10-K405
1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
Commission file number 1-9916
FREEPORT-McMoRan COPPER & GOLD INC.
Organized in Delaware I.R.S. Employer Identification No. 74-2480931
First Interstate Bank Building, One East First Street,
Suite 1600, Reno, Nevada 89501
Registrant's telephone number, including area code: (702) 688-3000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- ------------------
Class A Common Stock Par Value $0.10 per Share New York Stock Exchange
and Australian Stock
Exchange
Depositary Shares Representing 2-16/17 shares of New York Stock Exchange
Special Preference Stock Par Value $0.10 per Share
Depositary Shares Representing 0.05 shares of Step-Up New York Stock Exchange
Convertible Preferred Stock Par Value $0.10 per Share
Depositary Shares Representing 0.05 shares of Gold- New York Stock Exchange
Denominated Preferred Stock Par Value $0.10 per Share
Depositary Shares, Series II, Representing 0.05 shares New York Stock Exchange
of Gold-Denominated Preferred Stock, Series II,
Par Value $0.10 per Share
Depositary Shares Initially Representing 0.025 shares New York Stock Exchange
of Silver-Denominated Preferred Stock Par Value
$0.10 per Share
9-3/4% Senior Notes Due 2001 of P.T. ALatieF Freeport New York Stock Exchange
Finance Company B.V. guaranteed by the registrant
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant was approximately $1,352,817,000 on March 10, 1995.
On March 10, 1995, there were issued and outstanding 65,972,568 shares of
Class A Common Stock, par value $0.10 per share, of which 1,859,660 shares
were held by the registrant's parent, Freeport-McMoRan Inc., and 139,980,763
shares of Class B Common Stock, par value $0.10 per share, all of which were
held by Freeport-McMoRan Inc.
Documents Incorporated by Reference
Portions of the registrant's Annual Report to stockholders for the year ended
December 31, 1994 (Parts I, II and IV) and portions of the Proxy Statement
dated March 23, 1995, submitted to the registrant's stockholders in connec-
tion with its 1995 Annual Meeting to be held on May 4, 1995 (Part III).
TABLE OF CONTENTS
Page
Part I................................................................ 1
Items 1 and 2. Business and Properties.............................. 1
Introduction...................................................... 1
P.T. Freeport Indonesia Company................................... 2
Contract of Work.................................................. 3
Ore Reserves...................................................... 4
Mining Operations................................................. 5
Exploration....................................................... 5
Milling and Production............................................ 7
Transportation and Other Infrastructure........................... 8
Marketing......................................................... 10
Republic of Indonesia............................................. 10
Rio Tinto Minera, S.A............................................. 11
P.T. Irja Eastern Minerals Corporation............................ 11
Research and Development.......................................... 12
Environmental Matters............................................. 12
Employees......................................................... 13
Competition....................................................... 13
Item 3. Legal Proceedings.......................................... 14
Item 4. Submission of Matters to a Vote of Security Holders........ 14
Executive Officers of the Registrant................................ 14
Part II............................................................... 15
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters..................................... 15
Item 6. Selected Financial Data.................................... 15
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 16
Item 8. Financial Statements and Supplementary Data................ 16
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..................... 16
Part III.............................................................. 16
Items 10, 11, 12, and 13. Directors and Executive Officers of
the Registrant, Executive Compensation, Security
Ownership of Certain Beneficial Owners and
Management, and Certain Relationships and Related
Transactions............................................ 16
Part IV............................................................... 16
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K..................................... 16
Signatures............................................................ 17
Index to Financial Statements......................................... F-1
Report of Independent Public Accountants.............................. F-1
Exhibit Index......................................................... E-1
PART I
Items 1 and 2. Business and Properties.
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INTRODUCTION
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation formed in
1987 ("FCX"), is a subsidiary of Freeport-McMoRan Inc. ("FTX"*). FCX's
principal operating subsidiary is P.T. Freeport Indonesia Company ("PT-FI"), a
limited liability company organized under the laws of the Republic of
Indonesia and domesticated in Delaware. PT-FI engages in the exploration for
and development, mining, and processing of copper, gold and silver in
Indonesia and in the marketing of concentrates containing such metals
worldwide. FCX believes that PT-FI has one of the lowest cost copper
producing operations in the world, taking into account customary credits for
related gold and silver production. At March 10, 1995, FTX owned
approximately 68.9% of FCX's common stock, and FCX owned 81.28% of the
outstanding common stock of PT-FI. Of the remaining 18.72% of the outstanding
PT-FI common stock, 9.36% is owned by the Government of the Republic of
Indonesia (the "Government") and 9.36% is owned by an Indonesian limited
liability company, P.T. Indocopper Investama Corporation ("PT-II"), in which
FCX owns a 49% interest. In 1993 FCX acquired the Spanish company Rio Tinto
Minera, S.A. ("RTM") which is principally engaged in the smelting and refining
of copper concentrates in Spain through wholly owned subsidiaries. RTM
provides an additional market for a portion of PT-FI's copper concentrates.
FCX's wholly owned subsidiary, Eastern Mining Company, Inc. ("EMI"), owns 80%
of the outstanding common stock of P.T. Irja Eastern Minerals Corporation
("Eastern Mining"), an Indonesian limited liability company, which signed a
Contract of Work (the "Eastern Mining COW") with the Government in August 1994
covering approximately 2.5 million acres in Indonesia. PT-II owns 10% of the
outstanding common stock of Eastern Mining, and P.T. Setdco Ganesha, an
Indonesian limited liability company, owns the remaining 10% of the
outstanding common stock.
In May 1994, FTX announced a plan to separate its two principal
businesses, metals and agricultural minerals, into two independent financial
and operating entities. To accomplish this plan, FTX will effect a pro rata
distribution (the "Distribution") to its common stockholders of all of the
Class B common stock of FCX which it owns at the time of the Distribution on a
tax-free basis. As a result of the Distribution, FTX will no longer own any
interest in FCX. The Distribution is contingent on a number of factors,
including the recapitalization of FCX and FTX. In order for FTX to make the
Distribution on a tax-free basis, the FCX stockholders recently approved
-----------------
*The term "FTX", as used in this report, means Freeport-McMoRan Inc.,
its divisions, and its direct and indirect subsidiaries and affiliates other
than FCX, or any one or more of them, unless the context requires Freeport-
McMoRan Inc. only.
certain changes to FCX's capital structure and the voting rights of its common
stock and preferred stock. Prior to the Distribution, the voting rights of
FCX stockholders will be amended so that holders of Class B common stock elect
80% of the FCX directors and holders of Class A common stock and holders of
preferred stock elect the balance. The Distribution is expected to occur by
June 30, 1995.
In March 1995, FCX, FTX, The RTZ Corporation PLC ("RTZ") and RTZ America
Inc. ("RTZ America") signed letters of intent to establish a strategic
alliance. Pursuant to the proposed transactions, RTZ America will acquire
from FTX approximately 21.5 million shares of FCX Class A common stock
(approximately 10.4% of the outstanding common stock of FCX). RTZ America
also will receive an option to acquire from FTX approximately 3.5 million
shares of FCX Class A common stock. In connection with FTX's
recapitalization, if requested by FTX, RTZ America will make a cash tender
offer for certain of FTX's convertible debt, and convert any such debt to FTX
common stock. If RTZ America acquires such convertible debt and exercises its
option, after completion of the Distribution, RTZ America will own over 18% of
the outstanding common stock of FCX. However, as the total number of shares
of FCX will not change as a result of these transactions, RTZ America's
acquisition of FCX common stock from FTX will not result in any dilution to
the current holders of FCX Class A common stock. The transactions with RTZ
America will enable FTX to complete its recapitalization and the Distribution.
In addition to RTZ America's acquisition of FCX stock, FCX, PT-FI and
Eastern Mining will enter into joint venture arrangements with subsidiaries of
RTZ pursuant to which RTZ's subsidiaries intend to invest up to $850 million
on exploration and development projects on lands controlled by PT-FI and
Eastern Mining. These transactions are further described below under
"Contract of Work." RTZ also will acquire 25% of RTM's Spanish smelter
operations, and a 25% interest in RTM's Spanish mineral exploration program.
All of the transactions with RTZ and RTZ America are subject to, among other
things, certain regulatory approvals. The transactions are expected to be
completed by June 30, 1995.
In January 1994, FCX redeemed its Zero Coupon Exchangeable Notes due
2011 (the "Zero Coupon Notes"). Of the $118.6 million principal amount of
Zero Coupon Notes outstanding at the initiation of the call for redemption,
$118.3 million principal amount was converted into an aggregate of 6.7 million
shares of FCX's Class A common stock prior to the redemption of the Zero
Coupon Notes. The balance was redeemed for cash. Also in January 1994, FCX
sold 4.3 million depositary shares, each representing 0.05 shares of its Gold-
Denominated Preferred Stock, Series II to the public for net proceeds of
$158.5 million. In April 1994, P. T. ALatieF Freeport Finance Company B.V.,
a wholly owned subsidiary of FCX, completed a public offering of $120 million
of 9-3/4% Senior Notes Due 2001, for net proceeds of $116.3 million. In July
1994, FCX sold 4.8 million depositary shares, each initially representing
0.025 shares of its Silver-Denominated Preferred Stock, to the public for net
proceeds of $94.5 million.
P.T. FREEPORT INDONESIA COMPANY
PT-FI's operations are located in the rugged highlands of the Sudirman
Mountain Range in the province of Irian Jaya, Indonesia, located on the
western half of the island of New Guinea. Over the last 26 years, PT-FI has
met an extraordinary combination of engineering and construction challenges to
develop its mining and milling complex and supporting infrastructure in one of
the least explored areas in the world. PT-FI's largest mine, Grasberg,
discovered in 1988, contains the largest single gold reserve and one of the
three largest open-pit copper reserves of any mine in the world. In order to
develop the Grasberg deposit, PT-FI undertook an expansion program in stages,
initially from 20,000 metric tons of ore per day ("MTPD") to 57,000 MTPD.
Expansion from 57,000 MTPD to 66,000 MTPD was completed in 1993 ahead of
schedule and within budget. PT-FI is currently expanding its production
capacity from 66,000 MTPD to 115,000 MTPD, which is expected to be completed
during the second half of 1995 and to almost double annual production to
approximately 1.1 billion pounds of copper and approximately 1.5 million
ounces of gold from the 1993 levels of 658 million pounds of copper and 787
thousand ounces of gold, respectively.
CONTRACT OF WORK
In 1967, PT-FI's predecessor, Freeport Indonesia, Incorporated, a
Delaware corporation ("FII"), and the Government entered into a Contract of
Work (the "1967 COW"), pursuant to which FII operated as the Government's sole
contractor for the production and marketing of certain minerals from a 24,700
acre area (the "1967 Mining Area") from 1967 until the end of 1991. On
December 30, 1991, FII was merged into PT-FI in Delaware, and PT-FI and the
Government signed a new Contract of Work (the "New COW"), which superseded the
1967 COW and has a 30-year term, with provisions for two 10-year extensions
under certain conditions.
The New COW covers both the 1967 Mining Area and a contiguous 6.5
million acre exploration area (the "New COW Area"). Pursuant to a provision
in the New COW, PT-FI must progressively relinquish its rights to the
nonprospective parts of the New COW Area in amounts equal to 25% of the 6.5
million acres at the end of each of three specified periods. PT-FI
relinquished approximately 1.7 million acres in December 1994. In light of
these relinquishment provisions, PT-FI has implemented an active exploration
program with a focus on both what it believes to be the most promising
exploration opportunities in the New COW Area as well as identification of
areas which appear to hold the least promise. The next relinquishment will
occur at the end of 1995, unless extended by the Government.
The New COW also contains provisions for PT-FI to conduct or cause to be
conducted a feasibility study relating to the construction of a copper
smelting facility in Indonesia and for the eventual construction of such a
facility by PT-FI, if such facility is deemed to be economically viable by PT-
FI and the Government. In January 1995, FCX announced that it would form a
joint venture with Mitsubishi Materials Corporation and Fluor Daniel Wright
Ltd. to build, own and operate a copper smelter/refinery in Gresik, East Java,
Indonesia. This project remains subject to the execution of definitive
agreements among the joint venture participants, the confirmation of the
feasibility of the project, financing and certain Government approvals. For
further information with respect to the proposed smelter/refinery project,
reference is made to Note 10 to the financial statements of FCX referred to on
page F-1 hereof (the "FCX Financial Statements").
Pursuant to the proposed transactions with RTZ, subsidiaries of RTZ will
acquire a 40% beneficial interest in the Eastern Mining COW and a portion of
the New COW covering the New COW Area. In addition, a subsidiary of RTZ will
acquire a 40% beneficial interest in future expansion projects in the 1967
Mining Area.
Under joint venture arrangements, RTZ and FCX will establish an
Exploration Committee to approve exploration expenditures, and subsidiaries of
RTZ will pay for all further exploration approved by the committee until RTZ
has paid an aggregate of $100 million. The parties will pay, ratably in
proportion to their ownership, additional exploration costs and the costs to
develop projects mutually agreed upon in the New COW Area and the Eastern
Mining COW Area.
For further expansion projects in the 1967 mining Area, subsidiaries of
RTZ will provide up to a maximum of $750 million for 100% of defined costs to
develop such projects. RTZ will receive 100% of incremental cash flow
attributed to the expansion projects until it has received an amount equal to
the funds it had provided plus interest based on RTZ's costs of borrowing.
Subsequently, the parties will share incremental cash flow ratably in
proportion to their ownership. Future expansion projects in the 1967 Mining
Area will exclude any interest in future production equivalent to FCX's
expanded 115,000 MTPD milling operations.
ORE RESERVES
Based upon published reports, FCX believes that PT-FI's Grasberg deposit
contains the largest single gold reserve and one of the three largest open-pit
copper reserves of any mine in the world. Proved and probable ore reserves at
December 31, 1994 were 1,125.6 million tons** of ore at an average grade of
1.30% copper, 1.42 grams of gold per ton and 4.06 grams of silver per ton
compared with 1,074.1 million tons of ore with an average grade of 1.31%
copper, 1.47 grams of gold per ton and 4.04 grams of silver per ton at
December 31, 1993. Primarily as a result of the drilling operations at the
Grasberg mine (see "Mines in Production" below), PT-FI's proved and probable
copper and gold reserves as of December 31, 1994 have increased, net of
production, since December 31, 1989 by approximately 237% and 389%,
respectively, and from year-end 1993 by 4.5% and 1.3%, respectively.
This increase in proved and probable reserves, net of production, is
largely the result of a drilling program that includes data obtained from the
surface down to approximately the 3,060 meter elevation at the Grasberg ore
body. PT-FI's proved and probable reserves at Grasberg do not include
reserves below the 3,060 meter level. PT-FI has begun driving an adit (the
"Amole adit") from the mill site to a point below the currently delineated
Grasberg ore body at the 2,900 meter level. The Amole adit, expected to be
completed in 1996, will facilitate further deep exploration to delineate the
extent of the Grasberg deposit below the 3,060 meter level. Preliminary
drilling from the existing 3,700 meter adit indicates significant additional
mineralization below the existing proved and probable reserves. There can be
no assurance, however, that PT-FI's exploration programs will result in the
delineation of additional reserves in commercial quantities. For further
information with respect to the copper, gold and silver content of proved and
probable ore reserves of PT-FI, reference is made to Note 12 to the FCX
Financial Statements.
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**As used herein, "ton" refers to a metric ton, which is equivalent to
2,204.62 pounds on a dry weight basis.
MINING OPERATIONS
Mines in Production
PT-FI currently has two mines in operation: the Grasberg and the
Intermediate Ore Zone (the "IOZ"), both within the 1967 Mining Area. Open pit
mining of the Grasberg ore body commenced in January 1990. In 1994 Grasberg
mine output totaled approximately 27.2 million tons of ore, providing
approximately 95% of total PT-FI ore production. The IOZ is an underground
block cave operation which came into production in the first half of 1994.
The production level is at the 3550 meter elevation, which is 150 meters below
the Ertsberg East deposit, which was depleted in the second half of 1994. In
1994 mine output from the IOZ totaled approximately 0.7 million tons of ore.
Mines in Development
Three other significant ore bodies are currently at various stages of
mine development. All are carried as proved and probable reserves, and are
intended to augment or replace other underground production areas as they
become depleted. These deposits include the Deep Ore Zone ("DOZ"), the DOM
(from the Dutch word meaning "cathedral") and the Big Gossan.
The DOZ ore body lies within the 1967 Mining Area, vertically below the
IOZ. This underground mine was originally developed for mining using a
variety of stoping methods and is currently capable of production. Initial
production from the DOZ ore body commenced in 1989 but was suspended in favor
of production from the Grasberg. Production by the block cave mining method
is anticipated to begin after depletion of the overlying IOZ reserve, sometime
after 1998.
The DOM ore body's production level is 380 meters above and
approximately 1,200 meters southeast of the now depleted Ertsberg East mining
operation. The DOM ore body was developed as an underground mine, employing
the block cave mining method. Pre-production development was completed just
as the Grasberg began production from the open pit in 1990. All maintenance,
warehouse and service facilities are in place. Like the DOZ ore body,
production at the DOM ore body was deferred as a result of the increasing
reserves and production capabilities of the Grasberg.
The Big Gossan ore body lies approximately 1,000 meters southwest of the
original Ertsberg deposit/pit and within the 1967 Mining Area. Initial
underground development of the ore body began in 1993 when tunnels were driven
from the mill area, into the ore zone at approximately the 2900 meter
elevation. A variety of stoping methods will be used to mine the deposit,
with production expected by 1998.
EXPLORATION
In addition to continued delineation of the Grasberg deposit and other
deposits discussed under "Mining Operations" above, PT-FI is continuing its
ongoing exploration program for copper and gold mineralization within the 1967
Mining Area. Three anomalous zones in the vicinity of PT-FI's current mining
activities are under investigation. The Big Gossan and Wanagon mineralizations
are located west of the Erstberg open pit, southwest of the Grasberg ore body
and anchor the ends of a clearly defined mineralized structure trending
roughly east-west for 4.5 kilometers. The Big Gossan mineralization, as
drilled to date, extends approximately 1,100 meters westward from just east of
the intersection of the Amole adit. The Amole adit is being driven at the
2,900 meter level for approximately 4 kilometers from the mill to the deep
levels of the Grasberg deposit, providing a platform from which to explore
deeper mineral potential in a significant portion of the 1967 Mining Area.
The Lembah Tembaga prospect described below is located approximately one
kilometer southwest of the Grasberg deposit.
At the Big Gossan mineralization, nearly 200 holes have been drilled
from the Amole adit and from an exploration drift being driven in a westwardly
direction parallel to the Big Gossan structure. This drilling resulted in the
inclusion of 31.8 million tons of ore at an average grade of 2.5% copper and
0.7 grams of gold per ton to PT-FI's total proved and probable reserves at
December 31, 1994.
During the first quarter of 1993, PT-FI initiated helicopter-supported
surface drilling of the Wanagon gold/silver/copper prospect. Seven holes were
drilled during 1993 at Wanagon, located approximately 2 kilometers northwest
of Big Gossan and approximately 3 kilometers southwest of Grasberg.
Significant copper values have been encountered below the 2,900 meter
elevation. Additional holes were drilled during 1994 to explore the area near
the surface for gold potential. Evaluation of this prospect and similar
potential mineral sites along the Big Gossan-Wanagon structure will be
undertaken as the Big Gossan exploration drift is extended west toward the
Wanagan prospect.
PT-FI has intercepted porphyry copper mineralization in several holes at
its Lembah Tembaga prospect. The holes were drilled from the surface and
intersected copper mineralization at considerable depth below the surface.
Three rigs are currently drilling at Lembah Tembaga to further evaluate the
prospect. Target evaluation in other parts of the 1967 Mining Area is also
continuing.
Preliminary exploration of the New COW Area has indicated many promising
targets. Extensive stream sediment sampling within the new acreage has
generated analytical results which are being evaluated. This sampling
program, when coupled with regional mapping completed on the ground and from
aerial photographs and air-magnetometer surveys, has led to the outlining of
over 70 exploration targets. Detailed follow-up exploration of these anomalies
by additional mapping and sampling and through the use of both aerial and
ground magnetic surveys is now in progress. Systematic drilling of these
targets has already commenced with mineralization being discovered at several
prospects. Additional drilling is required to determine if any of these are
commercially viable.
PT-FI has focused its initial drilling in the New COW Area in an area 35
kilometers north of Grasberg, an area called the Hitalipa District, that
displays anomalous geochemical and magnetic characteristics. Although this
area requires additional exploratory drilling, initial results indicate a
large mineralized district that covers three times the aerial extent or
approximately 75,000 acres when compared to the original 24,700-acre Ertsberg
District that contained the Ertsberg, Grasberg, Ertsberg East, IOZ, DOZ, Big
Gossan and DOM ore bodies. The discovery of widespread igneous activity,
including volcanic rocks, in the Hitalipa District indicates the potential for
Grasberg-type stockwork and porphyry deposits as well as skarn-type
copper/gold/silver deposits similar to the ore bodies of the Ertsberg
District. Because of its size and number of geologic leads, the Hitalipa
District is likely to be explored for many years. PT-FI has also initiated
drilling programs on other prospects. Drilling results are being interpreted,
and no assurance can be given that any of these new areas contain commercially
exploitable mineral deposits.
Site specific work within the Hitalipa District continues where the
drilling of over 100 holes at the Wabu prospect has been completed. Within a
200 acre area at the Wabu prospect, drilling has indicated a potential
resource of between 700,000 and 1.7 million ounces of gold. The variation is
dependent upon a 25 to 50 meter radius area of influence around the drill
holes, respectively. This area is open to the east and west and also at
depth. Further drilling will be required to determine the extent and
commercial potential of this resource. PT-FI has initiated drilling programs
on other prospects within the Hitalipa District, and drilling results are
being interpreted.
PT-FI's exploration expenditures were $27.7 million in 1994, compared to
$31.7 million in 1993.
MILLING AND PRODUCTION
Milling
Most of the ore from PT-FI's mines moves by a conveyor system to an ore
pass through which it drops to the mill site. At the mill site, which is
located approximately 2,900 meters above sea level, the ore is crushed and
ground. The powdered ore is then mixed in tanks with chemical reagents and
continuously agitated with air. At this stage the copper-bearing concentrate
rises to the top of the tanks from which it is removed and thickened. The
product leaves the mill site as a thickened concentrate slurry, consisting of
approximately 65% solids by weight. During 1994, the recovery rates for the
milling facilities averaged 83.7% of the copper content, 72.8% of the gold
content and 64.7% of the silver content of the ore processed, compared to
87.0%, 76.2% and 67.2%, respectively, during 1993.
Production
In 1994 PT-FI achieved record copper production of 710.3 million
recoverable pounds, approximately 8% more than in 1993. Gold production was
784,000 recoverable ounces, approximately the same as 1993. For a summary of
PT-FI's production, sales and average product realizations for 1994 and the
previous four years, reference is made to "Selected Financial and Operating
Data" appearing on page 16 of FCX's 1994 Annual Report to stockholders, which
is incorporated herein by reference.
In 1993 PT-FI completed, within budget and ahead of schedule, the
expansion of its production facilities, increasing its mining and milling
capacity from 57,000 MTPD to 66,000 MTPD. Average mill throughput was 72,500
MTPD in 1994, compared to 62,300 MTPD in 1993. PT-FI is currently expanding
its overall mining and milling rate to 115,000 MTPD, which is expected to be
completed during the second half of 1995. Once the expansion is complete,
PT-FI expects annual production of 1.1 billion pounds of copper, 1.5 million
ounces of gold and 2.4 million ounces of silver.
TRANSPORTATION AND OTHER INFRASTRUCTURE
Transportation
From the mill site, the thickened concentrate is pumped through two 115
kilometer pipelines to the port-site facility at Amamapare. At the port-site
the slurry is filtered, dried and stored for shipping. When ships arrive,
they are loaded at the dock facilities at the port-site until they draw their
maximum water. The ships then normally move to deeper water, where loading is
completed from shuttling barges.
Other Infrastructure
The location of PT-FI's operations in a remote and undeveloped area
requires that such operations be virtually self-sufficient. The facilities,
in addition to those described above, include an airport, a heliport, a 119
kilometer road with bridges and tunnels, an aerial service tramway to
transport personnel, equipment and supplies to the mines, a hospital and two
town sites with schools, housing and other required facilities sufficient to
support approximately 14,000 persons, including approximately 360 who are
located at the port-site.
In conjunction with the expansion of ore throughput to 115,000 MTPD, the
first phase of the Enhanced Infrastructure Project ("EIP") is being
implemented. The EIP is a long term program created (1) to provide certain
infrastructure facilities needed for PT-FI's operations, (2) to enhance the
quality of conditions for PT-FI's employees and (3) to develop and promote the
growth of local and other third party activities and enterprises in Irian Jaya
through the construction of certain required physical support facilities. The
full EIP includes plans for various commercial, residential, educational,
retail, medical, recreational, environmental and other infrastructure
facilities to be constructed during the next ten to twenty years. Depending on
the long-term growth of PT-FI's operations, the total cost of the EIP could
range between $500 million and $600 million. The first phase of the EIP is
needed to support the 115,000 MTPD expansion. FCX anticipates that the first
phase, which includes various residential, community and commercial
facilities, increases in electric generating capacity and an extension of the
principal road which will enable vehicle traffic to travel all the way to the
port-site, will be completed by mid-1996.
Pursuant to a joint venture agreement which PT-FI entered into with P.T.
ALatieF Nusakarya Corporation ("ALatieF"), an Indonesian investor, in 1993,
PT-FI has sold approximately $195 million of existing infrastructure assets,
of which approximately $105 million of assets were sold in 1994, to P.T.
ALatieF Freeport Infrastructure Corporation ("AFIC") and to P.T. ALatieF
Freeport Hotel Corporation ("AFHC"). AFIC and AFHC are each owned one-third
by PT-FI and two-thirds by ALatieF. AFIC is expected to purchase an
additional $75 million of infrastructure assets during 1995 subject to certain
Government approvals. The funding for the AFIC and AFHC purchases is provided
by equity contributions from the shareholders ($90 million) and debt financing
($180 million). Debt financing has been secured by a $60 million bank loan,
guaranteed by PT-FI, and a $120 million bond issue, guaranteed by FCX,
completed during the second quarter of 1994. See "Introduction" above. The
acquired assets will be made available to PT-FI and its employees and
designees under arrangements which will provide ALatieF with a guaranteed
minimum rate of return on its investment.
In December 1993, PT-FI announced the execution of a Letter of Intent
with Duke Energy Corp. ("DE") and PowerLink Corporation ("PL"), pursuant to
which PT-FI would sell its existing and to be constructed power generation and
transmission assets and certain other power-related assets to a joint venture
company. In December 1994, P.T. Puncakjaya Power ("PJP"), an Indonesian
limited liability company, was formed, whose ownership consists of DE (30%),
PL (30%), PT-FI (30%) and P.T. Austindo Nusantara Jaya ("ANJ"), an Indonesian
limited liability company, (10%). The first sale, representing the majority
of the existing assets, was completed in December 1994, for a price of $100
million. The final two sales are expected to occur during 1995. The total
value of these transactions is estimated at $215 million. Pursuant to these
transactions, PJP will own these assets and be responsible for providing the
electrical power services required by PT-FI at its mining, milling and support
operations in Irian Jaya, Indonesia, including the power services required for
the expansion of ore throughput to 115,000 MTPD. These transactions will
provide DE, PL and ANJ with a guaranteed minimum rate of return on their
investments.
PT-FI has also entered into two separate letters of intent with respect
to the sale to joint ventures of certain construction equipment, certain port
facilities and related marine, logistics and related assets (the "Port Joint
Venture") and certain aircraft, airport and related operations (the "Airport
Joint Venture"). The Port Joint Venture is expected to be owned by P & O
Australia Ltd. and ALatieF. PT-FI would not have an equity interest in the
Port Joint Venture. PT-FI would enter into one or more agreements with the
Port Joint Venture for use of the transferred assets. It is expected that the
purchase price of the assets transferred to the Port Joint Venture will not
exceed $100 million. PT-FI would have a 25% equity interest in the Airport
Joint Venture, with certain Indonesian investors owning the remainder. PT-FI
would enter into one or more agreements with the Airport Joint Venture for air
transport services for both passengers and cargo. It is expected that the
purchase price of the assets transferred to the Airport Joint Venture will be
approximately $45 million.
The foregoing letters of intent are not binding and are subject to the
execution of definitive agreements, financing, and certain Government
approvals. No assurance can be given that any of these transactions will be
consummated.
MARKETING
PT-FI's copper concentrates, which contain significant gold and silver
components, are sold primarily under long-term, U.S. dollar-denominated
contracts, pursuant to which the selling price is based on world metals
prices, generally the London Metal Exchange ("LME") settlement prices for
Grade A copper metal, less certain allowances. PT-FI supplies copper
concentrates to Asian, European and North American smelters and international
trading companies under long-term sales agreements and pursuant to "spot"
sales contracts. Substantially all of PT-FI's 1994 production of copper
concentrates was sold under prior commitments with the balance sold in the
spot market. PT-FI has commitments from various parties to purchase virtually
all of its estimated 1995 production of copper concentrates. For further
information with respect to sales of concentrates, reference is made to Note 8
to the FCX Financial Statements.
For average realizations per recoverable pound of copper, reference is
made to "Selected Financial and Operating Data" on page 16 of FCX's 1994
Annual Report to stockholders, which is incorporated herein by reference. For
information with respect to PT-FI's price protection program, reference is
made to "Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages 11 through 14 and 17 through 20, of FCX's 1994
Annual Report to stockholders, which is incorporated herein by reference.
REPUBLIC OF INDONESIA
The economy of Indonesia is based on export commodity agriculture, the
extraction of petroleum, natural gas and other mineral resources, wholesale
and retail trade and, to an increasing extent, manufacturing. Indonesia has a
presidential republic system of government. President Suharto assumed power
in 1966 following an attempted communist coup and has been in power since
then. The Government has maintained a high degree of stability for the past
27 years. President Suharto was re-elected in March 1993 to serve a sixth
consecutive five-year term.
The Government has promoted policies designed to help develop Indonesia
economically and has encouraged foreign investment in numerous areas where
such investment would benefit the Indonesian economy. Indonesia's foreign
investment policy is expressed in the 1967 Foreign Capital Investment Law. It
provides basic guarantees of remittance rights and protection against
nationalization, a framework for incentives and some basic rules as to the
other rights and obligations of foreign investors. PT-FI's rights and
obligations relating to taxes, exchange controls, repatriation and other
matters are governed by the New COW, which was concluded pursuant to the 1967
Foreign Capital Investment Law.
PT-FI has had and continues to enjoy a good working relationship with
the Government. PT-FI's mining complex was Indonesia's first copper mining
project and was the first major foreign investment made in Indonesia following
the new economic development program instituted by the Suharto administration
in 1967. PT-FI works closely with the various levels of the Government in
development efforts in the vicinity of its operations. PT-FI incurs
significant costs associated with providing health and educational assistance,
job training, employment opportunities, agricultural assistance and other
community development services and facilities for the Indonesian people living
in the areas of its operations. In 1990 PT-FI established a foundation to
provide educational and work opportunities for the benefit of the people of
Irian Jaya. Over the next several years, PT-FI will contribute at least $10
million to the foundation for community projects. PT-FI also has in place a
long-term business development program to provide financing and support for
new and emerging businesses, many of which are expected to be suppliers of
goods and services for PT-FI's operations. Over time, PT-FI anticipates
investing $25 million in this program.
FCX has the benefit of political risk insurance from the Overseas
Private Investment Corporation, the Multilateral Investment Guaranty Agency
and other insurers, where available, which covers a portion of its interest in
PT-FI. The insurance is primarily designed to cover certain breach of
contract risks.
RIO TINTO MINERA, S.A.
In 1993 FCX acquired RTM, which is principally engaged in the smelting
and refining of copper concentrates in Spain through wholly owned
subsidiaries. RTM is expanding its smelter production capacity to
approximately 270,000 tons of metal per year by early 1996, which will enable
RTM's operations to achieve significant unit cost efficiencies and is expected
to bring RTM's cash costs into the smelter industry's lowest quartile
worldwide. During 1994, PT-FI supplied RTM with approximately 173,000 tons of
copper concentrate and is expected to supply approximately 150,000 tons in
1995, providing for approximately 38% and 30%, respectively, of RTM's
requirements in those years. Beginning in 1996, PT-FI is expected to provide
the RTM smelter with approximately one-half of its copper concentrate
requirements. For further information concerning RTM, reference is made to
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 11 through 14 and 17 through 20 of FCX's 1994 Annual
Report to stockholders, which is incorporated herein by reference.
P.T. IRJA EASTERN MINERALS CORPORATION
FCX owns 84.9% of Eastern Mining, which entered into the Eastern Mining
COW with the Government in August 1994 covering 2.5 million acres adjacent to
the New COW Area in Irian Jaya, Indonesia. The Eastern Mining COW provides
for a 30-year term and for two 10-year extensions under certain circumstances.
Reconnaissance activity, including air-magnetometer analysis has indicated a
number of interesting magnetic anomalies, one of which is located near sea
level in an area known as Etna Bay. It is believed that this expansive
magnetic anomaly indicates igneous material intruding sedimentary rocks and
appears to be on trend with and contains geologic characteristics similar to
those exhibited in the 1967 Mining Area. FCX is currently drilling with three
rigs at its Etna Bay prospect areas. Eastern Mining's exploration
expenditures totaled $8.3 million in 1994.
RESEARCH AND DEVELOPMENT
In 1993 FTX contracted with Crescent Technology, Inc. ("Crescent") to
furnish engineering consulting, research and development, environmental and
safety services to FTX. Crescent maintains engineering consulting, analytical
laboratory and mine development groups in New Orleans, Louisiana, which
provide engineering consulting, environmental services and design and
construction supervision activities required to implement new ventures and
apply improvements to existing operations of PT-FI and RTM.
ENVIRONMENTAL MATTERS
FTX and its affiliates, including FCX, have a history of commitment to
environmental responsibility. Since the 1940s, long before the general public
recognized the importance of maintaining environmental quality, FTX has
conducted, and continues to conduct, preoperational, bioassay, marine
ecological and other environmental surveys to determine the environmental
compatibility of its operations. FTX's Environmental Policy commits its
operations to full compliance with applicable laws and regulations. FTX has
contracted with Crescent whose environmental specialists develop and implement
environmental programs that include the activities of PT-FI and RTM.
FCX believes that it is in compliance with Indonesian environmental
laws, rules and regulations. PT-FI had a team of environmental scientists
from a leading Indonesian scientific institution conduct a study to update its
1984 Environmental Evaluation Study, with particular focus on its 66,000 MTPD
expansion program, and which addressed the anticipated effect of PT-FI's
expansion to 66,000 MTPD on the environment within the study area including
water quality, aquatic and terrestrial biology, hydrology, geomorphology,
oceanography, sociology and economics. The study was submitted to the
Government, and a formal hearing was held on the document. The Government
then requested PT-FI to update the document to include future expansion plans.
An additional environmental evaluation study was submitted in late 1993 with
respect to the proposed expansion of production to 115,000 MTPD, and it was
approved in February 1994. In February 1995 the Government approved PT-FI's
Environmental Management Plan (RKL) and Environmental Monitoring Plan (RPL).
These plans addressed all PT-FI environmental programs, including sustainable
development, reaffirming its long-term commitment to manage its operations in
an environmentally responsible manner.
RTM's smelter production capacity expansion costs include approximately
$18 million for environmental optimization. Subsequent to expansion, FCX
believes RTM's facilities will be in compliance with all standards in Spain.
PT-FI and RTM, through FTX, maintain insurance coverage in amounts
deemed prudent for certain types of damages associated with environmental
liabilities which arise from sudden, unexpected and unforeseen events.
FCX has made, and continues to make, expenditures at its operations for
protection of the environment. On the basis of an analysis of its operations
in relation to current and anticipated environmental requirements, FCX does
not anticipate that these investments will have a significant adverse impact
on its future operations, liquidity, capital resources or financial position.
EMPLOYEES
In order to allow access to the FTX employee benefit plans for United
States citizens employed full time in PT-FI's and RTM's businesses, such
persons are formally employed by certain United States subsidiaries of FTX.
For all operational purposes, however, such individuals are regarded as
employees of PT-FI or RTM, respectively, and references herein to PT-FI or RTM
employees include such individuals.
FCX, PT-FI and FTX are parties to a Management Services Agreement (the
"Management Agreement") pursuant to which FTX furnishes general executive,
administrative, financial, accounting, legal, environmental, tax, research and
development, sales and certain other services to FCX and PT-FI. The term of
the Management Agreement is unlimited, subject to termination by any of the
parties on December 31 of any year and subject to at least six months prior
written notice. FCX and PT-FI reimburse FTX monthly at FTX's cost, including
allocated overhead, for such services. For further information with respect
to the Management Agreement, including costs reimbursed to FTX, and the effect
of the Distribution, reference is made to Note 9 to the FCX Financial
Statements.
As of December 31, 1994, PT-FI had a total of 6,074 employees
(approximately 94% Indonesian), compared with 6,054 employees (approximately
94% Indonesian) at year-end 1993. In addition, as of December 31, 1994, PT-FI
had approximately 9,600 contract workers, most of whom were Indonesian.
Approximately 40% of PT-FI's Indonesian employees are members of the All
Indonesia Workers' Union, which operates under Government supervision, with
which a labor agreement covering PT-FI's hourly paid Indonesian employees runs
until September 30, 1995. PT-FI experienced no work stoppages in 1994, and
relations with the union have generally been good. As of December 31, 1994,
RTM had a total of 1,250 employees, of which approximately 95% are covered by
union contracts. RTM experienced limited work stoppages in 1994, but
relations with these unions have also generally been good.
COMPETITION
PT-FI competes with other mining companies in connection with the sale
of its mineral concentrates and the recruitment and retention of qualified
personnel. Some competing companies possess financial resources equal to or
greater than those of PT-FI. The management of FCX believes that PT-FI is one
of the lowest cost copper producers in the world, taking into account credits
for related gold and silver production.
Item 3. Legal Proceedings.
--------------------------
Although FCX may be from time to time involved in various legal
proceedings of a character normally incident to the ordinary course of its
business, the management of FCX believes that potential liability in any such
pending or threatened proceedings would not have a material adverse effect on
the financial condition or results of operations of FCX. FCX, through FTX,
maintains liability insurance to cover some, but not all, potential
liabilities normally incident to the ordinary course of its business as well
as other insurance coverages customary in its business, with such coverage
limits as management deems prudent.
Item 4. Submission of Matters to a Vote of Security Holders.
------------------------------------------------------------
Not applicable.
Executive Officers of the Registrant.
------------------------------------
In addition to the elected executive officers of FCX (the "Elected FCX
Executive Officers"), one officer of PT-FI is deemed by FCX to be an executive
officer of FCX (the "Designated FCX Executive Officer") for purposes of the
federal securities laws. Listed below are the names and ages, as of March 15,
1995, of each of the Elected FCX Executive Officers and the Designated FCX
Executive Officer, together with the principal positions and offices with FCX,
FTX, and PT-FI held by each. All officers of FCX, FTX, and PT-FI are elected
or appointed for one year terms, subject to death, resignation or removal.
Name Age Position or Office
---- --- -------------------
Richard C. Adkerson 48 Senior Vice President of FCX. Senior Vice
President of FTX. Commissioner of PT-FI.
John G. Amato 51 General Counsel of FCX. General Counsel of FTX.
Commissioner of PT-FI.
Richard H. Block 44 Senior Vice President of FCX. Senior Vice
President of FTX.
Thomas J. Egan 50 Senior Vice President of FCX. Senior Vice
President of FTX.
Charles W. Goodyear 37 Senior Vice President of FCX. Senior Vice
President of FTX. Commissioner of PT-FI.
Hoediatmo Hoed*** 55 President Director of PT-FI.
W. Russell King 45 Senior Vice President of FCX. Senior Vice
President of FTX.
Rene L. Latiolais 52 Director and Vice Chairman of the Board of FCX.
Director, President, and Chief Operating
Officer of FTX. Commissioner of PT-FI.
George A. Mealey 61 Director, President, and Chief Executive Officer
of FCX. Executive Vice President of FTX.
Director and Executive Vice President of
PT-FI.
James R. Moffett 56 Director and Chairman of the Board of FCX.
Director, Chairman of the Board, and
Chief Executive Officer of FTX. President
Commissioner of PT-FI.
The individuals listed above have served FCX, FTX, or PT-FI in various
executive capacities for at least the last five years.
PART II
Item 5. Market for Registrant's Common Equity and Related
-----------------------------------------------------------------
Stockholder Matters.
-------------------
The information set forth under the caption "FCX Class A Common Shares"
and "Class A Common Share Dividends", on the inside back cover of FCX's 1994
Annual Report to stockholders, is incorporated herein by reference. As of
March 10, 1995, there were 19,844 record holders of FCX's Class A common
stock.
-----------------
***This individual is a Designated FCX Executive Officer and not an
Elected FCX Executive Officer. He is deemed by FCX to be a Designated FCX
Executive Officer solely for purposes of the federal securities laws in view
of his position and responsibilities as an officer of PT-FI; he holds no
actual position as an officer of FCX.
Item 6. Selected Financial Data.
--------------------------------
The information set forth under the caption "Selected Financial and
Operating Data", on page 16 of FCX's 1994 Annual Report to stockholders, is
incorporated herein by reference.
FCX's ratio of earnings to fixed charges for each of the years 1990
through 1994, inclusive, was 9.2x, 4.5x, 6.5x, 3.6x and 7.5x respectively. For
this calculation, earnings consist of income from continuing operations before
income taxes, minority interest and fixed charges. Fixed charges include
interest and that portion of rent deemed representative of interest.
Item 7. Management's Discussion and Analysis of Financial Condition and
-------------------------------------------------------------------------------
Results of Operations.
---------------------
The information set forth under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations", on pages 11
through 14 and 17 through 20, of FCX's 1994 Annual Report to stockholders, is
incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data.
----------------------------------------------------
The financial statements of FCX, the notes thereto and the report
thereon of Arthur Andersen LLP, appearing on pages 21 through 34, inclusive,
and the report of management on page 15 of FCX's 1994 Annual Report to
stockholders, are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting
----------------------------------------------------------------------------
and Financial Disclosure.
------------------------
Not applicable.
PART III
Items 10, 11, 12, and 13. Directors and Executive Officers of the
---------------------------------------------------------------------
Registrant, Executive Compensation, Security Ownership of
------------------------------------------------------------
Certain Beneficial Owners and Management, and Certain
---------------------------------------------------------
Relationships and Related Transactions.
--------------------------------------
The information set forth under the captions "Voting Procedure" and
"Election of Directors", beginning on pages 1 and 4, respectively, of the
Proxy Statement dated March 23, 1995, submitted to the stockholders of FCX in
connection with its 1995 Annual Meeting to be held on May 4, 1995, is
incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
--------------------------------------------------------------------------
(a)(1), (a)(2), and (d). Financial Statements. See Index to Financial
Statements appearing on page F-1 hereof.
(a)(3) and (c). Exhibits. See Exhibit Index beginning on page E-1
hereof.
(b). Reports on Form 8-K. No reports on Form 8-K were filed by the
registrant during the fourth quarter of 1994.
SIGNATURES
----------
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on March 23, 1995.
FREEPORT-McMoRan COPPER & GOLD INC.
BY: /s/ James R. Moffett
--------------------------------
James R. Moffett
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 23, 1995.
/s/ James R. Moffett Chairman of the Board
---------------------- Director
James R. Moffett
George A. Mealey* President, Chief Executive Officer
and Director
(Principal Executive Officer)
Richard C. Adkerson* Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
John T. Eads* Controller - Financial Reporting
(Principal Accounting Officer)
Leland O. Erdahl* Director
Ronald Grossman* Director
Rene L. Latiolais* Director
Wolfgang F. Siegel* Director
Elwin E. Smith* Director
Eiji Umene* Director
*By: /s/ James R. Moffett
--------------------------
James R. Moffett
Attorney-in-Fact
INDEX TO FINANCIAL STATEMENTS
------------------------------
The financial statements of FCX, the notes thereto, and the report
thereon of Arthur Andersen LLP appearing on pages 21 through 34, inclusive, of
FCX's 1994 Annual Report to stockholders are incorporated by reference.
The financial statement schedules listed below should be read in
conjunction with such financial statements contained in FCX's 1994 Annual
Report to stockholders.
Page
----
Report of Independent Public Accountants........................F-1
III-Condensed Financial Information of Registrant...............F-2
Schedules other than those schedules listed above have been omitted since
they are either not required or not applicable or the required information is
included in the financial statements or notes thereof.
* * *
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
We have audited, in accordance with generally accepted auditing
standards, the financial statements as of December 31, 1994 and 1993 and for
each of the three years in the period ended December 31, 1994 included in
Freeport-McMoRan Copper & Gold Inc.'s annual report to shareholders
incorporated by reference in this Form 10-K, and have issued our report
thereon dated January 24, 1995. Our audits were made for the purpose of
forming an opinion on those statements taken as a whole. The schedule listed
in the index above is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
New Orleans, Louisiana,
January 24, 1995
FREEPORT-McMoRan COPPER & GOLD INC.
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Balance Sheets
December 31,
------------------------
1994 1993
---------- ----------
(In Thousands)
Assets
Cash and short-term investments $ 171 $ 427
Interest receivable 12,676 7,582
Receivable from Government of Indonesia - 2,247
Notes receivable from PT-FI 1,338,611 1,064,888
Investment in PT-FI 195,258 145,959
Investment in PTII 76,081 75,601
Investment in RTM 81,386 43,254
Other assets 14,988 2,011
---------- ----------
Total assets $1,719,171 $1,341,969
========== ==========
Liabilities and Stockholders' Equity
Accounts payable and accrued liabilities $ 27,270 $ 32,468
Long-term debt 190,000 102,039
Amount due to FTX 800 12,270
RTM stock subscription payable - 12,644
Other liabilities and deferred credits 6,119 2,001
Mandatory redeemable preferred stock 500,007 232,620
Stockholders' equity 994,975 947,927
---------- ----------
Total liabilities and stockholders' equity $1,719,171 $1,341,969
========== ==========
Statements of Income
Years Ended December 31,
--------------------------------
1994 1993 1992
-------- -------- --------
(In Thousands)
Income from investment in PT-FI and PTII,
net of PT-FI tax provision $111,822 $ 53,861 $128,220
Net loss from investment in RTM (6,309) (15,666) -
Elimination of intercompany profit 3,005 (6,610) -
General and administrative expenses (7,253) (5,207) (4,802)
Depreciation and amortization (3,711) (2,397) (200)
Interest expense (10,259) (8,017) (16,518)
Interest income on PT-FI notes receivable:
Zero coupon exchangeable notes 352 19,175 18,326
Promissory notes 21,094 9,292 11,097
8.235% convertible 14,033 14,036 -
Step-up perpetual convertible 26,256 12,785 -
Gold and silver production payment loans 20,222 4,055 -
Other income (expense), net (7,424) (406) 5,561
Provision for income taxes (31,587) (24,085) (11,791)
-------- -------- --------
Net income 130,241 50,816 129,893
Preferred dividends (51,838) (28,954) (7,025)
-------- -------- --------
$ 78,403 $ 21,862 $122,868
======== ======== ========
FREEPORT-McMoRan COPPER & GOLD INC.
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(Continued)
Statements of Cash Flow
Years Ended December 31,
-----------------------------
1994 1993 1992
-------- -------- --------
(In Thousands)
Cash flow from operating activities:
Net income $130,241 $ 50,816 $129,893
Adjustments to reconcile net income to net
cash provided by operating activities:
Income from investment in PT-FI and PTII (111,822) (53,861) (128,220)
Net loss from investment in RTM 6,309 15,666 -
Elimination of intercompany profit (3,005) 6,610 -
Dividends received from PT-FI and PTII 147,465 132,048 78,214
Accretion of note receivable from PT-FI,
net - (9,104) (1,808)
Depreciation and amortization 3,711 2,397 200
(Increase) decrease in accounts receivable (24,240) - 20,000
Increase (decrease) in accounts payable (4,648) (646) 597
Other 1,654 (5,959) (1,854)
-------- -------- --------
Net cash provided by operating activities 145,665 137,967 97,022
-------- -------- --------
Cash flow from investing activities:
Received from Government of Indonesia 2,247 6,288 3,911
Investment in RTM (36,365) (43,642) -
Investment in PTII (8) - (211,892)
Investment in Freeport Hasa Inc. - - (1)
-------- -------- --------
Net cash used in investing activities (34,126) (37,354) (207,982)
-------- -------- --------
Cash flow from financing activities:
Cash dividends paid:
Class A common stock (38,316) (33,298) (26,088)
Class B common stock (85,187) (85,277) (85,277)
Special preference stock (15,708) (15,708) (4,407)
Step-Up preferred stock (17,500) (5,590) -
Mandatory redeemable preferred stock (13,614) (1,683) -
Proceeds from sale of:
Class A common stock - - 174,142
Preferred and preference stock 252,985 561,090 217,867
PT-FI common shares - - 212,484
9 3/4% senior notes 116,276 - -
Proceeds from equipment loan 70,000 - -
Proceeds from FTX 88,280 20,650 -
Repayment to FTX (99,750) (8,380) -
Loans to PT-FI (369,261) (706,750) (212,484)
-------- -------- --------
Net cash provided by (used) in financing
activities (111,795) (274,946) 276,237
-------- -------- --------
Net increase (decrease) in cash and short-
term investments (256) (174,333) 165,277
Cash and short-term investments at beginning
of year 427 174,760 9,483
-------- -------- --------
Cash and short-term investments at end of
year $ 171 $ 427 $174,760
======== ======== ========
Interest paid $ 7,788 $ 213 $ -
======== ======== ========
Taxes paid $ 29,871 $ 22,723 $ 11,762
======== ======== ========
FREEPORT-McMoRan COPPER & GOLD INC.
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(Continued)
a. The footnotes contained in FCX's 1994 Annual Report to stockholders are
an integral part of these statements.
Freeport-McMoRan Copper & Gold Inc.
EXHIBIT INDEX
---------------
Sequentially
Exhibit Numbered
Number Page
-------- ----
3.1 Composite copy of the Certificate of
Incorporation of FCX.
3.2 By-Laws of FCX, as amended.
Incorporated by reference to Exhibit
3.2 to the Annual Report on Form 10-K
of FCX for the fiscal year ended
December 31, 1992 (the "FCX 1992 Form
10-K").
4.1 Certificate of Designations of the 7%
Convertible Exchangeable Special
Preference Stock (the "Special
Preference Stock") of FCX.
Incorporated by reference to Exhibit 5
to the Form 8 Amendment No. 1 dated
July 16, 1992 (the "Form 8 Amendment")
to the Application for Registration on
Form 8-A of FCX dated July 2, 1992.
4.2 Deposit Agreement dated as of July 21,
1992 among FCX, Mellon Securities
Trust Company, as Depositary, and
holders of depositary receipts
("Depositary Receipts") evidencing
certain Depositary Shares, each of
which, in turn, represents 2-16/17
shares of Special Preference Stock.
Incorporated by reference to Exhibit 2
to the Form 8 Amendment.
4.3 Form of Depositary Receipt.
Incorporated by reference to Exhibit 1
to the Form 8 Amendment.
4.4 Certificate of Designations of the
Step-Up Convertible Preferred Stock
of FCX. Incorporated by reference to
Exhibit 4.4 to the Annual Report on
Form 10-K of FCX for the fiscal year
ended December 31, 1993 (the "FCX 1993
Form 10-K").
4.5 Deposit Agreement dated as of July 1,
1993 among FCX, Mellon Securities
Trust Company, as Depositary, and
holders of depositary receipts ("Step-
Up Depositary Receipts") evidencing
certain Depositary Shares, each of
which, in turn, represents 0.05 shares
of Step-Up Convertible Preferred
Stock. Incorporated by reference to
Exhibit 4.5 to the FCX 1993 Form 10-K.
4.6 Form of Step-Up Depositary Receipt.
Incorporated by reference to Exhibit
4.6 to the FCX 1993 Form 10-K.
4.7 Certificate of Designations of the
Gold-Denominated Preferred Stock of
FCX. Incorporated by reference to
Exhibit 4.7 to the FCX 1993 Form 10-K.
4.8 Deposit Agreement dated as of August
12, 1993 among FCX, Mellon Securities
Trust Company, as Depositary, and
holders of depositary receipts ("Gold-
Denominated Depositary Receipts")
evidencing certain Depositary shares,
each of which, in turn, represents
0.05 shares of Gold-Denominated
Preferred Stock. Incorporated by
reference to Exhibit 4.8 to the FCX
1993 Form 10-K.
4.9 Form of Gold-Denominated Depositary
Receipt. Incorporated by reference to
Exhibit 4.9 to the FCX 1993 Form 10-K.
4.10 Certificate of Designations of the
Gold-Denominated Preferred Stock,
Series II (the "Gold-Denominated
Preferred Stock II") of FCX.
Incorporated by reference to Exhibit
4.1 to the Quarterly Report on Form
10-Q of FCX for the quarter ended
March 31, 1994 (the "FCX 1994 First
Quarter Form 10-Q").
4.11 Deposit Agreement dated as of January
15, 1994, among FCX, Mellon Securities
Trust Company, as Depositary, and
holders of depositary receipts ("Gold-
Denominated II Depositary Receipts")
evidencing certain Depositary shares,
each of which, in turn, represents
0.05 shares of Gold-Denominated
Preferred Stock II. Incorporated by
reference to Exhibit 4.2 to the FCX
1994 First Quarter Form 10-Q.
4.12 Form of Gold-Denominated II Depositary
Receipt. Incorporated by reference to
Exhibit 4.3 to the FCX 1994 First
Quarter Form 10-Q.
4.13 Certificate of Designations of the
Silver-Denominated Preferred Stock of
FCX.
4.14 Deposit Agreement dated as of July 25,
1994 among FCX, Mellon Securities
Trust Company, as Depositary, and
holders of depositary receipts
("Silver-Denominated Depositary
Receipts") evidencing certain
Depositary shares, each of which, in
turn, initially represents 0.025
shares of Silver-Denominated Preferred
Stock. Incorporated by reference to
Exhibit 4.2 to the July 15, 1994 Form
8-A.
4.15 Form of Silver-Denominated Depositary
Receipt. Incorporated by reference to
Exhibit 4.1 to the July 15, 1994, Form
8-A.
4.16 Credit Agreement dated as of June 1,
1993 (the "PT-FI Credit Agreement")
among PT-FI, the several banks which
are parties thereto (the "PT-FI
Banks"), Morgan Guaranty Trust Company
of New York, as PT-FI Trustee (the
"PT-FI Trustee"), and Chemical Bank,
as agent (the "PT-FI Bank Agent").
Incorporated by reference to Exhibit
4.10 to the FCX 1993 Form 10-K.
4.17 First Amendment dated as of February
2, 1994 to the PT-FI Credit Agreement
among PT-FI, the PT-FI Banks, the PT-
FI Trustee and the PT-FI Bank Agent.
Incorporated by reference to Exhibit
4.11 to the FCX 1993 Form 10-K.
4.18 Second Amendment dated as of March 1,
1994 to the PT-FI Credit Agreement
among PT-FI, the PT-FI Banks, the PT-
FI Trustee and the PT-FI Bank Agent.
Incorporated by reference to Exhibit
4.12 to the FCX 1993 Form 10-K.
4.19 Third Consent and Waiver dated as of
October 18, 1994 to the PT-FI Credit
Agreement among PT-FI, the PT-FI
Banks, the PT-FI Trustee and the PT-FI
Bank Agent.
4.20 Fourth Amendment, Consent and Limited
Waiver dated as of November 23, 1994
to the PT-FI Credit Agreement among
PT-FI, the PT-FI Banks, the PT-FI
Trustee and the PT-FI Bank Agent.
4.21 Term Loan and Working Capital
Agreement dated as of November 4, 1994
(the "RTML Term Loan") among Rio Tinto
Metal, S.A. ("RTML"), the Lenders and
Barclays Bank PLC as Agent (the
"Agent").
4.22 Amendment No. 1 dated as of March 7,
1995 to the RTML Term Loan among
RTML, the Lenders and the Agent.
4.23 Agreement dated as of May 1, 1988
between Freeport Minerals Company and
FCX assigning certain stockholder
rights and obligations. Incorporated
by reference to Exhibit 10.13 to
Registration No. 33-20807.
10.1 Design, Engineering and Related
Services Contract dated as of
September 15, 1992 between PT-FI and
Fluor Daniel Engineers & Constructors,
Ltd. Incorporated by reference to
Exhibit 10.1 to the FCX 1992 Form 10-
K.
10.2 Site Services Contract dated as of
September 15, 1992 between PT-FI and
Fluor Daniel Eastern, Inc.
Incorporated by reference to Exhibit
10.2 to the FCX 1992 Form 10-K.
10.3 Contract of Work dated December 30,
1991 between The Government of the
Republic of Indonesia and PT-FI.
Incorporated by reference to Exhibit
10.20 to the FCX 1991 Form 10-K.
10.4 Management Services Agreement dated as
of May 1, 1988 among FCX, FII and FTX.
Incorporated by reference to Exhibit
10.01 to Registration No. 33-20807.
10.5 Concentrate Sales Agreement dated as
of December 30, 1990 between FII and
Dowa Mining Co., Ltd., Furukawa Co.,
Ltd., Mitsubishi Materials
Corporation, Mitsui Mining & Smelting
Co., Ltd., Nittetsu Mining Co., Ltd.,
Nippon Mining Co., Ltd. and Sumitomo
Metal Mining Co., Ltd. (Confidential
information omitted and filed
separately with the Securities and
Exchange Commission.) Incorporated by
reference to Exhibit 10.3 to the
Annual Report on Form 10-K of FCX for
the fiscal year ended December 31,
1990.
12.1 FCX Computation of Ratio of Earnings
to Fixed Charges.
13.1 Those portions of the 1994 Annual
Report to stockholders of FCX which
are incorporated herein by reference.
21.1 Subsidiaries of FCX.
23.1 Consent of Arthur Andersen LLP dated
March 23, 1995.
24.1 Certified resolution of the Board of
Directors of FCX authorizing this
report to be signed on behalf of any
officer or director pursuant to a
Power of Attorney.
24.2 Powers of Attorney pursuant to which
this report has been signed on behalf
of certain officers and directors of
FCX.
27.1 FCX Financial Data Schedule.
EX-3
2
Exhibit 3.1
COMPOSITE COPY
OF THE
CERTIFICATE OF INCORPORATION
OF
FREEPORT-McMoRan COPPER & GOLD INC.
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:
1. 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,
-1-
tantalum, tin, titanium, tungsten, uranium, zinc and ores
and concentrates thereof.
2. To purchase, locate, denounce, lease 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.
3. 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
-2-
and description.
4. 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:
I. The total number of shares of all classes of
capital stock that the corporation shall have authority to
issue is 500,000,000 shares, with a par value of $0.10 per
share. Of such shares, 250,000,000 shares shall consist of
Special Stock, 200,000,000 shares shall consist of Class B
Common Stock and 50,000,000 shares shall consist of
Preferred Stock.
II. Special Stock.
A. Class A Common Stock
Within the limits of the authorized
Special Stock, the corporation shall
have authority to designate shares of
Special Stock as shares of Class A
Common Stock. The Class A Common Stock
shall be treated, for all purposes,
together with the Class B Common Stock
as though they were of the same class.
B. Additional Shares of Special Stock
The Board of Directors is expressly
authorized to adopt, from time to time,
a resolution or resolutions providing
for the issuance of the remaining shares
of Special Stock in one or more series,
to fix the number of shares in each such
series (subject to the aggregate
limitations thereon in this Article),
and to fix the designations, powers,
preferences and rights and the
qualifications, limitations and
restrictions of each such series.
