================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1997
Commission file number 1-82
PHELPS DODGE CORPORATION
(a New York corporation)
13-1808503
(I.R.S. Employer Identification No.)
2600 N. Central Avenue, Phoenix, AZ 85004-3089
Registrant's telephone number: (602) 234-8100
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 .
--- ---
Number of Common Shares outstanding at August 7, 1997: 60,391,156 shares.
================================================================================
<PAGE>
PHELPS DODGE CORPORATION
Quarterly Report on Form 10-Q
For the Quarter Ended June 30, 1997
Table of Contents
-----------------
Part I. Financial Information
Item 1. Financial Statements
Statement of Consolidated Income
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Common Shareholders' Equity
Notes to Consolidated Financial Information
Review by Independent Accountants
Report of Independent Accountants on Review of Interim Financial
Information
Item 2. Management's Discussion and Analysis
Results of Operations
Results of Phelps Dodge Mining Company
Results of Phelps Dodge Industries
Other Matters Relating to the Statement of Consolidated Income
Changes in Financial Condition
Part II. Other Information
Item 1. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
Signatures
Index to Exhibits
<PAGE>
PHELPS DODGE CORPORATION AND SUBSIDIARIES
Part I. Financial Information
Item 1. Financial Statements
- ----------------------------
STATEMENT OF CONSOLIDATED INCOME
- --------------------------------
(Unaudited; in millions except per share data)
Second Quarter First Six Months
-------------- ----------------
1997 1996 1997 1996
------ ------ ------ ------
SALES AND OTHER OPERATING REVENUES .......... $1,065.0 957.7 2,086.7 1,962.4
-------- ----- ------- -------
OPERATING COSTS AND EXPENSES
Cost of products sold ..................... 742.9 646.9 1,438.8 1,311.4
Depreciation, depletion and amortization .. 69.7 62.7 138.6 123.9
Selling and general administrative expense 35.2 31.2 68.9 61.7
Exploration and research expense .......... 26.5 21.4 43.7 40.1
-------- ----- ------- -------
874.3 762.2 1,690.0 1,537.1
-------- ----- ------- -------
OPERATING INCOME ............................ 190.7 195.5 396.7 425.3
Interest expense .......................... (16.4) (10.3) (32.8) (27.5)
Capitalized interest ...................... 3.7 0.3 6.2 0.5
Miscellaneous income and expense, net ..... 15.0 2.2 24.9 17.2
-------- ----- ------- -------
INCOME BEFORE TAXES, MINORITY INTERESTS
AND EQUITY IN NET EARNINGS OF AFFILIATED
COMPANIES .................................. 193.0 187.7 395.0 415.5
Provision for taxes on income ............. (57.8) (62.2) (122.4) (135.1)
Minority interests in consolidated
subsidiaries ............................. (2.8) (3.0) (5.1) (6.4)
Equity in net earnings of affiliated
companies ................................ 2.4 3.8 4.8 5.4
-------- ----- ------- -------
NET INCOME .................................. $ 134.8 126.3 272.3 279.4
======== ===== ======= =======
EARNINGS PER SHARE .......................... $ 2.16 1.90 4.28 4.16
======== ===== ======= =======
AVERAGE NUMBER OF SHARES OUTSTANDING ........ 62.4 66.6 63.7 67.1
See Notes to Consolidated Financial Information.
<PAGE>
BUSINESS SEGMENTS
- -----------------
(Unaudited; in millions)
Second Quarter First Six Months
-------------- ----------------
1997 1996 1997 1996
------ ------ ------ ------
SALES AND OTHER OPERATING REVENUES
Phelps Dodge Mining Company ............... $ 603.8 529.3 1,194.1 1,113.9
Phelps Dodge Industries ................... 461.2 428.4 892.6 848.5
-------- ----- ------- -------
$1,065.0 957.7 2,086.7 1,962.4
======== ===== ======= =======
OPERATING INCOME (LOSS)
Phelps Dodge Mining Company ............... $ 142.4 146.3 314.2 330.9
Phelps Dodge Industries ................... 59.9 60.1 105.2 114.5
Corporate and other ....................... (11.6) (10.9) (22.7) (20.1)
-------- ----- ------- -------
$ 190.7 195.5 396.7 425.3
======== ===== ======= =======
See Notes to Consolidated Financial Information.
<PAGE>
CONSOLIDATED BALANCE SHEET
- --------------------------
(Unaudited; in millions)
June 30, December 31,
1997 1996
-------- -----------
ASSETS
Cash and short-term investments, at cost ............. $ 352.1 470.1
Accounts receivable, net ............................. 515.0 489.1
Inventories .......................................... 308.1 293.0
Supplies ............................................. 117.0 117.0
Prepaid expenses ..................................... 17.4 6.1
Deferred income taxes ................................ 45.1 46.2
-------- -------
Current assets ................................... 1,354.7 1,421.5
Investments and long-term accounts receivable ........ 137.5 86.4
Property, plant and equipment, net ................... 3,163.9 3,020.5
Other assets and deferred charges .................... 287.5 288.0
-------- -------
$4,943.6 4,816.4
======== =======
LIABILITIES
Short-term debt (see Note 4) ......................... $ 195.9 66.5
Current portion of long-term debt .................... 48.5 38.2
Accounts payable and accrued expenses ................ 549.1 564.9
Dividends payable (see Note 5) ....................... 30.6 --
Income taxes ......................................... 18.3 16.3
-------- -------
Current liabilities .............................. 842.4 685.9
Long-term debt (see Note 4) .......................... 602.8 554.6
Deferred income taxes ................................ 457.2 424.9
Other liabilities and deferred credits ............... 315.9 309.6
-------- -------
2,218.3 1,975.0
-------- -------
MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES ......... 90.4 85.5
-------- -------
COMMON SHAREHOLDERS' EQUITY
Common shares, 61.1 outstanding (12/31/96 - 64.7) .... 382.1 404.4
Retained earnings .................................... 2,372.2 2,465.0
Cumulative translation adjustments ................... (105.2) (98.8)
Other ................................................ (14.2) (14.7)
-------- -------
2,634.9 2,755.9
-------- -------
$4,943.6 4,816.4
======== =======
See Notes to Consolidated Financial Information.
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
- ------------------------------------
(Unaudited; in millions)
Six months ended June 30,
-------------------------
1997 1996
------- ------
OPERATING ACTIVITIES
Net income ............................................ $ 272.3 279.4
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization .......... 138.6 123.9
Deferred income taxes ............................. 35.5 43.7
Equity earnings net of dividends received ......... (1.9) (4.9)
Changes in current assets and liabilities:
(Increase) decrease in accounts receivable ..... (29.8) (5.3)
(Increase) decrease in inventories .............. (18.5) (0.6)
(Increase) decrease in supplies ................. 1.3 2.1
(Increase) decrease in prepaid expenses ......... (11.4) (22.3)
(Increase) decrease in deferred income taxes .... 1.0 1.3
Increase (decrease) in interest payable ......... 2.0 0.8
Increase (decrease) in other accounts payable ... (8.4) (7.1)
Increase (decrease) in income taxes ............. 1.9 (1.6)
Increase (decrease) in other accrued expenses ... (6.1) (10.7)
Other adjustments, net ............................ (1.3) 6.8
------- -----
Net cash provided by operating activities . 375.2 405.5
------- -----
INVESTING ACTIVITIES
Capital outlays ....................................... (281.9) (209.0)
Capitalized interest .................................. (6.2) (0.5)
Investment in subsidiaries ............................ (33.7) (30.0)
Proceeds from asset dispositions and other, net ....... (1.3) 2.0
------- -----
Net cash used in investing activities ..... (323.1) (237.5)
------- -----
FINANCING ACTIVITIES
Increase in debt ...................................... 214.3 15.6
Payment of debt ....................................... (24.3) (6.6)
Common dividends ...................................... (63.2) (63.5)
Purchase of common shares ............................. (306.6) (191.3)
Other, net ............................................ 9.7 10.3
------- -----
Net cash used in financing activities ..... (170.1) (235.5)
------- -----
DECREASE IN CASH AND SHORT-TERM INVESTMENTS .............. (118.0) (67.5)
CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF PERIOD ... 470.1 608.5
------- -----
CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD ......... $ 352.1 541.0
======= =====
See Notes to Consolidated Financial Information.
<PAGE>
CONSOLIDATED STATEMENT OF COMMON SHAREHOLDERS' EQUITY
- -----------------------------------------------------
(Unaudited; in millions)
Common Shares Cumulative
----------------- Translation Common
Number At Par Retained Adjustments Shareholders'
of Shares Value Earnings and Other Equity
--------- ------ -------- --------- ------
BALANCE AT DECEMBER 31, 1996 64.7 $ 404.4 $2,465.0 ($ 113.5) $ 2,755.9
Stock options exercised .. 0.4 2.7 10.3 13.0
Common shares purchased .. (4.0) (25.0) (281.6) (306.6)
Net income ............... 272.3 272.3
Dividends declared on
common shares .......... (93.8) (93.8)
Translation adjustment ... (6.4) (6.4)
Other .................... 0.5 0.5
---- ------- -------- -------- ---------
BALANCE AT JUNE 30, 1997 ... 61.1 $ 382.1 $2,372.2 ($ 119.4) $ 2,634.9
==== ======= ======== ======== =========
See Notes to Consolidated Financial Information.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
- -------------------------------------------
(Unaudited)
1. The unaudited consolidated financial information presented herein has
been prepared in accordance with the instructions to Form 10-Q and does
not include all of the information and note disclosures required by
generally accepted accounting principles. Therefore, this information
should be read in conjunction with the consolidated financial
statements and notes thereto included in the Corporation's Form 10-K
for the year ended December 31, 1996. This information reflects all
adjustments that are, in the opinion of management, necessary to
present a fair statement of the results for the interim periods
reported.
2. The results of operations for the three-month and six-month periods
ended June 30, 1997, are not necessarily indicative of the results to
be expected for the full year.
3. Depending on market circumstances, the Corporation may periodically
purchase or liquidate various copper price protection contracts for a
portion of its expected future mine production to mitigate the risk of
adverse price fluctuations. The Corporation currently has no copper
price protection contracts in place.
During the 1996 third quarter, the Corporation liquidated a portion of
its copper price protection contracts that covered anticipated mine
production in the first quarter of 1997. Consequently, a $6.8 million
gain was recognized in pre-tax income during the 1997 first quarter.
4. The Corporation's short-term debt increased from $66.5 million on
December 31, 1996, to $195.9 million on June 30, 1997, primarily as a
result of borrowings under the Corporation's revolving credit agreement
to support the Corporation's capital expenditure and share purchase
programs. The revolving credit agreement between the Corporation and
several lenders was amended on June 25, 1997. The agreement, as amended
and restated, permits borrowings of up to $1 billion until its
scheduled maturity on June 25, 2002. The agreement allows for two
one-year renewals beyond the scheduled maturity date if the Corporation
requests and receives approval from at least two-thirds of the lenders
involved. Interest is payable at a fluctuating rate based on the agent
bank's prime rate or a fixed rate based on the Eurodollar Interbank
Offered Rate (LIBOR), or at fixed rates offered independently by the
several lenders, for maturities of from seven to 360 days. This
agreement provides for a facility fee of six and one-half basis points
(0.065 percent) on total commitments. The agreement requires the
Corporation to maintain a minimum consolidated tangible net worth of
$1.1 billion and limits indebtedness to 50 percent of total
consolidated capitalization. There were borrowings of $125 million
under this agreement at June 30, 1997; there were no borrowings under
this agreement at December 31, 1996.
In addition, the Corporation's long-term debt increased from $554.6
million on December 31, 1996, to $602.8 million on June 30, 1997.
During the second quarter of 1997, the Corporation's 80-percent-owned
Chilean subsidiary, Compania Contractual Minera Candelaria (CCMC),
borrowed $30 million of 12-year, dollar-denominated debt to refinance
Chilean peso-denominated debt that was prepaid in December 1996. In
addition, during the quarter CCMC borrowed $58 million of a $150
million, 12-year dollar-denominated facility arranged in order to
partially finance CCMC's $337 million expansion project. Both of these
facilities are based on floating rates tied to six-month LIBOR and are
non-recourse to the Corporation. Under the proportional consolidation
method, the Corporation reflects 80 percent of these amounts in its
financial statements. The Corporation also caused CCMC to sell the 9
percent and 11 percent interest rate caps purchased in 1993 that were
intended to limit the effect of increases in the cost of CCMC's
floating rate debt. In turn, the Corporation caused CCMC to enter into
interest rate swaps with certain financial institutions to effectively
convert all of CCMC's floating rate debt to 7.84 percent, fixed rate
debt for the life of the debt. The obligations under the interest rate
swaps are non-recourse to the Corporation.
