before November 1 of the calendar
year preceding the year in which the third Contract Year begins, a
preliminary monthly shipping schedule for the third Contract Year
based on Buyer's then current projections for such period. The sum
of the quantities reflected for all months in such preliminary
monthly shipping schedule for the third Contract Year shall not
exceed the Annual Shipping Schedule Quantity for such Contract
Year; provided, however, Buyer will issue an adjusted monthly
shipping schedule in such Contract Year if it elects to exercise
its rights to an Inventory Allowance in accordance with the
provisions of Section 3.3.
At least 30 days prior to the beginning of each
consecutive three-month period (except in the case of the final
period which may be less than three months) of the third Contract
Year, Buyer shall furnish to Seller in writing the final
declaration of its quantity requirements for each of such three
calendar months (which in the case of the final period shall be
reduced to whatever lesser period remains in the third Contract
Year). In providing such final declaration, Buyer shall limit the
quantity variation for each such month so that it does not exceed
plus 25% or minus 25% of the quantity which is set out with respect
to the same month in the shipping schedule which Buyer furnishes to
Seller on or before November 1 pursuant to the first paragraph of
this Section 6.4, and Buyer shall limit the quantity variation for
each three-month period so that it does not exceed plus 10% or
minus 25% of the quantity which is set out with respect to the same
three-month or lesser period in such shipping schedule which Buyer
furnishes to Seller on or before November 1 pursuant to the first
paragraph of this Section 6.4. The month identified in such final
written declaration for the shipment of particular cargoes shall be
considered to be the Month of Scheduled Shipment with respect to
such cargoes. In addition, the quantity recited in each such final
declaration shall constitute the quantity of Concentrates which
Buyer is obligated to purchase and which Seller is obligated to
deliver during such three-month (or lesser) period.
6.5 Fourth and Subsequent Contract Years. Buyer shall, if
requested by Seller, provide to Seller on or before November 1 of
the calendar year preceding the commencement of the fourth and each
subsequent Contract Year a preliminary monthly shipping schedule
for the fourth (or subsequent) Contract Year based on Buyer's then
current projections for such year. The sum of the quantities
reflected for all months in such preliminary monthly shipping
schedule for such Contract Year shall not exceed the Annual
Shipping Schedule Quantity for such Contract Year; provided,
however Buyer may issue an adjusted monthly shipping schedule in
any such Contract Year in which it elects to exercise its rights to
an Inventory Allowance in accordance with the provisions of Section
3.3.
At least 30 days prior to the beginning of each
calendar quarter of such Contract Year, Buyer shall furnish to
Seller in writing the final declaration of its quantity
requirements for each calendar month in such calendar quarter. In
providing such final declaration, Buyer shall limit the quantity
variation for each such month so that it does not exceed plus 25%
or minus 25% of the quantity which is set out with respect to the
same month in the shipping schedule which Buyer furnishes to Seller
on or before November 1 pursuant to the first paragraph of this
Section 6.5, and Buyer shall limit the quantity variation for each
three-month period so that it does not exceed plus 10% or minus 25%
of the quantity which is set out with respect to the same three-
month period in such shipping schedule which Buyer furnishes to
Seller on or before November 1 pursuant to the first paragraph of
this Section 6.5. The month identified in such final written
declaration for the shipment of particular cargoes shall be
considered to be the Month of Scheduled Shipment with respect to
such cargoes. In addition, the quantity recited in each such final
declaration shall constitute the quantity of Concentrates which
Buyer is obligated to purchase and which Seller is obligated to
deliver during such three-month period.
6.6 General. Seller shall deliver each shipment of
Concentrates reflected in the latest shipping schedule provided by
Buyer in accordance with the provisions of this Article 6 during
the month identified in such schedule, provided that Buyer uses all
reasonable efforts to reflect in its shipping schedules the
spreading of shipments as evenly as practicable throughout each
Contract Year of the term of this Agreement taking into account
Buyer's operational requirements. Any failure by Seller to comply
with such schedule shall be governed by the provisions of Section
3.5. Any modifications of shipping schedules not provided for
herein shall be in accordance with the mutual agreement of Buyer
and Seller.
6.7 Buyer's Shipping Instructions and Documentation, Vessel
Information and Further Shipment Confirmation. Each party hereto
shall provide to the other party hereto all shipping instructions
and information, documentation, vessel information, arrival and
departure information, tonnage figures, stowage plans and other
information and papers reasonably requested by such other party to
assure the orderly delivery of all Concentrates which are to be
sold and delivered under this Agreement.
ARTICLE 7
Insurance
Seller shall effect cargo insurance with an internationally reputed insurance company(ies) on the following conditions:
7.1 Insured Value. The insured value shall be 110% (one
hundred ten percent) of the value of the Concentrates as per the
invoice for the provisional payment, subject to adjustment to the
final value, as determined in accordance with this Agreement.
In the event that Seller's insurance company shall at
any time charge an overage premium on vessels which are over 15
years of age, Seller shall bear and pay the full amount of such
overage premium without any obligation on the part of Buyer to
reimburse Seller for any portion of such premium.
7.2 Insurance Coverage. The insurance shall designate
Buyer or the collateral trustee or agent acting for the Project
lenders who is designated by Buyer, as the loss payee(s). Such
coverage shall be valid from the time when the Concentrates pass
the ship's rail of the carrying vessel at the Port of Loading until
final destination at the receiving smelter's warehouse and shall be
effective under the terms of the Institute Cargo Clause (A) or its
equivalent, average irrespective of percentage, including the risk
of all fire or heating even when caused by inherent vice or
spontaneous combustion, and Institute War Clause and Institute
Strike, Riots and Civil Commotion Clauses or their equivalents.
7.3 Claims. Claims for total or partial loss and/or damage
shall be payable based on the value as per the invoice for the
provisional payment subject to later adjustment to the final value.
Such claims shall also include expenditure directly associated with
the loss (including but not limited to surveyor's fees and salvage
and removal costs), if any, arising from such loss and/or damages.
Any claim shall be payable in Dollars.
7.4 Insolvency Exclusion Clause. The price of any cargo
shipped hereunder shall be reduced to the extent of any loss
reasonably suffered by Buyer in any situation where all or any
portion of a cargo insurance claim submitted by Buyer is denied for
the reason that a shipment has been seized and the cargo sold or
damaged due to the insolvency of the ship owner or carrier and
Seller either knew or should have known that such insolvency might
prevent the normal prosecution of the voyage.
7.5 Seller's Assistance. If any Concentrates are lost or
damaged, Seller shall, upon the request of Buyer, assist in the
recovery of the insurance from the insurers.
7.6 War Risk Premiums. Seller shall bear the full cost of the premiums for war risk insurance up to one percent (1%) of the estimated value of the Concentrates in any shipment. In the event such premiums exceed one percent (1%), Buyer and Seller will each pay one-half (1/2) of the excess cost over one percent (1%), with Seller including the charge for Buyer's one-half (1/2) of such excess premiums on its invoice to Buyer for the affected shipment(s). Notwithstanding the foregoing, Buyer and Seller may discuss and mutually agree on other alternatives such as not carrying war risk on any particular shipment(s) if they mutually agree in writing that the cost of such insurance is excessive.
ARTICLE 8
Price
8.1 Payable Copper. Payable Copper shall mean 96.55% of
the full copper content (as ascertained by assay in accordance with
Article 13) of each DMT of Concentrates, subject to a minimum
deduction of 1.05 units for the first five Contract Years. The
definition of this term shall be reviewed prior to the end of the
fifth Contract Year hereunder, and every five years thereafter in
accordance with the provisions of Article 10.
8.2 Payable Gold. Payable Gold shall mean 97.0% of the
full gold content (as ascertained by assay in accordance with
Article 13) of each DMT of Concentrates. The definition of this
term shall be reviewed prior to the end of the fifth Contract Year
hereunder, and every five years thereafter in accordance with the
provisions of Article 10.
8.3 Payable Silver. Payable Silver shall mean (i) 90% of
the full silver content (as ascertained by assay in accordance with
the provisions of Article 13) of each DMT of Concentrates if the
full silver content is greater than or equal to 30 grams per DMT of
Concentrates, subject to a minimum deduction of 15 grams; and (ii)
zero percentage (i.e. no payment) if such full silver content of
each DMT of Concentrates is less than 30 grams. The definition of
this term shall be reviewed prior to the end of the fifth Contract
Year hereunder, and every five years thereafter in accordance with
the provisions of Article 10.
8.4 Quotational Period. Quotational Period shall mean,
with respect to Payable Copper in any portion of any shipment, the
third calendar month following the month in which the Date of
Arrival occurs, and with respect to Payable Gold and Payable Silver
in any portion of any shipment, the Month of Scheduled Shipment.
8.5 Determination of Price. The price of each shipment of
Concentrates sold hereunder shall be an amount equal to the sum of
the following payments less the sum of the deductions set forth in
Article 9.
8.6 Copper Price. Buyer shall pay for the Payable Copper
in Concentrates sold hereunder at a price equal to the daily
official London Metal Exchange Grade A Settlement price (the "LME
Copper - Grade A Settlement Price") quoted in Dollars, as published
in "Platt's Metals Week" and averaged over the applicable
Quotational Period.
8.7 Gold Price. Buyer shall pay for the Payable Gold in
Concentrates sold hereunder at a price equal to the daily average
of the London free bullion market "Initial" and "Final" quotations
for gold (the "London Gold Price") quoted in Dollars, as published
in "Platt's Metals Week" and averaged over the applicable
Quotational Period.
8.8 Silver Price. Buyer shall pay for the Payable Silver
in Concentrates sold hereunder at a price equal to the daily London
bullion brokers spot price for silver quoted in Dollars, as
published in "Platt's Metals Week" and averaged over the applicable
Quotational Period.
8.9 Conversion to Dollars. The prices of copper, gold and
silver, if quoted in any currency other than Dollars by "Platt's
Metals Week" (or any other publication substituted for "Platt's
Metals Week" by mutual agreement of Seller and Buyer), shall be
converted daily during any applicable Quotational Period into
Dollars by using the noon buying rate for the applicable currency
for cable transfers as certified by the Federal Reserve Bank of New
York for customs purposes. The average price for any such
Quotational Period shall be calculated by totaling the Dollar
equivalence of the daily prices during such period and dividing
such total by the number of pricing days in such period.
8.10 Alternate Pricing.
(a) Pricing Basis No Longer Published or No Longer
Representative. In the event that (i) "Platt's Metals Week" ceases
to be published, or ceases to publish any quotation specified in
this Article 8 for determining the prices for copper, gold or
silver, or publishes and does not later correct an erroneous
quotation for copper, gold or silver, of a value then being
obtained for copper, gold or silver (as applicable), or (ii) it is
the reasonable belief of Buyer or Seller that the quotations are no
longer representative of the fair market values then being obtained
by non-integrated mines for copper, gold and silver contained in
copper concentrates, then, upon written notice by Seller or Buyer
to the other, the parties shall promptly confer and agree on a new
pricing basis for the Payable Copper, Payable Gold or Payable
Silver in the Concentrates to be sold hereunder.
(b) Interim Invoicing. If Seller or Buyer shall
give notice as provided in Section 8.10(a), Seller shall have the
right by written notice to Buyer to invoice provisionally at the
"Interim Price" (as hereinafter determined) and Buyer shall
thereafter pay, on the basis of the Interim Price until (i) Seller
and Buyer shall reach agreement with respect to a new pricing basis
for the metal concerned or (ii) a referee's decision shall have
been made as hereinafter provided, whichever shall first occur.
The Interim Price shall be the applicable price(s) applied to the
last previous shipment sold hereunder prior to such written notice.
(c) Referral to Referees. In the event that
within 60 days after the date of any notice pursuant to this
Section 8.10, Seller and Buyer shall not reach agreement regarding
an appropriate basis for the fair market value of the copper, gold
and/or silver content of the Concentrates to be sold hereunder,
either Seller or Buyer shall have the right to refer the matter to
the referee(s) as provided in Article 19 for the sole purpose of
determining such basis or reference method.
ARTICLE 9
Deductions for Smelting and Refining Charges and for Impurities
9.1 Smelting and Refining Charges for Part A Tonnage.
Subject to the provisions of Section 9.3 (Floor TC's and RC's) of
this Agreement, the smelting and refining charge(s) applicable to
Part A Tonnage in each cargo of Concentrates delivered hereunder
shall be determined as follows:
(i) Initial Negotiation. During the period January
1, 1998 through March 31, 1998 (or earlier with the approval of
both parties) Seller and Buyer shall conduct negotiations in good
faith for the purpose of reaching agreement by no later than March
31, 1998 on the following matters:
(a) A percentage of the Payable Copper price
determined pursuant to Article 8, the applicable price range for
such percentage and the associated (price participation) formula
for smelting and refining charges for the Payable Copper price
which is outside of such designated price range (or alternatively
two or more different percentages of such Payable Copper price with
a corresponding range of prices which are applicable to each such
percentage) for each cargo of Concentrate sold hereunder during the
period commencing with the first delivery of Concentrates hereunder
and continuing through December 31, 2003, which shall constitute a
combined smelting and refining charge for Part A Tonnage for such
period; and
(b) Whether or not gold and silver refining
charges will be applicable to Part A tonnage, and the amount (if
any) of such charges applicable for the same period specified in
(a) above, all based on the generally prevailing market for price
sharing type contracts.
Notwithstanding the above, each of Buyer and Seller
shall have the right and option at any time within the 18 month
period preceding the deadline date for reaching a negotiated
agreement on such Part A Tonnage charges, to obtain from a third
party and submit a copy thereof to the other party hereto a written
competitive offer(s) satisfying the following criteria: (1) in the
case of Buyer, a bona fide offer to sell and deliver copper
concentrates to the Gresik smelter or, in the case of Seller, a
bona fide offer to purchase from Seller copper concentrates
produced from Seller's mines and processing facilities in
Indonesia, (2) having a term or duration of five (5) years or more,
(3) having commercial smelting and refining terms based on a price
sharing formula and not having other commercial terms and
conditions which have the effect of distorting the level of such
smelting and refining charges (such as inadequate price adjustments
and penalties to appropriately reflect variances in concentrate
quality, or exceptionally high or low percentages of payable
metals), and (4) the party tendering such offer may not be an
Affiliate of the party hereto which is receiving the offer or have
any financial linkages to the party hereto receiving such offer
which could affect the commercial terms offered. The sum of the
tonnage represented by the competitive offers shall be a quantity
which is greater than or equal to 100,000 DMT's per year (i.e. the
average annual quantity during the first five years covered by such
offer) with no single offer representing less than 50,000 DMT's per
year (based on the same calculation of the average annual
quantity). Unless the parties otherwise agree, if more than one
offer is submitted by a party hereto and the terms offered in such
offers are not identical to each other, the submitting party must
assure that they are structured in a manner whereby a combined
weighted average of the smelting and refining charge terms can be
readily calculated from the face of such offers.
The party hereto which is the recipient of a
competitive offer(s) submitted to it by the other party hereto in
accordance with the preceding paragraph shall have a period of
three (3) months following its receipt of such offer(s) to decide
whether to accept the smelting and refining charges reflected in
such offer(s) as a whole (which shall be the combined weighted
average thereof if more than one competitive offer has been
submitted) or to reject such charges as a whole. The failure of the
party receiving such offer(s) to agree to the charges contained in
such offer(s) as a whole within such three (3) month period of time
shall constitute a rejection of such charges.
During the period when such offer(s) is (are) under
consideration, Buyer and Seller may by mutual agreement have
discussions to determine whether a compromise is feasible on such
smelting and refining charges for the Part A Tonnage (i.e. whether
a solution other than the acceptance of the offered charges is
feasible), but neither party shall be obligated to compromise. In
the event that the party to whom such third party offer(s) was
submitted submits its own third party offer(s) to the other party
hereto meeting all of the above described criteria and quantity
requirements within the above described three (3) month evaluation
period and the smelting and refining charges contained in such
subsequent offer(s) is (are) more favorable to the party submitting
such subsequent offer(s), then Buyer and Seller shall immediately
conduct good faith negotiations to resolve the differences between
such offers in an effort to reach agreement upon the smelting and
refining charges which will be applicable from the initial delivery
of Concentrates hereunder through December 31, 2003. If agreement
is not reached as a result of such negotiations by the end of a
period of 3 months following the first submittal of a third party
offer in accordance with this Section 9.1(i) or by the end of such
other period as is mutually agreed upon, Buyer and Seller may by
mutual agreement (but shall not be obligated to) submit such third
party offers or sets of offers to a referee(s) for final
determination in accordance with the provisions of Article 19, and
in such event the referee(s) shall take into account the two (2)
offers or sets of offers which have been submitted and decide the
Part A Tonnage smelting and refining charges which shall be
applicable from the initial delivery of Concentrates hereunder
through December 31, 2003. If there is no mutual agreement
following such negotiation regarding the two (2) third party offers
or sets of offers and if the parties do not decide to have a
referee(s) determine such charges, then the same consequences shall
apply as are set forth in the penultimate (next to last) paragraph
of this Section 9.1(i).
If the recipient of a third party offer(s) submitted to
it by the other party hereto agrees to accept such Part A Tonnage
smelting and refining charges as a whole, if mutual agreement is
reached on such smelting and refining charges, or if the referee
resolves the two (2) offers or sets of offers, then such smelting
and refining charges shall be applicable to all of the Part A
Tonnage commencing with the first delivery of Concentrates
hereunder and continuing through December 31, 2003.
If the recipient of such offer(s) rejects such smelting
and refining charges (either expressly or impliedly), or if Buyer
and Seller shall otherwise fail to agree upon the above specified
smelting and refining charges for Part A Tonnage prior to March 31,
1998, then notwithstanding anything contained in this Agreement to
the contrary, provided that offers (i.e. by Buyer or Seller) or
third party offers (i.e. the third party offers which are
specifically described above) have been submitted in good faith by
both parties, Seller shall be relieved from the obligation to sell
and deliver to Buyer and likewise Buyer shall be relieved from the
obligation to purchase, pay for and accept delivery from Seller of
fifty percent (50%) of the Part A Tonnage, in the case of the
failure of the parties to agree or, in the case of the rejection of
a third party offer(s), a quantity of Concentrates selected by the
party rejecting the smelting and refining charges contained in the
third party offer(s) which shall be equal to either (a) fifty
percent (50%) of the Part A Tonnage, or (b) the annual quantity
represented by the competitive third party offer(s). Either of
such quantity reductions shall be hereinafter referred to as the
"Permanent Holiday Tonnage"; and in either situation the reduction
shall commence on January 1, 1999 and continue for the remainder of
the term of this Agreement. If the rejecting party fails to notify
the party which submitted the offer(s) within thirty (30) days of
its rejection, with respect to its selection of the (a) or (b)
quantity, then (a) shall apply. In the event of such a reduction,
the smelting and refining charges which are applicable to the Part
B Tonnage shall apply to one hundred percent (100%) of the Part A
Tonnage during the period from the first shipment hereunder through
December 31, 1998, and to the portion of the Part A Tonnage which
does not constitute the Permanent Holiday Tonnage from January 1,
1999 through December 31, 2003.
If the smelting and refining charges for Part A Tonnage
for the period from the date of the initial shipment hereunder
through December 31, 2003 are not resolved prior to the time of the
initial shipment hereunder, then any shipments of Concentrates
which are delivered prior to such final resolution shall utilize
the Part B Tonnage smelting and refining charges, and as soon as a
resolution is reached a retroactive adjustment payment shall be
made with respect to all shipments on which a payment is made
between the date of the first shipment hereunder and the date of
the final resolution for the amount of the difference between the
pricing based on the Part B Tonnage smelting and refining charges
and the pricing based on the finally resolved Part A Tonnage
smelting and refining charges.
(ii) Subsequent Negotiations. In the event Buyer and
Seller determine or reach agreement on the smelting and refining
charges for the Part A Tonnage in accordance with Section 9.1(i) as
a result of negotiations, as a result of the acceptance of the
smelting and refining charges contained in a third party offer(s)
or with the referee resolving the differences between two (2) third
party offers or sets of offers, then on or before March 31, 2003
and on or before March 31 of each fifth year thereafter, Buyer and
Seller shall comply with the procedures set forth in Section 9.1
(i) including but not limited to the obligations associated with
the right of each party to submit a third party offer(s) in order
to determine the smelting and refining charges which will be
applicable to the Part A Tonnage for the five (5) Contract Years
commencing on January 1, 2004 with respect to the first such
settlement under this Section 9.1(ii), and with the same timing to
apply to each subsequent five (5) Contract Years, mutatis mutandis.
If as a result of the compliance by Buyer and Seller
with the procedures provided for in the immediately preceding
paragraph of this Section 9.1(ii): (i) Buyer and Seller mutually
agree on the smelting and refining charges which shall be
applicable for the ensuing five (5) Contract Years, (ii) Buyer or
Seller agrees to the smelting and refining charges for such period
contained in a third party offer(s) submitted to it by the other
party hereto, or (iii) the referee resolves the differences between
two (2) offers or sets of offers, all in the manner provided in
Section 9.1(i), then upon the occurrence of any of such events the
smelting and refining charges as so determined shall be applicable
to all Part A Tonnage for the ensuing five (5) Contract Years.
In the event the Part A Tonnage has not previously been
reduced due to the failure of the parties to agree on smelting and
refining charges, and in any subsequent five (5) year negotiation
agreement is not reached utilizing the Section 9.1(i) procedures,
then notwithstanding anything to the contrary recited above in this
Section 9.1(ii) Buyer and Seller shall determine the amount of the
Permanent Holiday Tonnage reduction in accordance with the
procedures set forth in Section 9.1(i), and a Part A Tonnage
reduction equal to such Permanent Holiday Tonnage shall be
effective from the commencement of the applicable ensuing five (5)
Contract Years through the end of the term of this Agreement, and
in such event the smelting and refining charges which are
applicable to the Part B Tonnage for each of the ensuing five (5)
Contract Years shall apply during each of the ensuing five (5)
Contract Years to the portion of the Part A Tonnage which does not
constitute the Permanent Holiday Tonnage.
In the event a Permanent Holiday Tonnage reduction of
Part A Tonnage has occurred, either under Section 9.1(i) or Section
9.1(ii), then notwithstanding anything to the contrary recited in
this Section 9.1(ii), Buyer and Seller shall meet at such times as
may be mutually agreed and conduct negotiations in good faith and
conclude such negotiations by March 31 of each fifth year
thereafter (i.e. 2003, 2008 and so on, as applicable) with respect
to: (a) a percentage of the Payable Copper price determined
pursuant to Article 8, the applicable price range for such
percentage and the associated (price participation) formula for
smelting and refining charges for the Payable Copper price which is
outside of such designated price range (or alternatively two or
more percentages of such Payable Copper price with a corresponding
range of prices which are applicable to each such percentage) which
shall constitute a combined smelting and refining charge during the
ensuing five (5) Contract Years for the portion of the Part A
Tonnage which does not constitute the Permanent Holiday Tonnage,
and (b) whether or not gold and silver refining charges will be
applicable during such five (5) Contract Years period to such Part
A Tonnage and, if they are determined to be applicable based on the
generally prevailing market, the amount of such charges. If
agreement is reached in accordance with the foregoing provisions of
this paragraph, the agreed upon charges shall be applicable to the
above specified Part A Tonnage for the ensuing five (5) Contract
Years. If despite such good faith negotiations mutual agreement on
such charges is not reached between Buyer and Seller by March 31 of
such year, then the smelting and refining charges which are
applicable to the Part B Tonnage during each of the ensuing five
(5) Contract Years shall apply to such Part A Tonnage for each of
such ensuing five (5) Contract Years.
(iii) Agreements Required if Permanent Holiday
Reduction Effected. If a reduction in Part A Tonnage is effected as
a result of the application of this Section 9.1, then
notwithstanding anything to the contrary recited in Section 6.6 or
any other provision of this Agreement, from and after the effective
date of such reduction any changes to the shipping schedule
provided by Buyer by November 1 of each year shall be by mutual
agreement. In the event of such reduction, Buyer and Seller shall
also promptly discuss and agree upon an appropriate amendment to
this Agreement reflecting the change which has occurred in the
nature of this Agreement. Such amendment shall consist of the
following items: (1) the adoption of a simplified procedure to
determine the Contractual Tonnage figure, which is fair and
reasonable to both parties, (2) proper revisions to the alumina
penalty due to the possibility of blending of the Concentrates with
copper concentrates supplied by third parties, and (3) the
establishment of audit procedures to verify that Buyer's third
party purchases are and continue to be in accordance with generally
accepted international business practices and on competitive world
market terms and conditions at the time of sale or contract.
9.2 Smelting and Refining Charges for Part B Tonnage.
(i) Smelting Charge, Payable Copper Refining Charge
and Price Participation Terms for Part B Tonnage. Subject to the
provisions of Section 9.3 (Floor TC's and RC's) and Article 10
(review of commercial terms) of this Agreement, the smelting
charge, the Payable Copper refining charge and the price
participation terms applicable to Part B Tonnage in each cargo of
Concentrates delivered hereunder shall be determined as follows:
(a) Determination on Basis of Weighted Average of
Eligible Reference Contracts. The smelting charge, the Payable
Copper refining charge and the price participation terms applicable
to Part B Tonnage for each calendar year shall be determined by
calculating the weighted average of each of such terms as contained
in each of three (3) separate groups of Reference Contracts, the
first group being those eligible designated Reference Contracts
submitted by Seller, the second group being those eligible
designated Reference Contracts submitted by Buyer, and the third
group being the Ertsberg Concentrate Agreement and the MMC
Concentrate Agreement (in each case as referred to in item (viii)
of the definition of "Contracts Criteria" in Appendix "A" hereto)
and then calculating the combined weighted average of such three
(3) groups of Reference Contracts for each such term (with equal
weight being given to each of the three groups), all in accordance
with the procedures described in this Section 9.2(i), and the
weighted average figures for the above identified terms which are
determined every calendar year thereafter shall be applicable to
50% of the Part B Tonnage for the Contract Year in which the
determinations are made and also to 50% of the Part B Tonnage for
the following Contract Year. Notwithstanding the above: (1) as to
shipments made during the portion of a calendar year which is prior
to completion of the annual determination in accordance with the
process set forth in (b) through (f) of this Section, such terms
shall be as provided for in subsection (h) of this Section 9.2; (2)
the weighted average figures for the above identified terms which
are determined preceding the commencement of the first Contract
Year shall be applicable to 100% of the Part B Tonnage for the
calendar year which includes the Initial Inventory Period and the
beginning of the First Contract Year; (3) the weighted average
figures for the above identified terms which are determined
following the commencement of the first Contract Year shall be
applicable to 100% of the Part B Tonnage for the calendar year
which includes both the end of the First Contract Year and the
beginning of Second Contract Year; and (4) the weighted average
figures for the above identified terms which are determined
following the commencement of the second Contract Year and which
shall be applicable to 100% of the Part B Tonnage for the calendar
year which includes both the end of the Second Contract Year and
all of the third Contract Year, shall also be applicable to 50% of
the Part B Tonnage for the fourth Contract Year.
(b) Selection of Auditor. As early as practicable
during the first three months of each calendar year (including but
not limited to any calendar year comprising a Contract Year) Buyer
and Seller shall select by mutual agreement and retain an
internationally recognized auditor to perform the responsibilities
of the auditor as specified in this Section 9.2(i). Such auditor's
fees and expenses shall be borne equally by the parties. At the
time the auditor is retained such auditor shall be provided with a
copy of this Agreement on a strictly confidential basis for use in
its work hereunder.
Prior to such selection of the auditor, and as soon as
practicable following the date of execution of this Agreement,
Seller shall develop guidelines and hypothetical examples for use
by the auditor in order for such auditor to efficiently and
properly perform its duties and responsibilities hereunder, and
Seller shall review with Buyer such guidelines and hypothetical
examples, and obtain Buyer's concurrence which shall not be
unreasonably delayed or withheld, prior to submitting them to the
auditor.
(c) Determination of Eligibility for Designated Reference Contracts. Within three (3) Business Days following the commencement of the third month of each calendar year except as contemplated in item (ix) of the definition of Contracts Criteria in Appendix "A" hereto, commencing with calendar year 1998 (or such later calendar year in which the first delivery of Concentrates to the Facilities is expected to occur), each of Seller and Buyer shall designate as many concentrate sales and/or purchase agreements to which it is a party (or, in the case of Buyer, to which MMC is a party) as exist up to a maximum of three (3) such agreements which such party believes are eligible Reference Contracts, meaning Reference Contracts which satisfy all of the Contracts Criteria. If Buyer or Seller, in its good faith judgment, believes that it has three (3) or less eligible Reference Contracts satisfying all of the Contracts Criteria, such party shall designate all such Reference Contracts that it does have. Each party's designations shall be in writing and delivered by express courier service or facsimile to the auditor. Each such designation shall clearly identify the Reference Contract being designated. Such identification shall include, at a minimum, the name of the agreement, the name of the buyer(s) and the seller(s), the effective date and duration of the agreement and the contractual tonnage for the annual period which is covered by the "Current Settlement" (excluding any tonnage which will be shipped during periods beyond the first annual period following such settlement). The phrase "Current Settlement" shall mean a settlement of the commercial terms identified above which is concluded during the period from October 1 of the immediately preceding year to March 1 of the current year except as contemplated in item (ix) of the definition of Contracts Criteria in Appendix "A" hereto, which applies to tonnage being utilized by the designating party in its weighted average calculations and which tonnage is obligated to be shipped under such agreement during the annual period covered by such settlement. Each designation shall be accompanied by a written certification signed by an authorized representative of the designating party that such designated Reference Contract satisfies all of the Contracts Criteria including a brief explanation as to why each Contracts Criteria has been satisfied. A copy of each such Reference Contract shall be provided to the auditor on a strictly confidential basis together with the designation, certification and explanations for such Reference Contract. Each party shall simultaneously provide to the other party a copy of the designation, certification and explanations for each Reference Contract which it designates but not a copy of the Reference Contract being designated. The party receiving the designation and accompanying materials shall have seven (7) Business Days following its receipt of such designation and accompanying materials to provide to the auditor by express courier service or facsimile any comments or objections it may have regarding the eligibility of such designated Reference Contract (with a copy to the designating party).
Based on the auditor's determination as to whether or not each designated Reference Contract satisfies all of the Contracts Criteria, such auditor shall notify both parties of the acceptance as eligible or rejection as ineligible of each designated Reference Contract. In order to expedite the completion of the auditor's work, the auditor may, if it so desires, provide a notice of acceptance or rejection as soon as it determines that a Reference Contract is eligible or ineligible without waiting for the completion of its evaluations of other Reference Contracts. If a party which has one or more of its designated Reference Contracts rejected has one or more other Reference Contracts which it has not previously designated and which it believes to satisfy all of the Contracts Criteria, then such affected party shall within three (3) Business Days following its receipt from the auditor of a rejection notice designate either a single substitute Reference Contract or two (2) such substitute Reference Contracts (designating one as its first preference and the other one as its second preference), in the same manner as the original designation. If a party whose Reference Contract(s) was (were) rejected has two (2) or more other concentrate purchase or sale agreements which it believes qualify as Reference Contracts, it shall be obligated to designate two (2) substitute Reference Contracts (with its first and second preferences indicated to the auditor). The auditor shall evaluate the second preference substitute Reference Contract only if required for the party who submitted such second substitute Reference Contract to have the full number of eligible Reference Contracts. If notwithstanding the submittal of such substitute Reference Contract(s) the auditor does not rule as eligible the full number of Reference Contracts for a party, then the remaining Reference Contracts which were submitted by such party and which are determined to be eligible shall be used exclusively in such party's weighted average determinations.
Notwithstanding anything to the contrary recited in this
Section 9.2(i), each calendar year each party shall have the option
of making one but not more than one discretionary change in its
designations of eligible designated Reference Contracts. A
designated Reference Contract which is eligible for one or more
years but which subsequently expires or is terminated, under which
a Current Settlement is not made, or which no longer satisfies all
of the Contracts Criteria, shall be deleted as one of such party's
eligible designated Reference Contracts, but such deletion and any
substitution therefor shall not be considered to be a discretionary
change for purposes of this paragraph.
(d) Calculation of Weighted Average Figures for
Each Party's Eligible Reference Contracts. Upon completion of the
review of all designated Reference Contracts by the auditor, if
Buyer or Seller has received a ruling from the auditor that at
least one of its designated Reference Contracts is eligible, then
such party shall promptly calculate the weighted average figure for
each of the above identified terms taking into account the Current
Settlement which is applicable to all eligible tonnage (i.e. the
tonnage which is being sold by Seller or purchased by Buyer or MMC)
to be delivered under all of its eligible designated Reference
Contracts during the annual period covered by such Current
Settlement. Such calculations, the results thereof and a brief
explanatory report of how each figure was determined shall be
furnished to the auditor (with a copy sent to the other party)
within five (5) Business Days following the completion of the
auditor's rulings on all designated Reference Contracts.
If either Seller or Buyer is unable to designate any Reference
Contracts satisfying all of the Contracts Criteria, or the auditor
does not rule as eligible any of such designated Reference
Contracts, then such party's concentrate sales agreements shall not
be taken into account in making the combined weighted average
determinations under this Section 9.2.
The weighted average figure for the smelting charge shall be
calculated separately from the weighted average figure for the
Payable Copper refining charge. In the event that the smelting
charge and the Payable Copper refining charge is expressed on a
combined smelting and refining charge basis in any eligible
designated Reference Contract, the smelting charge shall be
calculated separately from the Payable Copper refining charge for
such Reference Contract in a manner which allows direct comparison
of the smelting and Payable Copper refining figures on a similar
number basis. In other words, the number of Dollars used for a
smelting charge shall equal the number of tenths of a cent used for
the refining charge. For example, in an eligible designated
Reference Contract which recites a combined smelting and refining
charge of $0.20 per pound of Payable Copper for copper concentrates
with a 44% copper grade and with a Payable Copper figure of 96.5%,
such combined smelting and Payable Copper refining charge shall be
converted to a $97.00 smelting charge and a $0.097 Payable Copper
refining charge, and such latter figures utilized in the weighted
average calculations for the smelting charge and the Payable Copper
refining charge for such Reference Contract.
With respect to calculation of the weighted average figures
for price participation, for each eligible designated Reference
Contract the price participation shall be determined for each price
of copper and averaged together on a weighted average basis. An
illustration of the proper method for each party to use in
calculating its weighted average figure for price participation is
set out on Appendices (C) and (D).
(e) Calculation of Weighted Average Figures for the
Ertsberg Concentrate Agreement and MMC Concentrate Agreement. At
the same time that Seller calculates and furnishes to the auditor
the weighted average figures for its own eligible designated
Reference Contracts, Seller shall separately calculate and furnish
to the auditor (with a copy to Buyer) a weighted average figure for
each of the above identified terms together with a brief
explanatory report, taking into account all quantities covered by
Seller's Current Settlement under (1) the Ertsberg Concentrate
Agreement, plus (2) the MMC Concentrate Agreement. For purposes of
these Section 9.2(i) calculations, both of these contracts
(including their successors as described in the definitions of such
Agreements) shall be deemed to be eligible designated Reference
Contracts. The provisions of subsection (d) governing how such
calculations will be made shall also apply to the calculation of
the weighted average figures for this group of eligible designated
Reference Contracts.
If only one of the two (2) above identified agreements is in
effect for the calendar year under consideration, or if a Current
Settlement has been made under only one of such agreements, then
only the figures reflected in such agreement which has been
currently settled shall be utilized. If neither of such two
agreements is in effect for such calendar year or if no Current
Settlement has been effected under such agreement(s) for such
calendar year, then such concentrate sales agreements shall not be
taken into account in making the weighted average determinations
under this Section 9.2(i).
Each party, within five (5) Business Days following receipt of
the weighted average figures, supporting calculations and
explanatory reports produced by the other party, shall furnish to
the auditor for its consideration any questions, comments or
objections it may have regarding such figures, calculations and
reports produced by the other party.
(f) The Auditor's Preliminary and Final
Determinations. The auditor, promptly after receiving the above
described weighted average figures and supporting calculations and
explanations, and any comments or objections made by the non-
submitting party, shall evaluate such information and then make any
adjustments it deems appropriate to each party's calculations.
Such adjustments may be made by the auditor if the auditor finds
simple mathematical errors, errors resulting from a
misinterpretation of this Section 9.2(i), errors resulting from a
misinterpretation of any eligible designated Reference Contract,
errors due to the failure to take into account factors which
unreasonably distort a figure being utilized by a party in its
calculations or for other reasons deemed appropriate by the
auditor.
The auditor shall then issue to both parties a preliminary
report reciting its determination as to each weighted average
figure (including an explanation of any adjustments which it has
made) for each of the three above described groups of Reference
Contracts. The auditor shall simultaneously calculate and include
in its preliminary report a weighted average figure for each of the
above described terms, giving equal weight to each of the three
separate groups of Reference Contracts without consideration of the
tonnage included in any of the three constituent weighted average
figures [e.g., (Group 1 Weighted Average Smelting Charge Figure x
1/3) + (Group 2 Weighted Average Smelting Charge Figure x 1/3) +
(Group 3 Weighted Average Smelting Charge Figure x 1/3) = Weighted
Average Smelting Charge Figure]; provided, however, if one or more
of the three groups of Reference Contracts is not to be taken into
account in making the weighted average determinations hereunder,
then the weighted average shall be determined by the auditor by
giving equal weight to each of the remaining category(ies) of
Reference Contracts.
Each party shall have five (5) Business Days following receipt
of the auditor's preliminary report of the weighted average figures
for each of the above recited terms to submit to the auditor any
comments or objections which it may have to such figures and
report. The auditor shall promptly consider such comments or
objections and submit its final combined weighted average figures
and final report to the parties.
(g) Effect of Final Report and Retroactive
Adjustment. The combined weighted average figures reflected in the
auditor's final report shall constitute the smelting charge, the
Payable Copper refining charge and the price participation terms
applicable to Part B Tonnage in each cargo of Concentrates
delivered hereunder during the then current calendar year. Such
terms shall be reflected in all invoices for shipments following
issuance of the final report and shall be made retroactive to the
first day of the calendar year. An adjustment statement with
accompanying invoice or payment, as appropriate, shall be issued by
Seller as soon as practicable following Seller's receipt of the
final report, to reflect any differences between the amount of the
payments previously made by Buyer based on the interim terms which
are applicable between the first day of the calendar year and the
date of the adjustment, and the amounts which are applicable to
such periods based on the final report of the auditor.
(h) Interim Terms Governing the Period Prior to
Final Report Issuance. The smelting charge, the Payable Copper
refining charge and the price participation terms applicable to the
Part B Tonnage for any period of any calendar year prior to the
issuance of the auditor's final report for such year with respect
to any portion of the Part B Tonnage as to which the above
identified terms have not yet been determined, shall be: (i) with
respect to the initial annual determination for 1998 (or such later
calendar year in which the first delivery of Concentrates to the
smelter is expected to occur), the weighted average of (a) the
smelting and Payable Copper refining charge and price participation
terms reflected in the most recent Part B settlement under the
Ertsberg Concentrate Agreement, and (b) the smelting and Payable
Copper refining charge and price participation terms reflected in
the most recent settlement under the MMC Concentrate Agreement,
utilizing the quantity which has been settled in the most Current
Settlement for MMC's account under each such agreement, and (ii)
with respect to the annual determinations for all subsequent
calendar years, the smelting and Payable Copper refining charge and
price participation terms applicable hereunder for the immediately
preceding calendar year.
(ii) Payable Gold and Payable Silver Refining
Charges for Part B Tonnage. The Payable Gold refining charge for
all Part B Tonnage shall be $6.00 per ounce of Payable Gold, and
the Payable Silver refining charge for all Part B Tonnage shall be
$0.35 per ounce of Payable Silver.
9.3 Minimum Smelting and Refining Charges; Possible
Recoupment of Lost Revenues. Notwithstanding anything to the
contrary recited in this Agreement, if at any time during the
period commencing with the first shipment hereunder during the
Initial Inventory Period and ending with the ninth anniversary of
the Commencement of Commercial Operations, the smelting and
refining charges for all payable metals (copper, gold and silver)
and any applicable price participation (on a combined basis) for
the average of the Part A Tonnage and the Part B Tonnage are below
$0.21 per pound of Payable Copper, then the smelting and refining
charges for all such payable metals including any applicable price
participation (on a combined basis) for the average of the Part A
Tonnage and the Part B Tonnage shall be $0.21 per pound of Payable
Copper (the "Floor TC's and RC's"). The applicability and amount
of the Floor TC's and RC's shall be determined on a shipment-by-
shipment basis and reflected on Seller's final invoice for each
shipment of Concentrates hereunder, whenever the Floor TC's and
RC's are applicable.
At least 180 days prior to the ninth anniversary of the
Commencement of Commercial Operations, Seller and Buyer shall meet
for the purpose of negotiating and agreeing upon a new "Floor TC's
and RC's" figure which shall be at a level which is sufficient to
cover all projected costs of debt service, if any, associated with
the Project Loans or any refinancing thereof, and cash operating
costs. Such new Floor TC's and RC's figure shall remain in effect
from the ninth anniversary to the fifteenth anniversary of the
Commencement of Commercial Operations, and so long thereafter as
mutually agreed upon at the time such negotiation takes place, it
being understood that neither party shall propose to extend the
applicability of such Floor TC's and RC's beyond such fifteenth
anniversary any longer than is necessary to fully repay the Project
Loans or any refinancing thereof. If for any reason agreement on
such figure is not reached by 90 days prior to the ninth
anniversary date, such figure shall be determined by arbitration
(and giving effect to the requisite level thereof contemplated by
this paragraph) in accordance with the provisions of Article 20 of
this Agreement. Such Floor TC's and RC's figure shall be subject
to the required approval of the Government, which approval Seller
shall seek to procure on a timely basis in good faith.
If at any time (i) MMC has received an average annual
simple return of 13% on its total capital contribution (which
includes subordinated loans) and Seller has been reimbursed for all
return amounts which it previously assigned to MMC, sample
calculations of which occurrences are set forth on Appendix "B"
hereto, and (ii) the smelting and refining charges for all payable
metals (on a combined basis) for the Part A Tonnage and the Part B
Tonnage shall be more than $0.10 per pound of Payable Copper above
the Floor TC's and RC's, then to the extent necessary to reimburse
Seller for any loss of revenues in prior periods due to the
application of the Floor TC's and RC's in accordance with the
foregoing paragraphs of this Section 9.3, the smelting and refining
charges for all payable metals (on a combined basis) for Part A
Tonnage and Part B Tonnage shall be $0.10 per pound of Payable
Copper above the Floor TC's and RC's. The reference in (i) above
to MMC and Seller shall in each case be inclusive of any successor
to each such entity.
The calculation of such return on equity positions
shall be the responsibility of Buyer. Such calculation shall be
made not less frequently than once per year following the
Commencement of Commercial Operations, and not less frequently than
once per calendar quarter when Buyer determines in good faith that
such return will be realized in less than one year; and a copy
shall be furnished to Seller. Seller shall have the right to
conduct an annual audit of Buyer's calculations, including the
information supporting the figures reflected in such calculation,
and Buyer shall make such information and calculation available to
Seller. The parties shall promptly resolve any disagreements
regarding such calculation.
9.4 Deductions for Impurities. The following amounts, if
applicable pursuant to Section 12.5, shall be deducted from the
Seller's final invoices for each cargo of Concentrates sold
hereunder. The amounts stated below are deductions per DMT of
Concentrates in such cargo.
As: If the arsenic assay exceeds 0.2 unit,
$2.50 for each 0.1 unit of such excess
(fractions pro rata).
Bi: If the bismuth assay exceeds 0.05 unit,
$0.30 for each 0.01 unit of excess
(fractions pro rata).
Sb: If the antimony assay exceeds 0.1 unit,
$0.50 for each 0.01 unit of such excess
(fractions pro rata).
Cl: If the chlorine assay (other than for
possible seawater contamination) exceeds
0.05 unit, $0.50 for each 0.01 unit of
such excess (fractions pro rata).
Pb: If the lead assay exceeds 1 unit, $1.50
for each one unit of such excess
(fractions pro rata).
Zn: If the zinc assay exceeds 3 units, $1.50
for each one unit of such excess
(fractions pro rata).
Ni plus Co: If the nickel plus cobalt assay exceeds
0.5 unit, $0.30 for each 0.1 unit of such
excess (fractions pro rata).
F: If the fluorine assay exceeds 330 ppm,
$0.10 for each 10 ppm of such excess
(fractions pro rata).
Hg: If the mercury assay exceeds 10 ppm, $0.20
for each 1 ppm of such excess (fractions
pro rata).
Alumina: If the alumina assay (A1 x 1.8889) over
three consecutive calendar months averages (on
a weighted average basis) in excess of 3%,
$3.00 for each 1% of such excess (fractions
pro rata). This penalty may be reviewed at
the end of the fifth Contract Year upon the
request of either party upon furnishing a
written request to do so to the other party.
9.5 Exclusive Remedy. The deductions per DMT of
Concentrates set forth in Section 9.4 shall be the Seller's sole
obligation and the Buyer's exclusive remedy for the quality of or
the impurities in the Concentrates, except as otherwise expressly
provided in Sections 2.3, 2.5 and 9.7.
9.6 General Provisions Applicable to Smelting and Refining Charges. For purposes of computing the smelting and refining charges applicable to each cargo sold under this Agreement, each of the different smelting and refining charges shall be applied proportionately to the total quantity of such cargo. For example, during all periods of time when agreement is in effect with respect to the smelting and refining charges applicable to all of the Part A Tonnage, for each cargo of Concentrates sold, 50% of the smelting and refining charges shall be computed in accordance with the provisions of this Article 9 governing Part A Tonnage, 50% of the smelting and refining charges shall be computed as provided in accordance with the provisions of this Article 9 governing Part B Tonnage; and the weighted average of the two calculations shall be the smelting and refining charges applicable to that cargo (subject to adjustment in accordance with Section 9.3, if applicable). All commercial terms and conditions applicable to Concentrates sold hereunder during the first calendar year portion of the first Contract Year shall also be applicable to the sale of Concentrates to Buyer during the Initial Inventory Period except as specifically provided in Section 9.1.
9.7 Special Provisions Applicable to Concentrates with
Copper, Gold and/or Silver Outside the Five-Year Expected Analysis.
If the average analysis of copper, gold and/or silver contained in
the total quantity of Concentrates delivered hereunder with respect
to any consecutive three (3) calendar months is outside the ranges
of the Five-Year Expected Analysis provided by Seller to Buyer in
accordance with the provisions of Section 2.2 for the then current
five (5) Contract Year period, then upon the written request of
either Seller or Buyer, Buyer and Seller shall promptly meet for
the purpose of mutually agreeing on adjustments to the smelting and
refining charges (including consideration of price participation
terms) and to the definition of the payable metal(s) which is (are)
outside such five (5) year range to a level which is equivalent to
the world market smelting and refining charges and payable metals
definitions for copper concentrates of the same quality. If the
parties cannot agree on such adjustments within 30 days from the
date of the first meeting held for such purpose, then the parties
shall mutually refer the matter to the referee(s) under Article 19.
Pending resolution of such adjustments, the current smelting and
refining charges and payable metals definitions applicable to
Concentrates having copper, gold and silver within the then current
five (5) year specifications shall be utilized in calculating
payments for shipments hereunder, with an appropriate retroactive
adjustment made as soon as the adjustments are determined (with
interest at the 60 day LIBOR rate plus 0.5% per annum). The
provisions of this Section shall not be applicable to those
quantities of Concentrates delivered by Seller and which are within
the Five-Year Expected Analysis ranges provided by Seller to Buyer
in accordance with the provisions of Section 2.2 for the then
current five (5) Contract Year period. Any adjustment to smelting
and refining charges (including price participation terms) under
this Section 9.7 shall in no event increase or diminish the effect
or applicability of Section 9.3 of this Agreement.
ARTICLE 10
Periodic Review of Commercial Terms
10.1 Provision Governing Part A Tonnage Smelting and
Refining Charges and Minimum Smelting and Refining Charges.
Provisions governing the smelting and refining charges applicable
to Part A Tonnage are set forth in Section 9.1, and the provisions
of this Article 10 shall have no application to the Part A Tonnage
smelting and refining charges. The provisions of this Article 10
shall also have no application to Section 9.3.
10.2 Periodic Review of Certain Commercial Terms. Between
January 1, 2003 and March 31, 2003 and between January 1 and March
31 of each fifth year thereafter during the term of this Agreement,
Buyer and Seller shall meet at a neutral location which alternates
between a location selected by Seller and a location selected by
Buyer, in order to review with each other the Commercial Terms of
this Agreement and to agree on such terms on a basis which is fair,
reasonable and reflective of then current market conditions. For
purposes of this Section 10.2 the term "Commercial Terms" shall
mean: (1) the definitions of the terms "Payable Copper", "Payable
Gold" and "Payable Silver" contained in Sections 8.1, 8.2 and 8.3,
(2) the definitions of the term Quotational Period contained in
Section 8.4, (3) the payment terms of Article 11, (4) the penalties
contained in Section 9.4, (5) the discharging rates contained in
Section 5.3, (6) the amount of dispatch and demurrage contained in
Section 5.6, and (7) the definition of Contracts Criteria contained
in Appendix "A" and the number of Reference Contracts recited in
Section 9.2(i)(c) to be included in each of Buyer's and Seller's
group of Reference Contracts used in determining the smelting
charge, the Payable Copper refining charge and the price
participation terms applicable to Part B Tonnage. All agreements
reached as a result of such periodic review shall be reflected in
a written amendment hereto signed by both Buyer and Seller reciting
the settlement of the Commercial Terms which will be applicable for
the ensuing period of five (5) Contract Years. If agreement on any
Commercial Term(s) is (are) not reached by the end of the month of
March of any such fifth year, unless such deadline date is extended
by mutual written agreement, and a party hereto is of the good
faith opinion that a Commercial Term(s) is (are) either no longer
fair, reasonable and reflective of the current market (as to item
numbers 1-6 above), or is no longer functional or within the
original intent of this Agreement (as to item number 7 above), then
such party may refer such Commercial Term(s) to the referee(s) on
or before April 15 of such year by notice in accordance with the
procedure set forth in Article 19. The party referring such
Commercial Term(s) to the referee(s) shall bear and pay all of the
costs and expenses associated with such referee(s) determination,
unless the referee(s) shall determine that the merits of the
arguments submitted by the non-referring party lack significant
merit in which case the referee(s) may require a different sharing
of such costs and expenses. Pending a determination of any such
Commercial Term(s) referred to the referee(s), the Commercial
Term(s) which were in effect for the immediately preceding Contract
Year shall be applicable, and promptly following such determination
a retroactive adjustment to the beginning of such five (5) Contract
Year period shall be made with interest on the amount of the
adjustment equal to the published prime commercial lending rate of
The Chase Manhattan Bank (National Association) or its successor
for loans in New York applicable for each day thereof on the date
of determination, for the period from April 1 to the date the
retroactive adjustment is made. If agreement between Buyer and
Seller is not reached during the course of any such periodic review
as to any Commercial Term(s) and such Commercial Term(s) is (are)
not referred to the referee(s) in accordance with the above
described procedure, then such Commercial Term(s) as to which
mutual agreement is not reached or decided by the referee(s) shall
remain in effect as it existed during the immediately preceding
Contract Year and shall continue in effect for the ensuing five (5)
Contract Year period and until changed in accordance with the
periodic review procedures of this Section 10.2 during a subsequent
review.