Within the limits of the authorized
-3-
Special Stock, the corporation will be
authorized to issue additional shares of
Class A Common Stock and shares of
additional Special Stock (including
stock having preferential rights as to
dividends or upon liquidation),
including the issuance of such shares in
exchange for shares of Class B Common
Stock. The authority of the Board of
Directors with respect to each such
series shall include, but not be limited
to, determination of the following
(which may vary as between the different
series of Special Stock):
(a) The number of shares constituting
the shares of the series and the
distinctive designation of the series;
(b) The dividend rate of the shares of
the series and the extent, if any, to
which dividends thereon shall be
cumulative;
(c) Whether shares of the series shall
be redeemable and, if redeemable, the
redemption price payable on redemption
thereof, which price may, but need not,
vary according to the time or
circumstances of such redemption;
(d) The amount or amounts payable upon
the shares of the series in the event of
voluntary or involuntary liquidation,
dissolution or winding up of the
corporation prior to any payment or
distribution of the assets of the
corporation to any class or classes of
stock of the corporation ranking junior
to the Special Stock;
(e) Whether the shares of the series
shall be entitled to the benefit of a
sinking or retirement fund to be applied
to the purchase or redemption of shares
of the series and, if so entitled, the
amount of such fund and the manner of
its application, including the price or
prices at which the shares may be
redeemed or purchased through the
application of such fund;
-4-
(f) Whether the shares of the series
shall be convertible into, or
exchangeable for, shares of any other
class or classes or of any other series
of the same or any other class or
classes of stock of the corporation,
and, if so convertible or exchangeable,
the conversion price or prices, or the
rates of exchange, and the adjustment
thereof, if any, at which such
conversion or exchange may be made, and
any other terms and conditions of such
conversion or exchange;
(g) The extent, if any, to which the
holders of shares of the series shall be
entitled to vote on any questions or in
any proceedings or to be represented at
and to receive notice of any meeting of
stockholders of the corporation;
(h) Whether, and the extent to which,
any of the voting powers, designations,
preferences, rights, qualifications,
limitations or restrictions of any such
series may be made dependent upon facts
ascertainable outside of this
Certificate of Incorporation or of any
amendment hereto or outside the
resolution or resolutions providing for
the issuance of such series adopted by
the Board of Directors, provided the
manner in which such facts shall operate
upon the voting powers, designations,
preferences, rights, qualifications,
limitations or restrictions of such
series is clearly and expressly set
forth in the resolution or resolutions
providing for the issuance of such
series adopted by the Board of
Directors; and
(i) Any other preferences, privileges
or powers and any relative,
participating, optional or other special
rights and qualifications, limitations
or restrictions of such series, as the
Board of Directors may deem advisable,
which shall not affect adversely any
other class or series of Special Stock
at the time outstanding and which shall
not be inconsistent with the provisions
-5-
of this Certificate of Incorporation.
III. (a) The holders of outstanding shares
of Special Stock, including Class A
Common Stock, and Class B Common Stock
are entitled to receive dividends out of
assets legally available therefor at
such times and such equal per share
amounts as the Board of Directors may
from time to time determine and upon
liquidation, dissolution or winding up
of the corporation, the holders of
Special Stock, including Class A Common
Stock, and Class B Common Stock are
entitled to receive on an equal per
share basis the assets of the
corporation which are legally available
for distribution, after payment of all
debts and other liabilities of the
corporation, except as otherwise
provided by the Board of Directors,
pursuant to clause (B)(d) of Paragraph
II above, with respect to any series of
Special Stock other than the Class A
Common Stock. The shares of Special
Stock, including Class A Common Stock,
and Class B Common Stock are neither
redeemable nor convertible, and the
holders thereof have no preemptive or
subscription rights to purchase any
securities of the corporation, except as
otherwise provided by the Board of
Directors, pursuant to clauses (B)(c)
and (B)(f) of Paragraph II above, with
respect to any series of Special Stock
other than the Class A Common Stock.
(b) Each outstanding share of Special
Stock, including Class A Common Stock,
and Class B Common Stock is entitled to
one vote on all matters submitted to a
vote of stockholders, except as
otherwise provided by the Board of
Directors, pursuant to clause (B)(g) of
Paragraph II above, with respect to any
series of Special Stock other than the
Class A Common Stock. There is no
cumulative voting. The special Stock
entitled to vote, including Class A
Common Stock, and the Class B Common
Stock shall vote as a single class.
-6-
IV. 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 different
series in the following respects:
(a) The distinctive serial
designation of such series;
(b) The annual dividend rate for
such series, and the date or
dates from which dividends
shall commence to accrue;
(c) The redemption price or
prices, if any, for shares of
such series and the terms and
conditions on which such
shares may be redeemed;
(d) The sinking fund provisions,
if any, for the redemption or
purchase of shares of such
series;
(e) The preferential amount or
amounts payable upon shares of
such series in the event of
the voluntary or involuntary
liquidation of the
corporation;
(f) The voting rights of shares of
such series;
(g) The terms and conditions, if
any, upon which shares of such
series may be converted and
-7-
the class or classes or series
of shares of the corporation
into which such shares may be
converted; and
(h) 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.
FIFTH: The name and mailing address of the
incorporator is:
NAME MAILING ADDRESS
R. Blain Andrus 6110 Plumas Street
Reno, Nevada 89509
SIXTH: The names and mailing addresses of the
persons who are to serve as directors until the first annual
meeting of stockholders or until their successors are
elected and qualify are as follows:
NAME MAILING ADDRESS
Milton H. Ward 1615 Poydras Street
New Orleans, LA 70112
Joseph W. Murray Mountain City Star Route
Elko, NV 89801
Richard Block Mountain City Star Route
Elko, NV 89801
SEVENTH: In furtherance, and not in limitation, of the
powers conferred by statute, (a) the Board of Directors is
expressly authorized to adopt, amend or repeal the by-laws
-8-
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.
EIGHTH: Election of directors need not be by ballot
unless the by-laws of the corporation shall so provide.
NINTH: (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 (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law,
(iii) under Section 174 of the Delaware General Corporation
Law, or (iv) 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
-9-
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 NINTH.
(c) The provisions of this Article NINTH 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 capacity at any time while
this Article NINTH is in effect. No repeal or modification
of the foregoing provisions of this Article NINTH 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
-10-
directors or otherwise.
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.
Rev JND 5/94
-11-
EX-4
3
Exhibit 4.13
CERTIFICATE OF DESIGNATIONS
OF
SILVER-DENOMINATED PREFERRED STOCK
(Par Value $0.10 Per Share)
OF
FREEPORT-McMoRan COPPER & GOLD INC.
Pursuant to Section 151(g) of the
General Corporation Law of the State of Delaware
We, the undersigned, being a Vice President and the
Secretary, respectively, of Freeport-McMoRan Copper & Gold
Inc. (hereinafter called the "Corporation"), a corporation
organized and existing under and by virtue of the provisions
of the General Corporation Law of the State of Delaware,
DO HEREBY CERTIFY:
FIRST. The Certificate of Incorporation of the
Corporation, as amended (hereinafter called the "Certificate
of Incorporation"), authorizes the issuance of 50,000,000
shares of Preferred Stock, par value $0.10 per share, of
which 1,215,279 shares have been issued. The Board of
Directors of the Corporation is authorized by the
Certificate of Incorporation to provide, without further
stockholder action, for the issuance of any or all of the
shares of the Preferred Stock in one or more series, with
such designation, powers, preferences and relative,
participating, optional or other rights, and any
qualifications, limitations or restrictions thereof, as may
be determined by the Board of Directors of the Corporation
with respect to each particular series prior to the issue
thereof.
SECOND. The Board of Directors of the Corporation,
acting at a meeting of the Board of Directors on February
22, 1994 and by Unanimous Written Consent dated July 8,
1994, and a Special Committee thereof, pursuant to authority
specifically granted to it by such Board of Directors,
acting by Unanimous Written Consent dated July 22, 1994,
duly adopted the following resolutions authorizing the
creation and issuance of a series of Preferred Stock to be
known as "Silver-Denominated Preferred Stock."
1
RESOLVED, that the Board of Directors, pursuant to
authority vested in it by the provisions of the Certificate
of Incorporation of the Corporation, hereby authorizes the
issuance of a series of Preferred Stock of the Corporation
and hereby fixes the number, designation, preferences,
rights and any qualifications, limitations or restrictions
thereof as follows:
1. Designation. (a) 136,808 shares of Preferred
Stock of the Corporation are hereby constituted as a series
of Preferred Stock designated as "Silver-Denominated
Preferred Stock" (hereinafter called "this Series"). Each
share of this Series shall be identical in all respects with
the other shares of this Series. The Board of Directors is
authorized to increase or decrease (but not below the number
of shares of this Series then outstanding) the number of
shares of this Series.
(b) Shares of this Series which have been redeemed
for cash as hereinafter provided or purchased by the
Corporation shall be canceled, and shall revert to
authorized but unissued shares of Preferred Stock undesig-
nated as to series, and may be reissued as a part of this
Series or may be reclassified and reissued as part of a new
or existing series of Preferred Stock to be created by
resolution or resolutions of the Board of Directors, all
subject to the conditions or restrictions on issuance set
forth in any resolution or resolutions adopted by the Board
of Directors providing for the issue of such series of
Preferred Stock.
2. Dividends. (a) The holders of shares of this
Series shall be entitled to receive, but only out of funds
legally available therefor, cash dividends as hereinafter
provided. Such dividends shall be paid when, as and if
declared by the Board of Directors on the first day of
February, May, August and November in each year commencing
November 1, 1994 and ending August 1, 2006 (or, if any
shares of this Series remain outstanding after August 1,
2006, the last such date thereafter on which any shares of
this Series remain outstanding) (each such date being
referred to herein as a "Dividend Payment Date") to holders
of record on the record date determined by the Board of
Directors in advance of the payment of each particular
dividend. Such dividends shall be cumulative from the date
of original issuance of the shares of this Series.
(b) So long as any shares of this Series shall be
outstanding, the Corporation shall not, unless full
cumulative dividends for all past dividend periods shall
have been paid or declared and set apart for payment upon
all outstanding shares of this Series and the shares of any
other class or series of Preferred Stock (including the
2
Gold-Denominated Preferred Stock, the Gold-Denominated
Preferred Stock, Series II and the Step-Up Convertible
Preferred Stock), the 7% Convertible Exchangeable Special
Preference Stock (hereinafter called the "Special Preference
Stock") and any other class or series of stock of the
Corporation ranking, as to dividends, on a parity with
shares of this Series (the shares of any other class or
series of Preferred Stock (including the Gold-Denominated
Preferred Stock, the Gold-Denominated Preferred Stock,
Series II and the Step-Up Convertible Preferred Stock), the
Special Preference Stock and any other class or series of
stock of the Corporation ranking, as to dividends, on a
parity with shares of this Series being herein referred to
as "Parity Dividend Stock"), (i) declare, pay or set apart
any amounts for dividends on, or make any other distribution
in cash or other property in respect of, the Class A Common
Stock of the Corporation (the "Class A Common Stock"), the
Class B Common Stock of the Corporation ("Class B Common
Stock") or any other stock of the Corporation ranking junior
to this Series as to dividends or distribution of assets
upon liquidation, dissolution or winding up of the affairs
of the Corporation (the Class A Common Stock, the Class B
Common Stock and any such other stock being herein referred
to as "Junior Stock"), other than a dividend payable solely
in Junior Stock, (ii) purchase, redeem or otherwise acquire
for value any shares of Junior Stock, directly or
indirectly, other than as a result of a reclassification,
exchange or conversion of one Junior Stock for or into
another Junior Stock, or other than through the use of
proceeds of a substantially contemporaneous sale of other
Junior Stock, or (iii) make any payment on account of, or
set aside money for, a sinking or other like fund for the
purchase, redemption or other acquisition for value of any
shares of Junior Stock. For purposes of this Section 2 and
of Section 4(f), if any depositary shares have been issued
with respect to any series of stock, actions with respect to
such depositary shares, including acquisition of and pay-
ments on or with respect to such depositary shares, shall be
regarded as actions with respect to such series of stock.
(c) If the funds available for the payment of
dividends are insufficient to pay in full the dividends
payable on all outstanding shares of this Series and shares
of Parity Dividend Stock, the total available funds to be
paid in partial dividends on the shares of this Series and
shares of Parity Dividend Stock shall be divided among this
Series and the Parity Dividend Stock in proportion to the
aggregate amounts of dividends accrued and unpaid with
respect to this Series and the Parity Dividend Stock.
Accruals of dividends shall not bear interest.
3. Dividend Rate. (a) The Dividend Rate per
quarter on each share of this Series shall be an amount
3
equal to the Dollar Equivalent Value (as defined below) of
1.65 ounces of silver. "Dollar Equivalent Value" means the
applicable Reference Silver Price multiplied by the appli-
cable number of ounces of silver. "Reference Silver Price"
means, when used to calculate the amount of any dividend
payable on any Dividend Payment Date, the arithmetic average
of the London silver fixing spot price for an ounce of
silver in the London bullion market on each of the twenty
trading days ending on the second trading day prior to the
last day of the calendar quarter immediately preceding such
Dividend Payment Date, as published in The Wall Street
Journal (Eastern Edition) (or, if such prices are not
published in The Wall Street Journal, as published in the
Financial Times). If for any reason silver is not traded
during any relevant period in the London bullion market or
is not quoted in U.S. dollars in such market, silver will be
valued during such period or portion thereof, as the case
may be, on the basis of trading prices, quoted in U.S.
dollars, in the then principal international trading market
for silver as determined by the Corporation's Board of
Directors. On or before the fifth business day preceding
each record date for the payment of a dividend in respect of
the shares of this Series, the Corporation will cause to be
published in The Wall Street Journal (Eastern Edition) or,
if such newspaper is not then published, in a newspaper or
other publication of national circulation, the amount of the
dividend payable in respect of each share of this Series
(and, if the shares of this Series are represented by
depositary shares, the amount so payable per depositary
share) on the next succeeding Dividend Payment Date.
(b) Dividends in respect of the first Dividend
Period shall accrue from the date of original issuance of
the shares of this Series and shall be calculated on the
basis of a year of 360 days consisting of 12 30-day months.
The term "Dividend Period", as used herein, means (i), with
respect to the November 1, 1994 Dividend Payment Date, the
period from the date of original issuance of the shares of
this Series to and including such Dividend Payment Date, and
(ii), with respect to any other Dividend Payment Date, the
period commencing on the day following the immediately pre-
ceding Dividend Payment Date to and including such Dividend
Payment Date.
4. Redemption. (a) The Company will redeem
annually on August 1 beginning in 1999, out of funds legally
available therefor, a number of shares of this Series equal
to one eighth of the total number of shares of this Series
outstanding immediately after the date of original issuance
of the shares of this Series (including any shares issued
pursuant to underwriters' over-allotment options) (the
"Original Shares"), at the Dollar Equivalent Value per share
of 160 ounces of silver.
4
(b) The shares of this Series shall not be subject
to redemption at the option of the Corporation except as
described in this Section 4(b). If at any time the total
number of outstanding depositary shares representing shares
of this Series (the "Depositary Shares") shall be less than
15% of the total number of Depositary Shares representing
shares of this Series outstanding immediately after the date
of original issuance of the shares of this Series, the
Corporation shall have the option to redeem the outstanding
shares of this Series, in whole but not in part, on any
subsequent Dividend Payment Date out of funds legally
available therefor, at an amount equal to the Dollar
Equivalent Value of 160 ounces of silver per share plus
accrued and unpaid dividends (as hereinafter defined) to the
date fixed for redemption. For purposes of determining the
number of shares of this Series outstanding on any Dividend
Payment Date, the shares of this Series acquired by the
Corporation on or prior to such Dividend Payment Date and
not theretofore canceled (or in the case of any shares of
this Series represented by depositary shares, the depositary
shares representing shares of this Series acquired by the
Corporation on or prior to such Dividend Payment Date and
not theretofore delivered to the depositary for the
depositary shares for cancellation) shall be deemed to be
outstanding. Notice of any such redemption as described in
this Section 4(b) shall be mailed to holders of the shares
of this Series within 30 days after such Dividend Payment
Date in accordance with the provisions of Section 4(c). In
connection with any redemption pursuant to this Section
4(b), the Corporation shall instruct the depositary in
respect of any Depositary Shares representing shares of this
Series to redeem such Depositary Shares on the same date as
the redemption of shares of this Series.
(c) At least 30 days but no more than 60 days prior
to the date fixed for redemption of the shares of this
Series in accordance with Section 4(a) or (b) hereof (the
"Call Date"), a written notice will be mailed to each holder
of record (and each beneficial owner to the extent required
by law) of shares of this Series to be redeemed, notifying
each holder of the Corporation's election to redeem such
shares if such redemption is pursuant to Section 4(b),
setting forth the method for determining the amount payable
per share of this Series on the Call Date, stating the Call
Date and calling upon such holder to surrender to the
Corporation on the Call Date at the place designated in such
notice the certificate or certificates representing the
shares called for redemption.
(d) At any time after a notice of redemption has
been given in the manner prescribed in Section 4(a) or (b)
and the amount payable on the date fixed for redemption can
be determined by the Corporation, and prior to the date
5
fixed for redemption, the Corporation may deposit in trust,
with a bank or trust company identified in the notice of
redemption having capital, surplus and undistributed profits
aggregating at least $50,000,000, an aggregate amount of
funds sufficient for such redemption (including dividends
accrued on the shares of this Series called for redemption
to the date fixed for redemption) for immediate payment in
the appropriate amounts upon surrender of certificates for
such shares. Any interest accrued on such funds shall be
paid to the Corporation from time to time. Such deposit in
trust shall be irrevocable, except that any funds deposited
by the Corporation which are unclaimed at the end of two
years from the date fixed for such redemption shall be paid
over to the Corporation upon its request, and upon such
repayment the holders of the shares so called for redemption
shall look only to the Corporation for payment of the
appropriate amount.
(e) From and after the date fixed for redemption
(unless the Corporation shall default in making payment of
the amount payable upon such redemption), whether or not
certificates for shares so called for redemption have been
surrendered by the holders thereof as described below,
dividends on the shares of this Series so called for redemp-
tion shall cease to accrue, and, from and after the date of
the deposit of trust funds for the redemption of shares of
this Series in accordance with the provisions of Section
4(d) hereof, such shares shall be deemed to be no longer
outstanding, and all rights of the holders thereof as stock-
holders of the Corporation (except the right to receive from
the Corporation the amount payable upon such redemption)
shall cease and terminate. Upon surrender in accordance
with the notice of redemption of the certificates for any
shares of this Series so redeemed (properly endorsed or
assigned for transfer if the Corporation shall so require
and the notice shall so state), the holder thereof shall be
entitled to receive payment of the redemption price plus an
amount equal to all accrued and unpaid dividends as afore-
said.
(f) If the Corporation shall have failed to make
any required annual redemption then, until it shall have
redeemed all outstanding shares of this Series then required
to be redeemed, the Corporation may not (i) declare, pay or
set apart any amounts for dividends on, or make any other
distribution in cash or other property in respect of, any
Junior Stock other than a dividend payable solely in Junior
Stock, (ii) purchase, redeem or otherwise acquire for value
any shares of Junior Stock, directly or indirectly, other
than as a result of a reclassification, exchange or conver-
sion of one Junior Stock for or into another Junior Stock,
or other than through the use of proceeds of a substantially
contemporaneous sale of other Junior Stock, (iii) make any
6
payment on account of, or set aside money for, a sinking or
other like fund for the purchase, redemption or other acqui-
sition for value of any shares of Junior Stock or (iv) pur-
chase, redeem or otherwise acquire for value any shares of
stock of the Corporation ranking on a parity with the shares
of this Series as to dividends or distribution of assets
upon liquidation, dissolution or winding up ("Parity
Stock").
(g) (i) Within 90 days following each Calculation
Date (as defined below), the Corporation shall be required
to prepare a certificate (a "Corporation Certificate")
setting forth its determination of the Reserve Amount (as
defined below) as of such Calculation Date. If the Reserve
Amount, as shown on the Corporation Certificate prepared
with respect to any Calculation Date is less than the
Aggregate Reserve Requirement (as defined below) as of such
Calculation Date, the Corporation will be required to make
an offer (a "Reserve Coverage Offer") to purchase, out of
funds legally available therefor, at a price equal to the
liquidation preference thereof as of the Purchase Date (as
hereinafter defined), plus accrued and unpaid dividends
thereon to the Purchase Date, a sufficient number of shares
of this Series and of other Silver Parity Stock (as defined
below) (or the depositary shares, if any, issued with
respect thereto) such that, if all such shares had been
repurchased on the relevant Calculation Date, the Reserve
Amount on that date would have been greater than or equal to
the Aggregate Reserve Requirement on such date. If the
Corporation Certificate prepared with respect to any Calcu-
lation Date shows that the Reserve Amount is less than the
Aggregate Reserve Requirement on such date, the Corporation
shall include in such Certificate its calculation of the
number of shares of this Series (or related depositary
shares) and the number of shares of other Parity Stock (or
related depositary shares) it intends to offer to purchase
to satisfy the foregoing requirements (such number with
respect to any series being referred to as the "Offer
Amount" with respect to such series). The Corporation, in
its sole discretion, may determine the number of shares, if
any, of this Series (or related depositary shares) and the
number of shares, if any, of each other series of Silver
Parity Stock (or related depositary shares) to which a
Reserve Coverage Offer will be made so long as such require-
ments are satisfied.
(ii) If required to make a Reserve Coverage Offer,
the Corporation will commence such offer not more than 60
days after the date of the Corporation Certificate prepared
with respect to the applicable Calculation Date, by mailing
a notice to all holders of record of the shares of each
series included in such Reserve Coverage Offer setting forth
(A) that such notice is being given pursuant to a Reserve
7
Coverage Offer, (B) the Offer Amount with respect to such
series, (C) the method for determining the amount payable
per share of such series on the Purchase Date, (D) the last
date (the "Purchase Date"), which shall not be less than 30
nor more 60 days after the date of such notice, by which a
holder must elect whether to accept the Reserve Coverage
Offer, (E) the procedures that such holder must follow to
exercise its rights and (F) the procedures for withdrawing
an election. The Corporation shall also cause a copy of
such notice to be published in The Wall Street Journal
(Eastern Edition) or another daily newspaper of national
circulation.
(iii) Holders of shares of any series electing to
have shares of such series purchased by the Corporation
pursuant to a Reserve Coverage Offer will be required to
surrender the certificates representing such shares, with an
appropriate form duly completed, to the Corporation prior to
the Purchase Date. Holders will be entitled to withdraw an
election by a written notice of withdrawal delivered to the
Corporation prior to the close of business on the Purchase
Date. The notice of withdrawal shall state the number of
shares and certificate numbers to which the notice of with-
drawal relates and the number of shares and certificate
numbers, if any, which remain subject to the election. If
the aggregate number of shares of any series tendered
exceeds the Offer Amount with respect to such series, the
Corporation will select the shares of such series to be
purchased on a pro rata basis as nearly as practicable. The
Corporation shall, as promptly as reasonably practicable
after the Purchase Date, cause payment to be mailed or
delivered to each tendering holder in the amount of the
purchase price, and any unpurchased shares to be returned to
the holder thereof.
(h) If, at the time of any annual redemption or of
a Reserve Coverage Offer, the funds of the Corporation
legally available for redemption or repurchase of the shares
of this Series are insufficient to redeem or repurchase all
of such shares and all of the shares of any other series of
Parity Stock which the Corporation is then obligated to
redeem or repurchase, (i) the total legally available funds
shall be allocated among the shares of this Series and of
such other series in proportion to the aggregate dollar
amount of redemption or other repurchase obligations with
respect to this Series and such other series and (ii) the
portion of such funds allocated to this Series will be used
to redeem or repurchase the maximum possible number of
shares of this Series, pro rata based upon the number of
shares to be redeemed or delivered for repurchase, as the
case may be. At any time thereafter when additional funds
of the Corporation become legally available for such pur-
pose, after giving effect to the foregoing allocation
8
provisions, such funds shall immediately be used to redeem
or repurchase, as the case may be, any additional shares of
this Series which the Corporation is obligated to redeem or
repurchase, as the case may be, but which it has not so
redeemed or repurchased.
(i) The Corporation shall not have the right to
redeem shares of this Series pursuant to Section 4(a) or (b)
unless full cumulative dividends for all past dividend
periods shall have been paid or declared and set aside for
payment upon all outstanding shares of this Series and all
outstanding shares of other series of stock of the
Corporation ranking, as to dividends, on a parity with the
shares of this Series.
(j) The Corporation will not consummate or permit
any subsidiary to consummate any transaction involving the
Corporation which would cause the Reserve Amount to fall
below the Aggregate Reserve Requirement immediately after
consummation of such transaction unless the Corporation will
have sufficient legally available funds immediately
following consummation of such transaction to complete any
Reserve Coverage Offer required as a result thereof.
(k) Definitions. For purposes of this Section 4,
the following terms shall have the meanings indicated:
(i) "accrued and unpaid dividends" per share of
this Series (A) in the case of any Reserve Coverage Offer,
(B) in the case of any annual or optional redemption and
(C) in the case of a liquidation event, shall be equal to
the sum of (x) the aggregate amount of any accrued and
unpaid dividends on such share through the next preceding
Dividend Payment Date (calculated as provided in Section 3)
plus (y) a proportionate amount of the regular quarterly
dividend at the Dividend Rate for the period from the day
following the immediately preceding Dividend Payment Date
through the redemption date, Purchase Date or date of
liquidating distribution (calculated on the basis of a year
of 360 days consisting of twelve 30-day months) multiplied
by the Reference Silver Price used to calculate the other
amounts payable to holders of the shares of this Series in
connection with such redemption, purchase or liquidation
event. If a quarterly dividend is not declared and paid as
provided in Section 3, the unpaid dividend that shall
cumulate for such Dividend Period will be the amount of the
dividend that would have been payable on the Dividend
Payment Date if such dividend had been timely paid.
(ii) "Aggregate Reserve Requirement" as of any
Calculation Date means the sum of the individual Reserve
Coverage Requirements with respect to each series of Silver
Parity Stock, including this Series.
9
(iii) "Calculation Date" means (i) December 31 of
each year and (ii) the date of the consummation of each
transaction undertaken by the Corporation or any subsidiary
of the Corporation which would either (a) cause the Reserve
Amount, as estimated by the Corporation, to decrease by 50%
or more from the preceding Calculation Date or (b) cause the
Reserve Amount, as estimated by the Corporation, to fall
below the Aggregate Reserve Requirement on such date.
(iv) "Silver Parity Stock" means this Series and any
other series of Parity Stock the liquidation preference of
which is based on specified amounts of silver or the Dollar
Equivalent Value thereof.
(v) "Reference Silver Price", when used to
calculate the amount of any dividend payable on any Dividend
Payment Date or of any annual or optional redemption payment
with respect to the shares of this Series means the
arithmetic average of the London silver fixing spot price
for an ounce of silver in the London bullion market on each
of the twenty trading days ending on the second trading day
prior to the last day of the calendar quarter immediately
preceding such quarterly date, as published in The Wall
Street Journal (Eastern Edition) (or, if such prices are not
published in The Wall Street Journal (Eastern Edition), as
published in the Financial Times). When used to calculate
any other amount payable with respect to the shares of this
Series or to purchase any shares of this Series on any date,
the "Reference Silver Price" means the arithmetic average of
the London silver fixing spot price for an ounce of silver
on the London bullion market on each of the twenty trading
days ending on the second trading day prior to (i) in the
case of any Reserve Coverage Offer, the date of commencement
thereof and (ii) in the case of a liquidation event, the
date 30 days prior to the date fixed for the liquidating
distribution. If for any reason silver is not traded during
any relevant period in the London bullion market or is not
quoted in U.S. dollars in such market, silver will be valued
during such period or portion thereof, as the case may be,
on the basis of trading prices, quoted in U.S. dollars, in
the then principal international trading market for silver
as determined by the Corporation's Board of Directors.
(vi) "Required Coverage Multiplier" means (x) 2.0
with respect to this Series, (y) with respect to any other
series of Silver Parity Stock having the benefit of a
provision requiring an offer similar to the Reserve Coverage
Offer, the multiplier applicable thereto by the terms of
such other series, and (z) 1.0 with respect to any other
series of Silver Parity Stock.
(vii) "Reserve Amount" as of any Calculation Date
means the Corporation's Proportionate Interest in the
10
estimated proved and probable silver reserves of the
Corporation and of any entity in which the Corporation has a
direct or indirect beneficial ownership interest. The
estimated proved and probable silver reserves shall be
determined based upon evaluation methods generally applied
by the mining industry. The Corporation's "Proportionate
Interest" in any estimated proved and probable silver
reserves shall be the Corporation's direct or indirect
beneficial ownership interest in such reserves, giving
effect to reductions required to reflect any beneficial
ownership interest of any person other than the Corporation
in such reserves.
(viii) "Reserve Coverage Requirement" with respect to
any series of Silver Parity Stock shall mean the product of
(x) the aggregate liquidation preference of all outstanding
shares of such series (expressed in ounces of silver) times
(y) the Required Coverage Multiplier applicable to such
series. With respect to any series with respect to which
depositary shares have been issued, the aggregate
liquidation preference of such series shall be determined on
the basis of the number of such depositary shares as are
issued and outstanding as of the applicable Calculation Date
(excluding any depositary shares which have been acquired by
the Corporation on or prior to the date of the preparation
of the Corporation Certificate with respect to such
Calculation Date).
5. Voting Rights. (a) Except for the voting
rights described below and except as otherwise required by
law, the holders of shares of this Series shall not be
entitled to vote on any matter or to receive notice of, or
to participate in, any meeting of the stockholders of the
Corporation. Each share of Preferred Stock of this Series
will be entitled to one vote on matters which holders of
such Series are entitled to vote.
(b) Whenever dividends payable on shares of this
Series shall be in default in an aggregate amount equal to
or exceeding six full quarterly dividends on all shares of
this Series at the time outstanding, the number of directors
then constituting the Board of Directors of the Corporation
shall be increased by two, and holders of shares of this
Series shall, in addition to any other voting rights, have
the right, voting separately as a class together with
holders of all other series of stock of the Company ranking
on a parity with shares of this Series either as to
dividends or the distribution of assets upon liquidation,
dissolution or winding up and upon which like voting rights
have been conferred and are exercisable (such other series
of stock being herein referred to as "Other Voting Stock"),
to elect such two additional directors. In such case, the
Board of Directors will be increased by two directors, and
11
the holders of shares of this Series (either alone or with
the holders of Other Voting Stock) will have the exclusive
right as members of such class, as described above, to elect
two directors at the next annual meeting of stockholders.
Whenever such right of the holders of shares of this Series
shall have vested, such right may be exercised initially
either at a special meeting of such holders as provided in
Section 5(c) hereof or at any annual meeting of stockholders
held for the purpose of electing directors, and thereafter
at such annual meetings. The right of the holders of shares
of this Series to vote together as a class with the holders
of shares of any Other Voting Stock shall continue until
such time as all dividends accrued on outstanding shares of
this Series to the Dividend Payment Date next preceding the
date of any such determination shall have been paid in full,
or declared and set apart in trust for payment, at which
time the right of the holders of shares of this Series so to
vote shall terminate, except as herein or by law expressly
provided, subject to revesting upon the occurrence of a
subsequent default of the character mentioned above.
(c) At any time when the right of the holders of
shares of this Series to elect directors as provided in
Section 5(b) hereof shall have vested, and if such right
shall not already have been initially exercised, a proper
officer of the Corporation, upon the written request of the
holders of record of at least 10% of the aggregate number of
shares of this Series and shares of any Other Voting Stock
at the time outstanding, addressed to the Secretary of the
Corporation, shall call a special meeting of the holders of
shares of this Series and of such Other Voting Stock for the
purpose of electing directors. Such meeting shall be held
at the earliest practicable date upon the same form of
notice as is required for annual meetings of stockholders at
the place for the holding of annual meetings of stockholders
of the Corporation (or such other suitable place as is
designated by such officer). If such meeting shall not be
called by a proper officer of the Corporation within 20 days
after personal service of such written request upon the
Secretary of the Corporation, or within 20 days after
mailing the same within the United States of America,
addressed to the Secretary of the Corporation at its
principal office (such mailing to be evidenced by the
registry receipt issued by the postal authorities), then the
holders of record of at least 10% of the aggregate number of
shares of this Series and shares of any Other Voting Stock
at the time outstanding may designate in writing one of
their number to call such a meeting at the expense of the
Corporation, and such meeting may be called by such person
so designated upon the same form of notice as is required
for annual meetings of stockholders and shall be held at the
place for the holding of annual meetings of stockholders of
the Corporation (or such other suitable place as is
12
designated by such person). Any holder of shares of this
Series so designated shall have access to the registry books
of the Corporation for the purpose of causing a meeting of
stockholders to be called pursuant to this subsection (c).
Notwithstanding anything to the contrary contained in this
subsection (c), no such special meeting shall be called
during the period within 90 days immediately preceding the
date fixed for the next annual meeting of stockholders of
the Corporation.
(d) At any meeting held for the purpose of electing
directors at which holders of shares of this Series shall
have the right, voting together as a class with holders of
shares of any Other Voting Stock to elect directors as
provided in Section 5(b) hereof, the presence, in person or
by proxy, of the holders of 33 1/3% of the aggregate number
of shares of this Series and shares of such Other Voting
Stock at the time outstanding shall be required and be
sufficient to constitute a quorum of such class for the
election of directors pursuant to such Section 5(b). At any
such meeting or adjournment thereof, (i) the absence of a
quorum of the shares of this Series and shares of such Other
Voting Stock shall not prevent the election of the directors
to be elected otherwise than pursuant to Section 5(b) hereof
and (ii) in the absence of a quorum, either of the shares of
this Series and shares of such Other Voting Stock or of any
other shares of stock of the Corporation, or both, a
majority of the holders, present in person or by proxy, of
the class or classes of stock which lack a quorum shall have
the power to adjourn the meeting for the election of
directors whom they are entitled to elect, from time to time
without notice other than announcement at the meeting, until
a quorum shall be present.
(e) During any period when the holders of shares of
this Series shall have the right to vote together as a class
with the holders of shares of any Other Voting Stock for
directors as provided in Section 5(b) hereof, (i) the
directors so elected by such holders shall continue in
office until their successors shall have been elected by
such holders or until termination of the rights of such
holders to vote as a class for directors and (ii) any
vacancies in the Board of Directors shall be filled only by
a majority (even if that be only a single director) of the
remaining directors theretofore elected by the holders of
the class or classes of stock which elected the director
whose office shall have become vacant. Immediately upon
termination of the right of holders of this Series and any
Other Voting Stock to vote as a class for directors, (i) the
term of office of the directors so elected shall terminate
and (ii) the number of directors shall be such number as may
be provided for in the by-laws of the Corporation irrespec-
13
tive of any increase pursuant to the provisions of Section
5(b) hereof.
(f) In addition to any other vote required by law,
the Corporation shall not (i) amend, alter or repeal,
whether by merger, consolidation or otherwise, the provi-
sions of the Certificate of Incorporation (including this
Certificate of Designations) so as to materially and
adversely affect any right, preference, privilege or voting
power of this Series or (ii) create, authorize or issue any
series or class of stock ranking prior, either as to payment
of dividends or distributions of assets upon liquidation,
dissolution or winding up, to this Series, without the
affirmative vote or consent of the holders of at least two-
thirds of the aggregate number of shares of this Series at
the time outstanding, voting as a separate class; provided,
that any increase in the total number of authorized shares
of Class A Common Stock, Special Stock or Preferred Stock,
or the creation, authorization or issuance of any series of
stock ranking, as to dividends or distribution of assets
upon liquidation, dissolution or winding up of the affairs
of the Corporation, on a parity with the shares of this
Series will not be deemed to materially and adversely affect
such rights, preferences, privileges or voting powers;
provided, further, that no class vote of the holders of
shares of this Series shall be required if, at or prior to
the time when the actions described in clause (i) or (ii) of
this Section 5(f) shall become effective, provision is made
in accordance with Section 4 hereof for the redemption of
all shares of this Series at the time outstanding.
6. Preference upon Liquidation. (a) In the event of
any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation, after payment
or provision for payment of the debts and other liabilities
of the Corporation and of dividends and liquidation
preferences in respect of any other stock of the Corporation
ranking senior to the shares of this Series as to such
payments, the holders of shares of this Series shall be
entitled to receive, out of the remaining net assets of the
Corporation, the Dollar Equivalent Value of 160 ounces of
silver in cash for each share of this Series, plus an amount
equal to all dividends (whether or not earned or declared)
accrued and unpaid on each such share up to the date fixed
for distribution, before any distribution shall be made to
or set apart for the holders of any Junior Stock. If, after
payment or provision for payment of the debts and other
liabilities of the Corporation and of dividends and liqui-
dation preferences in respect of any other stock of the
Corporation ranking senior to the shares of this Series as
to such payments, the remaining net assets of the Corpora-
tion are not sufficient to pay to the holders of shares of
this Series the full amount of their preference set forth
14
above, then the remaining net assets of the Corporation
shall be divided among and paid to the holders of shares of
this Series, holders of shares of any other class or series
of Preferred Stock, holders of shares of Special Preference
Stock and holders of shares of any other stock of the
Corporation on a parity with this Series as to dividends and
distribution of assets upon liquidation, dissolution or
winding up of the affairs of the Corporation ratably per
share in proportion to the full per share amounts to which
they respectively are entitled. For purposes of this
Section 6(a) and Section 6(b), a consolidation or merger of
the Corporation with one or more other corporations or the
sale of all or substantially all of the assets of the
Corporation shall not be deemed to be a voluntary or
involuntary liquidation, dissolution or winding up of the
affairs of the Corporation.
(b) Subject to the rights of the holders of shares
of any series or class of stock ranking on a parity as to
dividends and distribution of assets upon liquidation,
dissolution or winding up of the affairs of the Corporation,
after payment shall have been made in full to the holders of
this Series as provided in Section 6(a) and this
Section 6(b), the holders of any Junior Stock shall, subject
to the respective terms and provisions (if any) applying
thereto, be entitled to receive any and all assets remaining
to be paid or distributed, and shares of this Series shall
not be entitled to share therein.
7. Taxes. The Corporation will pay any and all
documentary, stamp or similar taxes payable to the United
States of America or any political subdivision or taxing
authority thereof or therein in respect of the issue or
delivery of certificates for shares of this Series on
redemption of less than all of the shares represented by any
certificate for such shares surrendered for redemption or
pursuant to a Reserve Coverage Offer; provided, that the
Corporation shall not be required to pay any tax which may
be payable in respect of any transfer involved in the issue
or delivery of certificates for shares of this Series in a
name other than that of the holder of shares of this Series
to be redeemed or repurchased and no such issue or delivery
shall be made unless and until the person requesting such
issue or delivery has paid to the Corporation the amount of
any such tax or has established, to the satisfaction of the
Corporation, that such tax has been paid. The Corporation
extends no protection with respect to any other taxes
imposed in connection with such redemption or repurchase of
shares of this Series.
8. No Other Rights. The shares of this Series
shall not have any relative, participating, optional or
15
other special rights and powers other than as set forth
herein and other than any which may be provided by law.
16
IN WITNESS WHEREOF, Freeport-McMoRan Copper & Gold
Inc. has caused its corporate seal to be hereunto affixed
and this Certificate of Designations to be signed by its
Vice President as of this 26th day of July, 1994.
FREEPORT-McMoRan COPPER & GOLD INC.
By: /s/ Stephen M. Jones
------------------------
Name: Stephen M. Jones
Title: Vice President
[CORPORATE SEAL]
Attest:
By: /s/ Michael C. Kilanowski, Jr.
------------------------------
Name: Michael C. Kilanowski, Jr.
Title: Secretary
17
EX-4
4
Exhibit 4.19
THIRD CONSENT AND WAIVER dated as of
October 18, 1994 (this "Consent"), relating
to the Credit Agreement dated as of October
27, 1989, as amended and restated as of June
1, 1993 (as further amended by the First
Amendment dated as of February 2, 1994, and
the Second Amendment dated as of March 1,
1994, the "Credit Agreement"), among P.T.
FREEPORT INDONESIA COMPANY, a limited
liability company organized under the laws of
Indonesia and also domesticated in Delaware
("FI"), FREEPORT-McMoRan INC., a Delaware
corporation ("FTX"), FREEPORT-McMoRan COPPER
& GOLD INC., a Delaware corporation ("FCX"),
the undersigned banks (collectively, the
"Banks"), MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, a New York banking corporation (for
purposes of Article VIII of the Credit
Agreement only), as trustee for the Banks
under the FI Trust Agreement and, in such
capacity, as security agent for the Banks
under the FI Security Documents (in such
capacity, the "FI Trustee") and CHEMICAL
BANK, a New York banking corporation, as
agent for the Banks (in such capacity, the
"Agent"). Capitalized terms used herein and
not otherwise defined herein shall have the
meanings given such terms in the Credit
Agreement.
WHEREAS, FCX has advised the Banks and the Agent
that it wishes to make an investment of up to $31,000,000 in
Freeport-McMoRan Spain Inc. ("Freeport Spain") substantially
as described in Exhibit A hereto (the "RTM Transaction");
and
WHEREAS, the Banks and the Agent are willing to
consent to the consummation of the RTM Transaction, subject
to the terms and conditions of this Consent.
NOW, THEREFORE, in consideration of the premises
and the agreements, provisions and covenants herein
contained, FI, FTX, FCX, the FI Trustee, the Agent and the
Required Banks hereby agree, on the terms and subject to the
conditions set forth herein, as follows:
SECTION 1. Consent. The Banks and the
Agent hereby agree that FCX may make an equity investment of
up to $31,000,000 in Freeport Spain substantially as
described in Exhibit A hereto (the "RTM Investment") and
agree that the RTM Investment shall not be included in the
calculation of the permitted investment limit set forth in
Section 5.2(1) of the Credit Agreement.
SECTION 2. Conditions to Effectiveness.
This Consent shall become effective on the date of receipt
(the "Effective Date") by the Agent of executed counterparts
of this Consent which, when taken together, bear the
signatures of FI, FTX, FCX, the FI Trustee, the Agent and
the Required Banks.
SECTION 3. Counterparts. This Consent may be
executed in multiple counterparts, each of which shall
constitute an original, but all of which when taken together
shall constitute but one instrument.
SECTION 4. Limited Effect. Except as
expressly set forth herein, this Consent shall not by
implication or otherwise limit, impair, constitute a waiver
of or otherwise affect the rights and remedies of the Banks
and the Agent under the Credit Agreement, nor alter, modify,
amend or in any way affect any of the terms, conditions,
obligations, covenants or agreements contained in the Credit
Agreement, all of which are ratified and affirmed in all
respects and shall continue in full force and effect. This
Consent shall apply and be effective only with respect to
the provisions of the Credit Agreement specifically referred
to herein. Except as expressly set forth herein, the Credit
Agreement shall continue in full force and effect in
accordance with the provisions thereof.
SECTION 5. APPLICABLE LAW. THIS CONSENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
SECTION 6. Expenses. FTX shall pay all
out-ofpocket expenses incurred by the Agent in connection
with the preparation of this Consent, including, but not
limited to, the reasonable fees and disbursements of
Cravath, Swaine & Moore, special counsel for the Agent.
SECTION 7. Headings. The headings of this
Consent are for reference only and shall not limit or
otherwise affect the meaning hereof.
IN WITNESS WHEREOF, the parties hereto have caused
this Consent to be executed by their duly authorized
officers or agents as of the date first above written.
P.T. FREEPORT INDONESIA
COMPANY,
by: /s/R. Foster Duncan
-------------------
Name: R. Foster Duncan
Title: Treasurer
FREEPORT-McMoRan INC.,
by: /s/R. Foster Duncan
-------------------
Name: R. Foster Duncan
Title: Treasurer
FREEPORT-McMoRan COPPER & GOLD
INC.,
by: /s/ R. Foster Duncan
--------------------
Name: R. Foster Duncan
Title: Treasurer
CHEMICAL BANK, individually and
as
Agent,
by: /s/ Theodore L. Parker
----------------------
Name: Theodore L. Parker
Title: Vice President
EX-4
5
Exhibit 4.20
FOURTH AMENDMENT, CONSENT AND
LIMITED WAIVER dated as of November 23,
1994 (this "Amendment"), relating to the
Credit Agreement dated as of October 27,
1989, as amended and restated as of June
1, 1993 (as further amended by the First
Amendment dated as of February 2, 1994,
the Second Amendment dated as of March
1, 1994, and the Third Consent and
Waiver dated as of October 18, 1994, the
"Credit Agreement"), among P.T. FREEPORT
INDONESIA COMPANY, a limited liability
company organized under the laws of
Indonesia and also domesticated in
Delaware ("FI"), FREEPORT-McMoRan INC.,
a Delaware corporation ("FTX"),
FREEPORT-McMoRan COPPER & GOLD INC., a
Delaware corporation ("FCX"), the
undersigned banks (collectively, the
"Banks"), MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, a New York banking
corporation (for purposes of Article
VIII of the Credit Agreement only), as
trustee for the Banks under the FI Trust
Agreement and, in such capacity, as
security agent for the Banks under the
FI Security Documents (in such capacity,
the "FI Trustee") and CHEMICAL BANK, a
New York banking corporation, as agent
for the Banks (in such capacity, the
"Agent"). Capitalized terms used herein
and not otherwise defined herein shall
have the meanings given such terms in
the Credit Agreement.
WHEREAS, FCX has advised the Banks and the Agent
that it wishes to borrow $70,000,000 (the "Caterpillar
Debt") from Caterpillar Financial Services Corporation
("Caterpillar"), with a guarantee thereof by FI (together
with the Caterpillar Debt, the "Caterpillar Obligations"),
such guarantee to be secured by certain specified heavy
equipment of FI and related spare parts (the "Caterpillar
Assets") to be released from the lien of the FI Security
Documents, all substantially on the terms set forth on
Exhibit A hereto (the "Caterpillar Transaction");
WHEREAS, FTX has advised the Banks and the Agent
that FRP wishes to purchase certain assets from Pennzoil
Company substantially on the terms described in Exhibit B
hereto (the "Pennzoil Transaction");
WHEREAS, FI has advised the Banks and the Agent
that it wishes to consummate the Power Facilities Transfer
by selling certain specified power generation and transfer
assets (the "PFT Assets") to P.T. Puncak Jaya Power ("Jaya
Power"), by entering into various contracts relating to the
supply and purchase of the electric power generated from the
PFT Assets (the obligations of FI relating to the PFT
Transaction being collectively referred to as the "PFT
Obligations") and by making an equity investment of up to
$17,750,000 in Jaya Power, all substantially on the terms
set forth on Exhibit C hereto (collectively, the "PFT
Transaction");
WHEREAS, FI has advised the Banks and the Agent
that it wishes to enter into a financing transaction with
P.T. ALatieF P&O Port Development Corporation ("P&O") to be
secured by certain specified port facilities and assets (the
"P&O Assets") to be released from the Lien of the FI
Security Documents (all obligations of FI relating to the
P&O Transaction being collectively referred to as the "P&O
Obligations"), all substantially as described in Exhibit D
hereto (the "P&O Transaction");
WHEREAS, FI has advised the Banks and the Agent
that it wishes to enter into a financing transaction with
P.T. Airfast Aviation Facilities Company ("Avco") to be
secured by certain specified aircraft and airport facilities
(the "Airfast Assets") to be released from the Lien of the
FI Security Documents (all obligations of FI relating to the
Airfast Transaction being collectively referred to as the
"Airfast Obligations"), and to make an equity investment of
up to $2,000,000 in Avco (the "Airfast Transaction"), all
substantially as described in Exhibit E hereto (the "Airfast
Transaction"); and
WHEREAS, the Banks and the Agent are willing to
consent to FI, FCX and FRP, as applicable, entering into the
Caterpillar Transaction, the Pennzoil Transaction, the PFT
Transaction, the P&O Transaction and the Airfast Transaction
(each a "Transaction") and to provide certain amendments and
limited waivers of provisions of the Credit Agreement with
respect thereto, all subject to the terms, conditions,
covenants, limitations and restrictions of this Amendment.
NOW, THEREFORE, in consideration of the premises
and the agreements, provisions and covenants herein
contained, FI, FTX, FCX, the FI Trustee, the Agent, the
Required Banks (with respect to the Pennzoil Transaction)
and all the Banks (with respect to each Transaction other
than the Pennzoil Transaction) hereby agree, on the terms
and subject to the conditions set forth herein, as follows:
SECTION 1. Amendments, Consents and Limited
Waivers. (a) Subject to the covenants, limitations and
reservations set forth below and subject to the written
approval of the Agent of all relevant documentation
governing the Caterpillar Transaction (the "Caterpillar
Documents") , the Banks and the Agent consent to the
execution by FI and FCX of the Caterpillar Documents in the
form so approved and agree that incurrence by FI and FCX of
the Caterpillar Obligations will not be prohibited by
Section 5.2(g) of the Credit Agreement, provided that,
except to the extent specifically waived or consented to
hereby, the Agent and the Banks hereby reserve all rights
and remedies under the Loan Documents with respect to (and
shall not be deemed, by implication or otherwise, to have
consented to or waived) any performance by FI or FCX under
the Caterpillar Documents which would be a Default or Event
of Default, including without limitation any voluntary
prepayment prohibited by clause (iii) below. FI, FCX and
FTX hereby covenant and agree that (i) the Agent shall
promptly receive copies of all material notices delivered by
or to FI or FCX pursuant to the Caterpillar Documents which
are not otherwise provided to the Agent under any other
agreement, (ii) neither FI nor FCX shall, without the prior
written consent of the Required Banks, enter into any
amendment or modification of any of the Caterpillar
Documents which would have an adverse effect upon the rights
and remedies of the Agent, the FI Trustee and the Banks
under the Loan Documents or the collateral therefor (the "FI
Collateral and Rights") or impair the ability of any of FTX
and the Restricted Subsidiaries to perform all of their
respective obligations under the Loan Documents; and (iii)
no voluntary prepayment of the Caterpillar Obligations shall
be made by FTX or any Restricted Subsidiary or, directly or
indirectly, with or from any funds or assets provided,
directly or indirectly, by FTX or any Restricted Subsidiary
beyond those expressly permitted by Section 5.2(1) of the
Credit Agreement (collectively, "Restricted Assets"), during
the continuance of any Default or Event of Default or, if,
after giving effect to any such voluntary prepayment any
Default or Event of Default would then exist or result from
such transaction. The undertakings of FI, FTX and FCX under
clause (i) of the preceding sentence and under clauses (ii)
and (iii) thereof shall be deemed to be covenants under
Sections 5.1 and 5.2, respectively, of the Credit Agreement
for all purposes, including for purposes of Article VII
thereof. Subject to all the foregoing, the Banks and the
Agent acknowledge receipt of the terms and conditions of the
Caterpillar Transaction for purposes of Section 5.2(g)(viii)
of the Credit Agreement. The parties hereto further agree
that Section 5.2(g)(i) of the Credit Agreement is hereby
amended by the deletion of the word "and" at the end of
clause (G) thereof, by the substitution of a semi-colon for
the period at the end of clause (H) thereof and by the
addition of a new clause (I) to read as follows:
"(I) up to $70,000,000 aggregate principal
amount of borrowings from Caterpillar Financial
Services Corporation ("Caterpillar") by FCX, and the
Guarantee thereof by FI, all subject to the terms set
forth in the Fourth Amendment and subject to the
limitations and reservation of rights set forth
therein; and"
and that Section 5.2(d)(iv) of the Credit Agreement is
amended by the addition of the following immediately after
the reference to "Section 5.2(g)(x)":
"; and the Liens on the Caterpillar Assets (as
defined in to the Fourth Amendment)."
The Banks hereby authorize the Agent to enter into an
agreement with Caterpillar recognizing and agreeing not to
contest the lien of Caterpillar on the Caterpillar Assets in
exchange for a reciprocal agreement by Caterpillar with
respect to the liens of the FI Security Documents and to
instruct the FI Trustee to enter into release documentation
with respect to the FI Security Documents (and execute such
other instruments as may be necessary in connection
therewith) in the form approved in writing by the Agent to
release the security interest of the FI Trustee in the
Caterpillar Assets (as such specific Caterpillar Assets are
approved by the Agent) and the Agent is further authorized
to instruct the FI Trustee to enter into additional release
documentation (to be approved by the Agent) to release the
security interest of the FI Trustee in other similar assets
in an aggregate amount (valued as provided in the
Caterpillar Documents) not in excess for all such additional
collateral provided during the term of the Caterpillar Debt
of $10,000,000, to the extent required pursuant to the
Caterpillar Documents as a result of decreases in the value
of the Caterpillar Assets.
(b) The Banks and the Agent hereby consent to
the terms of the Pennzoil Transaction substantially as set
forth in Exhibit B hereto, and the Banks and FTX acknowledge
and agree that the payment obligation of FRP in connection
with the Pennzoil Transaction is an "obligation for deferred
payment for property purchased having an original maturity
greater than one year after the date of incurrence thereof"
contemplated by the definition of "Indebtedness for Borrowed
Money" in Section 1.1 of the Credit Agreement and shall,
until the recalculation of the Borrowing Base next occurring
under the FTX Credit Agreement, be calculated as having an
original principal amount of zero for all purposes of
calculations of Borrowing Base Debt; Section 5.2(g)(i) of
the Credit Agreement is hereby amended by the addition of a
new clause (J) to read as follows:
"(J) the deferred payment obligation for the
property purchased in the Pennzoil Transaction (as
defined in the Fourth Amendment) on substantially
the terms set forth in Exhibit B to the Fourth
Amendment."
and Section 5.2(d)(iv) of the Credit Agreement is hereby
amended by the addition of the following at the end thereof:
"; and, so long as such Liens are limited to only those
assets purchased in the Pennzoil Transaction referred
to in Section 5.2(g)(i)(J), Liens securing the Debt
referred to in Section 5.2(g)(i)(J)."
(c) Subject to the covenants, limitations and
reservations set forth below and subject to the written
approval of the Agent of all relevant documentation
governing the PFT Transaction (the "PFT Documents"), the
Banks and the Agent consent to the execution by FI of the
PFT Documents in the form so approved and agree that the
existence of the PFT Obligations shall not be prohibited by
Sections 5.2(g) or 5.2(1) of the Credit Agreement, provided
that, except to the extent specifically waived or consented
to hereby, the Agent and the Banks hereby reserve all rights
and remedies under the Loan Documents with respect to (and
shall not be deemed, by implication or otherwise, to have
consented to or waived) any performance by FI under the PFT
Documents which would be a Default or Event of Default,
including without limitation any voluntary prepayment or
repurchase prohibited by clause (iii) below. FI and FTX
hereby covenant and agree that (i) the Agent shall promptly
receive copies of all material notices provided by or to FI
under the PFT Documents which are not otherwise provided to
the Agent under any other agreement; (ii) FI shall not,
without the prior written consent of the Required Banks,
enter into any amendment or modification of any of the PFT
Documents which would have an adverse effect upon the FI
Collateral and Rights or impair the ability of any of the
FTX and the Restricted Subsidiaries to perform all of their
respective obligations under the Loan Documents and (iii) no
voluntary prepayment of the PFT Obligations or voluntary
repurchase of the PFT Assets shall be made by FTX or any
Restricted Subsidiary or directly or indirectly from or with
any Restricted Asset during the continuance of any Default
or Event of Default or, if, after giving effect to any such
voluntary prepayment or voluntary repurchase, any Default or
Event of Default would then exist or result from such
transaction. The undertakings of FI and FTX under clause
(i) of the preceding sentence and under clauses (ii) and
(iii) thereof shall be deemed to be covenants under
Sections 5.1 and 5.2, respectively, of the Credit Agreement
for all purposes, including for purposes of Article VII
thereof. The Banks, FTX, FCX and FI further agree that the
obligation of FI to pay the Debt Component under and as
defined in the Power Sales Agreement (the "Power Sales
Agreement") between FI and Jaya Power in the form approved
by the Agent as part of the PFT Documents shall be deemed to
be Indebtedness for Borrowed Money of FI for all purposes of
the Credit Agreement, including without limitation Section
7.1(i) thereof. Subject to all the foregoing, the Banks and
the Agent acknowledge receipt of the terms and conditions of
the PFT Transaction to the extent deemed a Capitalized Lease
for the purposes of Section 5.2(g)(viii) of the Credit
Agreement; agree that only the book amount of the debt
portion of such PFT Obligations shall be counted as
Borrowing Base Debt (but only if and to the extent that the
equity portion of the PFT Obligations has been taken into
account in the most recent determination of the Borrowing
Base); and agree that FI may make an investment (through
either the acquisition of an equity interest in, or the
purchase of subordinated debt securities of, Jaya Power) of
up to $17,750,000 in Jaya Power on substantially the terms
set forth in Exhibit C hereto (the "Power Investment"),
which investments and the PFT Obligations shall not be
included in the calculation of the permitted investment
limit set forth in Section 5.2(1) of the Credit Agreement.
Subject, however, to all of the covenants, agreements,
limitations and reservations set forth in this paragraph
(c), the Banks authorize the Agent to approve, and the Agent
hereby approves, the terms and conditions of the PFT
Transaction substantially as set forth on Exhibit C hereto
as contemplated by the definition of "Power Facilities
Transfer" in Section 1.1 of the Credit Agreement; and the
parties hereto agree that Article VII of the Credit
Agreement is amended by the addition of a new section (p) to
read as follows:
"(p) any default or other event shall occur with
respect to the PFT Documents which would (with or
without the passage of time or the giving of notice)
permit acceleration or require prepayment of the PFT
Obligations other than with respect to a casualty event
or condemnation affecting the PFT Assets (as such term
is defined in the Fourth Amendment), permit
foreclosure upon the PFT Assets or require FI to
repurchase the PFT Assets;"
and that Article I of the Credit Agreement is amended by the
addition of the following definitions in their appropriate
alphabetical order:
""Fourth Amendment" means the Fourth Amendment,
Consent and Limited Waiver hereto dated as of November
23, 1994."
""PFT Documents" means each of the agreements
governing the Power Facilities Transfer and related
transactions as permitted by the Fourth Amendment."
The Banks hereby authorize the Agent to enter into an
agreement with the secured bank lenders to Jaya Power
recognizing and agreeing not to contest such lenders' liens
on the PFT Assets in exchange for a reciprocal agreement by
such lenders with respect to the liens of the FI Security
Documents and to instruct the FI Trustee to enter into
release documentation with respect to the FI Security
Documents (and execute such other instruments as may be
necessary in connection therewith) in the form approved in
writing by the Agent to release the security interest of the
FI Trustee in the PFT Assets (as such specific PFT Assets
are approved by the Agent.)