5. On June 25, 1997, the Corporation's board of directors declared a
regular quarterly dividend of 50 cents per common share for the 1997
third quarter. This dividend is to be paid on September 10, 1997, to
common shareholders of record at the close of business on August 20,
1997. This has resulted in an outstanding dividends payable balance as
of June 30, 1997, of $30.6 million.
6. The effect of the implementation of Statement of Financial Accounting
Standards No. 128, "Earnings per Share," would be immaterial on a pro
forma basis for the calculation of earnings per share for the
three-month and six-month periods ended June 30, 1997.
REVIEW BY INDEPENDENT ACCOUNTANTS
---------------------------------
The financial information as of June 30, 1997, and for the three-month
and six-month periods ended June 30, 1997 and 1996, included in Part I pursuant
to Rule 10-01 of Regulation S-X has been reviewed by Price Waterhouse LLP (Price
Waterhouse), the Corporation's independent accountants, in accordance with
standards established by the American Institute of Certified Public Accountants.
Price Waterhouse's report is included in this quarterly report.
Price Waterhouse does not carry out any significant or additional audit
tests beyond those that would have been necessary if its report had not been
included in this quarterly report. Accordingly, such report is not a "report" or
"part of a registration statement" within the meaning of Sections 7 and 11 of
the Securities Act of 1933 and the liability provisions of Section 11 of such
Act do not apply.
<PAGE>
<AUDIT-REPORT>
PRICE WATERHOUSE LLP
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Phelps Dodge Corporation
We have reviewed the accompanying consolidated balance sheet of Phelps Dodge
Corporation and its subsidiaries as of June 30, 1997 and the consolidated
statements of income, of cash flows and of common shareholders' equity for the
three-month and six-month periods ended June 30, 1997 and 1996. These financial
statements are the responsibility of the Corporation's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
We previously audited in accordance with generally accepted auditing standards,
the consolidated balance sheet as of December 31, 1996, and the related
consolidated statements of income, of cash flows and of common shareholders'
equity for the year then ended (not presented herein), and in our report dated
January 15, 1997 we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying consolidated balance sheet information as of December 31, 1996, is
fairly stated in all material respects in relation to the consolidated balance
sheet from which it has been derived.
Price Waterhouse LLP
Phoenix, Arizona
July 10, 1997
</AUDIT-REPORT>
<PAGE>
Item 2. Management's Discussion and Analysis
- ------- ------------------------------------
RESULTS OF OPERATIONS
Phelps Dodge Corporation had consolidated net income of $134.8 million,
or $2.16 per common share, in the second quarter of 1997, compared with $126.3
million, or $1.90 per common share, in the 1996 second quarter. Net income for
the six months ended June 30, 1997, was $272.3 million, or $4.28 per common
share, compared with $279.4 million, or $4.16 per common share in the
corresponding 1996 period. Earnings per share in the three-month and six-month
periods ended June 30, 1997, were higher than those reported in the
corresponding 1996 periods principally due to a decrease in the average number
of shares outstanding as a result of the Corporation's share purchase program.
Operating income in the 1997 second quarter was $190.7 million, a
decrease of $4.8 million from the corresponding 1996 period principally as a
result of higher copper production costs and lower sales volumes of specialty
chemicals in the European markets. Operating income of $396.7 million for the
six-month period ended June 30, 1997, was $28.6 million less than the
corresponding 1996 period principally due to higher copper production costs,
lower sales volumes of specialty chemicals in the European markets and the
effects of a first quarter strike at the Corporation's London, Ontario, wheel
and rim plant. Increased sales volumes in the Corporation's wire and cable
businesses and continued strength in the North American wheel and rim markets
partially offset these negative factors in 1997.
Any material change in the price the Corporation receives for copper,
or in its unit production costs, has a significant effect on the Corporation's
results. The Corporation's present share of annual production is approximately
1.6 billion pounds of copper. Accordingly, each 1 cent per pound change in the
average annual copper price received by the Corporation, or in average annual
unit production costs, causes a variation in annual operating income before
taxes of approximately $16 million.
The COMEX spot price per pound of copper cathode, upon which the
Corporation bases its selling price for a majority of its production, averaged
$1.14 in the second quarter and $1.13 in the first six months of 1997, compared
with $1.16 and $1.17 in the corresponding 1996 periods. From July 1 to August 7,
1997, the COMEX price averaged $1.09 per pound, closing at $1.08 on August 7,
1997.
Depending on market circumstances, the Corporation may periodically
purchase or liquidate various copper price protection contracts for a portion of
its expected future mine production to mitigate the risk of adverse price
fluctuations. For a further discussion of the Corporation's copper price
protection arrangements for 1997 production, see Note 3 to the Consolidated
Financial Information.
Sales were $1,065.0 million in the 1997 second quarter and $2,086.7
million in the first six months of 1997, compared with $957.7 million and
$1,962.4 million in the corresponding 1996 periods. The 1997 increases
principally resulted from increased sales of wire and cable products and wheels
and rims, and from increased amounts of copper purchased for resale.
<PAGE>
RESULTS OF PHELPS DODGE MINING COMPANY
Phelps Dodge Mining Company is an international business comprising a
group of companies involved in vertically integrated copper operations including
mining, concentrating, electrowinning, smelting and refining, rod production,
marketing and sales, and related activites. Copper is sold primarily to others
as rod, cathode or concentrates, and as rod to the Phelps Dodge Industries
segment. In addition, Phelps Dodge Mining Company at times smelts and refines
copper and produces copper rod for others on a toll basis. Phelps Dodge Mining
Company also produces gold, silver, molybdenum and copper chemicals, principally
as by-products, and sulfuric acid from its air quality control facilities. This
segment also includes the Corporation's other mining operations and investments
(including fluorspar, silver, lead and zinc operations) and its worldwide
mineral exploration and development programs.
- --------------------------------------------------------------------------------
Second Quarter First Six Months
-------------- ----------------
1997 1996 1997 1996
---- ---- ---- ----
Copper production (short tons):
Total production-------------------------241,400 236,000 476,700 467,400
Less minority participants' shares *----- 41,900 40,800 82,600 82,000
------- ------- ------- -------
Net Phelps Dodge share-------------------199,500 195,200 394,100 385,400
======= ======= ======= =======
Copper sales (short tons):
Net Phelps Dodge share from
own mines------------------------------189,700 189,000 382,500 379,400
Purchased copper------------------------- 83,100 57,500 156,200 119,600
------- ------- ------- -------
Total copper sales-----------------------272,800 246,500 538,700 499,000
======= ======= ======= =======
New York Commodity Exchange
average spot price per
pound - copper cathodes------------------$ 1.14 1.16 1.13 1.17
(in millions)
Sales and other operating revenues---------$ 603.8 529.3 1,194.1 1,113.9
Operating income---------------------------$ 142.4 146.3 314.2 330.9
- ------------------------------
* Minority participant interests include (i) a 15 percent undivided
interest in the Morenci, Arizona, copper mining complex held by
Sumitomo Metal Mining Arizona, Inc., (ii) a one-third partnership
interest in Chino Mines Company in New Mexico held by Heisei Minerals
Corporation, and (iii) a 20 percent interest in Candelaria in Chile
held by SMMA Candelaria, Inc., a jointly owned subsidiary of Sumitomo
Metal Mining Co., Ltd. and Sumitomo Corporation.
- --------------------------------------------------------------------------------
Phelps Dodge Mining Company's sales of copper increased by 26,300 tons
or 11 percent in the second quarter of 1997 and by 39,700 tons or 8 percent in
the first six months of 1997 compared with the corresponding 1996 periods. The
sales volume increases principally consisted of copper purchased for resale.
Resulting sales and other operating revenues in the second quarter of 1997 were
$603.8 million, 14 percent higher than the corresponding 1996 period, while
sales and other operating revenues in the first six months of 1997 were 7
percent higher than the same 1996 period.
Phelps Dodge Mining Company recorded operating income of $142.4 million
in the 1997 second quarter and $314.2 million in the first six months of 1997,
compared with $146.3 million and $330.9 million in the corresponding 1996
periods. These decreases reflected higher copper production costs primarily
resulting from increased depreciation charges and reduced by-product credits for
gold.
The collective bargaining agreements covering approximately 625
employees at Phelps Dodge Mining Company's Chino operations in New Mexico
expired on June 30, 1996. As of August 7, 1997, employees who were covered by
the agreements have continued to work without a contract.
<PAGE>
RESULTS OF PHELPS DODGE INDUSTRIES
Phelps Dodge Industries is a business segment comprising a group of
companies that manufacture engineered products principally for the
transportation, energy and telecommunications sectors worldwide. Its operations
are characterized by products with significant market share, internationally
competitive cost and quality, and specialized engineering capabilities. This
business segment includes the Corporation's specialty chemical operations
through Columbian Chemicals Company and its subsidiaries; its wheel and rim
operations through Accuride Corporation and its subsidiaries; and its wire and
cable and specialty conductor operations through Phelps Dodge International
Corporation and Phelps Dodge Magnet Wire Company and their subsidiaries and
affiliates.
- --------------------------------------------------------------------------------
Second Quarter First Six Months
-------------- ----------------
1997 1996 1997 1996
---- ---- ---- ----
(in millions)
Sales and other operating revenues:
Specialty chemicals---------------- $ 106.4 109.9 215.1 222.3
Wheels and rims-------------------- 87.1 81.1 168.6 163.9
Wire and cable--------------------- 267.7 237.4 508.9 462.3
-------- ------- ------- -------
$ 461.2 428.4 892.6 848.5
======== ======= ======= =======
Operating income:
Specialty chemicals---------------- $ 18.6 23.7 35.8 44.9
Wheels and rims-------------------- 13.7 13.2 19.8 24.2
Wire and cable--------------------- 27.6 23.2 49.6 45.4
-------- ------- ------- -------
$ 59.9 60.1 105.2 114.5
======== ======= ======= =======
- --------------------------------------------------------------------------------
During the 1997 second quarter, Phelps Dodge Industries recorded
operating income of $59.9 million, compared with a record $60.1 million in the
corresponding 1996 period. Operating income in the first six months of 1997 was
$105.2 million, compared with $114.5 million in the first six months of 1996.
The strong second quarter earnings reflected increased sales volumes in the wire
and cable business and continued strength in the North American wheel and rim
markets. The year-to-date decrease in earnings reflected lower sales volumes of
specialty chemicals in the European markets and the effects of a strike at the
Corporation's London, Ontario, wheel and rim plant which began on January 21,
1997, and was settled on March 15, 1997.
The collective bargaining agreement covering approximately 360
employees at Phelps Dodge Magnet Wire Company's Hopkinsville, Kentucky, plant
expired on October 11, 1996. As of August 7, 1997, employees who were covered by
the agreement have continued to work without a contract.
OTHER MATTERS RELATING TO
THE STATEMENT OF CONSOLIDATED INCOME
Miscellaneous income and expense, net, increased by $12.8 million in
the second quarter and $7.7 million in the first six months of 1997, compared
with the corresponding 1996 periods. These increases principally reflected a
1996 second quarter $7.1 million foreign exchange loss from the effect on
working capital of the devaluation of the Venezuelan Bolivar, and a $6.0 million
pre-tax, non-cash gain in the 1997 second quarter from the exchange of shares of
a cost basis investment in a wire and cable business located in Greece. The
year-to-date increase was partially offset by a $3.4 million decrease in
dividends received from the Corporation's 13.9 percent minority interest in
Southern Peru Copper Corporation. The $7.1 million 1996 second quarter foreign
exchange loss from the devaluation of the Bolivar was offset by an $8.0 million
interest expense gain that represented a remeasurement of Venezuelan local
currency debt after the devaluation.
CHANGES IN FINANCIAL CONDITION
Capital outlays during the first six months of 1997 were $207.3 million
for Phelps Dodge Mining Company including $108.3 million for the expansion of
the Corporation's Candelaria mining operations in Chile. Capital outlays were
$72.6 million for Phelps Dodge Industries. Capital outlays in the corresponding
1996 period were $136.4 million for Phelps Dodge Mining Company and $71.0
million for Phelps Dodge Industries. The Corporation expects capital outlays for
the year 1997 to be approximately $500 million for Phelps Dodge Mining Company
(including approximately $175 million for the Candelaria expansion project).