ARTICLE 11
Payments
11.1 Manner of Payment.
(a) All payments by Buyer for Concentrates sold
|
hereunder shall be net cash, in Dollars, and shall be paid in good
and collected funds by wire transfer to "The Chase Manhattan Bank
N.A., New York, New York, ABA No. 021000021, for credit to P.T.
Freeport Indonesia Company Sales Proceeds Account No. 920-1-
073278", unless and until Seller shall otherwise direct. Buyer
shall notify Seller by telex or facsimile at the time it makes a
payment as provided above.
(b) All payments by Seller in connection with the
sale of Concentrates hereunder shall be net cash, in Dollars, and
shall be paid in good and collected funds by wire transfer to an
account specified by Buyer and acceptable to Seller (which
acceptance shall not be unreasonably withheld), unless and until
Buyer shall otherwise direct. Seller shall notify Buyer by telex
or facsimile at the time it makes a payment as provided above.
(c) Bank charges, if any, in respect of payments
hereunder shall be for the account of the party transferring funds.
11.2 Provisional Price. For purposes of provisional
invoicing as provided in Section 11.3, the provisional price of
each cargo of Concentrates shall be determined by Seller by
reference to loaded weights, estimated assays, and except as
provided otherwise in Section 8.10 of this Agreement the respective
prices for (i) Payable Copper determined pursuant to Section 8.6 of
this Agreement as if the applicable Quotational Period for Payable
Copper were the two full calendar weeks prior to the date of
shipment, less applicable smelting and refining charges, and (ii)
Payable Gold and Payable Silver determined pursuant to Sections 8.7
and 8.8 of this Agreement, less applicable refining charges, as if
the applicable Quotational Period for Payable Gold and Payable
Silver were the two full calendar weeks prior to the date of
shipment.
11.3 Provisional Payment. Seller shall present the
following documents to Buyer: (i) Seller's provisional invoice,
(ii) Seller's weight, moisture and assay certificates based on
loaded weights and Seller's provisional assay certificate, (iii) a
full set of clean on-board ocean bills of lading or charter party
bills of lading reflecting that freight is payable by Seller, and
(iv) original insurance policy or certificate upon each shipment.
Buyer shall make a provisional payment equal to 90% of the
provisional price as determined pursuant to Section 11.2 for the
Payable Copper, Payable Gold and Payable Silver in each shipment of
Concentrates sold hereunder, such provisional payment to be made on
the fifth Business Day after the Date of Arrival. The provisional
invoice shall reflect Seller's preliminary calculation of any
applicable penalties based on the best information available to
Seller at the time such invoice is prepared. Seller shall prepare
the documents described above in such number of sets, and otherwise
in accordance with such directions, as Buyer shall reasonably
specify in light of Buyer's own financing and other requirements.
11.4 Final Payment. Seller shall transmit to Buyer its
final invoice for each cargo of Concentrates by telex or facsimile
within two Business Days after dry weights and assays shall have
been agreed and the final price applicable to such cargo shall have
been determined. The final price shall include such adjustments to
the penalties recited in Seller's provisional invoice as are
appropriate to take into account the results of the final assays.
Final payment for each cargo of Concentrates sold hereunder shall
be made by Buyer on the second Business Day after receipt of
Seller's final invoice, or if the final price as shown on Seller's
final invoice is less than the amount of the provisional payment
made by Buyer pursuant to Section 11.3, the amount of the
difference shall be paid by Seller on the second Business Day after
Seller has transmitted its final invoice to Buyer or, at the option
of Buyer, Buyer may deduct such amount from sums thereafter
becoming due and payable to Seller.
11.5 Final Price Determination in the Event of Loss. In
case of (i) total loss or damage of the Concentrates at any time
prior to weighing, sampling and moisture determination at the
Receiving Works, or (ii) a total or partial loss or damage of the
Concentrates in any cargo delivered at an alternate port at any
time, the final invoice shall be based upon full dry weights and
assays as determined at time of loading.
In case of partial loss of the Concentrates in any
cargo delivered at the Receiving Works prior to weighing, sampling
and moisture determination at the Receiving Works, the final
invoice shall be based upon (i) the dry weight as determined at the
time of loading and (ii) the weighted average of the final assays
for copper, gold and silver, (as ascertained by assay in accordance
with Article 13 of this Agreement) as determined from the portion
of such cargo safely delivered to Buyer.
In case of damage to a portion of the Concentrates in
any cargo delivered to the Receiving Works, the final invoice shall
be based upon the dry weight determined at the Receiving Works and
the weighted average of the final assays for copper, gold and
silver, (as ascertained by assay in accordance with Article 13 of
this Agreement) as determined from the portion of such cargo safely
delivered to Buyer without damage.
In case of a total loss prior to delivery at the
Receiving Works, the Date of Arrival will be deemed to have
occurred 10 days after completion of loading at the Port of Loading
for purposes of determining Quotational Periods and payment dates.
In case of total loss prior to delivery at any Port of Discharge
other than Gresik, the Date of Arrival will be deemed to have
occurred 20 days after completion of loading at the Port of Loading
for purposes of determining Quotational Periods and payment dates.
11.6 Interest. In the event that any payment of moneys to
be made by either party to the other pursuant to this Agreement
shall not be made on or before the date such payment is due and
payable in accordance with the provisions of this Agreement, the
party which shall be liable for such payment shall also pay
interest on such late payment calculated from the date such payment
was due and payable through the date such payment is made at the
published prime commercial lending rate of The Chase Manhattan Bank
(National Association) or its successor for loans in New York in
effect from time to time (such rate to be adjusted simultaneously
with each change in such prime commercial lending rate), plus 2%,
and calculated on the basis of a 365-day year. Notwithstanding the
above, the provisions of Section 3.4 shall govern the calculation
of interest and the interest rate applicable to payments for
certain Concentrates which Buyer is unable to take delivery of in
a timely manner hereunder.
ARTICLE 12
Weighing, Sampling and Determination of Moisture
12.1 General Procedures. Weighing, sampling and
determination of moisture for each cargo shall be carried out in
accordance with accepted industry standards and with reliable
modern equipment (i) by Seller at Seller's expense at Seller's Port
of Loading and (ii) by Buyer at Buyer's expense at the Receiving
Works. The methodology of the sampling and moisture determination
shall be as mutually agreed by Seller and Buyer. Unless otherwise
mutually agreed, Seller shall be entitled to have not more than two
of its own representatives present, or at its own expense to be
represented by an independent weigher and sampler, at the Receiving
Works, and Buyer shall be entitled to have not more than two of its
own representatives present, or to be represented at its own
expense by an independent weigher and sampler, at Seller's Port of
Loading.
12.2 Determination of Dry Weight. Subject to Section 11.5,
the dry weight as determined at the Receiving Works shall govern
for the purpose of final settlement of the price for each cargo.
If any shipment is diverted to an alternate port pursuant to
Section 5.11, Seller's dry weight at the Port of Loading shall
govern unless Buyer obtains Seller's prior written consent to
utilize the dry weight at the alternate port, which consent Seller
shall not unreasonably withhold.
12.3 Sample Lots. Each lot shall form a separate and
complete delivery for all purposes of this Agreement. Subject to
the express provisions of this Agreement, the size of each lot
shall be approximately 500 wet metric tons or such other quantity
as may be mutually agreed.
12.4 Number and Handling of Samples. The sample taken from
each lot of Concentrates as specified in this Article 12 shall be
divided into six equal parts, two for Seller, two for Buyer, one
for the umpire and one for reserve. Seller shall cause its agent
promptly after completion of sampling to send via prepaid
airfreight the umpire samples to the umpire appointed pursuant to
Section 13.3. The reserve samples shall be retained by Seller's
agent where taken.
12.5 Composite Samples. For the purpose of conducting
analyses of elements set forth in Section 9.4, four sets of
composite samples shall be taken from each cargo -- one for Seller,
one for Buyer, one for the umpire and one for reserve. The umpire
and reserve samples shall be distributed and/or retained as
provided in Section 12.4.
ARTICLE 13
Assay
13.1 Method for Determining Final Analysis. From the samples taken in accordance with Article 12 at the Receiving Works, assays for copper, gold and silver, respectively, shall be made independently by the respective assayers of Seller and Buyer, and the results of such assays shall be exchanged simultaneously on a lot by lot basis within 40 days from time of sampling. The mean of such results shall be final and binding upon the parties hereto, if such results show that the differences between Seller's and Buyer's assays are within the following limits:
Copper 0.3% Gold 0.5 gram per DMT Silver 15.0 grams per DMT 13.2 Determination of Final Analysis if Shipment Diverted. |
If any shipment is diverted to an alternate port pursuant to
Section 5.11 other than any Port of Discharge, Seller's analysis at
the Port of Loading shall govern unless Buyer obtains Seller's
prior written consent to utilize the analysis at the alternate
port, which consent Seller shall not unreasonably withhold.
13.3 Designation of Umpire. If such results show that the
difference between Seller's and Buyer's assays for the copper, gold
or silver exceeds the applicable limit specified in Section 13.1,
either Seller or Buyer shall have the right, exercisable by notice
to the other, to refer the matter to an umpire mutually acceptable
to the parties, which acceptance shall not be unreasonably refused.
If neither Seller nor Buyer shall so refer the matter to the
umpire within 10 days after the date of exchange of such results,
the mean of such results shall be final and binding upon the
parties hereto.
13.4 Determination of Final Analysis Using Umpire's Assay.
If either Seller or Buyer shall so refer the matter to the umpire,
the umpire's assay shall be made on the basis of the umpire's
samples. The umpire shall be instructed to advise both Seller and
Buyer of the results of the umpire's assay by facsimile and mail.
The mean of the results of the umpire's assay and the results of
the assay of the party whose results are nearer to that of the
umpire's results shall be final and binding on the parties hereto.
If the results of the umpire's assay shall be the mean of the
results of the assays of the respective parties, the results of the
umpire's assay shall govern. The cost of the umpire shall be paid
by the losing party, except that, if the results of the umpire's
assay is the mean of the results of the respective parties, the
cost shall be shared equally by Seller and Buyer.
13.5 Analysis of Composite Samples for Impurities. Buyer
shall have the right, exercisable by notice in writing given not
later than 55 days after the completion of sampling in accordance
with Article 12, to exchange assays with Seller for any one or more
of the impurities referred to in Section 9.4. From the composite
samples held by Seller and Buyer, each party, at its own expense,
shall assay each of the designated impurities. The assay results
shall be exchanged within 10 days after the Buyer's notice to
Seller. If such results show that the mean of Seller's and Buyer's
assays exceeds the limits enumerated for such penalty elements in
Section 9.4, either Seller or Buyer shall have the right,
exercisable by notice to the other, to have any difference or
differences resolved by an umpire assay in accordance with Section
13.4. If neither Seller nor Buyer shall so notify the other in
writing within 10 days after such assay exchange, the mean of the
results of Seller's and Buyer's assays shall be final and binding
upon the parties hereto.
ARTICLE 14
Taxes
14.1 Value Added Tax. If Indonesian Value Added Tax, Sales
Tax or any other similar tax (but excluding tax imposed on net
income), hereinafter collectively, "VAT", is payable in connection
with this Agreement or the concentrate sales made hereunder, Seller
shall, in the manner required by applicable Indonesian tax law and
practice, calculate the amount of VAT payable and submit a proper
Faktur Pajak ("VAT Invoice") to Buyer along with Seller's invoice
prepared in accordance with Article 11 of this Agreement. Any such
VAT Invoice must comply with then applicable Indonesian tax law and
practice. Should Buyer be appointed a collector of VAT, then
Seller will supply to Buyer the required copies of the VAT Invoice
and the tax payment forms (Surat Setoran Pajak, or "SSP").
14.2 Payment of Value Added Tax. Buyer shall discharge the
VAT obligations reflected in the VAT Invoice in a manner consistent
with then applicable Indonesian tax laws and practice and shall
provide Seller with appropriate evidence of Buyer's discharge of
such obligations as required by such law and practice.
ARTICLE 15
Exemption from Liability and Obligation
In no event shall Buyer or Seller be liable, whether arising
under contract, tort (including negligence), strict liability or
otherwise, for loss of anticipated profits or consequential loss or
damage of any nature arising at any time from any cause whatsoever,
incurred or claimed to have been incurred by the other party
hereto. This Article 15 shall apply notwithstanding any other
provision of this Agreement.
The liability and obligation of Seller to deliver Concentrates
to Buyer under this Agreement shall be released and discharged if
Seller closes permanently all of its mining and milling operations
at its presently known deposits and at any new ore body(ies) in the
Contract Area for any reason; provided that Seller has given Buyer
at least 18 months prior written notice before such closure, and
the effect of such permanent closure shall be the automatic
termination of this Agreement for all purposes except for
liabilities which accrued prior to the effective termination date.
Buyer agrees to keep any such notice received from Seller
confidential until such time as the information concerning Seller's
permanent closure of all its mining and milling operations at its
known deposits and at any new ore body(ies) in the Contract Area
becomes public knowledge; provided, however, Buyer shall have the
right to disclose the information to its lenders, collateral
trustee or collateral agent, shareholders, significant customers,
or if required by law or regulation (including, without limitation
the regulations of any securities exchange on which Buyer's
securities are traded). In the event of such disclosure, Buyer
shall use its best efforts to obtain confidential treatment of the
information.
If Buyer decides to withdraw from the copper smelting business
for any reason, the liability and obligation of Buyer to take
delivery of Concentrates under this Agreement shall be released and
discharged; provided that Buyer has given Seller at least 18 months
prior written notice before such withdrawal, and the effect of such
permanent closure shall be the automatic termination of this
Agreement for all purposes except for liabilities which accrued
prior to the effective termination date. Seller agrees to keep any
such notice of withdrawal received from Buyer confidential until
such time as the information concerning Buyer's withdrawal from the
copper smelting business becomes public knowledge; provided,
however, Seller shall have the right to disclose the information to
its lenders, Trustees, shareholders, significant customers, or if
required by law or regulation (including, without limitation, the
regulations of any securities exchange on which Seller's securities
are traded). In the event of such disclosure, Seller shall use its
best efforts to obtain confidential treatment of the information.
ARTICLE 16
Relief from Economic Hardship
16.1 Consultation in the Event of Hardship. The provisions
of this Agreement are intended by Buyer and Seller to operate
fairly over the term of this Agreement. Buyer and Seller recognize
that it is impracticable to make provision for every contingency
which may arise during the term of this Agreement. In the future,
should circumstances arise which were unforeseeable at the time
this Agreement was made and which actually have caused severe
economic hardship to either Buyer or Seller from the continued
operation of this Agreement, then Buyer and Seller agree to
promptly consult together and review the provisions of this
Agreement and, in the spirit of good faith and fair dealing,
consider possible modifications thereof which might lessen such
severe economic hardship. Such economic difficulties shall not be
cause for the termination of this Agreement or relieve any party
from its obligations under this Agreement. No modification of this
Agreement shall be made except by mutual agreement of the parties
hereto in writing.
16.2 Limitations on Right to Request Consultation. It is
not intended that this Article 16 be invoked to deprive a party of
savings or advantages arising from the efficiency of the party
which contributes to the profitability of its operations.
ARTICLE 17
Notices
All notices, requests, directions and other communications
required or permitted by any provision of this Agreement shall be
in writing and in the English language and shall be sufficiently
given or transmitted if delivered by hand, sent by telegraph, telex
or telecopy, by registered mail or by internationally recognized
express courier service, and addressed (1) in the case of Buyer,
Plaza 89, 6th Floor, S-602, J1. H.R. Rasuna Said Kav. X-7, No. 6,
Jakarta 12940, Indonesia, FAX: 21-522-9615, and (ii) in the case of
Seller, 1615 Poydras Street, New Orleans, LA 70112, U.S.A., Telex:
62759930 with answerback - FREESULPH NO, FAX: (504) 582-1835, or at
such other address as may be designated in writing respectively by
Buyer or Seller, as the case may be, as the proper address to which
such communications should be mailed or delivered to it, and shall
become effective on the date of receipt by the party to which it
shall be addressed. If given other than by hand, by registered
mail or by internationally recognized express courier service, such
communication shall be promptly confirmed by letter.
ARTICLE 18
Assignment
18.1 Binding Effect. This Agreement shall inure to the
benefit of and be binding upon the successors of the parties hereto
and, subject to the further provisions of this Article 18, the
respective permitted assigns of such parties.
18.2 Seller's Assignment to the Trustee. Pursuant to the
terms of the Trust Agreement, upon execution hereof, this Agreement
and all rights and interests of Seller and PT-RTZ hereunder shall
automatically be assigned to the Trustee acting under such Trust
Agreement, for the benefit, amongst others, of Seller and PT-RTZ
and certain lenders to Seller or PT-RTZ. Said Trustee may further
assign the rights and interests previously referred to in this
Section 18.2 to an additional trustee or receiver as contemplated
by the Trust Agreement. In the event the Trust Agreement is
terminated, Seller and PT-RTZ may further assign such rights and
interests to any person who has or is entitled to an interest in
the COW or who has the right to participate in the production of
Concentrates to be sold and delivered under this Agreement or to
the Trustee in trust for any such person.
By executing this Agreement Buyer hereby acknowledges and
consents to any and all such assignments and agrees that (i) all
payments made pursuant to this Agreement by Buyer shall be made to
said Trustee (or to an additional trustee, or a receiver, if so
directed by the Trustee) without any deduction, counterclaim or
setoff other than adjustments contemplated by and deductions
specified in this Agreement other than incremental taxes or
liabilities associated with each payment to the Trustee and (ii) in
the event an Allocation Notice or an Enforcement Notice (as defined
in the Trust Agreement) shall have been given to the Trustee or, in
the event the Trust Agreement is terminated and a further
assignment by Seller or PT-RTZ as mentioned above is entered into,
Buyer shall accept performance by or on behalf of said Trustee,
such assignee, an additional trustee, a receiver or a successor
operator appointed to conduct operations contemplated by the COW,
provided that such performance shall in all other respects be in
accordance with the provisions of this Agreement. Buyer shall
execute and deliver such other documents, and do such acts and
things, as may be necessary or appropriate to acknowledge or
accomplish any assignment or assignments contemplated by, and to
effectuate the intent and purpose of, this Section 18.2.
18.3 Buyer's Assignment to a Trustee. Buyer shall have the
right to assign to a collateral trustee or collateral agent under
a trust agreement(s) or other similar agreement, all rights and
interests which Buyer now has or which shall hereafter arise under
this Agreement, as amended or modified from time to time, including
Buyer's right to receive proceeds payable to it in accordance with
this Agreement, for the sole purpose of providing security to one
or more lenders, and, in the event of any such assignment, Seller
agrees that (i) any payments to be made in accordance with the
terms of this Agreement by Seller shall, if and to the extent so
directed by Buyer, be made to the assignee or assignees, or one or
more duly appointed representatives thereof, without any deduction,
counterclaim or setoff other than adjustments contemplated and
deductions specified in this Agreement and (ii) in case of a
default under a security instrument, Seller shall accept
performance by such assignee or assignees or one or more such
representatives, provided that such performance shall in all other
respects be in accordance with the provisions of this Agreement.
Seller shall execute and deliver such other documents, and do such
acts and things, as may be necessary or appropriate to accomplish
any assignment or assignments contemplated by, and to effectuate
the intent and purpose of, this Section 18.3.
18.4 Other Assignments. Except as provided in Sections 18.2
and 18.3, this Agreement shall not be assignable by Buyer or Seller
without the express written consent of the other party, which
consent shall not be unreasonably withheld, and only in accordance
with a written instrument, in form and substance satisfactory to
the non-assigning party, by which the assignee or assignees shall
assume all the obligations hereunder of the assigning party. The
assumption of such obligations by the assignee shall not relieve
the assigning party of such obligations except to the extent that
such assignee or assignees shall in fact perform such obligations.
ARTICLE 19
Referees
19.1 General. In the event that any matter shall be
referred to referees pursuant to Sections 2.3, 8.10(c), 9.1(i)(b),
9.7 or Article 10, the referee mutually selected by the parties or,
failing such mutual selection, a majority of the three referees
appointed in accordance with this Article 19, shall make the
necessary determination. Each of Buyer and Seller shall use all
reasonable efforts to assure that the referee(s) shall be persons
qualified by reason of their experience and knowledge with respect
to both the worldwide marketing of copper concentrates and the
copper smelting business.
19.2 Selection of Referees. The party referring the
decision to the referees shall give notice in writing to the other
party. The parties shall then promptly confer with each other and
use all reasonable efforts to mutually agree upon the appointment
of a single referee to decide the matter involved. If agreement is
reached on such referee, both parties shall engage such referee.
If, notwithstanding such efforts, the parties are unable to
mutually agree upon a single referee within 15 days following the
date of receipt of the notice initiating such dispute resolution
process by the party to whom such notice was addressed, then the
party who sent the initiating notice shall appoint one referee. The
other party shall then appoint the second referee. In the event of
an unreasonable delay by either party in appointing a referee in
accordance with the above procedures, the Singapore International
Arbitration Centre, upon the application of the other party hereto,
shall appoint such referee within 30 days after such application is
made. A third referee shall be appointed by mutual agreement
between the parties. If the parties cannot agree on the third
referee within 45 days after the notice was given, the third
referee will be appointed by application to the Singapore
International Arbitration Centre who shall appoint the third
referee within 30 days after such application is made.
19.3 Proceedings. The referee(s) shall conduct its (their)
proceedings in accordance with rules it (they) shall establish for
itself (themselves) and it (they) shall use its (their) best
efforts to come to a decision within a period of 90 days from the
date on which the last referee was appointed. The parties shall
cooperate in good faith in providing the referee(s) with any
relevant information or necessary assistance it (they) may request.
19.4 The Decision. The referees shall be deemed to be
acting as experts and not as arbitrators, and their decision shall
be binding on the parties to the maximum extent of the law and be
deemed to be incorporated into this Agreement. Each such award
shall be retroactive to the date of the notice referred to in
Section 2.3, 8.10(a), 9.1(i)(b), or 9.7, or Article 10 as
applicable. Except where the referees decide to assess all costs
against the losing party and except as specifically provided to the
contrary elsewhere in this Agreement, each party shall be
responsible for and pay its own costs and expenses in such
negotiations and proceedings, including but not limited to the fees
and expenses of its attorneys, accountants, engineers and other
experts, plus one-half of all costs and expenses of the proceeding
itself including but not limited to the costs of rental or other
payment for the meeting room(s) or other place(s) where the
proceeding occurs, and each party shall bear the cost of the
referee nominated by it or on its behalf and the parties shall each
bear an equal share of the cost of the third referee.
ARTICLE 20
Arbitration
20.1 Amicable Settlement. Any dispute arising out of or in connection with this Agreement or its performance, including the validity, scope, meaning, construction, interpretation, application, breach or termination hereof shall to the extent possible be settled amicably by negotiation and discussion between the parties. Either party wishing to invoke the right to conduct such settlement negotiations shall give written notice to the other party of the substance of the dispute and propose a schedule of conferences to resolve the matter.
20.2 Arbitration Rules. Any such dispute not settled by
amicable agreement within 60 days of receipt of the written notice
described in Section 20.1 (or such other period as may be agreed by
both parties in writing in any specific case) shall be finally
settled by arbitration in Singapore as an international arbitration
under the auspices of the Singapore International Arbitration
Centre and applying the UNCITRAL Arbitration Rules, excluding only
those matters which are to be settled by referees or where another
settlement procedure is specifically provided for in this
Agreement. In the event of a conflict between the UNCITRAL
Arbitration Rules and the terms of this Agreement, the terms of
this Agreement shall govern. Documents may be submitted in either
English or Japanese without the need for translation.
20.3 Arbitrators. Any arbitration hereunder shall be
conducted in both the English and Japanese languages before a panel
of three arbitrators. Each arbitrator shall preferably be fluent
in both English and Japanese, but if fluent in only one of such
languages, such arbitrator shall retain an experienced interpreter
paid for by the appointing party (or in the case of the third
arbitrator the interpreter, if needed, shall be retained by such
arbitrator and paid for by the parties equally), and shall be
appointed in accordance with the following provisions:
(a) each of the Buyer and Seller shall appoint one
arbitrator and the two arbitrators so appointed shall
select the third arbitrator (who shall not be a
resident or national of the U.S. or Japan). The third
arbitrator shall act as the presiding arbitrator;
(b) if within a period of 30 days from the date of the
notice of arbitration, a party has failed to appoint an
arbitrator, or, the two appointed arbitrators have
failed to select the third arbitrator within 30 days
after both arbitrators have been appointed, the
Chairman of the Singapore International Arbitration
Centre shall appoint such arbitrator or arbitrators as
have not been appointed.
20.4 Arbitration Award. The award rendered in any
arbitration commenced hereunder shall apportion the costs of the
arbitration. With respect to the period of time from the effective
date of this Agreement up to and including the date on which the
Project Loans have been fully repaid, consistent with the
provisions of Article 631 R.V. (Reglement op de Rechtsvordering),
the parties expressly agree that the arbitrators shall be bound by
the strict rules of law in making their decisions, and shall not
render decisions ex aequo et bono. With respect to the period of
time following the date on which the Project Loans have been fully
repaid, consistent with the provisions of Article 631 R.V., the
arbitrators shall not be bound by strict rules of law where they
consider the application thereof to particular matters to be
inconsistent with the spirit of this Agreement and the underlying
intent of the parties, and as to such matters their conclusions
shall reflect their judgment of the correct interpretation of all
relevant terms hereof and the correct and just enforcement of this
Agreement in accordance with such terms.
20.5 Award to be Final and Conclusive. The award rendered
in any arbitration commenced hereunder shall be final and
conclusive, and judgment thereon may be entered in any court having
jurisdiction for its enforcement. The parties expressly agree to
waive Article 641 of the Indonesian Code of Civil Procedure and
Articles 15 and 108 of Law No. 1 of 1950 (Supreme Court Rules), and
accordingly there shall be no appeal to any court from the decision
of the panel of arbitrators. No party shall be entitled to
commence or maintain any action in a court of law upon any matter
in dispute until such matter shall have been submitted and decided
as herein provided and then only for the enforcement of the board
of arbitration's award.
20.6 Performance of Obligations Pending Decision. Pending
submission to the board of arbitration and thereafter until the
board of arbitration gives its award, the parties hereto agree that
they will continue to perform all their respective obligations
under this Agreement without prejudice to the final judgment in
accordance with the said award.
20.7 Waiver of Right to Terminate Board of Arbitration. The
parties hereto expressly agree to waive the applicability of
Article 650.2 of the Indonesian Commercial Code, so that the
appointment of the board of arbitration shall not terminate as of
the sixth month from the date of its appointment. The mandate of
the board of arbitration reconstituted in accordance with the terms
hereof shall remain in effect until a final arbitral award has been
issued by the board of arbitration.
20.8 The parties hereto agree that any matter which is
expressly subject to final settlement or negotiation pursuant to
Section 2.3, 8.10(c), 9.1(i)(b), 9.7 or Article 10, shall not be
referred to arbitration pursuant to this Article 20.
ARTICLE 21
Governing Law
The provisions of this Agreement shall be governed in all respects by and construed in accordance with the laws of the State of New York, U.S.A.
ARTICLE 22
Force Majeure
22.1 Definition. The term "Force Majeure" shall mean any
event beyond the control of the party affected thereby, including
without limitation, acts of God or the public enemy, war, warlike
operations, strikes, labor slowdowns or other work stoppages, labor
shortages, combination of workmen, suspension of labor, lockout or
other labor disturbance, fire, flood, explosion, earthquake, storm,
tidal wave or similar disturbance, drought, breakdown of machinery
or facilities, inability to obtain raw materials, operating
materials, plant equipment or materials required for maintenance or
repairs, sabotage, riot, confiscation, embargo, action of any
government including the passage of new legislation, court orders
and future orders (lawful or otherwise) of any regulatory body
having jurisdiction, accident, lack of truck or railroad
transportation or seaboard freight facilities, or delays in route,
or without limiting the generality of the foregoing, any other
disabling causes beyond the reasonable control of Seller or Buyer.
22.2 Effect of Force Majeure. Either party to this
Agreement shall be excused from making or accepting deliveries of
Concentrates to the extent described in this Article 22 when its
inability to perform is due to Force Majeure. The party claiming
force majeure shall give prompt notice thereof to the other party,
specifying the nature of the Force Majeure in reasonable detail as
well as its estimated duration, upon its occurrence. Notice shall
also be given immediately upon the termination of the Force
Majeure. The notice given on the occurrence of an event of Force
Majeure shall be referred to as a declaration of Force Majeure. If
the party receiving the declaration of Force Majeure disputes that
an event of Force Majeure has occurred, the matter will be resolved
as provided in Article 20, it being understood, however, that such
dispute shall not defeat the effectiveness of such notice pending
the resolution of such dispute. In the event of such dispute, the
parties will expedite the completion of arbitration to the maximum
extent feasible.
(a) As soon as possible following a declaration of
Force Majeure the parties shall discuss all relevant details of the
Force Majeure, including but not limited to all facts which would
assist in evaluating the projected duration of such Force Majeure.
At the end of such meeting or as soon thereafter as practicable the
party which declared such Force Majeure shall notify the non-
declaring party of its updated best estimate of the projected
duration of the Force Majeure.
(b) If the estimated duration of the event of Force
Majeure is no more than 15 consecutive days, the quantity of
Concentrates which cannot be delivered or accepted as a result of
such event of Force Majeure shall be delivered as soon as
practicable following the termination of such event of Force
Majeure.
(c) If the estimated duration of the event of Force
Majeure is more than 15 consecutive days, either party may, by
notice in writing to the other party, cancel in whole or in part
the sale and purchase of the quantity of Concentrates which cannot
be delivered or accepted, as a result of, and during the period of
continuance of the event of Force Majeure in which event the
Contractual Tonnage for such Contract Year shall be automatically
reduced by the quantity of Concentrates which are affected or
reasonably foreseen to be affected by the declaring party. If such
cancellation is made in respect of an event of Force Majeure
declared by Seller, Buyer shall be free to purchase from third
party suppliers of copper concentrates the quantities of
Concentrates which it reasonably requires during the estimated
duration of the Force Majeure event.
If any event of Force Majeure results in a suspension
of Seller's Concentrate production for more than 15 consecutive
days, Seller shall use its best efforts to deliver to Buyer, and
Buyer shall use its best efforts to accept delivery of, that
portion (provided that such portion shall be at least 5,000 DMT) of
the Concentrates allocated to this Agreement which had been
produced prior to the interruption of production by the event of
Force Majeure and Buyer shall accept and pay for all such
Concentrates so delivered.
22.3 Parties to Use Reasonable Efforts. Both parties agree
to use all reasonable efforts from time to time and at all times to
prevent the occurrence of any event of Force Majeure, and to cause
the termination of any event of Force Majeure that has occurred.
Notwithstanding the foregoing, the settlement of labor disputes
shall be entirely in the discretion of the party affected thereby
and there shall be no obligation on the affected party to test or
refrain from testing the validity of any order, regulation or law
relating to such labor disputes.
ARTICLE 23
Default
23.1 Events of Default. A party shall be deemed to be in
default of this Agreement if any of the following occur:
A. The party shall have become voluntarily or
involuntarily the subject of any receivership, bankruptcy or
insolvency proceedings; or
B. the party has committed a material breach of
any provision of this Agreement and such breach is not cured within
ninety (90) days after notice thereof is given to the defaulting
party, or within such longer period of time as may be reasonable
under the circumstances where the cure of the breach cannot be
completed within 90 days notwithstanding the continuous best
efforts of the defaulting party.
23.2 Notice of Default. If either party claims the other
party is in default with respect to the provisions of this
Agreement, the party so claiming shall give notice to the party
alleged to be in default, designating such claimed default and
providing all particulars of which it is aware. Within thirty (30)
days after its receipt of such notice, the party alleged to be in
default may either (a) cure such default, or (b) in good faith give
the other party notice that the party alleged to be in default
denies that such default has occurred. In the event a default is
denied by a party, said party shall not be deemed to be in default
hereof unless and until said party is found by a final, non-
appealable arbitral decision to be in default.
23.3 Liability for Default. In the event that a party's
default is confirmed by arbitration as provided in Article 20, the
arbitrators shall be entitled to grant to the non-defaulting party
such relief as they determine to be appropriate, subject to the
limitation of Article 15 that neither party shall be entitled to
loss of anticipated profits or consequential damages.
ARTICLE 24
Non-Waiver of Defaults
The failure of either party hereto to require in any one or more instances strict performance of any of the provisions of this Agreement, or a waiver by either party at any time of its rights with respect to a default under this Agreement by the other party hereto, or an election not to take advantage of any of its rights thereunder shall not be deemed a waiver of any such rights (except to the extent, and only to the extent, specifically waived in writing). No delay in asserting or enforcing any right hereunder shall be deemed a waiver of or limitation on such right; provided, however, that this Article shall not operate as a waiver of any applicable statute of limitations.
ARTICLE 25
Miscellaneous
25.1 Opinion of Buyer's Counsel. Buyer shall deliver to
Seller and/or to the Trustee under the Trust Agreement, for the
benefit of each of them, if requested to do so in writing at any
time prior to the Effective Date, an opinion of Buyer's counsel as
to the following:
(a) that the Buyer has been duly created and is
validly existing under the laws where Buyer was incorporated;
(b) that Buyer has full corporate power and
authority to own its properties and conduct the business in which
it is engaged and to make and perform this Agreement; and
(c) that this Agreement has been duly authorized,
executed and delivered by Buyer and constitutes the legal, valid
and binding obligation of Buyer, enforceable in accordance with its
terms.
25.2 Opinion of Seller's Counsel. Seller shall deliver to
Buyer and/or to a collateral lender or collateral agent of Buyer's
Project lenders, for the benefit of each of them, if requested to
do so in writing at any time prior to the Effective Date, an
opinion of Seller's counsel as to the following:
(a) that the Seller has been duly created and is
validly existing under the laws where Seller was incorporated;
(b) that Seller has full corporate power and
authority to own its properties and conduct the business in which
it is engaged and to make and perform this Agreement; and
(c) that this Agreement has been duly authorized,
executed and delivered by Seller and constitutes the legal, valid
and binding obligation of Seller, enforceable in accordance with
its terms.
25.3 Entire Agreement. This Agreement sets forth the entire
understanding of the parties with respect to the subject matter
hereof. Neither this Agreement nor any provision hereof can be
waived, changed, discharged or terminated except by an instrument
in writing signed by the party against which the enforcement of any
waiver, change, discharge or termination is sought.
25.4 Counterparts. This Agreement may be executed in any
number of counterparts and shall become binding when executed by
Seller and by Buyer. Each of such counterparts shall for all
purposes be deemed to be an original, and all such counterparts
shall together constitute but one and the same agreement.
25.5 Headings. The headings of the respective Articles,
Sections and Subsections of this Agreement are inserted for
convenience of reference only and shall not be deemed to be a part
of this Agreement or considered in construing this Agreement.
25.6 Publication of Articles. Seller hereby releases the
Direksi (executive officers) and the Komisaris (commissioners) of
Buyer from any personal liability that such Direksi or Komisaris
may have hereunder solely as a consequence of Buyer having executed
this Agreement prior to the publication of its Articles of
Association in the Official Gazette of the Republic of Indonesia.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the day and year
first above written.
WITNESS: P.T. FREEPORT INDONESIA COMPANY _______________________ By ___________________________ Louis T. Zawislak Senior Vice President |
WITNESS: P.T. SMELTING CO.
________________________ By _____________________________
APPENDIX "A"
DEFINITIONS
|
Attached to and made a part of that certain Concentrate Purchase and Sales Agreement between P.T. Freeport Indonesia Company and P.T. Smelting Co., dated as of December 11, 1996.
NOTE: ALL REFERENCES IN THIS APPENDIX "A" TO SECTION NOS. ARE TO THE SECTION NOS. OF THE ABOVE REFERENCED AGREEMENT.
1. "Affiliate" shall mean any entity which directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with a party to this Agreement; where control is determined by possession, directly or indirectly, through one or more intermediaries, of the ability to direct the management and policies of an entity and control shall be presumed to exist whenever one person or entity holds, directly or indirectly, through one or more intermediaries, twenty-five percent (25%) or more of the outstanding voting shares or interests in another entity.
2. "AIP" shall have the meaning set forth in the fourth WHEREAS clause of this Agreement.
3. "Agreement" shall mean the Concentrate Purchase and Sales Agreement between Buyer and Seller to which this Appendix "A" is attached.
4. "Annual Budgeted Copper Grade" shall mean with respect to each Contract Year the percentage of copper contained in Concentrates to be delivered hereunder as estimated by Seller pursuant to Section 2.2 as part of the annual product review, and as furnished to Buyer under the provisions of this Agreement.
5. "Annual Shipping Schedule Quantity" shall have the meaning set forth in Section 3.2 B.
6. "Approved Japanese Port" shall mean Naoshima and Onahama and, if and when Nippon Mining and Metals Co., Ltd. is a shareholder of Buyer, Saganoseki.
7. "Business Day" shall mean any day other than Saturday, Sunday or a day that is a bank or public holiday in the State of New York, United States of America or in Jakarta or Gresik, Indonesia (one of such Indonesian locations to be specified by Buyer as soon as possible following the date of this Agreement), as applicable.
8. "CIF" shall have the meaning set forth for such term in the publication Incoterms (latest edition).
9. "Commencement of Commercial Operations" shall mean the earlier of (i) the Production Date and (ii) the first anniversary of the date of Mechanical Completion.
10. "Commercial Terms" shall have the meaning specified in
Section 10.2.
11. "Concentrates" shall mean sulphide flotation copper concentrates produced at and originating from the Contract Area.
12. "Contract Area" shall have the meaning set forth in the first WHEREAS clause to this Agreement.
13. "Contracts Criteria" shall mean and include the
following characteristics of a Reference Contract:
(i) The party designating the Reference Contract must be a
signatory party to such Contract. For purposes of this criteria
as it applies to the Reference Contracts designated by Buyer, MMC
must be a signatory party;
(ii) The Reference Contract must have a term of at least two
(2) years;
(iii) The Reference Contract must be for the sale of 30,000
DMT's or more for the account of the designating party's account
for the year under consideration. However, a 30,000 DMT per year
concentrate sales agreement which quantity consists of two (2)
15,000 DMT per year bricks is acceptable provided the terms used
in the designating party's calculations of its weighted average
figures are in the first year of the brick (terms in later years
of a brick shall not be used because it is deemed that they do
not represent the current market). Buyer and Seller will
designate larger annual tonnage concentrate sales agreements in
preference to smaller annual tonnage concentrate sales agreements
unless special circumstances exist which cause the designating
party to believe in good faith that the larger annual tonnage
agreements are less representative of the then current world
market terms and conditions;
(iv) The quantity which a party may use from any particular
Reference Contract for purposes of making its weighted average
calculation shall be limited to the quantity which such party is
purchasing or selling under such Contract (i.e. a party cannot
use quantities intended for another party);
(v) The Reference Contract must be between the owner of a
smelter and the owner of a mine;
(vi) The Reference Contract must be between parties who are
not Affiliates;
(vii) A Reference Contract must not be between a party to
this Agreement and a third party (or such third party's
Affiliate) with whom the designating party has given or received
special financial or other consideration (such as a loan or other
contractual arrangement) which may affect the commercial terms of
such Reference Contract. Notwithstanding the foregoing, if a
party designates such a Contract and the other party raises this
criteria as an issue, then if the submitting party presents
arguments to the auditor which satisfy such auditor that the
terms were negotiated on a strictly arms length basis and were
not affected by such special financial or other consideration,
such Contract will be deemed to satisfy this criteria;
(viii) Neither the Ertsberg Concentrate Agreement nor the
MMC Concentrate Agreement shall be designated by either party as
these agreements are utilized in accordance with the provisions
of Section 9.2(i);
(ix) All commercial terms of the Reference Contracts which
are used in the weighted average calculations must have been
settled during the period from October 1 of the immediately
preceding year to March 1 of the current year and be applicable
to the immediately succeeding annual period following such
settlement. If a party is unable to settle a Reference Contract
by March 1 which was scheduled for settlement on or before March
1 according to the terms of such Contract, but gives notice to
the auditor that it believes in good faith that such settlement
will be concluded prior to March 31, and such party then
concludes such settlement during the month of March and provides
all of such terms as settled to the auditor by March 31, then
such Contract will be deemed to satisfy this criteria;
(x) The Reference Contract must be for copper concentrates
which are generally considered within the market as "clean
concentrates" and which have a current average annual copper
grade of 26% to 46%. "Clean concentrates" shall mean copper
concentrates not containing impurities or other characteristics
which cause the smelting and refining charges for such
concentrates to be inflated relative to the generally applicable
market level of such charges; and
(xi) A Reference Contract shall not be designated by a party
to replace a Reference Contract which has previously been ruled
eligible by the auditor, unless it: (a) is the replacement for an
eligible Reference Contract as a result of a party's exercise of
its discretionary right to replace one eligible Reference
Contract per calendar year, or (b) is a replacement for a
previously eligible Reference Contract which has terminated or
does not satisfy all of the Contracts Criteria for the current
annual period.
14. "Contractual Tonnage" with respect to each Contract Year shall mean the quantity of Concentrates measured in DMTs which Buyer is obligated to purchase, pay for and accept delivery of and which Seller is obligated to sell and deliver during such Contract Year, which quantity is determined in accordance with the provisions of Section 3.2, it being understood that the term "Contractual Tonnage" as set out in Section 3.2 may be modified in accordance with the express written provisions of other sections of this Agreement.
15. "Contract Year" shall mean, with respect to the first
Contract Year, the period of time commencing three (3) months
following the date of Mechanical Completion and ending twelve
(12) months following such date; with respect to the second
Contract Year, the period of time commencing at the end of the
first Contract Year and ending twelve (12) months following such
date; with respect to the third Contract Year, the period of time
commencing at the end of the second Contract Year and ending at
midnight on December 31 (at the Port of Loading) of the calendar
year in which such third Contract Year began; and with respect to
the fourth Contract Year and each succeeding Contract Year during
the term of this Agreement, each calendar year thereafter at the
Port of Loading.
16. "COW" shall have the meaning set forth in the first WHEREAS clause of this Agreement.
17. "Current Settlement" shall have the meaning set forth in subsection (c) of Section 9.2(i) of this Agreement.
18. "Date of Arrival" shall mean, with respect to shipments to a Port of Discharge or alternate port within Indonesia, the date on which the carrying vessel tenders Notice of Readiness at such port, and with respect to shipments to a Port of Discharge or alternate port outside Indonesia, the date on which the vessel carrying such quantity first reports officially to customs, quarantine or such other location at which vessels customarily report for discharging cargos at such port.
19. "Effective Date" shall mean the date first written above (subject to approval of this Agreement by the Government).
20. "Ertsberg Concentrate Agreement" shall mean that certain Concentrate Sales Agreement between Seller and certain Japanese corporations, dated December 31, 1990, as amended, and any concentrate sales agreement between Seller and any one or more of such Japanese corporations (but which must in any event include MMC) entered into upon or following expiration of such December 31, 1990 Agreement, as amended.
21. "Facilities" shall mean the copper smelter, refinery, jetty and other facilities of the Project.
22. "Financial Disadvantage" shall mean the net impact to the affected party resulting from the failure of the other party to comply with the terms of this Agreement and consisting of (i) documented actual lower revenues from sales, plus (ii) any costs and expenses incurred which are in excess of those costs which would otherwise have been incurred (including increased general and administrative expenses and the increased costs of purchasing concentrates), and minus (iii) any costs and expenses avoided thereby or reduced as a result of each party's duty to mitigate losses; but Financial Disadvantage shall not include any losses or costs arising out of third party liabilities.
23. "Five-Year Expected Analysis" shall have the meaning set forth in Section 2.2.
24. "Floor TC's and RC's" shall have the meaning set forth in Section 9.3 of this Agreement.
25. "FLUOR", "FDEC" and "FDA" shall have the meanings set forth in the WHEREAS clauses of this Agreement.
26. "Government" shall mean the Government of the Republic of Indonesia and its Ministries, agencies and political subdivisions.
27. "Initial Inventory Period" shall mean the three month period following Mechanical Completion.
28. "Inventory Allowance" shall have the meaning set forth in Section 3.3 of this Agreement.
29. "Major Contracts" shall mean those contracts as described in subparagraphs (a) through (g) (inclusive) of Section 4.3 of the Project Planning Agreement.
30. "Mechanical Completion" of the Facility means when, except for minor items of work that would not affect the performance or operation of the Facility such as painting, landscaping and so forth, (a) all materials and equipment for the Facility have been installed by the Contractor or Subcontractors in accordance with the plans and the Scope Book, and checked and tested for alignment, lubrication, rotation and hydrostatic or pneumatic pressure integrity; (b) the Facility has been flushed and cleaned out as necessary; (c) all systems are ready to commence start-up, testing and operations; and (d) a Punchlist of the uncompleted items shall be established and mutually agreed upon by Owners, Independent Engineer and Contractor, provided that Owner and Independent Engineer may waive, in writing, completion of Punchlist items. It is understood that Mechanical Completion can be accomplished in incremental steps, the sum total of which, after Notice in accordance with Section 8.2 of the Construction Contract described below, shall constitute Mechanical Completion of the Facility. All capitalized words in this definition shall have the meaning ascribed to them in the Construction Contract between P.T. Chiyoda International Indonesia and Buyer, effective as of May 31, 1996.
31. "MMC" shall have the meaning set forth in the third WHEREAS clause of this Agreement.
32. "MMC Concentrate Agreement" shall mean that certain Concentrate Sales Agreement between Seller and MMC, dated as of January 1, 1995, as amended, and any concentrate sales agreement between Seller and MMC entered into upon or following expiration of such January 1, 1995 Agreement, as amended.
33. "Month of Arrival" with reference to each cargo of Concentrates shall mean the calendar month the Date of Arrival falls in.
34. "Month of Scheduled Shipment" with reference to each cargo of Concentrates shall mean the calendar month set forth in the shipping schedule provided by Buyer to Seller pursuant to Article 6, as it is finally revised or amended in accordance with the provisions of such Article.
35. "Normal Office Hours" shall mean (i) on Monday through Friday, from _____:00 to _____:00, and (ii) on Saturday, from _____:00 to _____:00; provided, however, Normal Office Hours shall not include (unless such days are worked) national holidays, customary local and smelter holidays, and Saturdays customarily not worked by the office personnel at the Receiving Works. The times to be inserted in the blank spaces above shall be mutually agreed upon by Buyer and Seller as soon as possible following the date of this Agreement.
36. "Notice of Readiness" shall have the meaning set forth in Section 5.4.
37. "One Year in Advance Forecasted Quantity Requirement" shall have the meaning set forth in Section 3.2 A.
38. "Part A Tonnage" shall mean fifty percent (50%) of the Concentrates delivered in each cargo during each Contract Year of the term of this Agreement. The smelting and refining charge deduction for Part A Tonnage shall be determined as provided for in Section 9.1.
39. "Part B Tonnage" shall mean fifty percent (50%) of the Concentrates delivered in each cargo during each Contract Year of the term of this Agreement. The smelting and refining charge deduction for Part B Tonnage shall be determined as provided for in Section 9.2.
40. "Payable Copper" shall have the meaning set forth in
Section 8.1 of this Agreement.
41. "Payable Gold" shall have the meaning set forth in
Section 8.2 of this Agreement.
42. "Payable Silver" shall have the meaning set forth in
Section 8.3 of this Agreement.
43. "Permanent Holiday Tonnage" shall have the meaning set forth in Section 9.1(i).
44. "Port of Discharge" shall mean Buyer's dedicated berth at Gresik, Java, Indonesia or such other port(s) as may be mutually agreed upon. The term "Port of Discharge" shall also mean an Approved Japanese Port with respect to shipments of Concentrates to such Approved Japanese Port in accordance with the provisions of Section 2.3(c).
45. "Port of Loading" shall mean Amamapare, Irian Jaya, Indonesia or such other port at which Concentrates are loaded for shipment to the Port of Discharge.
46. "Preliminary Estimated Analysis" shall have the meaning specified in Section 2.2.
47. "Production Date" shall mean the date when the first 1,200 metric tons of anodes of a quality acceptable by Buyer for refining by Buyer's refinery have been produced over a period of four consecutive days by Buyer's smelter.
48. "Project" shall have the meaning set forth in the second WHEREAS clause of this Agreement.
49. "Project Loans" shall mean the total committed amount of the term and working capital loans to be provided pursuant to the initial financing documents to be entered into by Buyer and certain lenders for the financing of the Project (other than loans to Buyer from its shareholders).
50. "Project Planning Agreement" shall have the meaning set out in the sixth WHEREAS clause of this Agreement including any subsequent modifications, supplements or amendments thereto.