(d) Subject to the covenants, limitations
and reservations provided below and subject to the written
approval of the Agent of all relevant documentation
governing the P&O Transaction (the "P&O Documents"), the
Banks and the Agent hereby consent to the execution by FI of
the P&O Documents in the form so approved and agree that the
existence of the P&O Obligations will not be prohibited by
Sections 5.2(g) or 5.2(1) of the Credit Agreement; provided,
that, except to the extent specifically waived or consented
to hereby, the Agent and the Banks hereby reserve all rights
and remedies under the Loan Documents with respect to (and
shall not be deemed, by implication or otherwise, to have
consented to or waived) any performance by FI under the P&O
Documents which would be a Default or Event of Default,
including without limitation any voluntary prepayment or
repurchase prohibited by clause (iii) below. FI and FTX
hereby covenant and agree that (i) the Agent shall promptly
receive copies of all material notices delivered by or to FI
pursuant to the P&O Documents which are not otherwise
provided to the Agent under any other agreement; (ii) FI
shall not, without the prior written consent of the Required
Banks, enter into any amendment or modification of any of
the P&O Documents which would have an adverse effect upon
the FI Collateral and Rights or impair the ability of any of
FTX and the Restricted Subsidiaries to perform all of their
respective obligations under the Loan Documents; and (iii)
no voluntary prepayment of the P&O Obligations or voluntary
repurchase of the P&O Assets shall be made by FTX or any
Restricted Subsidiary or directly or indirectly from or with
any Restricted Asset during the continuance of any Default
or Event of Default or, if, after giving effect to any such
voluntary prepayment or voluntary repurchase, any Default or
Event of Default would then exist or result from such
transaction. The undertakings of FI and FTX under clause
(i) of the preceding sentence and under clauses (ii) and
(iii) thereof shall be deemed to be covenants under Sections
5.1 and 5.2, respectively, of the Credit Agreement for all
purposes, including for purposes of Article VII thereof.
Subject to all the foregoing, the Agent and the Banks waive,
with respect to the transfer of assets by FI described in
Exhibit D hereto, the provisions of Section 5.2(c) of the
Credit Agreement relating to the prohibition of transfer of
any substantial part of the assets of FI, acknowledge
receipt of the terms and conditions of the P&O Transaction
and the related Capitalized Leases for purposes of Section
5.2(g)(viii) of the Credit Agreement and agree that the P&O
Obligations shall not be included in the calculation of the
permitted investment limit set forth in Section 5.2(1) of
the Credit Agreement. The parties hereto further agree that
Article VII of the Credit Agreement is amended by the
addition of a new section (q) to read as follows:
"(q) any default or other event shall occur with
respect to the P&O Documents which would (with or
without the passage of time or the giving of notice)
permit acceleration or require prepayment of the P&O
Obligations other than with respect to a casualty event
or condemnation affecting the P&O Assets (as such term
is defined in the Fourth Amendment), permit foreclosure
upon any of the P&O Assets or require FI to repurchase
the P&O Assets; or"
and that Article I of the Credit Agreement is amended by the
addition of the following definition in its appropriate
alphabetical order:
""P&O Documents" means each of the agreements
governing the sale and leaseback transaction between FI
and P.T. ALatieF P&O Port Development Corporation
substantially on the terms permitted by the Fourth
Amendment."
The Banks hereby authorize the Agent to enter into an
agreement with the secured bank lenders to P&O recognizing
and agreeing not to contest such lenders' liens on the P&O
Assets in exchange for a reciprocal agreement by such
lenders with respect to the liens of the FI Security
Documents and to instruct the FI Trustee to enter into
release documentation with respect to the FI Security
Documents (and execute such other instruments as may be
necessary in connection therewith) in the form approved by
the Agent in writing to release any interest of the FI
Trustee in the P&O Assets (as such specific P&O Assets are
approved by the Agent).
(e) Subject to the covenants, limitations and
reservations set forth below and subject to the written
approval of the Agent of all documentation governing the
Airfast Transaction (the "Airfast Documents"), the Banks and
the Agent hereby consent to the execution by FI of the
Airfast Documents in the form so approved and agree that the
existence of the Airfast obligations will not be prohibited
by Sections 5.2(g) or 5.2(1) of the Credit Agreement,
provided that, except to the extent specifically waived or
consented to hereby, the Agent and the Banks hereby reserve
all rights and remedies under the Loan Documents with
respect to (and shall not be deemed, by implication or
otherwise, to have consented to or waived) any performance
by FI under the Airfast Documents which would be a Default
or Event of Default, including without limitation any
voluntary prepayment or repurchase prohibited by clause
(iii) below. FI and FTX hereby covenant and agree that
(i) the Agent shall promptly receive copies of all material
notices delivered by or to FI pursuant to the Airfast
Documents which are not otherwise provided to the Agent
under any other Agreement; (ii) FI shall not, without the
prior written consent of the Required Banks, enter into any
amendment or modification of any of the Airfast Documents
which would have an adverse effect upon the FI Collateral
and Rights or impair the ability of any of FTX and the
Restricted Subsidiaries to perform all of their respective
obligations under the Loan Documents; and (iii) no voluntary
prepayment of the Airfast Obligations or voluntary
repurchase of the Airfast Assets shall be made by FTX or any
Restricted Subsidiary or directly or indirectly from or with
any Restricted Asset during the continuance of any Default
or Event of Default or, if, after giving effect to any such
voluntary prepayment or voluntary repurchase, any Default or
Event of Default would then exist or result from such
transaction. The undertakings of FI and FTX under clause
(i) of the preceding sentence and under clauses (ii) and
(iii) thereof shall be deemed to be covenants under Sections
5.1 and 5.2, respectively, of the Credit Agreement for all
purposes, including for purposes of Article VII thereof.
Subject to all of the foregoing, the Banks and the Agent
acknowledge receipt of the terms and conditions of the
Airfast Transaction and the related Capitalized Leases for
purposes of Section 5.2(g)(viii) of the Credit Agreement;
agree that FI may make an equity investment (either through
the acquisition of an equity interest in, or the purchase of
subordinated debt securities, of Avco) of up to $2,000,000
in Avco on substantially the terms set forth in Exhibit E
hereto (the "Airfast Investment"); agree that the Airfast
Investment and the Airfast Obligations shall not be included
in the calculation of the permitted investment limit set
forth in Section 5.2(1) of the Credit Agreement; and agree
that only the book amount of the debt portion of such
Capitalized Lease obligations shall be counted as Borrowing
Base Debt (but only if and to the extent that the equity
portion of such Capitalized Lease has been taken into
account in the most recent determination of the Borrowing
Base). The parties hereto further agree that Article VII of
the Credit Agreement is amended by the addition of the
following section (r) to read as follows:
"(r) any default or other event shall occur with
respect to the Airfast Documents which would (with or
without the passage of time or the giving of notice)
permit acceleration or require prepayment of the
Airfast Obligations other than with respect to a
casualty event or governmental taking affecting the
Airfast Assets (as such terms are defined in the Fourth
Amendment), permit foreclosure upon the Airfast Assets
or require FI to repurchase the Airfast Assets."
and agree that Article I of the Credit Agreement is amended
by the addition of the following definition in its
appropriate alphabetical order:
""Airfast Document" means each of the agreements
governing the sale and leaseback transaction between FI
and P.T. Airfast Aviation Facilities Company on
substantially the terms permitted by Exhibit E to the
Fourth Amendment."
The Banks hereby authorize the Agent to enter into an
agreement with the secured bank lenders to Airfast
recognizing and agreeing not to contest such lenders' liens
on the Airfast Assets in exchange for a reciprocal agreement
by such lenders with respect to the liens of the FI Security
Documents and to enter into release documentation with
respect to the FI Security Documents and to instruct the FI
Trustee to release from the FI Security Documents (and
execute such other instruments as may be necessary in
connection therewith) in the form approved by the Agent in
writing to release any interest of the FI Trustee in the
fast Assets (as such specific Airfast Assets are approved by
the Agent).
SECTION 2. Representations and Warranties;
Condition Precedent. (a) Each of FTX , FCX and FI hereby
represent and warrant to the Agent and the Banks that as of
the date hereof, and after giving effect to this Amendment,
no Default or Event of Default has occurred and is
continuing and the representations and warranties contained
in the Credit Agreement are true and correct in all material
respects.
(b) The consents on the part of the Banks
provided for in Section 1 shall be subject to the foregoing
representations and warranties being true and correct on and
as of the date hereof.
SECTION 3. Conditions to Effectiveness.
This Amendment shall become effective (subject, with respect
to each Transaction, to the receipt and written approval by
the Agent of the necessary documentation for such
Transaction referred to herein and executed copies of the
reciprocal lien recognition letter referred to in the last
paragraph of Sections l(a), l(c), l(d) and l(e),
respectively) on the date of receipt (the "Effective Date")
by the Agent of executed counterparts of this Amendment
which, when taken together, bear the signatures of FTX, FCX,
FI, the Agent and, with respect to the Pennzoil Transaction,
the Required Banks, and, with respect to the other Transactions,
all the Banks.
SECTION 4. Counterparts. This Amendment may
be executed in multiple counterparts, each of which shall
constitute an original, but all of which when taken together
shall constitute but one instrument.
SECTION 5. Limited Effect. Section 1 hereof
constitutes a modification and amendment of the Credit
Agreement effective for each Transaction as of its
respective Effective Date. Except as, and until, expressly
waived or modified by such Section I hereof as of the
Effective Date, the Credit Agreement shall continue in full
force and effect in accordance with the provisions thereof
as in effect immediately prior to the Effective Date.
Except as expressly set forth herein, this Amendment shall
not by implication or otherwise limit, impair, constitute a
waiver of or otherwise affect the rights and remedies of the
Banks and the Agent under the Credit Agreement, nor alter,
modify, amend or in any way affect any of the terms,
conditions, obligations, covenants or agreements contained
in the Credit Agreement, all of which are ratified and
affirmed in all respects and shall continue in full force
and effect. This Amendment shall apply and be effective
only with respect to the provisions of the Credit Agreement
specifically referred to herein.
SECTION 6. APPLICABLE LAW. THIS AMENDMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
SECTION 7. Expenses. FTX shall pay all
out-ofpocket expenses incurred by the Agent in connection
with the preparation of this Amendment, including, but not
limited to, the reasonable fees and disbursements of
Cravath, Swaine & Moore, special counsel for the Agent;
Mochtar, Karuwin & Komar, special Indonesian counsel for the
Agent and the Banks and Milbank Tweed Hadley & McCloy,
special counsel for the FI Trustee.
SECTION 8. Headings. The headings of this
Amendment are for reference only and shall not limit or
otherwise affect the meaning hereof.
IN WITNESS WHEREOF, the parties hereto have
caused this Consent to be executed by their duly authorized
officers or agents as of the date first above written.
P.T. FREEPORT INDONESIA
COMPANY,
by: /s/R. Foster Duncan
-------------------
Name: R. Foster Duncan
Title: Treasurer
FREEPORT-McMoRan INC.,
by: /s/R. Foster Duncan
-------------------
Name: R. Foster Duncan
Title: Treasurer
FREEPORT-McMoRan COPPER & GOLD
INC.,
by: /s/ R. Foster Duncan
--------------------
Name: R. Foster Duncan
Title: Treasurer
CHEMICAL BANK, individually and as
Agent,
by: /s/ Theodore L. Parker
----------------------
Name: Theodore L. Parker
Title:Vice President
EX-4
6
Exhibit 4.21
TERM LOAN AND WORKING CAPITAL AGREEMENT
dated as of
November 4, 1994
among
Rio Tinto Metal, S.A.,
the Lenders
and
Barclays Bank PLC
as Agent
TABLE OF CONTENTS
Page
DEFINITIONS
Section 1.01. Definitions . . . . . . . . . . . . 2
(a) Terms Generally . . . . . . . . . . 2
(b) Accounting Terms . . . . . . . . . 2
(c) Other Terms . . . . . . . . . . . . 3
ARTICLE II
THE TERM LOANS
Section 2.01. The Term Loans . . . . . . . . . . 25
Section 2.02. Procedure for Term Loans . . . . . 25
Section 2.03. Repayment . . . . . . . . . . . . . 26
Section 2.04. Cancellation or Reduction of Term
Loan Commitment . . . . . . . . . 26
Section 2.05. Optional Prepayment . . . . . . . . 27
Section 2.06. Mandatory Prepayment . . . . . . . 27
ARTICLE III
THE WORKING CAPITAL LOANS
Section 3.01. The Working Capital Loans . . . . . 28
Section 3.02. Procedure for Working Capital
Loans . . . . . . . . . . . . . . 29
Section 3.03. Repayment . . . . . . . . . . . . . 30
Section 3.04. Swing Line Loans . . . . . . . . . 30
Section 3.05. Cancellation or Reduction of Work-
ing Capital Loan Commitment . . . 32
Section 3.06. Optional Prepayment . . . . . . . . 32
Section 3.07. Mandatory Prepayment . . . . . . . 33
ARTICLE IV
INTEREST AND FEES
Section 4.01. Interest on Loans . . . . . . . . . 34
Section 4.02. Post Maturity Interest . . . . . . 35
Section 4.03. Maximum Interest Rate . . . . . . . 35
Section 4.04. Certain Fees . . . . . . . . . . . 36
ARTICLE V
DISBURSEMENT AND PAYMENT
Section 5.01. Pro Rata Treatment . . . . . . . . 37
Section 5.02. Method of Payment; Evidence of
Debt . . . . . . . . . . . . . . 37
Section 5.03. Compensation for Losses . . . . . . 38
(a) Compensation . . . . . . . . . . . 38
(b) Certificate, etc. . . . . . . . . . 38
Section 5.04. Withholding, Reserves and Addi-
tional Costs . . . . . . . . . . 38
(a) Withholding . . . . . . . . . . . . 38
(b) Additional Costs . . . . . . . . . 40
(c) Notification and Lending
Office Designations . . . . . . . . 42
(d) Certificate, etc. . . . . . . . . . 42
(e) Substitution of Lender . . . . . . 42
Section 5.05. Illegality . . . . . . . . . . . . 43
Section 5.06. Working Capital Accounts . . . . . 44
Section 5.07. Reserve Account . . . . . . . . . 44
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Section 6.01. Representations and Warranties . . 46
(a) Good Standing and Power . . . . . . 46
(b) Compliance with Laws . . . . . . . 46
(c) Corporate Authority . . . . . . . . 46
(d) Authorizations . . . . . . . . . . 46
(e) Binding Agreements . . . . . . . . 47
(f) Taxes . . . . . . . . . . . . . . . 47
(g) Litigation . . . . . . . . . . . . 47
(h) No Conflicts . . . . . . . . . . . 47
(i) Financial Condition . . . . . . . . 48
(j) Information . . . . . . . . . . . . 48
(k) Use of Proceeds . . . . . . . . . . 49
(l) Title to Properties; Possession
Under Leases . . . . . . . . . . . 49
(m) Not an Investment Company . . . . . 49
(n) The Security Documents . . . . . . 49
(o) Environmental Protection . . . . . 49
(p) Insurance . . . . . . . . . . . . . 50
(q) Material Agreements . . . . . . . . 50
(r) Consents . . . . . . . . . . . . . 50
(s) Employment Law . . . . . . . . . . 50
(t) Patents, etc. . . . . . . . . . . . 50
(u) Physical Operation of Project . . . 50
(v) Supply Contracts . . . . . . . . . 50
(w) Affiliate Transactions . . . . . . 51
(x) No Subsidiaries . . . . . . . . . . 51
ARTICLE VII
CONDITIONS OF LENDING
Section 7.01. Conditions to the Effectiveness of
this Agreement . . . . . . . . . 51
(a) This Agreement . . . . . . . . . . 51
(b) Evidence of Corporate Action
of Borrower . . . . . . . . . . . . 51
(c) Evidence of Corporate Action
of RTM . . . . . . . . . . . . . . 52
(d) Evidence of Corporate Action
of FCX . . . . . . . . . . . . . . 52
(e) Security Arrangements . . . . . . . 52
(f) Evidence of RTM Contribution . . . 54
(g) Opinions of Counsel . . . . . . . . 54
(h) Notarial Deed . . . . . . . . . . . 55
(i) Modification of By-Laws . . . . . . 55
(j) Insurance . . . . . . . . . . . . . 55
(k) Authorizations . . . . . . . . . . 55
(l) Report of the Independent
Engineer . . . . . . . . . . . . . 56
(m) Project Documents . . . . . . . . . 56
(n) Environmental Report . . . . . . . 56
(o) Off-take, Supply and Tolling
Contracts . . . . . . . . . . . . . 56
(p) Lurgi Certificate . . . . . . . . . 56
(q) Computer Model . . . . . . . . . . 56
(r) Management Services Contract . . . 56
(s) Other Indebtedness . . . . . . . . 56
(t) Inducement Agreement . . . . . . . 57
(u) Investor Capital Investment . . . . 57
(v) Payment of Fees and Expenses . . . 57
(w) Litigation . . . . . . . . . . . . 57
(x) Other Documents . . . . . . . . . . 57
Section 7.02. Conditions to All Loans . . . . . . 57
(a) Loan Request . . . . . . . . . . . 57
(b) Use of Proceeds . . . . . . . . . . 57
(c) No Default . . . . . . . . . . . . 57
(d) Representations and
Warranties; Covenants . . . . . . . 58
(e) Other Documents . . . . . . . . . . 58
Section 7.03. Conditions to All Term Loans . . . 58
(a) Status of Construction . . . . . . 58
(b) Certifications . . . . . . . . . . 58
(c) Other Documents . . . . . . . . . . 59
Section 7.04. Conditions to All Working Capital
Loans and Swing Line Loans . . . 59
(a) Borrowing Base Report . . . . . . . 60
(b) Security Documentation . . . . . . 60
(c) Supplemental Security Documents . . 60
(d) Working Capital Loan Commitment . . 60
(e) Other Documents . . . . . . . . . . 60
ARTICLE VIII
COVENANTS
Section 8.01. Affirmative Covenants . . . . . . . 61
(a) Financial Statements; Borrowing
Base Reports; etc. . . . . . . . . 61
(b) Taxes . . . . . . . . . . . . . . . 63
(c) Insurance . . . . . . . . . . . . . 63
(d) Corporate Existence . . . . . . . . 64
(e) Authorizations . . . . . . . . . . 64
(f) Maintenance of Records . . . . . . 64
(g) Inspection . . . . . . . . . . . . 64
(h) Maintenance of Property, etc. . . . 65
(i) Conduct of Business . . . . . . . . 65
(j) Notification of Defaults and
Adverse Developments . . . . . . . 65
(k) Environmental Matters . . . . . . . 66
(l) Environmental Reports . . . . . . . 66
(m) Supply Contracts . . . . . . . . . 67
(n) Hedging Arrangements . . . . . . . 67
(o) Use of Proceeds . . . . . . . . . . 68
(p) Completion of Project . . . . . . . 69
(q) Management Services Contract . . . 69
Section 8.02. Negative Covenants . . . . . . . . 70
(a) Indebtedness . . . . . . . . . . . 70
(b) Restricted Payments . . . . . . . . 72
(c) Mortgages and Pledges . . . . . . . 72
(d) Merger, Acquisition or Sales
of Assets . . . . . . . . . . . . . 72
(e) Contingent Liabilities . . . . . . 72
(f) Loans and Investments . . . . . . . 72
(g) Capital Expenditures . . . . . . . 73
(h) Subsidiaries . . . . . . . . . . . 73
(i) Preferred Stock . . . . . . . . . . 73
(j) Stock of Subsidiaries . . . . . . . 73
(k) Related Agreements . . . . . . . . 73
(l) Transactions with Affiliates . . . 73
(m) Environmental Matters . . . . . . . 73
Section 8.03. Preparation of Forecast and Cover
Ratio Certificate . . . . . . . . 73
Section 8.04. Change Orders and Variance
Requests . . . . . . . . . . . . 74
Section 8.05. Technical Non-Compliance . . . . . 75
Section 8.06. Partial Release of Pledged Shares . 75
ARTICLE IX
EVENTS OF DEFAULT
Section 9.01. Events of Default . . . . . . . . . 76
ARTICLE X
THE AGENT AND THE LENDERS
Section 10.01. The Agency . . . . . . . . . . . . 79
Section 10.02. The Agent's Duties . . . . . . . . 80
Section 10.03. Sharing of Payment and Expenses . 80
Section 10.04. The Agent's Liabilities . . . . . 81
Section 10.05. The Agent as a Lender . . . . . . 82
Section 10.06. Lender Credit Decision . . . . . . 82
Section 10.07. Indemnification . . . . . . . . . 82
Section 10.08. Successor Agent . . . . . . . . . 83
Section 10.09. Power of Attorney . . . . . . . . . 84
ARTICLE XI
CONSENT TO JURISDICTION; JUDGMENT CURRENCY
Section 11.01. Consent to Jurisdiction . . . . . 84
Section 11.02. Judgment Currency . . . . . . . . 85
ARTICLE XII
MISCELLANEOUS
Section 12.01. APPLICABLE LAW . . . . . . . . . . 85
Section 12.02. Right of Set-off . . . . . . . . . 85
Section 12.03. Expenses . . . . . . . . . . . . . 86
Section 12.04. Amendments . . . . . . . . . . . . 86
Section 12.05. Cumulative Rights and No Waiver . 87
Section 12.06. Notices . . . . . . . . . . . . . 87
Section 12.07. Separability . . . . . . . . . . . 88
Section 12.08. Assignments and Participations . . 88
Section 12.09. WAIVER OF JURY . . . . . . . . . . 90
Section 12.10. Confidentiality . . . . . . . . . 90
Section 12.11. Indemnity . . . . . . . . . . . . 90
Section 12.12. Execution in Counterparts . . . . 91
EXHIBITS
Page
EXHIBIT A Form of Master Assignment Agreement . . A-1
EXHIBIT B Eligible Account Documentation . . . . . B-1
EXHIBIT C Form of Borrowing Base Report . . . . . C-1
EXHIBIT D Form of Certificate of Independent
Engineer . . . . . . . . . . . . . . . D-1
EXHIBIT E Huelva Expansion Project Completion
Test . . . . . . . . . . . . . . . . . E-1
EXHIBIT E-1 Form of Borrower's Completion
Certificate . . . . . . . . . . . . . E-1-1
EXHIBIT E-2 Form of Completion Certificate of
the Independent Engineer . . . . . . . E-2-1
EXHIBIT F Scope of Work . . . . . . . . . . . . . F-1
EXHIBIT G Form of Cover Ratio Certificate . . . . G-1
EXHIBIT H Form of Assignment of Contracts . . . . H-1
EXHIBIT I Form of Inducement Agreement . . . . . . I-1
EXHIBIT J Form of Lurgi Certificate . . . . . . . J-1
EXHIBIT K Form of Mortgage . . . . . . . . . . . . K-1
EXHIBIT L Form of Pledge of Shares . . . . . . . . L-1
EXHIBIT M Form of Pledge on Authorized
Investments . . . . . . . . . . . . . M-1
EXHIBIT N Form of Pledge Without Displacement . . N-1
EXHIBIT O Form of Swing Line Loan Request . . . . O-1
EXHIBIT P Form of Term Loan Request . . . . . . . P-1
EXHIBIT Q Form of Working Capital Loan Request . . Q-1
EXHIBIT R Form of Opinion of Davis Polk &
Wardwell . . . . . . . . . . . . . . . R-1
EXHIBIT S Form of Opinion of J&A Garrigues . . . . S-1
EXHIBIT T Opinion of the Independent Insurance
Advisor . . . . . . . . . . . . . . . T-1
EXHIBIT U-1 Minimum Requirements for Supply and
Off-take Contracts and Letters of
Intent at Closing . . . . . . . . . . U-1-1
EXHIBIT U-2 Minimum Requirements for Supply and
Off-take Contracts by January 1,
1997 . . . . . . . . . . . . . . . . . U-2-1
EXHIBIT V Form of Officer's Certificate: Status
of Construction . . . . . . . . . . . V-1
EXHIBIT W Form of Opinion of Sullivan & Cromwell . W-1
EXHIBIT X Form of Opinion of Uria & Menendez . . . X-1
EXHIBIT Y Form of Shutdown Certificate of the
Borrower . . . . . . . . . . . . . . . Y-1
EXHIBIT Z Form of Shutdown Certificate of the
Independent Engineer . . . . . . . . . Z-1
EXHIBIT AA Form of Assignment and Acceptance . . . AA-1
Schedules
Schedule I - Commitments
Schedule 1.01(c) - Project Documents
Schedule 6.01(o) - Environmental Protection
Schedule 6.01(v) - Supply Contracts
Schedule 7.01(k) - Authorizations
TERM LOAN AND WORKING CAPITAL AGREEMENT
TERM LOAN AND WORKING CAPITAL
AGREEMENT, dated as of November 4, 1994 (the "Agreement"),
among RIO TINTO METAL, S.A., a corporation organized under
the laws of the Kingdom of Spain (the "Borrower"), each of
the financial institutions identified on the signature pages
hereof (each, a "Lender" and, collectively, the "Lenders")
and BARCLAYS BANK PLC, as Agent for the Lenders (the
"Agent").
W I T N E S S E T H:
WHEREAS, the Borrower has requested the
Lenders to provide a $290,000,000 working capital and term
loan facility to the Borrower for the purpose of financing
the costs of construction, expansion and operation of a
copper smelting and refining complex at Huelva, Spain and
for other related purposes; and
WHEREAS, the Borrower has requested
that such facility consist of a $65,000,000 working capital
loan facility ($10,000,000 of which may be used for swing
line loans) and a $225,000,000 term loan facility; and
WHEREAS, the Borrower is currently a
wholly owned subsidiary of Rio Tinto Minera, S.A., a
corporation organized under the laws of the Kingdom of Spain
("RTM"); and
WHEREAS, by a public deed executed
before the Notary Public of Madrid, Mr. Jose Antonio
Torrente Secorum, on June 23, 1994, under number 2,298 of
his files of public records and entered at the Commercial
Registry of Huelva, Spain on June 28, 1994, in Volume 282
General, Book 142 of the General Companies Section, Folio
203, page number H-3041, entry 6, RTM transferred to the
Borrower the assets and certain of the liabilities of RTM's
business relating to the copper smelter and refinery in
Huelva, Spain, including RTM's rights and obligations under
the Revolving Credit Agreement (as defined below), the Gold-
Silver Loan Agreement (as defined below) and the ESP 1.62
Billion Loan Agreement (as defined below); and
WHEREAS, the Borrower is willing to
secure all of its obligations hereunder by pledging or
assigning to the Lenders the collateral described in the
Security Documents (as defined below);
NOW, THEREFORE, the parties hereby
agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions.
(a)Terms Generally. The definitions
ascribed to terms in this Section 1.01 and elsewhere in this
Agreement shall apply equally to both the singular and
plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include",
"includes" and "including" shall be deemed to be followed by
the phrase "without limitation". The words "hereby",
"herein", "hereof", "hereunder" and words of similar import
refer to this Agreement as a whole (including any exhibits
and schedules hereto) and not merely to the specific
section, paragraph or clause in which such word appears.
All references herein to Articles, Sections, Exhibits and
Schedules shall be deemed references to Articles and Sec-
tions of, and Exhibits and Schedules to, this Agreement
unless the context shall otherwise require. Except as
otherwise expressly provided herein, all references to
"dollars" or "$" shall be deemed references to the lawful
money of the United States of America and all reference to
"pesetas" shall be deemed references to the lawful money of
the Kingdom of Spain. All conversions from dollars into any
other currency or from any other currency into dollars made
in connection with this Agreement shall be made at the
selling rate ("cambio vendedor") which appears on the
display designated as page "FXFX" or page "FXFY", as
appropriate, on the Reuters Monitor Money Rates Service
("Reuters") (or such other page as may replace either such
page on that service for purposes of displaying the rate of
exchange from dollars into other currencies or other
currencies into dollars) at or around 11:00 a.m., Madrid
time, on the relevant date of conversion.
(b) Accounting Terms. Except as
otherwise expressly provided herein, all terms of an
accounting or financial nature shall be construed in
accordance with Spanish GAAP (as defined below), as in
effect from time to time; provided, however, that, for
purposes of determining compliance with any covenant set
forth in Article VIII, such terms shall be construed in
accordance with Spanish GAAP as in effect on the date of
this Agreement applied on a basis consistent with the
construction thereof applied in preparing the Borrower's
audited financial statements delivered to the Lenders
immediately preceding the date of this Agreement. In the
event there shall occur a change in Spanish GAAP which but
for the foregoing proviso would affect the computation used
to determine compliance with any covenant set forth in
Article VIII, the Borrower and the Lenders agree to
negotiate in good faith in an effort to agree upon an
amendment to this Agreement that will permit compliance with
such covenant to be determined by reference to Spanish GAAP
as so changed while affording the Lenders the protection
afforded by such covenant prior to such change (it being
understood, however, that such covenant shall remain in full
force and effect in accordance with its existing terms
pending the execution by the Borrower and the Lenders of any
such amendment).
(c)Other Terms. The following terms
shall have the meanings ascribed to them below or in the
Sections of this Agreement indicated below:
"Additional Completion Amounts" shall
mean agreed expenditure amounts, if any, in excess of those
projected to be required pursuant to the Project Development
Plan, to be used by the Borrower to complete the Project.
"Adjusted Pro Rata Share" shall mean,
with respect to the sharing of payments due any Lender at
any time pursuant to this Agreement, the proportion of such
Lender's total outstanding Loans and the sum of the net
liabilities and other amounts owing to such Lender by the
Borrower under each type of Hedging Arrangement with such
Lender secured pursuant to Section 8.01(n) to the aggregate
amount of outstanding Loans and the total amount of such
liabilities and other amounts owing by the Borrower under
each type of Hedging Arrangement to all Lenders at such
time.
"Affiliate" shall mean, with respect to
any Person, any other Person (i) which has a 20% or more
beneficial equity interest in such first Person, (ii) in
which such first Person has a 20% or more beneficial equity
interest, (iii) in which any Person which has a 20% or more
beneficial equity interest in such first Person has a 20% or
more beneficial equity interest or (iv) any Person defined
as an Affiliate ("asociado") under Spanish law.
"Applicable Margin" shall mean for the
period from the date hereof until the Contract Date, 1.85%
per annum, for the period from the Contract Date until the
third anniversary thereof, 1.60% per annum, for the period
from the third anniversary of the Contract Date until the
sixth anniversary thereof, 1.75% per annum, and from and
after the sixth anniversary of the Contract Date, 1.90% per
annum.
"Assignment of Contracts" shall mean
each Assignment of Contracts by the Borrower in favor of the
Lenders and the Agent substantially in the form of Exhibit H
hereto creating in favor of the Agent an assignment of
certain of the Borrower's supply and off-take agreements,
described in Exhibits U-1 and U-2 hereto, and the Lurgi
Contract.
"Authorized Investments" shall mean (i)
certificates of deposit of, or other time deposits or bank
accounts evidenced by an acceptable instrument that may be
pledged with, OECD-nation chartered banks (or with their
branches) with a rating of at least "A" as rated by Standard
& Poor's Corporation or Moody's Investors Service, Inc., or
the reasonable equivalent; (ii) investments in readily
marketable money market funds having assets in excess of one
billion dollars, which assets have an average life of less
than one year and an average quality of at least "A" as
rated by Standard & Poor's Corporation or Moody's Investors
Service, Inc.; (iii) commercial paper rated A-1 by Standard
& Poor's Corporation or P-1 by Moody's Investors Service,
Inc.; and (iv) securities issued by the Kingdom of Spain in
each case having a maturity not to exceed one year.
"Barclays LIBOR" shall mean, with
respect to any Swing Line Interest Period for a Dollar Swing
Line Loan, the rate per annum at which deposits in dollars
are offered to the Agent by leading banks in the London
interbank market two Business Days prior to the first day of
such Swing Line Interest Period in an amount substantially
equal to the outstanding principal amount of such Swing Line
Loan and for a period equal to such Swing Line Interest
Period.
"Barclays MIBOR" shall mean, with
respect to any Swing Line Interest Period for a Peseta Swing
Line Loan, the rate per annum at which deposits in pesetas
are offered to Barclays Bank, S.A. by leading banks in the
Madrid interbank market one Business Day prior to the first
day of such Swing Line Interest Period in an amount
substantially equal to the outstanding principal amount of
such Swing Line Loan and for a period equal to such Swing
Line Interest Period.
"Base Case" shall mean the agreed upon
base case described in a letter agreement dated the date
hereof between the Borrower and the Agent.
"BEX Gold Loan" shall mean the Gold
Loan, dated December 18, 1990, as amended, between RTM, as
borrower, and Banco Exterior Industrial, S.A., as lender.
"Borrowing Base" shall mean the sum of
75% of Eligible Inventory plus 75% of Eligible Accounts plus
100% of cash plus 100% of the value of Authorized
Investments in which Lenders (including Lenders providing
Hedging Arrangements to the Borrower) have a valid and
perfected first priority security interest under all
applicable laws; provided that with respect to any Peseta
Swing Line Loan, the Borrowing Base shall not include
Eligible Inventory and, provided, further, that the
Borrowing Base shall not include the Reserve Account
Balance. The value of any Authorized Investment shall
initially be its value as of the date of delivery to the
Agent and, thereafter, its value shall be determined as of
the date of any subsequent Borrowing Base Report which
includes such Authorized Investment.
"Borrowing Base Report" shall mean a
report signed by an authorized officer of the Borrower as to
Eligible Inventory and Eligible Accounts to be delivered on
the date of delivery of the Working Capital Loan Request for
each Working Capital Loan and, if required, on the date of
delivery of the Swing Line Loan Request for each Swing Line
Loan and monthly as specified in Section 7.04(a) and
8.01(a)(ii), such report to be substantially in the form of
Exhibit C hereto.
"Borrowing Date" shall mean the date
set forth in each Swing Line Loan Request, each Working
Capital Loan Request and each Term Loan Request as the date
upon which the Borrower desires to borrow Swing Line Loans,
Working Capital Loans or Term Loans, as the case may be,
pursuant to the terms of this Agreement.
"Business Day" shall mean any day on
which commercial banks are open for domestic and inter-
national business (including dealings in U.S. dollar
deposits) in The City of New York, New York, London, England
and Madrid, Spain.
"Capital Lease Obligation" shall mean,
with respect to any Person, any obligation of such Person to
pay rent or other amounts under a lease with respect to any
property (whether real, personal or mixed) acquired or
leased by such Person that is required to be accounted for
as a capital lease on a balance sheet of such Person in
accordance with Spanish GAAP.
"Certificate of the Independent
Engineer" shall mean the Certificate of the Independent
Engineer in the form of Exhibit D hereto.
"Change in Tax Law" shall mean, as to
each Lender, the enactment, promulgation, execution or
ratification of, or any change in or amendment to, any law
(or in the application or official interpretation of any
law), including an amendment, modification or revocation of
an applicable tax treaty or a change in official position
regarding the application or interpretation thereof,
occurring after the date hereof or, if later, the date on
which such Lender first becomes a party hereto.
"Change Order" shall have the meaning
ascribed to such term in the Lurgi Contract.
"Collateral" shall mean the collateral
described and defined in each of the Security Documents.
"Commitment" of any Lender shall mean,
collectively, its Working Capital Loan Commitment and Term
Loan Commitment.
"Committed Government Grants" shall
mean the dollar amount (or peseta equivalent amount as of
the date of any calculation referencing such amount) of
government grants that have been committed to by appropriate
Governmental Authorities subject to no contingencies or
material conditions other than the progress of construction
toward completion of the Project in accordance with the
Project Development Plan and the hiring of employees and
expenditures relating thereto.
"Completion Date" shall mean the date
on which all requirements of the Completion Test have been
met or otherwise waived by the Required Lenders.
"Completion Test" shall have the
meaning ascribed to such term in Exhibit E.
"Computer Model" shall mean the
computer model delivered in the form of a diskette and a
printout, as represented in the Information Memorandum and
acknowledged by each of the Borrower and the Agent pursuant
to Section 7.01(q) and as amended or replaced from time to
time by agreement between the Borrower and the Agent.
"Construction Report" shall mean a
construction report of the Borrower substantially in the
form of the reports previously provided to the Agent.
"Constructive Total Loss" shall mean
(i) the physical destruction of the Project as a consequence
of flooding, earthquake, volcanic activity, collapse or
other act of God rendering such property damaged beyond
repair or permanently unfit for use as contemplated by the
Project Documents; or (ii) any damage to the Project or any
condemnation, confiscation or seizure of the Project that
results in an insurance settlement with respect to such
property on the basis of a total loss.
"Contract Date" shall mean the first
date after the Completion Date upon which (i) all contracts
required by Exhibit U-2 are in effect, in the case of
concentrate supply contracts, substantially in a form
previously approved by the Agent or in a form which is
substantially comparable to a form previously approved by
the Agent or is otherwise in form and substance reasonably
satisfactory to the Agent (it being understood that only for
purposes of determining compliance with Section 8.01(m) and
Exhibit U-2 the Agent shall have an opportunity to review
and approve material changes in procedures for establishing
treatment and refining charge pricing under concentrate
supply contracts using formula pricing but not actual prices
resulting therefrom) and (ii) the Borrower submits to the
Agent a Forecast demonstrating that the Loan Life Cover
Ratio is equal to or greater than 1.6 to 1.0 and the Two
Year Cover Ratio is equal to or greater than 1.3 to 1.0 and
such Forecast has been approved in accordance with Section
8.03.
"Cover Ratio Certificate" shall mean a
certificate of the Borrower, dated as of a Forecast Date,
substantially in the form of Exhibit G hereto, setting forth
the Borrower's calculation of the Loan Life Cover Ratio and
the Two Year Cover Ratio at the relevant Forecast Date as
derived from the Forecast attached as an annex thereto.
"Default" shall mean any event or
circumstance which, with the giving of notice or the passage
of time, or both, would become an Event of Default.
"Dollar Swing Line Loans" shall have
the meaning ascribed to such term in Section 3.04.
"Eligible Accounts" shall mean any
outstanding trade accounts receivable of the Borrower, with
a maturity of up to 90 days or such longer maturity as may
be approved by the Required Lenders and on documentation
substantially in the form of Exhibit B or other
documentation acceptable to the Required Lenders, with
respect to amounts due in the ordinary course of the
Borrower's business as to which the Borrower has furnished
reasonably detailed information to the Lenders in the
Borrowing Base Report, and as to which the Lenders have a
valid and perfected first priority security interest under
all applicable laws, determined after deducting from the
aggregate amount thereof all amounts due thereon considered
by the Agent, in its reasonable discretion, to be difficult
to collect or uncollectible by reason of return, rejection,
or loss of the property giving rise thereto, quality or
other disputes, rights of setoff of the account debtor,
insolvency of the account debtor or any other reason the
Agent considers such account receivable difficult to collect
or uncollectible. Trade accounts receivable from any single
obligor (other than the government of Spain, to the extent
provided below) shall be considered Eligible Accounts up to
a maximum of $10,000,000 (or, subject to the restrictions
described below, the aggregate equivalent in pesetas,
Deutsche marks, French francs, Italian lira, Pounds sterling
or any other currency that is approved by the Required
Lenders as of the date of the relevant Borrowing Base
Report) outstanding at any one time; provided, however,
that, in the case of dollar denominated Eligible Accounts
only, FCX shall not be subject to such limitation. Eligible
Accounts shall not include any accounts receivable (i) in
which any other Person has a security interest, (ii) which
singly or collectively with respect to a single account
debtor, are 60 days or more overdue in an amount in excess
of $0.5 million or (iii) unless otherwise agreed by the
Agent, payable by any obligor which has previously defaulted
in payment to the Borrower. In addition to the foregoing,
accounts receivable due (without contingency of any type)
from the government of Spain with respect to (i) payments to
the Borrower of government grants provided in consideration
of the Huelva Expansion Program and (ii) reimbursements of
Impuesto sobre de Valor Anadido paid to Lurgi, in each case
with a maturity of up to 180 days and as to which the
Lenders have a valid and perfected first priority security
interest under all applicable laws, shall be deemed to be
Eligible Accounts, provided that such accounts receivable
are evidenced by documentation acceptable to the Required
Lenders. The Borrower must maintain in the Borrowing Base
dollar denominated Eligible Accounts and Eligible Inventory
valued in dollars at all times equal to or exceeding the
amount of the outstanding Dollar Swing Line Loans. The
Borrower must maintain in the Borrowing Base peseta
denominated Eligible Accounts at all times equal to or
exceeding the amount of the outstanding Peseta Swing Line
Loans. For purposes of Working Capital Loans up to an
aggregate maximum of $10,000,000 outstanding at any one
time, otherwise eligible accounts denominated in pesetas
(which are not otherwise maintained in the Borrowing Base in
respect of Peseta Swing Line Loans), Deutsche marks, French
francs, Italian lira, Pounds sterling or any other currency
that is approved by the Required Lenders shall be deemed to
be Eligible Accounts. For purposes of all other Working
Capital Loans, only accounts denominated in dollars shall be
deemed to be Eligible Accounts.
"Eligible Inventory" shall mean an
amount calculated in dollars equal to the sum of (a) the
value of the copper, gold and silver content of all of the
anodes in the Borrower's inventory, such value to be calcu-
lated, in the case of (i) copper, by reference to the LME
Grade A cash, P.M. unofficial price, (ii) gold, by reference
to the London P.M. daily fix price and (iii) silver, by
reference to the London daily fix price, (b) the value of
the copper content of all of the cathodes in the Borrower's
inventory, such value to be calculated by reference to LME
Grade A cash, P.M. unofficial price, (c) the acquisition
price of all of the fully paid copper concentrate in the
Borrower's inventory, (d) the value of the copper content of
the Borrower's wire-rod located either at the Borrower's
premises or at the Cordoba plant of Metalcable, S.A., by
reference to the LME Grade A cash, P.M. unofficial price,
and (e) the value of the gold and silver content of all of
the slimes in the Borrower's inventory, such value to be
calculated, in the case of (i) gold, by reference to the
London P.M. daily fix price and (ii) silver, by reference to
the London daily fix price, all as to which the Lenders have
a valid and perfected first priority security interest under
all applicable laws, determined after taking into account
all charges and liens (other than carrier, warehouse,
customs and similar statutory liens arising in the ordinary
course of business) of all kinds against such inventory all
as determined by the Agent in its reasonable discretion.
Inventory shall immediately lose its status as Eligible
Inventory when the Borrower sells it, otherwise passes title
thereto or consumes it in such a manner that it no longer
qualifies as Eligible Inventory, or the Lenders release, at
the Borrower's request, their security interest therein, or
when accounts receivable arise by virtue of constituting
proceeds of such inventory. Eligible Inventory shall not
include any inventory in which any other Person has a secur-
ity interest (other than carrier, warehouse, customs and
similar statutory liens arising in the ordinary course of
business).
"Engineer's Report" shall mean the
Huelva Expansion Project Report of Technical Audit, dated
May 1994, prepared by the Independent Engineer, as amended
and supplemented prior to the date of the Initial Loans.
"Environmental Advisor" shall mean
Dames & Moore, International Division or such alternate
advisor as may be agreed upon by the Borrower and the Agent.
"Environmental Claim" shall mean any
claim, demand, notice of violation, suit, administrative or
judicial proceeding, regulatory action, investigation,
information request or order involving any Hazardous
Substance, Environmental Law, noise or odor pollution or any
injury or threat of injury to human health, property or the
environment.
"Environmental Laws" shall mean any
statute or regulation, rule, order or permit now or
hereafter enacted by any competent body of the European
Union, or the Kingdom of Spain (including but not limited to
those enacted by the Spanish Parliament, the Central
Government or any of its Ministries, the Parliament of the
relevant Autonomous Communities, the Governing Body of such
Communities or any of its Departments, and those now or
hereafter enacted by any other competent Local Authority)
and all other applicable national, regional, and local laws,
ordinances, regulations, rules, orders, permits, and the
like, which are directed at the protection of human health
or the protection or restoration of the environment.
"Environmental Report" shall mean the
Environmental Due Diligence Assessment for Barclays Bank
Mining Finance Final Report, dated July, 1994, prepared by
the Environmental Advisor.
"ESP 1.62 Billion Loan Agreement" shall
mean the ESP 1.62 Billion Pesetas Credit Agreement, dated
June 15, 1993, as amended from time to time, between the
Borrower and Barclays Bank, S.A.
"Event of Default" shall mean any of
the events described in Section 9.01.
"Expropriatory Action" shall mean any
action or series of actions that is taken, authorized,
ratified or condoned by the Kingdom of Spain, its Central
Government, any of its Autonomous Communities or any other
Local Authority or any agency or instrumentality thereof,
for the appropriation, confiscation, expropriation or
nationalization (by intervention, condemnation or other form
of taking), whether with or without compensation and whether
under color of law or otherwise, of the ownership interest
of the Borrower in the Project.
"FCX" shall mean Freeport-McMoRan
Copper & Gold Inc.
"Financing Documents" shall mean this
Agreement, the Security Documents, the Inducement Agreement,
and any other financing agreements entered into between the
Lenders (or the Agent on their behalf) and the Borrower or
any other Person relating to the Project and documents with
any Lender with respect to Hedging Arrangements.
"Force Majeure" shall mean an act of
God, labor dispute and industrial action of any kind
(including, without limitation, a strike, interruption,
slowdown and other similar action on the part of organized
labor), a lockout, act of the public enemy, war (declared or
undeclared), civil war, sabotage, blockage, revolution,
riot, insurrection, civil disturbance, terrorism, epidemic,
cyclone, tidal wave, landslide, lightning, earthquake,
flood, storm, fire, adverse weather conditions,
expropriation, nationalization, act of eminent domain, laws,
rules, regulations or orders of government authority,
explosion, breakage or accident to machinery or equipment or
facility embargo, inability to obtain or delay in obtaining
equipment, materials, transport or any event whether similar
to the foregoing or not which is not within the reasonable
control of the Borrower, as the case may be, and which makes
continued construction of the Project impracticable or has a
Material Adverse Effect on the ability of the Borrower to
develop or operate the Project as contemplated by the
Project Development Plan.
"Forecast" shall mean a forecast
prepared by the Borrower applying to the variables contained
in the Computer Model such assumptions as the Borrower
believes are appropriate as of the relevant Forecast Date
and delivered in accordance with the terms hereof, setting
forth (a) projections of the Forecast Net Cash Flow for each
period from the Forecast Date to the Maturity Date; (b) the
Loan Life Cover Ratio as at the relevant Forecast Date; (c)
the Two Year Cover Ratio as at the relevant Forecast Date;
and (d) the amount of any mandatory prepayments required
pursuant to Section 2.06 to maintain the Loan Life Cover
Ratio and the Two Year Cover Ratio at the required levels
for the applicable period; provided, that if the Forecast so
prepared by the Borrower is not accepted by the Required
Lenders pursuant to Section 8.03, "Forecast" shall be deemed
to refer to the Forecast as modified by the Required Lenders
in accordance with Section 8.03.
"Forecast Assumptions" shall have the
meaning ascribed to such term in Section 8.03.
"Forecast Date" shall mean the earlier
of (i) the Completion Date and (ii) September 30, 1996, and,
thereafter, any subsequent date selected by the Borrower
occurring not less than six months nor more than one year
following the immediately preceding Forecast Date, and any
Recalculation Date and any additional date selected by the
Borrower in connection with the establishment of the
Contract Date.
"Forecast Net Cash Flow" shall mean, in
respect of any period, the aggregate receipts and revenues
estimated to be received by the Borrower during such period
less the aggregate of all Permitted Payments made or
estimated to be made during such period in accordance with
the terms hereof.
"FTX" shall mean Freeport-McMoRan Inc.
"Gold-Silver Loan Agreement" shall mean
the Gold-Silver Loan, dated December 13, 1989, between the
Borrower, as borrower, and Barclays Structured Finance
Limited and The Bank of Nova Scotia, as lenders, and
Barclays Bank PLC, as agent.
"Governmental Authority" shall mean any
nation or government, any state or other political
subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative
functions of or pertaining to government, including but not
limited to the competent bodies of the European Union, the
Kingdom of Spain, the Central Government, Autonomous
Communities, Provinces, Municipalities or any other Local
Authority.
"Guarantee" by any Person shall mean
any obligation, contingent or otherwise, of such Person
guaranteeing or having the economic effect of guaranteeing
any Indebtedness of any other Person (the "primary obligor")
in any manner, whether directly or indirectly, and including
any obligation of such Person, (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such
Indebtedness or to purchase (or to advance or supply funds
for the purchase of) any security for the payment of such
Indebtedness, (ii) to purchase property, securities or
services for the purpose of assuring the holder of such
Indebtedness of the payment of such Indebtedness, or
(iii) to maintain working capital, equity capital or other
financial statement condition or liquidity of the primary
obligor so as to enable the primary obligor to pay such
Indebtedness (and "Guaranteed", "Guaranteeing" and "Guaran-
tor" shall have meanings correlative to the foregoing).
"Hazardous Substance" shall mean
(a) any substance, in any concentration, that is listed,
classified or regulated pursuant to any Environmental Law;
(b) any petroleum product or by-product, asbestos containing
material, polychlorinated biphenyls, radioactive materials
or radon; or (c) any other substance where human exposure is
regulated by any Governmental Authority or any Environmental
Law.
"Hedging Arrangement" shall mean any
customary agreement, contract or similar arrangement for the
forward assurances against adverse fluctuations (but which
need not be on a fixed forward basis) of interest rates,
metal prices or currency exchange rates, including but not
limited to Interest Rate Protection Agreements and Optional
Currency Hedging Arrangements.
"Huelva Expansion Program" shall mean
the expansion and improvement program at the Huelva Smelter
as contemplated by (a) the Lurgi Contract and (b) the scope
of work description contained in Exhibit F hereto.
"Huelva Smelter" shall mean the
Borrower's copper smelter and refining complex in Huelva,
Spain, as more fully described in the Project Development
Plan.
"Indebtedness" of any Person shall
mean, without duplication, (a) all indebtedness of such
Person for borrowed money or for the deferred purchase price
of property or services having an original maturity greater
than 180 days (including all obligations, contingent or
otherwise, of such Person in connection with letter of
credit facilities, bankers' acceptance facilities, Hedging
Arrangements or other similar facilities including currency
swaps) other than indebtedness to trade creditors and
service providers incurred in the ordinary course of busi-
ness, (b) all obligations of such Person evidenced by bonds,
notes, debentures or other similar instruments, (c) all
indebtedness created or arising under any conditional sale
or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such
property), (d) all Capital Lease Obligations of such Person,
(e) all Indebtedness referred to in clause (a), (b), (c) or
(d) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise,
to be secured by) any Lien upon or in property (including
accounts and contract rights) owned by such Person, even
though such Person has not assumed or become liable for the
payment of such Indebtedness and (f) all Indebtedness of
others Guaranteed by such Person.
"Independent Engineer" shall mean Hatch
Associates Limited or such alternate engineer as may be
agreed upon by the Borrower and the Agent.
"Independent Insurance Advisor" shall
mean Fenchurch Insurance Brokers Limited.
"Inducement Agreement" shall mean the
Inducement Agreement, dated as of December 7, 1994, from RTM
and FCX to the Agent substantially in the form of Exhibit I
hereto and any amendments or successor agreements thereto.
"Information Memorandum" shall mean the
Information Memorandum: $290 Million Project Finance of
Copper Smelter and Refinery Expansion, Huelva, Spain dated
September, 1994, as supplemented with the Base Case and an
updated Term Sheet reflecting the terms hereof.
"Initial Loan" shall mean the first
Loan which is made pursuant to the terms hereof.
"Interest Period" shall mean each one,
two, three, six, nine or twelve month period or such longer
period acceptable to the Lenders, such period being the one
selected by the Borrower pursuant to Section 2.02 or 3.02
hereof and commencing on the date the relevant Loan is made
or the last day of the current Interest Period, as the case
may be, provided, however, that the Borrower may elect to
have one Interest Period of a different duration at any one
time outstanding in order to avoid payments under Section
5.03(a) in respect of funding losses that, absent such
election, would be incurred by the Borrower on each
Repayment Date.
"Interest Rate Protection Agreement"
shall mean any interest rate swap agreement, interest rate
cap agreement, interest rate collar agreement or similar
arrangement used by a Person to mitigate interest rate risk
on Indebtedness.
"Investor" shall mean FCX indirectly
through Subsidiaries providing $30,000,000 of equity to the
Borrower.
"LIBOR" shall mean, with respect to any
Interest Period for a Loan, the rate per annum determined by
the Agent to be the arithmetic mean (rounded to the nearest
1/100 of 1% or, if there is no nearest 1/100 of 1%, to the
next higher 1/100 of 1%) of the respective rates of interest
communicated by the Reference Lenders to the Agent as the
rate at which dollar deposits are offered to the Reference
Lenders by leading banks in the London interbank deposits
market at approximately 11:00 A.M., London time, on the
second full Business Day preceding the first day of such
Interest Period in an amount substantially equal to the
respective Reference Amounts for a term equal to such
Interest Period.
"Lien" shall mean, with respect to any
asset, (a) any mortgage, deed of trust, lien, pledge,
encumbrance, charge or security interest in or on such
asset, (b) the interest of a vendor or lessor under any
conditional sale agreement, capital lease or title retention
agreement relating to such asset, and (c) in the case of
securities, any purchase option, call or similar right of a
third party with respect to such securities.
"LME" shall mean the London Metal
Exchange.
"Loan Life Cover Ratio" shall mean, on
any date, the ratio of (a) the Forecast Net Cash Flow
through the Maturity Date calculated and discounted as in
the most recent Forecast to (b) an amount equal to the
aggregate principal amount of Term Loans outstanding on such
date less the Reserve Account Balance on such date.
"Loans" shall mean, collectively, the
Working Capital Loans, Swing Line Loans and Term Loans
outstanding hereunder from time to time.
"Lurgi" shall mean Lurgi Espanola, S.A.
"Lurgi Certificate" shall mean a
Certificate of Lurgi in the form of Exhibit J hereto,
delivered by the Borrower to the Agent as a condition
precedent to the effectiveness of this Agreement and in each
calendar month prior to the Completion Date.
"Lurgi Contract" shall mean
collectively (i) the contracts between RTM and Lurgi for the
modification of the acid plant for RTM 1 and RTM 2, Phase 1
dated July 30, 1993 and Phase 2 dated December 14, 1993 and
(ii) the Turn Key Lump Sum Contract, dated June 2, 1994,
between RTM and Lurgi for the expansion of the Huelva
Smelter, as the same may be supplemented, modified or
amended from time to time, each as assigned by RTM to the
Borrower.
"Management Services Contract" shall
mean the Management Services Contract, effective as of
January 1, 1994, between FTX and RTM and its subsidiaries,
including the Borrower.
"Master Assignment Agreement" shall
mean the Master Assignment Agreement by the Borrower in
favor of the Lenders and the Agent substantially in the form
of Exhibit A hereto creating in favor of the Agent an
assignment of the Borrower's receivables (to the extent such
items constitute a portion of the Borrowing Base).
"Material Adverse Effect" shall mean a
material adverse effect, taking into account all facts and
circumstances (i) on the business, properties, condition
(financial or otherwise) or operations of the Borrower which
has had, or could reasonably be expected to have, a material
adverse effect on the ability of the Borrower to perform its
obligations under any Financing Document or (ii) on the
ability of the Borrower to construct, develop, operate, or
use the Project as contemplated in the Project Development
Plan, or (iii) on the validity or enforceability of any
Project Document or Financing Document or the validity,
perfection or priority of any security interest purported to
be granted by the Borrower or RTM in favor of the Lenders
thereunder.
"Maturity Date" shall mean the earlier
of (a) June 30, 2005 and (b) the prepayment in full of all
Term Loans.
"Mortgage" shall mean the Mortgage on
Real Estate by the Borrower in favor of the Lenders and the
Agent, substantially in the form of Exhibit K hereto,
granting the Agent a first priority mortgage on all of the
Borrower's real estate and concessions and related assets
and initially securing a dollar amount equal to 25% (as the
same may be subsequently increased as provided herein and
therein) of the Total Term Loan Commitment.
"Net Cash" shall mean for any date the
total cash balances and Authorized Investments of the
Borrower on such date (after giving effect to the payment of
all payment obligations of the Borrower hereunder due
through such date and any optional prepayments noticed
through such date) less cash or Authorized Investments
subject to Liens or included in the Borrowing Base.
"OECD" shall mean the Organization for
Economic Cooperation and Development.
"Operating Report" shall mean a
management report of the Borrower substantially in the form
of the reports previously provided to the Agent.
"Optional Currency Hedging
Arrangements" shall have the meaning ascribed to such term
in Section 8.01(n).
"Participant" shall have the meaning
ascribed to such term in Section 12.08(b).
"Permitted Capital Expenditures" shall
mean for any fiscal year prior to the Contract Date, the
aggregate capital expenditures of the Borrower and its
Subsidiaries in an amount not to exceed $5,000,000, or any
additional amounts approved by the Required Lenders in such
fiscal year, and for any year after the Contract Date, any
amounts available for Restricted Payments and not utilized
therefor.
"Permitted Encumbrances" shall mean (i)
Liens for taxes not delinquent or being contested in good
faith and by appropriate proceedings and for which adequate
reserves (in accordance with Spanish GAAP) are being
maintained, (ii) deposits or pledges to secure obligations
under workers' compensation, social security or similar
laws, or under unemployment insurance, in each case arising
in the ordinary course of business (iii) deposits or pledges
to secure bids, tenders, contracts (other than contracts for
the payment of money), leases, statutory obligations, surety
and appeal bonds and other obligations of like nature, in
each case arising in the ordinary course of business, (iv)
mechanics', workers', materialmen's or other like Liens, in
each case arising in the ordinary course of business with
respect to obligations which are not due or which are being
contested in good faith, (v) minor imperfections of title on
real estate, provided such imperfections do not render title
unmarketable, (vi) immaterial existing easements or future
easements arising by operation of law, in each case provided
such easements do not materially adversely affect
marketability of title, (vii) any mortgage, encumbrance or
other Lien upon, or security interest in, any property here-
after acquired by the Borrower or its Subsidiaries, created
contemporaneously with such acquisition to secure or provide
for the payment or financing of any part of the purchase
price thereof, or the assumption of any Lien upon, or
security interest in, any such property hereafter acquired
existing at the time of such acquisition, or the acquisition
of any such property subject to any Lien without the
assumption thereof; provided, that (x) the Indebtedness
secured by all such Liens shall not exceed $2,500,000 in the
aggregate or its equivalent in another currency and (y) each
such Lien shall attach only to the property so acquired and
fixed improvements thereon, (viii) Liens granted to the
Agent and the Lenders pursuant to the Financing Documents
(including Liens granted to secure interest, currency and
commodity hedging arrangements with the Agent or any Lender
pursuant to Section 8.01(n)), (ix) existing mortgages dis-
closed in the Borrower's most recent financial statements
(or the notes thereto), (x) Liens on accounts receivable
securing the Peseta Loan, (xi) in the event the Borrower has
sufficient Net Cash available to permit it to make
Restricted Payments, in lieu of making all or a portion of
such Restricted Payments, Liens in an amount of up to
$10,000,000 at any one time outstanding in respect of cash
margin obligations related to commodity hedging arrangements
made in the ordinary course of business, and (xii) Liens or
other reserved interests of a seller of copper concentrate
in copper concentrate sold to the Borrower in favor of such
seller securing the purchase price thereof prior to payment
in full for such copper concentrate by the Borrower.
"Permitted Payments" shall mean for any
relevant period, all payments paid, or forecast to be
payable, by the Borrower during that period, calculated on
an actual rather than an accrual basis, in respect of (a)
capital costs; (b) operating costs; (c) any taxes; (d) any
amount of interest, fees or other expenses and any amounts
of scheduled principal the Borrower expects to pay and not
refinance during such period in connection with the Peseta
Loan and other permitted Indebtedness; and (e) any other
costs and liabilities as the Borrower and the Required
Lenders may agree. Permitted Payments do not include any
amount of principal or interest payable under this
Agreement.
"Person" shall mean any corporation, an
association, a partnership, an organization, a business, an
individual, a government or any political subdivision
thereof or a governmental agency.
"Peseta Loan" shall mean, collectively,
borrowings of the Borrower in an amount of up to $20,000,000
or its equivalent in another currency under other facilities
provided by Spanish or other OECD-nation chartered banks
determined as of the date of the relevant Peseta Loan.
"Peseta Swing Line Loans" shall have
the meaning ascribed to such term in Section 3.04.