Phelps Dodge Industries is expected to spend approximately $200 million during
the year.
At June 30, 1997, the Corporation's total debt was $847.2 million,
compared with $659.3 million at year-end 1996. Debt increased as a result of
non-recourse borrowings for the expansion of the Candelaria mine and borrowings
under the Corporation's revolving credit agreement to support the Corporation's
capital expenditure and share purchase programs. The Corporation's ratio of debt
to total capitalization was 23.7 percent at June 30, 1997, compared with 18.8
percent at December 31, 1996. For further information concerning the Candelaria
borrowings and the Corporation's revolving credit agreement that was amended in
the second quarter of 1997, please refer to Note 4 of the Consolidated Financial
Information.
On June 10, 1997, the Corporation paid a regular quarterly dividend of
50 cents per share on its common shares for the 1997 second quarter; the total
amount paid was $30.9 million, bringing total 1997 dividends paid through June
30 to $63.2 million. On June 25, 1997, the board of directors declared a 1997
third quarter regular dividend of 50 cents per common share to be paid on
September 10, 1997, to shareholders of record at the close of business on August
20, 1997.
On May 7, 1997, the Corporation announced that its board of directors
had authorized the purchase of up to an additional 6 million of its common
shares, approximately 10 percent of its then outstanding shares. This
authorization follows a 5 million share purchase program that was initiated in
March 1995 and extended to 10 million shares in March 1996. Under that program,
9.9 million shares were purchased by the Corporation. In 1997 through August 7,
the Corporation purchased a total of 4.8 million of its common shares at a total
cost of $370.5 million, including 1.8 million shares at a cost of $151.9 million
under the new 6 million share authorization. An additional 4.2 million shares
remain authorized for purchase under the new program. There were 61.1 million
common shares outstanding on June 30, 1997.
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
- --------------------------
I. Reference is made to Paragraph II, section A.2.(a) of Item 3, Legal
Proceedings of the Corporation's Form 10-K for the year ended December 31, 1996,
and to paragraph I of Item 1, Legal Proceedings of the Corporation's Form 10-Q
for the quarter ended March 31, 1997, regarding In re the General Adjudication
of All Rights to Use Water in the Gila River System and Source, Nos. W-1 (Salt
River), W-2 (Verde River), W-3 (Gila River) and W-4 (San Pedro River) (Superior
Court of Arizona, Maricopa County).
On May 12, 1997, the San Carlos Apache Tribe filed a complaint (the
"Complaint") in San Carlos Apache Tribal Court naming the Corporation as a
defendant (the "Tribal Court Action"). The Complaint alleges, among other
things, that a right-of-way permit issued by the Secretary of the Interior in
1944 and relied upon by the Corporation in transporting water from the Black
River across the San Carlos Apache reservation to Morenci was void when issued
or has expired. The Complaint seeks declaratory and injunctive relief, including
eviction of the Corporation from the reservation, and requests substantial
damages based on, among other things, production and profits of the Morenci
mine. The Corporation believes that the right-of-way was validly issued and has
at no point expired and that the Corporation's presence on the reservation lands
has been lawful.
In June 1997, federal legislation (Public Law No. 105 18, sec. 5003,
the "Legislation") was adopted which amends the San Carlos Apache Water Rights
Settlement Act of 1992 and provides for dismissal of the Tribal Court Action.
The Corporation's time to respond to the Complaint has been adjourned
indefinitely and under the Legislation, the Tribal Court Action must be
dismissed by August 22, 1997. The Legislation does not address any potential
claims by the Tribe relating to the Corporation's historical occupancy and
operation of its pump station on the Black River and related facilities but does
require that any such claims be brought, if at all, exclusively in the United
States District Court.
On July 23, 1997, as contemplated by the Legislation, personnel of the
Federal Bureau of Reclamation officially assumed operation of the Black River
facilities and the Corporation's personnel vacated the reservation.
Responsibility for operation of the Black River pump station and related
facilities is to be transferred to the Tribe by December 31, 1998, upon a
finding by the United States that the Tribe is qualified to operate the
facilities. With the approval of the Secretary of the Interior, the Tribe may
contract with third parties for the operation of the facilities. During the
period prior to the transfer of operation of such facilities to the Tribe (the
"Interim Period"), the Corporation is entitled to receive up to 14,000 acre feet
of water per year (subject to certain limitations) from Black River. During the
Interim Period, the Corporation shall pay a monthly fee and reimburse the
Bureau's operating costs of the Black River facilities.
Following the Interim Period, the Tribe will lease to the Corporation
14,000 acre feet of water per year (subject to certain limitations) under a
lease having a term of 50 years subject to a 50 year extension (or to earlier
termination if mining activities cease at the Morenci mine complex). The
Corporation will make an initial one-time payment of $5 million and make an
annual payment on an ongoing basis of approximately $640,000 per year, subject
to inflation adjustment and the amount of water actually delivered. The
Corporation will also advance funds sufficient to cover the reasonable costs of
the operation of the Black River facilities and pay certain monthly fees and
other charges.
In addition, the Legislation also provides that the Corporation, for a
monthly fee, may transport water from the Corporation's Upper Eagle Creek
wellfields across the Tribe's reservation. The amount pumped from the Upper
Eagle Creek wellfield, in combination with the water received from the Black
River facilities, may not exceed 22,000 acre feet annually. The rights of
landholders to pump percolating groundwater, such as the Corporation's rights to
pump water from the Upper Eagle Creek wellfields, are subject to determination
under the general adjudication proceeding pending in the Superior Court of
Arizona.
Management believes that the water available under the arrangement
prescribed by the Legislation, along with other available water supplies, will
be adequate for the needs of the Morenci mine.
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
The Corporation's annual meeting was held on May 7, 1997. A total of
54,042,107 common shares, or about 84 percent of the issued and outstanding
common shares of the Corporation, were represented at the meeting. Set forth
below is a description of the matters voted upon at the meeting and a summary of
the voting regarding each matter:
For Withheld
--- --------
Election of Directors:
Robert N. Burt 53,835,117 206,990
Robert D. Krebs 53,839,184 202,923
Douglas C. Yearley 53,830,017 212,090
For Against Abstain
--- ------- -------
Appointment of Auditors 53,892,119 56,222 93,766
Proposal to approve an amendment
to the 1993 Stock Option and
Restricted Stock Plan 52,413,148 1,433,865 195,094
Proposal to amend the Registrant's
Certificate of Incorporation to
increase the number of authorized
common shares 46,904,944 6,992,729 144,434
Proposal to amend the Registrant's
Certificate of Incorporation to
decrease the maximum size of the
Registrant's Board of Directors 53,661,619 259,065 121,423
There were no broker non-votes included in the results of the election
of directors listed above, or the appointment of auditors, amendment to the 1993
Stock Option and Restricted Stock Plan, or the two amendments to the
Registrant's Certificate of Incorporation.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Any exhibits required to be filed by the Corporation are
listed in the Index to Exhibits.
(b) No reports on Form 8-K were filed by the Corporation during
the quarter ended June 30, 1997.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Corporation has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PHELPS DODGE CORPORATION
(Corporation or Registrant)
Date: August 12, 1997 By: Gregory W. Stevens
------------------
Gregory W. Stevens
Vice President and Controller
(Principal Accounting Officer)
<PAGE>
PHELPS DODGE CORPORATION AND SUBSIDIARIES
Index to Exhibits
-----------------
3.1 Certificate of Amendment of the Restated Certificate of Incorporation
effective June 19, 1997 (SEC File No. 1-82). Complete composite copy of
the Certificate of Incorporation of the Corporation as amended to date
(incorporated by reference to exhibit 3.1 to the Corporation's 1992
Form 10-K (SEC File No. 1-82)).
3.2 By-Laws of the Corporation, as amended, effective May 7, 1997 (SEC File
No. 1-82).
4.2 Second Amended and Restated Credit Agreement, dated as of June 25,
1997, among the Corporation, several banks and other lending
institutions, and The Chase Manhattan Bank, as administrative agent
(SEC File No. 1-82).
10.5 Deferred Compensation Plan for the Directors of the Corporation,
amended and restated as of June 25, 1997, effective September 30, 1997
(SEC File No. 1-82).
10.15 Amendment to the Corporation's 1993 Stock Option and Restricted Stock
Plan (the 1993 Plan), effective May 7, 1997 (SEC File No. 1-82).
12 Computation of ratios of total debt to total capitalization.
15 Letter from Price Waterhouse LLP with respect to unaudited interim
financial information.
EXHIBIT 3.1
Certificate of Amendment
of the
Certificate of Incorporation
of
Phelps Dodge Corporation
Under Section 805 of the Business Corporation Law
-------------------------------------------------
We, Douglas C. Yearley and Robert C. Swan, being, respectively,
Chairman of the Board, President and Chief Executive Officer and Vice President
and Secretary of Phelps Dodge Corporation, a corporation formed under the laws
of the State of New York (the "Corporation"), DO HEREBY CERTIFY as follows:
1. The name of the Corporation is PHELPS DODGE CORPORATION. The name under
which the Corporation was formed was Copper Queen Consolidated Mining Company.
2. The Certificate of Incorporation of the Corporation was filed by the
Department of State of the State of New York on August 10, 1885. A Restated
Certificate of Incorporation was filed by such Department on June 16, 1987.
3. The Certificate of Incorporation of the Corporation, as amended to
date, is hereby amended as authorized by Section 801(b)(7) of the Business
Corporation Law to increase the aggregate number of authorized Common Shares,
par value $6.25 per share, from 100,000,000 to 200,000,000. Such amendment is
effected by the deleting Article THIRD of the Certificate of Incorporation of
the Corporation and inserting in lieu thereof the following:
"THIRD: The total number of shares which the
Corporation shall have authority to issue shall be two hundred
six million (206,000,000), consisting of six million
(6,000,000) Preferred Shares having a par value of one dollar
($1.00) per share and two hundred million (200,000,000) Common
Shares having a par value of six dollars and twenty-five cents
($6.25) per share."
4. The Certificate of Incorporation of the Corporation, as amended to
date, is hereby further amended as authorized by Section 801(a) of the Business
Corporation Law to decrease the maximum size of the Corporation's Board of
Directors from 15 to 12. Such amendment is effected by deleting Article SIXTH of
the Certificate of Incorporation of the Corporation and inserting in lieu
thereof the following:
<PAGE>
"SIXTH: The number of the Corporation's Directors
shall not be less than nine nor more than twelve, provided
that whenever the holders of any one or more series of
Preferred Shares of the Corporation become entitled to elect
one or more Directors to the Board of Directors in accordance
with any applicable provisions of this Certificate of
Incorporation, such maximum number of Directors shall be
increased automatically by the number of Directors such
holders are so entitled to elect. Such increase shall remain
in effect until the right of such holders to elect such
Director or Directors shall cease and until the Director or
Directors elected by such holders shall no longer hold
office."
5. The amendments of the Certificate of Incorporation of the Corporation
set forth in paragraphs 3 and 4 of this Certificate of Amendment were duly
authorized by an affirmative vote of the Board of Directors of the Corporation,
followed by an affirmative vote of the holders of a majority of all outstanding
shares entitled to vote thereon at a meeting of shareholders.
IN WITNESS WHEREOF, we have executed this Certificate and affirm that
the statements made herein are true under the penalties of perjury, on this
11th day of June, 1997.
/s/ Douglas C. Yearley
-----------------------
Douglas C. Yearley
Chairman of the Board,
President, and
Chief Executive Officer
/s/ Robert C. Swan
-----------------------
Robert C. Swan
Vice President and
Secretary
Exhibit 3.2
Amended Effective May 7, 1997
B Y - L A W S
PHELPS DODGE CORPORATION
ARTICLE I. NAME, LOCATION and CORPORATE SEAL
Sec. 1. The name of this Corporation is PHELPS DODGE CORPORATION.
Sec. 2. The principal office of the Company shall be in the City of
Phoenix, County of Maricopa, State of Arizona. The Company shall also have such
other offices, either within or without the United States, and may transact its
business at such other places, as the Board of Directors may appoint.
Sec. 3. The corporate seal of the Company shall have inscribed thereon
the name of the corporation, and the year of its creation. It shall be of the
form impressed upon the margin hereof. It shall be in charge of the Secretary. A
duplicate of the seal may be kept and used by the Treasurer or by any Assistant
Secretary or Assistant Treasurer, when so ordered by the Board of Directors.