51. "Quotational Period" shall have the meaning set forth in Section 8.4 of this Agreement.
52. "Receiving Works" shall mean the Port of Discharge or the Facilities, whichever is applicable.
53. "Reference Contract" shall mean a concentrate purchase or sales agreement which is or may be designated by Buyer or Seller in accordance with and for the purposes set out in Section 9.2.
54. "Rolling Five Year Concentrates Requirements Forecast" shall have the meaning set forth in Section 3.2 A.
55. "Shareholders Agreement" shall have the meaning specified in the ninth WHEREAS clause of this Agreement.
56. "Trust Agreement" shall mean the Restated Trust Agreement dated as of October 11, 1996, among Seller, P.T. RTZ- CRA Indonesia ("PT-RTZ"), The Chase Manhattan Bank (National Association), as Depository, and First Trust of New York, National Association, as Trustee, as such Restated Trust Agreement may be amended, modified and/or restated from time to time, or any successor agreement pursuant to which Seller and/or PT-RTZ, as participants holding certain undivided interests in the COW and in the agreements pursuant to which Concentrates are sold, shall assign or has assigned any rights and interests which Seller and PT-RTZ now have or may hereafter have under this Agreement (as this Agreement may be amended and modified from time to time) including but not limited to the right to receive sales proceeds, for the purposes, inter alia, of facilitating the administration of the respective interests of Seller and PT-RTZ and of providing security to one or more lenders to Seller or PT- RTZ from time to time.
57. "Trustee" shall have the meaning specified in the definition of Trust Agreement.
58. "Weights, Measures and Currencies" shall mean: A metric ton = 2,204.62 pounds (avoirdupois) A ton = a metric ton A DMT = a dry metric ton A WMT = a wet metric ton A unit = a hundredth part An ounce = a troy ounce of 31.1035 grams A pound = 453.593 grams (avoirdupois) Dollars = currency of the United States |
of America (represented by the sign "$")
Dated October 11, 1996
(1) P.T. FREEPORT INDONESIA COMPANY
(2) P.T. RTZ-CRA INDONESIA
PARTICIPATION AGREEMENT
with respect to the Contract Area
TABLE OF CONTENTS
1. DEFINITIONS 1
1.2 Interpretation 11
1.3 Headings 11
2. PURPOSES AND TERM 11
2.1 General 11
2.2 Purposes 12
2.3 Assignment of COW 12
2.4 Term 13
2.5 Termination 13
3. RELATIONSHIP OF THE PARTICIPANTS 14
3.1 Contribution of Use of Assets 14
3.2 Obligations Several and Not Joint 14
3.3 Not a Partnership 14
3.4 No Authority to Act for other Participants 15
3.5 No Joint Receipt of Income 15
3.6 Area of Mutual Interest 15
3.7 Other Business Opportunities 17
3.8 Waiver of Right to Partition 17
3.9 Employees 17
3.10 Title 17
4. REPRESENTATIONS AND WARRANTIES 18
4.1 Capacity 18
4.2 PT-FI Representations and Warranties 18
4.3 Disclosures 20
5. EXPLORATION CONTRIBUTIONS BY PARTICIPANTS 20
5.1 Exploration Contribution by PT-RTZ 20
5.2 Additional Cash Contributions 20
6. INTERESTS OF PARTICIPANTS 21
6.1 Participating Interests 21
6.2 Changes in Participating Interests 21
6.3 Default in Making Contributions 22
6.4 Continuing Liabilities Upon Adjustment of the Participating
Interests 26
7. COVENANTS AND RIGHTS 27
7.1 Mutual Covenants 27
7.2 PT-FI Covenants 28
7.3 PT-RTZ Covenant 30
7.4 Power of Attorney 30
7.5 Retained PT-FI Rights 31
8. COMMITTEES 33
8.1 Exploration Committees 33
8.2 Operating Committee 33
8.3 Other Committees 34
8.4 Quorum 34
8.5 Decisions 34
8.6 Meetings 35
8.7 Action Without Meeting 36
8.8 Close-down 36
9. OPERATOR 37
9.1 Appointment 37
9.2 Powers and Duties of Operator 37
9.3 No Fee 41
9.4 Standard of Care 41
9.5 Resignation; Deemed Offer to Resign 41
9.6 Transactions With Affiliates 43
10. FEASIBILITY STUDY INTO EXPANSION 43
11. GREENFIELD PROJECTS AND LATER EXPANSION PROJECTS 45
12. SOLE RISK 46
13. PROGRAMMES AND BUDGETS 48
14. TAXATION IN INDONESIA 48
15. TRANSFER OF PARTICIPATING INTERESTS 49
15.1 General 49
15.2 Limitations on Free Transferability 49
15.3 First Offer Right 51
15.4 Exceptions to First Offer Right 51
16. GENERAL PROVISIONS 52
16.1 Notices 52
16.2 Waiver 53
16.3 Modification 53
16.4 Force Majeure 54
16.5 Governing Law 55
16.6 Penalties 56
16.7 Rule Against Perpetuities 57
16.8 Further Assurances 57
16.9 Confidentiality and Public Statements 57
16.10 Entire Agreement; Successors and Assigns 58
16.11 Severability 59
16.12 Indonesian Law Waiver 59
16.13 Tax Covenant 59
SCHEDULE 1 62
Privatisation Agreements 62
SCHEDULE 2 65
Deed of Assignment of Interest in COW 65
SCHEDULE 3 69
Exceptions to Representations and Warranties 69
ANNEX A 70
Product Schedule 70
ANNEX B 72
Financial and Accounting Procedures 72
ATTACHMENT X 1
THIS AGREEMENT is made October 11, 1996
BETWEEN:
(1) P.T. FREEPORT INDONESIA COMPANY, a limited liability company
organised under the laws of the Republic of Indonesia and
domesticated in the State of Delaware, U.S.A. ("PT-FI") and
(2) P.T. RTZ-CRA INDONESIA, a company in formation under the laws
of the Republic of Indonesia ("PT-RTZ"),
WHEREAS
(A) By a Contract of Work dated 30 December 1991 made between The
Government of the Republic of Indonesia (the "Government") and
PT-FI, the Government appointed PT-FI as the sole contractor for
the Government with respect to the Contract Area, as defined in
the Contract of Work, with the sole rights to explore, mine,
process, store, transport, market, sell, and dispose of Products,
as defined below, in the Contract Area (defined as aforesaid)
(B) PT-FI desires PT-RTZ and PT-RTZ desires to participate in
operations under the COW (as defined below) on the terms and
conditions hereinafter appearing
IT IS HEREBY AGREED as follows:
1. DEFINITIONS
1.1 In this Agreement (including the Schedules and Annexes
hereto), unless the context otherwise requires, the following
terms shall have the following meanings:
1.1.1 "Affiliate" or "Affiliates" of any specified person means
any such other person, company, partnership, joint venture, or
other form of enterprise which directly or indirectly controls,
or is controlled by or is under common control with, the
specified person and, in the case of RTZ, includes CRA Limited
and the Affiliates of CRA Limited. The term "control" as used
herein means possession, directly or indirectly, of the power to
direct or cause direction of management and policies through
ownership of voting securities, contract, voting trust or
otherwise;
1.1.2 "Agreement" means this Participation Agreement, including
all amendments and modifications thereof, and all schedules and
annexes hereto, which are incorporated herein by this reference;
1.1.3 "Annual Budget Meeting" means the meeting defined in Clause
8.6;
1.1.4 "Approved Expansion Project" means any project of Expansion
in Contract Area Block A which has been approved by the boards of
directors of PT-FI, FCX and PT-RTZ or is otherwise an Approved
Expansion Project in accordance with Clause 10.3;
1.1.5 "Approved Programme and Budget" means a Programme and
Budget which has been approved by the boards of directors of
PT-FI and PT-RTZ upon the recommendation of the relevant
Exploration Committee or the Operating Committee, as appropriate,
as provided in Clause 8.5 and paragraph 10.1 of the Financial and
Accounting Procedures;
1.1.6 "Area of Mutual Interest" has the meaning assigned to that
expression in Clause 3.6;
1.1.7 "Assignment" means the assignment referred to in Clause
2.3;
1.1.8 "board of directors" of PT-FI or PT-RTZ shall mean the
respective board of directors and/or board of commissioners (if
any) of such entity and, in the case of PT-RTZ during the period
prior to Completion of Formation, means the board of directors
and/or board of commissioners as constituted from time to time
pursuant to the Deed of Establishment of PT-RTZ, whichever is the
appropriate body (whether pursuant to its constitutional
documents or law) for the decision or action in question;
1.1.9 "Budget" means a detailed estimate of all costs to be
incurred by the Participants with respect to a Programme and an
estimated schedule of cash calls to be made therefor;
1.1.10 "Budgetary Period" means the budgetary period established
in a Programme and Budget;
1.1.11 "Chargeable Operations" has the meaning assigned to that
expression in the Financial and Accounting Procedures;
1.1.12 "Close-down" means a decision by the boards of directors
of PT-FI, FCX and PT-RTZ, upon the recommendation of the
Operating Committee, to cease all Mining and Processing in the
Contract Area;
1.1.13 "Committee" means whichever committee during the applicable time (be that the Exploration Committee in respect of either Contract Area Block A or Contract Area Block B or the Operating Committee or a committee established pursuant to Clause 8.3) is responsible for the subject matter under this Agreement as provided in Clause 8; 1.1.14 "Completion of Formation" has the meaning assigned to that expression in the Early Closing Agreement; 1.1.15 "Confidential Information" means the confidential information referred to in Clause 16.9; 1.1.16 "Contract Area" means the area defined as such under the COW; 1.1.17 "Contract Area Block" means, as appropriate or as the context requires, either Contract Area Block A or Contract Area Block B; 1.1.18 "Contract Area Block A" has the meaning assigned to that expression in the COW; 1.1.19 "Contract Area Block B" has the meaning assigned to that expression in the COW; 1.1.20 "Cover Payment" means the payment described in Clause 6.3.2.1; 1.1.21 "COW" means the Contract of Work referred to in Recital (A) of this Agreement and includes any other contract of work, whenever granted, for the conduct of Exploration, Development or Mining in all or any part of the Contract Area; 1.1.22 "Cut-off Date" means the last day of the final Year covered in the Product Schedule, as the same may be extended pursuant to Clause 16.4.2; 1.1.23 "Defaulting Participant" means the Participant referred to in Clause 6.3; 1.1.24 "Development" has the meaning assigned to that expression in the Financial and Accounting Procedures; 1.1.25 "Dispose" means, in relation to any relevant property, to sell, transfer, assign, declare oneself a trustee of or part with the use or benefit of or otherwise dispose of the relevant property (or any interest therein); 1.1.26 "dollar" or "$" means a dollar being the lawful currency of the United States of America; 1.1.27 "Early Closing Agreement" means the agreement dated as of the date of this Agreement between PT-FI, FCX, PT-RTZ, RTZ, RTZ Jersey Investments One Limited, RTZ Jersey Nominees Limited, First Trust Of New York, National Association, as Trustee, The Chase Manhattan Bank (formerly Chemical Bank), as Administrative Agent, JAA Security Agent and Security Agent and The Chase Manhattan Bank (as successor to The Chase Manhattan Bank (National Association)), as Depositary and Documentary Agent; 1.1.28 "Effective Date" means the date of this Agreement; 1.1.29 "Encumbrance" means any mortgage, pledge, lien, charge, power of attorney, assignment for the purpose of providing security, hypothecation, security interest or trust arrangement for the purpose of providing security and any other security agreement or arrangement; 1.1.30 "Enterprise Operations" means all operations within the Contract Area under the COW by or on behalf of PT-FI or by or on behalf of PT-FI and PT-RTZ, including the Mining of the 10-K Reserves and Joint Operations, but excluding Sole Risk Ventures; 1.1.31 "Expansion" means a Development which is designed to increase the productive capacity of existing facilities (whether comprising PT-FI Available Assets or Joint Account Assets and whether Mining, milling and delivery facilities or related infrastructure) for the obtaining of Products from the aggregate resources in Contract Area Block A (being both the 10-K Reserves and reserves other than the 10-K Reserves) at an aggregate rate in excess of the then existing production capacity of such facility; 1.1.32 "Exploration" has the meaning assigned to that expression in the Financial and Accounting Procedures; 1.1.33 "Exploration Committee" means a committee established under Clause 8.1; 1.1.34 "Exploration Costs" has the meaning assigned to that expression in the Financial and Accounting Procedures as the same may have been amended or clarified with respect to specific costs as set out in the Memorandum of Understanding attached hereto and marked X and with such further changes with respect to specific costs as shall from time to time be approved in writing by the Participants; 1.1.35 "Exploration Obligation" means the obligation on the part of RTZ contained in Clause 6(1) of the Implementation Agreement as the same may have been modified in the agreement of even date herewith made between PT-FI, P.T. Irja Eastern Minerals Corporation, FCX, RTZ and PT-RTZ, a copy of which is annexed hereto and marked X and with such further changes as shall from time to time be approved in writing by the Participants; 1.1.36 "FCX" means Freeport-McMoRan Copper & Gold Inc., a Delaware corporation; 1.1.37 "Feasibility Study" means a report showing the economic viability of a proposed Development project, which may relate to Expansion, and shall include (i) reasonable assessment of the size and quality of the minable reserves of Minerals, (ii) reasonable assessments of the amenability of the Minerals to metallurgical treatment, (iii) reasonable description of the work, equipment, supplies and permitting, if any, required to bring the prospective deposit of Minerals into commercial production and the estimated costs thereof, (iv) conclusions regarding the economic viability of bringing the prospective deposit of Minerals into commercial production, (v) an analysis of the impact which such project will have on the existing Enterprise Operations and Sole Risk Programmes and (vi) such other information as may be appropriate to allow banking and other financial institutions familiar with the mining business to make a firm decision whether or not to advance funds sufficient to finance the Development in whole or in part; 1.1.38 "Financial and Accounting Procedures" means the document so entitled, in the form attached to this Agreement as Annex B; 1.1.39 "Government" means the Government of the Republic of Indonesia; 1.1.40 "Greenfield Project" means a Development project which does not rely to any significant extent on PT-FI Available Assets, the 10-K Reserves or the Joint Account Assets constituting part of any prior approved project; 1.1.41 "Implementation Agreement" means the agreement so designated between FCX and RTZ dated as of 2 May 1995; 1.1.42 "Incremental Expansion Cashflow" has the meaning assigned to that expression in the Financial and Accounting Procedures; 1.1.43 "Incremental Expansion Revenues" has the meaning assigned to that expression in the Financial and Accounting Procedures; 1.1.44 "Incremental Production" has the meaning assigned to that expression in the Financial and Accounting Procedures; 1.1.45 "Joint Account Assets" means (i) all Products (in whatever form) derived from Joint Operations prior to their being sold and (ii) all other real and personal property, tangible and intangible, which is acquired as a joint asset of the Participants or as a result or for the purpose of Joint Operations or the funding thereof (other than any thereof which is distributed to the Participants or either of them pursuant to the provisions of this Agreement); 1.1.46 "Joint Operations" means the conduct of the following activities: (i) Approved Expansion Projects; (ii) Exploration in the Contract Area; (iii) Development and Mining in Contract Area Block B and, after the Cut-off Date, if there has, before such Date, been a first Approved Expansion Project, also in Contract Area Block A and (iv) any other activities in or in relation to the Contract Area which the Participants agree to conduct jointly under the terms of this Agreement, including Joint Operations Greenfield Projects, but excluding Sole Risk Ventures; 1.1.47 "Liabilities" or "Liability" means any and all claims, demands, investigations, judgements, losses, liabilities, costs and expenses, including reasonable attorneys' fees; 1.1.48 "LIBOR" means a rate of interest which is equal to three month U.S dollar Libor as published in the London Financial Times; 1.1.49 "Memorandum Equity Account" means an account established for each Participant pursuant to paragraph 2 of the Financial and Accounting Procedures; 1.1.50 "Minerals" has the meaning assigned to that expression in the COW; 1.1.51 "Mining" means the mining, extracting, producing, handling, milling or other processing of Minerals and the marketing and selling of Products therefrom; 1.1.52 "Non-defaulting Participant" means a Participant which is not the Defaulting Participant as described in Clause 6.3;
1.1.53 "Operating Committee" means the committee established
under Clause 8.2;
1.1.54 "Operator" means the person or entity appointed under
Clause 9.1 or any successor Operator;
1.1.55 "Operator Replacement Agreement" means the agreement dated
as of the date of this Agreement between PT-FI, PT-RTZ, First
Trust of New York, National Association, as trustee under the
Trust Agreement and the Operator Selection Representative;
1.1.56 "Participation" means the business arrangement of the
Participants under this Agreement;
1.1.57 "Participants" means PT-FI and PT-RTZ and their respective
successors and permitted assigns and "Participant" means any one
of them;
1.1.58 "Participating Interest" means, at any time, with respect
to Contract Area Block A or Contract Area Block B, the percentage
interest then applicable to each Participant with respect to such
Contract Area Block determined in accordance with this Agreement
(including the Financial and Accounting Procedures), provided
that, if such expression is used with reference to assets, it
shall refer only to an interest in the Joint Account Assets and
Joint Operations, and if such expression is used with reference
to Products from Contract Area Block A, to Sales Revenues from
such Products or to revenues from Contract Area Block A, it
shall, until the Cut-off Date, refer only to Incremental
Production, or, as the case may be, Incremental Expansion
Revenues;
1.1.59 "Privatisation Agreements" means the agreements listed in
Schedule 1 to this Agreement;
1.1.60 "Processing" has the meaning assigned to that expression
in the COW;
1.1.61 "Product Schedule" means the Product Schedule annexed
hereto as Annex A, setting out the planned production of
Products for each Year from 1995 to 2021 as the same may be
amended pursuant to Clause 16.4.2;
1.1.62 "Products" has the meaning assigned to that expression in
the COW;
1.1.63 "Programme" means a description in reasonable detail of
Joint Operations or Sole Risk Ventures, as appropriate, to be
conducted for a Year or any longer period, which is prepared and
approved in accordance with paragraph 10.1 of the Financial and
Accounting Procedures;
1.1.64 "Proposing Participant" means the Participant referred to
in Clause 10.1;
1.1.65 "PT-FI Assets" means together
(i) the PT-FI Available Assets
(ii) the right, title and interest of PT-FI in and under the COW
and all authorisations issued pursuant to the COW and
(iii) all other real and personal assets, tangible and
intangible, of PT-FI, including without limitation, (A) cash,
accounts receivable, inventories and capital stock and
indebtedness of other corporations, including its interests in
the Gresik smelter and any assets in respect of Sole Risk
Ventures of PT-FI, but excluding (B) all Joint Account Assets or
interests therein;
1.1.66 "PT-FI Available Assets" means together
(i) all real and personal property, tangible and intangible, held
by PT-FI from time to time which are used or intended to be used
for Exploration, Development or Mining in the Contract Area,
including, without limitation, mills and infrastructure, but
excluding
(A) property which is produced by or acquired pursuant to (1)
Approved Expansion Projects or (2) Sole Risk Ventures of PT-RTZ
which is held in the name of PT-FI as Operator
(B) items specified in (i) and (iii)(A) of Clause 1.1.65 (the
definition of PT-FI Assets) and
(C) all Joint Account Assets or interests therein
(ii) the right, title and interest of PT-FI in and to the
Privatisation Agreements and;
(iii) except for the purpose of the Financial and Accounting
Procedures, capital replacements hereafter of physical property
subject to Privatisation Agreements or otherwise constituting
PT-FI Available Assets under (i) of this Clause 1.1.66;
1.1.67 "PT-RTZ Assets" means together
(i) the interest of PT-RTZ in and under the COW pursuant to the
Assignment
(ii) any assets in respect of Sole Risk Ventures of PT-RTZ and
(iii) all other real and personal assets, tangible and
intangible, of PT-RTZ, but excluding all Joint Account Assets or
interests therein;
1.1.68 "RTZ" means The RTZ Corporation PLC, an English company;
1.1.69 "RTZ Loan" has the meaning assigned to the expression
"Loan" in the RTZ Loan Agreement;
1.1.70 "RTZ Loan Agreement" means the facility agreement of even
date herewith between PT-FI and RTZ Indonesian Finance Limited
("RTZ Lender") whereby RTZ Lender agrees to make available to
PT-FI a facility of up to $450,000,000 to fund one or more
Approved Expansion Projects;
1.1.71 "Sales Revenues" has the meaning assigned to that
expression in the Financial and Accounting Procedures;
1.1.72 "Sharing Commencement Date" has the meaning assigned to
that expression in the Financial and Accounting Procedures;
1.1.73 "Sole Risk Programme" has the meaning assigned to it in
Clause 10.3;
1.1.74 "Sole Risk Venture" means any activity carried out by a
Participant in the Contract Area on its own account pursuant to
Clauses 10 and 12;
1.1.75 "Specified Area" means the area referred to as such in
Clause 10.1;
1.1.76 "subsidiary" has the meaning assigned to it in the
Implementation Agreement;
1.1.77 "Taxes" means all present and future income and other
taxes, levies, imposts, duties, charges, deductions and
withholdings whatsoever together with interest thereon and
penalties with respect thereto;
1.1.78 "10-K Reserves" means the proved and probable ore reserves
as at 31 December 1994 in Contract Area Block A being 1,125.6
million tonnes at an average grade of 1.30% copper, 1.42 grams of
gold per tonne and 4.06 grams of silver per tonne;
1.1.79 "Trust Agreement" means the amended and restated trust
agreement dated as of the date of this Agreement between, among
others, PT-FI, PT-RTZ, The Chase Manhattan Bank (as successor to
The Chase Manhattan Bank (National Association)), as Depositary,
First Trust of New York, National Association, as Trustee, and
certain Secured Creditors of PT-FI (as defined therein);
1.1.80 "Year" means a calendar year commencing on 1 January.
1.2 Interpretation In this Agreement
1.2.1 References to any document or agreement, including the COW,
includes such document or agreement as amended, novated,
substituted, varied, supplemented or replaced from time to time.
1.2.2 References to any Act of Parliament, code, decree,
regulation or ordinance or to any provision thereof include any
modification or re-enactment thereof or any provision substituted
therefor and all statutory or other instruments issued
thereunder.
1.2.3 References to a party to this Agreement or any other
document or agreement include such party's successors or
permitted assigns.
1.3 Headings Headings to Clauses, sub-clauses, Schedules or
Annexes are for convenience only and shall not affect the
interpretation of this Agreement.
2. PURPOSES AND TERM
2.1 General PT-FI and PT-RTZ hereby agree that all of their
rights and obligations as between themselves relating to Joint
Operations, Sole Risk Ventures and other operations within the
Contract Area shall be subject to and governed by this Agreement.
2.2 Purposes This Agreement is entered into for the following
purposes and for no others, and shall serve as the exclusive
means by which the Participants, or either of them, accomplish
such purposes:
2.2.1 to conduct Exploration within the Contract Area, including
the evaluation of Development or Mining opportunities within the
Contract Area;
2.2.2 to engage in Development and Mining within the Contract
Area if so decided in the manner provided in this Agreement;
2.2.3 to engage in the Disposal of Products derived from Joint
Operations;
2.2.4 to allocate costs of and revenues derived from Joint
Operations;
2.2.5 to regulate as between the parties the conduct of Joint
Operations and Sole Risk Ventures in the Contract Area;
2.2.6 to regulate as between the parties to the extent provided
herein the conduct by PT-FI of its activities in the Contract
Area, other than in respect of Joint Operations, using the PT-FI
Available Assets, the Joint Account Assets, and the Participants'
right, title and interest in and under the COW and all
authorisations issued pursuant to the COW;
2.2.7 to regulate the procedures for making a Close-down decision
and for implementing that decision; and
2.2.8 to perform any other operation or activity necessary,
appropriate or incidental to any of the foregoing.
2.3 Assignment of COW Simultaneously with signature of this
Agreement, PT-FI and PT-RTZ shall execute an assignment of
interests in the COW in the form set out in Schedule 2 to this
Agreement or in such other form as PT-RTZ may reasonably require
provided that such interests shall be reassigned by PT-RTZ to
PT-FI in the circumstances provided for in Clause 6(2) of the
Implementation Agreement.
2.4 Term The term of this Agreement shall commence on the
Effective Date and shall continue until the occurrence of any of
the following events:
2.4.1 the termination of the COW and the termination of all
rights of the Participants to conduct Exploration, Development
and Mining in the Contract Area and completion of a final
accounting between the Participants as provided in Clause 2.5.2;
or
2.4.2 the agreement by the Participants permanently to cease
Joint Operations and terminate this Agreement and completion of a
final accounting between the Participants as provided in Clause
2.5.2; or
2.4.3 the reduction of the Participating Interest of one of the
Participants in both Contract Area Block A and Contract Area
Block B to zero (including a reduction pursuant to the operation
of the proviso to Clause 2.3); or
2.4.4 the Disposal of all Joint Account Assets and the completion
of a final accounting between the Participants as provided in
Clause 2.5.2; or
2.4.5 the bankruptcy, dissolution or withdrawal of any
Participant, unless all of the remaining Participants agree to
continue this Agreement, and completion of a final accounting
between the Participants as provided in Clause 2.5.2.
2.5 Termination Upon expiry of the term of this Agreement:
2.5.1 all unpaid Liabilities properly incurred arising out of
Joint Operations during the term of this Agreement shall be paid
by the Participants as provided in this Agreement
2.5.2 the Operator shall take all action necessary to wind up the
activities of the Participation, and all costs and expenses
incurred in connection with the termination of the Participation
shall be expenses chargeable to the Participants. Where the term
of this Agreement expires pursuant to Clauses 2.4.1, 2.4.2, 2.4.4
or 2.4.5, the Joint Account Assets shall be paid, applied, or
distributed in satisfaction of all Liabilities of the
Participation arising out of Joint Operations to third parties.
Thereafter, all other Joint Account Assets shall be sold and the
proceeds, together with any remaining cash, shall be distributed
to the Participants in proportion to their Participating
Interests in Contract Area Block A or, as appropriate, Contract
Area Block B at the time of such distribution, subject as
provided in Clause 6.1 or the Financial and Accounting
Procedures, after first satisfying out of a Participant's share
any Liabilities owed by that Participant to the other
2.5.3 the Participants shall enter into such other agreements and
arrangements as may be necessary or appropriate in the
circumstances to regulate the conduct of any Sole Risk Ventures
in the Contract Area which are to continue after expiry of the
term of this Agreement.
3. RELATIONSHIP OF THE PARTICIPANTS
3.1 Contribution of Use of Assets
3.1.1 PT-FI agrees to make available in accordance with the terms
of this Agreement the PT-FI Available Assets, and each of PT-FI
and PT-RTZ agrees to make available in accordance with the terms
of this Agreement the Joint Account Assets, in each case for the
purposes of Enterprise Operations without charge to the
Participants except as otherwise provided in this Agreement.
3.1.2 PT-FI and PT-RTZ agree that their respective rights under
the COW will be made available to the Participants without charge
for the purposes of Joint Operations.
3.2 Obligations Several and Not Joint The liability of the
Participants shall be several and not joint nor joint and
several. Each Participant shall be liable to the other only for
its obligations as set out in this Agreement.
3.3 Not a Partnership Nothing contained in this Agreement shall
be deemed to constitute either Participant the partner of the
other, nor, except as otherwise herein expressly provided, to
constitute either Participant the agent or legal representative
of the other or to create any fiduciary relationship between
them.
3.4 No Authority to Act for other Participants No Participant
shall have any authority to act for or to assume any obligation
or responsibility on behalf of the other Participant, except as
otherwise expressly provided herein. Each Participant shall
indemnify, defend and hold harmless the other Participant and its
Affiliates (including, without limitation, direct and indirect
parent companies), and its or their respective directors,
commissioners, officers, shareholders, employees, agents and
attorneys, from and against any Liabilities which may be imposed
upon, asserted against or incurred by any of them and which arise
out of or result from any act of or any assumption of Liability
by the indemnifying Participant, or any of its directors,
commissioners, officers, shareholders, employees, agents,
attorneys and Affiliates, done or undertaken, or apparently done
or undertaken, on behalf of the other Participant, except
pursuant to the authority expressly granted herein or as
otherwise agreed in writing between the Participants.
3.5 No Joint Receipt of Income The Participants acknowledge
that it is not their intention to receive income jointly as a
result of the Participation.
3.6 Area of Mutual Interest
3.6.1 General Any exploration permit, contract of work, mineral
lease, right or interest, including an equity interest or option
to acquire an equity interest in an entity owning any of the
foregoing, including rights and interests which do not directly
involve Mining but which may be useful in connection with the
Joint Operations (collectively, "Mining Rights") acquired during
the term of this Agreement by or on behalf of a Participant or an
Affiliate of a Participant (the "Acquirer") which is situated in
the province of Irian Jaya, Indonesia (the "Area of Mutual
Interest") shall be subject to the terms and provisions of this
Clause 3.6, except Mining Rights acquired pursuant to an Approved
Programme and Budget or Sole Risk Ventures.
3.6.2 Notice Within 30 days after acquisition of Mining Rights
or the right to acquire any Mining Rights wholly or partially
within the Area of Mutual Interest, the Participant being the
Acquirer or an Affiliate of the Acquirer ("Acquirer's
Participant") shall notify the other Participant of such
acquisition. The Acquirer's Participant's notice shall describe
in detail the acquisition, the Mining Rights covered thereby and
the cost thereof and the Acquirer's Participant shall procure
that there is made available for inspection by the other
Participant any and all information available to the Acquirer
(subject to any confidentiality restrictions) concerning the
Mining Rights.
3.6.3 Option Exercised Within 30 days after receiving the
Acquirer's Participant's notice, the other Participant shall
elect, by notice to the Acquirer's Participant, that an Affiliate
of such other Participant shall:
(a) accept an interest in the Mining Rights equal to the other
Participant's Participating Interest at the date of this
Agreement; or
(b) not acquire an interest in the Mining Rights.
If a Participant entitled to make an election under this Clause
3.6.3 fails to give notice within the time allotted, such failure
shall be deemed an election by such Participant not to accept an
interest in the Mining Rights and the Mining Rights shall not be
subject to the same terms, mutatis mutandis, as this Agreement.
If a Participant entitled to make an election under this Clause
3.6.3 makes a timely election to accept an interest in the Mining
Rights, the Acquirer's Participant shall procure that the
Acquirer shall, subject to all necessary Governmental consents,
convey to an Affiliate of the other Participant nominated by the
other Participant, by appropriate instrument, an undivided
interest in the Mining Rights equal to such Participant's
Participating Interest at the date of this Agreement. If such
Participant has elected that an Affiliate shall accept an
interest in Mining Rights pursuant to this Clause 3.6.3, the
Mining Rights shall be held on the same terms as this Agreement,
mutatis mutandis to those with respect to Contract Area Block B,
unless the Participants agree otherwise. The Participant which
is not the Acquirer's Participant shall procure that its
Affiliate acquiring the interest in the Mining Rights shall
promptly pay to the Acquirer its proportionate share of the
latter's actual out-of-pocket acquisition costs.
3.7 Other Business Opportunities Except as expressly provided in
Clause 3.6, each Participant shall have the right independently
to engage in and receive full benefits from business activities
outside the Contract Area, whether or not in competition with the
Enterprise Operations, without consulting the other. Except as
expressly provided in Clause 3.6, no Participant shall have any
obligation to the other under this Agreement with respect to any
opportunity to acquire any property outside the Contract Area at
any time, or within the Contract Area after the termination of
this Agreement. Except as otherwise agreed by the Participants,
whether in this Agreement or subsequently, neither Participant
shall conduct any activity inside the Contract Area other than
Enterprise Operations, Sole Risk Ventures and activities which do
not adversely affect the carrying out of the Enterprise
Operations and any Sole Risk Ventures, without the prior written
approval of the other.
3.8 Waiver of Right to Partition The Participants hereby waive and release all rights of partition, or of sale in lieu thereof, or other division of Joint Account Assets, including any rights provided by law. 3.9 Employees Employees of one Participant are not and shall not be employees of the other Participant or of the Participation. 3.10 Title All Joint Account Assets acquired by the Operator for Joint Operations may be held in the name of PT-FI but, subject to any mandatory provisions of applicable law, the beneficial interest therein shall be for the benefit of PT-FI and PT-RTZ severally in proportion to their respective Participating Interests. Subject to any mandatory provisions of applicable law, each of the Participants agrees to execute appropriate documents to reflect any changes in Participating Interests which may occur hereunder from time to time and to execute, and register with the appropriate Governmental authorities, the necessary document(s) to effect the transfer of any property as contemplated by this Agreement. 4. REPRESENTATIONS AND WARRANTIES 4.1 Capacity Subject, in the case of PT-RTZ, to the matters stated in Schedule 3, each of the parties represents, warrants and undertakes to the other(s) as follows: 4.1.1 it is a company duly incorporated and in good standing in its place of incorporation and that it is qualified to do business and is in good standing in those jurisdictions where necessary in order to carry out the purposes of this Agreement; 4.1.2 it has the capacity to enter into and perform its obligations under this Agreement and, in the case of PT-FI, the Assignment and all transactions contemplated herein or (as appropriate) therein and that all corporate and, except as mentioned in Schedule 3 to this Agreement, other actions required to authorise it to enter into and perform its obligations under this Agreement and, in the case of PT-FI, the Assignment have been properly and duly taken; 4.1.3 this Agreement constitutes, and, in the case of PT-FI, the Assignment will constitute its legal, valid and binding obligation, save as enforcement may be limited by bankruptcy, reorganisation, insolvency, moratorium or other laws affecting the enforcement of creditors' rights generally and subject to any limitations acts and to general equitable principles; 4.1.4 the execution, delivery and performance by it of this Agreement and, in the case of PT-FI, the Assignment and the transactions implemented hereunder or (as appropriate) thereunder do not and will not contravene, conflict with or constitute a default under (a) any law or regulation or any official or judicial order, judgment, injunction or decree applicable to it or (b) its constitutional documents or (c) any agreement or document to which it is a party or which is binding upon it or any of its assets. 4.2 PT-FI Representations and Warranties Subject to the matters stated in Schedule 3 and in addition to the representations, warranties and undertakings contained in Clause 4.1, PT-FI represents, warrants and undertakes to PT-RTZ as follows: 4.2.1 the shareholders in PT-FI are FCX, as to 81.28%, the Government as to 9.36% and PT Indocopper Investama Corporation as to 9.36%; 4.2.2 it has all authorisations, consents and licences necessary to conduct its activities in the Contract Area as presently conducted; 4.2.3 it is up to date on all payments, filings, or other requirements in respect of the COW and there are no existing or threatened actions, suits, claims or proceedings in relation thereto, and PT-FI has not received any notice of violation or claim alleging any violation of any law, rule, regulation, or permit, including without limitation any environmental law, rule, regulation or permit, in connection with the COW except any thereof where such violation or claim would not, individually or in the aggregate, have a material adverse effect on the rights of PT-FI and PT-RTZ under the COW; 4.2.4 it has delivered to or made available to PT-RTZ or its Affiliates all geological data and other similar information in PT-FI's possession or control derived from its activities in the Contract Area which any person interested in acquiring a Participating Interest in the Contract Area would reasonably be expected to wish to see and all other information or copies thereof reasonably requested by them concerning the COW, its operations in the Contract Area and the disposal of Products, including, but not limited to, true and correct copies of all contracts relating to the COW and the Contract Area of which PT-FI has knowledge; 4.2.5 all activities by PT-FI under the COW up to the date of this Agreement have in all material respects been in accordance with the requirements of the Government and Indonesian law and there has been no breach by PT-FI of any of the provisions of the COW or of any other agreement binding upon it the breach of which might have a material adverse effect on the ability of PT-FI to carry out the Enterprise Operations; 4.2.6 there has been no material breach by the Government of any of the provisions of the COW and PT-FI has not received any indication from the Government that the Government is seeking to re-negotiate any of the terms of the COW; 4.2.7 to the best of PT-FI's knowledge, there has been no material breach by any third party of any material contract with PT-FI in relation to PT-FI's activities under the COW or the sale of Products; 4.2.8 there are no material litigation, arbitration or administrative proceedings or claims currently in progress or, so far as PT-FI is aware, pending or threatened against PT-FI or any of its assets under the COW or any material contract to which PT-FI is a party in relation to PT-FI's activities under the COW or the sale of Products; 4.2.9 PT-FI is not a party to any agreement or under any other obligation under or pursuant to which it has created or given or permitted to subsist or is obliged or bound to create or give or permit to subsist in favour of any third party any Encumbrance over PT-RTZ's share of the Joint Account Assets or over any revenues allocated to PT-RTZ (or to which PT-RTZ is entitled) under this Agreement; 4.2.10 PT-RTZ's interest in the COW pursuant to the Assignment is not subject to any Encumbrance created or given by PT-FI in favour of any third party. 4.3 Disclosures Each of the parties represents and warrants to the other(s) that it is unaware of any facts or circumstances which have not been disclosed in this Agreement and which should have been disclosed to the other party in order to prevent the representations and warranties given by it in this Clause 4 from being materially misleading. 5. EXPLORATION CONTRIBUTIONS BY PARTICIPANTS 5.1 Exploration Contribution by PT-RTZ PT-RTZ shall pay, in accordance with paragraph 10.3 of the Financial and Accounting Procedures, all Exploration Costs approved by an Exploration Committee after the Effective Date until the Exploration Obligation has been satisfied, including the expenditure of not less than $40,000,000 in respect of Contract Area Block A. 5.2 Additional Cash Contributions After the Exploration Obligation has been satisfied, the Participants shall contribute funds for Approved Exploration Programmes and Budgets in proportion to their respective Participating Interests, subject to their rights to conduct Sole Risk Ventures. 6. INTERESTS OF PARTICIPANTS 6.1 Participating Interests 6.1.1 At the date of this Agreement, except as otherwise provided in this Agreement (including the Financial and Accounting Procedures), the Participating Interests of the Participants in Contract Area Block A and in Contract Area Block B are: PT-FI sixty per cent (60%) PT-RTZ forty per cent (40%). The Participating Interests of the Participants shall not be changed except as provided in this Agreement (including the Financial and Accounting Procedures) and each Participant's Participating Interest in Contract Area Block A may, as provided in this Agreement and the Financial and Accounting Procedures, be different from its Participating Interest in Contract Area Block B. 6.1.2 There shall be allocated to the Participants the revenues and shares thereof calculated in accordance with the Financial and Accounting Procedures. 6.1.3 All costs and liabilities incurred in or attributable to Chargeable Operations in the Contract Area shall be allocated to and borne by the Participants in accordance with the Financial and Accounting Procedures. 6.1.4 Participating Interests shall be calculated to three decimal places and rounded to two (e.g. 1.519% rounded to 1.52%). Decimals of .005 and less shall be rounded down. 6.2 Changes in Participating Interests A Participant's Participating Interest may be changed as follows:- 6.2.1 in the event of default by a Participant in making its agreed upon contribution to an Approved Programme and Budget, followed by an election by the other Participant to invoke Clause 6.3.2.3; or 6.2.2 transfer by a Participant of less than all its Participating Interest in accordance with Clause 15; or 6.2.3 acquisition of less than all of the Participating Interest of the other Participant, however arising. In the event of a change in a Participant's Participating Interest with respect to either Contract Area Block A or Contract Area Block B, there will, subject to obtaining any necessary Governmental approval, be a corresponding and proportionate change in the Participant's interest in the COW with respect to Contract Area Block A (subject to PT-FI's rights with respect to the 10-K Reserves and PT-FI Assets) or the COW with respect to Contract Area Block B, as the case may be. 6.3 Default in Making Contributions If a Participant defaults in its obligation to pay a contribution or cash call properly payable or made under this Agreement (including the Financial and Accounting Procedures), (such Participant being a "Defaulting Participant"), 6.3.1 All rights of the Defaulting Participant to receive its proportionate share of the Incremental Expansion Cashflow of Approved Expansion Projects, or the revenues from Contract Area Block B, Joint Operations Greenfield Projects in Contract Area Block A or, as the case may be, in any Year after the Cut-off Date, the revenues from Joint Operations, shall be suspended until such time as the default has been remedied and until such time, such proportionate share shall go to the Non-Defaulting Participant(s), who shall apply such share of the relevant revenues or (as the case may be) Incremental Expansion Cashflow first, to make any contribution or meet any cash calls not made or met by the Defaulting Participant or made or met on its behalf, and second, to pay the indebtedness and unpaid and accrued interest thereon then owing by the Defaulting Participant to such Non-Defaulting Participant pursuant to Clause 6.3.2. The right of a Defaulting Participant to receive its proportionate share of the relevant revenues or (as the case may be) the Incremental Expansion Cashflow shall be reinstated at the first time when such Participant is not in default in its obligation to make a contribution or meet a cash call and all indebtedness and interest thereon arising out of the making by the Non-Defaulting Participant of Cover Payments has been paid in full. 6.3.2.1 The other Participant, by notice to the Defaulting Participant, may at any time, but shall not be obliged to, elect to make such contribution or meet such cash call on behalf of the Defaulting Participant (a "Cover Payment"). If more than one Cover Payment is made by the other Participant in relation to the same Contract Area Block, such Cover Payments shall be aggregated and the rights and remedies described herein pertaining to an individual Cover Payment shall be read to apply to the aggregated Cover Payments. 6.3.2.2 Each Cover Payment shall constitute indebtedness due from the Defaulting Participant to the Non-Defaulting Participant, which indebtedness, together with interest (calculated from the date of the Cover Payment at the rate specified in paragraph 10.3.3 of the Financial and Accounting Procedures) shall be payable upon demand. 6.3.2.3 If a Cover Payment shall have been made, upon the giving of not less than 5 days' prior notice to the Defaulting Participant, whether or not payment thereof has been demanded under Clause 6.3.2.2, the Non-Defaulting Participant may, but shall not be obliged to, elect to effect an adjustment of the Defaulting Participant's Participating Interest in the relevant Contract Area Block pursuant to this Clause 6.3.2.3; provided, however, that if within such 5 day period the Defaulting Participant shall evidence to the reasonable satisfaction of the Non-Defaulting Participant that it will have the funds to, and will, within 10 days of the expiry of such 5 day period, pay the indebtedness constituted by the Cover Payment together with interest accrued thereon pursuant to Clause 6.3.2.2 owing by the Defaulting Participant to the Non-Defaulting Participant, then such adjustment of Participating Interest may not be effected until the end of such additional 10 day period. If such election is made and such indebtedness has not been paid, at the expiration of such 5 day period, or, if applicable, at the end of such additional 10 day period, an amount equal to 125% times the Cover Payment shall be deducted from the Defaulting Participant's relevant Memorandum Equity Account for the relevant Contract Area Block and added to the relevant Memorandum Equity Account for that Contract Area Block of the Non-Defaulting Participant and the Participating Interests of the Participants shall be recalculated based on the relevant adjusted Memorandum Equity Accounts. 6.3.2.4 Notwithstanding anything to the contrary contained in this Agreement, failure by PT-FI to make a contribution or respond to a cash call shall not constitute a default hereunder or give rise to any adjustment of PT-FI's or PT-RTZ's Memorandum Equity Account if such failure occurs prior to the time an aggregate sum of $750,000,000 has been spent on one or more Approved Expansion Projects and is attributable to the failure by PT-FI to receive advances under the RTZ Loan Agreement. 6.3.3 If as a consequence of the adjustment of a Defaulting Participant's relevant Memorandum Equity Account under Clause 6.3.2.3 its recalculated Participating Interest in Contract Area Block A or, as the case may be, Contract Area Block B is less than 10% (such adjustment being a "Forced Sale Adjustment"), then 6.3.3.1 the Defaulting Participant shall be deemed to have elected to withdraw from participation in Joint Operations in Contract Area Block A or, as the case may be, Contract Area Block B 6.3.3.2 the Defaulting Participant shall sell to the Non-Defaulting Participant and the Non-Defaulting Participant shall buy all of the Defaulting Participant's Participating Interest in Contract Area Block A or, as the case may be, Contract Area Block B for a price equal to the Fair Market Value of the Defaulting Participant's Participating Interest in Contract Area Block A or, as the case may be, Contract Area Block B as at the date on which its Participating Interest first reduces below 10% 6.3.3.3 completion of the sale and purchase under Clause 6.3.3.2 shall take place within 90 days after establishment of the Fair Market Value. The Defaulting Participant shall be liable for all costs and expenses of the sale and purchase (other than the purchase price) and shall indemnify the Non-Defaulting Participant against all adverse tax consequences of the sale and purchase 6.3.3.4 for the purposes of Clause 6.3.3.2, the Fair Market Value of the Defaulting Participant's Participating Interest in Contract Area Block A or, as the case may be, Contract Area Block B means the amount determined by the Participants. Should the Participants be unable within 30 days after a Forced Sale Adjustment to agree as to the Fair Market Value of the Defaulting Participant's Participating Interest to be sold pursuant to Clause 6.3.3.2, the Participants shall, within 10 days after the expiration of such 30 day period, attempt to select one reasonably acceptable, internationally recognised independent investment bank to determine the Fair Market Value of the Defaulting Participant's Participating Interest, which determination shall be binding on all Participants. Should the Participants be unable to agree upon a mutually acceptable investment bank within such 10 day period, each of the Participants shall have 10 additional days to select one internationally recognised investment bank to determine the Fair Market Value of the Defaulting Participant's Participating Interest. Each such investment bank or, in default of selection by either Participant, the sole investment bank so selected shall, within 30 days of being requested to do so, determine the Fair Market Value of the Defaulting Participant's Participating Interest provided however that, where two such investment banks are so selected, the Fair Market Value of such interest shall be the average of their respective determinations if and only if the lower of the two determinations is at least 90% of the higher of the two determinations. If it is not, then such two investment banks shall select a third internationally recognised investment bank to determine the Fair Market Value of the Defaulting Participant's Participating Interest, and the Fair Market Value of such interest (i) shall be such third determination if such third determination is a figure between the two previous determinations; (ii) shall be the lower of the two previous determinations if the third determination is lower than both the two previous determinations; and (iii) shall be the higher of the two previous determinations if the third determination is higher than both the two previous determinations. The Participants shall each pay 50% of the costs of the services and expenses of the investment bank(s) 6.3.3.5 upon completion of the sale and purchase under Clause 6.3.3.2 the Defaulting Participant shall cease to conduct any activities in Contract Area Block A or, as the case may be, Contract Area Block B (other than then existing Sole Risk Ventures and other than, in the case of PT-FI, PT-FI's rights with respect to the 10-K Reserves and any retained rights referred to in Clause 7.5) and shall surrender to the Non-Defaulting Participant the right to conduct all such activities 6.3.3.6 each of the Participants appoints the other its attorney, such appointment becoming effective upon its becoming a Defaulting Participant, with power in its name or otherwise to do all such things and sign or execute all such deeds or documents as may be necessary or desirable to complete any of the transactions referred to in this Clause 6.3.3, and (without limitation) for that purpose to appear in the name of the Defaulting Participant before any notary or other Government official in Indonesia; provided that such power of attorney shall not be deemed to apply to each Participant's rights under Clause 6.3.3.4. 6.4 Continuing Liabilities Upon Adjustment of the Participating Interests Any reduction of a Participant's Participating Interest under this Clause 6 shall not relieve such Participant of its share of any Liability, whether it accrues before or after such reduction, arising out of Joint Operations in Contract Area Block A or, as the case may be, Contract Area Block B conducted after the Effective Date and prior to such reduction. For purposes of this Clause 6, such Participant's share of such Liability shall, subject to Clause 6.1 and the Financial and Accounting Procedures, be equal to its Participating Interest in the relevant Contract Area Block at the time such Liability was incurred. The increased Participating Interest accruing to a Participant as a result of the reduction of the other Participant's Participating Interest shall be free from Encumbrances arising by, through or under such other Participant, except those to which both Participants have given their written consent or are otherwise subject (including, without limitation, royalties payable under the COW). Each Participant's Participating Interest shall be shown in the books of the Operator. 7. COVENANTS AND RIGHTS 7.1 Mutual Covenants Each of the Participants covenants and agrees with the other that: 7.1.1 it will give prompt notice to the other Participant of any notice of default, lawsuit, proceeding, action or damage of which it becomes aware and which might affect the Joint Account Assets, the Contract Area or the COW 7.1.2 it will only conduct operations within or relating to the Contract Area in accordance with the provisions of the COW and this Agreement and, without prejudice to the foregoing, not at any time do or cause or permit to be done any act or omission which results or might result in a breach of the provisions of the COW, this Agreement or any other agreement binding upon it a breach of which might have a material adverse effect on Joint Operations. 7.1.3 to the extent required by any law, rule, regulation, decree, consent, contractual arrangement or otherwise by any Indonesian Governmental Agency, there shall be no sale or other transfer of any interest in the Contract of Work by PT-FI or PT-RTZ without the prior consent of the Ministry of Mines and Energy of the Republic of Indonesia. 7.2 PT-FI Covenants PT-FI covenants and agrees with PT-RTZ that it will: 7.2.1 At all times comply with and perform all its obligations under the Privatisation Agreements and exercise its rights under the Privatisation Agreements in consultation with PT-RTZ and in a manner which does not adversely affect the carrying out of the Joint Operations and will not enter into any other agreements in the nature of Privatisation Agreements (other than as listed in Schedule 1) except in consultation with PT-RTZ; 7.2.2 Prepare its annual financial statements in accordance with accounting principles generally accepted in the U.S.A. except as otherwise stated therein and based on accounting policies consistently applied in all respects except as otherwise stated therein and at the time of the issue thereof send to PT-RTZ copies of the same; 7.2.3 As and when required by PT-RTZ furnish to PT-RTZ promptly such financial or other information, data or maps relating to the Contract Area and the Enterprise Operations therein and thereon as PT-RTZ may from time to time require; 7.2.4 Furnish to PT-RTZ a copy of each material return and report (and each other return and report requested specifically by PT-RTZ) submitted to the Government under the COW and, with respect to major returns and reports (as determined from time to time by the Participants), do so within a reasonable time before the latest day for such submission to permit time for review by PT-RTZ provided that tax returns shall not be included in this sub-Clause 7.2.4; 7.2.5 Not, without the prior written consent of PT-RTZ, create or permit to exist any Encumbrance on or Dispose, except in the ordinary course of business, of the whole or any part of the PT-FI Available Assets or its right, title and interest in and under the COW or any authorisations issued pursuant to the COW or the Joint Account Assets, other than, with respect to Dispositions, sales otherwise permitted by this Agreement and, with respect to Encumbrances, (i) the security in favour of RTZ Lender referred to in the RTZ Loan Agreement, (ii) Encumbrances in favour of the existing bank lenders to PT-FI or the lenders under any replacement or refinancing thereof, (iii) Encumbrances in favour of lenders on PT-FI Available Assets or on PT-FI's share of the Joint Account Assets or, with PT-RTZ's consent, on all of the Joint Account Assets, (iv) Encumbrances on replacements of assets under Privatisation Agreements and (v) Encumbrances on replacements of PT-FI Available Assets provided that the lenders holding Encumbrances referred to in (ii) and (iii) above shall have executed documents recognising PT-RTZ's rights to the same extent as have PT-FI's existing bank lenders in connection with this Agreement; 7.2.6 Do and cause to be done all things necessary to preserve and keep in full force and effect its rights and authorisations with respect to the COW and the Contract Area, at all times comply with and cause to be complied with all applicable laws, the violation of which would be materially adverse to the Enterprise Operations and obtain and maintain in full force and effect all authorisations, approvals, consents, licences and exemptions with respect to the COW and the Contract Area, in each case where the failure to obtain or maintain which would be materially adverse to Enterprise Operations, promptly effect all filings, registrations and notarisations and promptly comply with all other requirements in any such case which may at any time be required with respect to or under this Agreement, the COW and Enterprise Operations, and the continued due performance of its obligations hereunder or thereunder or the validity or enforceability of this Agreement and the COW, and PT-RTZ shall provide to PT-FI all such information in relation to PT-RTZ's participation in Joint Operations as PT-FI may reasonably require and which is not otherwise available to PT-FI in order to enable PT-FI to fulfill its obligations under this Clause 7.2.6; 7.2.7 Notify PT-RTZ immediately upon becoming aware of the actual or threatened revocation or variation of any such authorisation as is referred to in Clause 7.2.6; 7.2.8 Without the prior written consent of PT-RTZ, not agree to any waiver or amendment of the terms of the COW which would have a material adverse effect on PT-RTZ's Participating Interest; 7.2.9 Not take any action, including actions using the PT-FI Available Assets, which would prejudice either the institution, completion or operation of any first Approved Expansion Project as described in Clause 10.5 and any projects of Expansion thereafter or any activity of PT-FI authorised hereunder; 7.2.10 Make available the PT-FI Available Assets and its right, title and interest in and under the COW and all authorisations issued pursuant to the COW for their use in Joint Operations on a first priority basis with respect to any PT-FI Available Assets which are not, at the time, being employed with respect to activities permitted by Clause 7.5, and on a shared basis that reflects equitably the needs of the parties with respect to other PT-FI Available Assets; 7.2.11 Without prejudice to any other provisions of this Agreement, not take any action or permit any action to be taken which will affect materially and adversely PT-RTZ's Participating Interest but PT-FI shall not be deemed to be in breach of this Clause merely because it exercises any right contained in Clauses 6.3 and 15 of this Agreement. 7.3 PT-RTZ Covenant PT-RTZ covenants and agrees with PT-FI that, without the prior written consent of PT-FI, it will not create or permit to exist any Encumbrance on or Dispose, except in the ordinary course of business, of the whole or any part of the interests assigned in the Assignment or the Joint Account Assets, or violate any applicable law if the effect thereof would be materially adverse to the Enterprise Operations provided that PT-RTZ may create Encumbrances in favour of project lenders on PT-RTZ's share of the Joint Account Assets or, with PT-FI's consent, on all of the Joint Account Assets. 7.4 Power of Attorney Each of the Participants hereby appoints the other Participant its attorney in its name or otherwise to do all such things and sign or execute all such deeds or documents as may be necessary or desirable to cure any and each default by that Participant under the COW or, in the case of PT-RTZ, its assigned interest in the COW and (without limitation) to appear in the name of the appointor before any notary or other Government official in Indonesia. 7.5 Retained PT-FI Rights 7.5.1 Existing Operations 7.5.1.1 Subject to Clause 7.5.1.2, PT-FI shall have the right, without the need to obtain the consent of PT-RTZ, to continue to carry on Mining activities with the use of the PT-FI Available Assets, including activities which, through optimisation or fine tuning of its operations and facilities, may result in treatment of ore at a rate in excess of 118,000 tonnes per day and shall have the right to use and make changes to the PT-FI Available Assets so long as such activities do not prejudice the undertaking of the first Approved Expansion Project at the current millsite, as described in Clause 10.5. 7.5.1.2 PT-FI will not undertake any Expansion project (as opposed to optimisation or fine tuning) in Contract Area Block A other than as part of Joint Operations or take any other action which will prejudice the undertaking of the first Approved Expansion Project at the current millsite, provided that, if no project for Expansion which meets the criteria specified in, or agreed pursuant to, Clause 10.5 has been proposed by PT-RTZ to the Operating Committee before the tenth anniversary of the Effective Date, the following provisions shall apply: (i) the foregoing limitation on PT-FI's ability to enter into an Expansion project other than as part of Joint Operations shall no longer be applicable, (ii) PT-FI shall be entitled to enter into such a project either as a Sole Risk Venture or, if it elects at its option to offer PT-RTZ a right of participation and PT-RTZ accepts such offer, as |
part of Joint Operations, in which latter event, RTZ Lender shall remain obliged to make available the loan funds contemplated by the RTZ Loan Agreement, and
(iii) except as set out in the immediately preceding item (ii), PT-RTZ will not have a right to participate in any revenues from nor will it be obliged to contribute to any costs in respect of Contract Area Block A, even after the Cut-off Date, except with respect to Joint Operations Greenfield Projects and Sole Risk Ventures in Contract Area Block A in which PT-RTZ has participated.