"Pledge of Shares" shall mean the
Pledge of Shares, dated as of August 3, 1994 and
subsequently amended, by RTM in favor of the Lenders and the
Agent substantially in the form of Exhibit L hereto creating
a pledge to the Agent of the shares, initially representing
100% of the capital stock of the Borrower, as the same
subsequently may be reduced to 51% as provided herein and
therein.
"Pledge on Authorized Investments"
shall mean each Pledge on Authorized Investments by the
Borrower in favor of the Lenders and the Agent, to be dated
as of the date of the pledge of the Authorized Investments
referred to therein, substantially in the form of Exhibit M
hereto creating a pledge to the Agent of such Authorized
Investments as are delivered to the Agent for inclusion in
the Borrowing Base in connection with each such Pledge on
Authorized Investments.
"Pledge Without Displacement" shall
mean the Pledge Without Displacement (Prenda Sin
Desplazamiento) by the Borrower in favor of the Lenders and
the Agent substantially in the form of Exhibit N hereto
creating a pledge to the Agent of the Borrower's fully paid
inventories which are at any time located in the Huelva
Smelter and, in the case of wire-rod and cathodes, located
at the Cordoba plant of Metalcable, S.A..
"Prescribed Forms" shall mean such duly
executed form(s) or statement(s), and in such number of
copies, which may, from time to time, be prescribed by law
and which, pursuant to applicable provisions of an income
tax treaty or other applicable rule, regulation, directive
or similar authorization between Spain and the country of
residence of the Lender providing the form(s) or
statement(s), permit the Borrower to make payments hereunder
for the account of such Lender free of deduction or
withholding for or on account of taxes.
"Project" shall mean the Huelva
Expansion Project as described in the Project Development
Plan.
"Project Development Plan" shall mean
the plan and agreement to expand the capacity of and operate
the Huelva Smelter as contained in the (i) Huelva Expansion
Program and (ii) assumptions applied in the preparation of
the Base Case and, following the Completion Date, the most
recent Forecast Assumptions.
"Project Documents" shall mean each
document specified on Schedule 1.01(c) hereto.
"Pro Rata Share" shall mean, with
respect to each of the facilities for each Lender at any
time, the proportion of such Lender's Working Capital Loan
Commitment or Term Loan Commitment, as the case may be, to
the Total Working Capital Loan Commitment or the Total Term
Loan Commitment, as the case may be, of all the Lenders or,
if the Working Capital Loan Commitment or the Term Loan
Commitment, as the case may be, shall have been cancelled or
reduced to $0 or expired, the proportion of such Lender's
then outstanding Working Capital Loans or Term Loans, as the
case may be, to the aggregate amount of Working Capital
Loans or Term Loans, as the case may be, then outstanding.
Each Lender's Pro Rata Share of the Term Loan Commitment
Fees which accrue prior to cancellation of the Revolving
Credit Agreement shall be calculated with respect to the
amount of such Lender's Term Loan Commitment less the amount
of such Lender's outstanding Revolving Loan Commitment under
the Revolving Credit Agreement.
"Recalculation Date" shall mean the
date of recalculation of a Forecast at the direction of the
Required Lenders, or in the circumstances permitting them to
determine that a Recalculation Event has occurred, any three
Lenders or Lenders collectively having 40% of the aggregate
Commitments, as the case may be, as a result of the
occurrence of a Recalculation Event.
"Recalculation Event" shall mean any
event or circumstance, as determined by the Required
Lenders, that has caused, or that can with reasonable
certainty be expected to cause, one or more of the
assumptions used in the most recently completed Forecast to
no longer be reasonable or appropriate in light of all facts
and circumstances, and, as a result thereof, indicates a
material change exists in the cover ratios that were
previously calculated on the basis thereof; provided,
however that (i) at any time (A) the Commitment of the Agent
is greater than or equal to 25% of the aggregate Commitments
of all of the Lenders, and (B) the Agent has received a
notice from the Borrower pursuant to Section 8.01(j)(vii) or
Section 8.01(j)(x) in respect of a material contract, then
any three Lenders may determine that the circumstances
described in such notice represent a Recalculation Event and
(ii) at any time (A) the Commitment of the Agent is less
than 25% of the aggregate Commitments of all of the Lenders
and (B) the Agent has received a notice from the Borrower
pursuant to Section 8.01(j)(vii) or Section 8.01(j)(x) in
respect of a material contract, then Lenders collectively
having at least 40% of the aggregate Commitments may
determine that the circumstances described in such notice
represent a Recalculation Event.
"Reference Amount", with respect to any
Reference Lender and Interest Period, shall mean (a) if that
Reference Lender is a Lender, the amount of that Lender's
Loan scheduled to be outstanding during that Interest
Period, or (b) if that Reference Lender has assigned any
portion of its Loan to an affiliate, the amount scheduled to
be outstanding during that Interest Period of the Loan at
the office of that Reference Lender without taking into
account any reduction in the amount of any Lender's Loan
through any such assignment or transfer, in each case
rounded up to the nearest integral multiple of $1,000,000.
"Reference Lender" shall mean each of
Barclays Bank PLC, ABN AMRO Bank N.V. and National
Westminster Bank Plc.
"Repayment Date" shall have the meaning
ascribed to such term in Section 2.03.
"Required Insurance" shall mean the
insurance coverage that in the written opinion of the
Independent Insurance Advisor, dated on or prior to the date
hereof, is all of the insurance which is required to be in
effect both prior to and following the Completion Date;
provided, that specifications therein for insurance to be
effective following the Completion Date, will refer to the
type of insurance and basis for determining at future dates
the coverage amount thereof, but not specific coverage
amounts.
"Required Lenders" shall mean at any
date Lenders having at least 66 2/3% of the Commitments or,
if the Commitments have been cancelled or terminated,
holding at least 66 2/3% of the aggregate unpaid principal
amount of the Loans.
"Required Reserve Account Balance"
shall have the meaning ascribed to such term in Section
5.07.
"Reserve Account" shall have the
meaning ascribed to such term in Section 5.07.
"Reserve Account Balance" shall mean
the amount in the Reserve Account as such term is defined in
Section 5.07.
"Restricted Payments" shall mean any
dividends on any shares of any class of any Person's capital
stock, or application of any of its property or assets to
the purchase, redemption or other retirement of, or the
setting apart of any sum for the payment of any dividends
on, or for the purchase, redemption or other retirement of,
or any other payment or distribution of assets in respect
of, shares of capital stock of such Person.
"Revolving Credit Agreement" means the
Amended and Restated Revolving Credit Agreement, dated as of
February 28, 1994, and amended and restated as of August 3,
1994, and further amended as of November 4, 1994, among the
Borrower, RTM, the Banks referenced therein and Barclays
Bank PLC, as agent.
"RTM" shall have the meaning ascribed
to such term in the Recitals hereto.
"RTM Capital Contribution" shall have
the meaning ascribed to such term in Section 5.07.
"Security Documents" shall mean the
Mortgage, the Pledge Without Displacement, each Pledge on
Authorized Investments, the Pledge of Shares, each
Assignment of Contracts and the Master Assignment Agreement.
"Spanish GAAP" shall mean Spanish
generally accepted accounting principles set forth in the
Commercial Code and the General Accounting Chart ("Plan
General de Contabilidad" as approved by Royal Decree
1642/1990, of December 20) and any relevant implementing
plans for special sectors of industry, opinions and
pronouncements of the Instituto de Contabilidad y Auditoria
de Cuentas or in such other statements by such other
entities as may be approved by a significant segment of the
accounting profession, which are applicable to the
circumstances as of the date of determination.
"Subsidiary" shall mean any corporation
or partnership the majority of the voting shares or voting
interests of which at the time are owned directly or
indirectly by the Borrower and/or by one or more
Subsidiaries of the Borrower.
"Swing Line Interest Period" shall mean
each one-, two- or three-week or one-month period, such
period being the one selected by the Borrower pursuant to
Section 3.04 hereof and commencing on the date the relevant
Swing Line Loan is made.
"Swing Line Limit" shall have the
meaning ascribed to such term in Section 3.04.
"Swing Line Loan Request" shall mean a
written request by the Borrower to borrow a Swing Line Loan
pursuant to the terms hereof, which shall be substantially
in the form of Exhibit O, shall be signed by the Chief
Financial Officer and another authorized officer of the
Borrower and shall specify, with respect to such requested
Swing Line Loan, (i) the requested Borrowing Date, (ii) the
requested principal amount (in U.S. dollars or pesetas) of
the Swing Line Loan and (iii) the requested term of the
Swing Line Interest Period thereafter.
"Swing Line Loans" shall have the
meaning ascribed to such term in Section 3.04.
"Swing Line Payment" shall have the
meaning ascribed to such term in Section 4.04(b).
"Taxes" shall have the meaning ascribed
to such term in Section 5.04(a).
"Technical Non-Compliance" shall have
the meaning ascribed to such term in Section 8.05.
"Term Loan Commitment" shall mean, in
the case of each Lender, the amount set forth opposite such
Lender's name under the heading "Term Loan Commitment" on
Schedule I hereof, as such amount may be reduced from time
to time pursuant to Section 2.04.
"Term Loan Commitment Fee" shall have
the meaning ascribed to such term in Section 4.04.
"Term Loan Commitment Termination Date"
shall mean the earlier to occur of (i) the Completion Date
and (ii) the date, if any, on which the Term Loan Commitment
is reduced to $0 pursuant to Section 2.04.
"Term Loan Request" shall mean a
written request by the Borrower to borrow Term Loans
pursuant to the terms hereof, which shall be substantially
in the form of Exhibit P, shall be signed by the Chief
Financial Officer and another authorized officer of the
Borrower and shall specify, with respect to such requested
Term Loans, (i) the requested Borrowing Date, (ii) the
aggregate amount of Term Loans which the Borrower desires to
borrow on such date, (iii) the requested term of the initial
Interest Period therefor and (iv) the intended use of
proceeds of such Term Loans.
"Term Loans" shall have the meaning
ascribed to such term in Section 2.01.
"Term Sheet" shall mean the Summary of
Terms and Conditions for $290 Million Term Loan and Working
Capital Facility executed July 6, 1994, as subsequently
revised.
"Total Term Loan Commitment" shall mean
the aggregate Term Loan Commitments of all the Lenders.
"Total Working Capital Loan Commitment"
shall mean the aggregate Working Capital Loan Commitments of
all the Lenders.
"Two Year Cover Ratio" shall mean on
any date, the ratio of (a) the Forecast Net Cash Flow during
the two years commencing on the most recent Forecast Date
plus, for all purposes hereunder other than as used in
application of the terms of Sections 2.06(b) and 8.02(b),
the Reserve Account Balance on such date to (b) an amount
equal to the sum of all scheduled payments of principal and
interest with respect to the Term Loans over such two years.
"Unrestricted Government Grant Amount"
shall mean, as of any date, an amount in dollars (or its
peseta equivalent calculated by reference to the exchange
rate in effect on such date) equal to the aggregate amount
of Committed Government Grants of the Borrower on such date
less $15,000,000 (or its peseta equivalent on such date
calculated as above).
"Variance Request" shall have the
meaning ascribed to such term in Section 8.04(d).
"Wholly owned Subsidiary" shall mean
any Subsidiary all the shares of stock of all classes of
which (other than directors' qualifying shares) at the time
are owned directly or indirectly by the Borrower and/or one
or more Wholly owned Subsidiaries of the Borrower.
"Working Capital Account" shall have
the meaning ascribed to such term in Section 5.06.
"Working Capital Commitment Fee" shall
have the meaning ascribed to such term in Section 4.04.
"Working Capital Loan Commitment" shall
mean, in the case of each Lender, the amount set forth
opposite such Lender's name under the heading "Working
Capital Loan Commitment" on Schedule I hereof, as such
amount may be reduced from time to time pursuant to Section
3.05.
"Working Capital Loan Commitment
Termination Date" shall mean the earlier to occur of (i) the
Maturity Date and (ii) the date, if any, on which the
Working Capital Loan Commitment is reduced to $0 pursuant to
Section 3.05.
"Working Capital Loan Request" shall
mean a written request by the Borrower to borrow Working
Capital Loans pursuant to the terms hereof, which shall be
substantially in the form of Exhibit Q, shall be signed by
the Chief Financial Officer and another authorized officer
of the Borrower and shall specify, with respect to such
requested Working Capital Loans, (i) the requested Borrowing
Date, (ii) the aggregate amount of Working Capital Loans
which the Borrower desires to borrow on such date, and (iii)
the requested term of the initial Interest Period therefor.
"Working Capital Loans" shall have the
meaning ascribed to such term in Section 3.01.
ARTICLE II
THE TERM LOANS
Section 2.01. The Term Loans. On or
before the Term Loan Commitment Termination Date, and
subject to the terms and conditions hereof, each Lender,
severally and not jointly with the other Lenders, agrees to
make term loans ("Term Loans") to the Borrower from time to
time in an aggregate principal amount not to exceed such
Lender's Term Loan Commitment.
Section 2.02. Procedure for Term
Loans. (a) The Borrower may borrow Term Loans by deliver-
ing a written Term Loan Request to the Agent by 10:00 A.M.,
London time, not less than three Business Days prior to the
requested Borrowing Date therefor. The Borrower also shall
(a) deliver to the Agent the certificate specified in
Section 7.03(a) and (b) cause to be delivered to the Agent
the certificates specified in Section 7.03(b), all of the
foregoing to be delivered not less than three Business Days
before the Borrowing Date provided, that only three Term
Loan Requests may be delivered during any calendar month.
Term Loans shall be in the minimum aggregate amount of
$2,500,000.
(b) Upon receipt of any Term Loan
Request from the Borrower, the Agent shall forthwith give
notice to each Lender of the substance thereof. On the
Borrowing Date specified in such Term Loan Request, each
Lender shall make available to the Agent in immediately
available funds at the office of the Agent at its address
set forth on the signature pages hereof, such Lender's Pro
Rata Share of the requested Term Loans.
(c) Upon receipt by the Agent of all
such funds and upon the satisfaction by the Borrower or
waiver by the Required Lenders of each of the conditions
precedent contained in Article VII applicable thereto, the
Agent shall disburse to the Borrower on the requested
Borrowing Date the Term Loans requested in such Term Loan
Request. The Agent may, but shall not be required to,
advance on behalf of any Lender such Lender's Pro Rata Share
of the Term Loans on a Borrowing Date unless such Lender
shall have notified the Agent prior to such Borrowing Date
that it does not intend to make available its Pro Rata Share
of such Term Loans on such date. If the Agent makes such
advance, the Agent shall be entitled to recover such amount
on demand from the Lender on whose behalf such advance was
made, and if such Lender does not pay the Agent the amount
of such advance on demand, the Borrower shall promptly repay
such amount to the Agent. Until such amount is repaid to
the Agent by such Lender or the Borrower, such advance shall
be deemed for all purposes to be a Term Loan made by the
Agent. The Agent shall be entitled to recover from the
Lender or the Borrower, as the case may be, interest on the
amount advanced by it for each day from the Borrowing Date
therefor until repaid to the Agent, at a rate per annum
equal to the applicable rate on the Term Loans made on the
Borrowing Date.
Section 2.03. Repayment. (a) The
outstanding principal balance of the Term Loans shall be
repaid in thirty-six equal quarterly installments payable on
the last day of each calendar quarter (each, a "Repayment
Date"), the first such Repayment Date being September 30,
1996; provided, that the outstanding Term Loans shall be
paid in full no later than June 30, 2005.
(b) The Borrower shall have the right
to elect to defer payment of all or a portion of any one
such scheduled quarterly installment in the event of a
planned shutdown of the Huelva Smelter provided that
(i) notice of such election shall be given to the Agent in
writing no later than the second preceding Repayment Date
and (ii) any amount so deferred shall be repaid in full in
either one, two or three equal installments payable on the
next successive Repayment Dates.
(c) Subject to the approval of the
Required Lenders, the Borrower may request to defer payment
of all or a portion of any one additional scheduled
quarterly installment provided that (i) notice of such
request shall be given to the Agent in writing no later than
the second preceding Repayment Date and (ii) any amount so
deferred shall be repaid in full in either one, two or three
equal installments payable on the next successive Repayment
Dates.
Section 2.04. Cancellation or
Reduction of Term Loan Commitment. The Borrower shall have
the right, upon not less than three Business Days' written
notice to the Agent and upon payment of the Term Loan
Commitment Fee accrued through the date of such cancellation
or reduction, to cancel the Total Term Loan Commitment in
full or to reduce the amount thereof. Partial reductions of
the Total Term Loan Commitment shall be in the amount of
$5,000,000 or, if greater, an integral multiple thereof (or,
if the outstanding aggregate amount of Term Loans is less
than $5,000,000, then all of such lesser amount). All such
cancellations or reductions shall be permanent. Notwith-
standing the foregoing, the Borrower may reduce or cancel
the Term Loan Commitment prior to the Completion Date only
upon its written certification in form and substance reason-
ably satisfactory to the Required Lenders and acceptance
thereof by the Agent on behalf of the Required Lenders, of
its ability to fund the remaining costs of construction of
the Huelva Smelter to the Completion Date with the remaining
Term Loan Commitment and/or Working Capital Loan Commitment
and other available funds.
Section 2.05. Optional Prepayment.
The Borrower shall have the right, on not less than three
Business Days' written notice to the Agent, to prepay the
Term Loans in whole or in part, without premium or penalty,
in the aggregate principal amount of $5,000,000 or, if
greater, an integral multiple thereof (or if the outstanding
aggregate amount of Term Loans is less than $5,000,000 then
such lesser amount), together with accrued interest on the
principal being prepaid to the date of prepayment and the
amounts required by Section 5.03. Each partial prepayment
shall be applied ratably to installments of principal of all
outstanding Term Loans. All prepayments of Term Loans
pursuant to this Section 2.05 shall be permanent.
Section 2.06. Mandatory Prepayment.
(a) After the Completion Date, in the event that (i) the
Loan Life Cover Ratio at any time is less than 1.6 to 1.0
but equal to or greater than 1.4 to 1.0, then so long as
such ratio exists, 75% of Net Cash on each Repayment Date
shall be applied to repay outstanding Term Loans and 25% of
Net Cash on such date may be either retained by the Borrower
for working capital purposes or shall be available for
distribution in accordance with Section 8.02(b) hereof
(subject to any required payments to the Reserve Account as
specified in Section 8.02(b)), and (ii) the Loan Life Cover
Ratio at any time is less than 1.4 to 1.0, then, so long as
such ratio exists, 100% of Net Cash on each Repayment Date
shall be applied to repay outstanding Term Loans.
(b) After the Completion Date, in the
event that (i) the Two Year Cover Ratio at any time is less
than 1.3 to 1.0 but equal to or greater than 1.2 to 1.0,
then, so long as such ratio exists, 75% of Net Cash on each
Repayment Date shall be applied to repay outstanding Term
Loans and 25% of Net Cash on such date may be either
retained by the Borrower for working capital purposes or
shall be available for distribution in accordance with Sec-
tion 8.02(b) hereof (subject to any required payments to the
Reserve Account as specified in Section 8.02(b)), and (ii)
the Two Year Cover Ratio at any time is less than 1.2 to
1.0, then, so long as such ratio exists, 100% of Net Cash on
each Repayment Date shall be applied to repay outstanding
Term Loans.
(c)Whichever of the tests referred to
in subclauses (a) and (b) above requires the larger
mandatory prepayment by the Borrower shall govern.
(d) In the event the Completion Date
does not occur on or prior to September 30, 1996, then 100%
of Net Cash shall be applied on each Repayment Date
occurring on or after such date until the Completion Date to
prepay outstanding Term Loans, subject to the provisions of
Section 8.05.
(e)In the event the events described in
clauses (i) and (ii) in the definition of "Contract Date"
have not occurred on or prior to January 1, 1997 and the
provisions of Section 2.06(d) are not applicable, then 100%
of Net Cash shall be applied on each Repayment Date
occurring on or after such date until the Contract Date to
prepay outstanding Term Loans.
(f) Any mandatory prepayments will be
applied first to the repayment of all Term Loans ratably
across all remaining scheduled installments of principal
and, following repayment of the Term Loans in full, to any
Working Capital Loans or Swing Line Loans as specified in
Section 3.07, provided, however, that any mandatory
prepayments made during the deferral period referenced in
Section 2.03(b) or (c) shall be applied first to any
installment of principal so deferred.
ARTICLE III
THE WORKING CAPITAL LOANS
Section 3.01. The Working Capital
Loans. Prior to the Working Capital Loan Commitment
Termination Date, and subject to the terms and conditions of
this Agreement, upon the request of the Borrower, and upon
the satisfaction by the Borrower or the waiver by the
Required Lenders of each of the conditions precedent
contained in Article VII applicable thereto, each of the
Lenders, severally and not jointly with the other Lenders,
agrees to make one or more working capital loans ("Working
Capital Loans") to the Borrower from time to time in an
aggregate principal amount at any one time outstanding not
to exceed its Working Capital Loan Commitment; provided,
however, that the aggregate outstanding Working Capital
Loans and the Dollar Equivalent Amount of the Swing Line
Loans may not exceed the lesser of (i) the Total Working
Capital Loan Commitment and (ii) the Borrowing Base as
specified in the then most recent Borrowing Base Report; and
provided, further, that Working Capital Loans may only be
made in dollars. Up to an aggregate of $10,000,000 in
principal amount of Working Capital Loans outstanding at any
one time may be made against pledges of Eligible Accounts
denominated in pesetas, Deutsche marks, French francs,
Italian lira, Pounds sterling or any other currency that is
approved by the Required Lenders. Only Eligible Accounts
denominated in dollars may be included in the Borrowing Base
maintained with respect to other Working Capital Loans.
Section 3.02. Procedure for Working
Capital Loans. (a) The Borrower may borrow Working Capital
Loans by delivering a written Working Capital Loan Request
to the Agent by 10:00 A.M., London time, not less than four
Business Days prior to the requested Borrowing Date therefor
(or such shorter period as may be agreed upon by the
Borrower and the Agent); provided, that only one Working
Capital Loan Request may be delivered during any calendar
month. Working Capital Loans shall be in the minimum
aggregate amount of $2,500,000.
(b) Upon receipt of any Working
Capital Loan Request from the Borrower, the Agent shall
forthwith give notice to each Lender of the substance
thereof. On the Borrowing Date specified in such Working
Capital Loan Request, each Lender shall make available to
the Agent in immediately available funds at the office of
the Agent at its address set forth on the signature pages
hereof, such Lender's Pro Rata Share of the requested
Working Capital Loans.
(c) Upon receipt by the Agent of all
such funds and upon the satisfaction by the Borrower or
waiver by the Required Lenders of each of the conditions
precedent contained in Article VII applicable thereto, the
Agent shall disburse to the Borrower on the requested
Borrowing Date the Working Capital Loans requested in such
Working Capital Loan Request. The Agent may, but shall not
be required to, advance on behalf of any Lender such
Lender's Pro Rata Share of the Working Capital Loans on a
Borrowing Date unless such Lender shall have notified the
Agent prior to such Borrowing Date that it does not intend
to make available its Pro Rata Share of such Working Capital
Loans on such date. If the Agent makes such advance, the
Agent shall be entitled to recover such amount on demand
from the Lender on whose behalf such advance was made, and
if such Lender does not pay the Agent the amount of such
advance on demand, the Borrower shall promptly repay such
amount to the Agent. Until such amount is repaid to the
Agent by such Lender or the Borrower, such advance shall be
deemed for all purposes to be a Working Capital Loan made by
the Agent. The Agent shall be entitled to recover from the
Lender or the Borrower, as the case may be, interest on the
amount advanced by it for each day from the Borrowing Date
therefor until repaid to the Agent, at a rate per annum
equal to the applicable rate on the Working Capital Loans
made on the Borrowing Date.
Section 3.03. Repayment. The Working
Capital Loans shall mature and be payable on the Maturity
Date.
Section 3.04. Swing Line Loans.
(a) Subject to the terms and conditions hereof, the Agent,
as an administrative convenience to the Borrower and each
other Lender, may, but shall not be obligated to, make swing
line loans ("Swing Line Loans"; Swing Line Loans denominated
in pesetas being also referred to from time to time as
"Peseta Swing Line Loans" and Swing Line Loans denominated
in dollars being also referred to from time to time as
"Dollar Swing Line Loans") to the Borrower from time to time
prior to the Working Capital Loan Commitment Termination
Date in accordance with the procedures set forth in this
Section 3.04; provided that (i) the aggregate principal
amount of all Swing Line Loans at any one time outstanding
shall not exceed $10,000,000 (or the equivalent thereof in
pesetas calculated as described below) (the "Swing Line
Limit"), (ii) the aggregate principal amount of all Swing
Line Loans and Working Capital Loans at one time outstanding
shall not exceed the lesser of (A) the Borrowing Base as
specified in the most recent Borrowing Base Report and (B)
the Total Working Capital Loan Commitment, subject to the
qualification that Peseta Swing Line Loans may only be made
against pledges of Eligible Accounts denominated in pesetas
and Dollar Swing Line Loans may only be made against pledges
of Eligible Accounts denominated in dollars and Eligible
Inventory valued in dollars, (iii) the proceeds of Swing
Line Loans will be used only to finance short-term working
capital needs of the Borrower (as specified in Sec-
tion 8.01(o)) for a period of one month or less, and (iv) in
no event may Swing Line Loans be borrowed hereunder if
(x) the Agent shall have received notice from the Borrower
or the Required Lenders specifying that a Default or Event
of Default shall have occurred and be continuing and
(y) such Default or Event of Default shall not have been
subsequently cured or waived. All Swing Line Loans made by
the Agent hereunder shall constitute usage of the Working
Capital Loan Commitment. Amounts borrowed under this
Section 3.04 may be prepaid, repaid and, up to but excluding
the Working Capital Loan Commitment Termination Date,
reborrowed.
(b) The Borrower may borrow Swing Line
Loans by delivering a written Swing Line Loan Request to the
Agent (along with the Borrowing Base Report or certificate
referred to in Section 7.04(a)) prior to 11:00 A.M., Madrid
time, not less than two Business Days prior to the requested
Borrowing Date for each Peseta Swing Line Loan and four
Business Days prior to the requested Borrowing Date for each
Dollar Swing Line Loan. Each Swing Line Loan shall be in a
minimum aggregate principal amount of $1,000,000 (or
150,000,000 pesetas) or an integral multiple of $1,000,000
(or 50,000,000 pesetas) in excess thereof. Upon the
satisfaction by the Borrower or waiver by the Required
Lenders of each of the conditions precedent contained in
Article VII applicable thereto, the Agent shall make the
proceeds of each Swing Line Loan available to the Borrower
on the requested Borrowing Date in same day funds. Each
Swing Line Loan shall be due and payable in the currency in
which such Loan was made on the last day of the applicable
Swing Line Interest Period.
(c) In the event that a Peseta Swing
Line Loan is to be made, the amount of any such requested
Loan and of any outstanding Peseta Swing Line Loans (the
"Dollar Equivalent Amount") shall be deemed to be, for
purposes of determining compliance with the Swing Line Limit
and other provisions of this Agreement, equal to an amount
in dollars calculated as set forth in Section 1.01(a), such
determination to be made as of the close of business on the
date which is one day prior to the date of delivery of the
Swing Line Loan Request for each such Loan. In the event
that on the date of delivery of a Swing Line Loan Request
for a Peseta Swing Line Loan, the Dollar Equivalent Amount
of the requested Peseta Swing Line Loan and outstanding
Peseta Swing Line Loans (as so calculated) plus the
aggregate principal amount of outstanding Working Capital
Loans and Dollar Swing Line Loans exceeds the Total Working
Capital Loan Commitment, the amount of the requested
borrowing shall be appropriately reduced.
(d) Although the Agent may as an
administrative convenience from time to time fund the Swing
Line Loans, each Lender severally, unconditionally, and
without regard to the occurrence of any Default or Event of
Default, agrees that it shall purchase from the Agent a
participating interest in all outstanding Swing Line Loans
upon written request to such effect by the Agent. Upon
receipt of any such request, each Lender will transfer to
the Agent, in immediately available funds, the amount of its
participation which amount shall be equal to such Lender's
Pro Rata Share of the outstanding Swing Line Loans, each
such purchase to be made either in the currency or
currencies in which the outstanding Swing Line Loans are
denominated or, if any Lender so requests, in dollars in an
amount representing such Lender's Pro Rata Share of the
outstanding Swing Line Loans as calculated by the Agent. In
the event any Lender defaults in its obligation to purchase
a participation in outstanding Swing Line Loans, the
Borrower, upon demand by the Agent, shall repay outstanding
Swing Line Loans in a principal amount equal to the relevant
unfunded participation.
Section 3.05. Cancellation or
Reduction of Working Capital Loan Commitment. (a) The
Borrower shall have the right, upon not less than three
Business Days' written notice to the Agent and upon payment
of the Working Capital Commitment Fee accrued through the
date of such cancellation or reduction, to cancel the Total
Working Capital Loan Commitment in full or to reduce the
amount thereof; provided, however, that the Total Working
Capital Loan Commitment may not be cancelled so long as any
Working Capital Loan or Swing Line Loan remains outstanding;
and provided, further, the Total Working Capital Loan
Commitment may not be reduced to an amount that is less than
the aggregate outstanding principal amount of Working
Capital Loans and Swing Line Loans. Partial reductions of
the Total Working Capital Loan Commitment shall be in the
amount of $5,000,000 or, if greater, in integral multiples
thereof (or, if the aggregate outstanding amount of Working
Capital Loans is less than $5,000,000, then all of such
lesser amount). All such cancellations or reductions shall
be permanent. Notwithstanding the foregoing, the Borrower
may reduce or cancel the Working Capital Loan Commitment
prior to the Completion Date only upon its written
certification to the Lenders and acceptance thereof by the
Agent on behalf of the Lenders, of its ability to fund the
remaining costs of the expansion of the Huelva Smelter to
the Completion Date with the remaining Working Capital
Commitment and/or Term Loan Commitment and other available
funds.
(b) In the event that the Term Loans
outstanding at any time are paid in full pursuant to the
mandatory prepayment provisions of Section 2.06, any further
amounts which would be required to be prepaid pursuant to
such Section 2.06 shall instead be applied to permanently
reduce the Working Capital Loan Commitment and the Borrower
shall make any prepayments as may be required by
Section 3.07.
Section 3.06. Optional Prepayment.
(a) The Borrower shall have the right, on not less than
three Business Days' written notice to the Agent to prepay
Working Capital Loans in whole or in part, without premium
or penalty, in the aggregate principal amount of $5,000,000
or in integral multiples of $5,000,000 in excess thereof
(or, if the outstanding aggregate amount of such Working
Capital Loan is less than $5,000,000, then all of such
lesser amount), together with accrued interest on the
principal being prepaid to the date of prepayment and the
amounts required by Section 5.03. Subject to the terms and
conditions hereof, prepaid Working Capital Loans may be
reborrowed.
(b) The Borrower shall have the right,
upon three Business Day's written notice to the Agent, to
prepay the Swing Line Loans in whole or in part, without
premium or penalty, in the aggregate principal amount of
$1,000,000 (or 150,000,000 pesetas) or an integral multiple
of $1,000,000 (or 50,000,000 pesetas), together with accrued
interest on the principal amount being prepaid to the date
of prepayment and the amounts required by Section 5.03.
Section 3.07. Mandatory Prepayment.
At any time that the aggregate outstanding principal amount
of Working Capital Loans and the Dollar Equivalent Amount of
the Swing Line Loans exceeds the Borrowing Base, the
Borrower shall (i) immediately cause additional Collateral
to be provided pursuant to the terms of this Agreement and
the Security Documents in an amount sufficient to cause the
Borrowing Base to equal or exceed such principal amount, or
(ii) prepay Working Capital Loans and/or Swing Line Loans in
such amounts as are necessary to reduce such outstanding
principal amount to an amount equal to or less than the
Borrowing Base on the date of prepayment. Notwithstanding
the foregoing, in the event that the outstanding principal
amount of Working Capital Loans and the Dollar Equivalent
Amount of the Swing Line Loans on any date exceeds the
Borrowing Base on such date solely as a result of a decline
in the dollar equivalent value of Eligible Inventory since
the date of the most recent Borrowing Base Report delivered
to the Agent, the Borrower shall have no obligation as a
consequence thereof to reduce outstanding Working Capital
Loans and/or Swing Line Loans, or increase the amount of
Collateral included in the Borrowing Base, until the earlier
of (i) the first date upon which such decline exceeds 5% of
the value of such Eligible Inventory as reflected in such
Borrowing Base Report, and (ii) the date upon which the
Borrower next delivers a Borrowing Base Report to the Agent.
At any time that the aggregate outstanding principal amount
of Working Capital Loans and the Dollar Equivalent Amount of
the Swing Line Loans exceeds the Working Capital Loan
Commitment, the Borrower shall prepay Working Capital Loans
and/or Swing Line Loans in such amounts as are necessary to
reduce such outstanding principal amount to an amount equal
to or less than the Working Capital Loan Commitment on the
date of prepayment.
ARTICLE IV
INTEREST AND FEES
Section 4.01. Interest on Loans.
(a) Each Working Capital and Term Loan shall bear interest
from the date of such Loan until maturity, payable in
arrears, with respect to Interest Periods of three months or
less, on the last day of such Interest Period, and with
respect to Interest Periods longer than three months, on the
last day of each three month period after the commencement
of such Interest Period and on the last day of such Interest
Period, at a rate per annum (on the basis of a 360-day year
for the actual number of days elapsed), determined by the
Agent with respect to each Interest Period, equal to the sum
of (i) the Applicable Margin and (ii) LIBOR. On the first
interest payment date to occur subsequent to the Contract
Date, the Borrower shall deduct from the interest
installment due on such date an amount equal to (i) the
amount of interest paid in respect of the period from the
delivery date of the Forecast delivered in respect of the
Contract Date less (ii) the amount of interest that would
have been payable in respect of such period if the
Applicable Margin had been reduced to 1.60% per annum on
such delivery date.
(b) The Interest Period for each such
Loan shall be selected by the Borrower at least three
Business Days prior to the beginning of such Interest
Period. If the Borrower fails to notify the Agent of the
Interest Period for any such Loan at least three Business
Days prior to the last day of the then current Interest
Period for such Loan, then such Loan shall at the end of
such current Interest Period have a new Interest Period of
one month.
(c) Notwithstanding the foregoing:
(i) if any Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless the
result of such extension would be to carry such Interest
Period into another calendar month, in which event such
Interest Period shall end on the immediately preceding
Business Day; (ii) any Interest Period that begins on the
last Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end on the
last Business Day of a calendar month; (iii) no Interest
Period for a Working Capital Loan may extend beyond the
Working Capital Loan Commitment Termination Date and no
Interest Period for a Term Loan may extend beyond the
Maturity Date; and (iv) no more than 10 Interest Periods for
all Term Loans and Working Capital Loans hereunder shall be
in effect at any one time.
(d) Each Swing Line Loan shall bear
interest from the date of such Swing Line Loan until
maturity, payable in arrears, on the last day of the Swing
Line Interest Period for such Swing Line Loan or any earlier
date of prepayment under Section 3.06(b), at a rate per
annum (on the basis of a 360-day year for the actual number
of days elapsed), determined by the Agent with respect to
each Swing Line Interest Period, equal to the sum of (i) the
Applicable Margin and (ii) in the case of Dollar Swing Line
Loans, Barclays LIBOR or, in the case of Peseta Swing Line
Loans, Barclays MIBOR. Notwithstanding the foregoing: (i)
if any Swing Line Interest Period would otherwise end on a
day which is not a Business Day, such Swing Line Interest
Period shall be extended to the next succeeding Business
Day; and (ii) no Swing Line Interest Period may extend
beyond the Working Capital Loan Commitment Termination Date.
Section 4.02. Post Maturity Interest.
Upon default in any payment of any installment of principal
of or interest on any Loan when due (whether by acceleration
or otherwise) and until such default is cured, interest
rates on all outstanding principal amounts of Loans will,
following the lapse of any applicable grace period, increase
by 2% per annum and any overdue amounts (other than overdue
principal) will accrue interest from the date due until paid
at the rate per annum applicable to Loans with an Interest
Period of one month, or at the reasonable discretion of the
Lenders, such shorter period as they may determine, plus 2%.
Section 4.03. Maximum Interest Rate.
(a) Nothing in this Agreement shall require the Borrower to
pay interest at a rate exceeding the maximum rate permitted
by applicable law. Neither this Section nor Section 12.01
is intended to limit the rate of interest payable for the
account of any Lender to the maximum rate permitted by the
laws of the State of New York (or any other applicable law)
if a higher rate is permitted with respect to such Lender by
supervening provisions of any other applicable law.
(b) If the amount of interest payable
for the account of any Lender on any interest payment date
in respect of the immediately preceding interest computation
period, computed pursuant to this Article IV, would exceed
the maximum amount permitted by applicable law to be charged
by such Lender, the amount of interest payable for its
account on such interest payment date shall automatically be
reduced to such maximum permissible amount.
(c) If the amount of interest payable
for the account of any Lender in respect of any interest
computation period is reduced pursuant to clause (b) of this
Section 4.03 and the amount of interest payable for its
account in respect of any subsequent interest computation
period would be less than the maximum amount permitted by
law to be charged by such Lender, then the amount of
interest payable for its account in respect of such
subsequent interest computation period shall be
automatically increased to such maximum permissible amount;
provided that at no time shall the aggregate amount by which
interest paid for the account of any Lender has been
increased pursuant to this clause (c) exceed the aggregate
amount by which interest paid for its account has
theretofore been reduced pursuant to clause (b) of this
Section 4.03.
Section 4.04. Certain Fees. (a) The
Borrower shall pay to the Agent for the account of the
Lenders a fee (the "Working Capital Commitment Fee") equal
to 0.65% per annum (calculated by the Agent on the basis of
a 360-day year for the actual number of days elapsed) on the
daily average unused portion of the Working Capital
Commitment from the earlier of the date of the Initial Loan
and December 7, 1994 to the Working Capital Loan Commitment
Termination Date. Such fee shall be payable in arrears on
the last day of each calendar quarter, commencing on the
first such date after the date of the Initial Loan, and on
the Working Capital Loan Commitment Termination Date,
payment to be due to the Agent five Business Days after the
receipt of advice.
(b) Upon receipt of each payment of
the Working Capital Commitment Fee and subject to the
Borrower's having paid in full all interest payments owed to
date on all Swing Line Loans, pursuant to clause (a) above,
the Agent shall pay, out of funds received by the Agent in
respect of outstanding Swing Line Loans, to each Lender its
Pro Rata Share of an additional amount (the "Swing Line
Payment") obtained by calculating the Working Capital
Commitment Fee that would otherwise have been payable by the
Borrower on that portion of the Working Capital Loan
Commitment utilized for Swing Line Loans with respect to
which participations have not been purchased by the Lenders.
The Swing Line Payment shall be calculated by the Agent in
arrears as of the last day of each calendar quarter and as
of the Working Capital Loan Commitment Termination Date.
(c) The Borrower shall pay to the
Agent for the account of the Lenders a fee (the "Term Loan
Commitment Fee") equal to 0.65% per annum (calculated by the
Agent on the basis of a 360-day year for the actual number
of days elapsed) on the daily average unused portion of the
Total Term Loan Commitment less, until cancellation of the
Revolving Credit Agreement, an amount equal to the maximum
available total commitments of all of the Lenders
thereunder, from the earlier of the date of the Initial Loan
and December 7, 1994 to the Term Loan Commitment Termination
Date. Such fee shall be payable in arrears on the last day
of each calendar quarter, commencing on the first such date
after the date of the Initial Loan, and on the Term Loan
Commitment Termination Date, payment to be due to the Agent
five Business Days after the receipt of advice.
(d) The Borrower shall pay to the
Agent certain upfront fees and agency fees in accordance
with the terms of a fee letter, dated as of July 27, 1994,
as amended from time to time, between the Borrower and the
Agent.
ARTICLE V
DISBURSEMENT AND PAYMENT
Section 5.01. Pro Rata Treatment.
Each borrowing by the Borrower from the Lenders hereunder
and each payment of the Working Capital Commitment Fee, the
Term Loan Commitment Fee and the Swing Line Payment and each
reduction of the Working Capital Loan Commitment and the
Term Loan Commitment shall be apportioned among the Lenders
in proportion to each Lender's Pro Rata Share. Each payment
(including each prepayment) by the Borrower on account of
principal of and interest on the Loans (other than Swing
Line Loans with respect to which participations have not
been purchased by the Lenders) shall be made in proportion
to each Lender's Pro Rata Share.
Section 5.02. Method of Payment;
Evidence of Debt. (a) All payments by the Borrower
hereunder shall be made without setoff or counterclaim to
the Agent, for its account or for the account of the Lender
or Lenders entitled thereto, as the case may be, in lawful
money of the United States or in pesetas, as the case may
be, and in immediately available funds at the office of the
Agent in Madrid, Spain on the date when due.
(b)(i) Each Lender shall maintain in
accordance with its usual practice an account or accounts
evidencing the indebtedness to such Lender resulting from
each Loan made by such Lender to the Borrower from time to
time, including the amounts of principal and interest
payable and paid to such Lender from time to time hereunder.
(ii)The Agent shall maintain an
internal account in which shall be recorded for each Lender
(A) the date and amount of each Loan hereunder, (B) any
Interest Period applicable thereto, (C) the amount of any
principal or interest due and payable or to become due and
payable from the Borrower with respect thereto and (D) the
amount of any sum received by the Agent from the Borrower
with respect thereto.
(iii) The entries made in such
internal account in respect of the Loans shall be conclusive
and binding for all purposes, absent manifest error.
Section 5.03. Compensation for Losses.
(a) Compensation. In the event that the Borrower makes a
repayment under Section 2.03 or a prepayment under Section
2.05, 2.06, 3.04, 3.06 or 3.07, or in the event the Borrower
revokes any notice given under Section 2.02, 3.02 or 3.04,
or in the event the Loans or portions thereof are prepaid
pursuant to Section 5.05, or the Loans shall be declared to
be due and payable prior to the scheduled maturity thereof
pursuant to Section 9.01, the Borrower shall pay to each
Lender promptly after its demand an amount which will
compensate such Lender for any loss or premium or penalty
incurred by such Lender as a result of such repayment,
prepayment, conversion, declaration or revocation of notice
in respect of funds obtained for the purpose of making or
maintaining such Lender's Loans, or any part thereof (but
not for any loss of profit in respect of any such event).
(b)Certificate, etc. Each Lender shall
promptly notify the Borrower, with a copy to the Agent, upon
becoming aware that the Borrower may be required to make any
payment pursuant to this Section 5.03. When requesting
payment pursuant to this Section 5.03, each Lender shall
provide to the Borrower, with a copy to the Agent, a cer-
tificate, signed by an officer of such Lender, setting forth
the amount required to be paid by the Borrower to such
Lender and the computations made by such Lender to determine
such amount. In the absence of manifest error, such
certificate shall be conclusive and binding on the Borrower
as to the amount so required to be paid by the Borrower to
such Lender.
Section 5.04. Withholding, Reserves
and Additional Costs. (a) Withholding. (i) Except as
required by law, any and all payments by the Borrower
hereunder shall be made in accordance with Section 5.02 free
and clear of and without deduction for any and all present
or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto
imposed by the Kingdom of Spain or any political subdivision
thereof, excluding taxes imposed on the net income of the
Agent or any Lender and franchise taxes imposed on the Agent
or any Lender (all such nonexcluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If as a result of a
Change in Tax Law the Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable
hereunder to any Lender or the Agent, (i) the sum payable
shall be increased by the amount necessary so that after
making all required deductions (including deductions
applicable to additional sums payable under this Section
5.04) such Lender or the Agent (as the case may be) shall
receive an amount equal to the sum it would have received
had no such deductions been made, (ii) the Borrower shall
make such deductions and (iii) the Borrower shall pay the
full amount deducted to the relevant taxing authority or
other Governmental Authority in accordance with applicable
law. The Borrower shall also hold each Lender harmless and
indemnify it for any stamp or other taxes with respect to
the preparation, execution, delivery, recording, performance
or enforcement of the Financing Documents (all of which
shall be included within "Taxes"). If any of the Taxes
specified in this Section 5.04(a) are paid by any Lender,
the Borrower shall, upon demand of such Lender, promptly
reimburse such Lender for such payments, together with any
interest, penalties and expenses incurred in connection
therewith, plus interest thereon at a rate per annum (based
on a 360-day year for the actual number of days elapsed)
equal to the sum of 1% and the interest rate then applicable
to the Loans, changing as and when such rate shall change,
from the date which is six Business Days after demand for
such payment or payments are made by such Lender to the date
of reimbursement by the Borrower. The Borrower shall
deliver to the Agent certificates or other valid vouchers
for all Taxes or other charges deducted from or paid with
respect to payments made by the Borrower hereunder.
(ii) At the time it becomes a party to
this Agreement, and from time to time as required by Spanish
law, each Lender that is not a Spanish resident person for
Spanish tax purposes or that is not acting through a
permanent establishment in Spain shall deliver to the
Borrower the Prescribed Forms and such documents or other
evidence, properly completed and duly executed by such
Lender or the Agent or by its corresponding tax authorities,
which, other than in the case of a Change in Tax Law, permit
and justify that the payments to such Lender are (i) not
subject to Spanish final tax on income or withholding tax or
(ii) exempt from both Spanish final tax on income and
withholding tax. Unless the Borrower has received the
Prescribed Forms properly completed and duly executed and
such other documents or evidence which indicate the payments
hereunder are not subject to or exempt from final tax on
income and withholding tax, the Borrower shall be entitled,
to the extent it is required to do so by law, to deduct or
withhold (and shall not be required to make payments as
otherwise required in this Section 5.04(a) and (b), as the
case may be, on account of such deductions or withholdings)
final tax on income, withholding or other similar taxes
imposed by the Kingdom of Spain from interest, fees or other
amounts payable hereunder for the account of any Lender;
provided, that if the Borrower shall so deduct or withhold
any such taxes, it shall provide a statement to the Agent
and such Lender, setting forth the amount of such taxes so
deducted or withheld, the applicable rate and any other
information or documentation which such Lender may
reasonably request for assisting such Lender to obtain any
allowable credits or deductions for the taxes so deducted or
withheld in the jurisdiction or jurisdictions in which such
Lender is subject to tax.
(iii) The failure of any Lender to
give the 90 day notice required pursuant to Section 5.04(c)
shall excuse the Borrower from its obligation to pay
additional amounts pursuant to this Section 5.04(a) incurred
prior to the giving of such notice.
(b) Additional Costs. (i) If after
the date hereof, any change in any law or regulation or in
the interpretation thereof by any court or administrative or
Governmental Authority charged with the administration
thereof or the enactment of any law or regulation shall
either (1) change the basis of the taxation of payments to
any Lender of principal of or interest on its Loans or other
fees and amounts payable hereunder, or any combination of
the foregoing (other than any franchise tax or tax or other
similar governmental charges, fees or assessments based on
the overall net income of any Lender by any jurisdiction in
which such Lender maintains an office unless the presence of
such office is solely attributable to the enforcement of any
rights hereunder with respect to an Event of Default);
(2) impose, modify or deem applicable any reserve, special
deposit or similar requirement against the Lenders'
Commitments or the Loans or (3) impose on any Lender any
other condition regarding this Agreement, its Commitment or
the Loans and the result of any event referred to in clause
(1), (2), or (3) of this clause (b) shall be to increase the
cost to any Lender of maintaining its Commitment or the
Loans (which increase in cost shall be calculated in
accordance with each Lender's reasonable averaging and
attribution methods) by an amount which any such Lender
deems to be material, then, upon written demand by such
Lender, the Borrower shall pay to such Lender within 15
Business Days of such written demand an amount equal to such
increase in cost; provided, that in respect of any Loan, no
such compensation shall be payable to the extent that, in
the reasonable opinion of such Lender, the interest rate on
the Loans has been adjusted to account for such increased
cost. Such amount shall bear interest from the date which
is six Business Days after receipt by the Borrower of such
demand until payment in full thereof, at a rate per annum
(based on a 360-day year, for the actual number of days
involved) equal to the sum of 1% and the interest rate then
applicable to the Loans, changing as and when such rate
shall change.
(ii) If any Lender shall have
determined that the adoption of any applicable law, rule,
regulation or guideline regarding capital adequacy, or any
change therein, or any change in the interpretation or
administration thereof by any governmental authority,
central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by
any Lender with any request or directive regarding capital
adequacy (whether or not having the force of law) of any
such authority, central bank or comparable agency made or
issued after the date hereof, has or would have the effect
of reducing the rate of return on capital for any such
Lender or any corporation controlling such Lender as a
consequence of its obligations under this Agreement to a
level below that which such Lender or such corporation could
have achieved but for such adoption, change or compliance
(taking into consideration such Lender's or such
corporation's policies with respect to capital adequacy),
then from time to time, upon demand by such Lender, the
Borrower shall pay to such Lender such additional amount or
amounts as will compensate such Lender for such reduction,
plus interest thereon at a rate per annum (based on a 360-
day year, for the actual number of days involved) equal to
the sum of 1% and the interest rate then applicable to the
Loans, changing as and when such rate shall change, from the
date which is six Business Days after such demand by such
Lender to the date of payment by the Borrower.
(iii) Failure on the part of any
Lender to demand compensation for any increased costs or
reduction in amounts received or receivable or reduction in
return on capital within the 90 days required under Section
5.04(c) shall not constitute a waiver of such Lender's
rights to demand compensation for any increased costs or
reduction in capital for any period after the date that is
90 days prior to the date of the delivery of demand for
compensation.
(c) Notification and Lending Office
Designations. Any Lender (or transferee) claiming any
additional amounts payable pursuant to this Section 5.04
shall give notice to the Agent and the Borrower within 90
days of the Change in Tax Law or change in law or regulation
or interpretation by any court or administrative or
Governmental Authority and use reasonable efforts
(consistent with legal and regulatory restrictions) to file
any certificate or document requested by the Borrower or to
change the jurisdiction of its applicable lending office if
the making of such a filing or change would avoid the need
for or reduce the amount of any such additional amounts
which may thereafter accrue and would not, in the sole
determination of such Lender, be otherwise disadvantageous
to such Lender (or transferee).
(d) Certificate, etc. When requesting
payment pursuant to this Section 5.04, each Lender shall
provide to the Borrower, with a copy to the Agent, a
certificate, signed by an officer of such Lender, setting
forth the amount required to be paid by the Borrower to such
Lender and the computations made by such Lender to determine
such amount. Determinations and allocations by such Lender
for purposes of this Section 5.04 shall be conclusive,
provided that such determinations and allocations are made
on a reasonable basis and are mathematically accurate. In
the absence of manifest error, such certificate shall be
conclusive and binding on the Borrower as to the amount so
required to be paid by the Borrower to such Lender.
(e) Substitution of Lender. If and on
each occasion that a Lender makes a demand for compensation
pursuant to clause (a) or (b) above, the Borrower may, upon
at least three Business Days' prior irrevocable written
notice to each of such Lender and the Agent, in whole
permanently replace the Commitment of such Lender; provided
that such notice must be given not later than the 60th day
following the date of a demand for compensation made by such
Lender; and provided that the Borrower shall replace such
Commitment with the Commitment of a commercial bank
satisfactory to the Agent in its sole discretion. Such
notice from the Borrower shall specify an effective date for
the termination of such Lender's Commitment which date shall
not be later than the tenth day after the date such notice
is given. On the effective date of any termination of such
Lender's Commitment pursuant to this clause (e), the
Borrower shall pay to the Agent for the account of such
Lender (A) any Term Loan Commitment Fees or Working Capital
Commitment Fees on the amount of such Lender's Commitment so
terminated accrued to the date of such termination, (B) the
principal amount of any outstanding Loans held by such
Lender plus accrued interest on such principal amount to the
date of such termination and (C) the amount or amounts
requested by such Lender pursuant to clause (a) or (b), as
applicable. The Borrower will remain liable to such
terminated Lender for any loss or expense that such Lender
may sustain or incur as a consequence of such termination
being made on a day other than the last day of an Interest
Period as set forth in Section 5.03. Upon the effective
date of termination of any Lender's Commitment pursuant to
this clause (d), such Lender shall cease to be a "Lender"
hereunder; provided that no such termination of any such
Lender's Commitment shall affect (i) any liability or
obligation of the Borrower or any other Lender to such
terminated Lender which accrued on or prior to the date of
such termination or (ii) such terminated Lender's rights
hereunder in respect of any such liability or obligation.
Section 5.05. Illegality. If at any
time any Lender shall have determined in good faith (which
determination shall be conclusive) that the making or
maintenance of all or any part of such Lender's Loans has
been made unlawful because of compliance by such Lender in
good faith with any law or guideline or interpretation or
administration thereof by any official body charged with the
interpretation or administration thereof or with any request
or directive of such body (whether or not having the effect
of law), then the Agent, upon notification to it of such
determination by such Lender, shall forthwith advise the
other Lenders and the Borrower thereof. Upon such date as
shall be specified in such notice and until such time as the
Agent, upon notification to it by such Lender, shall notify
the Borrower and the other Lenders that the circumstances
specified by it in such notice no longer apply, the
obligation of only such Lender to allow borrowing and
renewals of Loans bearing interest as specified in Section
4.01 shall be suspended and the Borrower shall either (i)
prepay the Loan (without regard to the requirements of
Section 2.05 or 3.06, as the case may be), such prepayment
to become due on the last day of the last Interest Period to
end prior to the effectiveness of the applicable change in
law or such earlier date as may be required by the relevant
law or regulation or (ii) negotiate with such Lender as to
an alternate rate of interest to be applied to such Lender's
Loans; provided, however, that if the Borrower and such
Lender fail to agree upon such alternate rate of interest,
the Borrower may continue to borrow from and renew Loans of
such Lender at a rate of interest equal to such Lender's
cost of obtaining funds to maintain such Loan (as certified
in writing by such Lender to the Borrower, which
certification shall be conclusive evidence of such cost in
the absence of manifest error) plus the Applicable Margin.
Section 5.06.Working Capital Accounts.
The Agent has established with Barclays Bank S.A., Madrid a
peseta current account and a dollar current account (each, a
"Working Capital Account") in the name of Barclays Bank PLC,
as Agent, and the Lenders and under the sole dominion and
control of the Agent, on behalf of the Lenders. The Working
Capital Accounts are subject to the terms of this Agreement
and the Security Documents and have been established for the
purpose of administering certain funds payable to the
Borrower from time to time in respect of the Collateral.
The Borrower shall deposit, or cause to be deposited, in the
appropriate Working Capital Account all funds required to be
so deposited pursuant to the terms of any of the Security
Documents.
From time to time the Borrower may
request the Agent to release funds on deposit in the Working
Capital Accounts and, upon any such request, the Agent shall
cause funds subject to any such request to be transferred to
an unrestricted account of the Borrower, or otherwise to the
Borrower or its order, provided, however, that the Agent
shall have no obligation to transfer funds to the Borrower
or its order if, after giving effect thereto, any (i)
Default or Event of Default has occurred and is continuing,
or (ii) the Borrowing Base is insufficient to otherwise meet
the requirements hereunder and under the Security Documents
with respect to then outstanding Loans.
Section 5.07. Reserve Account. (a)
The Agent will establish and maintain an account (the
"Reserve Account") for the purpose of holding as Collateral
certain reserves of cash and/or Authorized Investments. The
Borrower shall place, or cause to be placed, in the Reserve
Account (i) all payments to the Borrower of government
grants provided in consideration of the Huelva Expansion
Program in excess of the Unrestricted Government Grant
Amount up to a maximum amount of $15,000,000 (or the
equivalent in pesetas) less the amount of proceeds of any
government grants used to fund Additional Completion Amounts
which proceeds were not required to be placed in the Reserve
Account or (ii) in the event RTM and FCX are required to
make the capital contribution to the Borrower (the "RTM
Capital Contribution") required by Section 4.02 of the
Inducement Agreement, the capital contribution in the amount
of 1.8 billion pesetas described therein. Upon the earlier
of (a) the Contract Date and (b) the date of delivery of the
written evidence regarding receipt of government grants
specified in Section 4.02 of the Inducement Agreement, the
then remaining amount, if any, deposited pursuant to clause
(ii) above shall be released from the Reserve Account. From
and after the Contract Date, the Borrower shall maintain,
place, or cause to be placed, as the case may be, subject to
and in accordance with the next succeeding sentence, in the
Reserve Account and shall maintain or cause to be maintained
therein at all times thereafter until the Maturity Date an
amount (the "Required Reserve Account Balance"), not to
exceed $15,000,000, equal to the sum of (i) the principal
amount of Term Loans due on the next scheduled Repayment
Date and (ii) all interest to accrue in respect of the Term
Loans for the next two succeeding quarterly periods
calculated for such period at a rate per annum equal to six-
month LIBOR which appears on the display designated as page
"LIBO" (or such other page as may replace such page on that
service for purposes of displaying six-month LIBOR) on the
applicable Repayment Date plus the Applicable Margin. The
Required Reserve Account Balance shall be calculated as of
the Contract Date and each Repayment Date thereafter (other
then any Repayment Date as to which payment of the scheduled
quarterly installment of principal of the Term Loans has
been deferred pursuant to Section 2.03(b) or (c)) and
shortfalls from the Required Reserve Account Balance shall
be paid into the Reserve Account to the extent of the
Borrower's Net Cash after making all scheduled and mandatory
payments hereunder and before making any Restricted Payments
as of each such date. As of the date of any such
calculation, the Borrower may request that any excess
balances be released from the Reserve Account.
(b) Prior to the Contract Date, and so
long as no Default or Event of Default has occurred and is
continuing, the Borrower may request in writing that the
Agent withdraw funds from the Reserve Account and make such
funds available to the Borrower to pay satisfactorily
documented Additional Completion Amounts, such request to be
delivered to the Agent three Business Days prior to the
requested withdrawal date and to be accompanied by the
certificates specified in Section 7.03(b)(iv). At all
times, upon the occurrence and continuance of any Default or
Event of Default, amounts in the Reserve Account may be
applied by the Agent as additional collateral to any amounts
due and payable by the Borrower to the Lenders.
(c) All cash amounts in the Reserve
Account initially shall be deposited in a peseta account or
a dollar account in the name of Barclays Bank PLC, as Agent,
and the Lenders and under the sole dominion and control of
the Agent, on behalf of the Lenders, and thereafter shall be
maintained in the form of Authorized Investments subject to
a valid and perfected first priority security interest under
all applicable laws in favor of the Agent and the Lenders.
Prior to an Event of Default, the Agent will invest the
amounts in the Reserve Account in accordance with the
instructions of the Borrower.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Section 6.01. Representations and
Warranties. The Borrower represents and warrants to the
Lenders that:
(a)Good Standing and Power. The
Borrower is a corporation, duly organized and validly
existing under the laws of the Kingdom of Spain, and has the
corporate power and authority to own its property and to
carry on its business as now being conducted.
(b) Compliance with Laws. The
Borrower is not in violation of (a) any law, statute, rule,
regulation or order of any Governmental Authority (including
Environmental Laws) applicable to it or its properties or
assets except where such violation could not reasonably be
expected to have a Material Adverse Effect or (b) its
articles of incorporation, by-laws or any similar document.
(c)Corporate Authority. The Borrower
has full corporate power and authority to execute, deliver
and perform each of the Financing Documents and Project
Documents to which it is a party, to grant to the Lenders
the security interests and liens described therein, to make
the borrowings contemplated hereby, to incur the obligations
provided for herein and therein, and to complete the Project
in accordance with the Project Development Plan, all of
which have been duly authorized by all proper and necessary
corporate action. No consent or approval of stockholders
which previously has not been obtained is required as a
condition to the validity or performance or the exercise by
the Agent or the Lenders of any of their rights or remedies
under any of the Financing Documents.