(Imprint of corporate seal)
ARTICLE II. SHAREHOLDERS
Sec. 1. Annual Meeting. The annual meeting of shareholders shall be
held at 12:00 noon on the first Wednesday in May of each year, or at such other
time on that day or at such time on such other day as the Board of Directors
shall from time to time determine, at the principal office of the Company in the
City of Phoenix, County of Maricopa, State of Arizona, or at such other place
within or without the State of New York as the Board of Directors shall from
time to time determine, for the purpose of electing Directors and for the
transaction of such other business as may properly be brought before the
meeting.
<PAGE>
The Secretary shall cause to be sent by first class mail not less than
ten nor more than fifty days before the date of such meeting, a notice thereof
addressed to each shareholder of record entitled to vote at such meeting at his
or her address as it appears on the books of the Company. Notice may also be
sent by third class mail not less than twenty-four nor more than fifty days
before the date of such meeting. Any previously scheduled annual meeting of
shareholders may be postponed by resolution of the Board of Directors upon
public announcement of the postponement on or prior to the date previously
scheduled for such annual meeting of shareholders.
Sec. 2. Special Meetings. Special meetings of the shareholders may be
held at the principal office of the Company in the City of Phoenix, County of
Maricopa, State of Arizona, or at such other place within or without the State
of New York as the Board of Directors or the Chairman of the Board shall from
time to time determine, and may be called by vote of a majority of the Board of
Directors, or by the Chairman of the Board. Special meetings of the
shareholders, or of the holders of a particular class or series of shares, shall
also be called when required by the Certificate of Incorporation at the times
and in the manner therein set forth.
Notice of the time, place and purposes of any such special meeting
shall be served personally or sent by first class mail to each shareholder of
record entitled to vote at such meeting, not less than ten nor more than fifty
days before the date of such meeting, at his or her address as it appears on the
books of the Company. Notice may also be sent by third class mail not less than
twenty-four nor more than fifty days before the date of such meeting. A written
waiver of notice of any meeting may be made by any shareholder. Any previously
scheduled special meeting of the shareholders may be postponed by resolution of
the Board of Directors upon public announcement of the postponement on or prior
to the date previously scheduled for such special meeting of shareholders.
Sec. 3. Quorum. At any meeting of shareholders, unless otherwise
provided by law or by the Certificate of Incorporation, the holders of shares
(of any class) aggregating a majority of the total number of shares of all
classes of the Company then issued and outstanding and entitled to vote at the
meeting, present in person or represented by proxy, shall constitute a quorum,
provided that, unless otherwise provided by law or by the Certificate of
Incorporation, when a specified item of business is required to be voted on by
any one or more of a particular class or series of shares, voting as a separate
class, the holders of a majority of the shares so eligible to vote as a separate
class shall constitute a quorum for the transaction of such specified item of
business.
<PAGE>
The shareholders present at any duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of
sufficient shareholders to constitute the remaining shareholders less than a
quorum. Whether or not a quorum is present at a meeting, the person presiding at
the meeting or the holders of a majority of the shares of all classes of the
Company entitled to vote at the meeting so present or represented may adjourn
the meeting from time to time. At any such adjourned meeting at which a quorum
shall be present, any business may be transacted which might have been
transacted at the meeting as originally called.
Sec. 4. Chairman and Secretary. Meetings of shareholders shall be
presided over by the Chairman of the Board or, if he is not present, by the
President or, if neither of them is present, by a Vice Chairman, or if none of
them is present, by a Vice President or, if neither the Chairman of the Board,
the President, a Vice Chairman nor a Vice President is present, by a person to
be chosen at the meeting. The Secretary of the Company shall act as Secretary at
all meetings of the shareholders, but in the absence of the Secretary the
presiding officer may appoint any person to act as Secretary of the meeting.
Sec. 5. Voting. Except as otherwise provided by law or by the
Certificate of Incorporation, each shareholder entitled to vote at a meeting of
shareholders shall be entitled to one vote, in person or by proxy, for each
share having voting power held by him or her on the record date for such
meeting, as appears on the books of the Company.
Only the person in whose name shares stand on the books of the Company
at the time of closing of the transfer books for such meeting shall be entitled
to vote, in person or by proxy, the shares so standing in his or her name.
The Board of Directors shall have the power and authority to fix a day
not less than ten nor more than fifty days prior to the day of holding any
meeting of shareholders, as the day as of which shareholders entitled to notice
of and to vote at such meeting shall be determined; and all persons who are
holders of record of shares with voting rights on such day, and no others, shall
be entitled to notice of and to vote at such meeting.
<PAGE>
Sec. 6. Inspectors of Election. The Board of Directors, in advance of
any shareholders' meeting, may appoint one or more inspectors to act at the
meeting or any adjournment thereof. If inspectors are not so appointed, the
person presiding at a shareholders' meeting may, and on the request of any
shareholder entitled to vote thereat shall, appoint one or more inspectors. In
case any person appointed fails to appear or act, the vacancy may be filled by
appointment made by the Board of Directors in advance of the meeting or at the
meeting by the person presiding thereat. Each inspector, before entering upon
the discharge of his or her duties, shall take and sign an oath faithfully to
execute the duties of inspector at such meeting with strict impartiality and
according to the best of his or her ability. Thereafter each inspector shall
have at such meeting all of the powers and duties provided by law.
Sec. 7. Business Conducted at Meetings. At an annual meeting of
shareholders, only such business may be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual meeting
business must be (a) specified in the notice of meeting (including any
supplement thereto) given by or at the direction of the Board of Directors, (b)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors, or (c) otherwise properly brought before the meeting by a
shareholder of the Company who was a shareholder of record at the time of giving
of notice provided for in this Section 7, who is entitled to vote at the meeting
and who complies with the notice procedures set forth in this Section 7. For
business to be properly brought before an annual meeting by a shareholder, the
shareholder must have given timely notice thereof in writing to the Secretary of
the Company. To be timely, a shareholder's notice must be delivered to or mailed
and received at the principal office of the Company not less than 60 days nor
more than 90 days prior to the meeting; provided, however, that in the event
that the date of the annual meeting is scheduled for a day other than the first
Wednesday in May in such year and less than 70 days' notice or prior public
announcement of the new date of the meeting is given or made to shareholders,
notice by the shareholder to be timely must be so received not later than the
close of business on the 10th day following the day on which such notice of the
new date of the annual meeting was mailed or such public announcement was made.
A shareholder's notice to the Secretary shall set forth as to each
matter the shareholder proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (b) the name and
address of the shareholder proposing such business, as they appear on the
Company's books, and of the beneficial owner, if any, on whose behalf such
notice is being given, (c) the class and number of shares of the Company which
are owned beneficially and of record by such shareholder and by such beneficial
owner, and (d) any material interest in such business of such shareholder or of
such beneficial owner.
<PAGE>
At a special meeting of shareholders, only such business may be
conducted as shall have been properly brought before the meeting. To be properly
brought before a special meeting, business must be related to the purpose or
purposes set forth in the notice of the meeting (including any supplement
thereto) given by or at the direction of the Board of Directors or the Chairman
of the Board.
Notwithstanding anything in the By-Laws to the contrary, no business
shall be conducted at a meeting of shareholders except in accordance with the
procedures set forth in this Section 7. The chairman of a meeting shall, if the
facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the provisions of this
Section 7, and if the chairman should so determine, he or she shall declare to
the meeting that any such business not properly brought before the meeting shall
not be transacted. In addition to the provisions of this Section 7, a
shareholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth herein. Nothing in these By-Laws shall be deemed to affect any rights of
shareholders to request inclusion of proposals in the Company's proxy statement
pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended
from time to time (the "Exchange Act") and to put before such meeting any
proposals so included in the Company's proxy statement at his or her request.
Sec. 8. Nomination of Directors. Only persons who are nominated in
accordance with the procedures set forth in this Section 8 shall be eligible for
election as Directors at any meeting of shareholders held for the election of
Directors (an "Election Meeting"). Nominations of persons for election to the
Board of Directors of the Company may be made at an Election Meeting by or at
the direction of the Board of Directors or by a shareholder of the Company who
was a shareholder of record at the time of giving of notice provided for in this
Section 8, who is entitled to vote for the election of Directors at such
Election Meeting and who complies with the notice procedures set forth in this
Section 8. Such nominations, other than those made by or at the direction of the
Board of Directors, shall be made pursuant to timely notice in writing to the
Secretary of the Company. To be timely, a shareholder's notice must be delivered
to or mailed and received at the principal office of the Company not less than
60 days nor more than 90 days prior to such Election Meeting; provided, however,
that in the event the date of the Election Meeting is scheduled for a day other
than the first Wednesday in May and less than 70 days' notice or prior public
<PAGE>
announcement of the date of such Election Meeting is given or made to
shareholders, notice by the shareholder to be timely must be so received not
later than the close of business on the 10th day following the day on which such
notice of the date of such Election Meeting was mailed or such public
announcement was made. Notwithstanding anything in the foregoing sentence to the
contrary, in the event that the number of Directors to be elected to the Board
of Directors of the Company at such Election Meeting is increased or there is a
vacancy to be filled at such Election Meeting in a class of Directors whose
terms do not expire at such Election Meeting and there is no public announcement
at least 70 days prior to such Election Meeting naming all of the nominees for
Director or specifying the size of the increased Board of Directors or the
number of Directors to be elected, a shareholder's notice required by this
Section 8 shall also be considered timely, but only with respect to nominees for
any positions created by such increase or vacancy, if it shall be delivered to
or mailed and received at the principal office of the Company not later than the
close of business on the 10th day following the day on which such public
announcement is first made by the Company.
Such shareholder's notice to the Secretary shall set forth (a) as to
each person whom the shareholder proposes to nominate for election or
re-election as a Director, (i) the name, age, business address and residence
address of such person, (ii) the principal occupation or employment of such
person, (iii) the class and number of shares of the Company which are owned
beneficially by such person and (iv) any other information concerning such
person that is required to be disclosed in connection with the solicitation of
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Exchange Act (including without limitation
such person's written consent to being named in the proxy statement as a nominee
and to serving as a Director if elected); and (b) as to the shareholder giving
the notice and the beneficial owner, if any, on whose behalf the nomination is
made, (i) the name and address of such shareholder, as they appear on the
Company's books, and of such beneficial owner and (ii) the class and number of
shares of the Company which are owned beneficially and of record by such
shareholder and by such beneficial owner. At the request of the Board of
Directors any person nominated by the Board of Directors for election as a
Director shall furnish to the Secretary of the Company that information required
to be set forth in a shareholder's notice of nomination which pertains to the
nominee.
<PAGE>
No person shall be eligible for election as a Director of the Company
unless nominated in accordance with the procedures set forth in this Section 8.
In the event that a person is validly designated as a nominee in accordance with
the foregoing and shall thereafter become unable or unwilling to stand for
election to the Board of Directors, the Board of Directors or the shareholder
who proposed such nominee, as the case may be, may designate a substitute
nominee. The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
provisions of this Section 8, and if the chairman should so determine, he or she
shall declare to the meeting that the defective nomination shall be disregarded.
In addition to the provisions of this Section 8, a shareholder shall also comply
with all applicable requirements of the Exchange Act and the rules and
regulations thereunder with respect to the matters set forth herein.
Sec. 9. Public Announcement. For purposes of this Article II, "public
announcement" shall mean disclosure in a communication sent by first class mail
to shareholders, in a press release reported by the Dow Jones News Service,
Reuters Information Services, Inc., Associated Press or comparable national news
service or in a document filed by the Company with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
ARTICLE III. DIRECTORS
Sec. 1. Number; Classification of Board; Newly Created Directorships
and Vacancies. The business of the Company shall be managed under the direction
of its Board of Directors, which shall consist of not less than nine nor more
than twelve Directors, provided that whenever the holders of any one or more
series of Preferred Shares of the Company become entitled to elect one or more
Directors to the Board of Directors in accordance with any applicable provisions
of the Certificate of Incorporation, such maximum number of Directors shall be
increased automatically by the number of Directors such holders are so entitled
to elect. Such increase shall remain in effect until the right of such holders
to elect such Director or Directors shall cease and until the Director or
Directors elected by such holders shall no longer hold office. The exact number
of Directors within the foregoing minimum and maximum limitations shall be
determined from time to time by resolution adopted by the affirmative vote of a
majority of the entire Board.