7.5.1.3 PT-FI shall be entitled to receive and retain 100% of all revenues, including Sales Revenues, from Contract Area Block A:
(i) prior to the Sharing Commencement Date, except for any revenues from Joint Operations Greenfield Projects and Sole Risk Ventures in which PT-RTZ shall have participated, and
(ii) from the Sharing Commencement Date until the Cut-Off Date, except for Incremental Expansion Revenues and any revenues from Joint Operations Greenfield Projects and Sole Risk Ventures in which PT-RTZ shall have participated.
7.5.2 Privatisation Agreements Without prejudice and subject to the covenants on the part of PT-FI contained in Clause 7.2, PT-FI shall have the right, without the need to obtain the consent of PT-RTZ, to conduct activities in accordance with the Privatisation Agreements existing on the Effective Date or described in Schedule 1 provided that the consent of PT-RTZ shall be obtained prior to any material change in the terms thereof which results in an increase in the burdens of PT-FI thereunder, other than as described in Schedule 1. The Participants will discuss the possibility of future agreements in the nature of Privatisation Agreements on the basis of the financial requirements of the Participants. If PT-FI wishes to sell and lease back further of the PT-FI Available Assets (as part of such future agreements or otherwise) or to sell any part thereof reasonably deemed by it to be surplus to its requirements in relation to Enterprise Operations, it shall be permitted to do so provided such action does not affect materially and adversely the institution, completion or operation of any Approved Expansion Projects or the availability of the use of such assets, if required, for Joint Operations.
8. COMMITTEES
8.1 Exploration Committees The Participants will, not later than thirty days after the Effective Date, establish both an Exploration Committee for Contract Area Block A and an Exploration Committee for Contract Area Block B, in each case to determine overall policies, objectives, procedures, methods and actions for incurring the Exploration Costs. Until the Exploration Obligation has been satisfied, each Participant may appoint two members to each of the Exploration Committees. Once the Exploration Obligation has been satisfied, PT-FI may appoint an additional member to each of the Exploration Committees. Each Participant may appoint one or more alternates to act in the absence of a regular member. Any alternate so acting shall be deemed a member. Appointments shall be made or changed by written notice to the other Participant.
8.2 Operating Committee PT-FI shall establish an Operating Committee to, among other things:
(i) receive reports on all operations within the Contract Area, including Joint Operations,
(ii) design for presentation to the boards of directors of PT-FI and PT-RTZ appropriate actions respecting the Joint Operations,
(iii) develop plans and make recommendations to the board of directors of PT-FI,
(iv) monitor execution of plans approved by the board of directors of PT-FI, and
(v) subject to the control of the board of directors of PT-FI, be involved generally in directing day-to-day operations of the business of PT-FI,
but will not determine policies, objectives, procedures, methods and actions for incurring Exploration Costs, which will continue to be determined by the relevant Exploration Committee. The Operating Committee will have three members, comprising the Chief Operating Officer of PT-FI as Chairman, the General Manager (Mining Operations) of PT-FI and one member appointed by PT-RTZ. Each of PT-FI and PT-RTZ may appoint one or more alternates to act in the absence of the regular member appointed by it. Any alternate so acting shall be deemed a member. Appointments shall be made or changed by written notice to the other Committee members.
8.3 Other Committees A special Tax Committee will be established to administer the provisions of Clause 16.13 of this Agreement. Other committees may be established as required on which PT-FI shall be entitled to have majority representation provided that, on any committee established in respect of a Sole Risk Programme undertaken by PT-RTZ, PT-RTZ shall be entitled to have majority representation and that PT-FI and PT-RTZ shall be entitled to have equal representation on the special Tax Committee.
8.4 Quorum At any Committee meetings, a quorum will exist if a representative of each Participant is present at the meeting. If at the time a meeting is convened, a quorum is not present, the meeting may, upon notice to the parties entitled to be represented at the meeting, be adjourned to a date no sooner than twenty nor later than thirty days following such originally scheduled meeting. Those members who attend the rescheduled meeting shall be deemed to constitute a quorum and may adopt any resolutions or take any other action not inconsistent with the provisions of this Agreement.
8.5 Decisions Each party entitled to be represented, acting through its appointed members, shall have a vote on a Committee. Each member of a Committee shall have one vote. With respect to the approval of an Approved Expansion Project or of Programmes and Budgets, the function of the Operating Committee will be to recommend the same for the approval of the boards of directors of, in the case of an Approved Expansion Project, PT-FI, FCX and PT-RTZ and, in the case of Programmes and Budgets, PT-FI and PT-RTZ. No project for Expansion shall be an Approved Expansion Project unless and until it has been approved by the boards of directors of PT-FI, FCX and PT-RTZ (and each project of Expansion shall be an Approved Expansion Project if and when it has been so approved) or is otherwise an Approved Expansion Project in accordance with Clause 10.3 and no Programme and Budget shall be an Approved Programme and Budget unless and until it has been approved by the boards of directors of PT-FI and PT-RTZ. Subject to the foregoing, all decisions of each Committee shall be taken by simple majority vote of members present in person or by proxy except that all decisions relating to Approved Expansion Projects, including a decision regarding a material departure from the scope or cost of any Approved Expansion Project, shall, subject to Clause 10.3, require the approval of representatives of both Participants.
8.6 Meetings The Operator shall call the first meetings of the Exploration Committees within thirty days of the formation thereof. The purpose of such first meetings shall be to propose and agree the first Programme and Budget for the remainder of that Year provided that until such a first Programme and Budget has been agreed, Exploration activities will be conducted in accordance with the Exploration programme for 1995 in existence at the date of the Implementation Agreement or, if this Agreement is executed after 31 December 1995, the then existing Exploration programme of PT-FI which does not cover a period in excess of 12 months. Thereafter the Exploration Committees and the Operating Committee shall hold at least four meetings per Year, one of which shall be in December to propose the relevant Programme and Budget for the subsequent calendar year (the "Annual Budget Meeting"). The Operator shall give thirty days' notice to the Participants of each meeting. Additionally, any Participant or the Operator may call a special meeting upon fifteen days' notice to the other Participant(s) and to the Operator if the Operator is not calling the meeting. In case of emergency, reasonable notice of a special meeting shall suffice. All meetings shall be held in a mutually agreed place, failing which in New Orleans. Each notice of a meeting shall include an itemised agenda prepared by the Operator in the case of a regular meeting, or by the Participant calling the meeting in the case of a special meeting, but any matters may be considered with the consent of the Participants. The Operator shall prepare minutes of all meetings and shall distribute copies of such minutes to the Participants within thirty days after the meeting. The minutes, when signed by all Participants (and no signature shall be unreasonably withheld or delayed), shall be the official record of the decisions made by a Committee and shall be binding on the Participants and on the Operator. Each of the Participants shall bear its own costs of attendance at meetings of Committees. The Operator shall be entitled to be present at all meetings of a Committee unless such Committee otherwise resolves but the Operator shall not be counted in the quorum or be entitled to vote in its capacity as Operator.
8.7 Action Without Meeting In lieu of meetings, a Committee may hold telephone conferences, so long as all decisions are immediately confirmed in writing and signed by all the parties entitled to be represented at meetings of that Committee, and a member appointed by each party entitled to be represented at meetings of that Committee has a reasonable opportunity to be included in any such conference.
8.8 Close-down
8.8.1 If either Participant shall determine that, in its best judgment, Close-down shall occur within 11 years thereafter, it shall notify the other Participant and the Operator. Within 30 days after receipt of notice of such determination, the other Participant shall notify the first Participant whether or not it agrees with such determination. If there is a disagreement as to such determination, the Participants shall seek to achieve a mutually agreed expected date of Close-down (an "Anticipated Close-down Date"). In the absence of such an agreement, the dispute shall be referred to the firm of independent mining consultants which has most recently reviewed and confirmed the reserves in the Contract Area for Form 10-K reporting purposes, whose determination as to the Anticipated Close-down Date shall be binding on both Participants.
8.8.2 Within 90 days after a final determination of the Anticipated Close-down Date, the Operator shall deliver to the Participants its best estimate of the anticipated Close-down Costs. In December of the Year in which such determination of the Anticipated Close-down Date shall have been finally determined, and in December of each of the nine subsequent Years, each Participant shall secure the payment of 10% of the Close-down Costs payable by such Participant (in accordance with the Financial and Accounting Procedures), by such methods as shall be determined by agreement of the Participants or, in the absence of agreement, by (i) the purchase of bonds with an investment rating of A (or the then equivalent rating) or better and (ii) the delivery of such bonds to the Trustee under the Trust Agreement or such other trustee as shall be agreed by the Participants. The proceeds of such bonds or other form of security shall be made available, as required, to pay such Close-down Costs.
8.8.3 In the case of a Sole Risk Venture, the Participant undertaking the Sole Risk Venture shall provide for the anticipated Close-down Costs as provided in Clauses 8.8.1 and
8.8.2, unless an alternate method of funding Close-down Costs has been approved by the non-Participating Participant(s).
9. OPERATOR
9.1 Appointment Except as provided in Clauses 9.5 and 12.2, PT-FI shall be the Operator for all operations under the COW or this Agreement. The Operator shall report to the Committees.
9.2 Powers and Duties of Operator Subject to the provisions of this Agreement and other agreements which the Participants have agreed to be binding with respect to all or part of Enterprise Operations, the Operator shall, in addition to those powers and duties contained elsewhere in this Agreement, have the following powers and duties which shall be discharged in accordance with each Programme and Budget:
9.2.1 The Operator shall manage, direct and conduct Enterprise Operations.
9.2.2 The Operator shall prepare and present to each member of the appropriate Committee proposed Programmes and Budgets in accordance with paragraph 10.1 of the Financial and Accounting Procedures.
9.2.3 The Operator shall make cash calls as provided in paragraph
10.3 of the Financial and Accounting Procedures and on receipt of amounts from the Participants pursuant to paragraph 10.3 of the Financial and Accounting Procedures shall make all expenditures necessary to carry out Approved Programmes and Budgets and shall promptly advise the relevant Committee if it lacks sufficient funds to carry out its responsibilities under this Agreement. Any payments made by the Operator pursuant to this Agreement shall be for the account of the Participants and the Operator shall not be required as Operator to advance its own funds for the purposes of conducting Joint Operations.
9.2.4 The Operator shall make distributions of cashflow as provided in this Agreement (including the Financial and Accounting Procedures) and should the Operator default in making any such distributions and the default continues for 30 days after (i) (in the absence of any dispute or, in the event of a dispute, as regards the undisputed amount) notice from any Participant of non-payment or (ii) (in the event of a dispute, as to the disputed amount) final determination of such amount as provided in the Financial and Accounting Procedures, any Participant shall have the right to declare an Allocation Event (as defined in the Trust Agreement).
9.2.5 The Operator shall implement Approved Expansion Projects and other Expansions.
9.2.6 The Operator shall sell on behalf of the Participants with an interest in such Products, the Products derived from Enterprise Operations on terms which shall be discussed with such Participants. In carrying out its obligations pursuant to Clause 9.2.6, the Operator shall conduct such hedging and other price protection activities as are authorised by the relevant Participant with an interest in such Products. However, the costs and benefits of such price protection activities shall be specifically allocated to and borne solely by the authorising Participant.
9.2.7 The Operator shall:
(a) purchase or otherwise acquire all material, supplies, equipment, water, utility and transportation services required for operations, such purchases and acquisitions to be made on such terms as the Operator shall prudently approve, taking into account all of the circumstances, including the existence of prior agreements and arrangements;
(b) obtain such customary warranties and guarantees as are available in connection with such purchases and acquisitions, taking into account all of the circumstances; and
(c) keep the Joint Account Assets free and clear of all Encumbrances, except for those existing at the time of, or created concurrent with, the acquisition of such Joint Account Assets and those which are otherwise permitted by this Agreement, including Clause 7.2.5, or with the consent of the Participants.
9.2.8 The Operator shall: (a) make or arrange for all payments required by the COW, leases, claims, grants, permits, licences, concessions, contracts and other agreements related to the Joint Account Assets; (b) pay all Taxes, assessments and like charges on Enterprise Operations and Joint Account Assets except Taxes determined or measured by a Participant's net income subject to the provisions of Clause 14 and (c) do all other acts reasonably necessary to maintain the Joint Account Assets and the COW.
9.2.9 The Operator shall: (a) apply for all necessary permits, licences and approvals; (b) comply with applicable laws and regulations; (c) notify promptly the relevant Committee of any allegations of substantial violation thereof; and (d) prepare and file all reports or notices required for Joint Operations. The Operator shall not be in breach of this provision if a violation has occurred in spite of the Operator's good faith efforts to comply, and the Operator has in a timely manner cured or disposed of such violation.
9.2.10 The Operator shall prosecute and defend, but shall not initiate without consulting the Participants any litigation or administrative proceedings arising out of Joint Operations. The Participants shall have the right to participate, at their own expense, in such litigation or administrative proceedings.
9.2.11 The Operator shall maintain for the account of the Participants with respect to the Joint Operations such basic insurance as it shall reasonably deem to be necessary for prudent operation (details of which it shall supply to each Participant) and, to the extent practicable, shall also make available, at the individual Participant's cost and for the individual Participant's benefit, such additional insurance, including business interruption insurance, as the individual Participants shall desire. The premium for such basic insurance will be a charge to the Participation and for such additional insurance to the Participant(s) requesting the same. No other insurance shall be provided for the benefit of the Participants. However, after consultation with the other Participant, any Participant may procure and maintain at its cost and expense such other insurance as it shall determine and such other insurance shall be solely for the benefit of the Participant procuring the same and the premium therefor shall not be a charge to the Participation. Further, such insured Participant shall indemnify the other Participants not named as insured in such additional insurance policy against any claim of the insurer by subrogation or otherwise.
9.2.12 Except where the Operator is expressly permitted to Dispose of Joint Account Assets by the terms of this Agreement, the Operator may not Dispose of Joint Account Assets, whether by sale, assignment, abandonment or other transfer, except in the ordinary course of business or with the agreement of the Participants.
9.2.13 The Operator shall have the right (subject to Clause 9.6) to carry out its responsibilities hereunder through agents, Affiliates or independent contractors.
9.2.14 The Operator shall keep and maintain all accounting and financial records in accordance with the Financial and Accounting Procedures.
9.2.15 The persons employed in the Joint Operations will not be employees of the Participation.
9.2.16 At all reasonable times, the Operator shall provide the relevant Committee or the representative of any Participant, upon request, access to, and the right to inspect and copy all information acquired in Joint Operations, including, but not limited to, maps, drill logs, core tests, reports, surveys, assays, analyses, production reports, operations, technical, accounting and financial records. In addition, the Operator shall allow each Participant, at its sole risk and expense, and subject to reasonable safety regulations, to inspect the Joint Account Assets and observe Enterprise Operations at all reasonable times, so long as the inspecting Participant does not unreasonably interfere with Enterprise Operations.
9.2.17 The Operator shall undertake all other activities reasonably necessary to fulfill the foregoing.
The Operator shall not be in default of its duties under this Clause 9.2 if its inability to perform results from the failure of either Participant to perform acts or to contribute amounts required of it by this Agreement, but this shall not relieve any Participant which is the Operator of any liability in its capacity as a Participant.
9.3 No Fee Except as otherwise agreed or provided for in the Financial and Accounting Procedures, the Operator shall not be entitled to any fee or other compensation for acting as Operator.
9.4 Standard of Care The Operator shall conduct all Enterprise Operations (including the marketing of Products) in a good, workmanlike and efficient manner, in accordance with sound mining and other applicable industry standards and practices, and in accordance with applicable laws, the terms and provisions of the COW and any leases, licences, permits, contracts and other agreements pertaining to the Joint Account Assets. Without prejudice to the generality of the foregoing, the Operator shall maintain in good working order all material assets taken as a whole from time to time used in Enterprise Operations or Sole Risk Ventures. The Operator shall not be liable to any Participant for any act or omission in its capacity as Participant (insofar as such act or omission relates to conduct of operations in the Contract Area) or as Operator resulting in damage or loss except to the extent caused by or attributable to its wilful misconduct or gross negligence.
9.5 Resignation; Deemed Offer to Resign The Operator may resign upon 90 days' prior notice. In addition, the Operator shall be deemed to have resigned forthwith upon an Event of Resignation, as defined below and, as provided in the Operator Replacement Agreement, PT-RTZ shall, if at the time of such Event of Resignation, PT-RTZ is not the Operator and is an indirect or direct subsidiary of RTZ, have the right to become substitute Operator in succession to PT-FI with respect to the COW. Similarly, if the Operator shall resign upon 90 days' prior notice, PT-RTZ will have the right to become Operator in succession to PT-FI with respect to the COW if PT-RTZ is not then the Operator and shall at the time be a direct or indirect subsidiary of RTZ. For the purposes of this Agreement, an Event of Resignation shall mean one of the following occurrences:
9.5.1 an Event of Default shall have occurred under an FI Credit Document (as defined in the Trust Agreement) which gives the Operator Selection Representative a right under the Operator Replacement Agreement to cause PT-FI to resign as Operator and such Operator Selection Representative has elected to exercise such right; or
9.5.2 the Government has given PT-FI a notice of default under Article 20 of the COW and PT-FI has not within 30 days (unless the default relates to failure to make payments pursuant to Article 12 or 13 of the COW, in which event 20 days) after receipt thereof either corrected such default or obtained the withdrawal or stay of such notice, unless the question has been submitted to arbitration, in which event it shall be an Event of Resignation if PT-FI has not corrected such default within 10 days after affirmation of such default by arbitration; or
9.5.3 FCX and its Affiliates shall cease to own at least such number of shares of the capital stock of PT-FI as shall permit FCX and its Affiliates to elect a majority of the board of directors and of the board of commissioners of PT-FI; or 9.5.4 any person shall, except with the consent of RTZ, acquire such number of shares of the capital stock of FCX as shall permit such person to elect a majority of the board of directors of FCX; or
9.5.5 a general meeting of shareholders of the Operator resolves that the Operator be liquidated or the Operator suffers the appointment of a receiver, liquidator, administrator, assignee, custodian, trustee, sequestrator or similar official for a substantial part of its assets in a proceeding brought against or initiated by it, and such appointment is neither made ineffective nor discharged within ninety days after the making thereof or such appointment is consented to, requested by or acquiesced in by it; or
9.5.6 the Operator commences a voluntary case under any applicable bankruptcy, insolvency or similar law now or hereafter in effect; or consents to the entry of an order of relief in an involuntary case under any such law or to the appointment of or taking possession by a receiver, liquidator, administrator, assignee, custodian, trustee, sequestrator or other similar official of any substantial part of its assets; or makes a general assignment for the benefit of creditors; or
9.5.7 entry is made against the Operator of a judgment, decree or order for relief by a court of competent jurisdiction in an involuntary case commenced against the Operator under any applicable bankruptcy, insolvency or other similar law of any jurisdiction now or hereafter in effect.
9.6 Transactions With Affiliates If the Operator engages an Affiliate of either Participant to provide services hereunder or to perform any of the obligations of the Operator, it shall do so on terms no more favourable to the Affiliate than would be the case with an unrelated person in an arm's length transaction provided that arrangements with Affiliates consistent with the Management Services Agreement presently in existence between Freeport-McMoRan Inc. and PT-FI or between FCX and PT-FI, and substitute arrangements no more onerous to PT-FI, shall not constitute a violation of the foregoing.
10. FEASIBILITY STUDY INTO EXPANSION
10.1 At such time (whether before or after the Effective Date) as a Participant is of the good faith and reasonable opinion that an economically viable project of Expansion or Development may be possible in any area of the Contract Area (the "Specified Area") (the "Expansion Project"), such Participant (the "Proposing Participant") may propose that a Feasibility Study be prepared to assess the economic viability of such Expansion Project. Such proposal (the "Proposal") shall be made to the Operating Committee and shall detail the information upon which the Proposing Participant has based its opinion. The Specified Area shall be defined in terms of a three-dimensional physical description.
Within 30 days following the Operating Committee's receipt of the Proposal, the Operating Committee shall vote whether to authorise the Operator to conduct a Feasibility Study relating to such Proposal, except that, if the Proposal relates to an Expansion Project which satisfies the criteria specified in, or agreed pursuant to, Clause 10.5 and would be the first Approved Expansion Project, such approval shall be deemed to have been given. If the Operating Committee approves the Proposal, the Operator shall conduct a Feasibility Study relating thereto. If the Operating Committee does not approve the Proposal, the Proposing Participant may, at its sole risk and expense, proceed with the project as described in the Proposal as a Sole Risk Programme, to which the provisions of this Agreement relating to Sole Risk Programmes and Sole Risk Ventures shall apply.
10.2 Upon completion of any such Feasibility Study as is referred to in Clause 10.1 (including any initiated before the Effective Date and completed after the Effective Date), the Operator will deliver a copy of the results thereof to the Operating Committee and to the boards of directors of FCX, PT-FI and PT-RTZ respectively. Within 90 days following receipt of such results or, if the Expansion Project does not involve project financing on a joint basis and is not to be financed through the proceeds of the RTZ Loan Agreement, then within such additional reasonable period of time, not exceeding six months, as shall be necessary for either Participant to receive assurance of necessary financing, the boards of directors of FCX and PT-FI, on one hand, and of PT-RTZ, on the other, shall either
10.2.1 approve, and authorise the commencement of construction of, the Expansion Project in accordance with its terms;
10.2.2 agree in principle that the Expansion Project be carried out as Joint Operations but disagree as to scope or related Budget; or
10.2.3 decline to approve the Expansion Project.
10.3 Notwithstanding any other provision of this Agreement to the contrary, for a period of ten years from the date hereof, PT-RTZ shall have the sole right (i) to propose as the subject of a Feasibility Study an Expansion Project which satisfies the criteria specified in, or agreed pursuant to, Clause 10.5 and which would be the first Approved Expansion Project and (ii) to determine that the Expansion Project which is the subject of such Feasibility Study shall be the first Approved Expansion Project, for which purpose the approval of the board of directors of PT-FI shall be deemed to have been given. Accordingly, whether or not the board of directors of PT-FI or the board of directors of FCX approve such Expansion Project, such Expansion Project shall, provided it is approved by the board of directors of PT-RTZ, be an Approved Expansion Project for all purposes of this Agreement.
10.4 Except in relation to the Expansion Project falling within Clause 10.3 as to which the provisions of Clause 10.3 shall apply, if the boards of directors of FCX, PT-FI and PT-RTZ do not agree on the scope and Budget of an Expansion Project as mentioned in Clause 10.2.2, the matter shall be left open for an additional period of 30 days to allow for further discussion. If the boards of directors shall decline to approve the Expansion Project within such 30 day period, the board of directors of the Proposing Participant may, within a further period of 30 days thereafter by notice to the other Participant and the Operator elect, subject, in the case of PT-FI, to the limitation specified in Clause 7.5.1.2, to carry out such Expansion Project as a sole risk venture (a "Sole Risk Programme") and, unless the other Participant, within a further period of 30 days after receipt of the Proposing Participant's notice of election, elects by written notice to the Proposing Participant and the Operator to join in such Sole Risk Programme (in which case the Expansion Project shall become part of Joint Operations), the Proposing Participant shall have the right to carry out the Expansion Project as a Sole Risk Venture provided that it commences work within one year after the date of its written election to carry out such Expansion Project as a Sole Risk Venture, and provided further that, in the case of any Sole Risk Programme carried out by PT-RTZ, unless PT-RTZ has obtained the prior written consent of PT-FI, the Sole Risk Programme is not based to any significant degree on the accelerated mining of the 10-K Reserves.
10.5 No project shall be capable of being the first Approved
Expansion Project unless it is a project for Expansion which is
(a) based on the aggregate of (i) the 10-K Reserves and (ii) New
Reserves of not less than 400,000,000 tonnes containing an
average of 0.5% copper and 0.5 grammes/tonne of gold (or the
economic equivalent thereof), unless FCX and PT-RTZ shall agree
that a smaller reserve would suffice and (b) designed to result
in the treatment of ore mined from the aggregate resources in
Contract Area Block A (being both the 10-K Reserves and the
above-mentioned New Reserves) at an aggregate rate in excess of
118,000 tonnes per day. In this Clause 10.5, "New Reserves"
means proved and probable ore reserves situated in Contract Area
Block A which are additional to the 10-K Reserves.
11. GREENFIELD PROJECTS AND LATER EXPANSION PROJECTS
11.1 The Participants will plan together, in accordance with the procedures set out in Clause 10, the Development of any new Greenfield Project in Contract Area Block A or Contract Area Block B, and any project of Expansion which is to be funded wholly without the use of the proceeds of the RTZ Loan and the related direct investment by PT-RTZ. The procedures outlined in Clause 10 and the Financial and Accounting Procedures will be applicable.
11.2 If any project referred to in Clause 11.1 is to be developed as part of Joint Operations, the financing of such project, insofar as it is not to be funded by way of the RTZ Loan and the related direct investment by PT-RTZ, will be either on a joint basis, in which event the financing costs will be part of the Operating Costs for purposes of the Financial and Accounting Procedures, or on an individual basis, in which event each Participant will be solely liable for its financing costs but will be entitled to determine the form which such financing will take, including, if such Participant so desires, sale and leaseback transactions so long as such transactions relate solely to such Participant's interest in the Joint Account Assets and do not prejudice or unduly interfere with the carrying on of Enterprise Operations or previously established Sole Risk Ventures. The costs and benefits of any such project carried on as part of Joint Operations will, subject to the above provisions of this Clause 11.2 and Clause 6.1 and the Financial and Accounting Procedures, be borne by the Participants in proportion to their respective Participating Interests in Contract Area Block A or Contract Area Block B, as the case may be.
11.3 If, pursuant to the procedures set out in Clause 10, any project referred to in Clause 11.1 is not to be developed as part of Joint Operations, either Participant may treat the project as a Sole Risk Venture under the provisions of Clauses 10 and 12.
12. SOLE RISK
12.1 If a Proposing Participant shall proceed with a Sole Risk Programme and unless otherwise agreed by the Participants, for so long as the Sole Risk Programme continues or the Proposing Participant continues to conduct operations on its own account in the Specified Area:
12.1.1 the Specified Area shall not be eligible for Joint Operations and the Proposing Participant shall have the exclusive right to carry out the Sole Risk Programme and any subsequent work programmes as it may think fit in the Specified Area at its sole risk and cost and the other Participant shall, to the extent necessary and so far as it is able and without prejudice to the existing Enterprise Operations, provide full rights of ingress, egress and regress to, from and over the Specified Area and the remainder of the Contract Area so that the Proposing Participant may exercise such right. Without prejudice to the generality of the foregoing, to the extent that the Sole Risk Venture requires the use of PT-FI Available Assets PT-FI support services or Joint Account Assets, and the use of these assets and support services does not prejudice then or later the conduct of Enterprise Operations, each of PT-FI and PT-RTZ (as appropriate) will make available and charge to the Sole Risk Venture the direct and allocable costs of providing such assets and services;
12.1.2 the Participant which is not the Proposing Participant shall cease to have any rights to the production of Minerals or proceeds therefrom from operations in the Specified Area provided that the rights of the Proposing Participant will relate solely to the obtaining of exclusive rights to the proved and probable reserves in the three-dimensional physical area of the Specified Area, as described in the Feasibility Study with respect to the project in question, to the extent such reserves constitute the basis for the project, as presented to the Participants pursuant to Clause 10, but will not thereby obtain rights with respect to any other reserves. Any further Expansion within the Specified Area, but not constituting part of the Sole Risk Programme, will be subject to the procedure provided in Clause 11 for approval of Programmes, but with protections afforded to the holder of the Sole Risk Programme which are comparable to those afforded PT-FI with respect to the 10-K Reserves and the related PT-FI Available Assets.
12.2 All Sole Risk Programmes shall be conducted by the Operator appointed under this Agreement, unless it declines to act as operator with respect thereto, in which event the operator with respect thereto shall be the person designated as operator by the Participant for whose account the Sole Risk Venture is being conducted, subject to the reasonable approval of PT-FI. The Operator or other operator shall have, with respect to the Sole Risk Venture, the same powers, rights and obligations as are applicable to the Operator's activities with respect to Enterprise Operations. In the event of any conflict between the conduct of Enterprise Operations and a Sole Risk Programme, the Operator shall give priority to Enterprise Operations.
12.3 Should the Operator conduct a Sole Risk Programme on behalf of a Participant which is not also the Operator, the charges provided for in the Financial and Accounting Procedures with respect to such Sole Risk Programme shall be payable or repayable to the Operator upon demand. The Operator shall be authorised to establish such procedures as are reasonably necessary to obtain such payments from revenues otherwise payable to such Participant or to issue cash calls with respect thereto to such Participant.
12.4 Should the board of directors of any Participant determine, in any Year, not to participate in the proposed Exploration Programme for such Year as recommended by the Exploration Committee, or if no Programme is recommended by the Committee, the board of directors of either Participant may elect, upon 30 days' notice after having submitted a proposed Exploration Programme to the other Participant, to carry out such Programme as a Sole Risk Venture, unless within such period the other Participant elects to join in such Programme. If no such election by the other Participant is made,
(a) if the proposed Programme is in Contract Area Block B, the declining Participant shall not be entitled to participate in that or any subsequent Exploration Programmes or in any subsequent Development Projects in Contract Area Block B other than any Development Projects already begun or pursuant to Exploration Programmes and subsequent Development Projects based on Feasibility Studies which have theretofore been approved, and
(b) if the proposed Programme is in Contract Area Block A, the absence of any such election by the other Participant shall not affect that other Participant's rights to participate in any subsequent Exploration Programmes or in any subsequent Development Projects except that if the Participant which carries out the Programme as a Sole Risk Programme subsequently puts forward a proposal for Development based on such Sole Risk Programme, the other Participant shall not, in reaching a decision whether or not to participate in such Development Project, be entitled to see or use any data relating to such Exploration Sole Risk Programme.
13. PROGRAMMES AND BUDGETS Joint Operations shall be conducted, expenses shall be incurred and Joint Account Assets shall be acquired pursuant only to Approved Programmes and Budgets. The Financial and Accounting Procedures contains, among other things, provisions concerning the preparation, review and approval of Programmes and Budgets.
14. TAXATION IN INDONESIA It is the intention of the Participants that each of the Participants should be liable for Indonesian Taxes on income separately according to its participation in Joint Operations and any of its Sole Risk Ventures (and with respect to PT-FI, its interest in the 10-K Reserves and the other Enterprise Operations). Each Participant shall be directly responsible for and shall directly pay all such Taxes applicable to such Participant in Indonesia.
Each Participant shall individually and timely file its own Indonesian Tax returns with the relevant authorities and independently file pertinent claims and recover Tax credits to the extent permitted by applicable law. Each Participant shall provide to the other promptly all such information reasonably requested by the other to enable such other to comply with its obligations under this Clause 14.
Failure by a Participant to make any payment of Indonesian Income Tax which is due and payable by the Participant and which would result in a default under the COW shall entitle the Operator after 3 business days' notice to the Participant to make the required payment on behalf of the Participant and withhold such amount from sums otherwise due to such Participant under this Agreement.
15. TRANSFER OF PARTICIPATING INTERESTS
15.1 General Subject to the provisions of this Clause 15, a Participant shall have the right to transfer, grant, assign, and otherwise commit or dispose (all such rights to be referred to as "transfer" in this Clause 15) to any third party all or any part of its Participating Interest.
15.2 Limitations on Free Transferability
The transfer right of a Participant in Clause 15.1 shall be
subject to the following terms and conditions:
15.2.1 no transferee (other than a transferee taking the
Participating Interest or part thereof for the purpose of
securing the payment or repayment of any indebtedness, or
enforcement thereof, or the taking of title by a party secured
thereby or an Affiliate (including any representative thereof and
the Trustee acting on its behalf under the Restated Trust
Agreement), and prior to the assumption of the position of a
Participant in substitution for a Participant under the
Participation Agreement) of all or part of its Participating
Interest shall have the rights of a Participant unless and until
the transferring Participant has provided to the other
Participants notice of the transfer, and the transferee (other
than a transferee as aforesaid), as of the effective date of the
transfer, has committed in writing to be bound by this Agreement
to the same extent and nature as the transferring Participant;
15.2.2 no transfer permitted by this Clause 15 shall relieve the transferring Participant of its share of any Liability, whether accruing before or after such transfer, which arises out of Joint Operations conducted after the Effective Date and prior to such transfer;
15.2.3 the transferring Participant and (unless the transferee is taking the Participating Interest or part thereof by way of security) the transferee shall indemnify the other Participant against all adverse tax consequences of the transfer;
15.2.4 no transfer shall be made of less than a 10% Participating Interest (unless it is the balance of the transferor's Participating Interest) and no such transfer shall result in the transferring Participant retaining less than a 10% Participating Interest provided that a Participant will be entitled, in connection with the financing of a Sole Risk Programme or an Approved Programme and Budget, subject to the other sub-clauses of this Clause 15.2, to transfer a partial interest of less than a 10% Participating Interest, or a partial interest that relates only to a specific geographic area, so long as such transfer and such financing do not materially and adversely affect any Joint Operations;
15.2.5 no transfer shall be made to a person which is bankrupt, insolvent, liable to be wound up, which is not of good financial standing or which is otherwise objectionable on reasonable grounds from the viewpoint of the interests of the Participation;
15.2.6 subject to Clause 15.4.4, such transfer shall be subject to a first offer right in favour of the other Participant as provided in Clause 15.3;
15.2.7 such transfer shall in no case affect the rights of the non-transferring Participant under the COW;
15.2.8 such transfer shall include the right to receive revenues from Enterprise Operations to the extent enjoyed by the transferor, but shall not include the right to participate in any Committees described in Clause 8 of this Agreement or in Clause 2 of the Implementation Agreement or to be an Operator as described in Clause 9 of this Agreement, unless the non-transferring Participants consent to the transfer of the right in question, which consent may be withheld for any reason; and 15.2.9 such transfer shall be subject to prior Government approval.
In addition, until the RTZ Loan has been repaid in full, no transferee of the whole or any part of PT-FI's Participating Interest in Incremental Expansion Cashflow (together with PT-FI's related rights under the COW and agreements for the sale of Products derived from Joint Operations) shall have the rights of a Participant unless and until it has committed in writing to be bound by the repayment provisions of the RTZ Loan Agreement and acknowledged and consented to the Intercreditor Agreement (as defined in the RTZ Loan Agreement).
15.3 First Offer Right Except as otherwise provided in Clause 15.4, if a Participant desires to transfer all or any part of its Participating Interest, including an interest therein that relates only to a specific geographic area, it shall first offer to sell such part to the other Participant on terms to be agreed. The Participants shall thereupon use all reasonable endeavours to agree the terms of the sale. If despite using all such reasonable endeavours, the Participants fail to agree on the terms of the sale within a period of 60 days after the date of the offer referred to in this Clause 15.3, the Participant desiring to sell shall have the right for the period of 180 days following the expiry of such 60 day period to sell such part of its Participating Interest to a third party. If the Participant desiring to sell shall fail to consummate such a sale to any third party within 180 days after such Participant shall become entitled hereunder to sell to such third party, no sale or transfer may thereafter be made by such Participant without again complying with the provisions of this Clause 15.3.
15.4 Exceptions to First Offer Right Clause 15.3 shall not apply to the following transfers:
15.4.1 transfer by a Participant of all or any part of its interest in this Agreement or any Participating Interest to an Affiliate;
15.4.2 corporate merger, consolidation, amalgamation or reorganisation of a Participant for the purposes of a financial reconstruction;
15.4.3 transfers among Participants which are expressly required or permitted by the provisions of this Agreement;
15.4.4 transfers by way of security or an enforcement or foreclosure thereof or the taking of title by a secured party or an Affiliate (including any representative thereof and the Trustee acting on its behalf under the Restated Trust Agreement) but not a subsequent transferee.
16. GENERAL PROVISIONS
16.1 Notices All notices, payments and other required communications hereunder ("Notice") between the parties shall be in writing and shall be addressed, respectively, as follows: All Notices shall be given (a) by personal delivery to each of the other parties, or (b) by electronic communication, with a confirmation sent by registered or certified mail, return receipt requested. All Notices shall be effective and shall be deemed delivered (i) if by personal delivery on the date of delivery and (ii) if by electronic communication on the date of receipt of the electronic communication. A party may change its address from time to time by Notice to the other parties.
If to PT-FI: P. T. Freeport Indonesia Company
1615 Poydras Street
New Orleans, LA 70161
Attention: Treasurer
Tel.: (504) 582-4628
Fax: (504) 582-4511
If to PT-RTZ: P.T. RTZ-CRA Indonesia
14th floor, World Trade Centre
Jalan Jend. Sudirman Kav. 29-31
Jakarta 12920
Indonesia
Tel: (6221) 521 1752
Fax: (6221) 521 1760
Attention: President Director
with a copy to: The RTZ Corporation PLC
6 St. James's Square
London SW1Y 4LD
England
Tel: 0171 930 2399
Fax: 0171 930 3249
Attention: The Secretary
16.2 Waiver The failure of a party to insist on the strict performance of any provision of this Agreement or to exercise any right, power or remedy upon a breach hereof shall not constitute a waiver of any provision of this Agreement or limit the party's right thereafter to enforce any provision or exercise any right.
16.3 Modification No modification or amendment of this Agreement shall be valid unless made in writing and duly signed by all the parties. If, in the event of experience gained through the operation of this Agreement, the parties agree that application of any of its provisions results in a material inequity to (a) party(ies), then the parties agree that they will meet to discuss possible changes in such provision(s) proposed by one or more parties as a means of obviating such inequity.
16.4 Force Majeure
16.4.1 The obligations of the Operator and of a Participant, other than the payment of money provided hereunder, shall be suspended and any period of time mentioned in this Agreement shall be extended to the extent and for the period that performance or the ability of the Operator or (as the case may be) one or both of the Participants to exercise rights or carry out obligations or otherwise act as permitted by or in accordance with this Agreement is prevented by any cause, whether foreseeable or unforeseeable, beyond its reasonable control, including, without limitation, labour disputes (however arising and whether or not employee demands are reasonable or within the power of the Participant to grant); acts of God; laws, regulations, orders, proclamations, instructions or requests of any government or governmental entity; judgments or orders of any court; inability to obtain on reasonably acceptable terms any public or private exploration or exploitation, right, licence, permit or concession; curtailment or suspension of activities to remedy or avoid an actual or alleged, present or prospective violation of federal, state or local environmental standards; acts of war or conditions arising out of or attributable to war, whether declared or undeclared; riot, civil strife, insurrection or rebellion; fire, explosion, earthquake, storm, flood, sink holes, drought or other adverse weather condition; delay or failure by suppliers or transporters of materials, parts supplies, services or equipment or by contractors or sub-contractors' shortage of, or inability to obtain, labour, transportation, materials, machinery, equipment, supplies, utilities, or services; accidents; breakdown of equipment, machinery or facilities; or any other cause, whether similar or dissimilar to the foregoing. The affected Participant shall promptly give notice to the other Participant of the suspension of performance, stating therein the nature of the suspension, the reasons therefor and the expected duration thereof. The affected Participant shall resume performance as soon as reasonably possible. During the period of suspension, the obligations of the Participants to advance funds pursuant to paragraph 10.3 of the Financial and Accounting Procedures shall be reduced to levels consistent with the Joint Operations which are capable of being carried on in the circumstances.
16.4.2 Should any of the causes referred to in Clause 16.4.1 result in the actual production of Products from Enterprise Operations (other than Greenfield Projects) in Contract Area Block A in any Year (the "Actual Production") falling short of the planned production of such Products for the Year as shown in the then current programme and budget (which, in the case of Joint Operations, shall be the Approved Programme and Budget) for that Year (the "Planned Production"), the Product Schedule shall be amended as follows:
(i) The scheduled production of Products for the Year in question as shown in the Product Schedule shall be reduced in accordance with the following formula:
D = A/B x C,
where D is the revised scheduled production for the Year in
question, A is the Actual Production, B is the Planned Production
and C is the scheduled production of Products for that Year as
shown in the Product Schedule prior to the occurrence of the
cause and the production which is D shall be substituted in the
Product Schedule as the scheduled production of Products for the
Year in question.
(ii) The shortfall in production being C - D (as defined in (i) above) shall be added to the final Year of production as shown by the Product Schedule prior to the occurrence of the cause or causes. If, in the final Year, the scheduled production as so revised would exceed the production which would result from a daily rate of 118,000 tonnes per day, the excess shall be carried forward to the subsequent Year (and the Cut-off Date shall be extended accordingly) and appropriate adjustments made to the production of recovered metal for that Year.
16.5 Governing Law
16.5.1 This Agreement shall be governed by and construed in accordance with the laws of the State of New York.
16.5.2 Each of the parties irrevocably agrees that any suit, action or proceedings (together in this Clause 16.5 referred to as "Proceedings") arising out of or in connection with this Agreement shall be brought in any United States Federal or New York State court sitting in the borough of Manhattan, City of New York and, except for the purposes of or Proceedings regarding enforcement, which may take place in any relevant jurisdiction, submits to the exclusive jurisdiction of the courts in such borough.
16.5.3 Each of the parties irrevocably waives any objection which it may have now or hereafter to the laying of venue of any Proceedings in any such court as is referred to in this Clause
16.5 and any claim that any such Proceedings have been brought in an inconvenient forum. Each of the parties hereby to the fullest extent permitted by law waives any right it may have to have any Proceedings take the form of a trial by jury.
16.5.4 Each of the parties hereby irrevocably designates, appoints and empowers, in the case of the United States Federal Courts in New York and the New York State courts, CT Corporation System, having offices at the date hereof at 1633 Broadway, New York, N.Y. 10019, U.S.A. to receive, for and on behalf of itself, service of process in such jurisdictions in any legal action or proceedings with respect to this Agreement or any judgment in connection herewith and agrees that failure by such process agent to give notice of such service of process to it shall not impair or affect the validity of such service or of any judgment based thereon.
16.6 Penalties It is agreed between the parties that, while the percentage and rate set out in Clause 6.3.2.3 and paragraph 10.3.3 of the Financial and Accounting Procedures are considered fair and reasonable and a genuine pre-estimate of the loss to the non-Defaulting Participants, if it should be found that either of such percentage and rate be unenforceable as going beyond what is fair and reasonable or a genuine pre-estimate in the circumstances and if by substituting a different percentage or rate for the percentage or rate set out in Clause 6.3.2.3 or paragraph 10.3.3 of the Financial and Accounting Procedures it would be enforceable, then there shall be substituted such next high percentage or rate as shall render Clause 6.3.2.3 or paragraph 10.3.3 of the Financial and Accounting Procedures valid and enforceable.
16.7 Rule Against Perpetuities Any right or option to acquire any interest in real or personal property under this Agreement must be exercised, if at all, so as to vest such interest in the acquirer within twenty-one years less one day after the death of the last known descendent of Queen Victoria alive on the Effective Date.
16.8 Further Assurances Each of the Participants agrees that it shall take from time to time such actions and sign or execute such additional instruments as may be reasonably necessary or convenient to implement and carry out the intent and purpose of this Agreement.
16.9 Confidentiality and Public Statements Except as otherwise provided in this Clause 16.9, the terms and conditions of this Agreement, and all data, reports, records and other information of any kind whatsoever developed or acquired by any Participant in connection with this Participation, shall be treated by the Participants as confidential (hereinafter called "Confidential Information"), and no Participant shall reveal or otherwise disclose such Confidential Information to third parties without the prior written consent of the other Participant(s). The foregoing restrictions shall not apply to the disclosure of Confidential Information (i) pursuant to the terms of the COW or the request of the Government, the laws, rules and regulations administered by the Securities & Exchange Commission or the rules of any stock or securities exchange on which the shares or stock of either of the Participants or any of its Affiliates may from time to time be listed or (ii) to any Affiliate, to any public or private financing agency or institution, to any contractors or subcontractors which the Participants may engage and to employees and consultants of the Participants or to any third party to which a Participant contemplates the transfer, sale, assignment, encumbrance or other disposition of all or part of its Participating Interest pursuant to Clause 15; provided that, in any such case under this (ii), only such Confidential Information as such third party shall have a legitimate business need to know shall be disclosed, and the person or company to whom disclosure is made shall first undertake in writing to protect the confidential nature of such information at least to the same extent as the parties are obligated under this Clause 16.9. In addition, (a) the foregoing restrictions shall not apply to Confidential Information which otherwise comes into the public domain and (b) notwithstanding anything to the contrary in this Clause 16.9, each Participant is permitted to use and disclose data arising from the Participation in its annual audited financial statements and notes thereto.