(d)Authorizations. All authorizations,
consents, approvals, registrations, notices, exemptions and
licenses with or from Governmental Authorities and other
Persons which are necessary for the borrowings hereunder,
the grant of the security interests in and liens on the
Collateral, the execution and delivery of the Financing
Documents and the Project Documents by the Borrower, the
performance by the Borrower of its obligations hereunder and
thereunder, the exercise by the Agent and the Lenders of
their remedies hereunder and thereunder except for any such
authorizations, consents, approvals, registrations, notices,
exemptions and licenses which may become necessary in the
future to effect enforcement of remedies, and the completion
of the Project in accordance with the Project Development
Plan, have been effected or obtained and are in full force
and effect except (a) where the failure to effect or obtain
such authorizations, consents, approvals, registrations,
notices, exemptions and licenses could not reasonably be
expected to have a Material Adverse Effect and (b) for those
authorizations, consents, approvals, registrations, notices,
exemptions and licenses not yet required to be obtained but
which are expected to be obtained in the ordinary course.
(e)Binding Agreements. Each of this
Agreement and each of the other Financing Documents and
Project Documents to which the Borrower is a party has been
duly executed and delivered by the Borrower and constitutes
the valid and legally binding obligation of the Borrower
enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general
equity principles.
(f) Taxes. The Borrower has filed or
caused to be filed all required tax returns and has paid all
taxes, assessments, penalties or other charges imposed on it
or any of its property by any Governmental Authority which
are due, except for those which are being contested in good
faith and for which adequate reserves have been established
in accordance with Spanish GAAP.
(g)Litigation. There are no
proceedings or investigations pending or, to the knowledge
of the officers of the Borrower, threatened with an
objectively reasonable possibility of an adverse
determination, against the Borrower before any court or
arbitrator or before or by any Governmental Authority which,
in any one case or in the aggregate, if determined adversely
to the interests of the Borrower, could reasonably be
expected to have a Material Adverse Effect.
(h)No Conflicts. There is no statute,
regulation, rule, order or judgment, no provision of the
Borrower's governing articles or by-laws and no provision of
any agreement or instrument binding on the Borrower, or
affecting its property, which would prohibit, conflict with
or in any way prevent the execution, delivery, or perfor-
mance of the terms of the Financing Documents or the Project
Documents or the incurrence of the obligations provided for
herein and therein or the completion of the Project in
accordance with the Project Development Plan, or result in
or require the creation or imposition of any Lien on any of
the Borrower's property as a consequence of the execution,
delivery and performance of any Financing Document or
Project Document or the transactions contemplated hereby and
thereby or the completion of the Project in accordance with
the Project Development Plan, other than as contemplated in
the Security Documents and no consents or waivers of other
lenders to the Borrower are required for the execution,
delivery or carrying out of the terms of the Financing
Documents or the Project Documents.
(i)Financial Condition. (i) Except as
noted by the independent certified public accountants in
their auditor's report, the individual and consolidated
financial statements of RTM dated December 31, 1993 fairly
present the individual and consolidated financial condition
of RTM, as of that date, and the results of its operations
for the year then ended and have been prepared in accordance
with Spanish GAAP. The initial balance sheet of the
Borrower dated June 20, 1994 prepared by the Borrower and
reviewed by the independent certified public accountants of
the Borrower to the extent indicated in their letter dated
June 28, 1994, fairly presents the financial condition of
the Borrower as of such date.
(ii) There has been no material
adverse change in the business, properties, condition
(financial or otherwise) or operations, present or
prospective, of the Borrower nor has there occurred any
fact, event or condition which could reasonably be expected
to have a Material Adverse Effect since June 20, 1994.
(j)Information. The information
relating to the Borrower and the Project delivered to the
Lenders in connection with the Financing Documents including
the information contained in the Information Memorandum is,
taken as a whole, complete and correct in all material
respects as of the date hereof. The assumptions provided to
the Agent by the Borrower and applied in the preparation of
the Base Case were made in good faith by the management of
the Borrower and in the view of Borrower's management are
reasonable in light of all information known to management
as of the date hereof. There are no facts, circumstances or
developments of which the Borrower is aware which,
individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect which has
not been disclosed to the Lenders in writing.
(k) Use of Proceeds. The proceeds of
the Loans will be used by the Borrower for the purposes
described in Section 8.01(o).
(l) Title to Properties; Possession
Under Leases. The Borrower has good and marketable
leasehold interests or concessions in all of its properties
and assets, except for such minor defects that could not
reasonably be expected to have a Material Adverse Effect.
All such assets and properties are free and clear of all
Liens, except Permitted Encumbrances.
(m)Not an Investment Company. The
Borrower is not, and, after giving effect to the
transactions contemplated hereby will not be, an "investment
company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of
1940, as amended.
(n)The Security Documents. The
provisions of the Security Documents will be effective to
create in favor of the Lenders valid, binding and
enforceable security interests in all right, title and
interest of the Borrower and RTM in the Collateral described
therein, and constitute a fully perfected first and prior
security interest, lien or mortgage, in all right, title and
interest of the Borrower in such Collateral, superior in
right to any Liens (subject to Permitted Encumbrances and
such other exceptions as the Lenders may agree) existing or
future, which the Borrower or any third Person may have
against such Collateral or interests therein.
(o)Environmental Protection. Except as
could not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect, (i) the
Borrower is not in violation of any Environmental Law
applicable to it or its properties or assets; (ii) no real
property owned or operated by the Borrower is contaminated
with any Hazardous Substances requiring remediation under
any Environmental Law; (iii) no real property formerly owned
or operated by the Borrower was contaminated with Hazardous
Substances at the time of ownership or operation; (iv) the
Borrower is not subject to liability for any off-site dis-
posal or contamination; (v) the Borrower has not been the
subject of any Environmental Claims or threatened Environ-
mental Claims; and (vi) to the knowledge of officers of the
Borrower there are no circumstances involving the Borrower
that could result in any Environmental Claims, liability,
investigation costs or restrictions on the ownership, use or
transfer of any property pursuant to any Environmental Law,
except as disclosed on Schedule 6.01(o).
(p)Insurance. All of the properties
and operations of the Borrower are adequately insured, by
financially sound and reputable insurers, against (i) loss
or damage, (ii) loss of revenue and (iii) liability to
others in respect of death, injury or damage, each of the
foregoing of the kinds and in amounts customarily insured
against by companies of established reputation engaged in
the same or a similar business similarly situated. The
Huelva Smelter is insured for physical loss or damage on a
replacement cost basis.
(q) Material Agreements. No default
has occurred by the Borrower under any material existing
agreement to which it is a party which default could
reasonably be expected to have a Material Adverse Effect.
(r) Consents. The Borrower has
received all required consents to the assignment of all of
the Collateral.
(s) Employment Law. The Borrower is
in compliance with all applicable employee benefit laws,
collective agreements, Social Security and other laws or
social regulations or contracts, except where such failure
to comply could not reasonably be expected to have a
Material Adverse Effect.
(t) Patents, etc. The Borrower owns
or has a valid right to use the patents, patent rights,
permits, licenses, trade secrets, trademarks, trademark
rights or copyrights being used to conduct its business as
now operated, except where the failure to own or have the
right to use such patents, patent rights, permits, licenses,
trade secrets, trademarks, trademark rights or copyrights
could not reasonably be expected to have a Material Adverse
Effect.
(u) Physical Operation of Project.
The Borrower is operating the Project materially in
accordance with the Forecast Assumptions relating to the
physical operation of the Project set forth in the most
recent Forecast or has delivered to the Agent the notice
specified in Section 8.01(a)(ix) relating to material
deviations from the Forecast Assumptions.
(v) Supply Contracts. The contracts
received at closing pursuant to Exhibit U-1 as specified in
Schedule 6.01(v) hereto or after the Contract Date pursuant
to Exhibit U-2 are in full force and effect or have been
extended or replaced in accordance with this Agreement and
such extensions or replacements are in full force and
effect.
(w) Affiliate Transactions. All
contracts between the Borrower and any Affiliate of the
Borrower, including any management services agreements
and/or cost reimbursement contracts, have been made or
obtained on an arm's length basis.
(x) No Subsidiaries. The Borrower has
no Subsidiaries as of the date hereof.
ARTICLE VII
CONDITIONS OF LENDING
Section 7.01. Conditions to the
Effectiveness of this Agreement. The effectiveness of this
Agreement and the obligations of each Lender in connection
with the Initial Loan are subject to the conditions
precedent that, on the date of such Initial Loan and after
giving effect thereto, each of the following conditions
precedent shall have been satisfied or waived in writing by
the Required Lenders:
(a)This Agreement. The Agent shall
have received this Agreement duly executed and delivered by
each of the Lenders and the Borrower.
(b)Evidence of Corporate Action of
Borrower. The Agent shall have received a certificate,
dated the date of the Initial Loan, and signed by the
Secretary of the Borrower, certifying as to:
(i) resolutions of the Borrower
authorizing all actions taken by the
Borrower in connection with this Agreement
and each of the other Financing Documents
to which it is a party;
(ii) the names of the officer or officers
authorized to sign this Agreement and such
other Financing Documents and the true
signatures of such officer or officers;
(iii) a copy of the By-Laws of the
Borrower; and
(iv) copies of the organizational
documents of the Borrower, including its
Articles of Incorporation as in effect on
the date of the Initial Loan.
(c)Evidence of Corporate Action of RTM.
The Agent shall have received a certificate, dated the date
of the Initial Loan, and signed by the Secretary of RTM,
certifying as to:
(i) resolutions of RTM authorizing all
actions taken by RTM in connection with
the Inducement Agreement and the Pledge of
Shares;
(ii) the names of the officer or officers
authorized to sign the Inducement
Agreement and the true signatures of such
officer or officers;
(iii) a copy of the By-Laws of RTM; and
(iv) copies of the organizational
documents of RTM, including its Articles
of Incorporation as in effect on the date
of the Initial Loan.
(d)Evidence of Corporate Action of FCX.
The Agent shall have received a certificate, dated the date
of the Initial Loan, and signed by the Secretary of FCX,
certifying as to:
(i) resolutions of FCX authorizing all
actions taken by FCX in connection with
the Inducement Agreement;
(ii) the names of the officer or
officers authorized to sign the Inducement
Agreement and the true signatures of such
officer or officers;
(iii) a copy of the By-Laws of FCX; and
(iv) copies of the organizational
documents of FCX, including its Articles
of Incorporation as in effect on the date
of the Initial Loan.
(e)Security Arrangements. The
following shall have occurred with respect to the Security
Documents and other security arrangements except as
otherwise indicated in clauses (i), (ii) and (iii):
(i) the Agent shall have received the
Mortgage, in Spanish, conforming to the
requirements hereof and executed by a duly
authorized officer of the Borrower by
means of a Notarial Deed (escritura
publica) before a Spanish Notary Public
and an irrevocable power of attorney from
the Borrower enabling it to extend the
Mortgage to 100% of the outstanding Term
Loans and to give evidence of the
construction on the property or to adapt
the entries in the Property Registry to
the current status of the property in the
event that (a) a Default or an Event of
Default has occurred and is continuing,
(b) after the Completion Date, the Loan
Life Cover Ratio is less than 1.25 or (c)
the Completion Date has not occurred on or
prior to September 30, 1996. The Notarial
Deed shall be filed before any
disbursement of funds available hereunder
and recorded to the extent required by the
Mortgage at the Property Registry
("Registro de la Propiedad") within 30
days of the date of the Initial Loan;
(ii) the Agent shall have received the
Pledge Without Displacement, in Spanish,
conforming to the requirements hereof and
executed by a duly authorized officer of
the Borrower, and the Pledge Without
Displacement shall have been formalized
before a Spanish Notary Public or an
Official Commercial Stockbroker ("Corredor
Colegiado de Comercio"). Within 30 days
of the date of the Initial Loan, the
Pledge Without Displacement shall be
registered at the Chattel Mortgage and
Pledge Without Displacement Registry
("Registro de Hipoteca Mobiliaria y Prenda
sin Desplazamiento");
(iii) at each such time as the Borrower
shall acquire any Authorized Investments,
the Agent shall receive a Pledge on
Authorized Investments, in Spanish,
conforming to the requirements hereof and
executed by a duly authorized officer of
the Borrower, and each pledge shall have
been formalized before a Spanish Notary
Public or Official Commercial Stockbroker.
Within 30 days of the execution thereof,
each Pledge on Authorized Investments
shall be duly recorded, as necessary,
before the Spanish Clearing House System
(Registro Central de Anotaciones en
Cuenta), and the Agent shall have received
certificates and title to the Authorized
Investments referred to therein;
(iv) the Agent shall have received the
Pledge of Shares, in Spanish, conforming
to the requirements hereof and executed by
a duly authorized officer of RTM, and the
pledge shall have been formalized before a
Spanish Notary Public or Official
Commercial Stockbroker and share
certificates for and title to all shares
being pledged pursuant to the Pledge of
Shares shall have been delivered to the
Agent duly endorsed (endoso en garantia)
in accordance with Spanish law;
(v) the Agent shall have received the
Master Assignment Agreement, in Spanish,
(which shall be updated from time to
time), conforming to the requirements
hereof and executed by a duly authorized
officer of the Borrower and notarized
before a Spanish Notary or an Official
Commercial Stockbroker, and the Agent
shall have received evidence satisfactory
to it that each customer and other
applicable contract party has been
notified of such assignment and, if
consent is required, has consented thereto
in writing; and
(vi) the Agent shall have received
appropriate Assignments of Contracts, in
Spanish, conforming to the requirements
hereof and executed by a duly authorized
officer of the Borrower, and notarized
before a Spanish Notary or Official
Commercial Stockbroker, and the Agent
shall have received evidence satisfactory
to it that each supplier and other
applicable contract party has been
notified of such Assignment Pledge and, if
consent is required, has consented thereto
in writing; and
(vii) the Borrower shall have delivered to
the Agent all other documentation and
shall have taken all other steps necessary
for the filing, recordation and perfection
of the Security Documents in accordance
with Spanish Law and procedure, so that
upon such filing, recordation and
perfection, there will be created in the
Lenders a valid and perfected first
priority security interest in the
Collateral described therein, as and to
the extent required hereunder and
thereunder and subject only to Permitted
Encumbrances and such other exceptions as
the Lenders may agree.
(f) Evidence of RTM Contribution. The
Agent shall have received documents evidencing the transfer
of RTM's assets and certain of its liabilities relating to
the Huelva Smelter, including its rights and obligations
under the Revolving Credit Agreement, including any SFETs,
the BEX Gold Loan, the Gold-Silver Loan Agreement and the
ESP 1.62 Billion Loan Agreement, to the Borrower.
(g) Opinions of Counsel. The Agent
shall have received:
(i) a favorable written opinion of Davis
Polk & Wardwell, counsel to the Borrower,
dated as of the date of the Initial Loan,
in substantially the form of Exhibit R
hereto;
(ii) a favorable written opinion of J&A
Garrigues, Spanish counsel to the
Borrower, dated as of the date of the
Initial Loan, substantially in the form of
Exhibit S hereto;
(iii) a written opinion of Sullivan &
Cromwell, counsel to the Agent, dated as
of the date of the Initial Loan,
substantially in the form of Exhibit W
hereto; and
(iv) a written opinion of Uria &
Menendez, Spanish counsel to the Agent,
dated as of the date of the Initial Loan,
substantially in the form of Exhibit X
hereto.
(h) Notarial Deed. The Agent shall
have received an appropriate Notarial Deed formalizing this
Agreement and the Inducement Agreement in accordance with
applicable Spanish law before a Spanish Notary.
(i) Modification of By-Laws. The
Agent shall have received evidence of the modification of
the By-Laws of the Borrower with respect to the assignment
of any shareholder rights in favor of a pledgee.
(j)Insurance. The Agent shall have
received, consistent with the requirements of Section
8.01(c) hereof, an opinion of the Independent Insurance
Advisor attached hereto as Exhibit T as to appropriate
levels of insurance. The Agent, on behalf of the Lenders,
shall be named as a loss payee or an additional insured as
recommended by the Opinion of the Independent Insurance
Advisor; provided, however, that with respect to any
liability insurance policy, the Agent and each of the
Lenders shall be named as a loss payee or an additional
insured, as appropriate.
(k) Authorizations. The Agent shall
have received certified copies of all material
registrations, notices, exemptions and licenses with or from
Governmental Authorities and other Persons arising from or
related to the operations of the business, the acquisition
of assets, the Term Loans, the Working Capital Loans, the
Swing Line Loans, the validity, perfection and priority of
the security interests and the construction, operation and
maintenance of the Project in accordance with the Project
Development Plan as specified on Schedule 7.01(k) other than
those which have been duly applied for (copies of
applications having been provided to the Agent) and which
are expected to be obtained in the ordinary course and
except where the failure to effect or obtain such
authorizations, consents, approvals, registrations, notices,
exemptions and licenses could not reasonably be expected to
have a Material Adverse Effect.
(l) Report of the Independent
Engineer. The Agent shall have received a true and correct
copy of the Report of the Independent Engineer in form and
substance satisfactory to the Agent.
(m)Project Documents.The Borrower shall
have delivered to the Agent true and correct copies of each
of the Project Documents (including the Lurgi Contract).
(n) Environmental Report. The
Borrower shall have delivered to the Agent:
(i) a copy of the Environmental Report;
and
(ii) certified copies of any agreements
between the Borrower and any Governmental
Authority or undertakings by any
Governmental Authority in connection with
Environmental Claims, Environmental Laws
or any other environmental issue with
respect to the Huelva Smelter or the
Project.
(o) Off-take, Supply and Tolling
Contracts. The Borrower shall have delivered to the Agent
copies of contracts or letters of intent or other
arrangements reasonably acceptable to the Agent, in form
reasonably satisfactory to the Agent, for the supply of
copper concentrate and oxygen, the off-take of anodes and
sulfuric acid and the delivery of copper at the levels
specified in Exhibit U-1 hereto.
(p) Lurgi Certificate. The Agent
shall have received a Lurgi Certificate, dated within 10
Business Days of the date of the Initial Loan.
(q)Computer Model. Each of the
Borrower and the Agent shall have acknowledged receipt of
the Computer Model.
(r) Management Services Contract. The
Borrower shall have delivered to the Agent a true and
correct copy of the Management Services Contract.
(s) Other Indebtedness. The Agent
shall have received satisfactory evidence that (i) the
Borrower has given irrevocable notices legally obligating it
to repay in full the Revolving Credit Agreement, the Gold-
Silver Loan Agreement and the ESP 1.62 Billion Loan
Agreement and (ii) the Borrower has no liability with
respect to the BEX Gold Loan, which shall be an obligation
of RTM.
(t) Inducement Agreement. The Agent,
on behalf of the Lenders, shall have received a copy of the
Inducement Agreement.
(u) Investor Capital Investment. The
Agent, on behalf of the Lenders shall have received
satisfactory evidence of the funding of the $30,000,000
capital investment from the Investor on terms reasonably
satisfactory to the Lenders.
(v)Payment of Fees and Expenses. The
Agent shall have received payment of the fees referred to in
Section 4.04 and all expenses, which are then due and
payable.
(w)Litigation. There shall not be
pending or threatened any action or proceeding before any
court or administrative agency relating to the transactions
contemplated by this Agreement or any other Financing
Document or any Project Document which, in the judgment of
the Agent and the Required Lenders, could materially impair
the ability of the Borrower or any other party to perform
its obligations hereunder or thereunder.
(x) Other Documents. The Agent shall
have received such other certificates and documents as the
Agent and the Lenders reasonably may require.
Section 7.02. Conditions to All Loans.
The obligations of each Lender in connection with each Loan
(including the Initial Loan) are subject to the conditions
precedent that, on the date of each such Loan and after
giving effect thereto, each of the following conditions
precedent shall have been satisfied or waived in writing by
the Required Lenders:
(a)Loan Request. For each Loan, the
Agent shall have received a Working Capital Loan Request, a
Swing Line Loan Request or a Term Loan Request, as the case
may be, in the form and manner set forth herein for such
requests.
(b)Use of Proceeds. The Agent shall
have received certification from the Borrower to the effect
that the proceeds of such Loan will be used in accordance
with the provisions of Section 8.01(o), such certification
to be included in the applicable borrowing request.
(c) No Default. No Default or Event
of Default shall have occurred and be continuing, and the
Agent shall have received certification from the Borrower to
that effect, such certification to be included in the
applicable borrowing request.
(d) Representations and Warranties;
Covenants. The representations and warranties of the
Borrower contained in Article VI hereof and in any Financing
Document shall have been true when made and shall be true
and correct with the same effect as though such
representations and warranties had been made at the time of
such Loan and the Borrower shall have complied with all of
its covenants and agreements under this Agreement, and the
Agent shall have received certification from the Borrower to
that effect, such certification to be included in the
applicable borrowing request.
(e) Other Documents. The Agent shall
have received such other certificates and documents as the
Agent and the Lenders reasonably may require.
Section 7.03. Conditions to All Term
Loans. The obligations of each Lender in connection with
each Term Loan (including the Initial Loan) are subject to
the conditions precedent that, on the date of each such Term
Loan and after giving effect thereto, each of the following
conditions precedent shall have been satisfied or waived in
writing by the Required Lenders:
(a) Status of Construction. The Agent
shall have received from the Borrower a certificate signed
by an authorized officer of the Borrower certifying as to
the satisfactory status of construction contract performance
and substantially in the form of Exhibit V hereto, such
certificate to be delivered with the applicable borrowing
request.
(b) Certifications. (i) The Agent
shall have received a Lurgi Certificate, dated no more than
31 days prior to the date of the applicable Term Loan
Request, certifying as to (A) the satisfactory status of
construction contract performance, including the ability of
Lurgi to continue to satisfactorily perform with respect to
the time schedule contained in the Lurgi Contract and (B)
the absence of a default or other action by the Borrower,
the consequence of which would be to permit Lurgi to
materially modify or avoid its performance under the Lurgi
Contract.
(ii) For each Term Loan the proceeds
of which will be used to make the payments required upon the
occurrence of a Milestone (as defined in Section 6.4.3 of
the Lurgi Contract), the Agent also shall have received a
Certificate of the Independent Engineer as to the matters
specified in (A) and (B) above.
(iii) For the Term Loan the proceeds
of which are to fund the Milestone payment specified in
Section 6.4.3.3 of the Lurgi Contract to be due upon the
satisfactory completion of the work required during the
general shutdown of the Huelva Smelter, the Agent shall have
received (A) a certificate signed by an authorized officer
of the Borrower certifying that all activities that were
essential to be completed during the shutdown of the Huelva
Smelter have been completed to the Borrower's satisfaction
and that the Huelva Smelter is operating and (B) a
certificate of the Independent Engineer certifying that such
essential work has been completed satisfactorily and that
the Huelva Smelter is operating at the scheduled level of
output.
(iv) For each Term Loan the proceeds
of which will be used to fund Additional Completion Amounts,
the Agent also shall have received and accepted as
reasonably satisfactory (A) a certificate of the Borrower
certifying that such Additional Completion Amounts are
necessary to complete the construction of the Huelva
Smelter, (B) a certificate of the Borrower as to the ability
of the Borrower to fund the remaining costs of construction
of the Huelva Smelter to the Completion Date with the
remaining Term Loan Commitment and/or Working Capital Loan
Commitment, grants from the government of Spain and other
available funds with supporting detail thereof to be
provided upon request of the Agent and (C) a certificate of
the Independent Engineer certifying as to and approving any
technical aspects of such Additional Completion Amounts.
The certificate specified in the foregoing clause (B) shall,
to the extent that it relies on the availability of funds
from sources other than Committed Government Grants, provide
evidence of the availability of such funds that is in form
and substance reasonably satisfactory to the Required
Lenders. The certificates specified in the foregoing
clauses (A) and (C) shall also be delivered in connection
with any request by the Borrower pursuant to Section 5.07(b)
to withdraw funds from the Reserve Account to pay Additional
Completion Amounts.
(v) Each of the foregoing certificates
shall be delivered with the applicable borrowing request.
(c) Other Documents. The Agent shall
have received such other certificates and documents as the
Agent and the Lenders reasonably may require.
Section 7.04. Conditions to All
Working Capital Loans and Swing Line Loans. The obligations
of each Lender in connection with each Working Capital Loan
and Swing Line Loan (including the Initial Loan) are subject
to the conditions precedent that, on the date of each such
Working Capital Loan and Swing Line Loan and after giving
effect thereto, each of the following conditions precedent
shall have been satisfied or waived in writing by the
Required Lenders:
(a) Borrowing Base Report. For each
Working Capital Loan, the Agent shall have received from the
Borrower a Borrowing Base Report dated no later than five
Business Days prior to the proposed Borrowing Date. For each
Swing Line Loan the Agent shall have received from the
Borrower either a revised Borrowing Base Report dated no
later than five Business Days prior to the proposed
Borrowing Date for a Dollar Swing Line Loan and three
Business Days prior to the proposed Borrowing Date for a
Peseta Swing Line Loan or a certificate dated the date of
delivery of the applicable borrowing request stating that
based on the most recently delivered Borrowing Base Report
there is sufficient Collateral for such Loan.
(b) Security Documentation. The Agent
shall have received any supplementary documentation required
pursuant to the Security Documents (duly notarized if
required) and all formalities relating to the creation in
favor of the Lenders of a valid and perfected first priority
security interest in the Collateral for such Loan shall have
been completed.
(c) Supplemental Security Documents.
The Agent shall have received from the Borrower updated
documents incorporating lists of newly assigned receivables
notarized as required by the terms of the Master Assignment
Agreement.
(d) Working Capital Loan Commitment.
The Agent shall have received certification from the
Borrower to the effect that the aggregate outstanding
Working Capital Loans and Swing Line Loans on the proposed
Borrowing Date do not exceed the lesser of the Borrowing
Base and the Working Capital Loan Commitment, such
certification to be included in the applicable borrowing
request.
(e) Other Documents. The Agent shall
have received such other certificates and documents as the
Agent and the Lenders reasonably may require.
ARTICLE VIII
COVENANTS
Section 8.01. Affirmative Covenants.
Until payment in full of the Loans and all reimbursement
obligations and performance of all other obligations of the
Borrower hereunder, the Borrower will:
(a)Financial Statements; Borrowing Base
Reports; etc. Furnish to the Agent and to each Lender the
following documents in the English language:
(i) no later than 30 days after the end
of each of the first two months of each
fiscal quarter prior to the Completion
Date, a balance sheet and an income
statement of the Borrower prepared in a
format and in scope as currently produced
and approved by the Agent; and
(ii) no later than 5 days prior to the
first day of each month and on the date of
delivery of each Working Capital Loan
Request and, if required, on the date of
delivery of each Swing Line Loan Request,
a Borrowing Base Report; provided that, in
the case of a Swing Line Loan, the
Borrower may deliver the certificate
referred to in Section 7.04(a) in lieu of
a Borrowing Base Report, if applicable;
and
(iii) no later than 20 days after the end
of each month prior to the Completion
Date, Construction Reports, Operating
Reports relating to the Project and a
statement specifying the estimated cost to
complete the Project; and
(iv) as soon as available but in no event
more than 50 days after the end of each of
the first three fiscal quarters, a copy of
the unaudited quarterly consolidated
balance sheets, income statements and
statements of cash flow of the Borrower
and its Subsidiaries, prepared in
accordance with Spanish GAAP, such
financial statements to be accompanied
after the Completion Date by an Operating
Report; and
(v) (A) as soon as available, but in no
event more than 60 days following the end
of each fiscal year, financial statements
relating to the Borrower and its Subsidi-
aries, and (B) within 15 days of signing
by the Borrower's independent public
accounting firm but in no event more than
150 days following the end of each fiscal
year, a copy of the annual consolidated
audit report and financial statements
relating to the Borrower and its
Subsidiaries, certified by an independent
public accounting firm, prepared in
accordance with Spanish GAAP; and
(vi) together with each of the financial
statements delivered pursuant to clauses
(iv) and (v)(A) of this Section 8.01(a), a
certificate of the Chief Financial Officer
and one other authorized officer of the
Borrower stating whether, as of the last
date of such financial statements, any
event or circumstance exists which consti-
tutes a Default or Event of Default and,
if so, stating the facts with respect
thereto, and whether the Borrower (and
where applicable, each of the Borrower's
Subsidiaries) is in compliance with each
of the covenants set forth in Article VIII
hereof; and
(vii) if the conditions set forth in
Section 2.06 then require repayment of
Loans out of Net Cash, on each Repayment
Date, a certificate of the Chief Financial
Officer and one other authorized officer
of the Borrower showing Net Cash as of
each such Repayment Date; and
(viii) not later than 60 days following the
initial Forecast Date and 30 days
following each subsequent Forecast Date, a
Forecast as specified in Section 8.03; and
(ix) promptly upon any determination by
the Borrower that it is operating the
Project in a manner that materially
deviates from the Forecast Assumptions
relating to the physical operation of the
Project, a notice specifying the revised
Forecast Assumptions, it being understood
by the parties that the delivery of any
such notice constitutes a Recalculation
Event; and
(x) as soon as practicable and in any
case at least 30 days prior to the
scheduled general shutdown of the Huelva
Smelter (currently scheduled to commence
in April 1995), a statement describing the
activities scheduled to be undertaken
during the shutdown and, with respect
thereto, specifying essential activities
that can only be undertaken during the
shutdown and non-essential activities
that, if necessary, can be completed after
the shutdown without causing any delay in
the Completion Date; and
(xi) at least once during each
calendar month prior to the Completion
Date, a duly executed Lurgi Certificate;
and
(xii) such additional information,
reports or statements as the Agent and the
Lenders from time to time may reasonably
request.
(b)Taxes. Pay and discharge all taxes,
assessments and governmental charges upon it, its income and
its properties, and cause each of its Subsidiaries to do so,
prior to the date on which penalties are attached thereto,
unless and to the extent only that (i) such taxes,
assessments and governmental charges shall be contested in
good faith and by appropriate proceedings by the Borrower or
Subsidiary, as the case may be, (ii) adequate reserves are
maintained by the Borrower in accordance with Spanish GAAP,
and (iii) such failure to pay and discharge such taxes,
assessments and governmental charges could not reasonably be
expected to have a Material Adverse Effect.
(c)Insurance. Maintain insurance with
financially sound and reputable insurance companies against
such risks, on such properties and in such kinds and amounts
as are described in the opinion of the Independent Insurance
Advisor delivered pursuant to Section 7.01(j), except to the
extent that such coverage is no longer available at reason-
able cost and the alternative kinds and amounts of insurance
available to the Borrower are of the kinds and in the
amounts customarily carried by businesses similar to that of
the Borrower. The Borrower shall provide or cause to be
provided to the Agent, upon request, and in any event within
30 days after the effective date of any new or renewed
insurance policy, a certificate from the insurers or
insurance brokers for such insurance policy indicating the
names of the insurance companies, the status of premium
payments, the amounts of the insurance, the dates of the
expiration thereof and the properties and risks covered
thereby. The Agent, on behalf of the Lenders, shall be
named as a loss payee or an additional insured as
appropriate to protect their respective interests
thereunder; provided, however, that with respect to any
liability insurance policy, the Agent and each of the
Lenders shall be named as a loss payee or additional named
insured, as appropriate. The Borrower shall at all times
maintain insurance on the Huelva Smelter on a replacement
cost basis. The Borrower shall not do anything and shall
not cause others to do anything to prejudice the insurance
so maintained and shall notify the Agent immediately of (1)
any material change of coverage, notice of cancellation or
suspension issued or advised by or on behalf of the insurers
and (2) any material fact, error or omission which may
reasonably be expected to prejudice such insurance including
but not limited to failure to pay any premium. In
furtherance of the foregoing, the Borrower shall notify in
writing such of its insurers as may be required pursuant to
its insurance policies in force from time to time, of any
changes of ownership or occupancy of, or increase of hazard
relating to, its properties or the risks covered by such
insurance. The Borrower shall provide a copy of each such
notice to the Agent at the time such notice is delivered to
any insurer. Except in the case of a Constructive Total
Loss, all proceeds of property and casualty insurance
received with respect to the Huelva Smelter shall be used by
the Borrower for costs of repair or replacement in respect
of the applicable property.
(d)Corporate Existence. Except as
permitted by Section 8.02(d), maintain, and cause each of
its Subsidiaries to maintain, its corporate existence in
good standing and qualify and remain qualified to do
business in each jurisdiction in which the character of the
properties owned or leased by it therein or in which the
transaction of its business is such that the failure to
qualify could reasonably be expected to have a Material
Adverse Effect.
(e) Authorizations. Obtain, make and
keep in full force and effect all authorizations from and
registrations with Governmental Authorities that may be
required for the validity or enforceability of the Financing
Documents and all such material authorizations with respect
to the Project Documents and for the completion of the
Project in accordance with the Project Development Plan.
(f)Maintenance of Records. For the
Borrower and each of its Subsidiaries (i) keep proper books
of record and account in which full, true and correct
entries will be made of all dealings or transactions of or
in relation to its business and affairs; (ii) set up on its
books reserves with respect to all taxes, assessments,
charges, levies and claims; and (iii) on a current basis,
set up on its books, from its earnings, appropriate reserves
against doubtful accounts receivable, advances and
investments and all other proper reserves (including by
reason of enumeration, reserves for premiums, if any, due on
required prepayments and reserves for depreciation,
obsolescence, or amortization of properties), which should
be set aside from such earnings in connection with its
business. All determinations pursuant to this
Section 8.01(f) shall be made in accordance with, or as
required by, Spanish GAAP consistently applied in the
opinion of such independent public accountants as shall then
be regularly engaged by the Borrower.
(g)Inspection. Permit, and cause each
of its Subsidiaries to permit, the Agent and the Lenders to
have one or more of their officers and employees, or any
other Person designated by the Agent or the Lenders, visit
and inspect the Project and any of the other properties of
the Borrower and its Subsidiaries and to examine the minute
books, books of account and other records of the Borrower
and its Subsidiaries and make copies thereof or extracts
therefrom, and discuss its affairs, finances and accounts
with its officers and, at the request of the Agent or the
Lenders, with the Borrower's independent accountants, during
normal business hours and at such other reasonable times and
as often as the Agent or the Lenders reasonably may desire.
(h)Maintenance of Property, etc. (i)
Maintain, keep and preserve and cause each of its
Subsidiaries to maintain, keep and preserve all of its
properties, including the Project, in good repair, working
order and condition and from time to time make all necessary
and proper repairs, renewals, replacements, and improvements
thereto in the ordinary course of business, and (ii)
maintain, preserve and protect and cause each of its
Subsidiaries to maintain, preserve and protect all
franchises, licenses, copyrights, patents and trademarks
material to its business (including completion and operation
of the Project in accordance with the Project Development
Plan), so that the business carried on in connection
therewith may be properly conducted at all times.
(i) Conduct of Business. (i) Pay all
of its commercial obligations when due and payable and (ii)
comply in all material respects with all rules and
regulations of all Governmental Authorities.
(j)Notification of Defaults and Adverse
Developments. Promptly notify the Agent upon the discovery
by any officer of the Borrower of the occurrence of (i) any
Default or Event of Default; (ii) any event, development or
circumstance whereby the financial statements most recently
furnished to the Agent fail in any material respect to
present fairly, the financial condition and operating
results of the Borrower and its Subsidiaries as of the date
of such financial statements; (iii) any material litigation
or proceedings that are instituted or threatened (to the
knowledge of the Borrower) against the Borrower or its
Subsidiaries or any of their respective assets; (iv) each
and every event which would be an event of default (or an
event which with the giving of notice or lapse of time or
both would be an event of default) under any Indebtedness of
the Borrower or any of its Subsidiaries, such notice to
include the names and addresses of the holders of such
Indebtedness and the amount thereof; (v) any event or act of
Force Majeure; (vi) loss of any material authorization,
approval, consent, exemption or license with or from any
Governmental Authority and other persons which are necessary
for the performance by the Borrower of the transactions
contemplated by the Financing Documents or the Project
Documents or the completion of the Project in accordance
with the Project Development Plan; (vii) default by the
Borrower in any material respect under any material contract
including without limitation any Project Document; (viii)
any violation of labor laws, collective agreements or
contracts or Environmental Laws that could reasonably be
expected to have a Material Adverse Effect; (ix) the threat
or actual occurrence of any Constructive Total Loss or
Expropriatory Action or any other material loss or damage in
respect of the Project; and (x) any other development in the
business or affairs of the Borrower or its Subsidiaries if
the effect thereof could reasonably be expected to have a
Material Adverse Effect; in each case describing the nature
thereof and the action the Borrower proposes to take with
respect thereto. Upon receipt of any such notice of default
or adverse development, the Agent shall forthwith give
notice to each Lender of the details thereof.
(k)Environmental Matters. (i) Comply,
and cause each of its Subsidiaries to comply, with all
applicable Environmental Laws, (ii) notify the Agent within
10 Business Days of becoming aware of any Environmental
Claim, circumstances that could result in an Environmental
Claim or any material change concerning any environmental
issue as disclosed in the Environmental Report,
(iii) provide copies of all correspondence and relevant
documents to the Agent within 10 Business Days of becoming
aware of an Environmental Claim or any condition or event
which could result in an Environmental Claim,
(iv) implement, if and at the time required, at least one
measure recommended in the Environmental Report or such
alternate measure or measures as may be proposed by the
Borrower and approved by the Environmental Advisor with
respect to each issue identified in the Environmental
Report, and (v) promptly discharge, or enter into an
arrangement to resolve, any Environmental Claim except for
those contested in good faith where the Borrower has
established appropriate reserves in accordance with Spanish
GAAP, except where the failure to do any of the foregoing
could not reasonably be expected to have a Material Adverse
Effect.
(l) Environmental Reports. Deliver to
the Agent a copy of any environmental report or any relevant
portion thereof (other than routine reports prepared by
regular employees of the Borrower or consultants engaged to
prepare such routine reports) that may be prepared for FCX,
RTM or the Borrower in connection with the construction or
operation of the Project and the Huelva Smelter within 10
Business Days of completion of any such report.
(m) Supply Contracts. Maintain
contracts (or, to the extent contemplated under
Section 7.01(o) for periods prior to the Contract Date,
letters of intent or other arrangements reasonably
satisfactory to the Required Lenders) for the supply of
copper concentrate and the supply of oxygen, the off-take of
anodes and sulfuric acid and the fabrication of copper at
levels equal to or exceeding those specified from time to
time therefor in Exhibits U-1 and U-2 hereto, as applicable,
or as may otherwise be reasonably satisfactory to the
Required Lenders. The Borrower shall be required to obtain
the consent of the Required Lenders, which consent shall not
be unreasonably withheld, to replace (unless such
replacement is with a contract substantially comparable in
form and substance to the contract being replaced) or
materially modify any of the contracts described in Exhibits
U-1 and U-2 hereto, it being understood that, among other
things, the Agent shall have the opportunity to review and
approve material changes in procedures for establishing
treatment and refining charge pricing under such concentrate
supply contracts using formula pricing, but not actual
prices resulting therefrom and it being further understood
that it may be necessary for the Borrower from time to time
to agree to changes in such contracts reflecting then
current commercial or market practices. In the case of any
replacement of any such contract, the Borrower will take
such steps as are necessary to assign to, or perfect a lien
thereon in favor of, the Agent on behalf of the Lenders
under the Security Documents.
(n) Hedging Arrangements. At all
times on or following the Completion Date, maintain (i)
Interest Rate Protection Agreements sufficient to provide
fixed payments or, subject to the agreement of the Agent,
capped payments of interest, for not less than a two year
period on 50% of the amount of the Term Loans outstanding at
any time, (ii) currency hedging arrangements with respect to
the Borrower's peseta/dollar exposure sufficient to hedge,
through the use of customary hedging arrangements, against
adverse risks at least 50% of its projected peseta/dollar
exposure for at least twelve months forward at any time and
(iii) hedging arrangements to protect against adverse fluc-
tuations in the price of the metal content of purchased
copper concentrate. The Borrower may also enter into
currency hedging arrangements in the ordinary course of its
business (the "Optional Currency Hedging Arrangements") with
respect to its capital expenditures, including payments
pursuant to the Lurgi Contract. In the event the Borrower
enters into cap agreements with respect to any of the
foregoing Hedging Arrangements, the cap amount specified in
such agreements will be taken into account to the extent
relevant for purposes of calculating the Loan Life Cover
Ratio and the Two Year Cover Ratio.
All Hedging Arrangements specified in
this Section 8.01(n) may be made with the Agent, any Lender
or any other third party, as counterparty; provided,
however, that only the net amount (as described below) of
each type of such arrangements as are made with the Agent or
any Lender will be secured (on a pari passu basis with the
Loans) under those Security Documents securing Hedging
Arrangements. The net amount of each Lender's Hedging
Arrangements entitled to share in the proceeds of the
Collateral shall be the sum of the net liabilities and other
amounts owing under each type of Hedging Arrangement,
including but not limited to Interest Rate Protection
Agreements, currency hedging arrangements, metal hedging
arrangements and Optional Currency Hedging Arrangements,
provided by such Lender, valued on the date of calculation.
In the event of any Collateral shortfall, such Lender will
share in available security with the Agent and Lenders
ratably as provided in Section 10.03. For purposes of this
Section 8.01(n), Hedging Arrangements may include, with the
consent of the Agent, interest rate caps and interest rate
collars.
(o) Use of Proceeds. (i) Use the
proceeds of the Term Loans hereunder solely for the
following purposes:
(A) financing costs (including hedging
costs) of construction and expansion of
the Huelva Smelter as more fully outlined
in the Project Development Plan (including
payments to Lurgi pursuant to the Lurgi
Contract), it being agreed by the parties
that the amount of each Term Loan Request
may include sufficient funds to pay the
Borrower's reasonably anticipated costs
for the next 30 days;
(B) subject to Section 7.03(b)(iv),
Additional Completion Amounts;
(C) refinancing of the Gold-Silver
Loan Agreement, the BEX Gold Loan, the
Revolving Credit Agreement and other
working capital facilities in existence on
the date hereof;
(D) payment of interest, closing fees
and other financing charges in respect of
the Financing Documents; and
(E) payment of mortgage and security
costs in respect of the Security
Documents.
(ii) Use the proceeds of the Working
Capital Loans hereunder solely for the following purposes:
(A) working capital and operating
costs of the Borrower;
(B) refinancing of the Revolving
Credit Agreement;
(C) payment of interest, closing fees
and other financing charges in respect of
the Financing Documents;
(D) payments to counterparties under
any Hedging Arrangement, Optional Currency
Hedging Arrangement or Interest Rate
Protection Agreement;
(E) refinancing of existing working
capital facilities including the ESP 1.62
Billion Loan Agreement and refinancing of
the Gold-Silver Loan Agreement and the BEX
Gold Loan up to that portion of FCX's
$30,000,000 equity contribution used to
reduce other outstanding working capital
loans; and
(F) value added or other taxes
associated with payments to Lurgi pursuant
to the Lurgi Contract.
(p) Completion of Project. Diligently
proceed to complete the Project in accordance with the
Project Development Plan and timely perform all of its
obligations when due under the Lurgi Contract except where
the failure to perform is the result of Force Majeure or a
bona fide dispute being negotiated between the Borrower and
Lurgi or any other applicable third party and the failure to
perform could not reasonably be expected to have a Material
Adverse Effect.
(q) Management Services Contract.
Maintain the Management Services Contract in full force and
effect until the Maturity Date; provided, however, that (i)
FTX or FCX can be replaced by an independent third party
reasonably satisfactory to the Required Lenders as the
provider of all or a portion of the services provided under
the Management Services Contract and (ii) if the Borrower
demonstrates to the reasonable satisfaction of the Required
Lenders that the Management Services Contract is no longer
required by the Borrower, it may be terminated; and
provided, further, that FTX or FCX, as the case may be, may
terminate the Management Services Contract in accordance
with its terms on or after the date upon which the Lenders,
or any third party acting on their behalf or otherwise as
their designee, by enforcement of rights under the Security
Documents, whether by taking control of the Borrower's
capital stock or otherwise, take control of the day to day
operations and management of the Borrower, the Project and
the Huelva Smelter.
Section 8.02. Negative Covenants.
Until payment in full of the Loans and all reimbursement
obligations and performance of all other obligations of the
Borrower hereunder, the Borrower will not:
(a)Indebtedness. Create, incur, assume
or suffer to exist any Indebtedness, or permit any
Subsidiary so to do, except (i) Indebtedness to the Agent
and the Lenders hereunder, (ii) the Peseta Loan, (iii)
commodity hedging transactions in the ordinary course of
business to hedge against metal price fluctuations and not
for the purpose of speculation and other Hedging
Arrangements entered into in the ordinary course of
business, (iv) Indebtedness of the Borrower and any
Subsidiary secured by mortgages, encumbrances or liens
described in clauses (vii) and (ix) of the definition of
"Permitted Encumbrances" in Section 1.01(c), (v) contingent
liabilities permitted by Section 8.02(e), and (vi) other
Indebtedness not exceeding $2,500,000 in the aggregate at
any time outstanding and (vii) the Indebtedness specified in
Section 7.01(s)(i) until such Indebtedness is repaid.
(b) Restricted Payments. (i) Prior
to the Contract Date, declare or make any Restricted Payment
except Restricted Payments in an aggregate amount not to
exceed the Unrestricted Government Grant Amount to RTM or
any member of RTM's consolidated group; provided, however,
that such Restricted Payment may not thereafter be used by
RTM or any of its other subsidiaries directly or indirectly
to make Restricted Payments to any other Person (except RTM)
and, provided further, that the Borrower may not make such
Restricted Payment unless prior thereto, the Agent shall
have received a Lurgi Certificate, dated no more than 31
days prior to the date of the proposed Restricted Payment,
and a Certificate of the Independent Engineer, accompanied
by an additional certificate signed by an authorized officer
of the Borrower certifying that, after all scheduled and
mandatory payments hereunder and any payments necessary to
cause the Reserve Account Balance to be at least equal to
the Required Reserve Account Balance and after giving effect
to the proposed Restricted Payment, Net Cash plus funds
available for borrowing under the unused portion of the
Commitments are sufficient to meet projected construction
costs as provided in the Lurgi Contract.
(ii) Following the Contract Date, declare
or make any Restricted Payment if (A) the Loan Life Cover
Ratio is less than 1.4 to 1.0 or the Two Year Cover Ratio is
less than 1.2 to 1.0 or (B) the Reserve Account Balance is
less than the Required Reserve Account Balance; provided
that in the event that either (x) the Loan Life Cover Ratio
is less than 1.6 to 1.0 but equal to or greater than 1.4 to
1.0 or (y) the Two Year Cover Ratio is less than 1.3 to 1.0
but equal to or greater than 1.2 to 1.0, then any Restricted
Payments must be made to, and retained for use by, RTM or
its consolidated group and may not be used by RTM or any of
its other subsidiaries to make Restricted Payments to any
other Person (except RTM) and, provided further, that in the
event the Borrower elects to defer all or a portion of a
scheduled installment payment of principal on the Term Loan
as provided in Sections 2.03(b) and (c) hereof, then the
Borrower may not make any Restricted Payments during the
period commencing on the scheduled payment date of any such
deferred installment payment and ending on the date that any
amount so deferred is repaid.
(iii) Notwithstanding the provisions of
paragraphs (i) and (ii),
(A) the Borrower may distribute to RTM
or its consolidated group (i) amounts received by it in cash
as grants from Governmental Authorities for any purpose at
any time up to a maximum aggregate amount of (x) the
Unrestricted Government Grant Amount plus (y) an amount (in
dollars) equal to the portion, if any, of the RTM Capital
Contribution that has been applied from the Reserve Account
to fund Additional Completion Amounts and (ii) an amount
equal to the remaining amount of any RTM Capital
Contribution released from the Reserve Account; provided,
however, that such amounts may not be paid as a Restricted
Payment by RTM to FCX or any other entity having an
ownership interest in RTM, until such time as the Borrower
is able to demonstrate to the reasonable satisfaction of the
Agent that neither RTM nor its mining subsidiary, Minas de
Riotinto, has any liability for actual or contingent
liabilities in respect of mine closure or employee
termination and pension costs (in excess of funds then
reserved for such purpose), and
(B) so long as no Default or Event of
Default shall have occurred and be continuing, the Borrower
may make a Restricted Payment on the date of the Initial
Loan to RTM for the purpose of repaying the BEX Gold Loan.
(C) the Borrower shall not make any
Restricted Payment (including pursuant to clause (A) above)
if, after giving effect thereto, any Default or Event of
Default would be continuing.
(iv) Restricted Payments shall be made,
to the extent permitted hereunder, only within 5 Business
Days following the end of a fiscal quarter and upon the
delivery to the Agent of a certificate signed by an
authorized officer of the Borrower certifying as to (i) Net
Cash available for Restricted Payments, (ii) the source of
funds for such Restricted Payments (including from
Governmental Authorities), (iii) the Reserve Account Balance
and whether such amount is equal to the Required Reserve
Account Balance and (iv) that no Default or Event of Default
has occurred or will be continuing after making such
Restricted Payments.
(c)Mortgages and Pledges. Create,
incur, assume or suffer to exist, or permit any of its
Subsidiaries to create, incur, assume or suffer to exist,
any Lien of any kind upon or in any of its property or
assets, whether now owned or hereafter acquired, except
Permitted Encumbrances.
(d) Merger, Acquisition or Sales of
Assets. Enter into any merger or consolidation or acquire
assets of any Person, or sell, lease, or otherwise dispose
of any of its assets, except in the ordinary course of its
business, or permit any Subsidiary so to do, except that (i)
a Wholly owned Subsidiary may be merged or consolidated with
one or more other Wholly owned Subsidiaries or into the
Borrower and (ii) the Borrower may sell, lease or otherwise
dispose of fixed assets in an amount not to exceed an
aggregate of $2,500,000 in any one year.
(e)Contingent Liabilities. Assume,
guarantee, endorse, contingently agree to purchase or
otherwise become liable upon the obligation of any other
Person, or permit any Subsidiary so to do, except:
(i) in connection with a merger
permitted by Section 8.02(d), and
(ii) by the endorsement of negotiable
instruments for deposit or collection or
similar transactions in the ordinary
course of business.
(f)Loans and Investments. Except as
permitted in Section 8.02(h), purchase or acquire the
obligations or stock of, or any other interest in, or make
loans or advances to, any Person, or permit any Subsidiary
so to do, except Authorized Investments.
(g)Capital Expenditures. Make any
material capital expenditures, or permit any Subsidiary so
to do, except as contemplated by the Project Development
Plan and Permitted Capital Expenditures.
(h) Subsidiaries. Create or suffer to
exist any Subsidiaries, except as agreed by the Required
Lenders; provided, however, that the Borrower may (a) create
no more than three such new Subsidiaries and (b) contribute
no more than a total of $1,500,000 in equity capital to all
such new Subsidiaries.
(i) Preferred Stock. Issue or sell
any preferred stock of the Borrower without the prior
consent of the Required Lenders, which consent shall not be
unreasonably withheld.
(j) Stock of Subsidiaries. Sell or
otherwise dispose of any shares of capital stock of any
Subsidiary (except in connection with a merger or
consolidation of a Wholly owned Subsidiary permitted by
Section 8.02(d) or with the dissolution of any Subsidiary)
or permit any Subsidiary to issue any additional shares of
its capital stock except pro rata to its stockholders.
(k)Related Agreements. Amend, modify
or waive, or permit to be amended, modified or waived
(except for Change Orders or Variance Requests as provided
in Section 8.04), any material provision of any Project
Document unless, within not less than 15 Business Days prior
to such amendment, modification or waiver, the Borrower
shall have given the Agent and each of the Lenders notice
thereof, including all relevant terms and conditions
thereof, and the Required Lenders shall not have objected in
writing thereto.
(l) Transactions with Affiliates.
Effect any transaction with any Subsidiaries or Affiliates
of the Borrower on a basis less favorable to the Borrower or
such Subsidiary than could at the time be made or obtained
in an arms' length transaction with an unrelated third
party.
(m) Environmental Matters. Engage in
any new activities or business operations, other than those
contemplated in the Project Documents or the Environmental
Report, that would materially increase the risk of an
Environmental Claim or materially increase the generation or
use of Hazardous Substances by the Borrower or any of its
Subsidiaries without the Agent's prior written consent.
Section 8.03. Preparation of Forecast
and Cover Ratio Certificate. As of the earlier of (i) the
Completion Date and (ii) September 30, 1996 and each date
thereafter which is a Forecast Date, the Borrower shall
prepare the Forecast required to be delivered pursuant to
Section 8.01(a)(viii) by applying to the variables contained
in the Computer Model assumptions selected by the Borrower
as appropriate for the applicable period (the "Forecast
Assumptions") in order to calculate the Forecast Net Cash
Flow to the Maturity Date, Loan Life Cover Ratio and Two
Year Cover Ratio for such period. Each such Forecast may be
prepared and delivered prior to the Forecast Date relating
thereto. Each Forecast shall be attached to a Cover Ratio
Certificate and delivered to the Agent. Upon receipt of the
Cover Ratio Certificate and related Forecast, the Agent will
review the Forecast and, no later than 10 Business Days
after receipt of the Forecast, (a) if the Agent approves the
Forecast, promptly deliver it to the Lenders for approval or
(b) if the Agent does not approve the Forecast, discuss
revised assumptions with the Borrower in order to produce a
revised forecast for delivery to the Lenders. Following
approval thereof by the Agent, such Cover Ratio Certificate
and Forecast shall be delivered to the Lenders for review
and approval. Upon approval thereof by the Required Lenders
which shall occur no later than 15 Business Days after
receipt of the Forecast by the Lenders, the Forecast shall
become effective and shall apply on and as from the relevant
Forecast Date until next calculated in accordance herewith.
Failure by any Lender to give or deny its approval of any
Forecast within such period shall be deemed to be acceptance
of such Forecast. In the event a Forecast is not approved
by the Required Lenders, the Agent shall work with the
Borrower and the Lenders to agree upon a revised Forecast
acceptable to the Required Lenders and any such revised
Forecast acceptable to the Required Lenders shall apply. In
the event the Agent, the Borrower and the Required Lenders
do not agree upon a revised Forecast within 5 Business Days,
then the Agent and the Required Lenders shall agree upon a
revised Forecast and such revised Forecast shall apply.
Section 8.04. Change Orders and
Variance Requests. (a) Upon the request of the Borrower,
the Agent, at its sole discretion, may approve Change Orders
up to a total cumulative amount of $6,000,000 (or the peseta
or Deutsche mark equivalent calculated on the date of the
Borrower's request for approval of any change order), pro-
vided, that no such individual Change Order may exceed
$3,000,000, and, provided further, that the cumulative
amount of $6,000,000 may include non-material Change Orders
relating to variations falling within the discretion of the
Borrower's Project Manager (as defined in the Lurgi
Contract) which do not impact upon the expected Completion
Date or the expected performance of the Project up to a
total cumulative amount of $500,000 which change orders
shall not require the approval of the Agent. The foregoing
is subject to (i) the delivery of a certificate from Lurgi
confirming that the Change Order will not result in a
material change in any term or covenant of the Lurgi Con-
tract on which the Lenders rely or, if a material change
will result, describing such material change, (ii) a
certificate signed by an authorized officer of the Borrower
specifying the additional cost, if any, of the Change Order
and the source of funds to meet any such additional cost and
(iii) the delivery of a certificate from the Independent
Engineer certifying as to and approving the technical
aspects of the Change Order.
(b) Change Orders not covered in
Section 8.04(a) must be approved by the Required Lenders,
subject to the requirements of Section 8.04(a).
(c) The Agent and the Required
Lenders, as the case may be, will respond promptly, and in
any event, within seven Business Days, to requests for
approval of Change Orders and any request not objected to
within seven Business Days of the Agent's receipt thereof
will be deemed approved.
(d) The Borrower's Project Manager (as
defined in the Lurgi Contract) will have discretionary
approval for requests for variations in Project design or
construction (each, a "Variance Request") to the extent each
such Variance Request does not increase the costs of the
Project, delay the Completion Date or materially impact the
scope of the Project or its expected performance.
Section 8.05. Technical Non-
Compliance. In the event that Technical Non-Compliance (as
defined below) has occurred and is continuing on September
30, 1996, the Borrower may seek to demonstrate to the
satisfaction of the Required Lenders that Technical Non-
Compliance will not impact the ability of the Borrower to
maintain on an ongoing basis the Loan Life Cover Ratio and
the Two Year Cover Ratio at the levels specified in para-
graph 3 of Exhibit E. As used herein the term "Technical
Non-Compliance" shall mean the failure of the Borrower to
meet any requirement specified in paragraph 2 of Exhibit E
by September 30, 1996 and the Borrower is in compliance with
ratio levels specified in paragraph 3 of Exhibit E, in which
case the prepayment described in Section 2.06(d) shall not
be required.
Section 8.06. Partial Release of
Pledged Shares. Upon the occurrence of the Contract Date,
shares representing the capital stock of the Borrower shall
be released from the lien created by the Pledge of Shares
such that from and after the Contract Date the Pledge of
Shares shall continue to provide for a pledge to the Agent
of shares representing 51% of the capital stock of the
Borrower.