Except as otherwise provided in any applicable provisions of the
Certificate of Incorporation relating to Preferred Shares of the Company, the
Directors shall be divided into three classes, designated Class I, Class II and
Class III. All classes shall be as nearly equal in number as possible. The terms
of office of the Directors initially classified shall be as follows: at the 1988
annual meeting of shareholders, Class I Directors shall be elected for a
one-year term expiring at the 1989 annual meeting of shareholders, Class II
Directors for a two-year term expiring at the 1990 annual meeting of
shareholders, and Class III Directors for a three-year term expiring at the 1991
annual meeting of shareholders. At each annual meeting of shareholders after the
1988 annual meeting, Directors so classified who are elected to replace those
whose terms expire at such annual meeting shall be elected to hold office until
the third succeeding annual meeting. Each Director so classified shall hold
office until the expiration of his term and until his successor has been elected
and qualified.
<PAGE>
Except as otherwise provided in any applicable provisions of the
Certificate of Incorporation relating to Preferred Shares of the Company, (a)
newly created directorships resulting from an increase in the number of
Directors and vacancies occurring on the Board of Directors for any reason may
be filled by vote of the Directors (including a majority of Directors then in
office if less than a quorum exists), and (b) if the number of Directors is
changed, (i) any newly created directorships or any decrease in directorships
shall be apportioned by the Board among the classes so as to make all classes as
nearly equal as possible, and (ii) when the number of Directors is increased by
the Board and any newly created directorships are filled by the Board, there
shall be no classification of the additional Directors until the next annual
meeting of shareholders. Any Director elected by the Board to fill a newly
created directorship or a vacancy shall hold office until the next annual
meeting of shareholders and until his successor, classified in accordance with
these By-Laws, has been elected and qualified. No decrease in the number of
Directors constituting the Board shall shorten the term of any incumbent
Director.
Sec. 2. Quorum. One-third, but in any event not fewer than five (5)
members of the Board of Directors, shall constitute a quorum for transacting
business at all meetings. In the event of a quorum not being present, a lesser
number may adjourn the meeting to a time not more than twenty (20) days later.
Sec. 3. Place of Meetings. The Directors may hold their meetings either
within or without the State of New York.
Sec. 4. Meetings. Regular and special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board, any Vice
Chairman, the President, any Executive Vice President or Senior Vice President,
or any member of the Executive Committee of the Board and shall be held at such
time and place as the notice of the meeting shall specify. Notice of any such
meeting shall be given to each Director (a) personally (either orally or in
writing) not less than 12 hours in advance of such meeting, (b) by telex or
similar method of communication dispatched to his usual place of business not
less than 24 hours in advance of such meeting, or (c) by mail or telegram
dispatched to his address on file at the Company for such purpose not less than
two days in advance of such meeting. Such notice shall be given by the Secretary
or, if the Secretary is not available, by the individual calling the meeting
and, in the case of special meetings, shall also specify the object of the
meeting. At any such meeting held without notice at which every member of the
Board shall be present or shall waive notice in writing before or after the
meeting, any business may be transacted which might have been transacted if
notice of the meeting had been duly given.
<PAGE>
Regular meetings may also be held at such times and places as the Board
may designate from time to time, and no notice shall be required for any such
regular meeting when held as so designated.
Any one or more members of the Board may participate in a meeting of
the Board by means of a conference telephone or similar communications equipment
allowing all persons participating in the meeting to hear each other at the same
time. Participation by such means shall constitute presence in person at the
meeting.
Sec. 5. Removal. Any officer elected or appointed by the Board of
Directors, may be removed at any time by the affirmative vote of a majority of
the whole Board.
Sec. 6. Compensation. Each Director of the Company who is neither an
officer or employee of the Company or of a subsidiary of the Company nor a
Chairman of a Committee of the Board of Directors of the Company shall receive
an annual retainer of Twenty-Five Thousand Dollars ($25,000). Each Director of
the Company who is not an officer or employee of the Company or of a subsidiary
of the Company and who is a Chairman of a Committee of the Board of Directors of
the Company shall receive an annual retainer of Twenty-Eight Thousand Dollars
($28,000). In addition, each Director of the Company who is not an officer or
employee of the Company or of a subsidiary of the Company shall receive: (i) a
fee of One Thousand Dollars ($1,000) per meeting for attendance at any regular
or special meeting of the Board or as a member or by invitation at any regular
or special meeting of any Committee of the Board and (ii) a fee of One Thousand
Dollars ($1,000) for each day (prorated for part of a day) that such Director
renders service to the Company in excess of that required by such Director's
usual responsibilities either as a member of the Board of Directors of the
Company or as a member of a Committee thereof.
Sec. 7. Indemnification--Third Party and Derivative Actions.
(a) The Company shall indemnify any person made, or threatened
to be made, a party to an action or proceeding other than one by or in the right
of the Company to procure a judgment in its favor, whether civil or criminal,
including an action by or in the right of any other corporation of any type or
kind, domestic or foreign, or any partnership, joint venture, trust, employee
benefit plan or other enterprise, which any Director or officer of the Company
served in any capacity at the request of the Company, by reason of the fact that
he, his testator or intestate, is or was a Director or officer of the Company,
or is or was serving such other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise in any capacity, against judgments,
fines, amounts paid in settlement and expenses (including attorneys' fees)
incurred in connection with such action or proceeding, or any appeal therein,
provided that no indemnification may be made to or on behalf of such person if
(i) his acts were committed in bad faith or were the result of his active and
deliberate dishonesty and were material to such action or proceeding or (ii) he
personally gained in fact a financial profit or other advantage to which he was
not legally entitled.
<PAGE>
(b) The Company shall indemnify any person made, or threatened
to be made, a party to an action by or in the right of the Company to procure a
judgment in its favor by reason of the fact that he, his testator or intestate,
is or was a Director or officer of the Company, or is or was serving at the
request of the Company as a Director or officer of any other corporation of any
type or kind, domestic or foreign, or of any partnership, joint venture, trust,
employee benefit plan or other enterprise, against judgments, amounts paid in
settlement and expenses (including attorneys' fees) incurred in connection with
such action, or any appeal therein, provided that no indemnification may be made
to or on behalf of such person if (i) his acts were committed in bad faith or
were the result of his active and deliberate dishonesty and were material to
such action or (ii) he personally gained in fact a financial profit or other
advantage to which he was not legally entitled.
(c) For the purpose of this Section 7, the Company shall be
deemed to have requested a person to serve an employee benefit plan where the
performance by such person of his duties to the Company also imposes duties on,
or otherwise involves services by, such person to the plan or participants or
beneficiaries of the plan; excise taxes assessed on a person with respect to an
employee benefit plan pursuant to applicable law shall be considered fines.
(d) The termination of any civil or criminal action or
proceeding by judgment, settlement, conviction or upon a plea of nolo
contendere, or its equivalent, shall not in itself create a presumption that any
such Director or officer has not met the standard of conduct set forth in this
Section 7. However, no Director or officer shall be entitled to indemnification
under this Section 7 if a judgment or other final adjudication adverse to the
Director or officer establishes (i) that his acts were committed in bad faith or
were the result of active and deliberate dishonesty and were material to the
cause of action so adjudicated, or (ii) that he personally gained in fact a
financial profit or other advantage to which he was not legally entitled.
<PAGE>
Sec. 8. Payment of Indemnification; Repayment.
(a) A person who has been successful, on the merits or
otherwise, in the defense of a civil or criminal action or proceeding of the
character described in Section 7 of this Article shall be entitled to
indemnification as authorized in such Section.
(b) Except as provided in Section 8(a), any indemnification
under Section 7 of this Article, unless ordered by a court, shall be made by the
Company only if authorized in the specific case:
(1) by the Board of Directors acting by a quorum
consisting of Directors who are not parties to the action or proceeding giving
rise to the indemnity claim upon a finding that the Director or officer has met
the standard of conduct set forth in Section 7 of this Article; or
(2) if a quorum under the foregoing clause (1) is not
obtainable or, even if obtainable, a quorum of disinterested Directors so
directs:
(i) by the Board of Directors upon the
opinion in writing of independent legal counsel (i.e., a reputable lawyer or law
firm not under regular retainer from the Company or any subsidiary corporation)
that indemnification is proper in the circumstances because the standard of
conduct set forth in Section 7 of this Article has been met by such Director or
officer, or
(ii) by the holders of the Common Shares of
the Company upon a finding that the Director or officer has met such standard of
conduct.
(c) Expenses incurred by a Director or officer in defending a
civil or criminal action or proceeding shall be paid by the Company in advance
of the final disposition of such action or proceeding upon receipt of an
undertaking by or on behalf of such Director or officer to repay such amount in
case he is ultimately found, in accordance with this Article, not to be entitled
to indemnification or, where indemnity is granted, to the extent the expenses so
paid exceed the indemnification to which he is entitled.
(d) Any indemnification of a Director or officer of the
Company under Section 7 of this Article, or advance of expenses under Section
8(c) of this Article, shall be made promptly, and in any event within 60 days,
upon the written request of the Director or officer.
<PAGE>
Sec. 9. Enforcement; Defenses. The right to indemnification or advances
as granted by this Article shall be enforceable by the Director or officer in
any court of competent jurisdiction if the Company denies such request, in whole
or in part, or if no disposition thereof is made within 60 days. Such person's
expenses incurred in connection with successfully establishing his right to
indemnification, in whole or in part, in any such action shall also be
indemnified by the Company. It shall be a defense to any such action (other than
an action brought to enforce a claim for the advance of expenses under Section
8(c) of this Article where the required undertaking, if any, has been received
by the Company) that the claimant has not met the standard of conduct set forth
in Section 7 of this Article, but the burden of proving such defense shall be on
the Company. Neither the failure of the Company (including its Board of
Directors, its independent legal counsel, and the holders of its Common Shares),
to have made a determination that indemnification of the claimant is proper in
the circumstances nor the fact that there has been an actual determination by
the Company (including its Board of Directors, its independent legal counsel,
and the holders of its Common Shares) that indemnification of the claimant is
not proper in the circumstances, shall be a defense to the action or create a
presumption that the claimant is not entitled to indemnification.
<PAGE>
Sec. 10. Contract; Savings Clause; Preservation of Other Rights.
(a) The foregoing indemnification provisions shall be deemed
to be a contract between the Company and each Director and officer who serves in
such capacity at any time while these provisions as well as the relevant
provisions of the New York Business Corporation Law are in effect and any repeal
or modification thereof shall not affect any right or obligation then existing
with respect to any state of facts then or previously existing or any action or
proceeding previously or thereafter brought or threatened based in whole or in
part upon any such state of facts. Such a contract right may not be modified
retroactively without the consent of such Director or officer.
(b) If this Article or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify each Director or officer of the Company against
judgments, fines, amounts paid in settlement and expenses (including attorneys'
fees) incurred in connection with any actual or threatened action or proceeding,
whether civil or criminal, including an actual or threatened action by or in the
right of the Company, or any appeal therein, to the full extent permitted by any
applicable portion of this Article that shall not have been invalidated and to
the full extent permitted by applicable law.
(c) The indemnification provided by this Article shall not be
deemed exclusive of any other rights to which those indemnified may be entitled
under any by-law, agreement, vote of shareholders or Directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be a Director or officer and shall inure to the benefit of the heirs, executors
and administrators of such a person. The Company is hereby authorized to provide
further indemnification if it deems it advisable by resolution of shareholders
or Directors or by agreement.
Sec. 11. Indemnification of Persons Not Directors or Officers of the
Company. The Company may, by resolution adopted by the Board of Directors of the
Company, indemnify any person not a Director or officer of the Company, who is
made, or threatened to be made, a party to an action or proceeding, whether
civil or criminal, by reason of the fact that he, his testator or intestate, is
or was an employee or other agent of the Company, against judgments, fines,
amounts paid in settlement and expenses (including attorneys' fees) incurred in
connection with such action or proceeding, or any appeal therein, provided that
no indemnification may be made to or on behalf of such person if (i) his acts
were committed in bad faith or were the result of active and deliberate
dishonesty and were material to such action or proceeding, or (ii) he personally
gained in fact a financial profit or other advantage to which he was not legally
entitled.
<PAGE>
ARTICLE IV. EXECUTIVE AND OTHER COMMITTEES
Sec. 1. The Board of Directors shall, by an affirmative vote of a
majority of the whole Board, appoint from the Directors an Executive Committee
not more than nine and not less than three, of which one-third (but not less
than two) shall constitute a quorum. Should it be impracticable at any time, due
to absence or illness of members or other cause, to obtain a quorum of the
members so appointed for any desired meeting, the Secretary, or, if the
Secretary is not available, the member calling the meeting, may call upon any
other Director or Directors, not members of such Executive Committee but who
have been designated by the Board as alternate members of the Executive
Committee, to make up a quorum for that particular meeting, which other Director
or Directors shall for the time being be members of said Executive Committee,
and the acts and proceedings of the Committee as so constituted for such meeting
shall have the same force and effect as the acts and proceedings of meetings
where a quorum of the regular committee is in attendance.