In the event that a Participant is required to disclose Confidential Information to any government and appropriate agencies and departments thereof, to the extent required by law or in response to a legitimate request for such Confidential Information, the Participant so required shall immediately and prior to any disclosure notify the other Participants hereto of such requirement and the terms thereof prior to such submission.
The provisions of this Clause 16.9 shall apply during the term of this Agreement and shall continue to apply to any Participant which forfeits, surrenders, assigns, transfers or otherwise disposes of its Participating Interest for one year following the date of such occurrence.
Except as may be required by applicable law or any listing
agreement with any national securities exchange or the rules of
any stock exchange on which the shares or stock of either of the
Participants or any of its Affiliates may from time to time be
listed, no party to this Agreement shall issue any press release
or make any public announcement or public disclosure with regard
to the Participation or its financial performance or condition,
including Confidential and non-Confidential Information, unless
either (i) a draft of the proposed press release has been
provided to the other party hereto at least twenty-four hours
prior to its proposed release in order to permit such party to
comment thereon or (ii) such press release or other public
statement contains factual information (or discussion or analysis
of or comment based upon such factual information) previously
provided to such party by the other party provided that neither
will present projections or forward-looking information that is
attributed to the other party or any of its Affiliates without
the prior written consent of the other party.
16.10 Entire Agreement; Successors and Assigns
This Agreement, together with the Implementation Agreement and the other documents referred to therein and the Early Closing Agreement and the other documents referred to therein, contains the entire understanding of the parties and supersedes all prior agreements and understandings between the parties relating to the subject matter hereof. This Agreement shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the parties.
16.11 Severability If part of this Agreement is rendered illegal, invalid or unenforceable under applicable law, the remaining clauses of this Agreement shall continue in force.
16.12 Indonesian Law Waiver Each of the Participants waives those provisions of Article 1266 of the Civil Code of the Republic of Indonesia (if and to the extent that, notwithstanding Clause 16.5, that Article is applicable to this Agreement) which would otherwise require the order of a court as a precondition to termination of this Agreement.
16.13 Tax Covenant In recognition of the fact that the Participants and the transactions contemplated by this Agreement may be affected adversely over the life of the Chargeable Operations, by the interaction of the laws relating to Taxes under multiple taxing jurisdictions, the Participants agree that they will cooperate with a view to minimizing the adverse tax impact of the various jurisdictions on the Participants to the extent such can be accomplished without material adverse affect on the conduct of the Chargeable Operations and the other Participant. The Participants will consult and work together to ensure that neither party takes any action which prejudices the Tax position of the other. The Participants hereby agree that each will endeavour to make such adjustments in the way in which Chargeable Operations are conducted, or in the terms of this Agreement, or in their other relationships, as may be reasonably requested by the other Participant to avoid or minimize any adverse tax impact on such Participant while taking into account any adverse tax or operational impact on Chargeable Operations and on the other Participant.
(Signature pages follow)
IN WITNESS WHEREOF the authorised representatives of the parties hereto have signed this Agreement as of the date first above written.
P.T. FREEPORT INDONESIA COMPANY
By: _____________________________
Name:
Title:
P.T. RTZ-CRA INDONESIA
By: _____________________________
Name:
Title:
In anticipation of the completion of formation of P.T. RTZ-CRA Indonesia under the laws of the Republic of Indonesia, this Agreement is also executed by RTZ Jersey Investments One Limited and RTZ Jersey Nominees Limited, jointly and severally, the founding shareholders.
RTZ JERSEY INVESTMENTS ONE LIMITED
By: ________________________________
Name:
Title:
RTZ JERSEY NOMINEES LIMITED
By: ________________________________
Name:
Title:
SCHEDULE 1
Privatisation Agreements
1. Joint Venture Agreement dated as of March 11, 1993 between P.T. ALatieF Nusakarya Corporation ("ANC") and PT-FI (the "ALatief J.V. Agreement"). The ALatief J.V. Agreement provides for the sale and purchase of US$270 million of infrastructure assets consisting primarily of warehouses, a hotel, housing (single and multi-family and dormitories), and food service, medical, retail and recreational facilities.
Master Services Agreement, dated December 15, 1993 between Alatief Freeport Infrastructure Corporation ("AFIC") and PT-FI regarding the operation and management of certain non-mining infrastructure assets for the benefit of PT-FI, as amended April 15, 1994 and April 19, 1994.
Master Services Agreement, dated August 11, 1994, between AFIC and PT-FI regarding the operation and management of certain non-mining infrastructure assets for the benefit of PT-FI. Master Services Agreement, dated August 11, 1994 between Alatief Freeport Hotel Corporation ("AFHC") and PT-FI regarding the provision of hotel management services for the Sheraton Inn at Timika.
Management Contract, dated October 28, 1993 between PT-FI and Indo-Pacific Sheraton Limited regarding the management of the Sheraton Inn at Timika which was assigned by Indo-Pacific Sheraton Limited to Sheraton Overseas Management Corporation on October 28, 1993. By Assignment, dated August 11, 1994 PT-FI assigned its rights and obligations under such Contract and other hotel privatisation agreements to AFHC.
As of February 1996, transactions involving the sale of approximately US$198 million of infrastructure assets have been closed with P.T. ALatief Freeport Infrastructure Company ("AFIC") purchasing approximately US$156 million and P.T. ALatief Freeport Hotel Company ("AFHC") purchasing US$42 million. AFIC and AFHC are each owned 2/3rds by ANC and 1/3rd by PT-FI.
ANC and PT-FI are currently discussing amending the ALatief J.V. Agreement to add additional infrastructure assets, thereby increasing the total amount of the infrastructure sales provided for in the ALatief J.V. Agreement to approximately US$350-450 million, and to restructure financing for the transaction on more favourable terms.
2. Asset Purchase Agreement dated as of December 26, 1994 between P.T. Puncakjaya Power ("PTPJP") and PT-FI (the "Asset Purchase Agreement").
The Asset Purchase Agreement provides for the sale and purchase of US$215 million of infrastructure assets consisting primarily of electric power generation and transmission facilities. The final closing under the Asset Purchase Agreement occurred in December 1995.
Power Sales Agreement, dated as of December 27, 1994 between P.T. Puncakjaya Power ("Seller") and P.T. Freeport Indonesia Company ("Buyer") providing for Seller to make available, sell and deliver to Buyer and to certain designees of Buyer, and for Buyer to purchase from Seller, certain electric capacity and electricity.
Operation, Maintenance and Management Agreement, dated and
effective as of January 30, 1995, between P.T. Puncakjaya Power
("Owner") and P.T. Nusantara Power Services ("Operator")
providing for Operator to furnish certain services to Owner on a
cost reimburable basis for the operation, maintenance and
management of the Mill Site Facility, the Timika Facility, the
New Town Facility, the Milepost 38/39 Facility and the Port Site
Facility.
3. Purchase and Sale Agreement dated as of March 22, 1995 between ANC, P&O Singapore Pte. Ltd., P.T. ALatief P&O Port Development Company and PT-FI (the "Purchase and Sale Agreement"). Master Services Agreement, dated March 22, 1995 between P.T. Alatief P & O Port Development Company ("PTAPPDC") and PT-FI regarding the operation and management of the port, marine and logistics assets by PTAPPDC for the benefit of PT-FI.
The Purchase and Sale Agreement provides for the purchase and sale of US$100 million of infrastructure assets consisting primarily of tugboats, motorised barges, wharfs and warehouses, cranes and other cargo handling equipment, concentrate drying equipment, heavy trucks and maintenance facilities. This transaction was closed on March 22, 1995.
4. Joint Venture Agreement dated as of March 18, 1994 among P.T. Airfast Indonesia, P.T. Giga Haksa and PT-FI (the "Aviation J.V. Agreement").
The Aviation J.V. Agreement provides for the sale and purchase of approximately US$48 million of infrastructure assets consisting primarily of aircraft and helicopters, spare parts and aviation support facilities. This transaction was closed in 1995.
5. PT-FI is currently negotiating with an Indonesian company concerning the sale and purchase of infrastructure assets constituting essentially all of PT-FI's potable water treatment and distribution facilities and sewerage treatment and collection facilities. PT-FI expects to enter into agreements resulting in the closing of a sale of such assets in 1996 or 1997.
6. PT-FI is currently negotiating with an Indonesian company concerning the sale and purchase of infrastructure assets constituting essentially all of PT-FI's solid waste treatment, storage and disposal facilities. PT-FI expects to enter into agreements resulting in the closing of a sale of such assets in 1996 or 1997.
7. PT-FI is currently negotiating with certain Indonesian companies concerning the sale and purchase of infrastructure assets constituting a steel fabrication shop and industrial gases plant. PT-FI expects to enter into agreements resulting in the closing of a sale of such assets in 1996 or 1997.
8. PT-FI has formed a service company named P.T. Mining Services International Company ("MSIC"). It is expected that in 1996 MSIC will enter into agreements for the provision of certain mining related services to PT-FI, PT-IRJA, other related companies, and potentially third parties. It is not anticipated that any significant amount of assets will be transferred to the MSIC, although PT-FI personnel may be transferred to MSIC.
9. PT-FI is currently negotiating with an Indonesian company concerning the sale and purchase of its existing and proposed new beef production and processing facilities and its proposed new poultry and egg production and processing facilities. PT-FI expects to enter into agreements resulting in the closing of a sale of such assets in 1996 or 1997.
10. PT-FI is currently negotiating with various persons concerning the sale and purchase of its existing and proposed single and multi-family housing facilities and certain existing and proposed retail and commercial facilities located at Kuala Kencana. PT-FI expects to enter into a series of agreements resulting in the closing of sales of such assets in 1996 through 2000.
SCHEDULE 2
Deed of Assignment of Interest in COW
ASSIGNMENT OF INTEREST
THIS AGREEMENT is made the 11th day of October, 1996 between P.T. Freeport Indonesia Company, a corporation organised and existing under the laws of Indonesia (hereinafter referred to as the "Assignor") and P.T. RTZ-CRA INDONESIA, a company in formation under the laws of the Republic of Indonesia (hereinafter referred to as the "Assignee").
WHEREAS, the Assignor has a 100% undivided ownership interest in and to the Contract of Work made 30 December 1991 between the Minister of Mines and Energy of the Republic of Indonesia, acting for and on behalf of the Government of the Republic of Indonesia, and the Assignor (hereinafter referred to as the "Contract of Work");
AND WHEREAS, under the terms of the Contract of Work the Assignor is now conducting certain development, mining and processing activities in the Contract Area Block A (as defined in the Contract of Work) and is implementing a plan for expansion of the capacity of its facilities for treatment of ore mined from Contract Area Block A to a design rate of 118,000 metric tonnes per day (hereinafter, together with all assets and rights reserved to PT-FI pursuant to the terms of the Participation Agreement (including Clause 7.5.1.3 thereof), referred to as the "Existing Project");
AND WHEREAS under the terms of a Participation Agreement made October 11, 1996, between the Assignor and the Assignee (hereinafter called the "Participation Agreement") the Assignee is entitled at this time to an assignment of a 40% undivided ownership interest in and to the Contract of Work excluding the Existing Project, subject to adjustment from time to time as set out in the Participation Agreement.
NOW, THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the mutual covenants and agreements herein contained and subject to the terms and conditions hereinafter set out, the Parties hereto agree as follows:
1. The Assignor does hereby assign, set over, transfer and convey unto the Assignee a 40% undivided ownership interest in and to the Contract of Work and all benefit and advantage derived or to be derived therefrom (excluding the Existing Project), subject to adjustment from time to time, as set out in the Participation Agreement (hereinafter called the "Assigned Interest"), to have and to hold the same unto the Assignee on the terms, conditions and obligations contained in the Contract of Work insofar as they relate to the Assigned Interest. This Assignment is subject to all terms and conditions of the Participation Agreement.
2. The Assignee hereby accepts the assignment of the Assigned Interest and covenants and agrees that it shall, at all times hereafter be bound by, observe and perform all of the provisions of the Contract of Work to be observed and performed by the Assignor, insofar as they relate to the Assigned Interest, to the same extent as if the Assignee had been a party thereto in the place and stead of the Assignor in respect of the Assigned Interest.
3. The Assignor shall remain responsible to the Government of the Republic of Indonesia for the conduct of all operations under the Contract of Work and for all communications with the Government of the Republic of Indonesia under the Contract of Work on behalf of itself and the Assignee.
4. The undivided ownership interest in and to the Contract of Work as at the Effective Date after giving effect to the assignment of the Assigned Interest and subject to the rights and obligations of the parties in relation to the Existing Project as set out in the Participation Agreement shall be as follows:
(i) P.T. Freeport Indonesia Company 60%
(ii) P.T. RTZ-CRA Indonesia 40%
5. Each of the Assignor and the Assignee covenants and agrees with the other of them that at the request of the other it will execute such further assurances and do all such further acts as may reasonably required for the purpose of vesting the Assigned Interest in the Assignee.
6. The address of the Assignee for notices shall be:
14th floor, World Trade Centre
Jalan Jend. Sudirman Kav. 29-31
Jakarta 12920
Indonesia
7. This Assignment shall enure to the benefit of and be binding on the Parties hereto and their respective successors and assigns.
(Signature page follows)
IN WITNESS WHEREOF the authorised representatives of the parties hereto have signed this Agreement as of the date first above written.
P.T. FREEPORT INDONESIA COMPANY
By: _____________________________
Name:
Title:
P.T. RTZ-CRA INDONESIA
By: _____________________________
Name: Michael A. Noakes
Title: President Director
In anticipation of the completion of formation of P.T. RTZ-CRA Indonesia under the laws of the Republic of Indonesia, this assignment is also executed by RTZ Jersey Investments One Limited and RTZ Jersey Nominees Limited, jointly and severally, the founding shareholders.
RTZ JERSEY INVESTMENTS ONE LIMITED
By: ________________________________
Name:
Title:
RTZ JERSEY NOMINEES LIMITED
By: ________________________________
Name:
Title:
SCHEDULE 3
Exceptions to Representations and Warranties
A. PT-FI
4.2.3
1. Tom Beanal v. Freeport-McMoRan Inc. and Freeport-McMoRan
Copper & Gold Inc., Civ. No. 96-1474 (E.D. La. filed Apr. 29,
1996) and Yosefa Alomang v. Freeport-McMoRan Inc. and
Freeport-McMoRan Copper & Gold Inc., Civ. No. 96-9962 (Orleans
Civ. Dist. Ct. La. filed June 19, 1996) and Civ. No. 96-2139
(E.D. La. removed June 24, 1996).
In both actions, the plaintiffs allege substantially identical environmental, human rights and social/cultural violations in Indonesia. Tom Beanal seeks $6 billion in monetary damages and other equitable relief and Yosefa Alomang seeks unspecified monetary damages and other equitable relief. FCX denies the allegations, which have been refuted by a series of independent examinations of the Indonesian mining operations of PT-FI. FCX believes that the actions are baseless and will vigorously defend such actions.
4.2.9 and 4.2.10
1. Assignment of the Contract of Work pursuant to the Trust Agreement dated as of May 15, 1970, as amended and restated, between PT-FI and First Trust, National Association (successor to Morgan Guaranty Trust Company of New York).
2. Assignment to Privatisation counterparties specified in Schedule 1 of rights to use, occupy and construct facilities on certain parcels of land on which infrastructure assets are situated which have been sold by PT-FI to such entities, and rights to pass over other land as reasonably necessary to gain ingress and egress to such parcels.
B. PT-RTZ
4.1.1, 4.1.2 and 4.1.3
1. Qualified, in the case of PT-RTZ, as to its status as being in formation.
ANNEX A
Product Schedule
Recovered Metal in Concentrate
Year Cu (mil. lbs) Au (000 oz.) Ag (000 oz.) 1995 1,029 1,318 2,872 1996 1,085 1,379 2,828 1997 1,140 1,791 2,969 1998 1,033 1,365 3,275 1999 1,165 1,503 3,822 2000 1,069 1,262 4,103 2001 1,132 1,397 3,943 2002 1,090 1,375 3,795 2003 1,082 1,610 4,045 2004 1,052 1,657 3,703 2005 1,082 1,695 3,730 2006 1,099 1,653 3,934 2007 1,099 1,631 4,045 2008 1,110 1,614 4,158 2009 1,107 1,589 4,203 2010 1,099 1,567 4,296 2011 1,049 1,269 4,138 2012 1,035 1,283 4,010 2013 1,066 1,471 4,268 2014 1,066 1,461 4,277 2015 1,057 1,493 4,156 2016 1,044 1,529 3,768 2017 1,008 1,589 3,359 2018 1,008 1,589 3,359 2019 1,024 1,589 3,396 2020 1,027 1,593 3,405 2021 219 344 716 TOT 28,076 39,616 98,573 |
ANNEX B
Financial and Accounting Procedures
1. Accounting Definitions Terms which are not defined in this Annex shall have the meaning ascribed to them in the Agreement of which this Annex B is a part.
1.1 Definitions Applicable to Contract Area Block A and Contract Area Block B
A. "AFE" means an authorisation for expenditures in relation to a capital expenditure project.
B. "Capital Costs" means all expenditures incurred in connection with or allocable to a capital project including fully loaded labour, materials, equipment and contractors' costs, engineering, procurement, including freight costs and handling, construction and management costs, allocated owners' cost, infrastructure and logistic support, support costs, Taxes other than those imposed on net income of the Participants, general and administrative costs, land acquisition and preparation costs (if any), legal and regulatory costs, pre-stripping and pre-production costs, initial fill, spares and consumables, capitalised finance costs, and any associated working capital, but excluding depreciation, non-cash charges, interest (other than capitalised finance costs), payments in the nature of principal and interest under Privatisation Agreements, and accounting provisions and reserves. Capital Costs shall not include any Exploration Costs.
C. "Chargeable Operations" means operations, including support activities, related to Mining and Processing of Minerals and marketing and delivery of Products produced from the Contract Area and excluding (i) any operations or activities of PT-FI not related to or associated with the Contract Area and (ii) any operations or activities of parties subject to the Privatisation Agreements to the extent that they are operations or activities of third parties unconnected with Enterprise Operations.
D. "Close-down Costs" means all costs incurred in or allocable to Close-down, including without limitation, rehabilitation of the environment, the removal of buildings, equipment, infrastructure and other tangible property, costs incurred in terminating equipment, supply, service and employment contracts, and costs incurred in terminating and surrendering the COW. Close-down Costs shall include all such costs incurred within the period ten Years prior to the Anticipated Close-down Date and prior to such date all such costs shall be treated as Operating Costs.
E. "Development" means all preparation for the removal and recovery of Products, including the construction or installation of a mine or heap leach facilities, ore and waste handling facilities, mining equipment, or any other improvement to be used for Mining, handling, transportation or milling of Minerals or other processing or marketing of Products, including infrastructure and logistic support facilities associated therewith. It is acknowledged that certain expenditures may involve activities that relate to both Exploration and Development. In such cases, the primary purpose of the activity related to such expenditure shall govern its classification as Exploration or Development.
F. "Eastern Minerals COW" means the contract of work dated 15 August 1994 made between the Government and P.T. IRJA Eastern Minerals Corporation with respect to the Contract Area as therein defined.
G. "Exploration" means all activities, excluding Development and Mining, directed towards ascertaining or appraising the existence, location, quantity, quality or commercial value of deposits of Minerals (other than the 10-K Reserves) and the feasibility of Development or Mining in relation to those deposits. It is acknowledged that certain expenditures may involve activities that relate to both Exploration and Development. In such cases, the primary purpose of the activity related to such expenditure shall govern its classification as Exploration or Development.
H. "Exploration Costs" means all labour, supplies, equipment, contract costs and other costs directly attributable or allocable to Exploration including fully loaded labour, logistical support costs, facility and other miscellaneous costs required to support these activities.
I. "Operating Costs" means the aggregate of:
(a) expenditure, adjusted for changes in inventory, that is either directly incurred or allocable to Chargeable Operations, including but not limited to production, maintenance and repair costs, logistical support and freight and handling costs, infrastructure and support facility costs (including similar expenditures under Privatisation Agreements), Taxes (other than those imposed on net income of the Participants), and general and administrative costs of the kind identified in PT-FI's annual financial statements for the period ended 31 December 1994 under the heading "General and Administrative Costs", but excluding depreciation, non-cash charges, interest, payments in the nature of principal and interest under Privatisation Agreements, and accounting provisions and reserves;
(b) Replacement Capital Costs in carrying out Chargeable Operations (including such expenditures under Privatisation Agreements); and
(c) the cash element of specific accounting provisions incurred in the normal course of business in conducting Chargeable Operations.
Exploration Costs, Taxes on net income of the Participants, and financing costs in connection with any financing arrangement entered into separately by a Participant (including without limitation, payments in the nature of principal and interest under Privatisation Agreements undertaken separately) shall not be treated as Operating Costs incurred in carrying out Chargeable Operations. Financing costs (including without limitation, payments in the nature of principal and interest under Privatisation Agreements) in connection with any financing arrangement entered into jointly by the Participants shall be included in Operating Costs.
J. "Replacement Capital Costs" means Capital Costs incurred other than for Expansion, a Greenfield Project or a Sole Risk Venture.
K. "Sales Revenues" means the value of Products sold based on actual prices realised (or which would have been realised but for any hedging and other price protection activities), net of smelting and refining charges, royalties and other selling expenses.
1.2 Definitions Applicable to Approved Expansion Projects Only
A. "Expansion Share of Costs" in any Year means that proportion of the Operating Costs in respect of Contract Area Block A in that Year which is represented by a fraction the numerator of which is the Incremental Expansion Revenues for that Year and the denominator of which is Total Sales Revenues from Contract Area Block A in that Year, and in any Year where Incremental Expansion Revenues is nil or deemed to be nil, "Expansion Share of Costs" shall be nil or be deemed to be nil.
Operating Costs and Sales Revenues from Greenfield Projects and Sole Risk Ventures shall be excluded from this calculation.
B. "Incremental Expansion Cashflow" in any Year means Incremental Expansion Revenues in that Year less Expansion Share of Costs in that Year.
C. "Incremental Expansion Revenues" in any Year means the Sales Revenues in respect of Incremental Production sold in that Year or part thereof in which sales of Incremental Production occurred, with sales from inventory deemed to be sold on a first-in, first-out basis, and any negative value of "Incremental Expansion Revenues" in any Year shall be deemed to be nil with respect to such period but shall be carried forward to the next Year in which there are Incremental Expansion Revenues.
D. "Incremental Production" in any Year means the excess of:
(i) the actual production in that Year of Products from Contract Area Block A, including actual production resulting from Approved Expansion Projects, but excluding actual production resulting from Greenfield Projects and Sole Risk Ventures; over
(ii) the scheduled production of Products for such Year as shown in the Product Schedule (as such schedule may be adjusted pursuant to Clause 16.4.2 of the Agreement).
Production of Products from Contract Area Block A at any time prior to the Sharing Commencement Date shall not be treated as Incremental Production.
E. "Sharing Commencement Date" means the date following the commissioning of the first Approved Expansion Project on which the first Sales Revenues from such project are accrued.
F. "Total Sales Revenues" in any Year means the Sales Revenues of all Products produced from Contract Area Block A (excluding Greenfield Projects and Sole Risk Ventures) sold in that Year.
2. Memorandum Equity Accounts A separate Memorandum Equity Account will be established by the Operator for each Participant for each of Contract Area Block A and Contract Area Block B. Each such Memorandum Equity Account shall be credited with such Participant's contribution to Capital Costs (other than Replacement Capital Costs and Capital Costs for Sole Risk Ventures) attributable to such Contract Area Block. The Memorandum Equity Account of each Participant shall be credited with such Participant's contributions to Capital Costs, regardless of how such contributions were financed by a Participant (it being understood that PT-FI will be credited with contributions funded under the RTZ Loan), but such Memorandum Equity Accounts shall not be credited for contributions to Capital Costs financed jointly by the Participants through project financing which encumbers the interests of both Participants. Specifically:
(A) Approved Expansion Projects up to $750,000,000. The first $750,000,000 of Capital Costs incurred pursuant to AFE's for Approved Expansion Projects shall be credited 60% to PT-FI's Memorandum Equity Account and 40% to PT-RTZ'S Memorandum Equity Account, with funding for PT-FI's proportionate share of such Capital Costs being provided pursuant to the RTZ Loan.
(B) Approved Expansion Projects in Excess of $750,000,000. All Capital Costs incurred pursuant to AFE's for Approved Expansion Projects in excess of $750,000,000 shall be credited to the Memorandum Equity Account of each Participant in proportion to its contribution to such Capital Costs.
3. Exploration Activities
3.1 General Separate accounts will be maintained for Exploration Costs incurred in respect of Contract Area Block A and Contract Area Block B and in respect of the Contract Area as defined in the Eastern Minerals COW ("Eastern Area").
3.2 Joint Operations Exploration Costs PT-RTZ will pay all Exploration Costs approved by the relevant Exploration Committee for Exploration in Contract Area Block A and Contract Area Block B until the Exploration Obligation has been satisfied, including the expenditure of not less than $40,000,000 in respect of Contract Area Block A. Thereafter, the Participants will pay all Exploration Costs in proportion to their respective Participating Interests in Contract Area Block A and Contract Area Block B.
3.3 Exploration Costs for Sole Risk Ventures All Exploration Costs for a Sole Risk Venture in Exploration shall be paid by the Participant undertaking such Sole Risk Venture.
3.4 Statements of Exploration Costs Monthly statements of Joint Operations Exploration Costs and Sole Risk Venture Exploration Costs will be prepared by the Operator and submitted to the Exploration Committee or the Participant undertaking the Sole Risk Venture, as appropriate, so that actual Exploration Costs may be monitored.
3.5 Payment for Exploration Costs Exploration Costs will be included in the monthly cash calls made pursuant to paragraph
10.3 of this Annex.
4. Feasibility Studies
4.1 General Separate accounts will be maintained for each Feasibility Study and will be reported by the Operator to the relevant Exploration Committee or Operating Committee, or to the Participant undertaking a Sole Risk Venture, as appropriate.
4.2 Joint Operations Feasibility Studies Prior to the date any AFE is approved as a result of a Feasibility Study, the costs of the Feasibility Study shall be Exploration Costs. In the event that an AFE is approved as a result of the Feasibility Study, then from and after the date that such AFE is approved, any additional Feasibility Study costs shall be Capital Costs of the project rather than Exploration Costs.
4.3 Sole Risk Feasibility Studies All costs of a Feasibility Study of a Sole Risk Venture shall be paid by the Participant undertaking the Feasibility Study as a Sole Risk Venture. There shall however be no reimbursement to the non-participating Participant of previously incurred costs.
4.4 Statements of Feasibility Study Costs Monthly statements of the costs of each Joint Operations Feasibility Study and Sole Risk Venture Feasibility Study will be prepared by the Operator and submitted to the relevant Exploration Committee or Operating Committee or the Participant undertaking the Sole Risk Venture, as appropriate, so that actual costs of the Feasibility Study may be monitored.
4.5 Payment of Feasibility Study Costs The costs of each Feasibility Study will be included as Exploration Costs or, as appropriate, Capital Costs, in the monthly cash calls made pursuant to paragraph 10.3 of this Annex.
5. Joint Operations in Contract Area Block A
5.1 Pre-Expansion Period "Pre-Expansion Period" means the period commencing on the Effective Date and continuing until the date that the first Approved Expansion Project in Contract Area Block A has been approved by the boards of directors of FCX, PT-FI, and PT-RTZ or, pursuant to Clause 10.3, approved by the board of directors of PT-RTZ.
During the Pre-Expansion Period, all revenues from and all Capital Costs and Operating Costs in respect of Contract Area Block A are attributable 100% to PT-FI except for revenues, Capital Costs and Operating Costs in respect of Joint Operations Greenfield Projects (as to which paragraphs 5.4 and 6 of this Annex shall apply) and Sole Risk Ventures undertaken by PT-RTZ, if any (as to which, subject to any express provision to the contrary in this Annex or the Agreement, PT-RTZ shall be entitled to all revenues attributable).
5.2 Development Period
5.2.1 "Development Period" means the period commencing with the date that the first Approved Expansion Project in Contract Area Block A has been approved by the boards of directors of FCX, PT-FI and PT-RTZ or, pursuant to Clause 10.3, approved by the board of directors of PT-RTZ and continuing until the Sharing Commencement Date.
During the Development Period, all revenues from Contract Area Block A are attributable 100% to PT-FI except for revenues in respect of Joint Operations Greenfield Projects (as to which paragraphs 5.4 and 6 of this Annex shall apply) and Sole Risk Ventures undertaken by PT-RTZ, if any (as to which, subject to any express provision to the contrary in this Annex or the Agreement, PT-RTZ shall be entitled to all revenues attributable).
During the Development Period, all Capital Costs and all Operating Costs in respect of Contract Area Block A are attributable 100% to PT-FI except for:
(i) all Capital Costs attributable to Approved Expansion Projects, as to which the provisions of 5.2.2 of this Annex shall apply
(ii) all Capital Costs and Operating Costs attributable to or in respect of Joint Operations Greenfield Projects as to which the provisions of paragraphs 5.4 and 6 of this Annex shall apply
(iii) all costs of Sole Risk Ventures undertaken by PT-RTZ, all of which shall, subject to any express provision to the contrary in this Annex or the Agreement, belong to and be borne by PT-RTZ.
5.2.2 Approved Expansion Projects
5.2.2.1 General For each Approved Expansion Project, an AFE will be prepared detailing budgeted expenditures of Capital Costs anticipated to be incurred. Separate accounts will be maintained for each AFE.
5.2.2.2 Allocation of Approved Expansion Project Development Costs
(a) Approved Expansion Projects up to $750,000,000 Until such time as aggregate Capital Costs for Approved Expansion Projects reach $750,000,000, these Capital Costs will be allocated to and be borne by the Participants in proportion to their respective Participating Interests in Contract Area Block A and PT-FI's share will be funded through the RTZ Loan.
(b) Approved Expansion Projects in Excess of $750,000,000 Capital Costs for Approved Expansion Projects after aggregate Capital Costs for Approved Expansion Projects exceed $750,000,000 will be allocated to and be borne by the Participants in proportion to their respective Participating Interests in Contract Area Block A.
5.2.3 Statements of Approved Expansion Project Development Costs Monthly statements of Approved Expansion Project Development costs will be prepared by the Operator and submitted to the Operating Committee so that actual Development costs may be monitored.
5.2.4 Payment for Development Costs Payment for Development costs will be included in the monthly cash calls made pursuant to paragraph 10.3 of this Annex.
5.3 Production Period
5.3.1 "Production Period" means the period commencing on the Sharing Commencement Date for the first Approved Expansion Project and continuing thereafter for so long as Joint Operations are producing Products from Contract Area Block A.
During the Production Period, the revenues from Contract Area Block A shall be allocated between the Participants as follows:
(a) until and including the Cut-off Date PT-RTZ shall be entitled to such share as is proportionate to its Participating Interest in Contract Area Block A of all Incremental Expansion Revenues and of revenues related to Joint Operations Greenfield Projects as provided in paragraphs 5.4 and 6 of this Annex
(b) after the Cut-off Date, PT-RTZ shall be entitled to such share as is proportionate to its Participating Interest in Contract Area Block A of all revenues derived from Joint Operations in Contract Area Block A
(c) PT-RTZ shall be entitled to all revenues attributable to Sole Risk Ventures undertaken by PT-RTZ
(d) PT-FI shall be entitled, as between the Participants, to all revenues from Contract Area Block A other than those allocated to PT-RTZ pursuant to sub-paragraphs (a), (b) and (c) above.
During the Production Period, the costs of or attributable to Contract Area Block A (other than Exploration Costs as to which paragraph 3 shall apply) shall be allocated to and borne by the Participants as between themselves as follows:
(i) until and including the Cut-off Date, PT-RTZ shall be obliged to contribute such share of the following costs as is proportionate to its Participating Interest in Contract Area Block A:
(A) Expansion Share of Costs
(B) Capital Costs of Approved Expansion Projects only
(C) Joint Operations Greenfield Projects
(ii) after the Cut-off Date, PT-RTZ shall be obliged to contribute such share of Operating Costs and of Capital Costs of Joint Operations in Contract Area Block A other than Sole Risk Ventures as is proportionate to its Participating Interest in Contract Area Block A
(iii) the costs of or attributable to each Sole Risk Venture in Contract Area Block A undertaken by PT-RTZ shall be allocated to and borne by PT-RTZ
(iv) all costs of or attributable to operations in Contract Area
Block A other than those allocated to and borne by PT-RTZ
pursuant to sub-paragraphs (i), (ii) or (iii) above shall, as
between the Participants, be allocated to and borne by PT-FI.
5.3.2 General Each month during the Production Period prior to
the Cut-off Date, Incremental Expansion Cashflow shall be
computed by the Operator and distributed to the Participants in
proportion to their Participating Interests in Contract Area
Block A; provided however, PT-FI shall assign to RTZ Lender all
of its interest in such distributions of Incremental Expansion
Cashflow pursuant to the RTZ Loan Agreement until such RTZ Loan
has been repaid (including, for the avoidance of doubt, all
interest under the RTZ Loan Agreement). Each month during the
Production Period from and after the Cut-off Date, all revenues
and costs in respect of Joint Operations in Contract Area Block A
shall be considered in determining the amount to be distributed
to the Participants in proportion to their Participating
Interests in Contract Area Block A.
(a) Incremental Expansion Revenue Each month during the Production Period, Incremental Expansion Revenue will be computed by the Operator and included in the computation of Incremental Expansion Cashflow for such month.
(b) Expansion Share of Costs Each month during the Production Period, Expansion Share of Costs will be computed by the Operator and included in the computation of Incremental Expansion Cashflow for such month.
(c) Incremental Expansion Cashflow Each month during the Production Period, Incremental Expansion Cashflow will be computed by the Operator and distributed to the Participants or, in the case of PT-FI, its assignee for the time being, in the proportions attributable to each not later than the 20th business day after the end of the month. The amount distributed will be based on the best estimate of Incremental Expansion Revenue less Expansion Share of Costs for such month.
(d) Statements of Incremental Expansion Cashflow Monthly statements will be prepared by the Operator showing details of the Incremental Expansion Cashflow computation. A copy of the statements will be distributed to the Participants not later than the 20th business day after the end of the month.
(e) Adjustment Any adjustment that is determined to be required at any time shall be included in the next monthly statement.
(f) Annual Adjustment Not later than 45 business days after the
end of each Year during the Production Period, a statement of the
previous Year's Incremental Expansion Cashflow shall be prepared
by the Operator and distributed. If the annual settlement
statement indicates an overpayment of Incremental Expansion
Cashflow, each Participant shall pay the Operator its share of
such overpayment within 30 business days. If the annual
settlement statement indicates an underpayment of Incremental
Expansion Cashflow, the Operator shall pay to each Participant
its share of such underpayment within 30 business days.
5.4 Joint Operations Greenfield Projects in Contract Area Block A
Joint Operations Greenfield Projects in Contract Area Block A
will be accounted for in a manner comparable to that provided in
paragraph 6 of this Annex in respect of Joint Operations in
Contract Area Block B. All costs, including allocable costs, of
and revenue related to Greenfield Projects in Contract Area Block
A will be excluded from costs of and revenues derived from other
operations in Contract Area Block A.
6. Joint Operations in Contract Area Block B
6.1 Development Phase "Development Phase" means the period commencing with the date on which the first Joint Operations Greenfield Project in Contract Area Block B has been approved by the boards of directors of PT-FI and PT-RTZ and continuing until the date following commissioning of such project on which the first Sales Revenues from such project are accrued.
6.1.1 General For each Joint Operations Development project, an AFE will be prepared by the Operator detailing budgeted expenditures of Capital Costs anticipated to be incurred. Separate accounts will be maintained for each AFE.
6.1.2 Allocation of Joint Operations Development Costs All Capital Costs incurred in Joint Operations in Contract Area Block B will be allocated to and borne by the Participants in proportion to their respective Participating Interests in Contract Area Block B and included in monthly cash calls made pursuant to paragraph 10.3 of this Annex.
6.1.3 Statements of Development Costs Monthly statements will be prepared by the Operator showing details of Joint Operations Development costs. These statements will be submitted to the Operating Committee not later than the 20th business day after the end of the month so that actual Joint Operations Development costs may be monitored.
6.1.4 Payment for Development Costs Payment for Development costs will be included in the monthly cash calls made pursuant to paragraph 10.3 of this Annex.
6.2 Production Phase "Production Phase" means the period commencing on the date following commissioning of the first Joint Operations Greenfield Project on which the first Sales Revenues from such project are accrued and continuing for so long as Joint Operations are producing Products from Contract Area Block B.
6.2.1 General During the Production Phase, all revenues and costs in respect of Joint Operations in Contract Area Block B shall be allocated to and be borne by the Participants in proportion to their Participating Interests in Contract Area Block B. All revenues and costs in respect of Joint Operations in Contract Area Block B shall be considered in determining the amount to be distributed to the Participants in proportion to their respective Participating Interests in Contract Area Block B.
(a) Revenue Each month during the Production Phase, the revenues that result from Joint Operations in Contract Area Block B will be computed by the Operator and included in the computation of cashflow from Joint Operations in Contract Area Block B for such month.
(b) Operating Costs Each month during the Production Phase, the Operating Costs that result from Joint Operations in Contract Area Block B will be computed by the Operator and included in the computation of cashflow from Joint Operations in Contract Area Block B for such month.
(c) Cashflow Each month during the Production Phase, the cashflow will be computed by the Operator by subtracting Operating Costs that result from Joint Operations in Contract Area Block B from revenues that result from Joint Operations in Contract Area Block B and the net amount of this calculation will be distributed to the Participants in the proportions to which they are entitled not later than the 20th business day after the end of the month. The amount distributed will be based on the best estimate of revenues and Operating Costs from Contract Area Block B for such month.
(d) Statements of Cashflow Monthly statements will be prepared by the Operator showing details of the cashflow computation and delivered to the Participants not later than the 20th business day after the end of the month.
(e) Adjustment Any adjustment that is determined to be required at any time shall be included in the next monthly statement.
(f) Annual Adjustment Not later than 45 business days after the end of each Year during the Production Phase, a statement of the previous Year's cashflow shall be prepared by the Operator and distributed. If the annual settlement statement indicates an overpayment of cashflow, each Participant shall pay the Operator its share of such overpayment within 30 business days. If the annual settlement statement indicates an underpayment of cashflow, the Operator shall pay to each Participant its share of such underpayment within 30 business days.
7. Accounting for Sole Risk Ventures
7.1 Conduct of Operations Upon the establishment of a Sole Risk Venture, the Operator, as determined pursuant to the Agreement, or some other entity selected as operator of the Sole Risk Venture in accordance with the Agreement (also in this Annex referred to as the Operator), will be responsible for the conduct of the operations of such venture, including its accounting requirements, and will be paid a reasonable fee for such services by the applicable Participant.
7.2 Determination of Costs and Revenues Separate accounts will be maintained for each Sole Risk Venture. All costs, including allocable costs, of and revenue related to Sole Risk Ventures will be excluded from the costs of and revenues derived from Enterprise Operations.
7.3 Use of PT-FI Available Assets To the extent that the Sole Risk Venture requires the use of PT-FI Available Assets, PT-FI support services or Joint Account Assets, and the use of these assets and support services does not prejudice then or later the conduct of Enterprise Operations, each of PT-FI and PT-RTZ (as appropriate) will make available and charge to the Sole Risk Venture the full direct and allocable costs, including financing and capital costs, under Privatisation Agreements, of providing such assets and services.
7.4 Sole Risk Venture Revenues and Costs All revenues and costs derived from any Sole Risk Venture will be directly attributed by the Operator to the Participant undertaking the Sole Risk Venture. The net amount of revenues less costs will be included in the monthly cash call made pursuant to paragraph 10.3 of this Annex for settlement (in the case of a negative amount) or distribution (in the case of a positive amount) to the Participant undertaking the Sole Risk Venture as appropriate.
7.5 Sole Risk Venture Reports The Operator will summarise each month all costs, including charges associated with the use of PT-FI Available Assets and support services, and revenues derived from the Sole Risk Venture during that month and deliver this report to the Participant undertaking the Sole Risk Venture not later than the 20th business day after the end of the month.
7.6 Programmes and Budgets Programme and Budgets for Sole Risk Ventures shall be approved and administered in a manner comparable to that provided in paragraph 10.1 of this Annex.
7.7 Co-operation Each Participant shall provide in a timely manner to the Operator all information that is within such Participant's knowledge, possession or control which the Operator may require in order to perform its accounting responsibilities for Sole Risk Ventures.
If the Operator is not PT-FI, the Operator shall provide in a timely manner to PT-FI all information that is within such Operator's knowledge, possession or control which PT-FI may require in connection with fulfilling its obligations under the COW.
8. Accounting for Hedging Activities The revenues allocated to the Participants shall be adjusted to allocate to the authorising Participant the costs and benefits of any hedging and other price protection activities authorised by either Participant pursuant to Clause 9.2.6 of the Agreement. Prior to entering into any hedging or other price protection activities authorised in writing by any Participant, the Participant authorising such activities shall make appropriate arrangements, satisfactory to the Operator, whereby the Operator is protected from and assured that it will never be required to use its own funds in connection with the placing or maintaining of any such hedging or other price protection activities.
9. Accounting Records, Inspection of Books
9.1 Required Records & Accounts
(A) The Operator shall keep comprehensive and accurate records and accounts of all Exploration Costs, Operating Costs, costs in respect of Feasibility Studies, and costs in respect of Development which are capable of separate identification, with respect to:
(i) Approved Expansion Projects,
(ii) Joint Operations with respect to Contract Area Block A,
(iii) Joint Operations Greenfield Projects with respect to Contract Area Block A,
(iv) Joint Operations with respect to Contract Area Block B,
(v) Sole Risk Ventures,
(vi) Chargeable Operations and any other operations within the Contract Area any part of the costs of which are borne by either Participant.
The costs of support and infrastructure facilities and activities shall be allocated to the activities for which they are utilised. The costs of support and infrastructure facilities and activities which are located in one Contract Area Block, but utilised in support of activities in one or more Contract Area Block, shall be allocated to the activities in the Contract Area Blocks in accordance with actual utilisation.
(B) The records and accounts in respect of activities in Contract Area Block A shall be capable of identifying Incremental Expansion Revenue and other revenues, those attributable to Joint Operations other than Approved Expansion Projects and those attributable to all other activities in Contract Area Block A, and costs attributable to the activities, sub-divided as above.
The records and accounts in respect of activities in Contract Area Block B shall show separately the costs and revenues of each project.
Activity attributable to Sole Risk Ventures by either Participant within the Contract Area shall likewise be separately identifiable within the records and accounts.
The records and accounts in respect of Greenfield Projects in Contract Area Block A, activities in Contract Area Block B and Sole Risk Ventures will separately identify direct costs of these projects from costs otherwise allocated thereto.
(C) All records and accounts referred to above shall be prepared and maintained in accordance with generally accepted accounting principles in the United States.
Accordingly, revenues recognised and costs incurred shall include, in the normal course of business, accruals to appropriately reflect the operations of the business conducted during a given month or year.
All accounting terms used in this Annex will, except to the extent otherwise expressly provided for, be determined in accordance with generally accepted accounting principles in the United States.
(D) Subject to compliance with the express provisions of this Annex, the Operator's basic accounting systems and accounting practices, policies and procedures will apply.
(E) All such records and accounts shall be retained for a period of 10 years or as required for compliance with tax or other regulatory requirements or as otherwise agreed to by the Participants.
9.2 Audits
(A) The Operator shall order an annual examination of the accounting and financial records kept by it in respect of activities in the Contract Area for each Year.
(B) The audits shall be conducted by a firm of accountants of international standing selected by the Operator and approved by the Operating Committee and such accountants shall provide certification that the records and accounts have been properly maintained in accordance with the provisions of this Agreement and that the revenues and costs have been properly calculated and allocated to the Participants in accordance with the provisions of this Annex and the Agreement.
9.3 Right of Participants to Inspect Records Without prejudice to any other provision of this Annex or the Agreement, and subject in any case to Clause 16.9 of the Agreement, representatives of each Participant (including for this purpose its accountants or another appointed firm of accountants and the Secured Creditors (as defined in the Trust Agreement)) shall be entitled upon reasonable prior notice at all reasonable times during normal working hours to inspect and obtain copies of all documents, records and accounts under the control of the Operator relating to Enterprise Operations or the Participation provided always that the frequency and duration of inspections shall be without undue hindrance to the proper conduct of Enterprise Operations or the activities of the Operator. Without prejudice to the above, but subject to the proviso, the Operator shall also give to the Participants and their accountants during normal working hours such access to the Operator's books and records and such explanation of the same as the Participants or their accountants may reasonably require in order to verify the revenues from Sole Risk Ventures undertaken by such Participants, Contract Area Block B, Incremental Expansion Cashflow, Joint Operations Greenfield Projects in Contract Area Block A and, after the Cut-off Date, revenues from Joint Operations in the Contract Area and costs attributable to the same.
9.4 Right of Participants to Conduct Audit
(A) Without prejudice to any other provision of this Annex or the Agreement, and subject in any case to Clause 16.9 of the Agreement, representatives of each Participant (including for this purpose its accountants or another appointed firm of accountants and the Secured Creditors (as defined in the Trust Agreement)) will be entitled, upon reasonable notice and at its own cost, to conduct an audit of the accounting and financial records of operations to which these Financial and Accounting Procedures apply for any Year, provided, however, that any such audit shall be conducted within eighteen months after the end of the Year to which the audit pertains and any claim for an adjustment must be made within thirty-six months after the end of the Year to which such adjustment pertains.
(B) Should such audit reveal an alleged error in the statement of revenues and costs or in the calculation of the revenues and costs allocated to each Participant, notice of the alleged error shall be given promptly to each Participant and the Participants shall thereupon use all reasonable endeavours to reconcile any differences.
(C) Should the Participants be unable to reconcile the differences to their mutual satisfaction within a period of 60 days following the notice referred to above, the dispute shall be referred to an independent firm of accountants of international standing appointed by agreement between the Participants or in default of such agreement within a period of 30 days following the expiry of the period of 60 days referred to above, by the President for the time being of the American Institute of Certified Public Accountants on the application of either of the Participants.
(D) Such independent firm of accountants shall act as an expert and not as an arbitrator and it shall be directed to find for one Participant or the other. Its costs shall be borne by the Participant losing the issue in question and its determination shall be final and binding upon the Participants and the Operator.
(E) If it is agreed between the Participants or determined by the expert that an error has been made to the calculation of the revenues and costs from operations to which these Financial and Accounting Procedures apply, such payments or reimbursements as shall be appropriate to correct such error shall be made by the Participants and the Operator shall make any and all necessary entries and corrections to the relevant Memorandum Equity Accounts of each Participant.
9.5 Fair clause The Participants agree that if any of the methods for determining charges and credits applicable to operations under the Agreement set out above prove to be unfair or inequitable to either party, the Participants will in good faith endeavour to agree on changes deemed necessary.
10. Other Financial and Accounting Matters
10.1 Programmes and Budgets
10.1.1 Joint Operations Pursuant to Programmes and Budgets Joint Operations shall be conducted, expenses shall be incurred and Joint Account Assets shall be acquired only pursuant to Approved Programmes and Budgets.
10.1.2 Preparation of Programmes and Budgets The Operator shall, not less than one month prior to the Annual Budget Meeting (which shall be held annually in December as provided in Clause 8.6 of the Agreement), prepare and submit to the relevant Committee for recommendation to the boards of directors of the Participants for the next ensuing Budgetary Period separate proposed Programmes and Budgets for Exploration and for Development and Mining. Any Programme which includes the undertaking of an Approved Expansion Project (or the relevant part of it) shall be based upon the programme for implementation thereof contained in the Feasibility Study relating thereto.
Each Programme and/or Budget, as proposed and approved, shall contain, as appropriate, a breakdown on a quarterly basis of the following:
(a) a reasonably detailed description of the Joint Operations to be undertaken with respect to each of Contract Area Block A and Contract Area Block B;
(b) an itemised estimate of the Capital Costs and Operating Costs to be incurred, distinguishing between Replacement Capital Costs and new Capital Costs and between Exploration and Development and Mining and between Contract Area Block A and Contract Area Block B;
(c) itemised schedules of estimated production of Products;
(d) itemised estimates of revenues;
(e) estimates of the amounts and timing of expected cash requirements from the Participants; and
(f) such other items as the Operator may deem necessary or desirable or as either Participant may reasonably require.
10.1.3 Review and Approval of Proposed Programmes and Budgets
(a) At the Annual Budget Meeting, the relevant Exploration Committee or Operating Committee shall review the Operator's proposed Programme and Budget and either submit it unchanged to the boards of directors of PT-FI and PT-RTZ for their approval or instruct the Operator to make specified revisions and submit the revised proposal to such boards for their approval.
(b) Revisions, modifications and amendments to Programmes and Budgets may be initiated by the Operator, the relevant Exploration or Operating Committee or the board of directors of PT-FI or PT-RTZ, provided that no material revision, modification or amendment shall be made without the approval of both such boards of directors.
(c) Any Programme and Budget, or any revision modification and amendment thereto, shall be deemed to be approved by any board of directors which does not, within thirty days after receipt, disapprove the same and notify the other board of directors and relevant Exploration or Operating Committee of its disapproval (including explanation thereof in reasonable detail).
(d) Except as otherwise specified in the Agreement or this Annex, unbudgeted AFEs, and budgeted AFEs in excess of amounts fixed from time to time by the relevant Exploration or Operating Committee, shall be submitted by the Operator and subject to the approval by such Committee, provided that any AFE which is in excess of amounts fixed from time to time by the boards of directors of PT-FI and PT-RTZ or which requires unbudgeted expenditure in excess of 5% of any Programme and Budget (whether individually or as part of a group of related expenditures) shall also be subject to the approval of such boards of directors in the manner set out in paragraph 10.1.3(c).