ARTICLE IX
EVENTS OF DEFAULT
Section 9.01. Events of Default. If
one or more of the following events (each, an "Event of
Default") shall occur:
(a)Default shall be made in the payment
of any installment of principal of or
interest on any Working Capital Loan,
Swing Line Loan or Term Loan when due and
payable, whether at maturity, by notice of
intention to prepay or otherwise, and such
default, in the case of principal, shall
continue unremedied for three Business
Days and, in the case of interest, shall
continue unremedied for five Business
Days; or
(b) Default shall be made in the
payment of the Agent fees or upfront fees
referred to in Section 4.04(d), the
Working Capital Commitment Fee, the Term
Loan Commitment Fee or any other fee or
amount payable hereunder when due and
payable and such default shall continue
unremedied for five Business Days; or
(c)Default shall be made in the due
observance or performance of any term,
covenant, or agreement contained in
Section 8.02; provided, however, that if
the cause of such default is beyond the
control of the Borrower, such default
shall have continued unremedied for a
period of 30 days after any officer of the
Borrower becomes aware, or should have
become aware, of such default; or
(d)Default shall be made in the due
observance or performance of any other
term, covenant or agreement contained in
this Agreement, and such default shall
have continued unremedied for a period of
30 days after any officer of the Borrower
becomes aware, or should have become
aware, of such default; or
(e)Any representation or warranty made
or deemed made by the Borrower, RTM or FCX
herein or in any Financing Document or any
statement or representation made by the
Borrower, RTM or FCX in any certificate,
report or opinion delivered in connection
herewith or in connection with any other
Financing Document shall prove to have
been false or misleading in any material
respect when made; or
(f)Any obligation (other than its
obligation hereunder) of the Borrower for
the payment of Indebtedness in excess of
$5,000,000 shall not be paid when due
(taking into account any applicable grace
period) or shall become or be declared to
be due and payable prior to the expressed
maturity thereof, or there shall have
occurred an event which, with the giving
of notice or lapse of time, or both, would
cause any such obligation to become, or
allow any such obligation to be declared
to be, due and payable; or
(g) An involuntary case or other
proceeding shall be commenced against the
Borrower seeking liquidation,
reorganization or other relief including
but not limited to "suspension de pagos o
quiebra" with respect to it or its debts
under any applicable bankruptcy,
insolvency, fraudulent transfer,
reorganization, moratorium or similar law
now or hereafter in effect or seeking the
appointment of a custodian, receiver,
liquidator, assignee, trustee,
sequestrator or similar official of it or
any substantial part of its property, and
such involuntary case or other proceeding
shall remain undismissed and unstayed, or
an order or decree approving or ordering
any of the foregoing shall be entered and
continued unstayed and in effect, in any
such event, for a period of 60 days; or
(h)The Borrower shall commence a
voluntary case or proceeding including but
not limited to "suspension de pagos o
quiebra" under any applicable bankruptcy,
insolvency, fraudulent transfer,
reorganization, moratorium or other
similar law or any other case or
proceeding to be adjudicated a bankrupt or
insolvent, or the Borrower shall consent
to the entry of a decree or order for
relief in respect of an involuntary case
or proceeding including but not limited to
"suspension de pagos o quiebra" under any
applicable bankruptcy, insolvency,
reorganization or other similar law or to
the commencement of any bankruptcy or
insolvency case or proceeding against it,
or the Borrower shall file a petition or
answer or consent seeking reorganization
or relief including but not limited to
"suspension de pagos o quiebra" under any
applicable law, or the Borrower shall
consent 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 Borrower or any
substantial part of its property, or the
Borrower shall make an assignment for the
benefit of creditors, or admit in writing
its inability to pay its debts generally
as they become due, or take any corporate
action in furtherance of any such action;
or
(i)One or more judgments against the
Borrower or attachments against its
property, which in the aggregate exceed
$5,000,000, shall remain unpaid, unstayed
on appeal, undischarged, or undismissed
for a period of 45 days following the date
on which the Borrower is notified of such
judgment; or
(j) The Borrower shall fail to
undertake the Completion Tests set forth
in Exhibit E prior to September 30, 1996;
or
(k)From and after September 30, 1996,
the Borrower shall fail to maintain the
Loan Life Cover Ratio at a level equal to
or greater than 1.25 to 1.0 after giving
effect to a grace period of 60 days; or
(l)FCX shall fail to (i) (x) maintain
at least a 95% indirect ownership interest
in the Borrower prior to the Contract Date
and (y) maintain at least a 50% direct and
indirect ownership interest in the
Borrower at all times after the Contract
Date or (ii) either (x) remain the largest
single shareholder (aggregating all its
direct and indirect interests) of the
Borrower or (y) have nominees for election
to the board of directors of the Borrower
which constitute a majority of the members
of the board of directors of the Borrower
or otherwise be able to direct the affairs
of the Borrower; or
(m)Default shall be made in the due
observance or performance of any material
term of any Security Document or the liens
purported to be created by the Security
Documents shall fail in any material
respect to be valid or perfected or fail
in any material respect to have the
priority contemplated thereby, except as a
result of any failure to complete any
necessary recordation of the Security
Documents in circumstances which do not
otherwise result in an Event of Default
hereunder; or
(n)Recordation of the Security
Documents pursuant to the requirements of
Spanish law shall not be completed within
30 days of execution of the Security
Documents and such failure to complete the
recordation shall be attributable to the
Borrower; or
(o)Default shall be made in the due
observance or performance of any material
term of the Inducement Agreement; or
(p) A Constructive Total Loss or an
Expropriatory Action shall have occurred
with respect to the Huelva Smelter and
such event shall continue unremedied for
60 days;
then (i) upon the happening of any of the foregoing Events
of Default which shall be continuing, the Agent may, and
upon the request of the Required Lenders the Agent shall,
terminate the obligation of the Lenders to make any further
Loans under this Agreement upon notice to that effect
delivered by the Agent to the Borrower and (ii) upon the
happening of any of the foregoing Events of Default which
shall be continuing, the Loans shall become and be
immediately due and payable upon notice to that effect
delivered by the Agent to the Borrower; provided, that upon
the happening of any Event of Default specified in Sec-
tion 9.01(g) or (h), the Loans shall become immediately due
and payable and the obligation of the Lenders to make any
further Loans hereunder shall terminate without declaration
or other notice to the Borrower. The Borrower expressly
waives any presentment, demand, protest or other notice of
any kind.
ARTICLE X
THE AGENT AND THE LENDERS
Section 10.01. The Agency. Each
Lender appoints Barclays Bank PLC as its Agent hereunder
and as its Collateral Agent under the Security Documents and
irrevocably authorizes the Agent to take such judicial or
extrajudicial action on its behalf and to exercise such
powers hereunder and thereunder as are specifically dele-
gated to the Agent by the terms hereof and thereof, together
with such powers as are reasonably incidental hereto and
thereto, including the execution and delivery by the Agent
on behalf of such Lender of the Security Documents and any
documents related thereto and the exercise by the Agent of
powers delegated to the Agent and the Lenders thereby, and
the Agent hereby accepts such appointment subject to the
terms hereof. The relationship between the Agent and the
Lenders shall be that of agent and principal only and
nothing herein or therein shall be construed to constitute
the Agent a trustee for any Lender nor to impose on the
Agent duties or obligations other than those expressly
provided for herein. The parties agree that the Agent may
delegate certain of its obligations hereunder to certain of
its Affiliates each of which will be entitled to the
protective clauses of this Agreement as if it were the Agent
and be bound by the duties and obligations of the Agent.
Section 10.02. The Agent's Duties.
The Agent shall promptly forward to each Lender copies, or
notify each Lender as to the contents, of all notices and
other communications received from the Borrower pursuant to
the terms of this Agreement and the other Financing
Documents and, in the event that the Borrower fails to pay
when due the principal of or interest on any Loan, the Agent
shall promptly give notice thereof to the Lenders. As to
any other matter not expressly provided for herein or
therein, the Agent shall have no duty to act or refrain from
acting with respect to the Borrower, except upon the
instructions of the Required Lenders. The Agent shall not
be bound by any waiver, amendment, supplement, or modifica-
tion of this Agreement or the other Financing Documents
which affects its duties hereunder and thereunder, unless it
shall have given its prior written consent thereto. The
Agent shall have no duty to ascertain or inquire as to the
performance or observance of any of the terms, conditions,
covenants or agreements binding on the Borrower pursuant to
this Agreement or any other Financing Document nor shall it
be deemed to have knowledge of the occurrence of any Default
or Event of Default (other than a failure of the Borrower to
pay when due the principal or interest on any Loan), unless
it shall have received written notice from the Borrower or a
Lender specifying such Default or Event of Default and
stating that such notice is a "Notice of Default".
Section 10.03. Sharing of Payment and
Expenses. All funds for the account of the Lenders received
by the Agent in respect of payments made by the Borrower
pursuant to, or from any Person on account of, this
Agreement or any other Financing Document, including
proceeds realized on any Collateral, shall be distributed
forthwith by the Agent among the Lenders, in like currency
and funds as received, ratably in proportion to their
Adjusted Pro Rata Shares or their Pro Rata Shares, as
applicable, in accordance with the applicable provisions of
this Agreement. In the event that any Lender shall receive
from the Borrower or any other source any payment of, on
account of, or for or under this Agreement or any other
Financing Document (whether received pursuant to the exer-
cise of any right of set-off, banker's lien, realization
upon any security held for or appropriated to such obliga-
tion or otherwise as permitted by law) other than in
proportion to its Adjusted Pro Rata Share or its Pro Rata
Share, as applicable, then such Lender shall purchase from
each other Lender so much of its interest in obligations of
the Borrower as shall be necessary in order that each Lender
shall share such payment with each of the other Lenders in
proportion to each Lender's Adjusted Pro Rata Share or Pro
Rata Share, as applicable; provided, that no Lender shall
purchase any interest of any Lender that does not, to the
extent that it may lawfully do so, set-off against the
balance of any deposit accounts maintained with it the
obligations due to it under this Agreement; and provided,
further, that nothing herein contained shall obligate any
Lender to apply any set-off or banker's lien or collateral
security permitted hereby first to the obligations of the
Borrower hereunder if the Borrower is obligated to such
Lender pursuant to other loans or notes, but any such
application of proceeds shall be in proportion to the total
obligations of the Borrower to such Lender. In the event
that any purchasing Lender shall be required to return any
excess payment received by it, the purchase shall be
rescinded and the purchase price restored to the extent of
such return, but without interest. If in connection with
any allocation of payments pursuant to this Section 10.03
there should occur any dispute concerning the amount of net
liabilities owing to any Lender in respect of a Hedging
Arrangement, at the request of the Required Lenders, the
Agent shall obtain three independent valuations of such
liabilities from financial institutions generally regarded
as experienced and active participants in relevant markets,
and the amount of net liabilities considered in the
calculation of the Lenders' Adjusted Pro Rata Shares shall
be the average of the net liabilities as calculated by each
of such financial institutions.
Section 10.04. The Agent's
Liabilities. Each of the Lenders and the Borrower agrees
that (i) neither the Agent in such capacity nor any of its
officers or employees shall be liable for any action taken
or omitted to be taken by any of them hereunder except for
its or their own gross negligence or wilful misconduct, (ii)
neither the Agent in such capacity nor any of its officers
or employees shall be liable for any action taken or omitted
to be taken by any of them in good faith in reliance upon
the advice of counsel, independent public accountants or
other experts selected by the Agent, and (iii) the Agent in
such capacity shall be entitled to rely upon any notice,
consent, certificate, statement or other document (including
any telegram, cable, telex, facsimile or telephone
transmission) believed by it to be genuine and correct and
to have been signed and/or sent by the proper Persons.
Section 10.05. The Agent as a Lender.
The Agent shall have the same rights and powers hereunder as
any other Lender and may exercise the same as though it were
not the Agent, and the terms "Lender" or "Lenders", unless
the context otherwise indicated, include the Agent in its
individual capacity. The Agent may, without any liability
to account, maintain deposits or credit balances for, invest
in, lend money to and generally engage in any kind of
banking business with the Borrower or any Subsidiary or
affiliate of the Borrower as if it were any other Lender and
without any duty to account therefor to the other Lenders.
Section 10.06. Lender Credit Decision.
Neither the Agent nor any of its officers or employees has
any responsibility for, gives any guaranty in respect of,
nor makes any representation to the Lenders as to, (i) the
condition, financial or otherwise, of the Borrower or any
Subsidiary thereof or the truth of any representation or
warranty given or made herein or in any other Financing
Document, or in connection herewith or therewith or (ii) the
validity, execution, sufficiency, effectiveness, construc-
tion, adequacy, enforceability or value of this Agreement or
any other Financing Document or any other document or instru-
ment related hereto or thereto. Except as specifically
provided herein and in the other Financing Documents to
which the Agent is a party, the Agent shall have no duty or
responsibility, either initially or on a continuing basis,
to provide any Lender with any credit or other information
with respect to the operations, business, property, condi-
tion or creditworthiness of the Borrower or any of its
Subsidiaries, whether such information comes into the
Agent's possession on or before the date hereof or at any
time thereafter. Each Lender acknowledges that it has,
independently and without reliance upon the Agent or any
other Lender, based on such documents and information as it
has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and to authorize the
Agent to execute on its behalf the Security Documents, as
required. Each Lender also acknowledges that it will
independently and without reliance upon the Agent or any
other Lender, based on such documents and information as it
shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this
Agreement or any other Financing Document.
Section 10.07. Indemnification. Each
Lender agrees (which agreement shall survive payment of the
Loans) to indemnify the Agent, to the extent not reimbursed
by the Borrower, ratably in accordance with their respective
Commitments or, in the event the Commitments have been
terminated, their respective outstanding Loans (as of the
time of the incurrence of the liability being indemnified
against), from and against any and all liabilities,
obligations, losses, claims, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred
by, or asserted against the Agent in any way relating to or
arising out of this Agreement or any other Financing Docu-
ment, or any action taken or omitted to be taken by the
Agent hereunder or thereunder; provided, that no Lender
shall be liable for any portion of such liabilities, obliga-
tions, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the
gross negligence or wilful misconduct of the Agent or any of
its officers or employees. Without limiting the foregoing,
each Lender agrees to reimburse the Agent promptly upon
demand for its ratable share of any out-of-pocket expenses
(including counsel fees) incurred by the Agent in such
capacity in connection with the preparation, execution or
enforcement of, or legal advice in respect of rights or
responsibilities under, this Agreement or any other Finan-
cing Document or any amendments or supplements hereto or
thereto, to the extent that the Agent is not reimbursed for
such expenses by the Borrower.
Section 10.08. Successor Agent. The
Agent may resign at any time by giving written notice
thereof to the Lenders and the Borrower, and the Agent may
be removed at any time by the Required Lenders by giving
written notice thereof to the Agent, the other Lenders and
the Borrower at least 10 Business Days' prior to the
effective date of such removal. Upon any such resignation
or removal, the Required Lenders shall have the right to
appoint a successor Agent subject to approval by the
Borrower. If no successor Agent shall have been so
appointed by the Required Lenders and shall have accepted
such appointment within 30 days after the resigning Agent's
giving of notice of resignation, or the Required Lenders'
giving notice of removal, as the case may be, the resigning
or removed Agent may, on behalf of the Lenders, appoint a
successor Agent subject to approval by the Borrower, which
shall be a commercial bank organized under the laws of any
OECD country and having a combined capital and surplus of at
least $250,000,000. Upon the acceptance of any appointment
as Agent hereunder by a successor Agent, such successor
Agent shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of the resigned or
removed Agent, and the resigned or removed Agent shall be
discharged from its duties and obligations under this
Agreement. After any Agent's resignation or removal here-
under as Agent, the provisions of this Article X shall inure
to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under this Agreement.
Section 10.09. Power of Attorney. The
Agent acknowledges for the benefit of the Lenders that as
between the Agent and each Lender the rights of the Agent to
exercise rights and remedies under this Agreement or the
Security Documents with respect to the Commitments, the
Loans, or the Collateral shall be subject to the consent of
the Required Lenders or the Lenders as may be specified
herein or in the Security Documents notwithstanding the
grant by each Lender to the Agent in the power of attorney
of the right to take all such actions as attorney-in-fact
for such Lender.
ARTICLE XI
CONSENT TO JURISDICTION; JUDGMENT CURRENCY
Section 11.01. Consent to
Jurisdiction. The Borrower hereby irrevocably submits to
the non-exclusive jurisdiction of any state or federal court
in the Borough of Manhattan, The City of New York for the
purpose of any suit, action, proceeding or judgment relating
to or arising out of this Agreement and each other Financing
Document. The Borrower hereby appoints CT System, with
offices on the date hereof at 1633 Broadway, New York, New
York, as its authorized agent on whom process may be served
in any action which may be instituted against it by the
Agent in its own name and on behalf of the Lenders in any
state or federal court in the Borough of Manhattan, The City
of New York, arising out of or relating to any Loan or this
Agreement and each other Financing Document. Service of
process upon such authorized agent and written notice of
such service to the Borrower shall be deemed in every
respect effective service of process upon the Borrower, and
the Borrower hereby irrevocably consents to the jurisdiction
of any such court in any such action and to the laying of
venue in the Borough of Manhattan, The City of New York.
The Borrower hereby irrevocably waives, to the extent
permitted by law, any objection to the laying of the venue
of any such suit, action or proceeding brought in the
aforesaid courts and hereby irrevocably waives any claim
that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient forum. Notwith-
standing the foregoing, nothing herein shall in any way
affect the right of the Agent in its own name and on behalf
of any Lender to bring any action arising out of or relating
to the Loans or this Agreement and each other Financing
Document in any competent court elsewhere having
jurisdiction over the Borrower or its property.
Section 11.02. Judgment Currency. If
for the purposes of obtaining judgment in any court in any
country it becomes necessary to convert into any other
currency ("the judgment currency") an amount due in United
States dollars, then the conversion shall be made at the
rate of exchange prevailing at the close of business on the
Business Day before the day on which the judgment is given.
If there is a change in the rate of
exchange prevailing between the Business Day before the day
on which the judgment is given and the date of payment of
the amount due the Borrower will pay such additional amounts
(if any) as may be necessary to ensure that the amount paid
in the judgment currency when converted at the rate of
exchange prevailing on the date of payment will produce the
amount then due under this Agreement in United States
dollars.
Any amount due from the Borrower under
this Section 11.02 will be due as a separate debt and shall
not be affected by judgment being obtained for any other
sums due under or in respect of this Agreement or any other
Financing Document.
The term "rate of exchange" means the
spot rate at which the Agent in accordance with its normal
practice is able on the relevant date to purchase United
States dollars with the judgment currency and includes any
premium and costs of exchange payable.
ARTICLE XII
MISCELLANEOUS
Section 12.01. APPLICABLE LAW. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, UNITED
STATES OF AMERICA.
Section 12.02. Right of Set-off. Upon
(a) the occurrence and during the continuance of any Event
of Default and (b) the making of the request, or the
granting of the consent, specified by Section 9.01 to
authorize the Agent to declare the Loans due and payable
pursuant to the provisions of Section 9.01, each Lender is
hereby authorized at any time and from time to time, without
notice to the Borrower (any such notice being expressly
waived by the Borrower), to the fullest extent permitted by
law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time
held and other Indebtedness at any time owing by such Lender
to or for the credit or the account of the Borrower against
any and all of the obligations of the Borrower now or
hereafter existing under this Agreement, irrespective of
whether or not such Lender shall have made any demand under
this Agreement and although such obligations may be
unmatured. Each Lender agrees promptly to notify the
Borrower after any such set-off and application made by such
Lender, provided that the failure to give such notice shall
not affect the validity of such set-off and application.
The rights of each Lender under this Section 12.02 are in
addition to other rights and remedies (including, without
limitation, other rights of set-off) which such Lender may
have.
Section 12.03. Expenses. The Borrower
agrees to pay (i) all reasonable out-of-pocket expenses of
the Agent (including the reasonable fees and expenses of
Sullivan & Cromwell, as Special New York counsel to the
Agent and Uria & Menendez, as special Spanish counsel to the
Agent) in connection with the negotiation, preparation,
operation and administration and execution of this Agreement
and the other Financing Documents and any amendments or
supplements hereto or thereto, including but not limited to
Notary, Official Commercial Stockbroker and Registration
Fees and (ii) all reasonable out-of-pocket expenses incurred
by the Agent and any Lender, including reasonable fees and
disbursements of counsel, in connection with enforcement or
similar actions with respect to any provisions of this
Agreement, the other Financing Documents or any amendment or
supplement hereto or thereto, including but not limited to
Notary, Official Commercial Stockbroker and Registration
fees. The Borrower shall indemnify each Lender against any
transfer taxes, documentary taxes, assessments or charges
made by any Governmental Authority by reason of the
execution and delivery of this Agreement or the Financing
Documents and any supplements and amendments hereto or
thereto.
Section 12.04. Amendments. Any
provision of this Agreement or the other Financing Documents
may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by the Borrower and the
Required Lenders (and, if the rights or duties of the Agent
are affected thereby, by the Agent); provided, that no such
amendment, waiver or modification shall, unless signed by
all the Lenders, (i) increase or decrease the Commitment of
any Lender or subject any Lender to any additional obliga-
tion, (ii) reduce the principal of or rate of interest on
any Loan or any fees hereunder, (iii) postpone the date
fixed for any payment of interest on any Loan, including any
fees hereunder or for any reduction or termination of any
Commitment, (iv) postpone the date fixed for any payment of
principal of any Loan pursuant to Section 2.03, 3.03 or
3.07, (v) change the percentage of any of the Commitments or
of the aggregate unpaid principal amount of the Loans, or
the number of Lenders, which shall be required for the
Lenders or any of them to take any action under this Section
or any other provision of this Agreement, (vi) release all
or substantially all of the Collateral or (vii) amend or
waive the provisions of this Section 12.04. Any amendment
to this Agreement of a term or provision that has been
included in or incorporated into a Security Document will be
sufficient to bind the parties thereto notwithstanding any
failure to amend such Security Document or any resulting
inconsistency.
Section 12.05. Cumulative Rights and
No Waiver. Each and every right granted to the Agent and
the Lenders hereunder or under any other document delivered
hereunder or in connection herewith, or allowed them by law
or equity, shall be cumulative and may be exercised from
time to time. No failure on the part of the Agent or any
Lender to exercise, and no delay in exercising, any right
will operate as a waiver thereof, nor will any single or
partial exercise by the Agent or any Lender of any right
preclude any other or future exercise thereof or the
exercise of any other right.
Section 12.06. Notices. Any
communication, demand or notice to be given hereunder or
with respect to the Loans will be duly given when delivered
in writing or by telecopy to a party at its address as
indicated below, except that notices from the Borrower
pursuant to Section 2.02, 3.02 and 3.04 will not be
effective until received by the Agent.
A communication, demand or notice given
pursuant to this Section 12.06 shall be addressed:
If to the Borrower, at
Rio Tinto Metal, S.A.
Zurbano, 76
28010 Madrid
Spain
Telecopy: 341-442-6411
Attention: Jose Luis Gomez-Quilez
With copies to:
Freeport-McMoRan Copper & Gold Inc.
1615 Poydras Street
New Orleans, Louisiana 70112
Telecopy: (504) 582-4511
Attention: R. Foster Duncan
If to the Agent or any Lender, at its
address as indicated on the signature pages hereof, with a
copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Telecopy: (212) 558-3588
Attention: Erik D. Lindauer
Unless otherwise provided to the
contrary herein, any notice which is required to be given in
writing pursuant to the terms of this Agreement may be given
by telex, telecopy or facsimile transmission.
Section 12.07. Separability. In case
any one or more of the provisions contained in this
Agreement shall be invalid, illegal or unenforceable in any
respect under any law, the validity, legality and
enforceability of the remaining provisions contained herein
shall not in any way be affected or impaired thereby.
Section 12.08. Assignments and
Participations. (a) This Agreement shall be binding upon
and inure to the benefit of the Borrower and the Lenders and
their respective successors and assigns, except that the
Borrower may not assign any of its rights hereunder without
the prior written consent of the Lenders.
(b) Any Lender may at any time grant
to one or more banks or other institutions (each a
"Participant") participating interests in its Commitment or
any or all of its Loans. In the event of any such grant by
a Lender of a participating interest to a Participant,
whether or not upon notice to the Borrower and the Agent,
such Lender shall remain responsible for the performance of
its obligations hereunder, and the Borrower and the Agent
shall continue to deal solely and directly with such Lender
in connection with such Lender's rights and obligations
under this Agreement. Any agreement pursuant to which any
Lender may grant such a participating interest shall provide
that such Lender shall retain the sole right and
responsibility to enforce the obligations of the Borrower
hereunder including the right to approve any amendment,
modification or waiver of any provision of this Agreement;
and in no event shall a Lender that sells a participation be
obligated to the Participant under the participation
agreement to take or refrain from taking any action except
any modification, amendment or waiver of this Agreement
described in clauses (i) through (vi), inclusive, of Sec-
tion 12.04 without the consent of the Participant. The
Borrower agrees that each Participant shall be entitled to
the benefits of Sections 5.03, 5.04 and 12.03 with respect
to its participating interest.
(c) Any Lender may at any time assign
to one or more banks or other institutions (each an
"Assignee") all, or a proportionate part of all, of its
rights and obligations under this Agreement, and such
Assignee shall assume such rights and obligations, pursuant
to an instrument executed by such Assignee and such
transferor Lender, substantially in the form of Exhibit AA
hereto, with (and subject to) the signed consent of the
Borrower and the Agent (which consent shall not be unreason-
ably withheld and with the creation of additional costs to
the Borrower, including taxes, being considered a reasonable
basis to withhold consent); provided, that any such
assignment shall be in a minimum amount of $5,000,000 and
shall constitute an assignment of a ratable portion of each
of such Lender's Working Capital Loan Commitment and Loans
and Term Loan Commitment and Loans; and, provided further,
that the foregoing consent requirement shall not be
applicable in the case of, and this subsection (c) shall not
restrict, an assignment or other transfer by any Lender to
any other Lender, to an affiliate of any Lender or to a
Federal Reserve Bank. Upon execution and delivery of such
an instrument and payment by such Assignee to such trans-
feror Lender of an amount equal to the purchase price agreed
between such transferor Lender and such Assignee, such
Assignee shall be a Lender party to this Agreement and shall
have all the rights and obligations of a Lender with a
Commitment as set forth in such instrument of assumption,
and the transferor Lender shall be released from its obliga-
tions hereunder to a corresponding extent, and no further
consent or action by any party shall be required.
(d) No Assignee, Participant or other
transferee of any Lender's rights shall be entitled to
receive any greater payment under Section 5.03 or 5.04 than
such Lender would have been entitled to receive with respect
to the rights transferred, unless such transfer is made with
the Borrower's prior written consent or by reason of the
provisions of Section 5.04 requiring such Lender to desig-
nate a different lending office under certain circumstances
or at a time when the circumstances giving rise to such
payment did not exist.
(e) If any Reference Lender assigns
its Commitment and Loans to an unaffiliated institution, the
Agent shall, in consultation with the Borrower and with the
consent of the Required Lenders, appoint another bank to act
as a Reference Lender hereunder.
Section 12.09. WAIVER OF JURY. THE
BORROWER, THE AGENT AND EACH OF THE LENDERS HEREBY WAIVE
TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY
OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED
TO, OR CONNECTED WITH THIS AGREEMENT OR THE RELATIONSHIPS
ESTABLISHED HEREUNDER.
Section 12.10. Confidentiality.
Except as may be required to enforce the rights and duties
established hereunder (including establishing and
maintaining the Agent's and the Lenders' perfected security
interest in the Collateral), the parties hereto shall
preserve in a confidential manner all information received
from the other pursuant to this Agreement, the Financing
Documents and the transactions contemplated hereunder and
thereunder, and shall not disclose such information except
to those persons with which a confidential relationship is
maintained (including regulators, legal counsel,
accountants, or designated agents), or where required by
law.
Section 12.11. Indemnity. The
Borrower agrees to indemnify the Agent and each of the
Lenders and their respective directors, officers, employees
and agents (each such person being called an "Indemnitee")
against, and to hold each Indemnitee harmless from, any and
all losses, claims, damages, liabilities and related
expenses, including counsel fees and expenses, incurred by
or asserted against any Indemnitee arising out of, in any
way connected with, or as a result of (i) the execution or
delivery of this Agreement or any other Financing Document
or any agreement or instrument contemplated hereby or
thereby, the performance by the parties thereto of their
respective obligations hereunder or thereunder or the
consummation of the transactions and the other transactions
contemplated hereby or thereby, (ii) the use of the proceeds
of the Loans or (iii) any claim, litigation, investigation
or proceeding relating to any of the foregoing, whether or
not any Indemnitee is a party thereto; provided that such
indemnity shall not, as to any Indemnitee, be available to
the extent that such losses, claims, damages, liabilities or
related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence or wilful misconduct of
any Indemnitee.
The provisions of this Section 12.11
shall remain operative and in full force and effect
regardless of the expiration of the term of this Agreement,
the consummation of the transactions contemplated hereby,
the repayment of any of the Loans, the reduction or
cancellation of the Commitment, the invalidity or
unenforceability of any term or provision of this Agreement
or any other Financing Document, or any investigation made
by or on behalf of the Lenders. All amounts due under this
Section 12.11 shall be payable in immediately available
funds upon written demand therefor.
Section 12.12. Execution in
Counterparts. This Agreement may be executed in any number
of counterparts and by the different parties hereto on
separate counterparts, each of which when so executed and
delivered shall be an original, but all the counterparts
shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto
have caused this Agreement to be duly executed as of the
date first above written.
RIO TINTO METAL, S.A.
By: /s/ Jose Luis Gomez Quilez
--------------------------
Name: Jose Luis Gomez Quilez
Title: Director Economico
BARCLAYS BANK PLC, as Agent for the
Lenders
By: /s/ J.B. Cooper
---------------
Name: J.B. Cooper
Title: Assistant Director
Address for Notices:
St. Mary's Court
100 Lower Thames Street
London EC3R 6JN
England
Attn: Structured Finance Division
Fax: 071-775-8845
BARCLAYS BANK PLC
By: /s/ J.B. Cooper
-----------------
Name: J.B. Cooper
Title: Assistant Director
Address for Notices:
St. Mary's Court
100 Lower Thames Street
London EC3R 6JN
England
Attn: Structured Finance Division
Fax: 071-775-8845
ABN AMRO BANK N.V.
By: /s/ I. Mataix
--------------
Name: I. Mataix
Title: Manager
By: /s/ A. Gatius
--------------
Name: A. Gatius
Title: Manager
Address for Notices:
ABN AMRO BANK N.V.
Sucursal en Espana
Serrano 55
28006, Madrid
Attn: C. Simon/I. Andino
Fax: 341-520-9107
NATIONAL WESTMINSTER BANK PLC
By: /s/ Ian M. Plester
-------------------
Name: Ian M. Plester
Title: Vice President
Address for Notices:
National Westminster Bank Plc
Kings Cross House
Phase 2
200 Pentonville Road
London N1 9HL
Attn: Commercial Loans Manager
Fax: 44-71-239-8257
DEUTSCHE BANK AG,
New York Branch
By: /s/ Sandra E. Bell
--------------------
Name: Sandra E. Bell
Title: Director
By: /s/ Brett A. Parker
--------------------
Name: Brett A. Parker
Title: Associate
Address for Notices:
DEUTSCHE BANK AG
31 West 52nd Street
New York, NY 10019
USA
Attn: Sandra Bell
Fax: 0101 212 474 8256
BANQUE NATIONALE DE PARIS
By: /s/ Orsini
-----------
Name: Orsini
Title: Senior Vice President
By: /s/ Coindreau
--------------
Name: Coindreau
Title: Senior Vice President
Address for Notices:
Banque Nationale de Paris
27, Boulevard des Italiens
Paris, France
Attn: Mr. Jean Alain Orsini
Mr. Bruno Weill
Fax: 19.33.1.40.14.89.25
LANDESBANK BERLIN - GIROZENTRALE
By: /s/ Fred Mugge
---------------
Name: Fred Mugge
Title: Senior Vice President
By: /s/ Michael Lipczynski
-----------------------
Name: Michael Lipczynski
Title: Assistant Vice President
Address for Notices:
Bundesallee 171
10889 Berlin - Wilmersdorf
Federal Republic of Germany
Attn: Corporate Special Finance
Fax: (49) 30/869-3050
DE NATIONALE INVESTERINGSBANK N.V.
By: /s/ H.E.W. Kwak
----------------------
Name: Herbert E.W. Kwak
Title: Senior Account Manager
By: /s/ F.U. van der Lee
---------------------
Name: F.U. van der Lee
Title: General Manager
Address for Notices:
De Nationale Investeringsbank N.V.
P.O. Box 380
2501 BH The Hague
The Netherlands
Attn: Mr. E.J. Wesseling (101447)
Fax: +31 70 365 1071
EXHIBIT A
Form of Master Assignment Agreement
A-1
EXHIBIT B
Eligible Account Documentation
B-1
EXHIBIT C
Form of Borrowing Base Report
[Date]
Barclays Bank PLC, as Agent
for the Lenders parties
to the Credit Agreement
referred to below
St. Mary's Court
100 Lower Thames Street
London EC3R 6JN
Attention: Structured Finance Division
Mining Finance
This Borrowing Base Report is delivered
to you in accordance with Sections 7.04(a) and 8.01(a)(ii)
of the Term Loan and Working Capital Agreement, dated as of
November 4, 1994 (the "Credit Agreement", the terms defined
therein being used herein as therein defined), among Rio
Tinto Metal, S.A., the Lenders parties thereto and Barclays
Bank PLC, as Agent for said Lenders.
The undersigned hereby certifies the
following information as of the date hereof:
A. Borrowing Base Calculation:
1. (a) Total value of Eligible
Inventory$ ___________
(b) Eligible Inventory
available for Borrowing
Base (75% of item A.1(a))$ ___________
2. (a) Total value of Eligible
Accounts denominated
in dollars $ ___________
(b) Eligible Accounts
denominated in dollars
available for Borrowing
Base (75% of item A.2(a))$ ___________
C-1
3. (a) Total value of Eligible
Accounts denominated in
pesetas____________pta.
(b) Eligible Accounts
denominated in pesetas
available for Borrowing
Base (75% of item A.3(a))
____________pta.
4. (a) Total value of Eligible
Accounts denominated in
other currencies (from
Worksheet, subject to
a maximum of $13,333,333)$ ____________
(b) Eligible Accounts
denominated in other
currencies available for
Borrowing Base (75% of
item A.4(a)) (subject to
a maximum of $10,000,000)$ ____________
5. Cash and Authorized
Investments in which Lenders
have valid and perfected
first priority security
interest $ ___________
B. Borrowing Base
1. Borrowing Base for Working
Capital Loans (total of
items A.1(b), A.2(b), A.4(b)
and A.5)$
2. Borrowing Base for Dollar
Swing Line Loans (total of
items A.1(b) and A.2(b))$
3. Borrowing Base for Peseta
Swing Line Loans (item
A.3(b))$
C. Amounts Available for Borrowing:
1. Total outstanding Working
Capital Loans$ ___________
2. Total outstanding Swing
Line Loans$ ___________
C-2
3. Total of items C.1 and C.2$ ___________
4. Total Working Capital Loan
Commitment$ ___________
5. Maximum amount available for
Working Capital Loans (the
lesser of item B.1
and item C.4)$
6.* (a) Maximum amount available
for Dollar Swing Line
Loans (the lesser of
item B.2 and $10,000,000)$
(b) Maximum amount available
for Peseta Swing Line
Loans (the lesser of
item B.3 and $10,000,000)$
The undersigned hereby represents and
warrants that this Borrowing Base Report and accompanying
schedules is a correct and complete statement of all the
undersigned's Eligible Inventory, Eligible Accounts, cash and
Authorized Investments assigned to the Lenders, that the Eligible
Inventory, Eligible Accounts, cash and Authorized Investments
covered hereby are subject to a perfected first priority security
interest in favor of the Agent for the benefit of the Lenders
pursuant to the applicable Security Documents, that all Eligible
Accounts covered hereby meet the requirements of the definition
of Eligible Accounts in the Credit Agreement, that all Eligible
Inventory covered hereby meets the requirements of the definition
of Eligible Inventory in the Credit Agreement, that all
Authorized Investments covered hereby meet the requirements of
the definition of Authorized Investments in the Credit Agreement
and that the undersigned has delivered herewith to the Agent all
documentation required under the Credit Agreement and the Master
Assignment Agreement in respect of newly assigned Eligible
Accounts and all other supplementary security documentation
required by the Credit Agreement or the Security Documentation.
RIO TINTO METAL, S.A.
By ___________________________
Title:
* The maximum aggregate Swing Line Loans at
any one time outstanding may not exceed
$10,000,000 or its equivalent.
C-3
Borrowing Base Worksheet for Eligible Accounts
Calculation of dollar value of Eligible Accounts denominated in
other currencies:
Face Amount of Conversion
Eligible Accounts X Rate* =$ Value
____________ pta**
____________ DM
____________ Ffr
____________ lira
____________ pound
____________ Other
__________
Total Value of Eligible Accounts
Denominated in Other Currencies $__________
* Conversions from any currency into dollars
shall be made at the selling rate ("cambio
vendedar") on the display designated as
page "FXFX" or page "FXFY", as
appropriate, on the Reuters Monitor Money
Rates Service at or around 11:00 a.m.,
Madrid time, on the date of conversion.
** These accounts are in addition to the
peseta-denominated Eligible Accounts
available for the Borrowing Base for
Peseta Swing Line Loans. The same peseta-
denominated Eligible Accounts cannot be
used as part of the Borrowing Base for
both Peseta Swing Line Loans and Working
Capital Loans.
C-4
Borrowing Base Worksheet for Eligible Inventory
Calculation of dollar value of Eligible Inventory:
Quantity X $ Value* =Total
A. Anodes
Copper
Gold
Silver
B. Cathodes
Copper
C. Copper
Concentrate
Copper
concentrate
D. Wire-rod
Copper
E. Slimes
Gold
Silver
* Dollar values to be calculated, in the
case of (i) copper, by reference to the
LME Grade A cash, P.M. unofficial price,
(ii) gold, by reference to the London P.M.
daily fix price, (iii) silver, by
reference to the London daily fix price
and (d) copper concentrate, by reference
to the acquisition price of all of the
fully paid copper concentrate in the
Borrower's inventory. Conversions from
any currency into dollars shall be made at
the selling rate ("cambio vendedar") on
the display designated as page "FXFX" or
page "FXFY", as appropriate, on the
Reuters Monitor Money Rates Service at or
around 11:00 a.m., Madrid time, on the
date of conversion.
C-5
Total Value of Eligible Inventory $
C-6
EXHIBIT D
Form of Certificate of Independent Engineer
[Date]
Barclays Bank PLC, as Agent
for the Lenders parties
to the Credit Agreement
referred to below
St. Mary's Court
100 Lower Thames Street
London EC3R 6JN
Attention: Structured Finance Division
Mining Finance
This certificate is delivered to you in
accordance with Section 7.03(b)(ii) of the Term Loan and
Working Capital Agreement, dated as of November 4, 1994 (the
"Credit Agreement", the terms defined therein being used
herein as therein defined), among Rio Tinto Metal, S.A. (
the "Borrower"), the Lenders parties thereto and Barclays
Bank PLC, as Agent for said Lenders.
The undersigned hereby certifies to you as follows:
(i)As of the date hereof the status of
construction of the Project is in
compliance with the terms and conditions
of the Lurgi Contract and the Borrower is
and will be able to continue to comply
with the terms and conditions of the Lurgi
Contract, including the time schedule for
construction contained therein.
(ii) As of the date hereof the
Borrower is not in default under the Lurgi
Contract nor has the Borrower taken any
action or omitted to take any action as a
result of which Lurgi would be permitted
to materially modify or avoid its
performance under the Lurgi Contract.
HATCH ASSOCIATES LIMITED
By ___________________________
Title:
D-1
EXHIBIT E
Huelva Expansion Project
Completion Test
Completion will be achieved when all of the following events
have occurred:
1.The Borrower has advised the Agent in writing that the
turnkey construction contract with Lurgi has been completed
satisfactorily and that all performance tests relating to
the Lurgi contract have been passed to the complete
satisfaction of the Borrower in all material respects.
2.The Independent Engineer has certified that:
(a)Physical construction and the installation of all
facilities relating to the concentrate handling, flash
smelting furnace, converter and anode sections, electric
furnace, acid plants, refinery tankhouse and all the supply
and infrastructural requirements of the Project have been
completed in all material aspects in accordance with the
Huelva Expansion Program, except for such changes which have
been agreed in writing by the Agent.
(b)The Borrower has provided in writing an audited statement
that all costs incurred in achieving physical completion as
set out in (a) above, as well as the ISA Technology Fee,
have been paid or will be paid in the ordinary course of
business, subject to normal contract retentions.
(c)Over a consecutive period of 90 days the Project
operations have produced on a sustainable basis not less
than 90% of planned throughput of new blister copper in the
form of anodes of a quality on a proportional basis relating
to the volumes under each contract not less than that
specified in the anode off-take agreement(s) then applicable
as described in Exhibit U-1 of the Agreement. Within the
stated 90-day period the Project operations have produced
over a consecutive period of 30 days not less than 90% of
design throughput and over a consecutive period of 5 days
not less than 100% of design throughput.
(d)Over a consecutive period of 90 days the Project
operations have produced on a sustainable basis not less
than 90% of planned throughput of copper cathode of a
quality not less than that capable of satisfying the LME
Grade A contract. Within the stated 90-day period the
Project operations have produced over a consecutive period
of 30 days not less than 90% of design throughput and over a
E-1
consecutive period of 5 days not less than 100% of design
throughput.
(e)As stated in the Huelva Expansion Program the increased
management and staffing levels have been attained and the
work force has been adequately trained.
3.(a)The Borrower shall have submitted to the Agent a com-
pletion certificate substantially in the form attached as
Exhibit E-1 to the Agreement and signed by an authorized
officer of the Borrower, certifying that the Loan Life Cover
Ratio is equal to or greater than 1.6 to 1.0 and the Two
Year Cover Ratio is equal to or greater than 1.3 to 1.0,
such cover ratios to be calculated as described in Sec-
tion 8.03 of the Agreement.
(b)The Independent Engineer shall have submitted to the
Agent a certificate, substantially in the form attached as
Exhibit E-2 to the Agreement, certifying that the
Independent Engineer agrees with all technical assumptions
used in calculation of the ratios set forth in the
Borrower's completion certificate specified in clause (a) in
light of the status of the Project as of the date of such
certificate.
4.The due recordation of the Security Documents shall have
been completed in accordance with Spanish Law.
E-2
EXHIBIT E-1
Form of Borrower's Completion Certificate
[Date]
Barclays Bank PLC, as Agent
for the Lenders parties
to the Credit Agreement
referred to below
St. Mary's Court
100 Lower Thames Street
London EC3R 6JN
Attention: Structured Finance Division,
Mining Finance
This certificate is delivered to you in
accordance with Exhibit E of the Term Loan and Working
Capital Agreement, dated as of November 4, 1994 (the "Credit
Agreement", the terms defined therein being used herein as
therein defined), among Rio Tinto Metal, S.A., the Lenders
parties thereto and Barclays Bank PLC, as Agent for said
Lenders. The undersigned hereby certifies to you that as of
the date hereof the Loan Life Cover Ratio is equal to or
greater than 1.6 to 1.0 and the Two Year Cover Ratio is
equal to or greater than 1.3 to 1.0 and that these cover
ratios have been calculated in accordance with Section 8.03
of the Credit Agreement.
RIO TINTO METAL, S.A.
By ___________________________
Title:
E-1-1
EXHIBIT E-2
Form of Completion Certificate of the Independent Engineer
[Date]
Barclays Bank PLC, as Agent
for the Lenders parties
to the Credit Agreement
referred to below
St. Mary's Court
100 Lower Thames Street
London EC3R 6JN
Attention: Structured Finance Division,
Mining Finance
This certificate is delivered to you in
accordance with Exhibit E of the Term Loan and Working
Capital Agreement, dated as of November 4, 1994 (the "Credit
Agreement", the terms defined therein being used herein as
therein defined), among Rio Tinto Metal, S.A., the Lenders
parties thereto and Barclays Bank PLC, as Agent for said
Lenders.
The undersigned hereby certifies to you
that as of the date hereof:
(a)Physical construction and the installation of all
facilities relating to the concentrate handling, flash
smelting furnace, converter and anode sections, electric
furnace, acid plants, refinery tankhouse and all the supply
and infrastructural requirements of the Project have been
completed in all material aspects in accordance with the
Huelva Expansion Program, except for such changes which have
been agreed in writing by the Agent.
(b)The Borrower has provided in writing an audited statement
that all costs incurred in achieving physical completion as
set out in (a) above, as well as the ISA Technology Fee,
have been paid or will be paid in the ordinary course of
business, subject to normal contract retentions.
(c)Over a consecutive period of 90 days the Project
operations have produced on a sustainable basis not less
than 90% of planned throughput of new blister copper in the
form of anodes of a quality on a proportional basis relating
E-2-1
to the volumes under each contract not less than that
specified in the anode off-take agreement(s) then
applicable. Within the stated 90-day period the Project
operations have produced over a consecutive period of
30 days not less than 90% of design throughput and over a
consecutive period of 5 days not less than 100% of design
throughput.
(d)Over a consecutive period of 90 days the Project
operations have produced on a sustainable basis not less
than 90% of planned throughput of copper cathode of a
quality not less than that capable of satisfying the LME
Grade A contract. Within the stated 90-day period the
Project operations have produced over a consecutive period
of 30 days not less than 90% of design throughput and over a
consecutive period of 5 days not less than 100% of design
throughput.
(e)As stated in the Huelva Expansion Program the increased
management and staffing levels have been attained and the
work force has been adequately trained.
(f)The undersigned agrees with all technical assumptions
used in calculation of the ratios set forth in the
Borrower's Completion Certificate specified in clause 3(a)
of Exhibit E of the Credit Agreement in light of the status
of the Project as of the date of such certificate. Copies
of the Borrower's Completion Certificate and the technical
assumptions used in calculation of the ratios set forth
therein are attached as annexes hereto.
HATCH ASSOCIATES LIMITED
By ___________________________
Title:
E-2-2
EXHIBIT F
Scope of Work
a) The Lurgi Contract.
b) Non-Lurgi Contract work:
* Inspection, alignment, renovation of
existing tankhouse cells.
* Replace approximately 83 m3 catalyst, 6
m3 packing - RTM 1 + 2.
* Repair antiacid floor tiles - RTM 1 +
2.
* Rehabilitate SO2 blower - RTM 1.
F-1
EXHIBIT G
Form of Cover Ratio Certificate
[Date]
Barclays Bank PLC, as Agent
for the Lenders parties
to the Credit Agreement
referred to below
St. Mary's Court
100 Lower Thames Street
London EC3R 6JN
Attention: Structured Finance Division
Mining Finance
This Cover Ratio Certificate is
delivered to you in accordance with the Term Loan and
Working Capital Agreement, dated as of November 4, 1994 (the
"Credit Agreement", the terms defined therein being used
herein as therein defined), among Rio Tinto Metal, S.A., the
Lenders parties thereto and Barclays Bank PLC, as Agent for
said Lenders.
The undersigned hereby certifies the
following information as of the date hereof:
1.
Attached as Annex I hereto is the
Forecast, calculated in accordance with
Section 8.03 of the Credit Agreement.
2.
The Loan Life Cover Ratio is __________.
3.
The Two Year Cover Ratio is ___________.
4.
[In accordance with Section 2.06 of the
Credit Agreement, subject to the
provisions of Section 8.05, no Mandatory
Prepayments to repay outstanding Term
Loans are required.]
G-1
[In accordance with Section 2.06 of the
Credit Agreement, subject to the
provisions of Section 8.05, the amount
of Mandatory Prepayments to repay
outstanding Term Loans is
$__________________, such Mandatory
Prepayments to be paid on the next
subsequent Repayment Date(s) until
fully paid.]
RIO TINTO METAL, S.A.
By:__________________
Title:
G-2
EXHIBIT H
Form of Assignment of Contracts
H-1
EXHIBIT I
Form of Inducement Agreement
I-1
EXHIBIT J
Form of Lurgi Certificate
[Date]
Rio Tinto Metal, S.A.
Zurbano, 76
28010 Madrid
Spain
Attention: Jose Luis Gomez-Quilez
This certificate is delivered to you
for your sole use in connection with your requirements for
obtaining advances pursuant to Section 7.03(b) and Section
8.01(a)(xi) of a Term Loan and Working Capital Agreement,
dated as of November 4, 1994 (the "Credit Agreement", the
terms defined therein being used herein as therein defined),
among Rio Tinto Metal, S.A. (the "Borrower"), the Lenders
parties thereto and Barclays Bank PLC, as Agent for said
Lenders. The undersigned hereby certifies to you as
follows:
(i)As of the date hereof the status of
construction of the Project is in
compliance with the terms and conditions
of the Lurgi Contract and the undersigned
is and will be able to continue to comply
with the terms and conditions of the Lurgi
Contract, including the time schedule for
construction contained therein and as
modified in the monthly progress reports
of the undersigned.
(ii) As of the date hereof the
Borrower is not in default under the Lurgi
Contract nor is the undersigned aware of
any action or omission by the Borrower as
a result of which the undersigned would be
permitted to materially modify or avoid
its performance under the Lurgi Contract.
LURGI ESPANOLA, S.A.
By ___________________________
Title:
J-1
EXHIBIT K
Form of Mortgage
K-1
EXHIBIT L
Form of Pledge of Shares
L-1
EXHIBIT M
Form of Pledge on Authorized Investments
M-1
EXHIBIT N
Form of Pledge Without Displacement
N-1
EXHIBIT O
Form of Swing Line Loan Request
[Date]
Barclays Bank PLC, as Agent
for the Lenders parties
to the Credit Agreement
referred to below
St. Mary's Court
100 Lower Thames Street
London EC3R 6JN
Attention: Structured Finance Division,
Mining Finance
Reference is made to the Term Loan and
Working Capital Agreement, dated as of November 4, 1994 (the
"Credit Agreement", the terms defined therein being used
herein as therein defined), among Rio Tinto Metal, S.A., the
Lenders parties thereto and Barclays Bank PLC, as Agent for
said Lenders. The undersigned hereby gives you notice,
irrevocably, pursuant to Section 3.04(b) of the Credit
Agreement, of its request for a borrowing of a Swing Line
Loan under the Credit Agreement and, in that connection,
sets forth below the information relating to such borrowing
(the "Proposed Borrowing") as required by Section 3.04(b) of
the Credit Agreement:
(i)The Borrowing Date of the Proposed
Borrowing is _____________.
(ii)The aggregate amount of the
Proposed Borrowing is [$ ___________] [
____________ pesetas]. Such amount, when
added to the aggregate amount of
outstanding Swing Line Loans on the
proposed Borrowing Date will not exceed
$10,000,000 or the equivalent thereof in
pesetas. Such amount, when added to the
aggregate amount of outstanding Working
Capital Loans and Swing Line Loans on the
proposed Borrowing Date, will not exceed
the lesser of the Borrowing Base and the
Total Working Capital Loan Commitment.
O-1
(iii) The initial Interest Period for
the Proposed Borrowing is ____ days.
[(iv) The undersigned has delivered to
you on or prior to the date hereof a
Borrowing Base Report dated no later than
five Business Days prior to the proposed
Borrowing Date.*]
[(iv) The undersigned has delivered to
you on or prior to the date hereof a
Borrowing Base Report dated no later than
three Business Days prior to the proposed
Borrowing Date.**]
[(iv) Based on the most recently
delivered Borrowing Base Report there is
sufficient Collateral for the Proposed
Borrowing.***]
The undersigned hereby certifies that
the following statements are true on the date hereof, and
will be true on the date of the Proposed Borrowing:
(a)The proceeds of the Proposed
Borrowing will be used in accordance with
the provisions of Section 8.01(o)(ii) of
the Credit Agreement to finance working
capital needs of the undersigned for a
period of one month or less.
(b)No Default or Event of Default has
occurred and is continuing or would result
from the Proposed Borrowing or the
application of the proceeds thereof.
(c)The representations and warranties
of the undersigned contained in Article VI
of the Credit Agreement and in each
Financing Document to which the
* For use in the case of a Dollar Swing Line Loan.
** For use in the case of a Peseta Swing Line Loan.
*** For use in the case of any Swing Line Loan with respect
to which a new Borrowing Base Report is
not required under Section 7.04(a) of the
Credit Agreement.
O-2
undersigned is a party are true and
correct, before and after giving effect to
the Proposed Borrowing and to the
application of the proceeds thereof, as
though made on and as of such date.
O-3
(d)The undersigned is in compliance
with all of its covenants and agreements
contained in the Credit Agreement.
Very truly yours,
RIO TINTO METAL, S.A.
By ____________________________
Title: [Chief Financial Officer]
By ____________________________
Title: [Authorized Officer]
O-4
EXHIBIT P
Form of Term Loan Request
[Date]
Barclays Bank PLC, as Agent
for the Lenders parties
to the Credit Agreement
referred to below
St. Mary's Court
100 Lower Thames Street
London EC3R 6JN
Attention: Structured Finance Division,
Mining Finance
Reference is made to the Term Loan and
Working Capital Agreement, dated as of November 4, 1994 (the
"Credit Agreement", the terms defined therein being used
herein as therein defined), among Rio Tinto Metal, S.A., the
Lenders parties thereto and Barclays Bank PLC, as Agent for
said Lenders. The undersigned hereby gives you notice,
irrevocably, pursuant to Section 2.02(a) of the Credit
Agreement, of its request for a borrowing of Term Loans
under the Credit Agreement and, in that connection, sets
forth below the information relating to such borrowing (the
"Proposed Borrowing") as required by Section 2.02(a) of the
Credit Agreement:
(i)The Borrowing Date of the Proposed
Borrowing is _____________.
(ii)The aggregate amount of the
Proposed Borrowing is $ ___________. Such
amount, when added to the aggregate amount
of outstanding Term Loans on the proposed
Borrowing Date, will not exceed the Total
Term Loan Commitment.
(iii) The initial Interest Period for
the Proposed Borrowing is ____ months.
(iv) The undersigned is delivering to
you with this Term Loan Request (a) a
certificate of the undersigned dated the
date hereof as to the status of
P-1
construction in the form of Exhibit V to
the Credit Agreement and (b) a Lurgi
Certificate dated no more than 31 days
prior to the date hereof in the form of
Exhibit J to the Credit Agreement.
[(v) The undersigned is also
delivering to you with this Term Loan
Request a certificate of the Independent
Engineer dated the date hereof complying
with Section 7.03(b)(ii) of the Credit
Agreement.*]
[(vi) The undersigned is also
delivering to you with this Term Loan
Request (a) a certificate of the
undersigned, dated the date hereof and in
the form of Exhibit Y to the Credit
Agreement, certifying that all activities
that were essential to be completed during
the shutdown of the Huelva Smelter have
been completed to the Borrower's
satisfaction and that the Huelva Smelter
is operating and (b) a certificate of the
Independent Engineer, dated the date
hereof and in the form of Exhibit Z to the
Credit Agreement, certifying that such
essential work has been completed
satisfactorily and that the Huelva Smelter
is operating at the scheduled level of
output.**]
[(vii) The undersigned is also
delivering to you with this Term Loan
Request a certificate of the undersigned,
* To be included if proceeds of the Proposed
Borrowing will be used to make payments
received upon the occurrence of a
Milestone (as defined in Section 6.4.3 of
the Lurgi Contract).
** To be included if proceeds of the Proposed
Borrowing are to fund the Milestone
payment specified in Section 6.4.3.3 of
the Lurgi Contract to be due upon the
satisfactory completion of the work
required during the general shutdown of
the Huelva Smelter.
P-2
dated the date hereof, complying with
Section 7.03(v)(iv) of the Credit
Agreement.*]
The undersigned hereby certifies that
the following statements are true on the date hereof, and
will be true on the date of the Proposed Borrowing:
(a)The proceeds of the Proposed
Borrowing will be used in accordance with
the provisions of Section 8.01(o)(i) of
the Credit Agreement.
(b)No Default or Event of Default has
occurred and is continuing or would result
from the Proposed Borrowing or the
application of the proceeds thereof.
(c)The representations and warranties
of the undersigned contained in Article VI
of the Credit Agreement and in each
Financing Document to which the
undersigned is a party are true and
correct, before and after giving effect to
the Proposed Borrowing and to the
application of the proceeds thereof, as
though made on and as of such date.
(d)The undersigned is in compliance
with all of its covenants and agreements
contained in the Credit Agreement.
Very truly yours,
RIO TINTO METAL, S.A.
By ____________________________
Title: [Chief Financial
Officer]
By ____________________________
* To be included if proceeds of the Proposed
Borrowing are to fund Additional
Completion Amounts.
P-3
Title: [Authorized Officer]
P-4
EXHIBIT Q
Form of Working Capital Loan Request
[Date]
Barclays Bank PLC, as Agent
for the Lenders parties
to the Credit Agreement
referred to below
St. Mary's Court
100 Lower Thames Street
London EC3R 6JN
Attention: Structured Finance Division,
Mining Finance
Reference is made to the Term Loan and
Working Capital Agreement, dated as of November 4, 1994 (the
"Credit Agreement", the terms defined therein being used herein
as therein defined), among Rio Tinto Metal, S.A., the Lenders
parties thereto and Barclays Bank PLC, as Agent for said Lenders.
The undersigned hereby gives you notice, irrevocably, pursuant
to Section 3.02(a) of the Credit Agreement, of its request for a
borrowing of Working Capital Loans under the Credit Agreement
and, in that connection, sets forth below the information
relating to such borrowing (the "Proposed Borrowing") as required
by Section 3.02(a) of the Credit Agreement:
(i)The Borrowing Date of the Proposed
Borrowing is _____________.
(ii)The aggregate amount of the
Proposed Borrowing is $ ___________. Such
amount, when added to the aggregate amount
of outstanding Working Capital Loans and
Swing Line Loans on the proposed Borrowing
Date, will not exceed the lesser of the
Borrowing Base and the Total Working
Capital Loan Commitment.
(iii) The initial Interest Period for
the Proposed Borrowing is ____ months.
(iv) The undersigned has delivered to
you on or prior to the date hereof a
Borrowing Base Report dated no later than
Q-1
five Business Days prior to the proposed
Borrowing Date.
The undersigned hereby certifies that
the following statements are true on the date hereof, and
will be true on the date of the Proposed Borrowing:
(a)The proceeds of the Proposed
Borrowing will be used in accordance with
the provisions of Section 8.01(o)(ii) of
the Credit Agreement.
(b)No Default or Event of Default has
occurred and is continuing or would result
from the Proposed Borrowing or the
application of the proceeds thereof.
(c)The representations and warranties
of the undersigned contained in Article VI
of the Credit Agreement and in each
Financing Document to which the
undersigned is a party are true and
correct, before and after giving effect to
the Proposed Borrowing and to the
application of the proceeds thereof, as
though made on and as of such date.
(d)The undersigned is in compliance
with all of its covenants and agreements
contained in the Credit Agreement.
Very truly yours,
RIO TINTO METAL, S.A.
By ____________________________
Title: [Chief Financial Officer]
By ____________________________
Title: [Authorized Officer]
Q-2
EXHIBIT R
Form of Opinion of Davis Polk & Wardwell
[Date]
To the Lenders and the Agent
referred to below
c/o Barclays Bank PLC, as Agent
St. Mary's Court
100 Lower Thames Street
London EC3R 6JN
Ladies and Gentlemen:
This opinion is furnished to you
pursuant to Section 7.01(g)(i) of the Term Loan and Working
Capital Agreement, dated as of November 4, 1994 (the "Credit
Agreement"), among Rio Tinto Metal, S.A., a corporation
organized under the laws of Spain (the "Company"), the
Lenders parties thereto and Barclays Bank PLC, as Agent. We
have acted as special New York counsel (a) for the Company
in connection with the preparation, execution and delivery
of the Credit Agreement and other Financing Documents and
(b) for Rio Tinto Minera, S.A., a corporation organized
under the laws of Spain ("RTM"), and Freeport-McMoRan Copper
& Gold Inc., a corporation organized under the laws of
Delaware ("FCX"), in connection with the preparation,
execution and delivery of the Inducement Agreement, dated as
of date hereof (the "Inducement Agreement"), from RTM and
FCX to the Agent. Capitalized terms used but not otherwise
defined herein shall have the meanings ascribed to such
terms in the Credit Agreement.
In connection with this opinion, we
have examined such corporate records, certificates and other
documents, and such questions of law, as we have considered
necessary for the purposes of this opinion. Upon the basis
of such examination, we advise you that, in our opinion:
(1)FCX is a corporation duly organized
and validly existing under the laws of the State of
Delaware.
(2)FCX has full corporate power and
authority to execute, deliver and perform the Inducement
Agreement and to incur the obligations provided for therein,
R-1
all of which have been duly authorized by all proper and
necessary corporate action. No consent or approval of
stockholders which has not been obtained is required as a
condition to the validity or performance of, or the exercise
by the Agent or the Lenders of any of their rights or
remedies in respect of, the Inducement Agreement.
(3) No authorizations, consents,
approvals, registrations, notices, exemptions and licenses
with or from Governmental Authorities and other Persons
under the Federal laws of the United States, the laws of the
State of New York and the General Corporation Law of the
State of Delaware are necessary for the execution and
delivery of the Financing Documents by the Company, RTM and
FCX, as the case may be, the performance by each of the
Company, RTM and FCX of its obligations thereunder, as
applicable, and the exercise by the Agent and the Lenders of
their remedies thereunder (except for any such
authorizations, consents, approvals, registrations, notices,
exemptions and licenses which may become necessary in the
future to effect enforcement of remedies).
(4)The Credit Agreement constitutes the
valid and binding obligation of the Company enforceable in
accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium
and similar laws of general applicability relating to or
affecting creditors' rights and to general principles of
equity.
(5)The Inducement Agreement has been
duly executed and delivered by FCX and constitutes the valid
and binding obligation of each of RTM and FCX enforceable in
accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium
and similar laws of general applicability relating to or
affecting creditors' rights and to general principles of
equity.