The Board of Directors may from among their number also, by a similar
vote, appoint any other committees.
The Board of Directors shall fill vacancies in the Executive Committee
by election from Directors; and at all times it shall be the duty of the Board
of Directors to keep the membership of the Executive Committee up to the
required number.
Any member of the Executive Committee who shall cease to be a Director
shall ipso facto cease to be a member of the Committee.
All action by the Executive Committee, or by other committees appointed
by the Board of Directors, shall be reported to said Board at its meeting next
succeeding such action, and, except to the extent stated in the second sentence
of the first paragraph of Section 2 of this Article, shall be subject to
revision, alteration, or approval by the Board of Directors.
The Executive and other committees shall each fix its own rules of
procedure and arrange its own place of meeting; but in every case (except in the
case of the Executive Committee) a majority of such committee shall be necessary
to constitute a quorum, and in every case (except in the case of the Executive
Committee) the affirmative vote of a majority of the members of each of such
committees shall be necessary for its adoption of any resolution. Any one or
more members of the Executive or any other committee may participate in a
meeting of such committee by means of a conference telephone or similar
communications equipment allowing all persons participating in the meeting to
hear each other at the same time. Participation by such means shall constitute
presence in person at the meeting.
Meetings of the Executive Committee shall be held whenever called by
the Chairman of the Board, any Vice Chairman, the President, any Executive Vice
President or Senior Vice President or any member of that Committee, and shall be
held at such time and place as the notice of the meeting shall specify. Notice
of any such meeting shall be given to each member of the Committee (a)
personally (either orally or in writing) not less than 12 hours in advance of
such meeting, (b) by telex or similar method of communication dispatched to his
usual place of business not less than 24 hours in advance of such meeting, or
(c) by mail or telegram dispatched to his address on file at the Company for
such purpose not less than two days in advance of such meeting. Such notice
shall be given by the Secretary or, if the Secretary is not available, by the
individual calling the meeting and shall also specify the object of the meeting.
The Executive Committee shall keep regular minutes and cause them to be
recorded in a book to be kept in the principal office of the Company for that
purpose.
<PAGE>
Sec. 2. Powers of Committees. The Executive Committee shall, whenever
the Board of Directors is not in session, direct the management of the affairs
of the Company in all cases in which specific directions to the contrary shall
not have been given, or specific action of the Board of Directors is required by
law. Notwithstanding anything to the contrary stated in the fifth paragraph of
Section 1 of this Article, the rights of third persons acquired in reliance on
an Executive Committee resolution prior to receiving notice of action by the
Board of Directors shall not be prejudiced by action by the Board of Directors.
Other committees appointed by the Board of Directors shall have such
powers as the Board may delegate by resolution.
Sec. 3. Compensation. The members of the Executive Committee and the
members of any other committee appointed by the Board of Directors shall receive
such compensation for their services as from time to time shall be fixed by the
Board of Directors.
ARTICLE V. OFFICERS AND THEIR DUTIES
Sec. 1. Officers. The officers of the Company shall be: Chairman of the
Board of Directors, President, Treasurer, Secretary, and Controller, and such
Vice Chairmen, such Vice Presidents (one or more of whom may be designated
Executive Vice President or Senior Vice President), and such Assistant Vice
Presidents, Assistant Treasurers, Assistant Secretaries, and Assistant
Controllers as the Board of Directors in its discretion may elect or appoint. No
officer other than the Chairman of the Board need be a member of the Board of
Directors. Any number of offices may be held by the same person, except that the
same person shall not be (i) Treasurer and Controller or (ii) Chairman of the
Board or President and Secretary.
Officers shall be elected annually at the first meeting of the Board of
Directors following the annual meeting of shareholders, subject to the power of
the Board of Directors to fill vacancies at any time. All officers shall serve
at the pleasure of the Board of Directors and may be removed as provided in
Article III, Section 5 of these By-Laws.
Sec. 2. Chairman of the Board. The Chairman of the Board of Directors
shall be the chief executive officer of the Company and shall be responsible to
the Board of Directors for the administration and operations of the Company. He
shall preside at all meetings of the Board of Directors and at all meetings of
shareholders. By virtue of his office he shall be a member of the Executive
Committee of the Board of Directors and shall preside at meetings of the
Executive Committee. He shall have such other powers and perform such other
duties as from time to time may be assigned to him by, and shall be responsible
solely to, the Board of Directors. He may sign, with the Treasurer, all
promissory notes of the Company and any guarantees of the Company in respect of
borrowed money, and, with the Secretary when the corporate seal is to be
affixed, all share certificates, bonds, mortgages and other contracts of the
Company.
Sec. 2-A. Vice Chairmen. Each Vice Chairman shall have such powers and
perform such duties as from time to time may be assigned to him by the Board of
Directors or the Chairman of the Board. Any Vice Chairman may sign, with the
Treasurer, all promissory notes of the Company and any guarantees of the Company
in respect of borrowed money, and, with the Secretary when the corporate seal is
to be affixed, all share certificates, bonds, mortgages, and other contracts of
the Company.
<PAGE>
Sec. 3. President. The President shall have such powers and perform
such duties as from time to time may be assigned to him by the Board of
Directors or by the Chairman of the Board. He may sign, with the Treasurer, all
promissory notes of the Company and any guarantees of the Company in respect of
borrowed money, and, with the Secretary when the corporate seal is to be
affixed, all share certificates, bonds, mortgages, and other contracts of the
Company.
Sec. 3-A. Vice Presidents. Each Vice President shall have such powers
and perform such duties as from time to time may be assigned to him by the Board
of Directors, the Chairman of the Board, any Vice Chairman, or the President.
Any Vice President may sign, with the Treasurer, all promissory notes of the
Company and any guarantees of the Company in respect of borrowed money, and,
with the Secretary when the corporate seal is to be affixed, all share
certificates, bonds, mortgages, and other contracts of the Company.
Sec. 4. Assistant Vice Presidents. The Board of Directors may elect or
appoint one or more Assistant Vice Presidents, each of whom shall have such
powers and perform such duties as from time to time may be assigned to him by
the Board of Directors, the Chairman of the Board, any Vice Chairman, the
President, or any Vice President.
Sec. 5. Secretary. The Secretary shall keep a record of all proceedings
of the Board of Directors, and of all meetings of the shareholders, and of the
Executive Committee and of all other committees, in books provided for that
purpose, and he shall attend to giving and serving all notices of the Company.
The Secretary shall keep in safe custody the seal of the Company and he shall
affix such seal on all share certificates, bonds, mortgages, and other contracts
of the Company executed under such seal. He shall have charge of the records of
shareholders of the Company, including transfer books, and share ledgers, and
such other books and papers as the Board of Directors shall direct, and in
general shall perform all the duties incident to the office of Secretary.
Sec. 6. Assistant Secretaries. The Board of Directors may appoint one
or more Assistant Secretaries, who shall have power to sign, with the Chairman
of the Board, any Vice Chairman, the President, or any Vice President, share
certificates of the Company. In the absence of the Secretary, the Assistant
Secretaries shall be vested with the powers of, and any one of them may perform
the duties of, the Secretary. Each Assistant Secretary shall perform such other
duties as from time to time may be assigned to him by the Board of Directors,
the Chairman of the Board, any Vice Chairman, the President, or any Vice
President.
<PAGE>
Sec. 7. Treasurer. The Treasurer shall have in his charge all the funds
and securities of the Company. When necessary or proper, he, or such other
officer or officers of the Company as may be so duly authorized by the Board of
Directors, shall endorse on behalf of the Company for collection checks, notes
or other obligations and shall deposit the same to the credit of the Company in
such bank or banks or depositories as the Board of Directors may designate or as
may be designated by persons authorized by the Board of Directors to make such
designations. He, or such other officers or employees of the Company or any of
its subsidiaries, acting individually unless otherwise provided, as may from
time to time be designated by the Board of Directors or be designated in writing
by any officer or officers of the Company duly authorized by the Board of
Directors to make such designations, shall sign all receipts and vouchers for
payments made to the Company, and shall sign all checks, drafts or bills of
exchange, provided that the Board of Directors from time to time may designate
other persons as authorized signatories of the Company or authorize other
persons to make such designations on behalf of the Company. The Treasurer
jointly with the Chairman of the Board, any Vice Chairman, the President, or any
Vice President shall sign all promissory notes of the Company and any guarantees
of the Company in respect of borrowed money, and shall pay out and dispose of
the same under the direction of the Board; he shall keep a complete set of
books, showing the financial transactions of the Company, and shall exhibit his
books to any Director upon application at the office of the Company, during
business hours; he shall make such reports as the Board of Directors or the
Executive Committee may from time to time request; and he shall perform all acts
incidental to the office of Treasurer, subject, nevertheless, to the control of
the Board of Directors.
He shall give such bonds for the faithful discharge of his duties as
Treasurer as the Board of Directors may require.
Sec. 8. Assistant Treasurers. The Board of Directors may appoint one or
more Assistant Treasurers. In the absence of the Treasurer, the Assistant
Treasurers shall be vested with the powers of, and any one of them may perform
the duties of, the Treasurer. Each Assistant Treasurer shall perform such other
duties as from time to time may be assigned to him by the Board of Directors,
the Chairman of the Board, any Vice Chairman, the President, or any Vice
President.
Sec. 9. Controller. The Controller shall have supervision and direction
of all accounts of the Company, and shall see that the system of accounts is
duly enforced and maintained.
There shall be kept in his office a general set of books containing a
complete set of all the business transactions of the Company, and he shall, as
often as necessary, make an examination of the accounts of any officer, agent or
employee entrusted with the handling or care of money of the Company.
It shall be the duty of the Controller to know that all money belonging
to the Company, collected from any source by any officer, agent or employee, is
properly accounted for and promptly paid into the treasury, and that all
accounts of the Company are properly and promptly settled.
<PAGE>
It shall be the duty of the Controller to know that all bonds required
of officers, agents and employees for the faithful performance of their duties
are given. Such bonds shall be transmitted to the Controller for safe custody
and shall be released only upon a complete and satisfactory settlement of the
accounts covered by them, unless otherwise ordered by the Board.
Sec. 10. Additional Officers; Division Officers. In addition to the
above officers, the Board of Directors may also appoint one or more general
counsel and one or more auditors and such other officers as they may deem wise
and advisable for the best interests of the Company, who shall perform such
duties as from time to time may be assigned to them by the Board of Directors.
If the Board of Directors establishes divisions of the Corporation, the Board
may also establish such division offices and appoint such division officers as
the Board deems appropriate. Such division officers shall have such powers and
perform such duties as from time to time may be assigned to them by the Board of
Directors. The Board of Directors shall fix salaries for all officers of the
Company, or may delegate, to any committee of the Board or to the Chairman of
the Board, the power to fix salaries of officers of the Company in cases where
the Board deems it appropriate to so delegate.
Sec. 11. Voting upon Stocks. Unless otherwise ordered by the Board of
Directors, the Chairman of the Board, any Vice Chairman, the President or any
Vice President shall have full power and authority on behalf of the Company to
attend, act and vote, or in the name of the Company to execute proxies
appointing any person or persons to attend, act and vote on behalf of the
Company, at any meeting of stockholders of any corporation in which the Company
may hold stock, and at any such meeting such officer or person or persons
appointed in any such proxy, as the case may be, shall possess and may exercise
on behalf of the Company any and all rights, powers and privileges incident to
the ownership of such stock. The Board of Directors may by resolution from time
to time confer like powers upon any other person or persons.
Sec. 12. Sales of Stock. Neither the corporation of Phelps Dodge
Corporation nor any subsidiary company by it controlled, shall speculate in the
stock either of Phelps Dodge Corporation or of any subsidiary company, or shall
buy or sell same except in the regular course of legitimate business of such
company or for the purpose of retirement and this provision shall be unalterable
save by the vote of the holders of a majority of the stock of the company voting
thereon at a meeting called, as provided by these By-Laws.
ARTICLE VI. SHARE CERTIFICATES AND TRANSFERS
Sec. 1. Certificates for Shares. The Board of Directors shall prepare,
in form according to law, and approve, certificates evidencing shares of the
Company.