(e) Except as provided in Clause 10.3 of the Agreement, should the board of directors of PT-FI or PT-RTZ disapprove any Programme and Budget or any revision, modification or amendment thereto, both boards of directors and the relevant Exploration Committee or Operating Committee shall endeavour in good faith to resolve the difference(s) and reach mutual agreement on the applicable Programme and Budget as soon as possible.
10.1.4 Budget Overruns; Programme Changes The Operator shall immediately notify the relevant Committee of any material departure from an Approved Programme and Budget. As soon as practicable following the Operator becoming aware that the costs to be incurred under an Approved Budget are likely to be exceeded by more than 10%, then unless such excess is directly caused by an emergency or unexpected expenditure made pursuant to paragraph
10.2 of this Annex or otherwise authorised by the Participants, the Operator shall prepare a revised Programme and Budget for that Year and submit it as soon as practicable to the relevant Committee for review, and if needed, for recommendation for approval by the boards of directors of the Participants.
10.2 Emergency or Unexpected Expenditures In case of emergency, the Operator may take such action it deems necessary to protect life, limb or property, to protect the Enterprise Operations or Sole Risk Ventures or to comply with law or government regulation. Likewise, the Operator may make expenditures for unexpected events which are beyond its reasonable control and which do not result from a breach by it of its standard of care. In the case of either an emergency or unexpected expenditures, the Operator shall promptly notify the Participants of the emergency or unexpected expenditure, and the Operator shall be reimbursed therefor by the Participants as provided in Clause 6.1 of the Agreement and this Annex.
10.3 Cash Calls
10.3.1 On the basis of the Approved Programme and Budget or revision thereof, the Operator shall submit to each Participant prior to the fifth business day of each calendar month, a billing for estimated cash requirements for the next following calendar month, taking into consideration any cash the Operator has on hand from Joint Operations and any timing differences of actual expenditures from the Approved Programme and Budget, and identifying the separate contribution obligations of each Participant in accordance with the provisions of this Annex and the Agreement and any reimbursement obligations under Clause 12 of the Agreement relating to Sole Risk Ventures.
10.3.2 Prior to the first business day of the month for which the funds are requested, each Participant shall pay to the Operator by wire transfer to the bank account designated by the Operator, its share of the estimated amount as is shown in the billing unless the share of the amount shown therein is manifestly incorrect.
10.3.3 Time is of the essence of payment of each billing. A Participant that fails to meet cash calls in the amount and at the times specified in this paragraph 10.3 shall be in default, and the amount of the defaulted cash call shall bear interest from the date due at an annual rate equal to 5% above LIBOR as published in the London Financial Times on the business day immediately prior to the date of default.
10.3.4 All funds in excess of immediate cash requirements shall be invested in interest-bearing accounts, for the benefit of the Participants provided that (i) all funds representing the Exploration Obligation shall be so invested solely for the benefit of PT-RTZ and (ii) funds for any Sole Risk Venture shall be so invested solely for the benefit of the applicable Participant.
10.3.5 Should the Operator be required to pay large sums of money on behalf of the Participants which were unforeseen at the time of providing the monthly cash call, the Operator may make written request for special advances which shall be payable not later than the fifth business day after receipt of such notice.
10.4 Close-down Costs
10.4.1 Close-down Costs directly attributable to a Sole Risk Venture shall be allocated to and borne by the Participant undertaking the Sole Risk Venture.
10.4.2 Notwithstanding any other provision to the contrary in this Annex or the Agreement but subject to paragraph 10.4.1 above, each Participant agrees to pay and shall be liable to pay in respect of Close-down, that proportion of Close-down Costs which the value of Products sold by or for such Participant over the life of the COW bears to the value of all Products sold by or for the Participants over the life of the COW.
Final salvage shall be credited to the Participants in the same proportion as Close-down Costs are allocated to them.
10.4.3 For purposes of paragraph 10.4.2, "value" is determined by reference to the actual realised price of Products sold (or which would have been realised but for any price protection activities), adjusted for inflation, net of smelting and refining charges, royalties, and other selling expenses.
ATTACHMENT X
SECOND AMENDED AND RESTATED JOINT VENTURE
AND SHAREHOLDERS AGREEMENT
FOR P.T. SMELTING CO.
between
MITSUBISHI MATERIALS CORPORATION,
P.T. FREEPORT INDONESIA COMPANY,
MITSUBISHI CORPORATION, and
NIPPON MINING & METALS COMPANY, LIMITED
as amended on December 11, 1996
TABLE OF CONTENTS
PAGE
ARTICLE 1. DEFINITIONS AND INTERPRETATION............................2
1.1 Definitions...............................................2
1.2 Construction..............................................8
ARTICLE 2. ESTABLISHMENT OF PROJECT COMPANY..........................8
2.1 Organization and Registration.............................8
2.2 Articles of Association...................................9
2.3 Ratification by PTSC......................................9
ARTICLE 3. CAPITAL, SHARES, AND SUBORDINATED LOANS...................9
3.1 Initial Authorized Capital/Shares/Par Value...............9
3.2 Subscription for Initial Issued Capital...................9
3.3 First Capital Increase...................................10
3.4 Initial Payment for First Capital Increase...............11
3.5 Payment of the Authorized Capital Subscription
Balance................................................11
3.6 Increase of Authorized Capital Amount Prior to
Production Date........................................11
3.7 Making of Subordinated Shareholder Loans.................12
3.8 Default in Payment of Subscription or Making of
Subordinated Shareholder Loans.........................13
ARTICLE 4. PREEMPTIVE RIGHTS........................................15
4.1 Increase in Authorized Capital After the Production
Date...................................................15
4.2 Preemptive Rights of Parties.............................15
4.3 Consequences of Failure to Subscribe for Full
Proportionate Share....................................15
ARTICLE 5. TRANSFER OF SHARES OR SUBORDINATED LOANS.................16
5.1 Approval Required for Transfer...........................16
5.2 Prohibition on Certain Transfers.........................17
5.3 Right of First Offer.....................................17
5.4 Consent to Certain Transfers by MMC......................18
5.5 Consent to Certain Transfers to Subsidiaries.............19
5.6 Consent to Share Pledges in Connection With the
Project Loans..........................................20
5.7 Party's Right to Assign Shareholder Rights and
Subordinated Shareholder Loans.........................20
5.8 Mandatory Participation by a Third Party in the
Share Capital of PTSC..................................20
5.9 New Shareholder to Become Bound by this Agreement........22
5.10 Obligations Continuing...................................22
ARTICLE 6. BOARD OF DIRECTORS; PRESIDENT DIRECTOR...................22
ARTICLE 7. BOARD OF COMMISSIONERS; PRESIDENT COMMISSIONER...........23
ARTICLE 8. GENERAL PROVISIONS RELATING TO DIRECTORS AND
COMMISSIONERS..........................................24
8.1 Dismissal................................................24
8.2 Vacancy..................................................24
ARTICLE 9. DIVIDEND POLICY..........................................24
ARTICLE 10. EXECUTION OF AGREEMENTS; PREINCORPORATION EXPENSES.......24
10.1 Execution of Agreements..................................24
10.2 Reimbursement of Organizational Expenses.................25
10.3 Reimbursement of Feasibility Study Expenses..............25
ARTICLE 11. FINANCING................................................25
11.1 Financial Plan...........................................25
11.2 Financing and Guarantees.................................25
11.3 Share and Subordinated Loan Transfers....................26
11.4 Repayment of Shareholder Support.........................26
ARTICLE 12. COVENANTS................................................28
12.1 General..................................................28
12.2 Governmental Approvals...................................28
12.3 Execution of Other Agreements............................28
12.4 Competition With PTSC....................................28
12.5 MMC Preferential Return..................................28
(a) Total Return of 13% or Less........................28
(b) Total Return Exceeding 13%.........................29
(c) Calculation of Target Return.......................29
12.6 Increase in Floor TC's and RC's..........................30
12.7 Subordination of Advisory Fee............................31
12.8 Subordination of MMC Smelter License Royalty.............31
12.8 Subordination of MMC Smelter License Royalty.............32
12.9 Subordination of Financial Disadvantage Payable
to MMC, MC or NMM......................................32
ARTICLE 13. TERM OF THIS AGREEMENT...................................32
ARTICLE 14. DEFAULT..................................................32
14.1 Default..................................................32
14.2 Effect of Default........................................33
14.3 Share Purchase Right.....................................33
14.4 Share Price..............................................34
14.5 Share and Subordinated Loan Transfer.....................34
ARTICLE 15. EFFECT OF TERMINATION AND DISSOLUTION....................35
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ARTICLE 16. DISPUTE RESOLUTION.......................................36
16.1 Amicable Settlement......................................36
16.2 Arbitration Rules........................................36
16.3 Arbitrators..............................................36
16.4 Arbitration Award........................................37
16.5 Award to be Final and Conclusive.........................37
16.6 Performance of Obligations Pending Decision..............38
16.7 Waiver of Right to Terminate Board of Arbitration........38
ARTICLE 17. REPRESENTATIONS AND WARRANTIES...........................38
17.1 Corporate Power..........................................38
17.2 Statements True..........................................38
ARTICLE 18. CONFIDENTIALITY..........................................38
18.1 Confidential Treatment/Permitted Disclosures.............38
18.2 Implementation...........................................40
18.3 Treatment of Project Information by PTSC.................40
18.4 Obligations to Survive...................................40
Article 19. ASSIGNMENT...............................................40
Article 20. LAW AND INTERPRETATION...................................41
20.1 Governing Law............................................41
20.2 Governing Language of this Agreement.....................41
20.3 Headings.................................................41
Article 21. SEVERABILITY.............................................41
Article 22. NOTICES..................................................41
22.1 Manner of Delivery/Addresses.............................41
22.2 Change of Address........................................43
Article 23. FORCE MAJEURE............................................44
Article 24. ENTIRE AGREEMENT.........................................44
Article 25. AMENDMENTS...............................................44
Article 26. NO THIRD PARTY BENEFICIARIES.............................46
Article 27. NO CONFLICT WITH CREDIT DOCUMENTS........................46
Article 28. MISCELLANEOUS............................................46
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SECOND AMENDED AND RESTATED JOINT VENTURE
AND SHAREHOLDERS' AGREEMENT
THIS SECOND AMENDED AND RESTATED JOINT VENTURE AND SHAREHOLDERS' AGREEMENT is effective the 11th day of December 1996 between MITSUBISHI MATERIALS CORPORATION ("MMC"), a corporation organized and existing under the laws of Japan; P.T. FREEPORT INDONESIA COMPANY ("FI"), a limited liability company established under the laws of the Republic of Indonesia which is also domesticated in the State of Delaware, U.S.A.; MITSUBISHI CORPORATION ("MC"), a corporation organized and existing under the laws of Japan; and NIPPON MINING & METALS COMPANY, LIMITED ("NMM"), a corporation organized and existing under the laws of Japan (sometimes referred to individually as "Party" and together as the "Parties").
WHEREAS, MMC and FI are shareholders of P.T. Smelting Co., an Indonesian limited liability company ("PTSC") formed to develop, construct and operate a 200,000 metric ton per annum copper smelter and refinery to be located at Gresik, East Java, Indonesia (the "Project");
WHEREAS, MMC, FI and Fluor Daniel Asia, Inc. entered into that certain Joint Venture and Shareholders' Agreement dated October 25, 1995 concerning the development, construction, ownership and operation of the Project, as amended in the First Amended and Restated Joint Venture and Shareholders' Agreement ("First Amendment") dated May 24, 1996 (collectively, the "Shareholders Agreement");
WHEREAS, MMC has now agreed to sell, and MC has agreed to purchase 83,125 Shares and paid up subscription rights to an additional 53,200 Shares, constituting 9.5% of the total number of fully paid Shares and subscription rights to Shares as of the date hereof;
WHEREAS, MMC has also agreed to transfer to MC, and MC has agreed to assume from MMC, a portion of MMC's obligations as a shareholder of PTSC and sponsor of the Project, whereupon MMC shall be released from such obligations ot the extent transferred to MC;
WHEREAS, MMC has now agreed to sell, and NMM has agreed to purchase 43,750 Shares and paid up subscription rights to an additional 28,000 Shares, constituting 5.0% of the total number of fully paid Shares and subscription rights to Shares as of the date hereof;
WHEREAS, MMC has also agreed to transfer to NMM, and NMM has agreed to assume from MMC, a portion of MMC's obligations as a shareholder of PTSC and sponsor of the Project, whereupon MMC shall be released from such obligations to the extent transferred to NMM; and
WHEREAS, MMC and FI now desire to further amend the Shareholders Agreement to reflect the above transactions, MC and NMM desire by execution hereof to become Parties to the Shareholders Agreement, and MMC, FI, MC and NMM desire to further amend the Shareholders Agreement to reflect other matters approved by them;
NOW, THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, the Parties hereby agree as follows:
ARTICLE 1. DEFINITIONS AND INTERPRETATION.
1.1 Definitions. Unless otherwise defined herein, all capitalized terms used herein shall have the meaning as defined below:
"Affiliate" shall mean any entity which directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with a party to this Agreement. Control shall be presumed to exist whenever one person or entity holds, directly or indirectly, through one or more intermediaries, twenty-five percent (25%) or more of the outstanding voting shares or interests in another entity.
"Accepting Party" shall have the meaning set forth in Section 3.8(b).
"Auditor" means any independent firm of certified public accountants of good international repute, appointed by PTSC and approved by a General Meeting of Shareholders.
"Basic Share Proportion" means the proportion in which the Parties own Shares as set forth in Sections 3.2 and 3.3, as the same may be adjusted pursuant to Section 3.8 or 4.3.
"Basic Loan Proportion" means the proportion in which the Parties make Subordinated Shareholder Loans as set forth in Section 3.7, as the same may be adjusted pursuant to Section 3.8.
"BKPM" shall mean the Capital Investment Coordinating Board of Indonesia.
"Commencement of Commercial Operations" shall mean the date of the first charge of copper concentrates to the smelting furnace of PTSC's smelter.
"Concentrate Purchase and Sale Agreement" means the agreement to be entered into between PTSC and FI pursuant to which FI will sell copper concentrates to PTSC, and any subsequent modifications, supplements or amendments thereto.
"Copper Cathode Export Sale and Purchase Agreement" means the agreement to be entered into between PTSC and MMC, MC and NMM pursuant to which MMC, MC and NMM will offtake all of the copper cathode produced by PTSC for export sale.
"Cost Overrun Support" shall have the meaning set forth in the Credit Documents.
"Credit Documents" shall have the meaning set forth in the Loan Agreement.
"Default" shall have the meaning set forth in Section 14.1.
"EPC Contracts" means the agreements dated May 31, 1996 between PTSC and Chiyoda Corporation, a corporation organized and existing under the laws of Japan, or one or more of its Affiliates, as the main contractor for the engineering, procurement and construction of the Facilities, any related agreements for the engineering, procurement and construction of the Facilities for which Chiyoda or its Affiliates will act as project manager or general contractor, and any subsequent modifications, supplements or amendments thereto.
"Expatriate Consultant Recruitment Agreement" means the agreement to be entered into between PTSC and a recruiting company pursuant to which the recruiting company will recruit expatriate consultants for PTSC.
"Facilities" shall mean the copper smelter, refinery, sulfuric acid plant, waste water treatment plant, jetty and associated facilities to be constructed at the Project.
"Financial Plan" shall have the meaning set forth in Section 11.1.
"First Amendment" has the meaning set forth in the preliminary statements.
"First Capital Increase" shall have the meaning set forth in Section 3.3.
"Floor TC's and RC's Support" shall have the same meaning as "Floor Price Support" set forth in the Credit Documents.
"Government" shall mean any ROI ministry, department, political subdivision, agency, or commission.
"Land Agreements" means, collectively, the agreements dated July 3, 1996 entered into between PTSC and PG pursuant to which PG will lease land, provide use of PG facilities, and grant easements to PTSC as required for the Facilities, and any subsequent modifications, supplements or amendments thereto.
"Loan Agreement" shall mean that certain loan agreement dated as of December 11, 1996 by and among PTSC, the lenders and guarantee providers specified therein, Tokyo-Mitsubishi International (Singapore) Ltd., as facility agent, Barclays de Zoete Wedd Limited, as technical agent, The Industrial Bank of Japan Trust Company, as off-shore collateral agent, and P.T. IBJ Indonesia Bank, as on-shore collateral agent, and their respective successors and assigns.
"Major Contracts" means (i) the Offshore Marketing Services Agreement, (ii) the Sulfuric Acid Sale and Purchase Agreement, (iii) the Land Agreements, (iv) the Offshore Operation and Technical Assistance Agreement, (v) the Smelter License Agreement, (vi) the Concentrate Purchase and Sale Agreement, (vii) the EPC Contracts, (viii) the Utility Supply Agreements, (ix) the Copper Cathode Export Sale and Purchase Agreement, (x) the Precious Metal Slime Sale and Purchase Agreement (xi) the Offshore Training Agreement, (xii) the Expatriate Consultant Recruitment Agreement, (xiii) the Credit Documents, and (xiv) the Subordinated Shareholder Loan agreements.
"Mitsubishi Continuous Copper Smelting and Converting Process" means the method or process covered, in whole or in part, by the technical information and/or the patents for the substantially continuous production of anode copper from copper-bearing sulfide ore, copper scrap, cement copper, copper matte or other copper-bearing materials by using a series of furnaces which are mutually linked together through launders, provided however that the battery limits of the process range from concentrate dryer to anode furnace.
"MMC Warranty Support" means the warranty included in the Credit Documents pursuant to which MMC shall provide up to US$20,000,000 in assistance to PTSC if a certain copper loss recovery rate is exceeded in PTSC's smelter.
"Non-Subscribing Party" shall have the meaning set forth in Section 4.3.
"Offshore Marketing Services Agreement" means the agreement to be entered into between PTSC, MMC, MC and NMM pursuant to which MMC, MC and NMM will provide marketing services from outside of Indonesia for certain products produced by PTSC, and any subsequent modifications, supplements or amendments thereto.
"Offshore Operation and Technical Assistance Agreement" means the agreement to be entered into between PTSC and MMC pursuant to which MMC will provide certain operations and technical assistance services from outside of Indonesia to PTSC, and any subsequent modifications, supplements or amendments thereto.
"Offshore Training Agreement" means the agreement to be entered into between PTSC and MMC pursuant to which MMC will provide certain smelter operation training services in Japan.
"Overdue Interest Rate" shall mean (i) with respect to amounts to be paid by a Party or PTSC in Dollars, the Standard Dollar Interest Rate as changed from time to time from the due date of the payment to (but excluding) the date of payment, plus two percent (2%) (such rate to be adjusted simultaneously with each change in the Standard Dollar Interest Rate) and calculated on the basis of a three hundred sixth five (365) day year and actual days elapsed; and (ii) with respect to amounts to be paid by a Party or PTSC in Rupiah, the Standard Rupiah Interest Rate as changed from time to time from the due date of the payment to (but excluding) the date of payment, plus five percent (5%) (such rate to be adjusted simultaneously with each change in the Standard Rupiah Interest Rate) and calculated on the basis of a three hundred sixty five (365) day year and actual days elapsed.
"Ownership Transfer Date" shall mean the date when, as a result of the exercise by the Project Lenders of their rights under the Project Loans, a third party (other than one or more of the Project Lenders or their successors or an entity majority-owned or controlled by any of them) becomes the owner of a majority (at least 50.1%) of the issued Shares.
"PG" means P.T. Petrokimia Gresik (Persero), a State owned Indonesian limited liability company.
"PMA Account" means the Indonesian bank account(s) established by PTSC and into which shall be deposited all amounts contributed by each Shareholder to PTSC for Shares, for subscription payments for Shares, or for Subordinated Shareholder Loans made by such Shareholder to PTSC.
"Precious Metal Slime Sale and Purchase Agreement" means the agreement to be entered into between PTSC and MC pursuant to which MC will offtake all of the precious metal slime produced by PTSC.
"Production Date" means the date the first 1,200 MT of anodes acceptable for refining by PTSC's refinery have been produced by PTSC's smelter over a period of four (4) consecutive days.
"Project" has the meaning set forth in the preliminary statements.
"Project Information" has the meaning set forth in Section 18.1(a).
"Project Lenders" shall mean the agents and the lenders (other than PTSC's shareholders), and that are party to the Project Loans, and their successors and permitted assigns.
"Project Loans" shall mean the Loan Agreement (and related credit and security documentation) to be entered into between PTSC and the Project Lenders in regards to financing the construction and initial working capital of the Project.
"Project Planning Agreement" means that certain Project Planning Agreement dated May 12, 1995 entered into by MMC and FI concerning the preparation of a feasibility study for the Project.
"Qualified Transferee" has the meaning set forth in Section 5.7.
"ROI" means the Republic of Indonesia.
"Share" or "Shares" means a share of common stock in PTSC.
"Shareholder" means a person who owns Shares.
"Shareholders Agreement" has the meaning set forth in the preliminary statements.
"Shareholder Support" has the meaning set forth in the Credit Documents.
"Smelter License Agreement" means the agreement to be entered into between PTSC and MMC pursuant to which MMC will grant to PTSC a license of the Mitsubishi Continuous Copper Smelting and Converting Process, and any subsequent modifications, supplements or amendments thereto.
"Stage 2 Completion Date" shall have the meaning set forth in the Loan Agreement.
"Standard Dollar Interest Rate" shall mean the published prime commercial lending rate of The Chase Manhattan Bank or its successor.
"Standard Rupiah Interest Rate" shall mean the published prime commercial lending rate of Bank Indonesia or its successor.
"Subordinated Shareholder Loan" means a loan made by any Shareholder to PTSC which by its terms is expressly made subordinate to the Project Loans.
"Subsidiary" means any entity in which a Party to this Agreement holds, directly or indirectly, through one or more intermediaries, beneficial ownership of fifty percent (50%) or more of the voting shares or equity interests.
"Sulfuric Acid Sale and Purchase Agreement" means the agreement to be entered into between PTSC and PG pursuant to which PG will purchase from PTSC, and PTSC will sell to PG, PTSC's sulfuric acid output, and any subsequent modifications, supplements or amendments thereto.
"Support Fee" shall have the meaning set forth in the Offshore Operation and Technical Assistance Agreement.
"Termination Date" shall have the meaning set forth in the Loan Agreement.
"Transfer" means any pledge, mortgage, hypothecation, encumbrance, assignment, sale, conveyance or disposition, whether voluntarily, by operation of law, at judicial sale or otherwise.
"Utility Supply Agreements" means the agreements to be entered into between PTSC and suppliers of power, oxygen, low pressure steam, natural gas, and industrial water pursuant to which such suppliers will provide said utilities to PTSC, and any subsequent modifications, supplements or amendments thereto.
"VAT Support" shall have the meaning set forth in the Credit Documents.
"Voluntary Capital Contributions" shall have the meaning set forth in the Credit Documents.
1.2 Construction
(a) In this Agreement, unless the context otherwise requires, the singular shall include the plural and vice versa and reference to a gender shall include any other gender.
(b) Any reference herein to a Section or Sections is a reference to the referenced Section or Sections of this Agreement unless otherwise specifically provided.
(c) Any reference herein to an agreement is a reference to such agreement as amended, varied, added to, substituted, replaced, renewed, or extended from time to time.
(d) Any reference herein to any law or statute shall be construed as including all statutory provisions consolidating, amending, or replacing the law or statute referred to.
ARTICLE 2. ESTABLISHMENT OF PTSC
2.1 Organization and Registration. PTSC has been established under the laws of the Republic of Indonesia, and is domiciled in Jakarta at Plaza 89, 6th Floor-S-602, J1. H.R. Rasuna Said Kav.X-7 No. 6 Jakarta 12940, Indonesia.
2.2 Articles of Association. The Articles of Association of PTSC have been approved by the Minister of Justice of the Republic of Indonesia by Decree No. C2-1648.HT.01.01.TH'96 dated 7th February 1996 and have been published in the State Gazette of ROI No. 26 dated 29 March 1996 Supplement No. 3183. The Parties acknowledge that the provisions of this Agreement are more detailed in certain respects than the Articles of Association and the Parties agree that in such cases the more detailed provisions of this Agreement, as among the Parties, shall be applicable. In the event of any conflict between the provisions of this Agreement and the Articles of Association, this Agreement shall control and the Parties shall to the extent permitted by applicable law amend the Articles of Association to the extent of any such conflict, so as to be consistent with the provisions of this Agreement.
2.3 Ratification by PTSC. By its execution hereof, PTSC hereby ratifies and agrees to be bound by this Agreement as if it were a party hereto, to carry out the management and administration and its businesses in accordance with the terms and conditions of this Agreement, and to perform all obligations intended under this Agreement to be undertaken or performed by PTSC.
ARTICLE 3. CAPITAL, SHARES, AND SUBORDINATED LOANS.
3.1 Initial Authorized Capital/Shares/Par Value. PTSC was incorporated with an initial authorized capital (the "Initial Authorized Capital") of Rp 191,275,000,000 (One Hundred Ninety-One Billion, Two Hundred Seventy-Five Million Rupiah) [US$87,500,000 (Eighty-Seven Million, Five Hundred Thousand United States Dollars)], divided into Shares of par value Rp218,600 (Two Hundred Eighteen Thousand, Six Hundred Rupiah) [US$100 (One Hundred United States Dollars)] each.
3.2 Subscription for Initial Issued Capital. The initial issuance of authorized capital (the "Initial Issued Capital") is Rp 191,275,000,000 (One Hundred Ninety-One Billion, Two Hundred Seventy-Five Million Rupiah) [US$87,500,000 (Eighty-Seven Million, Five Hundred Thousand United States Dollars)], represented by Eight Hundred Seventy- Five Thousand (875,000) Shares. The Parties have subscribed for (or have received Transfer of) the Shares of the Initial Issued Capital in the following ratio:
Number of Subscription Basic Share
Party Shares Amount (US$) Proportion
------- --------- ------------ -----------
MMC 529,375 52,937,500 60.5%
FI 218,750 21,875,000 25.0%
MC 83,125 8,312,500 9.5%
NMM 43,750 4,375,000 5.0%
Total 875,000 $87,500,000 100.0%
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3.3 First Capital Increase. The Parties agree to take all
necessary steps to amend the Articles of Association of PTSC to reflect
an increase in the authorized capital from Rp 191,275,000,000 (One
Hundred Ninety-One Billion, Two Hundred Seventy-Five Million Rupiah)
[US$87,500,000 (Eighty-Seven Million, Five Hundred Thousand United States
Dollars)], represented by Eight Hundred Seventy-Five Thousand (875,000)
Shares to reflect a revised authorized capital of Rp 327,900,000,000
(Three Hundred Twenty-Seven Billion Nine Hundred Million Rupiah), or such
other number of Rupiah as shall be specified by BKPM as the equivalent of
US$150,000,000 (One Hundred Fifty Million United States Dollars)
represented by One Million Five Hundred Thousand (1,500,000) Shares of
par value Rp218,600 (Two Hundred Eighteen Thousand, Six Hundred Rupiah),
or such other number of Rupiah as shall be specified by BKPM as the
equivalent of US$100 (One Hundred United States Dollars) each (the "First
Capital Increase"). In addition to subscribing for and/or receiving
Transfer of Shares of the Initial Issued Capital in the Basic Share
Proportion specified in Section 3.2, the Parties agree to subscribe for
and accept the additional Six Hundred Twenty Five Thousand (625,000)
Shares resulting from the First Capital Increase in the same Basic Share
Proportion as follows:
Number of Subscription Basic Share
Party Shares Amount (US$) Proportion
------ -------- ------------ -----------
MMC 378,125 37,812,500 60.5%
FI 156,250 15,625,000 25.0%
MC 59,375 5,937,500 9.5%
NMM 31,250 3,125,000 5.0%
Total 625,000 $62,500,000 100.0%
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3.4 Initial Payment for First Capital Increase. Except as otherwise agreed by the Parties or resolved by the Board of Directors (subject to the approval of the General Meeting of the Shareholders), each Party shall pay its Basic Share Proportion of the subscription price for the additional Six Hundred Twenty Five Thousand (625,000) Shares resulting from the First Capital Increase into the PMA Account by the deadline required by the Indonesian Ministry of Justice in connection with approving the amendment to the Articles of Association of PTSC reflecting such increase in the authorized capital of PTSC. Payment shall be made in cash in U.S. Dollars, in a lump sum into the PMA Account without any right of set-off.
3.5 Payment of the Authorized Capital Subscription Balance. In accordance with the Financial Plan and the provisions of this Agreement, the Board of Directors may, subject to approval by the General Meeting of Shareholders, call further payments by the Parties for the authorized capital until the Shares subscribed to are fully paid-up. The Board of Directors may call such payments, subject to approval by the General Meeting of Shareholders, in U.S. Dollars at such times and in such amounts as may be necessary to meet the expenditures of PTSC in accordance with the Financial Plan. On each call for further payment, each Party shall pay in cash in the amount due without any right of set- off within thirty (30) days from the date of the notice into the PMA Account without any right of setoff. All Shares subscribed for must be fully paid up on or before the Commencement of Commercial Operations in accordance with the Financial Plan.
3.6 Increase of Authorized Capital Amount Prior to Commencement of Commercial Operations. To the fullest extent permitted by law, notwithstanding the Articles of Association, prior to the Commencement of Commercial Operations the Board of Directors may resolve, in accordance with the Financial Plan and the provisions of this Agreement and subject to approval by the General Meeting of Shareholders, that PTSC shall increase its authorized capital amount at such times and in such amounts as may be necessary to meet the expenditures of PTSC in accordance with the Financial Plan. Upon approval by the General Meeting of Shareholders, the Shares representing the increased authorized capital amount shall be offered to and subscribed for by each of the Parties in its Basic Share Proportion. Each Party shall pay the amount due, in cash, in U.S. Dollars, without any right of set-off, into the PMA Account by the deadline required by the Indonesian Ministry of Justice in connection with the approval of the amendment to the Articles of Association of PTSC reflecting such increase in the authorized capital of PTSC.
3.7 Making of Subordinated Shareholder Loans. In addition to the capital subscriptions set forth in Sections 3.2, 3.3 and 3.6, at such time or times as set by the Board of Directors and approved by the General Meeting of Shareholders in accordance with the Financial Plan and the Project Loans, the Parties each agree to make (or purchase from another Shareholder who has made) initial Subordinated Shareholder Loans to PTSC in U.S. Dollars in the following aggregate principal amounts:
Basic Loan
Party Principal Amount (US$) Proportion
------- ---------------------- ----------
MMC 106,480,000 60.5%
FI 44,000,000 25.0%
MC 16,720,000 9.5%
NMM 8,800,000 5.0%
Total $176,000,000 100.0%
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The terms of the Subordinated Shareholder Loans, including the Loan period(s), the interest rate(s), repayment terms, subordination, priority, etc. shall be determined by the Board of Directors in accordance with the Financial Plan and the Project Loans, and approved by the General Meeting of Shareholders. For the avoidance of doubt, at any time prior to the Commencement of Commercial Operations the amount of Subordinated Shareholder Loans may be increased or decreased in accordance with the Financial Plan by resolution of the Board of Directors, subject to approval by the General Meeting of Shareholders, in a manner consistent with the Credit Documents. Upon approval by the General Meeting of Shareholders, the additional Subordinated Shareholder Loans shall (unless otherwise agreed by each of the Shareholders) be lent by each of the Parties in its Basic Loan Proportion. Each Party shall pay the principal amount of the Subordinated Shareholder Loan, in cash, in U.S. Dollars, without any right of set-off, into the PMA Account by the deadline set by the Board of Directors, which shall not, unless otherwise approved by the General Meeting of Shareholders, be earlier than fourteen (14) days after the approval by BKPM of the revised investment plan reflecting such increase in Subordinated Shareholder Loans.
3.8 Default in Payment of Subscription or Making of Subordinated Shareholder Loans
(a) If any Party (in this Section, hereinafter called the "Defaulting Party") fails to fulfill any of its obligations (i) to make subscription payments for the Initial Authorized Capital, (ii) to make subscription payments for additional Shares issued as a result of an increase in authorized capital prior to the Commencement of Commercial Operations, or (iii) to make a Subordinated Shareholder Loan when due, PTSC or any non-defaulting Party may immediately serve notice on the Defaulting Party, with copies to all other Parties, declaring the Defaulting Party to be in default and requiring it to remedy such default in full within ten (10) days of the date of the notice. Interest on overdue amounts shall be payable by the Defaulting Party to PTSC at the Overdue Interest Rate from the date payment was due until paid. All the rights, but not the obligations, of the Defaulting Party as a Shareholder, lender of Subordinated Shareholder Loans, and Party to this Agreement shall be suspended for as long as such default is unremedied or until the Defaulting Party ceases to be a Shareholder and/or lender of Subordinated Shareholder Loans.
(b) Upon the expiration of the ten (10) day period described in Section 3.8(a) without remedy of the default, each non-defaulting Party shall have the right to acquire all or any portion of the Shares held by the Defaulting Party and assume all or any portion of the Subordinated Shareholder Loans held by the Defaulting Party by giving notice thereof within thirty (30) days. If the total number of Shares or total amount of Subordinated Shareholder Loans for which such notice has been given exceeds the total number of Shares or Subordinated Shareholder Loans held by the Defaulting Party then each Party giving notice (in this Section, hereinafter called "Accepting Party") may acquire at least the number of Shares and may assume at least the amount of Subordinated Shareholder Loans that bears the same ratio to the total number of Shares or Subordinated Shareholder Loans (as the case may be) of the Defaulting Party that such Accepting Party's respective Basic Share Proportion and Basic Loan Proportion bears to the aggregate Basic Share Proportions and Basic Loan Proportions of all the Accepting Parties. The Defaulting Party shall transfer the appropriate number of its Shares and assign the appropriate amount of its Subordinated Shareholder Loans to each of the Accepting Parties within ten (10) days of receipt of such notice from the Accepting Party, and each Party's Basic Share Proportion and Basic Loan Proportion shall be adjusted accordingly. The purchase price for the Shares to be paid by the Accepting Party shall be fifty percent (50%) of the aggregate amount paid up on such Shares by the Defaulting Party, or the book value of such Shares as determined by the Auditor, whichever is less. The Accepting Party shall also pay to PTSC the unpaid balance of any Shares that are not fully paid. The purchase price for the Subordinated Shareholder Loans shall be fifty percent (50%) of the aggregate outstanding principal and interest then due on the Subordinated Shareholder Loans to the Defaulting Party. In either case the purchase price shall be paid on the date the Accepting Party receives the Shares or the assignment of the Subordinated Shareholder Loans from the Defaulting Party, or, in the case of the Shares, as soon thereafter as the book value may be determined by the Auditor.
(c) If the total number of Shares or the total amount of the Subordinated Shareholder Loans accepted or assumed by the Accepting Parties is less than the total number of Shares owned or total amount of outstanding Subordinated Shareholder Loans held by the Defaulting Party, the Defaulting Party shall be required to sell any remaining Shares and assign any remaining Subordinated Shareholder Loans to a third party, designated by the Board of Directors and approved by a General Meeting of Shareholders, for the same price and payment terms as provided in Section 3.8(b) in the case of Transfer to an Accepting Party. Upon Transfer of the Shares and Subordinated Shareholder Loans to a third party, the Basic Share Proportion and Basic Loan Proportion of each Party and the third party shall be adjusted accordingly. The third party shall also pay to PTSC the unpaid balance of any Shares that are not fully paid. For the execution of such sale of Shares and assignment of Subordinated Shareholder Loans to a third party, the Board of Directors shall be empowered for and on behalf of the Defaulting Party to apply to, appear before, submit information, obtain approval from the competent authorities and to take any other action to accomplish the above Transfer of Shares and Subordinated Shareholder Loans.
ARTICLE 4. PREEMPTIVE RIGHTS
4.1 Increase in Authorized Capital After the Commencement of Commercial Operations. If, after the Commencement of Commercial Operations, the Board of Directors shall determine that PTSC should increase its authorized capital, the Board of Directors shall give notice to the Shareholders and set a General Meeting of Shareholders for approval of the authorized capital increase. If approved by the General Meeting of Shareholders, the increase in the authorized capital of PTSC shall take effect when the Articles of Association are duly amended and, when necessary, any Government approvals have been obtained.
4.2 Preemptive Rights of Parties. Each Party shall be entitled to subscribe for its Basic Share Proportion of any additional Shares issued by PTSC as a result of an increase in the authorized capital as specified in Section 4.1. Upon receipt of notice from the Board of Directors of PTSC's intention to issue additional Shares, each Party shall notify PTSC within thirty (30) days whether it intends to purchase its Basic Share Proportion of the additional Shares to be issued. If the total number of Shares for which the Parties have exercised such pre-emptive right exceeds the total number of shares to be issued, then each Party exercising such pre-emptive right may acquire at least the number of Shares that bears the same ratio to the total number of Shares to be issued that such Party's Basic Share Proportion bears to the aggregate Basic Share Proportion of all Parties giving such notice.
4.3 Consequences of Failure to Subscribe for Full Proportionate Share. Should any Party elect not to subscribe for its full Basic Share Proportion of the Shares then being offered (a "Non-Subscribing Party"), then such Non-Subscribing Party shall thereafter have no greater rights than any person or entity not a Party to this Agreement to subscribe for Shares later offered by PTSC. In the event any Party fails to notify the Board of Directors in writing within such thirty (30) day period that it will subscribe to its Basic Share Proportion of the new Shares to be issued, or notifies the Board of Directors in writing that it will not subscribe to such new Shares or will subscribe to fewer new Shares than those to which it is entitled, then the Board of Directors shall first offer such Shares (the "Non-Subscribing Party Shares") to the other Parties. Each Party receiving such notice shall have thirty (30) days to notify PTSC whether it desires to purchase its Basic Share Proportion of the Non-Subscribing Party Shares. If the total number of Non-Subscribing Party Shares desired by the other Parties exceeds the total number of Non-Subscribing Party Shares to be issued, then each Party desiring Non- Subscribing Party Shares may acquire at least the number of Non- Subscribing Party Shares that bears the same ratio to the total number of Non-Subscribing Party Shares to be issued that such Party's Basic Share Proportion bears to the aggregate Basic Share Proportion of all Parties giving such notice; provided that should any Party accept in writing less than the number of Shares to which it would be entitled under the foregoing, such Party shall be entitled only to the number of Shares it has so accepted, and the remaining Shares shall be divided proportionately as above among those Parties who have accepted more than the number of Shares to which they would be entitled in accordance with the foregoing. If the other Parties do not subscribe for Non-Subscribing Party Shares within the time limits established above, then the Board of Directors may offer such Shares to third parties, with the prior approval of a General Meeting of Shareholders. Upon completion of the foregoing transactions, the Basic Share Proportion of each Party and the third party (if applicable) shall be adjusted in accordance with its ownership percentage.
ARTICLE 5. TRANSFER OF SHARES OR SUBORDINATED LOANS
5.1 Approval Required for Transfer. Except as otherwise provided herein, or except as may be approved by the Board of Directors (subject to approval by the General Meeting of Shareholders), none of the Parties nor any person acting by authority of or for any of the Parties shall Transfer any or all of its right, title or interest in its respective Shares or its Subordinated Shareholder Loans, all such right, title and interest of each of the Parties being personal and non-transferable and non-assignable except as otherwise specified in this Agreement.
5.2 Prohibition on Certain Transfers. Except as specifically permitted by the Credit Documents and this Agreement, no Shareholder shall Transfer any interest in its Shares or its Subordinated Shareholder Loans prior to the Stage 2 Completion Date. Nor shall any Party, without the written consent of the other Parties or except in the case of a Transfer pursuant to Section 5.4, 5.7 or 5.8, make any Transfer of less than all of its Shares to a single transferee as a result of which either the transferring Party or its transferee shall own less than five percent (5%) of all Shares of PTSC then issued.
5.3 Right of First Offer.
(a) No Party (a "Transferring Party") shall Transfer any of its Shares or Subordinated Shareholder Loans to any third party, unless it shall have first offered to sell such Shares and assign such Subordinated Shareholder Loans by written notice to all the other Parties and the Board of Directors. The written notice shall contain a description of the number of Shares offered for sale and the amount and terms of the subordinated Shareholder Loans offered for assignment, the price sought by the Transferring Party, and any other material information necessary for the other Parties to make an informed decision whether to purchase the Shares and/or assume the Subordinated Shareholder Loans.
(b) Within thirty (30) days following receipt of the notice from the Transferring Party, each Party shall give written notice to all other Parties and the Board of Directors of its decision whether to purchase all or any portion of such Shares and/or assume all or any portion of such Subordinated Shareholder Loans. If the total number of Shares for which Parties have exercised such right exceeds the total number of Shares offered, or the total amount of Subordinated Shareholder Loans for which Parties have exercised such right exceeds the total amount of Subordinated Shareholder Loans offered, then each Party exercising such right may acquire at least the number of Shares and assume at least the amount of Subordinated Shareholder Loans that bears the same ratio to the total number of Shares or Subordinated Shareholder Loans offered that such Party's Shares or Subordinated Shareholder Loans bear to the total number of Shares or Subordinated Shareholder Loans of all Parties exercising such right; provided that should any Party accept less than the number of Shares or amount of Subordinated Shareholder Loans to which it would be entitled under the foregoing, such Party shall be entitled only to the number of Shares or amount of Subordinated Shareholder Loans it has so accepted, and the remaining Shares and Subordinated Shareholder Loans offered for Transfer shall be divided proportionately as above among those Parties who have accepted more than the number of Shares or amount of Subordinated Shareholder Loans to which they would be entitled in accordance with the foregoing.
(c) Notwithstanding the right of first offer stated in Section 5.3(a) and (b), in the event that the total number of Shares or Subordinated Shareholder Loans accepted in writing as provided in Section 5.3(b) is less than all of the Shares or Subordinated Shareholder Loans offered for Transfer, the Transferring Party may:
(i) withdraw in whole or in part its offer to Transfer the number of Shares and amount of Subordinated Shareholder Loans offered; or
(ii) Transfer (A) all of the Shares and/or Subordinated Shareholder Loans offered (including those accepted), or (B) if the Transferring Party so determines, only Transfer those Shares or Subordinated Shareholder Loans that were not accepted by the other Parties. In either case, the Transfer shall be made only to a third party who is financially responsible and of generally recognized good business repute at terms no more favorable than offered to the Parties, after the Transferring Party has notified the other Parties of the identity of the proposed purchaser and the terms of the proposed Transfer, and after the Transferring Party has received the consent of the General Meeting of Shareholders, and any Government approvals required for the proposed Transfer.
5.4 Consent to Certain Transfers by MMC, MC and NMM.
(a) Notwithstanding the provisions of Sections 5.1, 5.2 and 5.3 or the Articles of Association, MMC shall have the absolute right to Transfer up to five and four-tenths percent (5.4%) in total of the issued Shares and an equivalent amount of the Subordinated Shareholder Loans to MC and/or NMM, and/or, subject to the transferee being of financial standing acceptable to the other Parties, in their reasonable determination, any other Japanese company(ies) engaging in the copper smelting business or trading business, provided that the transferee company(ies) agree to be bound to all of the terms and conditions hereof and the Articles of Association. No guarantees or other support from MMC shall be required to effectuate such Transfer of Shares and Subordinated Shareholder Loans by MMC. Each Party agrees to vote in favor of such Transfer at a General Meeting of Shareholders at the request of MMC.
(b) If PG does not exercise its option under the Land Agreements to exchange its land for five percent (5%) of the Shares from MMC, MMC shall thereafter be entitled to Transfer such five percent (5%) of the Shares (or whatever portion of the five percent (5%) of Shares not transferred to PG) to MC, NMM or another third party transferee as authorized herein.
(c) Notwithstanding the provisions of Sections 5.1, 5.2 and 5.3 or the Articles of Association, MC and NMM shall have the absolute right to Transfer their Shares and/or Subordinated Shareholder Loans to MMC.
5.5 Consent to Certain Transfers to Subsidiaries. Notwithstanding the provisions of Section 5.1, 5.2 and 5.3 or the Articles of Association, any Party shall, subject to its obligations under the Credit Documents, have the right to Transfer its Shares and Subordinated Shareholder Loans to a Subsidiary, provided that either of the following conditions are met:
(a) such Subsidiary shall be of financial standing acceptable to the other Parties (which acceptance shall not be unreasonably withheld); or
(b) the transferring Party shall remain jointly and severally liable for its obligations assumed under this Agreement.
Notwithstanding the above:
(c) without the written consent of the other Parties or except in the case of a Transfer pursuant to Section 5.4 or 5.8, no Party shall make any Transfer as a result of which either the transferring Party or its Subsidiary shall own less than five percent (5%) of all Shares of PTSC then issued; and
(d) no such Subsidiary shall cease to be a fifty percent (50%) or more owned Subsidiary of a Party without first transferring all of the said Shares and Subordinated Shareholder Loans to the Party or to another fifty percent (50%) or more owned Subsidiary of the Party.
5.6 Consent to Share Pledges in Connection With the Project Loans. Notwithstanding the provisions of Section 5.1, 5.2 and 5.3 or the Articles of Association, the Parties hereby consent to a hypothecation or pledge of Shares if such hypothecation or pledge is required in connection with the execution or performance of the Project Loans.
5.7 Party's Right to Assign Shareholder Rights and Subordinated Shareholder Loans. Should applicable laws, regulations or decrees of the ROI at any time limit the ability of any Party to fully exercise the rights granted to it pursuant to this Agreement and the Articles of Association, then such Party shall have the right to assign all of the rights and privileges conferred upon it under this Agreement and the Articles of Association to any other person or entity qualified to hold its Shares and Subordinated Shareholder Loans (the "Qualified Transferee") and such Qualified Transferee shall be entitled to all of the privileges and to exercise all of the rights of such Party; provided, however, that such Qualified Transferee shall agree to be bound to all of the terms and conditions hereof.
5.8 Mandatory Participation by a Third Party in the Share Capital of PTSC.
(a) If, in the sole discretion of the Board of Directors, it becomes necessary in connection with the acquisition of the land for the Project, in connection with obtaining financing for the Project, or in order to comply with Indonesian laws, regulations and decrees, for a third party to acquire an interest in the share capital of PTSC (the "Third Party Shareholder"), the Parties agree that Shares and Subordinated Shareholder Loans shall be tendered to the Third Party Shareholder in accordance with the procedure set forth in this Section 5.8.
(b) If the Third Party Shareholder is PG and the Transfer is a result of PG's exercise of its option under the Land Agreements to exchange land for Shares, if so requested by the Board of Directors, MMC shall first make an irrevocable tender in writing to Transfer to PG up to five percent (5%) of the Shares and amount and type of Subordinated Shareholder Loans specified by the Board of Directors at MMC's cost for the Shares, plus the outstanding principal amount and accrued interest of such Subordinated Shareholder Loans. If it is necessary to fulfill the option given to PG in the Land Agreements to Transfer to PG more than five percent (5%) of the Shares, FI shall then make an irrevocable tender in writing to Transfer to PG the remainder of the Shares necessary to fulfill the option given to PG in the Land Agreements and amount and type of Subordinated Shareholder Loans specified by the Board of Directors at FI's cost for the Shares, plus the outstanding principal amount and accrued interest of such Subordinated Shareholder Loans.
(c) In all cases other than as described in subparagraph (b), before PTSC shall issue new Shares to a Third Party Shareholder, if so requested by the Board of Directors, FI shall make an irrevocable tender in writing to Transfer to the Third Party Shareholder the number and type of Shares and the amount and type of Subordinated Shareholder Loans specified by the Board of Directors at the amount actually paid for the Shares by FI plus the outstanding principal amount and accrued interest of the corresponding portion of such Subordinated Shareholder Loans. FI shall send a copy of the tender to the other Parties and the Board of Directors. The tender shall be open for ninety (90) days from receipt by the Third Party Shareholder and the Board of Directors. If accepted by the Third Party Shareholder, FI shall promptly Transfer such Shares and Subordinated Shareholder Loans to the Third Party Shareholder upon receipt of payment therefor. In the event that FI is required to Transfer Shares to a Third Party Shareholder in accordance with this subsection (c) and if, as a result, FI retains ten percent (10%) or more of the issued Shares, the other Parties agree to revise the Articles of Association and any affected provisions of this Agreement as necessary such that FI shall retain, despite such forced Transfer of Shares, the shareholder veto rights it had prior to the Transfer pursuant to the Articles of Association. Furthermore, in the case of a forced transfer of Shares from FI to a Third Party Shareholder in accordance with this subsection (c) where FI retains ten percent (10%) or more of the issued Shares of the Company, pending formal amendment of the Articles of Association and this Agreement, the Parties agree that FI shall continue to have the same veto rights specified in the Articles of Association as though it were an owner of twenty percent (20%) of the issued Shares.
(d) In the event of a forced Transfer in accordance with Subsections 5.8(b) or (c), the transferring Party shall Transfer to the Third Party Shareholder good and marketable title to the relevant Shares and Subordinated Shareholder Loans, and shall, prior to the Transfer, be responsible to satisfy in full any liens, pledges, or other encumbrances on the Shares and Subordinated Shareholder Loans other than liens, pledges or encumbrances arising in connection with the Project Loans.
5.9 New Shareholder to Become Bound by this Agreement. Any transferor of Shares or Subordinated Shareholder Loans shall, before the transfer is effected, cause the transferee (other than another Party) to submit to all the other Parties a written confirmation and agreement in a form reasonably satisfactory to all the Parties to the effect that the transferee acknowledges all the provisions of this Agreement and (prior to the earlier of the Ownership Transfer Date and the Termination Date) the Credit Documents, and agrees to be bound by and to comply with all the provisions applicable to the transferor as if the transferee were originally a party to this Agreement and (prior to the earlier of the Ownership Transfer Date and the Termination Date) the Credit Documents.
5.10 Obligations Continuing. In the event any Party ceases to own Shares and hold Subordinated Shareholder Loans, such Party shall cease to be a Party to this Agreement and shall thereafter not be entitled to any rights or benefits under this Agreement. However, such Party shall not be released from any outstanding obligations hereunder (including the Party's duty of Confidentiality as stated in Article 18), in the Major Contracts or under any guarantee unless the guarantee obligation is duly assumed by the transferee and such Party is released with the written consent of the other Parties.