(6)There is no statute, regulation or
rule under the Federal laws of the United States, the laws
of the State of New York or the General Corporation Law of
the State of Delaware and no provision of FCX's Certificate
of Incorporation or by-laws which would prohibit, conflict
with or in any way prevent the execution, delivery or
performance of the terms of the Inducement Agreement or the
incurrence of the obligations provided for therein.
(7)The Company is not, and, after
giving effect to the transactions contemplated by the
Financing Documents, will not be, an "investment company" or
R-2
a company "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
The foregoing opinion is subject to the
following qualifications:
(a)We express no opinion as to the
effect (if any) of any law of any
jurisdiction (except the State of
New York) in which any Lender is located
which may limit the rate of interest that
such Lender may charge or collect.
(b)We express no opinion as to Section
11.02 of the Credit Agreement.
The foregoing opinion is limited to the
Federal laws of the United States, the laws of the State of
New York and the General Corporation Law of the State of
Delaware, and we are expressing no opinion as to the effect
of the laws of any other jurisdiction. With respect to all
matters of Spanish law, we have, with your approval, relied
upon the opinion, dated as of the date hereof, of J&A
Garrigues delivered to you pursuant to Section 7.01(g)(ii)
of the Credit Agreement, and our opinion is subject to the
same assumptions, qualifications and limitations with
respect to such matters as are contained in such opinion of
J&A Garrigues. We believe you and we are justified in
relying on such opinion for such matters.
With your approval, we have relied as
to certain matters on information obtained from public
officials, officers of the Company, RTM and FCX and other
sources believed by us to be responsible and we have assumed
that the signatures on all documents examined by us are
genuine, an assumption that we have not independently
verified.
This letter is delivered by us as
special New York counsel to the Company, RTM and FCX to you
and is solely for your benefit.
Very truly yours,
R-3
EXHIBIT S
Form of Opinion of J&A Garrigues
S-1
EXHIBIT T
Opinion of the Independent Insurance Advisor
T-1
EXHIBIT U-1
Minimum Requirements for Supply and Off-take
Contracts and Letters of Intent at Closing
Delivery of executed contracts or
letters of intent pertaining to the following is required at
Closing:
Copper Concentrate 75% of forecast requirements prior
(Supply) to January 1, 1997.
Anodes (off-take) 75% of forecast tonnage production
intended for sale when forecast
tonnage production intended for sale
is in excess of 10,000 tpa prior to
January 1, 1997.
Sulfuric Acid 90% of forecast production for 1994
and, thereafter, 50% of forecast
production prior to January 1, 1997.
Oxygen Sufficient supplies of oxygen to
meet the Borrower's requirements
prior to January 1, 1997.
Cathodes Tolling Agreement with Metalcable,
S.A.
N.B. Percentages relate to total forecast consumption or
production as detailed in the Project Development Plan.
U-1-1
EXHIBIT U-2
Minimum Requirements for Supply and Off-take
Contracts by January 1, 1997
Executed contracts pertaining to the
following are required by January 1, 1997 and as at the
Forecast Date relating to the applicable Contract Date and
each Forecast Date thereafter:
Tonnage
Copper Concentrate Next 1 year : 90%
Following 1 year : 80%
Life of Loan : 66.6%
Over the next two years, the average
of 70% of forecast tonnage of copper
concentrate to have contracted T/Cs
and R/Cs.
Anodes Next 1 year : 80%
Following 1 year : 70%
Discount price formula to be con-
tracted.
Sulfuric Acid Next 1 year : 80%
Following 4 years : 40%
Contract price and/or disposal cost
to be contracted.
Oxygen Sufficient oxygen to supply the Bor-
rower's requirements for a minimum
period of twelve months.
N.B. Percentages relate to total forecast consumption or
production as detailed in the Project Development Plan.
U-2-1
EXHIBIT V
Form of Officer's Certificate:
Status of Construction
[Date]
Barclays Bank PLC, as Agent
for the Lenders parties
to the Credit Agreement
referred to below
St. Mary's Court
100 Lower Thames Street
London EC3R 6JN
Attention: Structured Finance Division,
Mining Finance
This certificate is delivered to you in
accordance with Section 7.03(a) of the Term Loan and Working
Capital Agreement, dated as of November 4, 1994 (the "Credit
Agreement", the terms defined therein being used herein as
therein defined), among Rio Tinto Metal, S.A., the Lenders
parties thereto and Barclays Bank PLC, as Agent for said
Lenders. The undersigned hereby certifies to you that as
of the date hereof the Borrower is in compliance with the
terms and conditions of the Lurgi Contract and that the
status of construction of the Project meets the
specifications of the Lurgi Contract, including the time
schedule for construction contained therein as modified in
the monthly progress reports of Lurgi.
RIO TINTO METAL, S.A.
By ____________________________
Title:
V-1
EXHIBIT W
Form of Opinion of Sullivan & Cromwell
____________, 1994
Barclays Bank PLC, as Agent,
St. Mary's Court,
100 Lower Thames Street,
London EC3R 6JN.
Dear Sirs:
In connection with the preparation of
the (i) Term Loan and Working Capital Agreement, dated as of
November 4, 1994 (the "Credit Agreement"), among Rio Tinto
Metal, S.A., a corporation organized under the laws of Spain
(the "Company"), each of the Banks identified on the
signature pages thereof and Barclays Bank PLC, as agent (the
"Agent"), and (ii) Inducement Agreement, dated as of
______________, 1994 (the "Inducement Agreement"), among
Freeport-McMoRan Copper & Gold Inc., a corporation organized
under the laws of the State of Delaware ("FCX"), Rio Tinto
Minera, S.A., a corporation organized under the laws of
Spain ("RTM"), and the Agent, we, as your counsel, have
examined such certificates and other documents, and such
questions of law, as we have considered necessary or
appropriate for the purposes of this opinion. Upon the
basis of such examination, we advise you that, in our
opinion:
W-1
(1)The documents delivered to you at
the closing today appear on their face to
be appropriately responsive in all
material respects to the conditions
precedent to the effectiveness of the
Credit Agreement and the obligation of
each Lender to make its Initial Loan (as
defined in the Credit Agreement) specified
in Section 7.01 of the Credit Agreement.
(2)Assuming that each of the Credit
Agreement and the Inducement Agreement
has been duly authorized, executed and
delivered by each of the parties thereto,
(i) the Credit Agreement constitutes a
valid and legally binding obligation of
the Company and (ii) the Inducement
Agreement constitutes a valid and legally
binding obligation of RTM and FCX, each
enforceable in accordance with its terms,
subject to bankruptcy, insolvency,
fraudulent transfer, reorganization,
moratorium and similar laws of general
applicability relating to or affecting
creditors' rights and to general equity
principles.
W-2
With your approval, we have assumed
that the Company has been duly incorporated and is an
existing corporation in good standing under the laws of
Spain and that the execution and delivery of the Credit
Agreement by the Company, and the performance by the Company
of its obligations thereunder, will comply with all
applicable law and with each requirement or restriction
imposed by the Company's governing articles or laws
(Escritura de Constitucion y Estatutos) or by any court or
governmental body having jurisdiction over the Company, its
properties or its activities, and will not result in a
default under or breach of any agreement or instrument
binding on the Company.
We have assumed further that (i) RTM
has been duly incorporated and is an existing corporation in
good standing under the laws of Spain, (ii) FCX has been
duly incorporated and is an existing corporation in good
standing under the laws of the State of Delaware and (iii)
the execution and delivery of the Inducement Agreement by
RTM and FCX, and the performance by RTM and FCX of their
obligations thereunder, will comply with all applicable law
and with each requirement or restriction imposed by RTM's
governing articles or laws (Escritura de Constitucion y
Estatutos) and FCX's articles of incorporation or by any
court or governmental body having jurisdiction over RTM or
FCX, their properties or their activities, and will not
W-3
result in a default under or breach of any agreement or
instrument binding on RTM or FCX.
The foregoing opinion is limited to the
Federal laws of the United States and the laws of the State
of New York, and we are expressing no opinion as to the
effect of the laws of any other jurisdiction. With respect
to all matters of Spanish law, we have, with your approval,
relied upon the opinion, dated ____________, 1994 of Uria &
Menendez delivered to you pursuant to Section 7.01(g)(iv) of
the Credit Agreement, and our opinion is subject to the same
assumptions, qualifications and limitations with respect to
such matters as are contained in such opinion of Uria &
Menendez. We believe you and we are justified in relying on
such opinion for such matters.
We have assumed that the signatures on
all documents examined by us are genuine, an assumption that
we have not independently verified.
This letter is delivered by us as your
counsel, and is solely for your benefit.
Very truly yours,
W-4
EXHIBIT X
Form of Opinion of Uria & Menendez
X-1
EXHIBIT Y
Form of Shutdown Certificate of the Borrower
[Date]
Barclays Bank PLC, as Agent
for the Lenders parties
to the Credit Agreement
referred to below
St. Mary's Court
100 Lower Thames Street
London EC3R 6JN
Attention: Structured Finance Division,
Mining Finance
This certificate is delivered to you in
accordance with Section 7.03(b)(iii) of the Term Loan and
Working Capital Agreement, dated as of November 4, 1994 (the
"Credit Agreement", the terms defined therein being used
herein as therein defined), among Rio Tinto Metal, S.A., the
Lenders parties thereto and Barclays Bank PLC, as Agent for
said Lenders. The undersigned hereby certifies to you that
as of the date hereof all activities that were essential to
be completed during the shutdown of the Huelva Smelter have
been completed to the satisfaction of the undersigned and
that the Huelva Smelter is operating.
RIO TINTO METAL, S.A.
By ____________________________
Title:
Y-1
EXHIBIT Z
Form of Shutdown Certificate of the Independent Engineer
[Date]
Barclays Bank PLC, as Agent
for the Lenders parties
to the Credit Agreement
referred to below
St. Mary's Court
100 Lower Thames Street
London EC3R 6JN
Attention: Structured Finance Division,
Mining Finance
This certificate is delivered to you in
accordance with Section 7.03(b)(iii) of the Term Loan and
Working Capital Agreement, dated as of November 4, 1994 (the
"Credit Agreement", the terms defined therein being used
herein as therein defined), among Rio Tinto Metal, S.A., the
Lenders parties thereto and Barclays Bank PLC, as Agent for
said Lenders. The undersigned hereby certifies to you that
as of the date hereof all activities that were essential to
be completed during the shutdown of the Huelva Smelter have
been completed satisfactorily and that the Huelva Smelter is
operating at the scheduled level of output.
HATCH ASSOCIATES LIMITED
By ____________________________
Title:
Z-1
EXHIBIT AA
Form of Assignment and Acceptance
[Date]
Reference is made to the Term Loan and
Working Capital Agreement, dated as of November 4, 1994 (the
"Credit Agreement"), among Rio Tinto Metal, S.A., a
corporation organized under the laws of the Kingdom of Spain
(the "Borrower"), each of the financial institutions
identified on the signature pages thereof (each, a "Lender"
and, collectively, the "Lenders") and Barclays Bank PLC, as
Agent for the Lenders (the "Agent"). Terms defined in the
Credit Agreement are used herein as therein defined.
____________________________ (the
"Assignor") and ______________________________ (the
"Assignee") agree as follows:
1. The Assignor hereby sells and
assigns to the Assignee, and the Assignee hereby purchases
and assumes from the Assignor, that interest in and to all
of the Assignor's rights and obligations under the Credit
Agreement as of the effective date of the Assignment and
Acceptance (the "Assignment and Acceptance Effective Date")
(as determined below) equal to the percentage interest
specified on Schedule I hereto of all outstanding rights and
obligations under the Credit Agreement specified on Schedule
I hereto. After giving effect to such sale and assignment,
the Assignee's Term Loan Commitment and Working Capital Loan
Commitment (and related outstanding Loans thereunder) shall
be as set forth on Schedule I hereto.
2. The Assignor (i) represents and
warrants that it is the legal and beneficial owner of the
interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes
no representation or warranty and assumes no responsibility
with respect to any statements, warranties or
representations made in or in connection with the Credit
Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the
Credit Agreement or any other document furnished pursuant
thereto; and (iii) makes no representation or warranty and
assumes no responsibility with respect to the financial
condition of the Borrower or the performance or observance
AA-1
by the Borrower of any of its obligations under the Credit
Agreement or any other document furnished pursuant thereto.
3. The Assignee confirms and agrees as
follows: (i) that it has received a copy of this Assignment
and Acceptance Agreement, together with copies of the
financial statements referred to in Section 8.01(a) of the
Credit Agreement and such other documents and information as
it has deemed appropriate to make its own credit analysis
and decision to enter into such Assignment and Acceptance;
(ii) that it will, independently and without reliance upon
the Agent or any other Lender and based on such documents
and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not
taking action under the Credit Agreement; (iii) that it
appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers under the
Credit Agreement as are delegated to the Agent by the terms
thereof, together with such powers as are reasonably
incidental thereto; (iv) that it will perform in accordance
with its terms all of the obligations which by the terms of
the Credit Agreement are required to be performed by it as a
Lender; and (v) that its address for notices is set forth
beneath its name on the signature pages hereof.
4. The Assignment and Acceptance
Effective Date shall be _____________. Following the
execution of this Assignment and Acceptance, it shall be
delivered to the Agent for acceptance by the Agent together
with a recording fee in the amount $3,000.00.
5. [This Assignment and Acceptance is
subject to the prior written consent of the Borrower.]*
Upon such [consent by the Borrower and] acceptance, as of
the Assignment and Acceptance Effective Date (i) the
Assignee shall be a party to the Credit Agreement, and shall
have the rights and obligations of a Lender with a
Commitment as set forth herein and (ii) the Assignor shall,
to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations
under the Credit Agreement.
6. Upon such acceptance and recording
by the Agent, from and after the Assignment and Acceptance
* To be inserted if the Assignee is not a
Lender, an Affiliate of a Lender or a
Federal Reserve Bank immediately prior to
the Assignment and Acceptance Effective
Date.
AA-2
Effective Date, the Agent shall make all payments under the
Credit Agreement in respect of the interests assigned hereby
(including, without limitation, all payments of principal,
interest and fees with respect thereto) to the Assignee.
The Assignor and Assignee shall make all appropriate
adjustments in payments under the Credit Agreement for
periods prior to the Assignment and Acceptance Effective
Date directly between themselves.
7. THIS ASSIGNMENT AND ACCEPTANCE
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
8. The Assignee agrees not to sell any
assignments of, or grant participations in, its Commitments
or its Loans except in accordance with the Credit Agreement.
[ASSIGNOR]
By:___________________________
Name:
Title:
[ASSIGNEE]
By:___________________________
Name:
Title:
Address for Notices:
______________________________
______________________________
______________________________
AA-3
[Approved this ____ day
of _______________, 19__
RIO TINTO METAL, S.A.
By:______________________
Name:
Title: ]*
* To be inserted if the Assignee is not a
Lender, an Affiliate of a Lender or a
Federal Reserve Bank immediately prior to
the Assignment and Acceptance Effective
Date.
AA-4
Accepted this ____ day
of _______________, 19__
BARCLAYS BANK PLC,
as Agent
By:______________________
Name:
Title:
AA-5
SCHEDULE I
TO
ASSIGNMENT AND ACCEPTANCE
DATED _____________, 19__
TOTAL FACILITY: $290,000,000
I. TERM LOANS
A. Total Term Loans: $225,000,000
B. Percentage of Total
Term Loans Assigned: ___________%
C. Amount Assigned:
Term Loans$___________
Term Loan Commitment $___________
D. As of the date hereof, after giving
effect to this assignment:
Assignor's Term Loans: $___________
Assignor's Term
Loan Commitment: $___________
Assignee's Term Loans $___________
Assignee's Term
Loan Commitment$___________
AA-6
II. WORKING CAPITAL LOANS
A. Total Working Capital Loans:$65,000,000
B. Percentage of Total Working
Capital Loans Assigned: ___________%
C. Amount Assigned:
Working Capital Loans$___________
Working Capital
Loan Commitment $___________
D. As of the date hereof, after giving
effect to this assignment:
Assignor's Working
Capital Loans: $___________
Assignor's Working
Capital Loan Commitment:
$___________
Assignee's Working
Capital Loans $___________
Assignee's Working
Capital Loan Commitment$___________
AA-7
Schedule I
COMMITMENTS
Term Loan Working Total Percentage
Commitment Capital Commitment of
Loan Total
Commitment Facility
BARCLAYS BANK PLC $76,248,513.69 $22,027,348.39 $98,275,862.08 33.8882%
ABN AMRO BANK
N.V. $35,582,639.71 $10,279,429.25 $45,862,068.96 15.8145%
NATIONAL
WESTMINSTER
BANK PLC $35,582,639.71 $10,279,429.25 $45,862,068.96 15.8145%
DEUTSCHE BANK AG,
NEW YORK BRANCH $23,275,862.07 $ 6,724,137.93 $30,000,000.00 10.3448%
LANDESBANK BERLIN $23,275,862.07 $ 6,724,137.93 $30,000,000.00 10.3448%
B.N.P. ESPANA,
S.A. $15,517,241.38 $ 4,482,758.62 $20,000,000.00 6.8966%
DE NATIONALE
INVESTERINGSBANK
N.V. $ 15,517,241.38 $ 4,482,758.62 $ 20,000,000.00 6.8966%
TOTAL $225,000,000.00 $65,000,000.00 $290,000,000.00 100.0000%
Schedule 1.01(c)
Project Documents
Lurgi Contract
Schedule 6.01(o)
Environmental Protection
Schedule 6.01(v)
Supply Contracts
1. Concentrate sales agreement between P.T.
Freeport Indonesia and Rio Tinto Minera,
S.A. dated as of September 22, 1992.*
2. Concentrate sales agreement between
Sociedade Mineira de Neves Corvo
(SOMINCOR) and Rio Tinto Minera, S.A.
dated as of July 7, 1988 and amended as of
November 30, 1992.*
3. Concentrate sales agreement between Minera
Escondida Limitada and Rio Tinto Minera,
S.A. dated as of March 12, 1990.*
4. Anode Supply Agreement between Rio Tinto
Metal, S.A. and Union Miniere dated as of
October 21, 1994.
5. Sulphuric Acid purchase agreement between
FMC Foret, S.A. and Rio Tinto Minera, S.A.
dated as of July 22, 1993.*
6. Oxygen Supply agreement between Rio Tinto
Minera, S.A. and Sociedad Espanola del
Oxigeno S.A. (SEO) dated as of August 17,
1982 and amended between Rio Tinto Metal,
S.A. and SEO dated as of November 4, 1994.
7. Tolling Agreement between Rio Tinto Metal,
S.A. and Metalcable, S.A. dated as of
October 28, 1994.
* This contract has been duly and validly
assigned by RTM to the Borrower.
Schedule 7.01(k)
Authorizations
1. Certificate issued by the Industrial
Registry ("Registro Industrial") dependent
from the Industry Secretary of the Junta
de Andalucia ("Consejeria de Industria de
la Junta de Andalucia") stating that Rio
Tinto Metal, S.A. is authorized to carry
out copper smelting and refining
activities and the production of sulphuric
acid.
2. Certificate issued by the Property
Registry ("Registro de la Propiedad") in
Huelva stating that the administrative
concessions and the real estate properties
to be mortgaged under the Mortgage on Real
Estate are recorded in the name of Rio
Tinto Metal S.A.
3. Administrative concessions.
4. Authorization to carry out the
construction, expansion and operation of
the copper smelting and refining complex
at Huelva issued by the Industry Secretary
of the Junta de Andalucia.
5. Authorization to carry out the
construction, expansion and operation of
the copper smelting and refining complex
at Huelva issued by the Huelva Port
Authority.
6. Authorization to carry out the
construction, expansion and operation of
the copper smelting and refining complex
at Huelva issued by the Huelva Town Hall.
7. Financial Operation Number (NOF) issued by
the Bank of Spain in relation to the
granting of the Term Loan and Working
Capital Agreement.
8. Authorization to mortgage the
administrative concessions issued by the
Huelva Port Authority.
EX-4
7
Exhibit 4.22
AMENDMENT NO. 1
AMENDMENT NO. 1, dated as of March 7, 1995 (the
"Amendment"), to the TERM LOAN AND WORKING CAPITAL
AGREEMENT, dated as of November 4, 1994 (the "Credit
Agreement"), among RIO TINTO METAL, S.A., a corporation
organized under the laws of Spain (the "Borrower"), the
LENDERS parties thereto (each, a "Lender" and collectively,
the "Lenders") and BARCLAYS BANK PLC, as Agent for the
Lenders (the "Agent").
WITNESSETH
WHEREAS, the Borrower, the Lenders and the Agent
have heretofore entered into the Credit Agreement;
WHEREAS, the Borrower and the Lenders wish to
confirm that Hedging Arrangements entered into with any
Lender or any Subsidiary or Affiliate of any Lender as
counterparties, pursuant to the terms of the Credit
Agreement, will be secured (on a pari passu basis with the
Loans) under those Security Documents securing Hedging
Arrangements;
WHEREAS, the Borrower and the Lenders wish to
confirm that any two authorized officers of the Borrower may
sign, on behalf of the Borrower, borrowing requests and
certain other certificates required pursuant to the terms of
the Credit Agreement; and
WHEREAS, the Lenders have agreed to amend the
Credit Agreement on the terms and conditions set forth
herein;
NOW, THEREFORE, the parties hereto agree as
follows:
ARTICLE I
AMENDMENTS
Section 1.1. The definition of "Adjusted Pro Rata
Share" in Section 1.01(c) of the Credit Agreement is amended
to read in its entirety as follows:
""Adjusted Pro Rata Share" shall mean,
with respect to the sharing of payments due any
Lender at any time pursuant to this Agreement, the
proportion of such Lender's total outstanding
-1-
Loans and the sum of the net liabilities and other
amounts owing to such Lender or any Subsidiary or
Affiliate of such Lender as provided in Section
8.01(n) by the Borrower under each type of Hedging
Arrangement with such Lender or any Subsidiary or
Affiliate of such Lender secured pursuant to
Section 8.01(n) to the aggregate amount of
outstanding Loans and the total amount of such
liabilities and other amounts owing by the
Borrower under each type of Hedging Arrangement to
all Lenders, including any Subsidiary or Affiliate
of such Lenders as provided in Section 8.01(n), at
such time."
Section 1.2. The parenthetical phrase in the
first sentence of the definition of "Borrowing Base" in
Section 1.01(c) of the Credit Agreement is amended to read
in its entirety as follows:
"(including Lenders and any Subsidiaries or
Affiliates of Lenders providing Hedging
Arrangements to the Borrower pursuant to Section
8.01(n))"
Section 1.3. The definition of "Financing
Documents" in Section 1.01(c) of the Credit Agreement is
amended by adding the words "or any Subsidiary or Affiliate
of such Lender" after the word "Lender" appearing therein.
Section 1.4. The definition of "Permitted
Encumbrances" in Section 1.01(c) of the Credit Agreement is
amended by adding the words "or any Subsidiary or Affiliate
of the Agent or any Lender, as the case may be," after the
word "Lender" appearing in clause (viii) therein.
Section 1.5. The definition of "Swing Line Loan
Request" in Section 1.01(c) of the Credit Agreement is
amended by deleting the words "the Chief Financial Officer
and another authorized officer" appearing therein and by
adding in place thereof the words "two authorized officers".
Section 1.6. The definition of "Term Loan
Request" in Section 1.01(c) of the Credit Agreement is
amended by deleting the words "the Chief Financial Officer
and another authorized officer" appearing therein and by
adding in place thereof the words "two authorized officers".
Section 1.7. The definition of "Working Capital
Loan Request" in Section 1.01(c) of the Credit Agreement is
amended by deleting the words "the Chief Financial Officer
-2-
and another authorized officer" appearing therein and by
adding in place thereof the words "two authorized officers".
Section 1.8. Section 5.02(b)(ii) of the Credit
Agreement is amended to read in its entirety as follows:
"(ii) The Agent shall maintain an
internal account in which shall be recorded for
each Lender (A) the date and amount of each Loan
hereunder, (B) any Interest Period applicable
thereto, (C) the amount of any principal or
interest due and payable or to become due and
payable from the Borrower with respect thereto,
(D) the amount of any sum received by the Agent
from the Borrower with respect thereto, (E) the
date, amount and type of each Hedging Arrangement,
as provided in Section 8.01(n), as is made with
any Lender or any Subsidiary or Affiliate of such
Lender, as provided in Section 8.01(n), and (F)
the amount of any sum received by the Agent from
the Borrower, including the proceeds of any
Collateral, with respect to such Hedging
Arrangements."
Section 1.9. Each of clauses (vi) and (vii) of
Section 8.01(a) of the Credit Agreement is amended by
deleting the words "the Chief Financial Officer and one
other authorized officer" appearing therein and by adding in
place thereof the words "two authorized officers".
Section 1.10. Section 8.01(n) of the Credit
Agreement is amended by deleting the last sentence thereof
and by adding in place thereof two new sentences to read in
their entirety as follows:
"For purposes of this Section 8.01(n), Hedging
Arrangements may include, with the consent of the
Agent, interest rate caps and interest rate
collars and shall include any Hedging Arrangements
entered into on or after the date of this
Agreement but prior to the effective date hereof
and shall also include the foreign exchange
Hedging Arrangement dated June 20, 1994 between
RTM and ABN-AMRO Bank, National Westminster Bank
Plc and Barclays Bank PLC relating to currency
exposure under the Lurgi Contract. For purposes
of this Section 8.01(n), any Lender or any
Subsidiary or Affiliate of any Lender may be a
counterparty to any Hedging Arrangement provided
for herein and any reference to "Lender" in this
-3-
Section 8.01(n), unless the context otherwise
indicates, shall be deemed to refer to a Lender
and any Subsidiary or Affiliate of such Lender
which may enter into a Hedging Arrangement with
the Borrower from time to time. In order to be
entitled to the benefits of the Security Documents
as specified above, each Lender and each
Subsidiary or Affiliate of any Lender which enters
into a Hedging Arrangement with the Borrower shall
deliver to the Agent promptly upon entering into
such Hedging Arrangement a mandate letter in the
form of Exhibit BB hereto providing in Schedule 1
thereto the information required by the Agent to
complete Annex 5 to the Master Assignment
Agreement and Annex 2 to the Pledge of Shares."
Section 1.11. Section 10.01 of the Credit
Agreement is amended by adding the words "and, solely with
respect to security interests created in connection with
Hedging Arrangements pursuant to Section 8.01(n), any
Subsidiary or Affiliate of any Lender that may enter into
Hedging Arrangements with the Borrower from time to time,"
after the word "Lender" appearing in the first line therein.
Section 1.12. Section 10.03 of the Credit
Agreement is amended by adding the words "or any Subsidiary
or Affiliate of such Lender" after the word "Lender"
appearing in the last sentence therein.
Section 1.13. The Credit Agreement is amended by
adding thereto a new Exhibit BB in the form of Annex A to
this Amendment.
ARTICLE II
Representations and Warranties
Section 2.1. The Borrower represents and warrants
to the Lenders that:
(a) Power and Authority. The Borrower has full
power and authority to execute, deliver and perform
this Amendment and to incur the obligations provided
for herein and in the Credit Agreement, as amended by
this Amendment, and to grant to the Lenders the
security interests and liens described herein and
therein, all of which have been duly authorized by all
proper and necessary corporate action. No consent or
approval of stockholders which previously has not been
obtained is required as a condition to the validity or
-4-
performance or the exercise by the Agent or the Lenders
of any of their rights or remedies under this Amendment
or the Credit Agreement, as amended hereby.
(b) Authorizations. All authorizations,
consents, approvals, registrations and notices with or
from any governmental or administrative authority or
any other person that are necessary for the execution
and delivery of this Amendment and the performance by
the Borrower of its obligations hereunder and under the
Credit Agreement, as amended hereby, have been effected
or obtained and are in full force and effect.
(c) Binding Agreement. Each of this Amendment
and the Credit Agreement, as amended hereby, has been
duly executed and delivered by the Borrower and
constitutes the valid and legally binding obligation of
the Borrower enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors'
rights and to general equity principles.
(d) No Conflicts. There is no statute,
regulation, rule, order or judgment, and no provision
of the Borrower's governing Articles or by-laws
(Escritura Constitucion y Estatutos) and no provision
of any mortgage, indenture, contract or agreement
binding on the Borrower or affecting its property that
would prohibit, conflict with or in any way prevent the
execution, delivery, or performance of the terms of
this Amendment or the Credit Agreement, as amended
hereby, or result in or require the creation or
imposition of any lien on any of the Borrower's
property as a consequence of the execution, delivery
and performance of this Amendment or the Credit
Agreement, as amended hereby, and no consents or
waivers of other lenders to the Borrower are required
for the execution, delivery or carrying out of the
terms of this Amendment or the Credit Agreement, as
amended hereby.
ARTICLE III
Conditions Precedent
Section 3.1. The effectiveness of this Amendment
is subject to the following conditions precedent:
-5-
(a) Counterparts hereof shall have been
executed by the Borrower, the Required Lenders and the
Agent.
(b) The Agent shall have received an
appropriate Notarial Deed formalizing this Amendment in
accordance with applicable Spanish law before a Spanish
notary.
(c) The Agent shall have received an amended
Pledge of Shares, in Spanish, executed by a duly
authorized officer of RTM, and the pledge shall have
been formalized before a Spanish Notary Public or
Official Commercial Stockbroker.
(d) The Agent shall have received an amended
Master Assignment Agreement, in Spanish, (which shall
be updated from time to time), executed by a duly
authorized officer of the Borrower and notarized before
a Spanish Notary or an Official Commercial Stockbroker.
ARTICLE IV
Miscellaneous
Section 4.1. Except as amended hereby, all of the
terms of the Credit Agreement shall remain and continue in
full force and effect and are hereby confirmed in all
respects.
Section 4.2. THIS AMENDMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF NEW YORK, UNITED STATES OF AMERICA.
Section 4.3. This Amendment may be executed in
any number of counterparts and by the different parties
hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all the
counterparts shall together constitute one and the same
instrument.
Section 4.4. In case any one or more of the
provisions contained in this Amendment shall be invalid,
illegal or unenforceable in any respect under any law, the
validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected
or impaired thereby.
-6-
Section 4.5. The Borrower hereby irrevocably
submits to the non-exclusive jurisdiction of any state or
federal court in the Borough of Manhattan, The City of New
York for the purpose of any suit, action, proceeding or
judgment relating to or arising out of this Amendment, the
Credit Agreement and each other Financing Document. The
Borrower hereby appoints CT System, with offices on the date
hereof at 1633 Broadway, New York, New York, as its
authorized agent on whom process may be served in any action
which may be instituted against it by the Agent in its own
name and on behalf of the Lenders in any state or federal
court in the Borough of Manhattan, The City of New York,
arising out of or relating to any Loan, the Credit Agreement
or this Amendment and each other Financing Document.
Service of process upon such authorized agent and written
notice of such service to the Borrower shall be deemed in
every respect effective service of process upon the
Borrower, and the Borrower hereby irrevocably consents to
the jurisdiction of any such court in any such action and to
the laying of venue in the Borough of Manhattan, The City of
New York. The Borrower hereby irrevocably waives, to the
extent permitted by law, any objection to the laying of the
venue of any such suit, action or proceeding brought in the
aforesaid courts and hereby irrevocably waives any claim
that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient forum. Notwith-
standing the foregoing, nothing herein shall in any way
affect the right of the Agent in its own name and on behalf
of any Lender to bring any action arising out of or relating
to the Loans, the Credit Agreement or this Amendment and
each other Financing Document in any competent court
elsewhere having jurisdiction over the Borrower or its
property.
-7-
IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be duly executed as of the date first
above written.
RIO TINTO METAL, S.A.
By: /s/ Javier Targhetta
______________________
Name: Javier Targhetta
Title:Managing Director
-8-
BARCLAYS BANK PLC, as Agent for the
Lenders
By: /s/ Chris Petit
________________
Name: Chris Petit
Title:Assistant Director
Address for Notices:
St. Mary's Court
100 Lower Thames Street
London EC3R 6JN
England
Attn: Structured Finance Division
Fax: 071-775-8845
BARCLAYS BANK PLC
By:___________________________
Name:
Title:
Address for Notices:
St. Mary's Court
100 Lower Thames Street
London EC3R 6JN
England
Attn: Structured Finance Division
Fax: 071-775-8845
-9-
ABN AMRO BANK N.V.
By:___________________________
Name:
Title:
By:___________________________
Name:
Title:
Address for Notices:
ABN AMRO BANK N.V.,
Sucursal en Espana
Serrano 55
28006, Madrid
Attn: I. Andino
Fax: 341-520-9107
-10-
NATIONAL WESTMINSTER BANK PLC
By:___________________________
Name:
Title:
Address for Notices:
National Westminster Bank Plc
Kings Cross House
Phase 2
200 Pentonville Road
London N1 9HL
Attn: Commercial Loans Manager
Fax: 44-71-239-8257
-11-
DEUTSCHE BANK AG,
New York Branch
By:___________________________
Name:
Title:
By:___________________________
Name:
Title:
Address for Notices:
DEUTSCHE BANK AG
31 West 52nd Street
New York, NY 10019
USA
Attn: Sandra Bell
Fax: 0101 212 474 8256
-12-
BANQUE NATIONALE DE PARIS
By:___________________________
Name:
Title:
By:___________________________
Name:
Title:
Address for Notices:
BANQUE NATIONALE DE PARIS
27, Boulevard des Italiens
Paris, France
Attn: Mr. Bruno Weill
Fax: 19.33.1.40.14.89.25
-13-
LANDESBANK BERLIN - GIROZENTRALE
By:___________________________
Name:
Title:
By:___________________________
Name:
Title:
Address for Notices:
LANDESBANK BERLIN - GIROZENTRALE
Bundesallee 171
10889 Berlin-Wilmersdorf
Federal Republic of Germany
Attn: Corporate Special Finance
Fax: (49) 30/869-3050
-14-
DE NATIONALE INVESTERINGSBANK N.V.
By:___________________________
Name:
Title:
By:___________________________
Name:
Title:
Address for Notices:
DE NATIONALE INVESTERINGSBANK N.V.
P.O. Box 380
2501 BH The Hague
The Netherlands
Attn: Mr. E.J. Wesseling (101447)
Fax: 31 70 365 1071
-15-
BAYERISCHE VEREINSBANK AG
By:___________________________
Name:
Title:
By:___________________________
Name:
Title:
Address for Notices:
BAYERISCHE VEREINSBANK AG
Kardinal-Faulhaber-Strasse 1
80311 Munich
Germany
Attn: Marcus Kleiner
Fax: 49-89-378-26293
-16-
Annex A
EXHIBIT BB
Form of Mandate Letter for
Hedging Arrangements
[Date]
Barclays Bank PLC, as Agent
for the Lenders as defined
in the Credit Agreement
referred to below
St. Mary's Court
100 Lower Thames Street
London, EC3R 61N
Attention: Structured Finance Division,
Mining Finance
Dear Sirs:
Reference is made to the Term Loan and Working Capital
Agreement, dated as of November 4, 1994 (the "Credit
Agreement" the terms defined therein being used herein as
therein defined), among Rio Tinto Metal, S.A., the Lenders
parties thereto and Barclays Bank PLC, as Agent for said
Lenders, notarized before the Spanish Notary Mr. Roberto
Blanquer Uberos on December 7, 1994, bearing number 4213 of
its protocol.
The undersigned hereby gives you the mandate, pursuant
to Section 8.01(n) of the Credit Agreement and in its
capacity as a "Lender" as defined in said Section 8.01(n),
to appear on its behalf before a Spanish Commercial
Stockbroker in order to confirm that the obligations of the
Borrower arising out of the Hedging Arrangement described on
Schedule 1 attached hereto are secured by the Pledge of
Shares notarized before the Spanish Notary Public Mr.
Roberto Blanquer Uberos on December 7, 1994, as amended,
bearing number 4216 of its protocol, and by the Master
Assignment Agreement executed before the Spanish Commercial
A-1
Stockbroker Mr. Manuel Richi Alberti on December 7, 1994, as
amended, on a pari passu basis with the Term Loans and
Working Capital Loans.
Very truly yours,
[Lender]
By __________________________
Title:
By __________________________
Title:
A-2
Schedule 1
Description of Hedging Arrangement
Referred to in Mandate Letter,
dated __________, 19__
Hedging Bank:
Type of Hedging:
Borrower's Obligation:
Maturity Date:
A-3
EX-12
8
Exhibit 12.1
FREEPORT-McMoRan COPPER & GOLD INC.
Computation of Ratio of Earnings to Fixed Charges
Years Ended December 31,
----------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
(In Thousands)
Income from continuing
operations $130,241 $ 60,670 $129,893 $101,962 $ 90,179
Add:
Provision for income taxes 123,412 67,589 103,726 45,585 88,330
Minority interests' share of
net income 25,439 9,134 31,075 12,199 13,726
Interest expense - 15,327 18,897 21,451 13,517
Rental expense factor(a) 2,333 3,190 876 841 693
-------- -------- -------- -------- --------
Earnings available for fixed
charges $281,425 $155,910 $284,467 $182,038 $206,445
======== ======== ======== ======== ========
Interest expense $ - $ 15,327 $ 18,897 $ 21,451 $ 13,517
Capitalized interest 35,110 24,519 23,974 18,276 8,244
Rental expense factor(a) 2,333 3,190 876 841 693
-------- -------- -------- -------- --------
Fixed charges $ 37,443 $ 43,036 $ 43,747 $ 40,568 $ 22,454
======== ======== ======== ======== ========
Ratio of earnings to fixed
charges(b) 7.5x 3.6x 6.5x 4.5x 9.2x
==== ==== ==== ==== ====
a. Portion of rent which is deemed representative of interest.
b. For purposes of this calculation, earnings consist of income from
continuing operations before income taxes, minority interest and fixed
charges. Fixed charges include interest and that portion of rent deemed
representative of interest.
EX-13
9
Exhibit 13.1
FREEPORT-McMoRan COPPER & GOLD INC.
SELECTED FINANCIAL AND OPERATING DATA
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- --------
FINANCIAL (Financial Data In Thousands, Except Per Share Amounts)
Revenues $1,212,284 $ 925,932 $ 714,315 $ 467,522 $434,148
Operating income 280,134a 155,319b 276,429 177,720 204,549
Net income 78,403a 21,862c 122,868 96,159d 90,179
Net income per common share .38a .11c .66 .53d .52
Dividends paid per common
share .60 .60 .60 .55 .69
Average common shares
outstanding 205,755 197,929 187,343 182,130 173,432
At December 31:
Property, plant and
equipment, net 2,360,489 1,646,603 993,412 601,675 502,171
Total assets 3,040,197 2,116,653 1,694,005 1,157,615 676,727
Long-term debt, including
current portion and
short-term borrowings 549,710 260,659 723,583 631,961 294,000
Minority interests 82,404 46,781 21,449 14,237 8,899
Mandatory redeemable preferred
stock 500,007 232,620 - - -
Stockholders' equity 994,975 947,927 646,457 172,545 176,557
Common share price 21.25 25.00 21.88 16.44 8.00
------------------------------------------------------
PT-FI OPERATING
Ore milled (MTPD) 72,500 62,300 57,600 38,200 31,700
Copper grade (%) 1.51 1.57 1.59 1.77 1.61
Gold grade
Grams per metric ton (MT) 1.31 1.46 1.35 1.23 .98
Ounce per MT .042 .047 .043 .040 .032
Silver grade
Grams per MT 3.02 4.02 4.79 5.90 6.96
Ounce per MT .097 .129 .154 .190 .224
Recovery rate (%)
Copper 83.7 87.0 88.2 89.9 90.1
Gold 72.8 76.2 73.7 79.6 79.8
Silver 64.7 67.2 65.5 75.4 73.4
Copper (000s of recoverable pounds)
Production 710,300 658,400 619,100 466,700 361,800
Sales 700,800 645,700 651,800 439,700 348,000
Average realized price e $1.02 $.90 $1.03 $1.01 $1.20
Gold (recoverable ounces)
Production 784,000 786,700 641,000 420,800 284,000
Sales 794,700 762,900 679,300 397,900 273,000
Average realized price $381.13 $361.74 $340.11 $358.76 $378.30
Silver (recoverable ounces)
Production 1,305,400 1,541,200 1,642,500 1,567,900 1,749,000
Sales 1,335,400 1,480,900 1,804,400 1,620,900 1,664,000
Average realized price $5.08 $4.15 $3.72 $3.87 $4.61
RTM OPERATING (since acquisition)
Smelter operations:
Concentrate treated (MT) 485,300 330,200
Anode production
(000s of pounds) 347,500 299,300
Cathode production
(000s of pounds) 312,100 227,300
Gold operations:
Ore milled (MTPD) 18,500 17,900
Grade
Grams per MT 1.04 1.05
Ounce per MT .033 .034
Production (recoverable
ounces) 172,500 132,500
Average realized price f $363.05 $337.33
a. Includes a $32.6 million gain ($17.4 million to net income or $0.08 per
share) from an insurance settlement on the June 1993 ore pass cave-in.
b. Includes charges totaling $37.1 million for restructuring and other related
charges (Note 1).
c. Includes the items discussed in Note b ($20.5 million or $0.10 per share)
and a $9.9 million charge ($0.05 per share) for the cumulative effect of
changes in accounting principle (Note 1).
d. Includes a $5.8 million charge ($0.03 per share) for the cumulative effect
of the change in accounting for postretirement benefits other than pensions
and a $26.5 million ($0.15 per share) reduction in the tax provision due to
signing the COW.
e. $1.15 in 1994 and $0.82 in 1993 excluding hedging adjustments.
f. $375.34 in 1994 and $368.53 in 1993 excluding hedging adjustments.
FREEPORT-McMoRan COPPER & GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
1994 proved to be a year of accomplishment. Highlights for FCX and its
operating units, include the following:
- PT-FI continued toward mine and mill capacity of 115,000 MTPD;
completion is expected during the second half of 1995. PT-FI will have
doubled its mill throughput rate in less than three years.
- RTM's smelter expansion to 270,000 metric tons of metal per year is
underway. FCX also agreed in principle to form a joint venture to
construct a copper smelter with annual production of 200,000 metric
tons of metal. Subsequent to completion of these projects,
approximately 70 percent of PT-FI's expanded annual concentrate
production will be sold to affiliates at market prices.
- World copper prices improved dramatically during 1994 because of
increased global copper demand. FCX's revenues and operating income
were significantly higher.
- FCX completed three public offerings and made meaningful steps in
monetizing infrastructure assets; proceeds provided funding for 115,000
MTPD expansion. Additionally, RTM obtained a new credit facility to
cover its expansion costs and refinance a portion of its existing debt.
- Exploration activities continued to yield encouraging results.
RESULTS OF OPERATIONS
1994 a 1993 a 1992
-------- ------ ------
(In Millions, Except
Per Share Amounts)
Revenues $1,212.3 $925.9 $714.3
Operating income 280.1b 155.3c 276.4
Net income applicable to common stock 78.4b 21.9c,d 122.9
Net income per share .38b .11c,d .66
PT-FI gross profit per pound of copper (cents):
Average realized pricee 102.2 90.4 103.3
----- ---- -----
Production costs:
Site production and delivery 57.3 49.3 47.4
Gold and silver credits (43.9) (43.4) (36.2)
Treatment charges 23.9 23.7 27.1
Royalty on metals 2.8 1.5 2.4
----- ---- -----
Cash production costs 40.1 31.1 40.7
Depreciation and amortization 8.0 8.7 7.4
----- ---- -----
Total production costs 48.1 39.8 48.1
----- ---- -----
Revenue adjustmentsf (0.8) (2.4) (0.4)
----- ---- -----
PT-FI gross profit per pound of copper 53.3 48.2 54.8
===== ==== =====
a. Includes RTM results subsequent to its March 1993 acquisition.
b. Includes a $32.6 million gain ($17.4 million to net income or $0.08 per
share) from an insurance settlement on the June 1993 ore pass cave-in.
c. Includes charges totaling $37.1 million ($20.5 million to net income or
$0.10 per share) for restructuring and other related charges (Note 1).
d. Includes a $9.9 million charge ($0.05 per share) for the cumulative effect
of changes in accounting principle (Note 1).
e. $1.15 in 1994 and $0.82 in 1993 excluding hedging adjustments.
f. Reflects adjustments for prior year concentrate sales (net of related
amounts recognized under the price protection program) and amortization of
the cost of the price protection program.
1994 Compared With 1993. FCX's revenues and operating income improved
primarily as a result of significantly higher copper and gold realizations and
increased copper sales volumes from PT-FI (see Selected Financial and
Operating Data). A reconciliation of revenues from 1993 to 1994 follows (in
millions):
Revenues - 1993 $ 925.9a
Increases (decreases):
RTM revenues, net of eliminations 140.0b
PT-FI sales:
Price realizations:
Copper 82.7
Gold 15.4
Volumes:
Copper 49.9
Gold 11.5
Treatment charges (14.4)
Adjustments to prior year concentrate sales 10.3
Other (9.0)
--------
Revenues - 1994 $1,212.3a
========
a. Includes net reductions totaling $103 million in 1994 and net additions
totaling $36.8 million in 1993 related to PT-FI's price protection
program. Also includes reductions totaling $4.3 million in 1994 and $5.9
million in 1993 related to RTM's hedging program.
b. 1993 included only nine months of RTM revenues.
Revenues increased significantly primarily because of a 13 percent
improvement in PT-FI's copper realizations, including the impact of the price
protection program, and a 5 percent increase in gold realizations.
Additionally, copper sales volumes rose 9 percent resulting from expanded mill
throughput, partially offset by lower grades and recoveries.
Treatment charges increased because of higher copper sales volumes and
prices, as certain charges vary with the price of copper. Treatment charges,
which are negotiated annually with customers, will decline significantly on a
per-pound basis in 1995 as a result of the overall tightness currently being
experienced in the copper concentrates market, although higher copper prices
expected in 1995 would somewhat offset reduced charges because of price
participation.
Adjustments to prior year concentrate sales are caused by changes in
prices on prior year open sales. Rising copper prices in early 1994 caused
positive adjustments as opposed to negative adjustments for 1993 when copper
prices declined early in the year. As discussed in Note 1 to the financial
statements, PT-FI recorded $1.01 per pound during the third quarter and fourth
quarter of 1994 on 192 million pounds of open copper sales at year end. This
price will not be adjusted in 1995 because of PT-FI's price protection
program.
PT-FI's 1994 mill throughput rate rose 16 percent. PT-FI's 1994 site
production and delivery costs totaled $401.5 million compared with $317.1
million for 1993, excluding charges related to restructuring activities
discussed below. Unit site production and delivery costs increased 8 cents
per pound because of lower copper grades and recoveries, higher jobsite
administrative expenses, expansion related activities and costs associated
with initial privatization efforts. Unit royalty costs were higher in 1994
because of higher copper prices. Recovery rates for copper and gold vary
depending on the quality of the ore mined. PT-FI anticipates mining a lower
copper grade ore in 1995 which is expected to have a negative impact on its
unit costs and operating results prior to completion of the expansion.
Operating results are expected to improve during the second half of 1995 as
the expansion is completed and higher gold grades are projected. For at least
a year following attainment of 115,000 MTPD, PT-FI intends to fine-tune its
operations to achieve cost efficiencies and maximum cash flows from its
expanded operations. During this optimization period, PT-FI will continue to
review the feasibility of further expansions as well as the results of
exploration activities to ascertain where best to make future investments.
As a result of significant 1993 reserve additions, PT-FI's 1994
depreciation rate decreased to 7.5 cents per pound compared with 8.3 cents for
1993. The initial depreciation rate for 1995 is expected to increase to 8.1
cents per pound as capital expenditures were added in 1994 to support current
operating levels. Once operating levels reach 115,000 MTPD, the depreciation
rate will be reevaluated to take into account the 115,000 MTPD expansion
capital additions, changes in ore reserve estimates and assessments of future
expansion.
In June 1993, two of PT-FI's four mill level ore passes caved resulting in
a blockage of a portion of the ore pass delivery system. The blockage's
primary effect was to limit mill throughput to approximately 40,700 MTPD for
eight weeks. The impact of the blockage was minimized by using an ore
stockpile adjacent to the mill and installing conveyors to alternative ore
pass systems. In December 1994, PT-FI settled the resulting property and
business interruption insurance claims and recognized a $32.6 million gain.
RTM generated earnings of $0.6 million in 1994 compared with a $15.7
million loss for the 1993 period. Smelter cash margins improved in 1994
because of higher operating rates, cost reduction efforts and greater price
participation resulting from higher copper prices. Cathode refinery
operations also continued to maintain high operating rates. Higher 1994 mill
throughput and recoveries at RTM's gold mining operations resulted in an
increase in gold sales; however, the impact was more than offset by
significantly lower silver grades. Fluctuations in RTM's ore grades are
expected to continue as the mine nears the end of its economic life.
RTM's 1995 results are expected to be negatively affected by the
significant industrywide decline in treatment charge rates. Additionally,
RTM's smelter will be shutdown in 1995 for major maintenance turnarounds and
expansion tie-ins. RTM's results continue to be subject to variations based
on the relative value of the U.S. dollar and the Spanish peseta. Based on
current operating levels, a one peseta change in the exchange rate has an
approximate $1 million impact on RTM's annual earnings and cash flow.
CAPITAL RESOURCES AND LIQUIDITY
FCX has been expanding its mining and milling capacity since the Grasberg
discovery in late 1988, the latest step being the expansion to 115,000 MTPD.
Over the past three years this expansion resulted in capital expenditures
totaling $1.5 billion, while at the same time FCX made $0.5 billion in
distributions to stockholders and minority interests. During this period,
FCX's operating activities generated a total of $0.7 billion in cash. The
remainder of the funding has been provided by various third-party sources,
including a public debt offering; infrastructure sales; and several common and
preferred stock offerings raising a total of $1.7 billion.
Net cash provided by operating activities during 1994 increased to $336.2
million, compared with $158.5 million in 1993, primarily reflecting higher
income from operations and an increase in accounts payable and accrued
liabilities related to PT-FI's price protection program. Cash flow used in
investing activities totaled $743.5 million during 1994, compared with $463.5
million in 1993, reflecting capital expenditures for continuing expansion at
PT-FI and RTM. Cash flow provided by financing activities totaled $437.7
million compared with a use of $53.1 million in 1993. Net proceeds from debt
(including the infrastructure and 9 3/4% Note proceeds) totaled $380.9 million
in 1994 compared with 1993 net repayments of $453.5 million. Net proceeds
from the sale of FCX equity securities totaled $253 million in 1994 compared
to $561.1 million in 1993, resulting in a $35.4 million increase in total
dividend payments during 1994.
Net cash provided by operating activities decreased to $158.5 million
during 1993, compared with $252.6 million for 1992, primarily due to lower net
income. Cash flow used in investing activities totaled $463.5 million,
compared with $579.7 million in 1992. In 1993 expansion activities increased
at PT-FI and during 1992 FCX acquired an indirect interest in PT-FI for $211.9
million. Cash flow used in financing activities totaled $53.1 million
compared with $618.2 million provided by 1992 financing activities. FCX
issued preferred stock during 1993 for net proceeds totaling $561.1 million,
which were used in part to reduce borrowings under the PT-FI credit agreement
by a net $537 million. Also in 1993, FCX received net proceeds of $20 million
from the sale of a portion of PT-FI's infrastructure assets (Note 10). In
1992, $212.5 million was received from the sale of a 10 percent interest in
PT-FI to Indonesian investors in December 1991 and $392 million was received
from the sale of FCX equity securities. Dividend payments rose in 1993 due to
the FCX equity securities issued in 1992 and 1993.
During 1995, PT-FI's estimated capital expenditures are expected to
approximate $450 million. These expenditures will be funded by operating cash
flow, sales of infrastructure assets, the bank credit facility (Note 7) which
had availability of $414 million at January 20, 1995 and other financing
sources. Upon completion of the 115,000 MTPD expansion during the second half
of 1995, PT-FI's operating cash flow will increase significantly. For at
least one year after completion of the 115,000 MTPD expansion, FCX plans to
undertake efforts to redue costs and maximize cash flows. During this period,
FCX will assess the feasibility of further mine/mill expansions, taking into
account the results of its exploration activities, to determine where best to
make future investments in capital projects. In connection with FTX's
proposed restructuring plan (Note 7), the existing FTX credit agreement in
which PT-FI participates is expected to be modified to become a separate
facility for PT-FI and a new facility will be arranged for FCX and PT-FI which
is expected to provide greater access to credit markets and reduce financing
costs. PT-FI's long-lived, low-cost reserve base provides it potential access
to a broad range of sources of capital, including additional public and
private issuances of securities.
In June 1994, RTM signed a turnkey contract to expand its smelter capacity
to 270,000 metric tons of metal per year by early 1996 at a cost of
approximately $215 million. In December 1994, RTM obtained $290 million of
project financing, nonrecourse to FCX, which also provided funds for
refinancing a portion of RTM's gold, silver and working capital loans (Note
7). RTM's future operating cash flow will be determined by the supply and
demand for copper smelter capacity, smelter and refining production rates, the
exchange rate between the U.S. dollar and the Spanish peseta and prices and
sales volumes of gold.
In January 1995, FCX agreed in principle to form a joint venture, 20
percent owned by FCX, to develop a 200,000 metric tons of metal per year
copper smelter in Gresik, Indonesia (Note 10). Alternatives for financing the
estimated $550 million aggregate project cost, which excludes approximately
$100 million of working capital, are being reviewed.
On January 5, 1995, the FCX Board of Directors declared a cash dividend of
$0.15 per share on FCX's Class A common stock and Class B common stock,
payable February 1, 1995. The declaration and amount of future dividends, if
any, will depend upon appropriate action of the Board of Directors and
economic and market factors which cannot be predicted.
PT-FI has had good relations with the Government of Indonesia (the
Government) since it commenced operations in Indonesia in 1967. The COW
provides that the Government will not nationalize the mining operations of PT-
FI or expropriate assets of PT-FI. Disputes under the COW are to be resolved
by international arbitration. The 1967 Foreign Capital Investment Law, which
expresses Indonesia's foreign investment policy, provides basic guarantees of
remittance rights and protection against nationalization, a framework for
incentives and some basic rules as to other rights and obligations of foreign
investors.
Other Financial Results. FCX continues its exploration activities within the
original 24,700 acre Block A area, the adjacent approximate 4.8 million acre
Block B area and the approximate 2.5 million acre Eastern Mining area.
Delineation drilling continues at the Big Gossan prospect within Block A with
development expected to begin in early 1995. Exploration activities continue
in other locations including the Wanagon and Lembah Tembaga prospects, both
within Block A, and the Wabu gold prospect in Block B. Exploratory drilling
with three rigs is also continuing at Etna Bay located within the Eastern
Mining acreage. PT-FI has relinquished its rights to approximately 1.7
million acres at Block B and will relinquish an additional approximate 3.2
million acres over the next four years. Similarly, 75 percent of the Eastern
Mining area must be relinquished over the next two to seven years. FCX's
exploration costs, currently budgeted at approximately $50 million for 1995,
totaled $40.4 million in 1994, $33.7 million in 1993 and $12.2 million in
1992. To support the capital requirements of its expanding and very extensive
exploration programs, FCX is reviewing the possibility of participation by
third party investors in these activities.
FCX's general and administrative expenses were $109 million in 1994, $81.4
million in 1993 and $68.5 million in 1992. The increases resulted from the
inclusion of RTM activities for a full year in 1994 and additional personnel
and administrative efforts to manage the expanding operations. Included in
the 1993 amount were charges of $6.3 million primarily consisting of a $2
million write-off of deferred charges incurred in 1992 for a planned
securities offering that was withdrawn and $4 million to downsize FCX's
management information systems (MIS) structure.
During 1993, FTX undertook a restructuring of its administrative
organization. This restructuring represented a major step by FTX to lower the
costs of operating and administering its businesses in response to weak market
prices of commodities produced by its operating units. As part of this
restructuring, FTX significantly reduced the number of employees engaged in
administrative function, changed its MIS environment to achieve efficiencies,
reduced its needs for office space, outsourced a number of administrative
functions and took other actions to lower costs. The restructuring process
resulted in FTX incurring certain one-time costs, portions of which were
allocated to FCX pursuant to its management services agreement with FCX (Notes
1 and 9).
FCX's total interest cost (before capitalization) was reduced to $35.1
million for 1994 from $39.8 million in 1993 and $42.9 million in 1992 because
of an overall reduction in average debt levels. Capitalized interest,
primarily relating to the PT-FI 115,000 MTPD mine and mill expansion, totaled
$35.1 million in 1994, $24.5 million in 1993 and $24 million in 1992. Upon
completion of the expansion in 1995, these expenditures will not be subject to
interest capitalization. Preferred stock dividends totaled $51.8 million in
1994, $29 million in 1993 and $7 million in 1992, reflecting the additional
preferred stock issued during 1994 and 1993.
FCX's effective tax rate was 44.2 percent in 1994, 52.2 percent in 1993
and 39.2 percent in 1992, as detailed further in Note 6 to the financial
statements. PT-FI's COW provides a 35 percent corporate income tax rate for
PT-FI and a 15 percent withholding on dividends paid to FCX by PT-FI and on
interest for debt incurred after the signing of the COW. The additional
withholding required on dividends and interest totaled $31.3 million in 1994,
$23.9 million in 1993 and $11.7 million in 1992. PT-FI also recognizes a tax
benefit for interest expense on loans from FCX, resulting in a consolidated
tax benefit totaling $25.5 million in 1994 and $18.6 million 1993. No income
tax benefit has been recorded for the losses at RTM, which is subject to
taxation in Spain, because it has not generated taxable income in recent
years.
MARKETING
PT-FI's copper concentrates, which contain significant amounts of recoverable
gold and silver, are sold primarily under long-term sales agreements. PT-FI's
current markets include Japan, Asia, Europe and North America. PT-FI has
commitments from various parties to purchase virtually all of its estimated
1995 production at market prices. Sales for 1995, currently estimated to be
approximately 850 million pounds of copper and 1.1 million ounces of gold,
will depend on the timing of completion of the 115,000 MTPD expansion. Upon
completion of RTM's smelter expansion and the proposed Gresik smelter (Note
10), FCX anticipates that approximately 70 percent of PT-FI's expanded annual
concentrate production will be sold to affiliates at market prices.
During 1994, PT-FI implemented a price protection program at a cost of
$31.7 million to cover anticipated copper sales for 1995 and a portion of
1996. In late 1994 and early 1995, when spot copper prices rose
significantly, PT-FI closed a portion of its 1995 contracts realizing $46.9
million which will be recognized in first-half 1995 revenues. As a result of
these transactions, PT-FI will realize $1.21 per pound on 142.2 million pounds
of copper in the first half of 1995. An additional 155.2 million pounds of
first-half 1995 PT-FI copper sales will be priced at a minimum average price
of $0.88 per pound, with full participation in prices above an average of
$0.98 per pound. For the second half of 1995, PT-FI's program established a
minimum average price of $0.83 per pound on sales of 396.8 million pounds of
copper with full participation in prices above that amount. PT-FI will also
realize an average price of $1.13 per pound on 119 million pounds of copper
during the second half of 1995. For 1996, PT-FI's program established a
minimum average price of $0.90 per pound on 596.9 million pounds of copper,
with full participation in prices above that amount. As of December 31, 1994,
the unrecognized cost to unwind PT-FI's hedging positions was approximately
$40 million, net of deferred gains on closed contracts. As conditions
warrant, PT-FI may modify or extend its existing program. This program
reflects a philosophy of providing for an assurance of realizing the benefits
of higher copper prices for a significant portion of FCX's production while it
is expanding its operations. Subsequently, management's intention is to
provide a floor price for its production, if attainable at an acceptable cost,
to protect operating cash flow from the impact of potentially significant
declines in copper prices, while providing for full participation in
potentially higher prices.