<PAGE>
No certificate shall be valid unless it is signed by the Chairman of
the Board, any Vice Chairman, the President or any Vice President; and also by
the Secretary or an Assistant Secretary. The signatures of the officers upon a
certificate may be facsimiles if the certificate is countersigned by a transfer
agent or registered by a registrar other than the Company itself or its
employee.
Sec. 2. Transfer of Shares. Shares of the Company shall be transferred
only on the books of the Company by the holder thereof in person or by his or
her attorney duly authorized thereto in writing, and by cancellation and
surrender of certificates for a like number of shares.
ARTICLE VII. AMENDMENTS
These By-Laws, with the exception of Section 12 of Article V, may be
amended or repealed by a vote of a majority of all the Directors at any regular
or special meeting of the Board.
ARTICLE VIII.
The Company expressly elects not to be governed by the provisions
currently designated as Article 2, Chapter 23, Title 10 of the Arizona Revised
Statutes.
EXHIBIT 4.2
- --------------------------------------------------------------------------------
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
among
PHELPS DODGE CORPORATION,
THE SEVERAL LENDERS
FROM TIME TO TIME PARTIES HERETO,
and
THE CHASE MANHATTAN BANK,
as Administrative Agent
Dated as of June 25, 1997
<PAGE>
TABLE OF CONTENTS
SECTION 1. DEFINITIONS
1.1 Defined Terms
1.2 Other Definitional Provisions
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Revolving Credit Commitments
2.2 Revolving Credit Notes
2.3 Procedure for Revolving Credit Borrowing
2.4 CAF Advances
2.5 Fees
2.6 Termination or Reduction of Commitments
2.7 Option Prepayments
2.8 Conversion and Continuation Options
2.9 Minimum Amounts and Maximum Number of Tranches
2.10 Interest Rates and Payment Dates
2.11 Computation of Interest and Fees
2.12 Inability to Determine Interest Rate
2.13 Pro Rata Treatment and Payments
2.14 Illegality
2.15 Requirements of Law
2.16 Taxes
2.17 Indemnity
2.18 Actions of Lenders
2.19 Actions of the Lenders
2.20 Extension of Termination Date
SECTION 3. REPRESENTATIONS AND WARRANTIES
3.1 Financial Condition
3.2 No Change
3.3 Corporate Existence
3.4 Corporate Power; Authorization; Enforceable
obligations
3.5 No Legal Bar
3.6 No Material Litigation
3.7 No Default
3.8 Ownership of Property; Liens
3.9 Compliance with Law
3.10 Taxes
3.11 Federal Regulations
3.12 ERISA
3.13 Investment Company Act; Other Regulations
3.14 Subsidiaries
3.15 Purpose of Loans
3.16 Environmental Matters
<PAGE>
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions to Effectiveness; Closing Date
4.2 Conditions to Each Loan
SECTION 5. AFFIRMATIVE COVENANTS
5.1 Financial Statements
5.2 Certificates; Other Information
5.3 Payment of Obligations
5.4 Conduct of Business and Maintenance of Existence
5.5 Compliance With Laws, etc
5.6 Maintenance of Property; Insurance
5.7 Inspection of Property; Books and Records;
Discussions
5.8 Notices
SECTION 6. NEGATIVE COVENANTS
6.1 Financial Condition Covenants
6.2 Limitation on Mortgages, Sale and Leaseback, etc.
SECTION 7. EVENTS OF DEFAULT
SECTION 8. THE ADMINISTRATIVE AGENT
8.1 Appointment
8.2 Delegation of Duties
8.3 Reliance by Administrative Agent
8.5 Notice of Default
8.6 Non-Reliance on Administrative Agent and Other
Lenders
8.7 Indemnification
8.8 Administrative Agent in Its Individual Capacity
8.9 Successor Administrative Agent
SECTION 9. MISCELLANEOUS
9.1 Amendments and Waivers
9.2 Notices
9.3 No Waiver; Cumulative Remedies
9.4 Survival of Representations and Warranties
9.5 Payment of Expenses and Taxes
9.6 Successors and Assigns; Participations; Purchasing
Lenders
9.7 Adjustments; Set-off
9.8 Counterparts
9.9 Severability
9.10 Integration
9.11 GOVERNING LAW
9.12 Submission To Jurisdiction; Waivers
9.13 Acknowledgements
9.14 WAIVERS OF JURY TRIAL
SCHEDULES
Schedule II Phelps Dodge Corporation Principal Domestic
Subsidiaries and other Subsidiaries
Schedule III Environmental Representation
Schedule IV Existing CAF Advances
<PAGE>
SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of June 25,
1997, among PHELPS DODGE CORPORATION, a New York corporation (the "Borrower"),
the several banks and other financial institutions from time to time parties to
this Agreement (the "Lenders") and THE CHASE MANHATTAN BANK, a New York banking
corporation, as administrative agent for the Lenders hereunder (in such
capacity, the "Administrative Agent").
W I T N E S S E T H :
WHEREAS, the Borrower is a party to the Amended and Restated Credit
Agreement, dated as of June 4, 1996, with the banks parties thereto and The
Chase Manhattan Bank (formerly known as Chemical Bank), as Agent (the "Existing
Credit Agreement");
WHEREAS, the Borrower wishes to amend and restate the Existing Credit
Agreement and, for that purpose, has requested the Lenders to make available to
it a revolving credit facility and a competitive advance facility in an
aggregate principal amount of up to $1,000,000,000 as more particularly
described herein; and
WHEREAS, the Lenders are willing to agree to amend and restate the
Existing Credit Agreement and to make available such facilities and to make
loans thereunder on the terms and conditions contained herein;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto hereby agree that on the Closing Date, the
Existing Credit Agreement will be amended and restated in its entirety as
follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms shall
have the following meanings:
<PAGE>
"ABR": for any day, a rate per annum (rounded upwards, if necessary, to
the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on
such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal
Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof:
"Base CD Rate" shall mean the sum of (a) the product of (i) the Three-Month
Secondary CD Rate and (ii) a fraction, the numerator of which is one and the
denominator of which is one minus the C/D Reserve Percentage and (b) the C/D
Assessment Rate; "Three-Month Secondary CD Rate" shall mean, for any day, the
secondary market rate for three-month certificates of deposit reported as being
in effect on such day (or, if such day shall not be a Business Day, the next
preceding Business Day) by the Board of Governors of the Federal Reserve System
(the "Board") through the public information telephone line of the Federal
Reserve Bank of New York (which rate will, under the current practices of the
Board, be published in Federal Reserve Statistical Release H.15(519) during the
week following such day), or, if such rate shall not be so reported on such day
or such next preceding Business Day, the average of the secondary market
quotations for three-month certificates of deposit of major money center banks
in New York City received at approximately 10:00 A.M., New York City time, on
such day (or, if such day shall not be a Business Day, on the next preceding
Business Day) by the Administrative Agent from three New York City negotiable
certificate of deposit dealers of recognized standing selected by it; and
"Federal Funds Effective Rate" shall mean, for any day, the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by the Administrative Agent
from three federal funds brokers of recognized standing selected by it. If the
Administrative Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the Base CD
Rate or the Federal Funds Effective Rate, or both, for any reason, including the
inability or failure of the Administrative Agent to obtain sufficient quotations
in accordance with the terms thereof, the ABR shall be determined without regard
to clause (b) or (c), or both, of the first sentence of this definition, as
appropriate, until the circumstances giving rise to such inability no longer
exist. Any change in the ABR due to a change in the Prime Rate, the Three-Month
Secondary CD Rate or the Federal Funds Effective Rate shall be effective as of
the opening of business on the effective day of such change in the Prime Rate,
the Three-Month Secondary CD Rate or the Federal Funds Effective Rate,
respectively.
"ABR Loans": Revolving Credit Loans the rate of interest applicable to
which is based upon the ABR.
"Accounts": "accounts" as such term is defined in Section 9-106 of the
Uniform Commercial Code of the State of New York.
<PAGE>
"Affiliate": as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person. For purposes of this definition,
"control" of a Person means the power, directly or indirectly, either to (a)
vote 20% or more of the securities having ordinary voting power for the election
of directors of such Person or (b) direct or cause the direction of the
management and policies of such Person, whether by contract or otherwise.
"Agreement": this Second Amended and Restated Credit Agreement, as
amended, supplemented or otherwise modified from time to time.
"Applicable Margin": for each Eurodollar Loan during each day, the rate
per annum set forth below opposite the Rating in effect on such day:
Applicable Margin-
Ratings Eurodollar Loans
------- -----------------
Rating I .0950%
Rating II .1275%
Rating III .1350%
Rating IV .1600%
Rating V .2500%
"Assignee": as defined in subsection 9.6(e).
"Assignment and Acceptance": as defined in subsection 9.6.
"Attributable Debt": at any time, the present value, discounted at a
rate per annum equal to the weighted average of the interest rates for any Loans
outstanding under the Credit Agreement, and if no Loans are outstanding under
the Credit Agreement, the Prime Rate at such time, compounded quarterly, of the
obligation of a lessee for rental payments (not including amounts payable by the
lessee for maintenance, property taxes and insurance) during the remaining term
of any lease (including any period for which such lease has been extended or
may, at the option of the lessor, be extended).
<PAGE>
"Available Commitments": at any time, an amount equal to the excess, if
any, of (a) the aggregate amount of the Commitments over (b) the aggregate
principal amount of all Loans then outstanding.
"Board of Directors": the Board of Directors of the Borrower, or the
Executive Committee of the Board of Directors of the Borrower.
"Borrowing Date": any Business Day specified in a notice pursuant to
subsection 2.3 or 2.4 as a date on which the Borrower requests the Lenders to
make Loans hereunder.
"Business Day": a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
close; provided, that when such term is used in respect of any Borrowing Date,
payment date, interest rate determination date or first or last day of an
Interest Period, in each case in respect of a Eurodollar Loan or a LIBOR Rate
CAF Advance, a Business Day shall also be a day on which dealings in foreign
currency and exchange between banks may be carried on in London, England.
"CAF Advance": each CAF Advance made pursuant to subsection 2.4; the
aggregate amount advanced by a Lender pursuant to subsection 2.4 on each
Borrowing Date shall constitute one or more CAF Advances, as specified by such
Lender pursuant to subsection 2.4(b).
"CAF Advance Assignees": as defined in subsection 9.6(c).
"CAF Advance Assignment": any assignment by a Lender to a CAF Advance
Assignee of a CAF Advance and related Individual CAF Advance Note; any such CAF
Advance Assignment to be registered in the Register must set forth, in respect
of the CAF Advance Assignee thereunder, the full name of such CAF Advance
Assignee, its address for notices, its lending office address (in each case with
telephone and facsimile transmission numbers) and payment instructions for all
payments to such CAF Advance Assignee, and must contain an agreement by such CAF
Advance Assignee to comply with the provisions of subsection 9.6 and subsection
2.16 to the same extent as any Lender.
<PAGE>
"CAF Advance Confirmation": each confirmation by the Borrower of its
acceptance of CAF Advance Offers, which CAF Advance Confirmation shall be
substantially in the form of Exhibit D-3 and shall be delivered to the
Administrative Agent in writing or by facsimile transmission.
"CAF Advance Notes": the collective reference to the Grid CAF Advance
Notes and the Individual CAF Advance Notes; individually, a "CAF Advance Note".
"CAF Advance Offer": each offer by a Lender to make CAF Advances
pursuant to a CAF Advance Request, which CAF Advance Offer shall contain the
information specified in Exhibit D-2 and shall be delivered to the
Administrative Agent by telephone, immediately confirmed by facsimile
transmission.
"CAF Advance Request": each request by the Borrower for Lenders to
submit bids to make CAF Advances, which shall contain the information in respect
of such requested CAF Advances specified in Exhibit D-1 and shall be delivered
to the Administrative Agent in writing or by facsimile transmission, or by
telephone, immediately confirmed by facsimile transmission.
"Capital Stock": any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation) and any
and all warrants or options to purchase any of the foregoing.
"Capitalized Lease": any Lease of property, real, personal or mixed, in
respect of which the present value (or some other computation) of the minimum
rental commitment thereunder would, in accordance with GAAP in effect on the
date such Lease is executed, be capitalized on a balance sheet of the lessee.
"Capitalized Lease Obligation": at any time, the aggregate amounts
which, in accordance with GAAP, are shown as liabilities on the balance sheet of
the lessee with respect to the minimum rental commitment under a Capitalized
Lease of the lessee.