ARTICLE 6. BOARD OF DIRECTORS; PRESIDENT DIRECTOR.
PTSC shall be managed by a Board of Directors to be elected at the General Meeting of Shareholders. The Board of Directors shall consist of not less than three (3) and not more than fourteen (14) Directors. The initial number of Directors shall be three (3), but shall be increased shortly after establishment of PTSC to eleven (11). Each Shareholder who holds nine percent (9%) or more of the issued Shares shall have the right to nominate one or more Directors. The number of Directors that each such Shareholder shall have the right to nominate shall be calculated by first dividing the Shareholder's percentage ownership of all issued and outstanding Shares of PTSC by the number nine (9), then rounding any resulting fraction up or down to the nearest whole integer (a resulting fraction of one-half shall be rounded up). Each Party covenants and agrees to vote as a Shareholder to elect as Directors the individuals nominated by each Shareholder who is entitled to do so. Each nominating Party shall cause its nominated individual(s) to abide by the terms and conditions of this Agreement. MMC shall have the right to designate one of the Directors it nominates to be the President Director.
ARTICLE 7. BOARD OF COMMISSIONERS; PRESIDENT COMMISSIONER.
PTSC shall have a Board of Commissioners to be elected at the
General Meeting of Shareholders. The Board of Commissioners shall
consist of not less than three (3) and not more than five (5)
Commissioners. The initial number of Commissioners shall be four (4).
Each Shareholder who holds twenty percent (20%) or more of the issued
Shares shall have the right to nominate one or more Commissioners. The
number of Commissioners that each such Shareholder shall have the right
to nominate shall be calculated by first dividing the Shareholder's
percentage ownership of all issued Shares of PTSC by the number twenty
(20), then rounding any resulting fraction up or down to the nearest
whole integer (a resulting fraction of one-half shall be rounded up).
Each Party covenants and agrees to vote as a Shareholder so as to elect
as Commissioners the individuals nominated by each Shareholder who is
entitled to do so. Each nominating Party shall cause its nominated
individual(s) to abide by the terms and conditions of this Agreement.
MMC shall have the right to designate one of the Commissioners it
nominates to be the President Commissioner.
ARTICLE 8. GENERAL PROVISIONS RELATING TO DIRECTORS AND COMMISSIONERS
8.1 Dismissal. Each nominating Party may at any time by advising the other Shareholders request the dismissal of such Directors or Commissioners as have been so nominated by it and request the replacement of such discussed Directors of Commissioners by other nominated individual(s). Each Party hereby covenants and agrees to vote as a Shareholder to appoint the selected replacements and dismiss the selected Directors or Commissioners as the case may be.
8.2 Vacancy. In the event that the office of a Director or Commissioner becomes vacant by reason of death, resignation, removal or otherwise, the Partners agree to cause the election of a successor from nominees of that Party which originally nominated the Director or Commissioner concerned.
ARTICLE 9. DIVIDEND POLICY
The PTSC shall declare and distribute by way of dividends all profits legally available for that purpose and permitted by the Project Loans after setting aside such reserves as may be required by law or by the General Meeting of Shareholders as provided in the Articles of Association.
ARTICLE 10. EXECUTION OF AGREEMENTS; PREINCORPORATION EXPENSES
10.1 Execution of Agreements. Upon approval by the Board of Directors and, when applicable, by the General Meeting of Shareholders, the Parties shall cause the PTSC to execute and deliver each of the Major Contracts to which it is a party and concurrently each Party shall execute and deliver each of the Major Contracts to which it is a party; provided that in each case each such Party's obligation to enter into such Major Contracts shall be subject to such documentation being in form and substance satisfactory to it after negotiation in good faith in accordance with the principles set forth in this Agreement.
10.2 Reimbursement of Organizational Expense. All costs and expenses of PTSC approved by the Board of Directors and reasonably incurred in connection with the incorporation and organization of PTSC and the Major Contracts, including but not limited to legal and notarial fees, shall be borne by PTSC. All other expenses incurred by any Party in connection herewith or otherwise relating to the Project shall be borne by the Party so incurring such expenses or shall be reimbursed by PTSC in accordance with the Project Planning Agreement.
10.3 Reimbursement of Feasibility Study Expenses. Subject to the availability of funds, PTSC shall reimburse any Party which has subscribed and fully paid in cash for its proportionate number of Shares in the capital of PTSC for all Feasibility Study Expenses actually paid by such Party pursuant to the terms of the Project Planning Agreement.
ARTICLE 11. FINANCING.
11.1 Financial Plan. As soon as feasible after the execution of
this Agreement, the Parties shall cause PTSC to adopt a Financial Plan
(the "Financial Plan"), which shall have been approved in writing by all
of the Parties and which shall contain a detailed plan of the financial
requirements of the Project and the funding thereof for a period of three
(3) years. In addition, not later than November 1st of each year, the
Board of Directors shall prepare and provide to the Shareholders for
their approval an annual operating and capital budget. For reference
purposes only in relation to the annual budgets, the Board of Directors
shall also prepare a rolling three (3) year business plan. The rolling
three (3) year plan shall not require the approval of a General Meeting
of Shareholders.
11.2 Financing and Guarantees. The Parties confirm that PTSC shall use its best efforts to procure on the basis of its own resources the funds and financial facilities it requires in accordance with the approved Financial Plan, by using its assets as security. Except as otherwise expressly provided in the Credit Documents, Shareholder Support shall be provided by the Parties severally, and not jointly, shall be proportionate to their respective Basic Share Proportion and Basic Loan Proportion at the time of provision of any such Shareholder Support, and shall be upon such terms and conditions as approved by a General Meeting of Shareholders. If any Party fails to fulfill any of its obligations to provide Shareholder Support approved by a General Meeting of Shareholders, then the Party failing to provide such Shareholder Support shall be deemed to be a Defaulting Party within the meaning of Section 3.8 hereof and the provisions of such Section shall apply mutatis mutandis with respect to such failure and such Defaulting Party.
11.3 Share and Subordinated Loan Transfers. In the event that any Party Transfers its Shares and/or Subordinated Shareholder Loans, the transferring Party shall (to the extent permitted by the terms of the Credit Documents) arrange that its guarantee or loan obligations shall be duly assumed by the transferee consistent with the percentage of the Shares and amount of Subordinated Shareholder Loans Transferred, unless such transferee is prohibited or precluded from providing any guarantee or making such loans(s) under the laws, regulations and policies of the ROI, in which chase the transferring Party shall continue to assume its guarantee or loan obligations.
11.4 Repayment of Shareholder Support. If Shareholder Support is provided by the Parties, regardless of the form in which it is contributed to PTSC (whether as Subordinated Shareholder Loans or otherwise), such Shareholder Support shall have priority over payment of dividends in respect of Shares, payment of principal or interest in respect of the $176,000,000 of Subordinated Shareholder Loans specified in Section 3.6 of this Agreement or any additional Subordinated Shareholder Loans made in the form of Voluntary Capital Contributions, and shall be repaid by PTSC in the following orders of priority:
(a) First Priority:
(i) Repayment of Floor TC's and RC's Support by FI (in the event that FI is required to increase its Floor TC's and RC's price from 21 cents to 23 cents per pound for a period of time as provided in Section 12.6 hereof);
(ii) Payment of subordinated Support Fees, in the event that such Support Fees payable to MMC are subordinated for a period of time as provided in Section 12.7 hereof; and
(iii)Repayment of subordinated Financial Disadvantage (as defined in the Copper Cathode Export Sale and Purchase Agreement), in the event that such Financial Disadvantage payments owed by FTSC to MMC, MC, or NMM are subordinated for a period of time as provided in Section 12.9 hereof;
with such payments to MMC, FI, MC and NMM being paid on a pro-rate basis based on the amounts of such Shareholder Support provided by each.
(b) Second Priority:
Payment of subordinated smelter license royalties owed to MMC (in the event that smelter license royalties owed to MMC pursuant to the Smelter License Agreement are subordinated as provided in Section 12.8).
(c) Third Priority:
Repayment of amounts incurred or paid by MMC in respect of the MMC Warranty Support (in the event that MMC Warranty Support is called upon).
(d) Fourth Priority:
Repayment of VAT Support (in the event that VAT Support is required in accordance with the Credit Documents);
with such payments to MMC, FI, MC and NMM being paid on a pro-rata basis based on the amounts of VAT Support provided by each.
(e) Fifth Priority:
Repayment of Coast Overrun Support (in the event that Cost Overrun Support is required in accordance with the Credit Documents);
with such payments to MMC, FI, MC and NMM being paid on a pro-rata basis based on the amounts of Cost Overrun Support provided by each.
ARTICLE 12. COVENANTS
12.1 General. Each of the Parties agrees and covenants that it will work diligently on all major aspects of the Project including, but not limited to, facility design, securing of financing, start-up and operation of the Project.
12.2 Governmental Approvals. Each of the Parties agrees and covenants that it shall during the term of this Agreement exert its best efforts to procure all of the required government approvals and licenses for the establishment and continuance of PTSC and the attainment of PTSC's objectives, including but not limited to all authorizations required under the Foreign Capital Investment law and regulations.
13.2 Execution of Other Agreements. Each of the Parties covenants and agrees to enter into and execute such other documents as are necessary to give full effect to the provisions of this Agreement.
12.4 Competition With PTSC. Each Party may, from time to time, be engaged in businesses which are directly or indirectly in competition with the business of PTSC. While the Parties intend that each Party shall be free to compete with each other Party and with PTSC, the Parties agree that none of the Project Information or other information which has been obtained concerning the Project or PTSC shall be used by any Party to the detriment of the other Parties or PTSC, or otherwise in contravention of Article 18.
12.5 MMC Preferential Return.
(a) Total Return of 13% or Less. FI agrees, any transferee of
Shares and/or Subordinated Shareholder Loans from FI shall agree as a
condition to such Share Transfer being registered in PTSC's share
register or such Transfer of Subordinated Shareholder Loans being binding
on PTSC, that for so long as MMC, MC and NMM (or any authorized
transferee(s) of Shares and Subordinated Shareholder Loans held by MMC,
MC or NMM) do not receive an average annual simple return of thirteen
percent (13%) on their total capital contribution (other than for Cost
Overrun Support) to PTSC (the "Target Return") during the first twenty
(20) years after the Commencement of Commercial Operations (the "Return
Adjustment Period") then (a) FI assigns to MMC, MC, NMM, and their
transferee(s) up to one hundred percent (100%) of any dividends with
respect to Shares and interest with respect to Subordinated Shareholder
Loans that FI may be entitled to receive from PTSC (other than for Cost
Overrun Support) during the Return Adjustment Period until such time as
MMC, MC, NMM and their transferee(s) have achieved an average annual
simple return equal to the Target Return (it being agreed by FI that
during the Return Adjustment Period there shall be no repayment of
principal on Subordinated Shareholder Loans lent by FI for so long as
MMC, MC, NM, and their transferee(s) have not received the Target Return)
and (b) as a condition to FI transferring any Shares and/or Subordinated
Shareholder Loans, FI shall require its transferee to assign to MMC, MC,
NMM and their transferee(s) up to one hundred percent (100%) of any
dividends with respect to Shares and interest with respect to
Subordinated Shareholder Loans that FI's transferee may be entitled to
receive from PTSC (other than for Cost Overrun Support) during the Return
Adjustment Period on the same basis, with such assignment to be prorated
based on the percentage shareholding as between FI and such transferee.
If the Return Adjustment Period should expire without MMC, MC, NMM and
their transferee(s) receiving the Target Return for the Return Adjustment
Period, they shall have no obligation to return any amounts assigned by
FI or any FI transferee.
(b) Total Return Exceeding 13%. Notwithstanding Section 12.5(a), if MMC's, MC's, NMM's and any of their transferee(s)'s average annual simple return shall at any time exceed the Target Return during the Return Adjustment Period, then, for so long as and only to the extent that their cumulative return from PTSC exceeds the Target Return during the Return Adjustment Period, MMC, MC, NMM and/or their transferee(s), as the case may be, shall assign such excess returns to FI and any such FI transferee in the same ratio as amounts were assigned to it/them by FI and any FI transferee until such time (irrespective of whether the Return Adjustment Period has expired) as FI and any FI transferee have been reimbursed for all amounts which FI and any such FI transferee previously assigned to MMC, MC, NMM and their transferee(s).
(c) Calculation of Target Return. In determining whether MMC's, MC's, NMM's and their transferee(s)'s actual return has equaled the Target Return, the following rules shall apply:
(i) Calculation of the total capital contribution made by any Shareholder shall include the amount of equity contributions and the amount of Subordinated Shareholder Loans still outstanding made by such Shareholder;
(ii) Calculation of the return received by MMC, MC, NMM and their transferee(s) (A) shall include dividends with respect to Shares and interest with respect to Subordinated Shareholder Loans held by such Shareholder, (B) shall not include any return of principal with respect to Subordinated Shareholder Loans made by them, and (C) shall include all amounts received by way of assignment from FI or any FI transferee pursuant to this Section 12.5;
(iii)Calculation of the return received by MMC, MC, and NMM and their transferee(s) shall consist of the gross amount of interest and dividends paid (before deducting applicable withholding taxes), but in the event that MMC, MC, NMM or any transferee(s), as the case may be, (A) notifies PTSC that it is unable to utilize all or any part of the amount of any Indonesian taxes actually withheld from payments made to it as a credit against its home country income taxes, and (B) has provided appropriate documentation to PTSC related thereto, then the assignment provisions of the preceding paragraph shall apply such that the sum of (1) the amount of cash actually received by MMC, MC, NMM or any transferee(s), as the case may be, and (2) the tax benefits actually received by MMC, MC NMM or any transferee(s), as the case may be against its home country income taxes, equal the Target Return;
(iv) Notwithstanding any other provision of this Section 12.5, the Target Return shall not apply to Cost Overrun Support, but shall apply to Voluntary Capital Contributions; and
(v) For reference purposes, a sample calculation of the average annual simple return is attached hereto as Exhibit "A".
12.6 Increase in Floor TC's and RC's. In the event that (a) the
Indonesian government has not imposed an import tariff on copper cathodes
of three percent (3%) or greater by the Commencement of Commercial
Operations, and (b) PTSC is receiving treatment and refining charges for
the combined Part A and Part B tonnage sold by FI and purchased by PTSC
pursuant to the Concentrate Purchase and Sale Agreement of less than
twenty-three cents (US$0.23) per pound of Payable Copper, as defined in
the Concentrate Purchase and Sales Agreement, then FI and PTSC shall
amend the Concentrate Purchase and Sale Agreement to increase the Floor
TC's and RC's, as defined in the Concentrate Purchase and Sale Agreement
to twenty-three cents (US$0.23) per pound of Payable Copper,
retroactively to the very first shipment to PTSC. The higher Floor TC's
and RC's shall continue until the first to occur of (i) the date on which
the Indonesian Government imposes an import tariff on copper cathodes of
three percent (3%) or greater or (ii) the date which is five (5) years
following the Production Date. For the avoidance of doubt, no interest
shall accrue on the amounts received by PTSC as a result of the foregoing
increase in the Floor TC's and RC's, except from the date when PTSC fails
to repay the increased amounts received when due in accordance with
Section 11.4(a)(i).
12.7 Subordination of Support Fee. In the event that (a) the Indonesian Government has not imposed an import tariff on copper cathodes of three percent (3%) or greater by the Commencement of Commercial Operations, and (b) FI and PTSC are required to amend the Concentrate Purchase and Sale Agreement to increase the Floor TC's and RC's under the Concentrate Purchase and Sale Agreement as provided in Section 12.6 above, then the full Support Fee shall be subordinated to debt service and debt service reserve requirements under the Project Loans, such subordination to be retroactive to the date of the very first shipment made by FI under the Concentrate Purchase and Sale Agreement and to continue until the first to occur of (i) the date on which the Indonesian Government imposes an import tariff on copper cathodes of three percent (3%) or greater or (ii) the date which is five (5) years following the Production Date; and further provided that a Support Fee payment which is deferred pursuant to the proviso immediately above shall not be deemed to be a late payment subject to accrual of interest provided that, if deferred, the deferred Support Fee is paid when no longer subordinated pursuant to the Project Loans.
12.8 Subordination of Smelter License Royalty. As support for PTSC, MMC agrees that each payment of the royalty due to MMC in accordance with the Smelter License Agreement shall be subordinated in priority of payment to (a) all operating expenses of PTSC, (b) all amounts payable by PTSC under the Project Loans, including funds required to be deposited into a debt service reserve fund, and (c) in the event that a tariff of at least three percent (3%) is not imposed by the Indonesian Government on the importation of copper cathode by the due date of the royalty payment, and the absence of such tariff results in the payment by FI to PTSC of increased treatment and refining charges pursuant to Section 12.6 and/or the deferral of payments by PTSC to MMC for Support Fees pursuant to Section 12.7, then to the payment to (i) FI of such increased treatment and refining charges and (ii) MMC of such deferred Support Fees in accordance with Section 11.4; and further provided that a royalty payment which is deferred pursuant to the proviso immediately above shall not be deemed to be a later payment subject to accrual of interest in accordance with Section 5.2 of the Smelter License Agreement provided that, if deferred, the deferred royalty payment is paid when no longer subordinated as provided herein.
12.9 Subordination of Financial Disadvantage Payable to MMC, MC or NMM. As support for PTSC, MMC, MC and NMM agree that payment of Financial Disadvantage (as defined in the Copper Cathode Export Sale and Purchase Agreement) owed by PTSC to MMC, MC or NMM in accordance with the Copper Cathode Export Sale and Purchase Agreement (and interest accrued thereon) shall be subordinated to debt service under the Project Loans to the extent provided in the Credit Documents.
ARTICLE 13. TERM OF THIS AGREEMENT
This Agreement shall remain in force and effect as long as PTSC continues to exist, unless earlier terminated as provided for in this Agreement.
ARTICLE 14. DEFAULT
14.1 Default. Any of the following will constitute a Default:
(a) If any of the Parties shall be declared insolvent or bankrupt, or make an assignment or other arrangement for the benefit of creditors;
(b) If any of the Parties shall be dissolved or liquidated; or
(c) If any of the Parties shall at any time be in default in any material respect in the performance of any of its obligations under this Agreement or otherwise commit any material breach of this Agreement, and such default of breach shall continue for a period of sixty (60) days after a written notice demanding rectification of such default or breach has been given by PTSC or any other Party to the defaulting Party, and, provided further, such default has been acknowledged by the defaulting Party or confirmed by an arbitrator's judgment as provided in Article 16.
14.2 Effect of Default. Upon the occurrence of a Default, without
prejudice to any other rights and remedies of the non-defaulting Parties
or Party, the rights of the defaulting Party under this Agreement shall
be suspended pending sale of the defaulting Party's Shares as provided in
Section 14.3 or for so long as the default is unrectified.
14.3 Share Purchase Right. In the event of a default, each of the non-defaulting Parties shall have the right to purchase all or any part of the Shares and assume all or any part of the Subordinated Shareholder Loans held by the defaulting Party, at the price determined in accordance with Section 14.4, by giving notice ("an Exercise Notice") thereof to all the Parties within sixty (60) days after the default occurs. If the total number of Shares and amount of Subordinated Shareholder Loans for which Parties have exercised such right exceeds the total number of Shares and Subordinated Shareholder Loans of the defaulting Party, then each Party exercising such right may acquire at least the number of Shares and amount of Subordinated Shareholder Loans that bears the same ratio to the total number of Shares and Subordinated Shareholder Loans held by the defaulting Party that such non-defaulting Party's respective Basic Share Proportion and Basic Loan Proportion bears to the aggregate Basic Share Proportion and Basic Loan Proportion of all non-defaulting Parties exercising such right; provided that should any Party accept in writing less than the number of Shares and/or Subordinated Shareholder Loans to which it would be entitled under the foregoing, such Party shall be entitled only to the number of Shares and/or Subordinated Shareholder Loans it has so accepted, and the remaining Shares and Subordinated Shareholder Loans offered for sale or assignment shall be divided proportionately as above among those Parties who have accepted more than the number of Shares and/or Subordinated Shareholder Loans to which they would be entitled in accordance with the foregoing. If the total number of Shares or Subordinated Shareholder Loans for which Parties have exercised such right is less than the total number of Shares or Subordinated Shareholder Loans available, then the Board of Directors may offer such Shares or Subordinated Shareholder Loans to third parties, with the prior approval of a General Meeting of Shareholders. Upon completion of the foregoing transactions, the Basic Share Proportion and Basic Loan Proportion of each Party and the third party (if applicable) shall be adjusted in accordance with its ownership percentage.
14.4 Share Price. For the purpose of the Transfer of the Shares and Subordinated Shareholder Loans as stated in Section 14.3 above, the sale and purchase price of the Shares and Subordinated Shareholder Loans shall be at (i) the then book value of such Shares and the outstanding principal and accrued interest of the Subordinated Shareholder Loans as determined by the Auditor in the case of Subsections 14.1(a) through (b) above, or (ii) seventy-five percent (75%) of the par value of such Shares or seventy-five percent (75%) of the then book value of such Shares as determined by the Auditor, whichever is less, and seventy-five percent (75%) of the outstanding principal and accrued interest of the Subordinated Shareholder Loans in the case of Subsection 14.1(c) above.
14.5 Share and Subordinated Loan Transfer. Within thirty (30) days after the Share and Subordinated Shareholder Loans purchase price is determined in accordance with Section 14.4:
(a) the defaulting Party shall:
(i) execute and deliver to the purchaser the relevant documents required to transfer the Shares and assign the Subordinated Shareholder Loans;
(ii) Transfer (consistent with the Credit Documents) to the purchaser the share certificate(s) (if any) relating to the Shares and loan and security documents relating to the Subordinated Shareholder Loans;
(iii)deliver to the purchaser a letter of resignation from each of the Director(s) and Commissioner(s) appointed or elected on its nomination with a waiver of all claims for compensation for loss of office;
(iv) deliver to the purchaser a bank check for one half of the amount of any stamp or other transfer tax or duty payable in respect of the Transfer of the Shares and Subordinated Shareholder Loans, failing which the purchaser may deduct such sum from the purchase price of the Shares and Subordinated Shareholder Loans;
(v) deliver to the purchaser all books and records of PTSC in its possession or in the possession of Director(s) or Commissioner(s) thereof elected or appointed on its nomination; and
(vi) co-operate with the purchaser in the orderly transfer of the Shares and Subordinated Shareholder Loans and, where appropriate, control and management of the business and affairs of PTSC to the purchaser.
(b) The purchasing Party shall deliver to the defaulting Party a bank check for the purchase price of the Shares and Subordinated Shareholder Loans less any deduction in respect of stamp or other tax or duty in accordance with subparagraph (a)(iv) of this Section 14.5.
ARTICLE 15. EFFECT OF TERMINATION AND DISSOLUTION
Termination of this Agreement for any cause shall not release the Parties from any liability which at the time of termination has already accrued or which thereafter may accrue in respect of any act or omission prior to such termination. Further, any such termination hereof shall in no way affect the survival of rights and obligations of the Parties which are expressly stated elsewhere in this Agreement to survive termination hereof or the obligations of the Parties under any of the Major Contracts. To the extent necessary to give effect to the termination provisions of this Agreement, the Parties hereby waive the provisions of Article 1266 of the Indonesian Civil Code to the extent they require judicial approval of the termination of contracts.
ARTICLE 16. DISPUTE RESOLUTION
16.1 Amicable Settlement. Any dispute arising out of or in connection with this Agreement or its performance, including the validity, scope, meaning, construction, interpretation, application, breach or termination hereof, shall to the extent possible be settled amicably by negotiation and discussion between the Parties. Any Party wishing to invoke the right to conduct such settlement negotiations shall give written notice to the other Parties of the substance of the dispute and propose a schedule of conferences to resolve the matter.
16.2 Arbitration Rules. Any such dispute not settled by amicable agreement within sixty (60) days of receipt of the written notice described in Section 16.1 (or such other period as may be agreed by all Parties in writing in any specific case) shall be finally settled by arbitration in Singapore as an international arbitration under the auspices of the Singapore International Arbitration Centre and applying the ICC Arbitration Rules. In the event of a conflict between the ICC Arbitration Rules and the terms of this Agreement, the terms of this Agreement shall govern. Documents may be submitted in either English or Japanese without the need for translation.
16.3 Arbitrators. Any arbitration hereunder shall be conducted in the English and/or Japanese languages before a panel of three arbitrators. Each arbitrator shall preferably be fluent in both English and Japanese, but if fluent in only one of such language, an interpreter shall be retained and paid for by the Parties equally. The arbitrators shall be appointed in accordance with the following provisions:
(a) where only two Parties are involved in the dispute, each Party shall appoint one arbitrator and the two arbitrators so appointed shall select the third arbitrator (who shall not be a resident or national of the same country as either of the Parties involved in the dispute). The third arbitrator shall act as the presiding arbitrator;
(b) if within a period of 30 days from the date of the notice of arbitration, a Party has failed to appoint an arbitrator, or, the two appointed arbitrators have failed to select the third arbitrator within 30 days after both arbitrators have been appointed, the Chairman of the Singapore International Arbitration Centre shall appoint such arbitrator or arbitrators as have not been appointed; and
(c) where more than two Parties are involved in the dispute, the Chairman of the Singapore International Arbitration Centre shall appoint each of the three arbitrators, and select one as the presiding arbitrator.
16.4 Arbitration Award. The award rendered in any arbitration commenced hereunder shall apportion the costs of the arbitration.
16.5 Award to be Final and Conclusive. The award rendered in any arbitration commenced hereunder shall be final and conclusive, and judgment thereon may be entered in any court having jurisdiction for its enforcement. The Parties expressly agree to waive Article 641 of the Indonesian Code of Civil Procedure and Articles 15 and 108 of Law No. 1 of 1950 (Supreme Court Rules), and accordingly there shall be no appeal to any court from the decision of the panel of arbitrators. No Party shall be entitled to commence or maintain any action in a court of law upon any matter in dispute until such matter shall have been submitted and decided as herein provided and then only for the enforcement of the board of arbitration's award.
16.6 Performance of Obligations Pending Decision. Pending submission to the board of arbitration and thereafter until the board of arbitration gives its award, the Parties hereto agree that they will continue to perform all their respective obligations under this Agreement without prejudice to the final judgment in accordance with the said award.
16.7 Waive of Right to Terminate Board of Arbitration. The Parties hereto expressly agree to waive the applicability of Article 650.2 of the Indonesian Commercial Code, so that the appointment of the board of arbitration shall not terminate as of the sixth month from the date of its appointment. The mandate of the board of arbitration reconstituted in accordance with the terms hereof shall remain in effect until a final arbitral award has been issued by the board of arbitration.
Article 17. REPRESENTATIONS AND WARRANTIES
17.1 Corporate Power. Each Party warrants that it has full corporate power to enter into this Agreement and to perform its obligations hereunder according to the terms of this Agreement, and that it has taken all necessary corporate or other actions to authorize its entry into and performance of this Agreement.
17.2 Statements True. Each party warrants that the statements made relating to it in this Agreement are true and accurate and that nothing further needs to be stated to prevent such statements from being misleading.
ARTICLE 18. CONFIDENTIALITY
18.1 Confidential Treatment/Permitted Disclosures. Each of the Parties covenants and agrees not to
(a) use for any commercial purpose other than in connection with the Project any of the proprietary or confidential information concerning the Project, including but not limited to proprietary and confidential technical information such as drawings, documents, specifications and non-public data and procedures, furnished by any Party or its Affiliates or developed for purposes of the Project (collectively, the "Project Information"), or
(b) divulge any Project Information to third parties without the consent of the other Parties; except that (i) any party may disclose Project Information to such of its directors, officers, employees, consultants and advisors (including financial and legal advisors) as have a reasonable need to know such Project Information in connection with the Project Loans and its equity participation in the Project (in each case pursuant to a written agreement whereby the recipient agrees to keep such Project Information confidential); (ii) FI shall have the right to disclose such Project Information to the Government in furtherance of its obligations under the Contract of Work with the ROI; and (iii) each other Party may disclose Project Information as required in accordance with applicable laws and for the due enforcement of its rights hereunder and under the Major Contracts.
Notwithstanding the above, no Party shall be under any obligation of confidentiality and restricted use as to any Project Information and knowledge based thereon, which, as evidenced by documents,
(c) was in the lawful possession of the receiving Party prior to the disclosure thereof by the disclosing Party and which was not obtained by the receiving Party either directly or indirectly from the disclosing Party or another Party, or
(d) is, after disclosure by the disclosing Party, lawfully disclosed to the receiving Party by a third party having no obligation of secrecy to the disclosing party as to the said information, or
(e) is or at any time becomes available to the public through no act, failure to act or other legal fault of receiving Party.
Specific information disclosed to a receiving Party shall not be deemed to be within the foregoing exceptions merely because such information is embraced by more general information in the public domain or is in the possession of the receiving Party. In addition, any combination of features shall not be deemed to be within the foregoing exceptions merely because individual features are in the public domain or in the possession of the receiving Party, but only if the combination itself and its principles of operation are in the public domain or in the possession of receiving Party.
18.2 Implementation. Each Party further agrees to make all reasonable efforts, and to take all reasonable precaution, to prevent any of its employees or personnel, or any other persons, from obtaining or making any unauthorized use of, or effecting any disclosure of any Project Information. The Parties shall implement this policy of confidentiality in part by appropriate contract provisions, including but not limited to appropriate terms in contracts of employment.
18.3 Treatment of Project Information by PTSC. Each Party further agrees that PTSC shall treat all Project Information as confidential and shall not disclose all or any part of it to any third party or otherwise seek to exploit all or any part of it without the prior written consent of the Party(ies) from which it was derived; provided that Project Information may be disclosed by PTSC (a) if required to be disclosed under any applicable law or regulation and (b) to its consultants, actual or prospective financiers or transferees thereof (or any of their legal counsel or consultants), the independent engineer appointed pursuant to the Project Loans or sub-consultants as reasonably necessary for their services to PTSC or their participation in the Project, such disclosure to be pursuant to a written agreement whereby the recipient agrees to keep such Project Information confidential.
18.4 Obligations to Survive. The obligations contained in this Article 18 shall bind the Parties during the term of this Agreement and shall continue to bind the Parties after this Agreement is terminated (for whatever cause) or expires for a period of five (5) years thereafter.
Article 19. ASSIGNMENT
Except as provided herein concerning the authorized Transfer of Shares or Subordinated Shareholder Loans, no Party may assign any of its rights or obligations under this Agreement without the prior written consent of the other Parties. In the event an assignment is consented to by the other Parties, this Agreement shall inure to the benefit of and be binding upon such assignee and its successors or assigns, and such assignee shall execute an appropriate document or documents as necessary to become a Party to this Agreement.
Article 20. LAW AND INTERPRETATION
20.1 Governing Law. The provisions of this Agreement shall be governed in all respects by and construed in accordance with the laws of Japan.
20.2 Governing Language of this Agreement. This Agreement is executed in the English language which shall be the governing language despite translation into any other language(s).
20.3 Headings. The headings of the Articles and Sections in this Agreement and table of contents shall not form part of this Agreement and shall be disregarded in interpreting and construing this Agreement.
Article 21. SEVERABILITY
If one or more of the provisions herein shall be void, invalid, illegal or unenforceable in any respect under any applicable law or decision, the validity, legality and enforceability of the remaining provisions contained shall not be affected or impaired in any way. Each Party hereto shall, in any such event, execute such additional documents as the other Party(ies) may reasonably request in order to give valid, legal and enforceable effect to any provision hereof which is determined to be invalid, illegal or unenforceable as written in this Agreement.
Article 22. NOTICES
22.1 Manner of Delivery/Addresses. Except as expressly set out in this Agreement to the contrary, all notices and other communications to be given to a Party under this Agreement shall be in writing in the English language and communicated by personal delivery, mail or facsimile from one Party to the other Party(ies) at their respective addresses as follows:
FI: P.T. Freeport Indonesia Company
Plaza 89, 5th Floor
Jl. H.R. Rasuna Said Kav. X-7 No. 6
Jakarta 12940 Indonesia
Attention: President Director
Fax Number: 62-21-850-6736
with a copy to:
P.T. Freeport Indonesia Company
1615 Poydras Street
New Orleans, LA 70112 U.S.A.
Attention: Legal Department
Fax Number: 1-504-585-3513
MMC: Mitsubishi Materials Corporation
1-5-1 Marunouchi
Chiyoda-ku
Tokyo 100, Japan
Attention: General Manager, Metals Division
Fax Number: 81-3-5252-5426
MC: Mitsubishi Corporation
2-6-3, Marunouchi
Chiyoda-ku
Tokyo 100-86, Japan
Attention: General Manager,
Base Metals Business Department
Fax Number: 81-3-3210-8186
NMM: Nippon Mining & Metals Company, Limited
2-10-1, Toranomon
Minato-ku
Tokyo 105, Japan
Attention: General Manager
Planning & Coordination Department
Copper & Chemical Division
Fax Number: 81-3-5573-7595
PTSC: P.T. Smelting Co.
Plaza 89, 6th Floor-S-602
Jl. H.R. Rasuna Said
Kav.X-7 No.6
Jakarta, 12940
Indonesia
Attention: President Director
Fax Number: 62-21-522-9615
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Subject to any express provisions contained in this Agreement to the contrary, the notices and other communications shall be deemed delivered when sent in the case of facsimile transmissions or personal delivery, and ten (10) days after sending in the case of mail.
22.2 Change of Address. Any Party hereto may at any time change its address by written notice to the other Parties of such change.
Article 23. FORCE MAJEURE
No Party shall be liable for any delay or failure in the performance of any of its obligations under this Agreement to the extent that such delay or failure is caused by Force Majeure, provided that the Party whose performance is prevented or delayed by such Force Majeure shall make every good faith effort to overcome or dispel the event of Force Majeure, and further provided that Force Majeure shall not excuse a failure to pay money when due. For the purposes of this Agreement, "Force Majeure" shall mean events or circumstances beyond the reasonable control of a Party such as lightning, fire, explosion, storm, wind, flood, tidal wave, earthquake, tempest or other natural disasters of overwhelming proportions or acts of God; civil commotion, rebellion, war, sabotage, riot, strike, lock out or industrial unrest; or the enactment of any law or regulation not existing or not applicable on the date of this Agreement by the Government which renders the Project economically impracticable, or the nationalization, expropriation or compulsory acquisition of the Project or any part thereof by the Government.
Article 24. ENTIRE AGREEMENT
This Agreement and the Credit Documents constitute the entire agreement between the Parties with respect to the subject matter hereof and, with the exception of the project Planning Agreement, supersedes all prior agreements, understandings and negotiations, both written and oral, between the Parties with respect to the subject matter of this Agreement. Insofar as possible this Agreement shall be interpreted to be consistent with the Project Planning Agreement, provided, however, that in the event of a direct inconsistency, this Agreement shall take precedence. No representation, inducement, promise, understanding, condition or warranty not set forth herein has been made or relied upon by any Party hereto.
Article 25. AMENDMENTS
This Agreement may not be modified or amended except in writing and with the unanimous agreement of the Parties hereto.
Article 26. NO THIRD PARTY BENEFICIARIES
Neither this Agreement nor any provision hereof is intended to confer upon any person, firm, corporation or other entity other than the Parties hereto any rights or remedies hereunder.
Article 27. NO CONFLICT WITH CREDIT DOCUMENTS
Each Party acknowledges (and upon any Transfer of Shares or Subordinated Shareholder Loans, each such transferee shall be deemed to have acknowledged) that it has read and is familiar with the terms and conditions of the Credit Documents and agrees that, prior to the earlier of the Termination Date and the Ownership Transfer Date, notwithstanding any provision in this Agreement to the contrary, such Party shall not take or permit to be taken any action pursuant hereto, or fail to take any action required hereunder, which shall conflict with any of its obligations under any of the Credit Documents or cause PTSC to conflict with any of its obligations under the Loan Agreement.
Article 28. MISCELLANEOUS
The Parties agree to amend the Articles of Association of PTSC as necessary to comply with this Agreement. This Agreement may be executed in any number of counterparts, all of which when taken together shall constitute one and the same instrument and any of the parties hereto may execute this Agreement by signing any such counterpart.
****
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives on the date and year and place first written above.
MITSUBISHI MATERIALS CORPORATION
By: /s/Teesuo Kumana
-------------------------------
Teesuo Kumana
Title: Managing Director, Metals Division
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P.T. FREEPORT INDONESIA COMPANY
By: /s/ Robert M. Wohleber
--------------------------------
Robert M. Wohleber
Title: Vice President
|
MITSUBISHI CORPORATION
By: /s/ Fukuda, Isamu
-------------------------------
Fukuda, Isamu
Title: Director, General Manager Non-Ferrous
Metals Div.
|
NIPPON MINING & METALS COMPANY, LIMITED
By: /s/ Matuo Ide
------------------------------
Matuo Ide
Title: Managing Director
|
RATIFICATION
PTSC hereby ratifies and agrees to be bound by this Agreement as if it were a party hereto, to carry out the management and administration of its business in accordance with the terms and conditions of this Agreement, and to perform all obligations intended under this Agreement to be undertaken or performed by it.
P.T. Smelting Co.
By: /s/Shunichi Ajima
--------------------------
Shunichi Ajima
Title: President Director
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EXHIBIT "A"
SAMPLE CALCULATION OF MMC/MC/NMM'S RECEIPT OF 13% SIMPLE RETURN
ON CONTRIBUTED CAPITAL
Return Amounts Refer to Gross Distributions
(i.e., Distribution Including Application
Withholding Tax)
Year 1(*1) Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
---------- ------ ------ ------ ------ ------ ------ ------ ------ -------
Cash Available for Interest
on Shareholder Loans 0 25,000 33,000 20,000 18,000 15,000 15,000 14,000 12,500 11,500
Cash Available for Dividend 0 0 0 0 28,000 35,000 15,000 45,000 50,000 54,542
Cash Available for Principal
Repayment on Shareholder
Loans 0 0 0 15,000 10,000 12,500 15,000 10,000 10,000 10,000
Total Cash Available for
Shareholder 0 25,000 33,000 35,000 56,000 62,500 45,000 69,000 72,500 76,042
MMC/MC/NMM
MMC/MC/NMM Pro-Rata Return
Interest on Shareholder
Loan (*2) 0 17,291 22,824 13,307 11,613 9,244 8,620 7,581 6,284 5,254
Common Stock Dividends 0 0 0 0 21,000 26,250 11,250 33,750 37,500 40,097
Return Assigned from FI 0 7,709 10,176 6,693 13,387 14,506 10,130 0 0 0
Return Reimbursed to FI 0 0 0 0 0 0 0 16,076 21,424 4,119
Annual Return 0 25,000 33,000 20,000 46,000 50,000 30,000 25,255 22,360 42,042
Cumulative Return 0 25,000 58,000 78,000 124,000 174,000 204,000 229,255 251,615 293,657
Average Balance-Shareholder
Loan 132,000 132,000 132,000 117,000 107,000 94,500 79,500 69,500 59,500 49,500
Average Balance-Common
Equity 112,500 112,500 112,500 112,500 112,500 112,500 112,500 112,500 112,500 112,500
Average Balance-Capital
Contributions 244,500 244,500 244,500 229,500 219,500 207,000 192,000 182,000 172,000 162,000
Cumulative Average Balance 244,500 489,000 733,500 963,000 1,182,500 1,389,500 1,581,500 1,763,500 1,935,500 2,097,500
Average Annual Simple
Return to MC/MC/NMM(*3) 0.0% 5.1% 7.9% 8.1% 10.5% 12.5% 12.9% 13.0% 13.0% 14.0%
(CUMULATIVE RETURN/SUM OF
AVERAGE CAPITAL)
FI
FI Return
Interest on Shareholder
Loan (*2) 0 7,709 10,176 6,693 6,387 5,756 6,380 6,419 6,216 6,246
Common Stock Dividends 0 0 0 0 7,000 8,750 3,750 11,250 12,500 13,636
Return Assigned to MMC/
MC/NMM 0 7,709 10,176 6,693 13,387 14,506 10,130 0 0 0
Return Reimbursed from
MMC/MC/NMM 0 0 0 0 0 0 0 16,076 21,424 4,119
FI Arrearage (*4) 0 8,333 19,333 26,000 41,333 58,000 68,000 42,673 9,987 0
Average Balance-
Shareholder Loan 44,000 44,000 44,000 44,000 44,000 44,000 44,000 44,000 44,000 44,000
Average Balance-Common
Equity 37,500 37,500 37,500 37,500 37,500 37,500 37,500 37,500 37,500 37,500
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*1 Years refer to fiscal years following commencement of commercial
operations.
*2 Interest is assumed to be calculated according to the terms of the
Subordinated Loan Agreements.
*3 Average annual simple return is equal to the sum of gross interest
and dividends paid to MMC/MC/NMM to date divided by the cumulative
average capital balance (based on actual days outstanding) from
the commencement of commercial operations to date. Total debt and
equity contributed by all Sponsors are assumed to total $326
million as of commencement of commercial operations. MMC/MC/NMM's
capital contribution is assumed to total $244.5 million.
*4 FI's arrearage amount equals the amount by which gross interest
and dividends received by FI on its subordinate debt and equity
investments fall short of or exceeds the pro-rata share of gross
interest and dividends received by MMC/MC/NMM on their subordinate
debt and equity investments. In the above example, FI holds $44
million of subordinated debt and $37.5 million of common equity
subject to dividend assignment obligations, and is therefore
entitled to receive 33.3% (i.e., 25%/75%) of the gross interest
and dividends received by MMC/MC/NMM.
1995 LONG-TERM PERFORMANCE INCENTIVE PLAN
OF FREEPORT-McMoRan COPPER & GOLD INC.
(As amended effective December 10, 1996)
ARTICLE I
PURPOSE OF PLAN
SECTION 1.1. The purposes of the 1995 Long-Term Performance
Incentive Plan of Freeport-McMoRan Copper & Gold Inc. (the "Plan") are
(i) to provide incentives for senior executives whose performance in
fulfilling the responsibilities of their positions can have a major
impact on the profitability and future growth of Freeport-McMoRan Copper
& Gold Inc. (the "Company") and its subsidiaries and (ii) to provide for
the issuance of awards relating to performance awards issued to employees
and officers of Freeport-McMoRan Inc. ("FTX"), the Company's current
parent, in connection with the Distribution.
ARTICLE II
ADMINISTRATION OF THE PLAN
SECTION 2.1. Subject to the authority and powers of the Board of Directors in relation to the Plan as hereinafter provided, the Plan shall be administered by a Committee designated by the Board of Directors consisting of two or more members of the Board each of whom is a "non- employee director" within the meaning of Rule 16b-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934. The Committee shall have full authority to interpret the Plan and from time to time to adopt such rules and regulations for carrying out the Plan as it may deem best; provided, however, that the Committee may not exercise any authority otherwise granted to it hereunder if such action would have the effect of increasing the amount of any credit to or payment from the Performance Award Account of any Covered Officer. All determinations by the Committee shall be made by the affirmative vote of a majority of its members, but any determination reduced to writing and signed by a majority of the members shall be fully as effective as if it had been made by a majority vote at a meeting duly called and held. All decisions by the Committee pursuant to the provisions of the Plan and all orders or resolutions of the Board of Directors pursuant thereto shall be final, conclusive and binding on all persons, including but not limited to the Participants, the Company and its subsidiaries and their respective equity holders.
ARTICLE III
ELIGIBILITY FOR AND GRANT OF PERFORMANCE AWARDS
SECTION 3.1. Subject to the provisions of the Plan, the Committee may from time to time select any of the following to be granted Performance Awards under the Plan, and determine the number of Performance Units covered by each such Performance Award: (a) any person providing services as an officer of the Company or a Subsidiary, whether or not employed by such entity, including any person who is also a director of the Company, (b) any salaried employee of the Company or a Subsidiary, including any director who is also an employee of the Company or a Subsidiary, (c) any officer or salaried employee of an entity with which the Company has contracted to receive executive, management or legal services who provides services to the Company or a Subsidiary through such arrangement and (d) any person who has agreed in writing to become a person described in clauses (a), (b) or (c) within not more than 30 days following the date of grant of such person's first Performance Award under the Plan. In addition, the Committee will identify Eligible Individuals for the grant of Transition Awards. Performance Awards may be granted at different times to the same individual. No Performance Awards shall be granted hereunder after December 31, 1999.
SECTION 3.2. Upon the grant of a Performance Award to a Participant, the Company shall establish a Performance Award Account for such Participant and shall credit to such Performance Award Account the number of Performance Units covered by such Performance Award.
SECTION 3.3. Subject to adjustment as provided in Section 3.4(d), the number of Performance Units outstanding at any time shall not exceed 3,000,000. Performance Units that shall have been forfeited or with respect to which payment has been made pursuant to Section 4.2 or deferred pursuant to Section 4.4 shall not thereafter be deemed to be credited or outstanding for any purpose of the Plan and may again be the subject of Performance Awards.
SECTION 3.4. (a) Notwithstanding the provisions of Section 3.1, 3.2 and 3.3, all Performance Awards granted to Covered Officers must be granted no later than 90 days following the beginning of the Plan Year. No Covered Officer may be granted more than 250,000 Performance Units in any calendar year.
(b) Notwithstanding the provisions of Section 3.1, 3.2 and 3.3 hereof and subject to adjustment as provided in Section 3.4(d), with respect to any Transition Awards granted under the Plan during calendar year 1995, the number of Performance Units covered by any such Transition Award that may be granted to the Covered Officer who is functioning as the chief executive officer of the Company at the time of such grant shall be 400,000, in such series as are designated on Schedule A; the number of Performance Units covered by any such Transition Award that may be granted to the Covered Officer who is functioning as the chief operating officer of the Company at the time of such grant shall be 160,000, in such series as are designated on Schedule A; the number of Performance Units covered by any such Transition Award that may be granted to the Vice Chairman of the Board of the Company at the time of such grant shall be 230,000, in such series as are designated on Schedule A; and the number of Performance Units covered by any such Transition Award that may be granted to any other Covered Officer shall be, as to each such individual, 120,000, in such series as are designated on Schedule A.
(c) All Performance Awards to Covered Officers under the Plan will be made and administered by two or more members of the Committee who are also "outside directors" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended, and rules promulgated by the Internal Revenue Service of the Department of the Treasury thereunder.
(d) Upon effectiveness of the Plan, each number of Performance Units specified in Section 3.3 and in paragraph (b) of this Section 3.4 shall be multiplied by a fraction, the numerator of which is the number of shares of all classes of common stock of the Company outstanding immediately after the Distribution, and the denominator of which is the number of common shares of FTX outstanding immediately prior to the Distribution.
ARTICLE IV
CREDITS TO AND PAYMENTS FROM PARTICIPANTS'
PERFORMANCE AWARD ACCOUNTS
SECTION 4.1. (a) Except as provided in paragraph (b), subject to the provisions of the Plan, each Performance Unit in any Performance Award Account of each Participant at December 31 of any year shall be credited, as of such December 31 of each year in the Performance Period for such Performance Unit, with an amount equal to the Annual Earnings Per Share (or Net Loss Per Share) for such year; provided that, if in any year there shall be any outstanding Net Loss Carryforward applicable to such Performance Unit, such Net Loss Carryforward shall be applied to reduce any amount which would otherwise be credited to or in respect of such Performance Unit pursuant to this Section 4.1 in such year until such Net Loss Carryforward has been fully so applied.
(b) With respect to Performance Units outstanding on December 31, 1995, the credit in respect of any such Performance Unit shall equal the portion of Annual Earnings Per Share (or Net Loss Per Share) that relates to the portion of such year occurring after the effective date of the Distribution.
SECTION 4.2. (a) Subject to the provisions of the Plan, amounts credited to a Participant's Performance Award Account in respect of Performance Units shall be paid to such Participant as soon as practicable on or after the Award Valuation Date with respect to such Performance Units.
(b) Payments pursuant to Section 4.2(a) shall be in cash.
(c) Notwithstanding any other provision of the Plan to the contrary, no Covered Officer shall be entitled to any payment with respect to any Performance Units unless the members of the Committee referred to in Section 3.4(c) hereof shall have certified the amount of the Annual Earnings Per Share (or Net Loss Per Share) for each year or portion thereof in the Performance Period applicable to such Performance Units.
SECTION 4.3. In addition to any amounts payable pursuant to
Section 4.2, the Committee may in its sole discretion determine that
there shall be payable to a former Participant, other than a Participant
who is at the time of any payment a Covered Officer, a supplemental
amount not exceeding the excess, if any, of (i) the amount determined in
accordance with Section 4.1 which would have been payable to such former
Participant if the Award Valuation Date with respect to any Performance
Units granted to such Participant had been December 31 of the first,
second or third calendar year next following the year in which such
Participant's Termination of Employment occurred (the selection of such
first, second or third calendar year to be in the sole discretion of the
Committee subject only to the last sentence of this Section 4.3) over
(ii) the amount determined in accordance with said Section 4.1 as of
December 31 of the calendar year in which such Termination of Employment
actually occurred. Any such supplemental amount so payable shall be paid
in a lump sum as promptly as practicable on or after December 31 of the
calendar year so selected by the Committee or in one or more installments
ending not later than five years after such December 31, as the Committee
may in its discretion direct. In no event shall any payment under this
Section 4.3 be made with respect to any calendar year after the year in
which such former Participant reaches his normal retirement date under
the Company's retirement plan.
SECTION 4.4. (a) Prior to January 1 of any calendar year in which it is anticipated that an Award Valuation Date with respect to any Performance Units may occur, a Participant may elect, in accordance with procedures established by the Committee, to defer, as and to the extent hereinafter provided, the payment of the amount, if any, which shall be paid pursuant to Section 4.2.
(b) All payments deferred pursuant to Section 4.4(a) shall be paid in one or more periodic installments, not in excess of ten, at such time or times after the applicable Award Valuation Date, but not later than ten years after such Award Valuation Date, as shall be specified in such Participant's election pursuant to Section 4.4(a).