To assure price participations on a portion of its estimated 1995
concentrate purchases, RTM wrote call option contracts in December 1994 on
19.8 million pounds of copper for 1995 at an average price of $1.18 per pound,
collecting $4.6 million in premiums. These premiums were deferred and will be
recognized in cost of sales during 1995. RTM also has a hedging program for
its mining operations. At December 31, 1994, RTM had sold forward 56,280
ounces of gold at $394.75 per ounce and 1,106,520 ounces of silver at $4.82
per ounce for 1995. As of December 31, 1994, the unrecognized cost to unwind
RTM's hedging positions was $0.5 million.
1993 Compared With 1992. Revenues in 1993 increased as a result of the RTM
acquisition. PT-FI revenues were down 4 percent primarily because of lower
copper realizations. Operating income was affected adversely by increased
unit site production and delivery, general and administrative and exploration
costs, and by RTM's losses. A reconciliation of revenues from 1992 to 1993
follows (in millions):
Revenues - 1992 $714.3a
Increases (decreases):
RTM revenues, net of eliminations 240.7
PT-FI sales:
Price realizations:
Copper (84.7)
Gold 14.7
Volumes:
Copper (5.5)
Gold 30.2
Treatment charges 23.6
Adjustments to prior year concentrate sales (13.0)
Other 5.6
------
Revenues - 1993 $925.9a
======
a. Includes net additions totaling $36.8 million in 1993 and net reductions
totaling $8.9 million in 1992 related to PT-FI's price protection program.
Also includes reductions totaling $5.9 million in 1993 related to RTM's
hedging program.
Copper price realizations, taking into account PT-FI's price protection
program, were 12 percent lower than in 1992. Gold realizations were up 6
percent. Although mill throughput averaged 62,300 MTPD in 1993, 8 percent
higher than in 1992, copper sales volumes decreased slightly because of a
reduction in inventory during 1992. Gold sales volumes in 1993 benefited from
higher gold grades and an increase in gold recovery rates. Treatment charges
declined 3.4 cents per pound from 1992, resulting from a tightening in the
concentrate market and lower copper prices. Open copper sales at the
beginning of 1993 were recorded at an average price of $1.04 per pound, but
subsequently were adjusted downward as copper prices fell during the first few
months of the year.
PT-FI's unit site production and delivery costs, excluding charges related
to the restructuring project, rose slightly from 1992 because of costs
incurred in connection with the ore pass blockage and higher production
overhead costs related to expansion activities. Unit cash production costs
declined 9.6 cents per pound in 1993, benefiting from higher gold and silver
credits, lower treatment charges and reduced royalties. PT-FI's depreciation
rate increased from 7.4 cents per pound during 1992 to 8.3 cents in 1993,
reflecting the increased cost relating to the 66,000 MTPD expansion.
ENVIRONMENTAL
FTX and affiliates, including FCX, have a history of commitment to
environmental responsibility. Since the 1940s, long before public attention
focused on the importance of maintaining environmental quality, FTX has
conducted preoperational, bioassay, marine ecological and other environmental
surveys to ensure the environmental compatibility of its operations. FTX's
Environmental Policy commits its operations to full compliance with local,
state and federal laws and regulations.
FCX believes it is in compliance with Indonesian environmental laws, rules
and regulations. FCX had a team of environmental scientists from a leading
Indonesian scientific institution conduct a study to update its 1984
Environmental Impact Assessment that covered expansion to 66,000 MTPD.
Subsequently, that document was expanded by other independent scientists to
cover all environmental aspects of the current expansion to 115,000 MTPD. The
latest study document was submitted to the Government in December 1993 and was
approved in February 1994.
RTM's expansion costs include approximately $18 million to modify and
expand its sulphuric acid plants. Subsequent to expansion, RTM believes its
facilities will be in compliance with all existing environmental standards in
Spain and Europe.
FCX makes expenditures at its operations for protection of the
environment. Increasing emphasis on environmental matters can be expected to
require FCX to incur additional costs, which will be charged against future
operations. On the basis of its analysis of its operations in relation to
current and anticipated environmental requirements, management does not
anticipate that these investments will have a significant adverse impact on
its future operations, liquidity, capital resources or financial position.
----------------------------------
The results of operations reported and summarized above are not necessarily
indicative of future operating results.
REPORT OF MANAGEMENT
Freeport-McMoRan Copper & Gold Inc. (the Company) is responsible for the
preparation of the financial statements and all other information contained in
this Annual Report. The financial statements have been prepared in conformity
with generally accepted accounting principles and include amounts that are
based on management's informed judgments and estimates.
The Company maintains a system of internal accounting controls designed to
provide reasonable assurance at reasonable costs that assets are safeguarded
against loss or unauthorized use, that transactions are executed in accordance
with management's authorization and that transactions are recorded and
summarized properly. The system is tested and evaluated on a regular basis by
the Company's internal auditors, Price Waterhouse LLP. In accordance with
generally accepted auditing standards, the Company's independent public
accountants, Arthur Andersen LLP, have developed an overall understanding of
our accounting and financial controls and have conducted other tests as they
consider necessary to support their opinion on the financial statements.
The Board of Directors, through its Audit Committee composed solely of
non-employee directors, is responsible for overseeing the integrity and
reliability of the Company's accounting and financial reporting practices and
the effectiveness of its system of internal controls. Arthur Andersen LLP and
Price Waterhouse LLP meet regularly with, and have access to, this committee,
with and without management present, to discuss the results of their audit
work.
George A. Mealey Richard C. Adkerson
President and Senior Vice President and
Chief Executive Officer Chief Financial Officer
FREEPORT-McMoRan COPPER & GOLD INC.
BALANCE SHEETS
December 31,
------------------------
1994 1993
---------- ----------
ASSETS (In Thousands)
Current assets:
Cash and short-term investments $ 44,252 $ 13,798
Accounts receivable:
Customers 153,585 122,527
Other 80,639 66,202
Inventories:
Products 121,247 58,247
Materials and supplies 192,775 153,681
Prepaid expenses and other 10,896 13,787
---------- ----------
Total current assets 603,394 428,242
---------- ----------
Property, plant and equipment 2,958,644 2,172,222
Less accumulated depreciation and amortization 598,155 525,619
---------- ----------
Net property, plant and equipment 2,360,489 1,646,603
---------- ----------
Other assets 76,314 41,808
---------- ----------
Total assets $3,040,197 $2,116,653
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 401,821 $ 218,083
Current portion of long-term debt and
short-term borrowings 24,098 48,791
Accrued income taxes 5,657 20,865
---------- ----------
Total current liabilities 431,576 287,739
Long-term debt, less current portion 525,612 211,868
Accrued postretirement benefits and
other liabilities 213,043 188,165
Deferred income taxes 292,580 201,553
Minority interests 82,404 46,781
Mandatory redeemable preferred stock 500,007 232,620
Stockholders' equity:
Special preference stock 223,900 224,400
Step-Up preferred stock 350,000 350,000
Class A common stock, par value $0.10 6,597 5,802
Class B common stock, par value $0.10 13,998 14,213
Capital in excess of par value of common stock 362,557 334,166
Retained earnings 41,663 29,358
Cumulative foreign translation adjustment (3,740) (10,012)
---------- ----------
994,975 947,927
---------- ----------
Total liabilities and stockholders' equity $3,040,197 $2,116,653
========== ==========
The accompanying notes are an integral part of these financial statements.
FREEPORT-McMoRan COPPER & GOLD INC.
STATEMENTS OF INCOME
Years Ended December 31,
-------------------------------------
1994 1993 1992
---------- -------- --------
(In Thousands,Except Per Share Amounts)
Revenues $1,212,284 $925,932 $714,315
Cost of sales:
Production and delivery 740,261 566,765 308,948
Depreciation and amortization 75,100 67,906 48,272
---------- -------- --------
Total cost of sales 815,361 634,671 357,220
Exploration expenses 40,380 33,748 12,185
Provision for restructuring charges - 20,795 -
Gain on insurance settlement (32,602) - -
General and administrative expenses 109,011 81,399 68,481
---------- -------- --------
Total costs and expenses 932,150 770,613 437,886
---------- -------- --------
Operating income 280,134 155,319 276,429
Interest expense, net - (15,327) (18,897)
Other income (expense), net (1,042) (2,599) 7,162
---------- -------- --------
Income before income taxes and
minority interests 279,092 137,393 264,694
Provision for income taxes (123,412) (67,589) (103,726)
Minority interests in net income of
consolidated subsidiaries (25,439) (9,134) (31,075)
---------- -------- --------
Income before changes in accounting
principle 130,241 60,670 129,893
Cumulative effect of changes in
accounting principle, net of taxes
and minority interests - (9,854) -
---------- -------- --------
Net income 130,241 50,816 129,893
Preferred dividends (51,838) (28,954) (7,025)
---------- -------- --------
Net income applicable to common stock $ 78,403 $ 21,862 $122,868
========== ======== ========
Net income per share of common stock:
Before changes in accounting principle $.38 $.16 $.66
Cumulative effect of changes in
accounting principle - (.05) -
---- ---- ----
$.38 $.11 $.66
==== ==== ====
Average common shares outstanding 205,755 197,929 187,343
======= ======= =======
Dividends per common share $.60 $.60 $.60
==== ==== ====
The accompanying notes are an integral part of these financial statements.
FREEPORT-McMoRan COPPER & GOLD INC.
STATEMENTS OF CASH FLOW
Years Ended December 31,
------------------------------------
1994 1993 1992
--------- --------- ---------
(In Thousands)
Cash flow from operating activities:
Net income $ 130,241 $ 50,816 $ 129,893
Adjustments to reconcile net income to net
cash provided by operating activities:
Cumulative effect of changes in
accounting principle - 9,854 -
Depreciation and amortization 75,100 67,906 48,272
Provision for restructuring charges,
net of payments - 4,623 -
Deferred income taxes 77,507 8,512 52,154
Amortization of discount on zero
coupon exchangeable notes - 10,844 17,297
Minority interests' share of net
income 25,439 9,134 31,075
(Increase) decrease in working capital,
net of effect of acquisition:
Amount due from FTX - - 20,000
Accounts receivable (45,543) (16,904) (77,448)
Inventories (60,843) (36,669) (10,644)
Prepaid expenses and other 2,912 (10,503) (4,157)
Accounts payable and accrued
liabilities 139,558 32,792 44,035
Accrued income taxes (1,688) 19,736 1,129
Other (6,476) 8,404 963
--------- --------- ---------
Net cash provided by operating
activities 336,207 158,545 252,569
--------- --------- ---------
Cash flow from investing activities:
Capital expenditures:
PT-FI (664,735) (450,854) (367,842)
RTM, including acquisition cost (78,735) (12,658) -
Purchase of indirect interest in PT-FI - - (211,892)
--------- --------- ---------
Net cash used in investing activities (743,470) (463,512) (579,734)
--------- --------- ---------
FREEPORT-McMoRan COPPER & GOLD INC.
STATEMENTS OF CASH FLOW
Years Ended December 31,
------------------------------------
1994 1993 1992
--------- --------- ---------
(In Thousands)
Cash flow from financing activities:
Proceeds from sale of:
Class A common stock $ - $ - $ 174,142
Preferred and preference stock 252,985 561,090 217,867
9 3/4% Senior notes 116,276 - -
PT-FI common shares - - 212,485
Proceeds from debt 1,591,561 457,971 153,000
Repayment of debt (1,437,807) (931,439) (7,848)
Net proceeds from infrastructure
financing 110,825 20,000 -
Cash dividends paid:
Common stock (123,503) (118,575) (111,365)
Preferred and preference stock (46,822) (22,981) (4,407)
Minority interests (25,798) (19,143) (15,643)
--------- --------- ---------
Net cash provided by (used in)
financing activities 437,717 (53,077) 618,231
--------- --------- ---------
Net increase (decrease) in cash and
short-term investments 30,454 (358,044) 291,066
Cash and short-term investments at
beginning of year 13,798 371,842 80,776
--------- --------- ---------
Cash and short-term investments at
end of year $ 44,252 $ 13,798 $ 371,842
========= ========= =========
Interest paid $ 26,332 $ 29,122 $ 22,581
========= ========= =========
Income taxes paid $ 47,593 $ 39,314 $ 50,029
========= ========= =========
The accompanying notes, which include information in Notes 1, 2, 3, 7 and 11
regarding noncash transactions, are an integral part of these financial
statements.
FREEPORT-McMoRan COPPER & GOLD INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31,
------------------------------
1994 1993 1992
-------- -------- --------
(In Thousands)
Special Preference Stock:
Balance at beginning of year $224,400 $224,400 $ -
Conversions to Class A common stock (500) - -
Sale of shares to the public - - 224,400
-------- -------- --------
Balance at end of year 223,900 224,400 224,400
-------- -------- --------
Step-Up Preferred Stock:
Balance at beginning of year 350,000 - -
Sale of shares to the public - 350,000 -
-------- -------- --------
Balance at end of year 350,000 350,000 -
-------- -------- --------
Class A common stock:
Balance at beginning of year 5,802 5,318 2,000
Two-for-one stock split - - 2,000
Sale of shares to the public - - 863
Conversions of special preference stock,
Class B common stock and zero coupon
exchangeable notes 795 484 455
-------- -------- --------
Balance at end of year 6,597 5,802 5,318
-------- -------- --------
Class B common stock:
Balance at beginning of year 14,213 14,213 7,106
Two-for-one stock split - - 7,107
Conversions to Class A common stock (215) - -
-------- -------- --------
Balance at end of year 13,998 14,213 14,213
-------- -------- --------
Capital in excess of par value of common stock:
Balance at beginning of year 334,166 353,697 163,439
Issuance cost of preferred and
preference stock (14,401) (21,530) (6,110)
Sale of Class A common stock - - 172,856
Conversion of special preference stock
and zero coupon exchangeable notes 100,197 79,241 69,945
Two-for-one stock split - - (9,107)
Cash dividends on common stock (57,405) (65,587) (37,326)
Dividends on preferred stock (11,655) -
-------- -------- --------
Balance at end of year 362,557 334,166 353,697
-------- -------- --------
Retained earnings:
Balance at beginning of year 29,358 48,829 -
Net income 130,241 50,816 129,893
Cash dividends on common stock (66,098) (52,988) (74,039)
Dividends on preferred stock (51,838) (17,299) (7,025)
-------- -------- --------
Balance at end of year 41,663 29,358 48,829
-------- -------- --------
Cumulative foreign translation adjustment:
Balance at beginning of year (10,012) - -
Adjustment 6,272 (10,012) -
-------- -------- --------
Balance at end of year (3,740) (10,012) -
-------- -------- --------
Total stockholders' equity $994,975 $947,927 $646,457
======== ======== ========
The accompanying notes are an integral part of these financial statements.
FREEPORT-McMoRan COPPER & GOLD INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation. The consolidated financial statements of Freeport-
McMoRan Copper & Gold Inc. (FCX) include its majority-owned subsidiaries
including; P.T. Freeport Indonesia Company (PT-FI), Rio Tinto Minera, S.A.
(RTM), P.T. IRJA Eastern Minerals Corporation (Eastern Mining) and certain
joint ventures which have PT-FI guarantees. All significant intercompany
transactions have been eliminated. Certain prior year amounts have been
reclassified to conform to the 1994 presentation.
Cash and Short-Term Investments. Highly liquid investments purchased with a
maturity of three months or less are considered cash equivalents.
Inventories. Inventories are generally stated at the lower of cost or market.
PT-FI uses the average cost method and RTM uses the first-in, first-out (FIFO)
cost method.
Property, Plant and Equipment. Property, plant and equipment is carried at
cost. Mineral exploration costs are expensed as incurred, except in the year
the property is deemed to contain a viable mineral deposit, in which case they
are capitalized. Development costs, including interest incurred during the
construction and development period, are capitalized. Expenditures for
replacements and improvements are capitalized. Depreciation for mining and
milling operations is determined using the unit-of-production method based on
estimated recoverable reserves. Other assets, including RTM's smelter, are
depreciated on a straight-line basis over estimated useful lives of 15 to 20
years for buildings and 3 to 25 years for machinery and equipment.
Derivatives. Derivatives have been used by FCX to manage certain market risks
resulting from fluctuations in commodity prices (primarily copper and gold),
foreign exchange rates and interest rates by creating offsetting market
exposures. Costs or premiums and gains or losses on the contracts, including
closed contracts, are recognized with the hedged transaction. Also, gains or
losses are recognized if the hedged transaction is no longer expected to
occur. FCX monitors its credit risk on an ongoing basis and considers this
risk to be minimal because its contracts are with a diversified group of
financially strong counterparties.
Redeemable preferred stocks and gold and silver denominated loans are
treated as hedges of future production and are carried at their original issue
value (the acquisition date value for the RTM gold and silver denominated
loans). As principal payments occur, differences between the carrying value
and the payment are recorded as an adjustment to revenues.
Concentrate Sales. Revenues from PT-FI's concentrate sales are recorded net
of royalties, treatment costs and the impact of the price protection program.
PT-FI's concentrate sales agreements provide for provisional billings based on
world metals prices, primarily the London Metal Exchange, with actual
settlement on the copper portion generally based on appropriate future prices.
Revenues, recorded initially using provisional prices, are adjusted using
current prices. At December 31, 1994, copper sales totaling 192 million
pounds remained to be contractually priced in 1995. As a result of PT-FI's
hedging activities, it will realize an average of $1.01 per pound on these
sales. Gold sales are priced according to individual contract terms.
In December 1991, PT-FI and the Government of Indonesia (the Government)
signed a contract of work (the COW) with a 30-year term and two 10-year
extensions permitted. Under the COW, PT-FI pays the Government a royalty of
1.5 percent to 3.5 percent on the value of copper sold, net of delivery costs
and treatment and refining charges, and a 1 percent royalty on gold and silver
sales. The royalties totaled $19.4 million in 1994, $9.5 million in 1993 and
$15.7 million in 1992.
Foreign Translation Adjustment. RTM's assets and liabilities are translated
to U.S. dollars using the exchange rate in effect at the balance sheet date,
with translation adjustments recorded as a component of stockholders' equity.
Results of operations are translated using the average exchange rates during
the period.
Changes in Accounting Principle. During 1993, FCX adopted the following
changes in accounting principle effective January 1, 1993:
Periodic Scheduled Maintenance - These costs are expensed when incurred.
Previously, costs were capitalized when incurred and amortized.
Deferred Charges - Costs that directly relate to the acquisition,
construction and development of assets and to the issuance of debt and related
instruments are deferred. Previously, certain other costs that benefited
future periods were deferred.
Management Information Systems (MIS) - MIS equipment and software that
have a material impact on net income are capitalized. Other MIS costs,
including equipment and purchased software, that involve immaterial amounts
(currently individual expenditures of less than $0.5 million) and short
estimated productive lives (currently less than three years) are charged to
expense when incurred. Previously, most expenditures for MIS equipment and
purchased software were capitalized.
These changes were adopted to improve the measurement of operating results
by expensing cash expenditures when incurred unless they directly relate to
long-lived asset additions. The change in accounting for MIS costs also
recognizes the rapid rate of technology change in MIS which results in a need
for continuing investments. These changes did not have a material impact on
1993 income before changes in accounting principle.
Restructuring Charges. During 1993, FCX recognized restructuring expenses
totaling $20.8 million, including $10.7 million allocated from Freeport-
McMoRan Inc. (FTX), the parent company of FCX, based on historical
allocations. The charges consisted of $8.3 million for personnel related
costs, $3.2 million for excess office space and furniture and fixtures
resulting from staff reductions, $6.1 million for downsizing its MIS structure
and $3.2 million of deferred charges relating to PT-FI's credit facility which
was substantially revised.
In connection with the restructuring project, FCX changed its accounting
systems and undertook a detailed review of its accounting records. As a
result of this process, FCX recorded a $10 million charge to production and
delivery costs comprised of $5 million for materials and supplies inventory
obsolescence; $2.5 million for revised estimates of value added taxes and
import duties related to prior years and $2.5 million for adjustments in
converting accounting systems.
2. OWNERSHIP IN PT-FI
In December 1992, FCX purchased 49 percent (10.5 million shares) of the
capital stock of a publicly traded Indonesian entity which owned 10 percent of
PT-FI. The fair market value of FCX Class A common stock at the time of the
agreement was the basis for calculating the purchase price. PT-FI issued
8,321 shares of its stock to FCX in December 1993 and 6,169 shares in January
1994 in exchange for the conversion of certain intercompany notes. FCX's
direct ownership in PT-FI totaled 81.3 percent and 80.8 percent at December
31, 1994 and 1993, respectively.
At December 31, 1994, PT-FI's net assets totaled $261.2 million, including
$57.6 million of retained earnings. FCX has several intercompany loans to PT-
FI totaling $1.3 billion at December 31, 1994 and PT-FI cannot pay dividends
if interest or principal is in arrears on certain of these loans.
3. OWNERSHIP IN RTM
In March 1993, FCX acquired a 65 percent interest in RTM and in December 1993,
RTM redeemed the remaining 35 percent. RTM is principally engaged in the
smelting and refining of copper concentrates in Spain. At December 31, 1994,
RTM's net assets totaled $80.2 million. RTM is not expected to pay dividends
in the near future. The purchase price allocation follows (in thousands):
Current assets $101,454
Current liabilities (158,445)
Property, plant and equipment 277,170
Other assets 5,358
Long-term debt (38,941)
Accrued postretirement benefits and other liabilities (176,206)
--------
Net cash investment $ 10,390
========
4. REDEEMABLE PREFERRED STOCK
In August 1993, FCX sold publicly 6 million depositary shares representing
300,000 shares of its Gold-Denominated Preferred Stock for net proceeds of
$220.4 million. Each depositary share has a cumulative quarterly cash
dividend equal to the value of 0.000875 ounces of gold and will be redeemed in
August 2003 for the cash value of 0.1 ounces of gold.
In January 1994, FCX sold publicly 4.3 million depositary shares
representing 215,279 shares of its Gold-Denominated Preferred Stock, Series II
for net proceeds of $158.5 million. Each depositary share has a cumulative
quarterly cash dividend equal to the value of 0.0008125 ounces of gold and
will be redeemed in February 2006 for the cash value of 0.1 ounces of gold.
In July 1994, FCX sold publicly 4.8 million depositary shares representing
119,000 shares of its Silver-Denominated Preferred Stock for net proceeds of
$94.5 million. Each depositary share has a cumulative quarterly cash dividend
equal to the value of 0.04125 ounces of silver. Annually, beginning in August
1999, FCX will redeem the underlying Silver-Denominated Preferred Stock in
eight equal installments.
The redeemable preferred stocks are being reported as a hedge of future
gold and silver sales for accounting purposes (Note 1).
5. STOCKHOLDERS' EQUITY
FCX has 500 million authorized shares of capital stock consisting of 250
million of Special stock, 200 million of Class B common stock and 50 million
of Preferred stock.
Special and Preferred Stock. At December 31, 1994, there were 92.3 million
shares of Special stock issued and outstanding, 66 million as Class A common
stock and 26.3 million as Special Preference Stock.
In July 1992, FCX sold publicly 8.6 million shares of its Class A common
stock and 9 million depositary shares for net proceeds of $392 million. Each
depositary share represents 2 16/17 shares of its 7% Convertible Exchangeable
Special Preference Stock, has a cumulative annual cash dividend of $1.75
(payable quarterly) and a $25 liquidation preference, and is convertible at
the option of the holder into 1.021 shares of FCX Class A common stock.
Beginning August 1995, FCX may redeem these depositary shares for cash at
$26.225 per share (declining ratably to $25 per share in March 2002) plus
accrued and unpaid dividends.
In July 1993, FCX sold publicly 14 million depositary shares representing
700,000 shares of its Step-Up Convertible Preferred Stock for net proceeds of
$340.7 million. Each depositary share has a cumulative annual cash dividend
(payable quarterly) of $1.25 through August 1996 and $1.75 thereafter and a
$25 liquidation preference, and is convertible at the option of the holder
into 0.835 shares of FCX Class A common stock. From August 1996 through
August 1999, FCX may redeem these depositary shares for 0.835 shares of FCX
Class A common stock per depositary share if the market price of FCX Class A
common stock exceeds certain specified levels. Thereafter, FCX may redeem
these depositary shares at $25 per share (payable in FCX Class A common stock,
cash or a combination of both, at FCX's option) plus accrued and unpaid
dividends.
6. INCOME TAXES
Income taxes are recorded pursuant to Statement of Financial Accounting
Standards No. 109. Substantially all temporary differences relate to
property, plant and equipment. FCX has provided a valuation allowance equal
to its tax credit carryforwards ($27 million) as these would only be used
should FCX be required to pay regular U.S. tax, which is unlikely. PT-FI's
Indonesian income tax returns for 1989-1993 are currently being reviewed by
the Indonesian tax authorities.
RTM is subject to taxation in Spain. FCX has provided a valuation
allowance equal to the future tax benefits resulting from RTM's approximately
$122 million of additional tax basis and for $5.5 million of net operating
losses because RTM has not generated taxable income in recent years.
The provision for income taxes consists of the following:
1994 1993 1992
-------- ------- --------
(In Thousands)
Current income taxes:
Indonesian $ 26,829 $54,994 $ 45,996
United States 5,406 3,933 5,376
State 150 150 200
-------- ------- --------
32,385 59,077 51,572
-------- ------- --------
Deferred income taxes:
Indonesian 91,027 4,600 52,771
United States - - (617)
-------- ------- --------
91,027 4,600 52,154
-------- ------- --------
$123,412 $63,677 $103,726
======== ======= ========
Reconciliations of the differences between income taxes computed at the
contractual Indonesian tax rate and income taxes recorded follow:
1994 1993 1992
----------------- --------------- -----------------
Amount Percent Amount Percent Amount Percent
-------- ------- ------- ------- -------- -------
(Dollars In Thousands)
Income taxes computed at the
contractual Indonesian tax rate $ 97,682 35% $42,656 35% $ 92,643 35%
Indonesian tax withheld on:
Dividend payments 22,090 8 19,765 16 11,732 4
Interest payments 9,161 3 4,170 3 - -
Increase (decrease) attributable to:
Intercompany interest expense (25,536) (9) (18,645) (15) - -
RTM net loss 2,208 1 5,500 5 - -
U.S. alternative minimum tax 5,556 2 4,083 3 5,302 2
Other, net 12,251 4 6,148 5 (5,951) (2)
-------- -- ------- -- -------- --
Provision for income taxes $123,412 44% $63,677 52% $103,726 39%
======== == ======= == ======== ==
7. LONG-TERM DEBT
December 31,
-------------------
1994 1993
-------- --------
(In Thousands)
Notes payable:
PT-FI credit agreement, average rate 6.5 in 1994
and 4.4% in 1993 $ 55,000 $ 13,000
RTM project financing, average rate 8.3% in 1994 110,000 -
ALatieF loan, average rate 6.7% in 1994 57,000 60,000
Equipment loan 70,000 -
Other, primarily RTM borrowings 21,125 46,336
Publicly traded notes:
Zero coupon exchangeable notes - 102,039
9 3/4% Senior Notes due 2001 120,000 -
Gold and silver denominated loans, average
rate 1.2% in 1994 and 1.3% in 1993 16,585 39,284
Capital lease obligation, net of $244 million
in future interest (Note 10) 100,000 -
-------- --------
549,710 260,659
Less current portion and short-term borrowings 24,098 48,791
-------- --------
$525,612 $211,868
======== ========
Notes Payable. FTX has a variable rate credit agreement (the Credit
Agreement), in which PT-FI participates, structured as a revolving line of
credit through June 1996 followed by a 3 1/2 year reducing revolver. The
Credit Agreement is part of an $800 million committed credit facility and is
subject to a borrowing base, redetermined annually by the banks, which
establishes maximum consolidated debt for FTX and its subsidiaries. PT-FI's
limit under the facility is $550 million, subject to the borrowing base. FCX
and FTX guarantee PT-FI's borrowings under the Credit Agreement. The Credit
Agreement provides for working capital requirements, specified coverage of
fixed charges and restrictions on other borrowings. PT-FI assigned its
existing and future sales contracts and pledged its rights under the COW and
certain assets as security for its borrowings. As of December 31, 1994,
$466.7 million was available under the borrowing base and $377 million of
borrowings were unused under the credit facility. To the extent FTX and its
other subsidiaries incur additional debt, the amount available to PT-FI under
the Credit Agreement may be reduced.
FTX is pursuing a plan to separate its two principal businesses,
copper/gold and agricultural minerals, into two independent financial and
operating entities. To accomplish this plan, FTX will use a portion of the
FCX shares it currently owns (140.7 million shares or 68.3 percent at December
31, 1994) to restructure its liabilities including its long-term debt and
would make a pro-rata distribution of its remaining shares to the FTX common
stockholders (the Distribution). FTX is contingently liable under guarantees
relating to the debt of FM Properties Inc. (FMPO), which totaled $132.1
million as of December 31, 1994. FMPO is endeavoring to refinance its debt
with an objective of eliminating the FTX guarantee. In the event that FMPO's
refinancing is not complete at the time of the Distribution, an arrangement is
being considered that would involve FCX's guaranteeing a significant portion
of FMPO's debt pending completion of FMPO's refinancing. As a result of the
Distribution, which will require a series of steps to implement over several
months, FTX would no longer own any interest in FCX. In connection with this
restructuring plan, the Credit Agreement is expected to be modified to become
a separate facility for PT-FI and a new facility will be arranged for FCX and
PT-FI. The Distribution is contingent on a number of factors including
changing the voting rights of FCX stockholders so that the Class B
stockholders elect 80 percent of the FCX directors and the Class A
stockholders and preferred stockholders elect the balance. The change in
voting rights is subject to FCX Class A stockholder approval.
In 1994, RTM obtained variable rate project financing (the RTM Facility)
consisting of a $225 million term loan facility and a $65 million working
capital facility, both nonrecourse to FCX. The term loan facility matures in
thirty-six equal quarterly payments starting September 30, 1996. The working
capital facility matures June 2005. The RTM Facility requires certain hedging
arrangements, restricts other borrowings and specifies certain coverage
ratios. Prior to the completion of the expansion, the RTM Facility is secured
by RTM's capital stock and thereafter by 51 percent of the capital stock.
The ALatieF bank loan, entered into as part of the PT-FI infrastructure
sales (Note 10), has a variable interest rate and is guaranteed by PT-FI.
Principal payments total $3 million annually with a balloon payment in
December 1998.
In December 1994, FCX entered into a $70 million variable rate equipment
loan secured by certain PT-FI assets. Principal payments total $7 million
annually with a balloon payment in December 2001.
Publicly Traded Notes. In 1991, FCX sold $1.035 billion face amount of Zero
Coupon Exchangeable Notes. Notes with a face amount of $386 million, $322.6
million and $326.4 million were presented for exchange in 1994-1992,
respectively, for which FCX issued 5.8 million, 4.8 million and 4.5 million
shares of Class A common stock. FCX also paid $0.3 million in 1994 and $7.9
million in 1992.
In April 1994, a wholly owned subsidiary of FCX sold publicly $120
million of 9 3/4% Senior Notes which are guaranteed by FCX.
Gold and Silver Denominated Loans. In December 1994, RTM used borrowings
under the RTM facility to in effect defease its two gold and silver
denominated loans. RTM retired one of its gold and silver loans and purchased
55,000 ounces of gold at $379.81 per ounce to offset the remaining gold loan
(5,000 ounces payable quarterly). The purchased gold is recorded as product
inventory or other long-term assets according to the payment terms.
Minimum Principal Payments. Payments scheduled for each of the five
succeeding years based on the amounts and terms outstanding at December 31,
1994 are $24.1 million in 1995, $29.7 million in 1996, $39.6 million in 1997,
$82 million in 1998 and $34.7 million in 1999.
Capitalized Interest. Capitalized interest totaled $35.1 million in 1994,
$24.5 million in 1993 and $24 million in 1992.
8. MAJOR CUSTOMERS
FCX markets its products worldwide primarily pursuant to the terms of long-
term contracts. The following table details the percentage of revenues
attributable to various contracts:
1994 1993 1992
---- ---- ----
Long-term contracts:
Japanese companies 19% 33% 34%
Swiss firm 10 10 13
Other 57 49 19
Spot sales 14 8 34
The contracts with a group of Japanese companies and the Swiss firm extend
through December 31, 2000. There are several other long-term agreements in
place, each representing less than ten percent of sales. Certain terms of
these long-term contracts are negotiated annually. Approximately 16 percent
and 9 percent of PT-FI's total concentrate sales in 1994 and 1993,
respectively, were made to RTM. Upon completion of RTM's smelter expansion
and the proposed Gresik smelter (Note 10), FCX anticipates that approximately
70 percent of PT-FI's expanded annual concentrate production will be sold to
affiliates at market prices.
9. TRANSACTIONS WITH FTX AND EMPLOYEE BENEFITS
Management Services Agreement. FTX furnishes certain management and
administrative services to FCX under a management services agreement
terminable by either party on December 31 in any year, upon six months written
notice. These costs, which include related overhead, are not interest
bearing, reimbursed monthly and totaled $54.3 million in 1994, $49 million in
1993 (excluding restructuring costs) and $44.9 million in 1992.
FCX expects that the management services agreement will remain in effect
for less than one year following the Distribution. It is anticipated that a
substantial number of persons, including certain existing officers and
employees of FTX, will become officers and employees of FCX. As a result, FCX
is currently in the process of establishing its own employee benefit and stock
option plans and will assume certain liabilities associated with FTX's
employee benefit and stock option plans.
Pension Plans. Substantially all United States employees are covered by FTX's
defined benefit plan. The accumulated benefits and plan assets are not
separately determined and amounts allocated to FCX under this plan have not
been material. As of December 31, 1994, FTX's accumulated benefit obligation
under the plan was fully funded.
PT-FI has a defined benefit plan covering substantially all of its
Indonesian national employees which is funded through cash payments to
retirees at the date of retirement. Benefits are based on years of service
and level of compensation. The actuarial present value of the accumulated
benefit obligation, determined by the projected credit method, was $7.1
million and was fully accrued at December 31, 1994. The projected benefit
obligation at December 31, 1994, was $13.2 million based on a discount rate of
11 percent and a 9 percent annual increase in future compensation levels.
RTM has an unfunded contractual obligation to supplement the amounts paid
to retired employees. Based on a discount rate of 8 percent, the accrued
liability totaled $84.7 million at December 31, 1994. RTM expensed $6.8
million in 1994 and $5.2 million since its acquisition in 1993 for interest on
this obligation. Cash payments were $7.8 million in 1994 and $8 million in
1993.
Other Postretirement Benefits. FTX provides certain health care and life
insurance benefits for retired employees, including employees seconded to FCX.
The related expense allocated from FTX totaled $1.6 million in 1994 ($0.2
million for service cost and $1.4 million in interest for prior period
services), $1.1 million in 1993 ($0.2 million and $0.9 million, respectively)
and $1.3 million in 1992 ($0.3 million and $1 million, respectively). Summary
information of the plan follows:
December 31,
------------------
1994 1993
-------- -------
(In Thousands)
Actuarial present value of accumulated
postretirement obligation:
Retirees $11,721 $11,046
Fully eligible active plan participants 944 1,312
Other active plan participants 494 1,314
------- -------
Total accumulated postretirement obligation 13,159 13,672
Unrecognized net gain (loss) 433 (1,328)
------- -------
Accrued postretirement benefit cost $13,592 $12,344
======= =======
The initial health care cost trend rate used was 11.5 percent for 1993,
decreasing 0.5 percent per year until reaching 6 percent. A one percent
increase in the trend rate would increase the amounts by approximately 10
percent. The discount rate used was 8.25 percent in 1994 and 7 percent in
1993. FTX has the right to modify or terminate these benefits.
10. COMMITMENTS AND CONTINGENCIES
Environmental. PT-FI believes it is in compliance with all applicable
Indonesian environmental laws, rules and regulations. Based on current
Indonesian environmental regulations, eventual mine closure and reclamation
costs for Irian Jaya mining operations are not expected to be material.
RTM's expansion costs include approximately $18 million to modify and
expand its sulphuric acid plants. Subsequent to expansion, RTM believes its
facilities will be in compliance with all existing Spanish and European
environmental standards. Additionally, at December 31, 1994 FCX had an
accrual of $12.9 million related to RTM's impending mine closure.
Long-Term Contracts and Operating Leases. In June 1994, RTM signed a turnkey
contract to expand its smelter capacity to 270,000 metric tons of metal per
year by early 1996 at a cost of approximately $215 million, of which $154
million had not been incurred at December 31, 1994. In addition, RTM has
commitments to purchase concentrate (excluding PT-FI) of 338,750 metric tons
in 1995, 285,000 metric tons in 1996, 330,000 metric tons in 1997, 280,000
metric tons in 1998 and a total of 280,000 metric tons from 1999-2000, at
market prices.
FCX's minimum annual contractual charges under noncancellable long-term
contracts and operating leases which extend to 1999 total $26.9 million, with
$8.4 million in 1995, $7.4 million in 1996, $5.6 million in 1997, $3.3 million
in 1998 and $2.2 million in 1999. Total rental expense under long-term
contracts and operating leases amounted to $11.7 million in 1994, $15.4
million in 1993 and $3.9 million in 1992.
Gresik Smelter. In January 1995, FCX agreed in principle to form a joint
venture, 20.0 percent owned by FCX, to develop a 200,000 metric tons of metal
per year copper smelter in Gresik, Indonesia. Design is under way and
construction is expected to begin in 1995, with operations commencing as soon
as the second half of 1998. Alternatives for financing the estimated $550
million aggregate project cost, which excludes approximately $100 million of
working capital, are being reviewed. It is contemplated that PT-FI would
provide all of the smelter's concentrate requirements at market rates;
however, for the first fifteen years of operations the treatment and refining
charges would not fall below a certain minimum rate. FCX has also agreed to
assign its earnings in the joint venture to support an after-tax return of 13
percent to the 70 percent partner, if necessary, for the first twenty years of
commercial operations. Additionally, the 10 percent partner has an option,
exercisable on the third anniversary of commercial operations, to require FCX
to purchase its interest at a 10 percent annual return.
Infrastructure Asset Sales. PT-FI entered into joint ventures owned one-third
by PT-FI and two-thirds by P.T. ALatieF Nusakarya Corporation (ALatieF), an
Indonesian investor, to purchase and manage certain PT-FI infrastructure
assets for $270 million. The management agreements, which are terminable by
either party upon six months written notice after debt repayment, provide
ALatieF with a guaranteed minimum rate of return on its investment and result
in the joint ventures being consolidated for financial reporting purposes.
The joint ventures have purchased $194.9 million of infrastructure assets
through December 31, 1994 and are expected to purchase the final $75.1 million
of assets in 1995. Funding for the purchases consists of $90 million in
equity contributions by the joint venture partners, the ALatieF bank loan and
the 9 3/4% Senior Notes (Note 7).
In December 1994, PT-FI entered into a joint venture, 30 percent owned by
PT-FI, to purchase and manage its power-related assets for an estimated $215
million. A $100 million sale occurred in December 1994 and the remaining
sales are expected to take place by the end of 1995. PT-FI guaranteed the
joint venture a minimum rate of return and is obligated to make minimum
payments sufficient to allow the joint venture to meet its debt service. PT-
FI accounts for its investment in the joint venture using the equity method.
PT-FI is proceeding with plans to sell other nonoperating assets whereby
the purchaser will operate the assets and provide services to PT-FI and its
designees.
11. FINANCIAL INSTRUMENTS
Summarized below are the financial instruments (including all derivative
instruments) whose carrying amount is not equal to its fair value at December
31, 1994. Fair values are based on quoted market prices and other available
market information.
Carrying Fair
Amount Value
-------- --------
(In Thousands)
Price protection program:
Open contracts in asset position $ 25,165 $ 84,602
Open contracts in liability position (98,900) (234,134)
Debt:
Long-term debt (Note 7) (549,710) (552,250)
Foreign exchange contracts:
$U.S./Deutsche marks - 2,750
$U.S./Spanish pesetas - 2,459
Interest rate swap - (462)
Redeemable preferred stocks (Note 4) (500,007) (437,999)
Price Protection Program. PT-FI has forward and option contracts to hedge the
market risk associated with fluctuations in commodity prices. At December 31,
1994, PT-FI had sold forward 608.5 million pounds of copper at an average
price of $0.92 per pound for delivery at various dates through March 1996.
PT-FI also has call option contracts for 218.3 million pounds of copper from
January-June 1995 with an average price of $0.98 per pound and put option
contracts for 993.7 million pounds of copper from October 1995 to December
1996 at an average price of $0.87 per pound. Deferred gains on closed
contracts at December 31, 1994 totaled $36.2 million.
At December 31, 1994, RTM had sold forward 56,280 ounces of gold at
$394.75 per ounce and 1,106,520 ounces of silver at $4.82 per ounce for 1995.
RTM had also bought forward 2.5 million pounds of copper at $1.36 per pound to
eliminate the copper price risk of its concentrate inventory. Additionally,
RTM has written call option contracts on 19.8 million pounds of copper at an
average price of $1.18 per pound to assure minimum price participations on a
portion of its estimated 1995 concentrate purchases. A deferred loss of $1.6
million was recorded in 1994 resulting from RTM's repayment of one of its gold
and silver loans.
Debt. Portions of RTM's smelter expansion contract are denominated in
Deutsche marks and Spanish pesetas while the related financing is denominated
in U.S. dollars. To eliminate exposure to fluctuations in foreign exchange
rates, RTM entered foreign exchange contracts which mature through March 1996,
totaling $73.8 million on 117 million Deutsche marks and $85.8 million on 11.8
billion Spanish pesetas at December 31, 1994.
PT-FI entered into an interest rate swap in 1991 to manage exposure to
interest rate changes on a portion of its variable rate debt. PT-FI pays 8.3
percent on $71.4 million of financing at December 31, 1994, reducing annually
through 1999. PT-FI received an average interest rate of 4 percent in 1994,
3.4 percent in 1993 and 4 percent in 1992, resulting in additional interest
costs of $3.3 million, $4.8 million and $4.3 million, respectively.
12. SUPPLEMENTARY MINERAL RESERVE INFORMATION (UNAUDITED)
FCX's estimated proved and probable mineral reserves follow:
Average Ore Grade Per Ton Recoverable Content
----------------------------------------- -----------------------------
Year-End Ore Copper Gold Silver Copper Gold Silver
-------- ------------- ------ -------------- --------------- --------- --------- ---------
(Metric Tons) (%) (Grams)(Ounce) (Grams) (Ounce) (Billions (Millions (Millions
of Lbs.) of Ozs.) of Ozs.)
PT-FI
1990 445,741,000 1.59 1.71 .055 4.60 .148 13.9 19.5 34.7
1991 768,045,000 1.45 1.66 .053 3.86 .124 21.8 32.4 50.0
1992 733,173,000 1.47 1.72 .055 3.87 .124 20.9 32.1 44.7
1993 1,074,100,000 1.31 1.47 .047 4.04 .130 26.8 39.1 76.7
1994 1,125,640,000 1.30 1.42 .046 4.06 .131 28.0 39.6 80.8
RTM
1993 12,700,000 - 1.03 .033 50.45 1.622 - .4 8.5
1994 4,531,000 - 1.21 .039 53.74 1.728 - .1 3.2
13. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Net Income (Loss) Net Income
Operating Applicable to (Loss)
Revenues Income (Loss) Common Stock Per Share
---------- ------------- ----------------- ----------
(In Thousands, Except Per Share Amounts)
1994
1st Quarter $ 266,153 $ 53,489 $13,559 $.07
2nd Quarter 281,452 52,513 9,718 .05
3rd Quarter 313,384 63,361 13,463 .07
4th Quarter a 351,295 110,771 41,663 .20
---------- -------- -------
$1,212,284 $280,134 $78,403 .38
========== ======== =======
1993
1st Quarter b,c $133,515 $ 25,225 $(5,160) $(.03)
2nd Quarter b 215,033 (18,302) (21,524) (.11)
3rd Quarter 261,504 58,950 19,188 .10
4th Quarter 315,880 89,446 29,358 .15
-------- -------- -------
$925,932 $155,319 $21,862 .11
======== ======== =======
a. In December 1994, PT-FI settled its property and business interruption
insurance claims for the June 1993 ore pass cave-in, recording a $32.6
million gain ($17.4 million to net income or $0.08 per share).
b. Includes restructuring charges of $3.4 million ($1.9 million to net income
or $0.01 per share) and $17.4 million ($9.6 million to net income or $0.05
per share) during the first and second quarters, respectively. The second
quarter includes nonrecurring charges totaling $16.3 million ($9 million
to net income or $0.05 per share).
c. Includes a $9.9 million charge to net income ($0.05 per share) for the
cumulative effect of changes in accounting principle.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF
FREEPORT-McMoRan COPPER & GOLD INC.:
We have audited the accompanying balance sheets of Freeport-McMoRan Copper &
Gold Inc. (the Company), a Delaware Corporation, as of December 31, 1994 and
1993, and the related statements of income, cash flow and stockholders' equity
for each of the three years in the period ended December 31, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of December
31, 1994 and 1993 and the results of its operations and its cash flow for each
of the three years in the period ended December 31, 1994 in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the financial statements, effective January 1,
1993, the Company changed its method of accounting for periodic scheduled
maintenance costs, deferred charges and costs of management information
systems.
New Orleans, Louisiana, Arthur Andersen LLP
January 24, 1995
FCX Class A Common Shares.
Our Class A common shares trade on the New York Stock Exchange (NYSE) and on
the Australian Stock Exchange under the symbol FCX. The FCX share price is
reported daily in the financial press under "FMCG" in most listings of NYSE
securities. At year-end 1994 the number of holders of record of our Class A
common shares was 19,873.
Class A common share price ranges on the NYSE composite tape during 1994
and 1993:
1994 1993
----------------- ------------------
High Low High Low
------ ------ ------ ------
First Quarter $27.50 $23.00 $26.13 $19.63
Second Quarter 25.63 21.13 27.38 22.38
Third Quarter 25.50 20.63 26.25 17.63
Fourth Quarter 25.00 19.63 25.88 17.50
Class A Common Share Dividends.
FCX has a policy of distributing to its shareholders all dividends the company
receives as the majority shareholder in PT-FI, less tax obligations, certain
administrative costs, investment opportunities and debt repayment. PT-FI also
has a policy of maximizing its dividend payments after considering its
operational, developmental and exploratory needs as well as debt repayment.
Cash dividends declared and paid for the quarterly periods of 1994 and
1993:
1994
-------------------------------------------------
Amount Record Payment
Per Share Date Date
--------- ------------- ------------
First Quarter $.15 Apr. 15, 1994 May 1, 1994
Second Quarter .15 Jul. 15, 1994 Aug. 1, 1994
Third Quarter .15 Oct. 17, 1994 Nov. 1, 1994
Fourth Quarter .15 Jan. 17, 1995 Feb. 1, 1995
1993
-------------------------------------------------
Amount Record Payment
Per Share Date Date
--------- ------------- ------------
First Quarter $.15 Apr. 15, 1993 May 1, 1993
Second Quarter .15 Jul. 15, 1993 Aug. 1, 1993
Third Quarter .15 Oct. 15, 1993 Nov. 1, 1993
Fourth Quarter .15 Jan. 14, 1994 Feb. 1, 1994
EX-21
10
EXHIBIT 21.1
List of Subsidiaries of
FREEPORT-McMoRan COPPER & GOLD INC.
Name Under Which
Entity Organized It Does Business
------------------------------- --------- ----------------
P.T. Freeport Indonesia Company Indonesia Same
and Delaware
Rio Tinto Metal, S.A. Spain Same
EX-23
11
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference of our reports included herein or
incorporated by reference in this Form 10-K, into Freeport-
McMoRan Copper & Gold Inc.'s previously filed Registration
Statements on Forms S-3 (File Nos. 33-45787, 33-63376, 33-66098,
33-52257-01 and 33-52503).
/s/ Arthur Andersen LLP
-------------------------
Arthur Andersen LLP
New Orleans, Louisiana
March 23, 1995
EX-24
12
Exhibit 24.1
FREEPORT-McMoRan COPPER & GOLD INC.
Certificate of Secretary
------------------------
I, Michael C. Kilanowski, Jr., Secretary of Freeport-
McMoRan Copper & Gold Inc. (the "Corporation"), a Delaware
corporation, do hereby certify that the following resolution was
duly adopted by the Board of Directors of the Corporation at a
meeting held on December 13, 1988, and that such resolution has
not been amended, modified or rescinded and is in full force and
effect:
RESOLVED, That any report, registration statement
or other form filed on behalf of this corporation
pursuant to the Securities Exchange Act of 1934, or any
amendment to any such report, registration statement or
other form, may be signed on behalf of any director or
officer of this corporation pursuant to a power of
attorney executed by such director or officer.
IN WITNESS WHEREOF, I have hereunto set my name and the
seal of the Corporation this 10th day of March, 1995.
/s/Michael C. Kilanowski, Jr.
(Seal) -----------------------------
Michael C. Kilanowski, Jr.
Secretary
EX-24
13
Exhibit 24.2
POWER OF ATTORNEY
-----------------
BE IT KNOWN: That the undersigned, in his
capacity or capacities as an officer and/or a member of the
Board of Directors of Freeport-McMoRan Copper & Gold Inc.,
a Delaware corporation (the "Company"), does hereby make,
constitute and appoint JAMES R. MOFFETT, RENE L. LATIOLAIS,
and GEORGE A. MEALEY, and each of them acting individually,
his true and lawful attorney-in-fact with power to act
without the others and with full power of substitution, to
execute, deliver and file, for and on behalf of him, in his
name and in his capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year
ended December 31, 1994, and any amendment or amendments
thereto and any other document in support thereof or
supplemental thereto, and the undersigned hereby grants to
said attorneys, and each of them, full power and authority
to do and perform each and every act and thing whatsoever
that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the foregoing as
the undersigned might or could do personally or in the
capacity or capacities as aforesaid, hereby ratifying and
confirming all acts and things which said attorney or
attorneys may do or cause to be done by virtue of this
Power of Attorney.
EXECUTED this 21st day of February, 1995.
/s/ John T. Eads
-------------------------
John T. Eads
POWER OF ATTORNEY
-----------------
BE IT KNOWN: That the undersigned, in his
capacity or capacities as an officer and/or a member of the
Board of Directors of Freeport-McMoRan Copper & Gold Inc.,
a Delaware corporation (the "Company"), does hereby make,
constitute and appoint JAMES R. MOFFETT, RENE L. LATIOLAIS,
and GEORGE A. MEALEY, and each of them acting individually,
his true and lawful attorney-in-fact with power to act
without the others and with full power of substitution, to
execute, deliver and file, for and on behalf of him, in his
name and in his capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year
ended December 31, 1994, and any amendment or amendments
thereto and any other document in support thereof or
supplemental thereto, and the undersigned hereby grants to
said attorneys, and each of them, full power and authority
to do and perform each and every act and thing whatsoever
that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the foregoing as
the undersigned might or could do personally or in the
capacity or capacities as aforesaid, hereby ratifying and
confirming all acts and things which said attorney or
attorneys may do or cause to be done by virtue of this
Power of Attorney.
EXECUTED this 21st day of February, 1995.
/s/ Richard C. Adkerson
-------------------------
Richard C. Adkerson
POWER OF ATTORNEY
-----------------
BE IT KNOWN: That the undersigned, in his
capacity or capacities as an officer and/or a member of the
Board of Directors of Freeport-McMoRan Copper & Gold Inc.,
a Delaware corporation (the "Company"), does hereby make,
constitute and appoint JAMES R. MOFFETT, RENE L. LATIOLAIS,
and GEORGE A. MEALEY, and each of them acting individually,
his true and lawful attorney-in-fact with power to act
without the others and with full power of substitution, to
execute, deliver and file, for and on behalf of him, in his
name and in his capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year
ended December 31, 1994, and any amendment or amendments
thereto and any other document in support thereof or
supplemental thereto, and the undersigned hereby grants to
said attorneys, and each of them, full power and authority
to do and perform each and every act and thing whatsoever
that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the foregoing as
the undersigned might or could do personally or in the
capacity or capacities as aforesaid, hereby ratifying and
confirming all acts and things which said attorney or
attorneys may do or cause to be done by virtue of this
Power of Attorney.
EXECUTED this 21st day of February, 1995.
/s/ Leland O. Erdahl
-------------------------
Leland O. Erdahl
POWER OF ATTORNEY
-----------------
BE IT KNOWN: That the undersigned, in his
capacity or capacities as an officer and/or a member of the
Board of Directors of Freeport-McMoRan Copper & Gold Inc.,
a Delaware corporation (the "Company"), does hereby make,
constitute and appoint JAMES R. MOFFETT, RENE L. LATIOLAIS,
and GEORGE A. MEALEY, and each of them acting individually,
his true and lawful attorney-in-fact with power to act
without the others and with full power of substitution, to
execute, deliver and file, for and on behalf of him, in his
name and in his capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year
ended December 31, 1994, and any amendment or amendments
thereto and any other document in support thereof or
supplemental thereto, and the undersigned hereby grants to
said attorneys, and each of them, full power and authority
to do and perform each and every act and thing whatsoever
that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the foregoing as
the undersigned might or could do personally or in the
capacity or capacities as aforesaid, hereby ratifying and
confirming all acts and things which said attorney or
attorneys may do or cause to be done by virtue of this
Power of Attorney.
EXECUTED this 21st day of February, 1995.
/s/ Ronald Grossman
-------------------------
Ronald Grossman
POWER OF ATTORNEY
-----------------
BE IT KNOWN: That the undersigned, in his
capacity or capacities as an officer and/or a member of the
Board of Directors of Freeport-McMoRan Copper & Gold Inc.,
a Delaware corporation (the "Company"), does hereby make,
constitute and appoint JAMES R. MOFFETT, RENE L. LATIOLAIS,
and GEORGE A. MEALEY, and each of them acting individually,
his true and lawful attorney-in-fact with power to act
without the others and with full power of substitution, to
execute, deliver and file, for and on behalf of him, in his
name and in his capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year
ended December 31, 1994, and any amendment or amendments
thereto and any other document in support thereof or
supplemental thereto, and the undersigned hereby grants to
said attorneys, and each of them, full power and authority
to do and perform each and every act and thing whatsoever
that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the foregoing as
the undersigned might or could do personally or in the
capacity or capacities as aforesaid, hereby ratifying and
confirming all acts and things which said attorney or
attorneys may do or cause to be done by virtue of this
Power of Attorney.
EXECUTED this 21st day of February, 1995.
/s/ Wolfgang F. Siegel
-------------------------
Wolfgang F. Siegel
POWER OF ATTORNEY
-----------------
BE IT KNOWN: That the undersigned, in his
capacity or capacities as an officer and/or a member of the
Board of Directors of Freeport-McMoRan Copper & Gold Inc.,
a Delaware corporation (the "Company"), does hereby make,
constitute and appoint JAMES R. MOFFETT, RENE L. LATIOLAIS,
and GEORGE A. MEALEY, and each of them acting individually,
his true and lawful attorney-in-fact with power to act
without the others and with full power of substitution, to
execute, deliver and file, for and on behalf of him, in his
name and in his capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year
ended December 31, 1994, and any amendment or amendments
thereto and any other document in support thereof or
supplemental thereto, and the undersigned hereby grants to
said attorneys, and each of them, full power and authority
to do and perform each and every act and thing whatsoever
that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the foregoing as
the undersigned might or could do personally or in the
capacity or capacities as aforesaid, hereby ratifying and
confirming all acts and things which said attorney or
attorneys may do or cause to be done by virtue of this
Power of Attorney.
EXECUTED this 21st day of February, 1995.
/s/ Elwin E. Smith
---------------------------
Elwin E. Smith
POWER OF ATTORNEY
-----------------
BE IT KNOWN: That the undersigned, in his
capacity or capacities as an officer and/or a member of the
Board of Directors of Freeport-McMoRan Copper & Gold Inc.,
a Delaware corporation (the "Company"), does hereby make,
constitute and appoint JAMES R. MOFFETT, RENE L. LATIOLAIS,
and GEORGE A. MEALEY, and each of them acting individually,
his true and lawful attorney-in-fact with power to act
without the others and with full power of substitution, to
execute, deliver and file, for and on behalf of him, in his
name and in his capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year
ended December 31, 1994, and any amendment or amendments
thereto and any other document in support thereof or
supplemental thereto, and the undersigned hereby grants to
said attorneys, and each of them, full power and authority
to do and perform each and every act and thing whatsoever
that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the foregoing as
the undersigned might or could do personally or in the
capacity or capacities as aforesaid, hereby ratifying and
confirming all acts and things which said attorney or
attorneys may do or cause to be done by virtue of this
Power of Attorney.
EXECUTED this 21st day of February, 1995.
/s/ Eiji Umene
---------------------------
Eiji Umene
POWER OF ATTORNEY
-----------------
BE IT KNOWN: That the undersigned, in his
capacity or capacities as an officer and/or a member of the
Board of Directors of Freeport-McMoRan Copper & Gold Inc.,
a Delaware corporation (the "Company"), does hereby make,
constitute and appoint JAMES R. MOFFETT and GEORGE A.
MEALEY, and each of them acting individually, his true and
lawful attorney-in-fact with power to act without the
others and with full power of substitution, to execute,
deliver and file, for and on behalf of him, in his name and
in his capacity or capacities as aforesaid, an Annual
Report of the Company on Form 10-K for the year ended
December 31, 1994, and any amendment or amendments thereto
and any other document in support thereof or supplemental
thereto, and the undersigned hereby grants to said
attorneys, and each of them, full power and authority to do
and perform each and every act and thing whatsoever that
said attorney or attorneys may deem necessary or advisable
to carry out fully the intent of the foregoing as the
undersigned might or could do personally or in the capacity
or capacities as aforesaid, hereby ratifying and confirming
all acts and things which said attorney or attorneys may do
or cause to be done by virtue of this Power of Attorney.
EXECUTED this 21st day of February, 1995.
/s/ Rene L. Latiolais
---------------------------
Rene L. Latiolais
POWER OF ATTORNEY
-----------------
BE IT KNOWN: That the undersigned, in his
capacity or capacities as an officer and/or a member of the
Board of Directors of Freeport-McMoRan Copper & Gold Inc.,
a Delaware corporation (the "Company"), does hereby make,
constitute and appoint JAMES R. MOFFETT and RENE L.
LATIOLAIS, and each of them acting individually, his true
and lawful attorney-in-fact with power to act without the
others and with full power of substitution, to execute,
deliver and file, for and on behalf of him, in his name and
in his capacity or capacities as aforesaid, an Annual
Report of the Company on Form 10-K for the year ended
December 31, 1994, and any amendment or amendments thereto
and any other document in support thereof or supplemental
thereto, and the undersigned hereby grants to said
attorneys, and each of them, full power and authority to do
and perform each and every act and thing whatsoever that
said attorney or attorneys may deem necessary or advisable
to carry out fully the intent of the foregoing as the
undersigned might or could do personally or in the capacity
or capacities as aforesaid, hereby ratifying and confirming
all acts and things which said attorney or attorneys may do
or cause to be done by virtue of this Power of Attorney.
EXECUTED this 21st day of February, 1995.
/s/ George A. Mealey
---------------------------
George A. Mealey
EX-27
14
5
0000831259
FREEPORT-MCMORAN COPPER & GOLD INC.
1,000
12-MOS
DEC-31-1994
DEC-31-1994
44,252
0
153,585
0
314,022
603,394
2,958,644
598,155
3,040,197
431,576
525,612
20,595
500,007
573,900
400,480
3,040,197
1,212,284
1,212,284
815,361
815,361
7,778
0
0
279,092
123,412
130,241
0
0
0
130,241
.38
.38