(c) In the case of payments deferred as provided in Section 4.4(a), the unpaid amounts shall, commencing with the applicable Award Valuation Date, accrue interest at a rate equal to the prime commercial lending rate announced from time to time by The Chase Manhattan Bank, N.A. (compounded quarterly) or by another major national bank headquartered in New York, New York and designated by the Committee. If subsequent to such Participant's election pursuant to Section 4.4(a) such Participant's Termination of Employment occurs for any reason other than death, Disability, retirement under the Company's retirement plan, or retirement with the consent of the Company outside the Company's retirement plan, the Committee may, in its sole discretion, pay to such Participant in a lump sum the aggregate amount of any payments so deferred, notwithstanding such election.
SECTION 4.5. Anything contained in the Plan to the contrary notwithstanding:
(a) The Committee may, in its sole discretion, suspend, permanently or for a specified period of time or until further determination by the Committee, the making of any part or all of the credits which would otherwise have been made to the Performance Award Accounts of all the Participants or to such Accounts of one or more Participants as shall be designated by the Committee.
(b) Each Performance Unit and all other amounts credited to a Participant's Performance Award Account in respect of such Performance Unit shall be forfeited in the event of the Discharge for Cause of such Participant prior to the end of the Performance Period applicable to such Performance Unit.
(c) Each Performance Unit and all other amounts credited to a Participant's Performance Award Account in respect of such Performance Unit shall, unless and to the extent that the Committee shall in its absolute discretion otherwise determine by reason of special mitigating circumstances, be forfeited in the event that such Participant's Termination of Employment shall occur for any reason other than death, Disability, retirement under the Company's retirement plan, or retirement with the consent of the Company outside the Company's retirement plan, at any time (except within two years after the date on which a Change in Control shall have occurred) prior to the end of the Performance Period applicable to such Performance Unit.
(d) If any suspension is in effect pursuant to Section 4.5(a)
on a date when a credit would otherwise have been made pursuant to
Section 4.1, the amount which would have been credited but for such
suspension shall be forfeited and no credits shall thereafter be made in
lieu thereof. If the Committee shall so determine in its sole
discretion, the amounts theretofore credited to any Performance Award
Account or Accounts, other than any Performance Award Account of a
Covered Officer, shall accrue interest, during the suspension period, at
a rate equal to the prime commercial lending rate announced from time to
time by The Chase Manhattan Bank, N.A. (compounded quarterly) or at such
other rate and in such manner as shall be determined from time to time by
the Committee.
ARTICLE V
GENERAL INFORMATION
SECTION 5.1. If Net Income, Annual Earnings Per Share or Net Loss Per Share for any year shall have been affected by special factors (including material changes in accounting policies or practices, material acquisitions or dispositions of property, or other unusual items) which in the Committee's judgment should or should not be taken into account, in whole or in part, in the equitable administration of the Plan, the Committee may, for any purpose of the Plan, adjust Net Income, Annual Earnings Per Share or Net Loss Per Share, as the case may be, for such year (and subsequent years as appropriate), or any combination of them, and make credits, payments and reductions accordingly under the Plan; provided, however, the Committee shall not have the authority to make any such adjustments to payments with respect to the Performance Awards of, or credits to the Performance Award Accounts of, any Participant who is at such time a Covered Officer if the effect of any such action would be to increase the amount that would be credited to or paid from such Performance Award Accounts.
SECTION 5.2. In addition to the adjustment specified in
Section 3.4(d), the Committee shall for purposes of Articles III and IV
make appropriate adjustments in the number of Performance Units which
shall remain subject to Performance Awards and in the number of
Performance Units which shall have been credited to Participants'
accounts, in order to reflect any merger or consolidation to which the
Company is a party or any stock dividend, split-up, combination or
reclassification of the outstanding shares of Company Common Stock or any
other relevant change in the capitalization of the Company.
SECTION 5.3. A Participant may designate in writing a beneficiary (including the trustee or trustees of a trust) who shall upon the death of such Participant be entitled to receive all amounts which would have been payable hereunder to such Participant. A Participant may rescind or change any such designation at any time. Except as provided in this Section 5.3, none of the amounts which may be payable under the Plan may be assigned or transferred otherwise than by will or by the laws of descent and distribution.
SECTION 5.4. All payments made pursuant to the Plan shall be subject to withholding in respect of income and other taxes required by law to be withheld, in accordance with procedures to be established by the Committee.
SECTION 5.5. The selection of an individual for participation in the Plan shall not give such Participant any right to be retained in the employ of the Company or any Subsidiary, and the right of the Company or any such Subsidiary to dismiss or discharge any such Participant, or to terminate any arrangement pursuant to which any such Participant provides services to the Company, is specifically reserved. The benefits provided for Participants under the Plan shall be in addition to, and shall in no way preclude, other forms of compensation to or in respect of such Participants.
SECTION 5.6. The Board of Directors and the Committee shall be entitled to rely on the advice of counsel and other experts, including the independent public accountants for the Company. No member of the Board of Directors or of the Committee or any officers of the Company or any Subsidiary shall be liable for any act or failure to act under the Plan, except in circumstances involving bad faith on the part of such member or officer.
SECTION 5.7. Nothing contained in the Plan shall prevent the Company or any Subsidiary or affiliate of the Company from adopting or continuing in effect other compensation arrangements, which arrangements may be either generally applicable or applicable only in specific cases.
ARTICLE VI
AMENDMENT OR TERMINATION OF THE PLAN
SECTION 6.1. The Board of Directors may at any time terminate,
in whole or in part, or from time to time amend the Plan, provided that,
except as otherwise provided in the Plan, no such amendment or
termination shall adversely affect the amounts credited to the
Performance Award Account of a Participant with respect to Performance
Awards previously made to such Participant. In the event of such
termination, in whole or in part, of the Plan, the Committee may in its
sole discretion direct the payment to Participants of any amounts
specified in Article IV and not theretofore paid out, prior to the
respective dates upon which payments would otherwise be made hereunder to
such Participants, and in a lump sum or installments as the Committee
shall prescribe with respect to each such Participant. Notwithstanding
the foregoing, any such payment to a Covered Officer must be discounted
to reflect the present value of such payment using the rate specified in
Section 4.4(c). The Board may at any time and from time to time delegate
to the Committee any or all of its authority under this Article VI.
ARTICLE VII
DEFINITIONS
SECTION 7.1. For the purposes of the Plan, the following terms shall have the meanings indicated:
(a) Annual Earnings Per Share: With respect to any year, the result obtained by dividing (i) Net Income for such year by (ii) the average number of issued and outstanding shares (excluding treasury shares and shares held by any subsidiaries) of Class A Common Stock, par value $.10 per share, of the Company and Class B Common Stock, par value $.10 per share, of the Company during such year as reviewed by the Company's independent auditors.
(b) Award Valuation Date: (I) With respect to any Performance
Units constituting a Performance Award granted after December 31, 1995,
(i) December 31 of the year in which the third anniversary of the grant
of such Performance Award to a Participant shall occur or, (ii) if
earlier, December 31 of the year in which such Participant's Termination
of Employment shall occur, if such Termination of Employment occurs (x)
within two years after a Change in Control or (y) as a result of death,
Disability, retirement under the Company's retirement plan or retirement
with the consent of the Company outside the Company's retirement plan and
(II) with respect to any Performance Units comprising all or a portion of
any Transition Award, (i) December 31 of the applicable year
corresponding to such Performance Unit, as set forth in Schedule A hereto
in respect of any Covered Officer, and as determined by the Committee in
respect of any other Participant, provided that in the case of any
Participant such date shall not be later than December 31 of the year in
which the third anniversary of the grant of such Performance Unit to such
Participant shall occur or (ii) if earlier, December 31 of the year in
which such Participant's Termination of Employment shall occur, if such
Termination of Employment occurs (x) within two years after a Change in
Control or (y) as a result of death, Disability, retirement under the
Company's retirement plan or retirement with consent of the Company
outside the Company's retirement plan.
(c) Board of Directors: The Board of Directors of the Company.
(d) Change in Control: A Change in Control shall be deemed to have occurred if either (i) any person, or any two or more persons acting as a group, and all affiliates of such person or persons, shall, otherwise than as a result of the Distribution, beneficially own more than 20% of all classes and series of the Company's stock outstanding, taken as a whole, that has voting rights with respect to the election of directors of the Company (not including any series of preferred stock of the Company that has the right to elect directors only upon the failure of the Company to pay dividends) pursuant to a tender offer, exchange offer or series of purchases or other acquisitions, or any combination of those transactions, or (ii) there shall be a change in the composition of the Board of Directors of the Company at any time within two years after any tender offer, exchange offer, merger, consolidation, sale of assets or contested election, or any combination of those transactions (a "Transaction"), so that (A) the persons who were directors of the Company immediately before the first such Transaction cease to constitute a majority of the Board of Directors of the corporation which shall thereafter be in control of the companies that were parties to or otherwise involved in such first Transaction, or (B) the number of persons who shall thereafter be directors of such corporation shall be fewer than two-thirds of the number of directors of the Company immediately prior to such first Transaction. A Change in Control shall be deemed to take place upon the first to occur of the events specified in the foregoing clauses (i) and (ii).
(e) Committee: The Committee designated pursuant to Section
2.1. Until otherwise determined by the Board of Directors, the Corporate
Personnel Committee designated by such Board shall be the Committee under
the Plan.
(f) Company Common Stock: Class B Common Stock, par value $0.10 per share, of the Company and such other Company or subsidiary securities as may be designated from time to time by the Committee.
(g) Covered Officer: At any date, (i) any individual who, with respect to the previous taxable year of the Company, was a "covered employee" of the Company within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended, and the rules promulgated thereunder by the Internal Revenue Service of the Department of the Treasury, provided, however, the term "Covered Officer" shall not include any such individual who is designated by the Committee, in its discretion, at the time of any grant or at any subsequent time as reasonably expected not to be such a "covered employee" with respect to the current taxable year of the Company and (ii) any individual who is designated by the Committee, in its discretion, at the time of any grant or at any subsequent time as reasonably expected to be such a "covered employee" with respect to the current taxable year of the Company or with respect to the taxable year of the Company in which payment from any Performance Award Account of such individual will be made.
(h) Disability: In the case of any Participant, disability which after the expiration of more than 26 weeks after its commencement is determined to be total and permanent by a physician selected by the Company and acceptable to such Participant or his legal representatives.
(i) Discharge for Cause: Involuntary Termination of Employment as a result of dishonesty or similar serious misconduct directly related to the performance of duties for any and all of the Related Entities.
(j) Distribution: The distribution by FTX to its common stockholders of all of the Company Common Stock then owned by it.
(k) Eligible Individual: Any holder of a performance award under the 1992 Long-Term Performance Incentive Plan of FTX on the date of the Distribution.
(l) Net Income: With respect to any year, the sum of (i) the net income (or net loss) of the Company and its consolidated subsidiaries for such year as reviewed by the Company's independent auditors and released by the Company to the public; plus (or minus) (ii) the minority interests' share in the net income (or net loss) of the Company's consolidated subsidiaries for such year as reviewed by the Company's independent auditors and released by the Company to the public; plus (or minus) (iii) the effect of changes in accounting principles of the Company and its consolidated subsidiaries for such year plus (or minus) the minority interests' share in such changes in accounting principles as reviewed by the Company's independent auditors and released by the Company to the public.
(m) Net Loss Carryforward: With respect to any Performance Units, (i) an amount equal to the Net Loss Per Share for any year in the applicable Performance Period times the number of such Performance Units then outstanding, reduced by (ii) any portion thereof which has been applied in any prior year as provided in Section 4.1.
(n) Net Loss Per Share: The amount obtained when the calculation of Annual Earnings Per Share results in a number that is less than zero.
(o) Participant: An individual who has been selected by the Committee to receive a Performance Award and in respect of whose Performance Award Account any amounts remain payable.
(p) Performance Award: The grant of Performance Units by the Committee to a Participant pursuant to Section 3.1 or 3.4.
(q) Performance Award Account: An account established for a Participant pursuant to Section 3.2.
(r) Performance Period: With respect to any Performance Unit, the period beginning on January 1 of the year in which such Performance Unit was granted and ending on the Award Valuation Date for such Performance Unit provided that, with respect to Performance Units constituting Transition Awards, the Performance Period shall begin on the effective date of the Distribution.
(s) Performance Unit: A unit covered by Performance Awards granted or subject to grant pursuant to Article III.
(t) Related Entities: The Company, any subsidiary of the Company, Freeport-McMoRan Inc., any subsidiary of Freeport-McMoRan Inc., McMoRan Oil & Gas Co., any subsidiary of McMoRan Oil and Gas Co., and any law firm rendering services to any of the foregoing entities provided such law firm consists of at least two or more members or associates who are or were officers of the Company or any subsidiary of the Company.
(u) Subsidiary: (i) Any corporation or other entity in which the Company possesses directly or indirectly equity interests representing at least 50% of the total ordinary voting power or at least 50% of the total value of all classes of equity interests of such corporation or other entity and (ii) any other entity in which the Company has a direct or indirect economic interest that is designated as a Subsidiary by the Committee.
(v) Termination of Employment: The cessation of the rendering of services, whether or not as an employee, to any and all of the Related Entities.
(w) Transition Award: A Performance Award granted to an Eligible Individual during 1995 by way of adjustment to such individual's FTX 1992 Long-Term Performance Incentive Plan performance award in connection with the Distribution.
SCHEDULE A
Transition Awards
Schedule of Award Valuation Dates
for Transition Award Performance Units Granted to Covered Officers During Calendar Year 1995
Number of Award Valuation
Covered Officer Performance Units* Date
------------------------ --------------------- ----------------
Chief Executive Officer 100,000 (1998 series) December 31,1998
100,000 (1997 series) December 31,1997
100,000 (1996 series) December 31,1996
100,000 (1995 series) December 31,1995
Chief Operating Officer 40,000 (1998 series) December 31,1998
40,000 (1997 series) December 31,1997
40,000 (1996 series) December 31,1996
40,000 (1995 series) December 31,1995
Vice Chairman of the Board 75,000 (1998 series) December 31,1998
75,000 (1997 series) December 31,1997
40,000 (1996 series) December 31,1996
40,000 (1995 series) December 31,1995
Each Additional Covered Officer 40,000 (1998 series) December 31,1998
40,000 (1997 series) December 31,1997
20,000 (1996 series) December 31,1996
20,000 (1995 series) December 31,1995
____________________
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* To be adjusted in accordance with Section 3.4(d).
EXHIBIT 10.8
Freeport-McMoRan Copper & Gold Inc.
President's Award Program
Purpose
The purpose of the President's Award Program (the "Program") of Freeport-McMoRan Copper & Gold Inc. (the "Company") is to provide an opportunity for discretionary cash rewards for those situations where an outstanding individual contribution cannot properly be or should not be rewarded with merit salary increases, annual incentives, or promotion.
Administration
The Program shall be administered by the President and Chief Operating Officer of the Company. The President shall have full authority to interpret the provisions of the Program and to make Awards thereunder.
Eligibility for and Payment of Awards
The following persons are eligible to receive Awards under the Program: (i) any person providing services as an officer of the Company or a Subsidiary (as hereinafter defined), whether or not employed by such entity, but excluding any such person who is also a director of the Company, (ii) any employee of the Company or a Subsidiary, including bargaining-unit employees but excluding any director who is also an employee of the Company or a Subsidiary, (iii) any officer, employee, member, or associate of an entity with which the Company has contracted to receive executive, management, or professional services who provides services to the Company or a Subsidiary through such arrangement, and (iv) any member or associate of, or counsel to, a law firm rendering services to the Company or a Subsidiary. For purposes of the Program, "Subsidiary" shall mean (i) any corporation or other entity in which the Company possesses directly or indirectly equity interests representing at least 50% of the total ordinary voting power or at least 50% of the total value of all classes of equity interests of such corporation or other entity and (ii) any other entity in which the Company has a direct or indirect economic interest that is designated as a Subsidiary by the President. Recommendations for a President's Award must be made to, and in a manner prescribed by, the President by senior executives of the Company. The aggregate amount of all Awards granted with respect to any calendar year may not exceed $350,000. The Awards can be granted and paid at any time during the calendar year deemed appropriate by the President.
General Provisions
The Program shall be funded from operating earnings of the Company and shall not be deducted from any funds established for the purpose of salary or incentive payments. The Program will become effective upon approval by the Board of Directors of the Company and shall continue as provided herein except as amended or terminated by the Board of Directors.
FREEPORT-McMoRan COPPER & GOLD INC.
1995 STOCK OPTION PLAN
(As amended effective December 10, 1996)
SECTION 1
Purpose. The purpose of the Freeport-McMoRan Copper & Gold Inc. 1995 Stock Option Plan (the "Plan") is to motivate and reward key personnel by giving them a proprietary interest in the Company's continued success.
SECTION 2
Definitions. As used in the Plan, the following terms shall have the meanings set forth below:
"Award" shall mean any Option, Stock Appreciation Right, Limited Right or Other Stock-Based Award.
"Award Agreement" shall mean any written agreement, contract or other instrument or document evidencing any Award, which may, but need not, be executed or acknowledged by a Participant.
"Board" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time to time.
"Committee" shall mean a committee of the Board designated by the Board to administer the Plan and composed of not fewer than two directors, each of whom, to the extent necessary to comply with Rule 16b-3 only, is a "non-employer director" within the meaning of Rule 16b-3 and, to the extent necessary to comply with Section 162(m) only, is an "outside director" under Section 162(m). Until otherwise determined by the Board, the Committee shall be the Corporate Personnel Committee of the Board.
"Company" shall mean Freeport-McMoRan Copper & Gold Inc.
"Designated Beneficiary" shall mean the beneficiary designated by the Participant, in a manner determined by the Committee, to receive the benefits due the Participant under the Plan in the event of the Participant's death. In the absence of an effective designation by the Participant, Designated Beneficiary shall mean the Participant's estate.
"Employee" shall mean (i) any person providing services as an
officer of the Company or a Subsidiary, whether or not employed by such
entity, including any such person who is also a director of the Company,
(ii) any employee of the Company or a Subsidiary, including any director
who is also an employee of the Company or a Subsidiary, (iii) any officer
or employee of an entity with which the Company has contracted to receive
executive or management services who provides services to the Company or
a Subsidiary through such arrangement and (iv) any person who has agreed
in writing to become a person described in clauses (i), (ii) or (iii)
within not more than 30 days following the date of grant of such person's
first Award under the Plan.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time.
"Incentive Stock Option" shall mean an option granted under
Section 6 of the Plan that is intended to meet the requirements of
Section 422 of the Code or any successor provision thereto.
"Limited Right" shall mean any right granted under Section 8 of the Plan.
"Nonqualified Stock Option" shall mean an option granted under
Section 6 of the Plan that is not intended to be an Incentive Stock
Option.
"Offer" shall mean any tender offer, exchange offer or series of purchases or other acquisitions, or any combination of those transactions, as a result of which any person, or any two or more persons acting as a group, and all affiliates of such person or persons, shall beneficially own more than 40% of all classes and series of the Company's stock outstanding, taken as a whole, that has voting rights with respect to the election of directors of the Company (not including any series of preferred stock of the Company that has the right to elect directors only upon the failure of the Company to pay dividends).
"Offer Price" shall mean the highest price per Share paid in
any Offer that is in effect at any time during the period beginning on
the ninetieth day prior to the date on which a Limited Right is exercised
and ending on and including the date of exercise of such Limited Right.
Any securities or property that comprise all or a portion of the
consideration paid for Shares in the Offer shall be valued in determining
the Offer Price at the higher of (i) the valuation placed on such
securities or property by the person or persons making such Offer, or
(ii) the valuation, if any, placed on such securities or property by the
Committee or the Board.
"Option" shall mean an Incentive Stock Option or a Nonqualified Stock Option.
"Other Stock-Based Award" shall mean any right or award granted under Section 9 of the Plan.
"Participant" shall mean any Employee granted an Award under the Plan.
"Person" shall mean any individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization, government or political subdivision thereof or other entity.
"Rule 16b-3" shall mean Rule 16b-3 promulgated by the SEC under the Exchange Act, or any successor rule or regulation thereto as in effect from time to time.
"SAR" shall mean any Stock Appreciation Right.
"SEC" shall mean the Securities and Exchange Commission, including the staff thereof, or any successor thereto.
"Section 162(m)" shall mean Section 162(m) of the Code and all regulations promulgated thereunder as in effect from time to time.
"Shares" shall mean the shares of Class B Common Stock, par value $0.10 per share, of the Company and such other securities of the Company or a Subsidiary as the Committee may from time to time designate.
"Stock Appreciation Right" shall mean any right granted under
Section 7 of the Plan.
"Subsidiary" shall mean (i) any corporation or other entity in which the Company possesses directly or indirectly equity interests representing at least 50% of the total ordinary voting power or at least 50% of the total value of all classes of equity interests of such corporation or other entity and (ii) any other entity in which the Company has a direct or indirect economic interest that is designated as a Subsidiary by the Committee.
SECTION 3
Administration. The Plan shall be administered by the Committee. Subject to the terms of the Plan and applicable law, and in addition to other express powers and authorizations conferred on the Committee by the Plan, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to an eligible Employee; (iii) determine the number of Shares to be covered by, or with respect to which payments, rights or other matters are to be calculated in connection with, Awards; (iv) determine the terms and conditions of any Award; (v) determine whether, to what extent, and under what circumstances Awards may be settled or exercised in cash, whole Shares, other whole securities, other Awards, other property or other cash amounts payable by the Company upon the exercise of that or other Awards, or canceled, forfeited or suspended and the method or methods by which Awards may be settled, exercised, canceled, forfeited or suspended; (vi) determine whether, to what extent, and under what circumstances cash, Shares, other securities, other Awards, other property, and other amounts payable by the Company with respect to an Award shall be deferred either automatically or at the election of the holder thereof or of the Committee; (vii) interpret and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan; (viii) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (ix) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon all Persons, including the Company, any Subsidiary, any Participant, any holder or beneficiary of any Award, any stockholder of the Company and any Employee.
SECTION 4
Eligibility. Any Employee who is not a member of the Committee shall be eligible to be granted an Award.
SECTION 5
(a) Shares Available for Awards. Subject to adjustment as provided in Section 5(b):
(i) Calculation of Number of Shares Available. The number of Shares with respect to which Awards may be granted under the Plan shall be 10,000,000. If, after the effective date of the Plan, an Award granted under the Plan expires or is exercised, forfeited, canceled or terminated without the delivery of Shares, then the Shares covered by such Award or to which such Award relates, or the number of Shares otherwise counted against the aggregate number of Shares with respect to which Awards may be granted, to the extent of any such expiration, exercise, forfeiture, cancellation or termination without the delivery of Shares, shall again be, or shall become, Shares with respect to which Awards may be granted.
(ii) Substitute Awards. Any Shares delivered by the Company, any Shares with respect to which Awards are made by the Company, or any Shares with respect to which the Company becomes obligated to make Awards, through the assumption of, or in substitution for, outstanding awards previously granted by an acquired company or a company with which the Company combines, shall not be counted against the Shares available for Awards under the Plan.
(iii) Sources of Shares Deliverable Under Awards. Any Shares delivered pursuant to an Award may consist of authorized and unissued Shares or of treasury Shares, including Shares held by the Company or a Subsidiary and Shares acquired in the open market or otherwise obtained by the Company or a Subsidiary.
(iv) Individual Limit. Any provision of the Plan to the contrary notwithstanding, no individual may receive in any year Awards under the Plan that relate to more than 1,750,000 Shares.
(b) Adjustments. In the event that the Committee determines that any dividend or other distribution (whether in the form of cash, Shares, Subsidiary securities, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Committee to be appropriate to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee may, in its sole discretion and in such manner as it may deem equitable, adjust any or all of (i) the number and type of Shares (or other securities or property) with respect to which Awards may be granted, (ii) the number and type of Shares (or other securities or property) subject to outstanding Awards, and (iii) the grant or exercise price with respect to any Award and, if deemed appropriate, make provision for a cash payment to the holder of an outstanding Award and, if deemed appropriate, adjust outstanding Awards to provide the rights contemplated by Section 9(b) hereof; provided, in each case, that with respect to Awards of Incentive Stock Options no such adjustment shall be authorized to the extent that such authority would cause the Plan to violate Section 422(b)(1) of the Code or any successor provision thereto and, with respect to all Awards under the Plan, no such adjustment shall be authorized to the extent that such authority would be inconsistent with the requirements for full deductibility under Section 162(m) of the Code and the regulations thereunder; and provided further, that the number of Shares subject to any Award denominated in Shares shall always be a whole number.
SECTION 6
(a) Stock Options. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Employees to whom Options shall be granted, the number of Shares to be covered by each Option, the option price therefor and the conditions and limitations applicable to the exercise of the Option. The Committee shall have the authority to grant Incentive Stock Options, Nonqualified Stock Options or both. In the case of Incentive Stock Options, the terms and conditions of such grants shall be subject to and comply with such rules as may be required by Section 422 of the Code, as from time to time amended, and any implementing regulations. Except in the case of an Option granted in assumption of or substitution for an outstanding award of a company acquired by the Company or with which the Company combines, the exercise price of any Option granted under this Plan shall not be less than 100% of the fair market value of the underlying Shares on the date of grant.
(b) Exercise. Each Option shall be exercisable at such times
and subject to such terms and conditions as the Committee may, in its
sole discretion, specify in the applicable Award Agreement or thereafter,
provided, however, that in no event may any Option granted hereunder be
exercisable after the expiration of 10 years after the date of such
grant. The Committee may impose such conditions with respect to the
exercise of Options, including without limitation, any condition relating
to the application of Federal or state securities laws, as it may deem
necessary or advisable.
(c) Payment. No Shares shall be delivered pursuant to any
exercise of an Option until payment in full of the option price therefor
is received by the Company. Such payment may be made in cash, or its
equivalent, or, if and to the extent permitted by the Committee, by
applying cash amounts payable by the Company upon the exercise of such
Option or other Awards by the holder thereof or by exchanging whole
Shares owned by such holder (which are not the subject of any pledge or
other security interest), or by a combination of the foregoing, provided
that the combined value of all cash, cash equivalents, cash amounts so
payable by the Company upon exercises of Awards and the fair market value
of any such whole Shares so tendered to the Company, valued (in
accordance with procedures established by the Committee) as of the
effective date of such exercise, is at least equal to such option price.
SECTION 7
(a) Stock Appreciation Rights. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Employees to whom Stock Appreciation Rights shall be granted, the number of Shares to be covered by each Award of Stock Appreciation Rights, the grant price thereof and the conditions and limitations applicable to the exercise thereof. Stock Appreciation Rights may be granted in tandem with another Award, in addition to another Award, or freestanding and unrelated to any other Award. Stock Appreciation Rights granted in tandem with or in addition to an Option or other Award may be granted either at the same time as the Option or other Award or at a later time. Stock Appreciation Rights shall not be exercisable after the expiration of 10 years after the date of grant. Except in the case of a Stock Appreciation Right granted in assumption of or substitution for an outstanding award of a company acquired by the Company or with which the Company combines, the grant price of any Stock Appreciation Right granted under this Plan shall not be less than 100% of the fair market value of the Shares covered by such Stock Appreciation Right on the date of grant or, in the case of a Stock Appreciation Right granted in tandem with a then outstanding Option or other Award, on the date of grant of such related Option or Award.
(b) A Stock Appreciation Right shall entitle the holder thereof to receive upon exercise, for each Share to which the SAR relates, an amount equal to the excess, if any, of the fair market value of a Share on the date of exercise of the Stock Appreciation Right over the grant price. Any Stock Appreciation Right shall be settled in cash, unless the Committee shall determine at the time of grant of a Stock Appreciation Right that it shall or may be settled in cash, Shares or a combination of cash and Shares.
SECTION 8
(a) Limited Rights. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Employees to whom Limited Rights shall be granted, the number of Shares to be covered by each Award of Limited Rights, the grant price thereof and the conditions and limitations applicable to the exercise thereof. Limited Rights may be granted in tandem with another Award, in addition to another Award, or freestanding and unrelated to any Award. Limited Rights granted in tandem with or in addition to an Award may be granted either at the same time as the Award or at a later time. Limited Rights shall not be exercisable after the expiration of 10 years after the date of grant and shall only be exercisable during a period determined at the time of grant by the Committee beginning not earlier than one day and ending not more than ninety days after the expiration date of an Offer. Except in the case of a Limited Right granted in assumption of or substitution for an outstanding award of a company acquired by the Company or with which the Company combines, the grant price of any Limited Right granted under this Plan shall not be less than 100% of the fair market value of the Shares covered by such Limited Right on the date of grant or, in the case of a Limited Right granted in tandem with a then outstanding Option or other Award, on the date of grant of such related Option or Award.
(b) A Limited Right shall entitle the holder thereof to receive upon exercise, for each Share to which the Limited Right relates, an amount equal to the excess, if any, of the Offer Price on the date of exercise of the Limited Right over the grant price. Any Limited Right shall be settled in cash, unless the Committee shall determine at the time of grant of a Limited Right that it shall or may be settled in cash, Shares or a combination of cash and Shares.
SECTION 9
(a) Other Stock-Based Awards. The Committee is hereby authorized to grant to eligible Employees an "Other Stock-Based Award", which shall consist of an Award, the value of which is based in whole or in part on the value of Shares, that is not an instrument or Award specified in Sections 6 through 8 of this Plan. Other Stock-Based Awards may be awards of Shares or may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible or exchangeable into or exercisable for Shares), as deemed by the Committee consistent with the purposes of the Plan. The Committee shall determine the terms and conditions of any such Other Stock-Based Award. Except in the case of an Other Stock-Based Award granted in assumption of or in substitution for an outstanding award of a company acquired by the Company or with which the Company combines, the price at which securities may be purchased pursuant to any Other Stock-Based Award granted under this Plan, or the provision, if any, of any such Award that is analogous to the purchase or exercise price, shall not be less than 100% of the fair market value of the securities to which such Award relates on the date of grant.
(b) Dividend Equivalents. In the sole and complete discretion of the Committee, an Award, whether made as an Other Stock-Based Award under this Section 9 or as an Award granted pursuant to Sections 6 through 8 hereof, may provide the holder thereof with dividends or dividend equivalents, payable in cash, Shares, Subsidiary securities, other securities or other property on a current or deferred basis.
SECTION 10
(a) Amendments to the Plan. The Board may amend, suspend or terminate the Plan or any portion thereof at any time, provided that no amendment shall be made without stockholder approval if such approval is necessary to comply with any tax or regulatory requirement. Notwithstanding anything to the contrary contained herein, the Committee may amend the Plan in such manner as may be necessary for the Plan to conform with local rules and regulations in any jurisdiction outside the United States.
(b) Amendments to Awards. The Committee may amend, modify or terminate any outstanding Award with the holder's consent at any time prior to payment or exercise in any manner not inconsistent with the terms of the Plan, including without limitation, (i) to change the date or dates as of which an Award becomes exercisable, or (ii) to cancel an Award and grant a new Award in substitution therefor under such different terms and conditions as it determines in its sole and complete discretion to be appropriate.
(c) Adjustment of Awards Upon the Occurrence of Certain
Unusual or Nonrecurring Events. The Committee is hereby authorized to
make adjustments in the terms and conditions of, and the criteria
included in, Awards in recognition of unusual or nonrecurring events
(including, without limitation, the events described in Section 5(b)
hereof) affecting the Company, or the financial statements of the Company
or any Subsidiary, or of changes in applicable laws, regulations, or
accounting principles, whenever the Committee determines that such
adjustments are appropriate to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the
Plan.
(d) Cancellation. Any provision of this Plan or any Award Agreement to the contrary notwithstanding, the Committee may cause any Award granted hereunder to be canceled in consideration of a cash payment or alternative Award made to the holder of such canceled Award equal in value to such canceled Award. The determinations of value under this subparagraph shall be made by the Committee in its sole discretion.
SECTION 11
(a) Delegation. Subject to the terms of the Plan and applicable law, the Committee may delegate to one or more officers of the Company the authority, subject to such terms and limitations as the Committee shall determine, to grant Awards to, or to cancel, modify or waive rights with respect to, or to alter, discontinue, suspend, or terminate Awards held by, Employees who are not officers or directors of the Company for purposes of Section 16 of the Exchange Act, or any successor section thereto, or who are otherwise not subject to such Section.
(b) Award Agreements. Each Award hereunder shall be evidenced by a writing delivered to the Participant that shall specify the terms and conditions thereof and any rules applicable thereto, including but not limited to the effect on such Award of the death, retirement or other termination of employment of the Participant and the effect thereon, if any, of a change in control of the Company.
(c) Withholding. A Participant may be required to pay to the Company, and the Company shall have the right to deduct from all amounts paid to a Participant (whether under the Plan or otherwise), any taxes required by law to be paid or withheld in respect of Awards hereunder to such Participant. The Committee may provide for additional cash payments to holders of Awards to defray or offset any tax arising from the grant, vesting, exercise or payment of any Award.
(d) Transferability. No Awards granted hereunder may be
transferred, pledged, assigned or otherwise encumbered by a Participant
except: (i) by will; (ii) by the laws of descent and distribution; (iii)
pursuant to a domestic relations order, as defined in the Code, if
permitted by the Committee and so provided in the Award Agreement or an
amendment thereto; or (iv) as to Options only, if permitted by the
Committee and so provided in the Award Agreement or an amendment thereto,
(a) to Immediate Family Members, (b) to a partnership in which Immediate
Family Members, or entities in which Immediate Family Members are the
sole owners, members or beneficiaries, as appropriate, are the only
partners, (c) to a limited liability company in which Immediate Family
Members, or entities in which Immediate Family Members are the sole
owners, members or beneficiaries, as appropriate, are the only members,
or (d) to a trust for the sole benefit of Immediate Family Members.
"Immediate Family Members" shall be defined as the spouse and natural or
adopted children or grandchildren of the Participant and their spouses.
To the extent that an Incentive Stock Option is permitted to be
transferred during the lifetime of the Participant, it shall be treated
thereafter as a Nonqualified Stock Option. Any attempted assignment,
transfer, pledge, hypothecation or other disposition of Awards, or levy
of attachment or similar process upon Awards not specifically permitted
herein, shall be null and void and without effect. The designation of a
Designated Beneficiary shall not be a violation of this Section 11(d).
(e) Share Certificates. All certificates for Shares or other securities delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the SEC, any stock exchange upon which such Shares or other securities are then listed, and any applicable federal or state laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
(f) No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company from adopting or continuing in effect other compensation arrangements, which may, but need not, provide for the grant of options, stock appreciation rights and other types of Awards provided for hereunder (subject to stockholder approval of any such arrangement if approval is required), and such arrangements may be either generally applicable or applicable only in specific cases.
(g) No Right to Employment. The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ of the Company or any Subsidiary or in the employ of any other entity providing services to the Company. The Company or any Subsidiary or any such entity may at any time dismiss a Participant from employment, or terminate any arrangement pursuant to which the Participant provides services to the Company, free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement. No Employee, Participant or other person shall have any claim to be granted any Award, and there is no obligation for uniformity of treatment of Employees, Participants or holders or beneficiaries of Awards.
(h) Governing Law. The validity, construction, and effect of the Plan, any rules and regulations relating to the Plan and any Award Agreement shall be determined in accordance with the laws of the State of Delaware.
(i) Severability. If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person or Award and the remainder of the Plan and any such Award shall remain in full force and effect.
(j) No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company.
(k) No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash, other securities or other property shall be paid or transferred in lieu of any fractional Shares or whether such fractional Shares or any rights thereto shall be canceled, terminated, or otherwise eliminated.
(l) Headings. Headings are given to the subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.
SECTION 12
Effective Date of the Plan. The Plan shall be effective as of the date of its approval by the holders of the common stock of the Company.
SECTION 13
Term of the Plan. No Award shall be granted under the Plan after the fifth anniversary of the effective date of the Plan; however, unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award theretofore granted may, and the authority of the Committee to amend, alter, adjust, suspend, discontinue, or terminate any such Award or to waive any conditions or rights under any such Award shall, extend beyond such date.
EXHIBIT 12.1
FREEPORT-McMoRan COPPER & GOLD INC.
Computation of Ratio of Earnings to Fixed Charges:
Years Ended December 31,
------------------------------------------------
1996 1997 1998 1999 2000
-------- -------- -------- -------- --------
(In Thousands)
Income from continuing
operations $226,249 $245,108 $153,848 $136,467 $ 76,987
Add:
Provision for income taxes 247,168 231,315 170,566 195,653 159,573
Minority interests' share
of net income 48,529 40,343 37,012 48,714 36,680
Interest expense, net 117,291 151,720 205,588 194,069 205,346
Rental expense factor 457 240 323 188 -
-------- -------- -------- -------- --------
Earnings available for
fixed charges $639,694 $668,726 $567,337 $575,091 $478,586
======== ======== ======== ======== ========
Interest expense, net $117,291 $151,720 $205,588 $194,069 $205,346
Capitalized interest 22,979 23,021 19,612 3,768 7,216
Rental expense factor 457 240 323 188 -
-------- -------- -------- -------- --------
Fixed charges $140,727 $174,981 $225,523 $198,025 $212,562
======== ======== ======== ======== ========
Ratio of earnings to
fixed charges 4.5x 3.8x 2.5x 2.9x 2.3x
==== ==== ==== ==== ====
|
Nine Months
Ended September 30,
------------------
2000 2001
-------- --------
(In Thousands)
Income from continuing
operations $ 9,709 $106,230
Add:
Provision for income taxes 93,477 173,308
Minority interests' share
of net income 21,832 35,855
Interest expense, net 153,287 129,945
Rental expense factor 141 -
-------- --------
Earnings available for
fixed charges $278,446 $445,338
======== ========
Interest expense, net $153,287 $129,945
Capitalized interest 4,841 6,563
Rental expense factor 141 -
-------- --------
Fixed charges $158,269 $136,508
======== ========
Ratio of earnings to
fixed charges 1.8x 3.3x
==== ====
|
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by reference in this registration statement of our reports dated January 18, 2001, included or incorporated by reference in the Freeport-McMoRan Copper & Gold Inc. Annual Report on Form 10-K for the year ended December 31, 2000, and to all references to our Firm included in this registration statement.
/s/ Arthur Andersen LLP New Orleans, Louisiana November 2, 2001 |
Exhibit 23.3
INDEPENDENT 2700 E. Executive Drive, Suite 140 MINING CONSULTANTS, INC. Tucson, Arizona 85706 USA Tel: (520) 294-9861 Fax: (520) 294-9865
November 2, 2001
Pat Prejean
Manager of Financial Reporting
Freeport-McMoRan Copper & Gold, Inc.
1615 Poydras Street
New Orleans, LA 70112
Dear Mr. Prejean,
We consent to the use in this registration Statement on Form S-3 of Freeport-McMoRan Copper & Gold, Inc.of our reports incorporated by reference therein and to all references to our firm in the Registration Statement, including the reference to us under the heading "Experts" in the Prospectus comprising a part of the Registration Statement as being experts in mining, geology and reserve determination.
INDEPENDENT MINING CONSULTANTS, INC.
Date: November 2, 2001 By: /s/ John M. Marek
---------------------------
Name: John M. Marek
Title: President
|
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Richard C. Adkerson his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the Registration Statement of Freeport-McMoRan Copper & Gold Inc. and FCX Investment Ltd. with respect to $603,750,000 of 8 1/4% Convertible Senior Notes due 2006 and Class A and Class B Common Stock into which such notes may be converted, and any and all amendments (including post-effective amendments) to the Registration Statement, including any related registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of October 4, 2001.
/s/ James R. Moffett James R. Moffett |
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Richard C. Adkerson and James R. Moffett, or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the Registration Statement of Freeport-McMoRan Copper & Gold Inc. and FCX Investment Ltd. with respect to $603,750,000 of 8 1/4% Convertible Senior Notes due 2006 and Class A and Class B Common Stock into which such notes may be converted, and any and all amendments (including post-effective amendments) to the Registration Statement, including any related registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of October 8, 2001.
/s/ Robert J. Allison, Jr. Robert J. Allison, Jr. |
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Richard C. Adkerson and James R. Moffett, or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the Registration Statement of Freeport-McMoRan Copper & Gold Inc. and FCX Investment Ltd. with respect to $603,750,000 of 8 1/4% Convertible Senior Notes due 2006 and Class A and Class B Common Stock into which such notes may be converted, and any and all amendments (including post-effective amendments) to the Registration Statement, including any related registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of October 4, 2001.
/s/ Robert W. Bruce III Robert W. Bruce III |
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Richard C. Adkerson and James R. Moffett, or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the Registration Statement of Freeport-McMoRan Copper & Gold Inc. and FCX Investment Ltd. with respect to $603,750,000 of 8 1/4% Convertible Senior Notes due 2006 and Class A and Class B Common Stock into which such notes may be converted, and any and all amendments (including post-effective amendments) to the Registration Statement, including any related registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of October 4, 2001.
/s/ R. Leigh Clifford R. Leigh Clifford |
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Richard C. Adkerson and James R. Moffett, or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the Registration Statement of Freeport-McMoRan Copper & Gold Inc. and FCX Investment Ltd. with respect to $603,750,000 of 8 1/4% Convertible Senior Notes due 2006 and Class A and Class B Common Stock into which such notes may be converted, and any and all amendments (including post-effective amendments) to the Registration Statement, including any related registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of October 4, 2001.
/s/ Robert A. Day Robert A. Day |
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Richard C. Adkerson and James R. Moffett, or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the Registration Statement of Freeport-McMoRan Copper & Gold Inc. and FCX Investment Ltd. with respect to $603,750,000 of 8 1/4% Convertible Senior Notes due 2006 and Class A and Class B Common Stock into which such notes may be converted, and any and all amendments (including post-effective amendments) to the Registration Statement, including any related registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of October 4, 2001.
/s/ Gerald J. Ford Gerald J. Ford |
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Richard C. Adkerson and James R. Moffett, or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the Registration Statement of Freeport-McMoRan Copper & Gold Inc. and FCX Investment Ltd. with respect to $603,750,000 of 8 1/4% Convertible Senior Notes due 2006 and Class A and Class B Common Stock into which such notes may be converted, and any and all amendments (including post-effective amendments) to the Registration Statement, including any related registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of October 4, 2001.
/s/ H. Devon Graham, Jr. H. Devon Graham, Jr. |
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Richard C. Adkerson and James R. Moffett, or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the Registration Statement of Freeport-McMoRan Copper & Gold Inc. and FCX Investment Ltd. with respect to $603,750,000 of 8 1/4% Convertible Senior Notes due 2006 and Class A and Class B Common Stock into which such notes may be converted, and any and all amendments (including post-effective amendments) to the Registration Statement, including any related registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of October 4, 2001.
/s/ Steven J. Green Steven J. Green |
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Richard C. Adkerson and James R. Moffett, or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the Registration Statement of Freeport-McMoRan Copper & Gold Inc. and FCX Investment Ltd. with respect to $603,750,000 of 8 1/4% Convertible Senior Notes due 2006 and Class A and Class B Common Stock into which such notes may be converted, and any and all amendments (including post-effective amendments) to the Registration Statement, including any related registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of October 5, 2001.
/s/ Oscar Y. L. Groeneveld Oscar Y. L. Groeneveld |
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Richard C. Adkerson and James R. Moffett, or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the Registration Statement of Freeport-McMoRan Copper & Gold Inc. and FCX Investment Ltd. with respect to $603,750,000 of 8 1/4% Convertible Senior Notes due 2006 and Class A and Class B Common Stock into which such notes may be converted, and any and all amendments (including post-effective amendments) to the Registration Statement, including any related registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of October 4, 2001.
/s/ J. Bennett Johnston J. Bennett Johnston |
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Richard C. Adkerson and James R. Moffett, or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the Registration Statement of Freeport-McMoRan Copper & Gold Inc. and FCX Investment Ltd. with respect to $603,750,000 of 8 1/4% Convertible Senior Notes due 2006 and Class A and Class B Common Stock into which such notes may be converted, and any and all amendments (including post-effective amendments) to the Registration Statement, including any related registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of October 4, 2001.
/s/ Bobby Lee Lackey Bobby Lee Lackey |
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Richard C. Adkerson and James R. Moffett, or either of them, her true and lawful attorney-in-fact and agent, with full power of substitution, for her and in her name, place and stead, in any and all capacities, to sign the Registration Statement of Freeport-McMoRan Copper & Gold Inc. and FCX Investment Ltd. with respect to $603,750,000 of 8 1/4% Convertible Senior Notes due 2006 and Class A and Class B Common Stock into which such notes may be converted, and any and all amendments (including post-effective amendments) to the Registration Statement, including any related registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and ratifying and confirming all that said attorney-in-fact and agent or her substitute or substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of October 5, 2001.
/s/ Gabrielle K. McDonald Gabrielle K. McDonald |
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Richard C. Adkerson and James R. Moffett, or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the Registration Statement of Freeport-McMoRan Copper & Gold Inc. and FCX Investment Ltd. with respect to $603,750,000 of 8 1/4% Convertible Senior Notes due 2006 and Class A and Class B Common Stock into which such notes may be converted, and any and all amendments (including post-effective amendments) to the Registration Statement, including any related registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of October 4, 2001.
/s/ B. M. Rankin, Jr. B. M. Rankin, Jr. |
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Richard C. Adkerson and James R. Moffett, or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the Registration Statement of Freeport-McMoRan Copper & Gold Inc. and FCX Investment Ltd. with respect to $603,750,000 of 8 1/4% Convertible Senior Notes due 2006 and Class A and Class B Common Stock into which such notes may be converted, and any and all amendments (including post-effective amendments) to the Registration Statement, including any related registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of October 4, 2001.
/s/ J. Stapleton Roy J. Stapleton Roy |
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Richard C. Adkerson and James R. Moffett, or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the Registration Statement of Freeport-McMoRan Copper & Gold Inc. and FCX Investment Ltd. with respect to $603,750,000 of 8 1/4% Convertible Senior Notes due 2006 and Class A and Class B Common Stock into which such notes may be converted, and any and all amendments (including post-effective amendments) to the Registration Statement, including any related registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of October 4, 2001.
/s/ J. Taylor Wharton J. Taylor Wharton |
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Richard C. Adkerson and James R. Moffett, or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the Registration Statement of Freeport-McMoRan Copper & Gold Inc. and FCX Investment Ltd. with respect to $603,750,000 of 8 1/4% Convertible Senior Notes due 2006 and Class A and Class B Common Stock into which such notes may be converted, and any and all amendments (including post-effective amendments) to the Registration Statement, including any related registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of October 4, 2001.
/s/ C. Donald Whitmire, Jr. C. Donald Whitmire, Jr. |
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints James R. Moffett his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the Registration Statement of Freeport-McMoRan Copper & Gold Inc. and FCX Investment Ltd. with respect to $603,750,000 of 8 1/4% Convertible Senior Notes due 2006 and Class A and Class B Common Stock into which such notes may be converted, and any and all amendments (including post-effective amendments) to the Registration Statement, including any related registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as of October 29, 2001.
/s/ Richard C. Adkerson Richard C. Adkerson |
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification
no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive (Zip code)
offices)
|
FREEPORT-McMoRAN COPPER & GOLD INC.
FCX INVESTMENT LTD.
(Exact name of obligor as specified in its charter)
Delaware 74-2480931
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification
no.)
1615 Poydras Street
New Orleans, Louisiana
(Address of principal executive 70112
offices) (Zip code)
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8 1/4% Convertible Senior Notes due 2006
(Title of the indenture securities)
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which it is subject.
Name Address
Superintendent of Banks of the 2 Rector Street, New
State of New York York, N.Y. 10006, and
Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New
York, N.Y. 10045
Federal Deposit Insurance Washington, D.C. 20429
Corporation
New York Clearing House New York, New York
Association 10005
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(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee.
(Exhibit 4 to Form T-1 filed with Registration
Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.)
7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority.
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 29th day of October, 2001.
THE BANK OF NEW YORK
By: /s/ VAN K. BROWN -------------------------- Name: VAN K. BROWN Title: VICE PRESIDENT |
EXHIBIT 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business March 31, 2001, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.
ASSETS Dollar Amounts
In Thousands
Cash and balances due from
depository institutions:
Noninterest-bearing balances and
currency and coin $ 2,811,275
Interest-bearing balances 3,133,222
Securities:
Held-to-maturity securities 147,185
Available-for-sale securities 5,403,923
Federal funds sold and Securities
purchased under agreements to resell 3,378,526
Loans and lease financing receivables:
Loans and leases held for sale 74,702
Loans and leases, net of unearned income 37,471,621
LESS: Allowance for loan and lease losses 599,061
Loans and leases, net of unearned
income and allowance 36,872,560
Trading Assets 11,757,036
Premises and fixed assets
(including capitalized leases) 768,795
Other real estate owned 1,078
Investments in unconsolidated
subsidiaries and associated companies 193,126
Customers' liability to this bank
on acceptances outstanding 592,118
Intangible assets
Goodwill 1,300,295
Other intangible assets 122,143
Other assets 3,676,375
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Total assets $70,232,359
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LIABILITIES
Deposits:
In domestic offices $25,962,242
Noninterest-bearing 10,586,346
Interest-bearing 15,395,896
In foreign offices, Edge and
Agreement subsidiaries, and IBFs 24,862,377
Noninterest-bearing 373,085
Interest-bearing 24,489,292
Federal funds purchased and
securities sold under agreements
to repurchase 1,446,874
Trading liabilities 2,373,361
Other borrowed money:
(includes mortgage indebtedness
and obligations under capitalized
leases) 1,381,512
Bank's liability on acceptances
executed and outstanding 592,804
Subordinated notes and debentures 1,646,000
Other liabilities 5,373,065
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Total liabilities $63,658,235
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EQUITY CAPITAL
Common stock 1,135,284
Surplus 1,008,773
Retained earnings 4,426,033
Accumulated other comprehensive income 4,034
Other equity capital components 0
Total equity capital 6,574,124
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Total liabilities and equity capital $70,232,359
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I, Thomas J. Mastro, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief.
Thomas J. Mastro, Senior Vice President and Comptroller
We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct.
Thomas A. Renyi Directors
Gerald L. Hassell
Alan R. Griffith