<PAGE>
"C/D Assessment Rate": for any day, the annual assessment rate in
effect on such day which is payable by a member of the Bank Insurance Fund
classified as well-capitalized and within supervisory subgroup "B" (or a
comparable successor assessment risk classification) within the meaning of 12
C.F.R. ss. 327.3(d) (or any successor provision) to the Federal Deposit
Insurance Corporation (or any successor) for such Corporation's (or such
successor's) insuring time deposits at offices of such institution in the United
States.
"C/D Reserve Percentage": for any day as applied to any calculation of
the Base C/D Rate, that percentage (expressed as a decimal) which is in effect
on such day, as prescribed by the Board of Governors of the Federal Reserve
System (or any successor) (the "Board"), for determining the maximum reserve
requirement for a Depositary Institution (as defined in Regulation D of the
Board) in respect of new non-personal time deposits in Dollars having a maturity
of 30 days or more.
"Chase": The Chase Manhattan Bank.
"Closing Date": the date on which the conditions precedent set forth in
subsection 4.1 shall be satisfied.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Commitment": as to any Lender, the obligation of such Lender to make
Revolving Credit Loans to the Borrower hereunder in an aggregate principal
amount at any one time outstanding not to exceed the amount set forth opposite
such Lender's name on Schedule I, as such amount may be reduced from time to
time in accordance with the provisions of this Agreement.
"Commitment Percentage": as to any Lender at any time, the percentage
which such Lender's Commitment then constitutes of the aggregate Commitments
(or, at any time after the Commitments shall have expired or terminated, the
percentage which the aggregate principal amount of such Lender's Revolving
Credit Loans then outstanding constitutes of the aggregate principal amount of
the Revolving Credit Loans then outstanding or, if the Commitments have
terminated or expired and no Revolving Credit Loans are then outstanding, the
percentage which the aggregate principal amount of such Lender's CAF Advances
then outstanding constitutes of the aggregate principal amount of the CAF
Advances then outstanding).
"Commitment Period": the period from and including the date hereof to
but not including the Termination Date or such earlier date on which the
Commitments shall terminate as provided herein.
"Commonly Controlled Entity": an entity, whether or not incorporated,
which is under common control with the Borrower within the meaning of Section
4001 of ERISA or is part of a group which includes the Borrower and which is
treated as a single employer under Section 414 of the Code.
<PAGE>
"Consolidated Tangible Net Worth": at any date, the excess at such date
of total assets over total liabilities of the Borrower and its consolidated
subsidiaries determined in accordance with GAAP, on a consolidated basis,
excluding, however, from the determination of total assets (i) all intangible
assets such as goodwill, trade names, trademarks, patents, organization
expenses, unamortized debt discount and expense and other like intangibles, (ii)
to the extent not already deducted from total assets, reserves for depreciation,
depletion, obsolescence and/or amortization of properties and all other reserves
or appropriations of retained earnings which, in accordance with GAAP, should be
established in connection with the business conducted by the relevant
corporation, and (iii) any revaluation or other write-up in book value of assets
subsequent to December 31, 1996 except in accordance with GAAP.
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Continuing Lenders": as defined in subsection 2.20(a)(ii).
"Default": any of the events specified in Section 7, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, has been satisfied.
"Dollars" and "$": dollars in lawful currency of the United States of
America.
"Environmental Laws": any and all applicable foreign, Federal, state,
local or municipal laws, rules, orders, regulations, statutes, ordinances,
codes, decrees, requirements of any Governmental Authority or other Requirements
of Law (including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of human health or the environment.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurodollar Loans": Revolving Credit Loans the rate of interest
applicable to which is based upon the Eurodollar Rate.
<PAGE>
"Eurodollar Rate": with respect to each day during each Interest Period
pertaining to a Eurodollar Loan, the rate per annum equal to (a) the rate for
deposits in Dollars with maturities equal to such Interest Period which appears
on the display designated "LIBO" of the Telerate screen page 3750 as used by the
British Bankers Association at 11:00 A.M., London time, on the date which is two
Business Days preceding the first day of such Interest Period, or (b) if no such
rate is being quoted at the time of determination, the rate per annum equal to
the average (rounded upward to the nearest 1/100th of 1%) of the respective
rates notified to the Administrative Agent by each of the Reference Lenders as
the rate at which such Reference Lender is offered Dollar deposits at or about
10:00 A.M., New York City time, two Business Days prior to the beginning of such
Interest Period in the interbank eurodollar market where the eurodollar and
foreign currency and exchange operations in respect of its Eurodollar Loans are
then being conducted for delivery on the first day of such Interest Period for
the number of days comprised therein and in an amount comparable to the amount
of its Eurodollar Loan to be outstanding during such Interest Period.
"Event of Default": any of the events specified in Section 7, provided
that any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"Existing Credit Agreement": as defined in the recitals.
"Existing Termination Date": as defined in subsection 2.20(a)(i).
"Facility Fee Rate": for each day during each quarterly calculation
period, a rate per annum set forth below opposite the Rating in effect on such
day:
Facility Fee
Ratings Rate
------- ------------
Rating I .0550%
Rating II .0600%
Rating III .0650%
Rating IV .0900%
Rating V .1250%
"Financing Lease": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee.
"Fixed Rate CAF Advance Request": any CAF Advance Request requesting
the Lenders to offer to make CAF Advances at a fixed rate (as opposed to a rate
composed of the LIBOR Rate plus (or minus) a margin).
"GAAP": generally accepted accounting principles in the United States
of America in effect from time to time.
<PAGE>
"Governmental Authority": 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.
"Grid CAF Advance Note": as defined in subsection 2.4(f); collectively,
the "Grid CAF Advance Notes".
"Guarantee": of a Person, at a particular date, the sum (without
duplication) of the following: (a) guarantees or endorsements (other than for
purposes of collection in the ordinary course of business) of, or obligations to
purchase goods or services for the purpose of supplying funds for the purchase
or payment of, indebtedness, liabilities or obligations of others, and other
contingent liabilities in respect of, or to purchase or otherwise acquire or
service, indebtedness, liabilities or obligations of others, provided that any
such obligation to purchase goods or services shall be treated as Indebtedness
only to the extent that payment thereunder will be required (after giving effect
to any provision limiting such payments) if such property or services are not
delivered to such Person, and (b) all indebtedness in effect guaranteed by an
agreement, contingent or otherwise, to make any loan, advance, capital
contribution or other investment in the debtor for the purpose of assuring a
minimum equity, asset base, working capital or other balance sheet condition for
any date, or to provide funds for the payment of any liability, dividend or
stock liquidation payment, or otherwise to supply funds to or in any manner
invest in the debtor, but only to the extent of the liability of such Person
thereunder.
"Hazardous Materials": any hazardous materials, hazardous wastes,
hazardous constituents, hazardous or toxic substances, petroleum products
(including crude oil or any fraction thereof), defined or regulated as such in
or under any Environmental Law.
"Indebtedness": of a Person, at a particular date, the sum (without
duplication) of the following: (a) all items of indebtedness which in accordance
with GAAP would be included in determining total liabilities as shown on the
liability side of a balance sheet of such Person as at such date, (b)
indebtedness for the repayment of borrowed money secured by any Mortgage
existing on a Principal Property owned subject to such Mortgage, whether or not
the indebtedness secured thereby shall have been assumed, (c) Guarantees, (d)
Capitalized Lease Obligations and (e) Production Payments, provided, however,
that the term "Indebtedness" shall not include liabilities in respect of advance
payments made under contracts for the sale of goods and/or services, or lease
obligations other than Capitalized Lease Obligations, or guarantees of any such
liabilities or lease obligations.
<PAGE>
"Indebtedness for Money Borrowed": of a Person, at a particular date,
the sum (without duplication) of the following (a) all Indebtedness, whether or
not represented by bonds, debentures, notes, commercial paper or other
securities, for the repayment of borrowed money, (b) all deferred obligations
for the payment of the purchase price of property or assets purchased and
secured by a purchase money mortgage, conditional sale agreement, security
agreement or any title retention agreement, (c) Indebtedness of the character
described in clauses (b) and (c) of the definition of "Indebtedness" in
subsection 1.1 if such Indebtedness relates to Indebtedness for Money Borrowed
of others, (d) Capitalized Lease Obligations and (e) Production Payments.
"Individual CAF Advance Note": as defined in subsection 2.4(g).
"Insolvency": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Interest Payment Date": (a) as to any ABR Loan, the last day of each
March, June, September and December to occur while such Loan is outstanding, (b)
as to any Eurodollar Loan having an Interest Period of three months or less, the
last day of such Interest Period, and (c) as to any Eurodollar Loan having an
Interest Period longer than three months, each day which is three months, or a
whole multiple thereof, after the first day of such Interest Period and the last
day of such Interest Period.
"Interest Period": with respect to any Eurodollar Loan:
(i) initially, the period commencing on the borrowing or conversion
date, as the case may be, with respect to such Eurodollar Loan and ending one,
two, three or six months thereafter or, to the extent available (as determined
by the Administrative Agent), nine or twelve months thereafter, as selected by
the Borrower in its notice of borrowing or notice of conversion, as the case may
be, given with respect thereto; and
(ii) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Eurodollar Loan and ending one,
two, three or six months thereafter or, to the extent available (as determined
by the Administrative Agent), nine or twelve months thereafter, as selected by
the Borrower by irrevocable notice to the Administrative Agent not less than
three Business Days prior to the last day of the then current Interest Period
with respect thereto;
provided that, all of the foregoing provisions relating to Interest Periods are
subject to the following:
(1) if any Interest Period would otherwise end on a day that 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;
(2) any Interest Period that would otherwise extend beyond the
Termination Date shall end on the Termination Date;
(3) 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; and
(4) the Borrower shall select Interest Periods so as not to require a
payment or prepayment of any Eurodollar Loan during an Interest Period for such
Loan.
<PAGE>
"LIBOR Rate": in respect of any CAF Advance requested pursuant to a
LIBOR CAF Advance Request, the rate for deposits in Dollars for the period
commencing on the date of such CAF Advance and ending on the maturity date
thereof which appears on the display designated "LIBO" of the Telerate screen
page 3750 as used by the British Bankers Association at 11:00 A.M., London time,
on the date which is two Business Days preceding the first day of such period.
"LIBOR Rate CAF Advance": any CAF Advance made pursuant to a LIBOR Rate
CAF Advance Request.
"LIBOR Rate CAF Advance Request": any CAF Advance Request requesting
the Lenders to offer to make CAF Advances at an interest rate equal to the LIBOR
Rate plus (or minus) a margin.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement and any Financing Lease
having substantially the same economic effect as any of the foregoing).
"Lease" or "lease": any lease or other similar arrangement for the use
of property and "lessee" thereunder shall include any lessee or user thereunder.
"Loan": any Revolving Credit Loan or CAF Advance made by any Lender
pursuant to this Agreement.
"Loan Documents": this Agreement and the Notes.
"Material Adverse Change": a material adverse change in the financial
condition of the Borrower and its consolidated subsidiaries taken as a whole
from that reflected in the Borrower's consolidated balance sheet as at December
31, 1996 referred to in subsection 3.1.
"Materials of Environmental Concern": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as such
in or under any applicable Environmental Law, including, without limitation,
asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.
"Mortgage": any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind (including any conditional sale or other title retention
agreement), provided that the sale of Accounts pursuant to hold-back
arrangements entitling the purchaser of such Accounts to offset against the
hold-back losses arising from defaults by account debtors shall not be deemed a
Mortgage.
"Moody's": Moody's Investor Service, Inc.
"Multiemployer Plan": a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"Non-Excluded Taxes": as defined in subsection 2.16.
"Notes": the collective reference to the Revolving Credit Notes and the
CAF Advance Notes.
"Participant": as defined in subsection 9.6(b).
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA.
<PAGE>
"Person": an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or a Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Prime Rate": the rate of interest per annum publicly announced from
time to time by Chase as its prime rate in effect at its principal office in New
York City (the Prime Rate not being intended to be the lowest rate of interest
charged by Chase in connection with extensions of credit to debtors).
"Principal Domestic Subsidiary": each of the Subsidiaries designated as
a "Principal Domestic Subsidiary" on Schedule II attached hereto.
"Principal Property": (a) any mineral property, located within the
United States of America or its territories or possessions, of the Borrower or
any Principal Domestic Subsidiary which is in production, under development or
included in estimates of reserves published by the Borrower, (b) any
concentrator, smelter, refinery, rod mill, metal fabricating plant or similar
processing or manufacturing facility, located within the United States of
America or its territories or possessions, of the Borrower or any Principal
Domestic Subsidiary, or (c) any Capital Stock of, or any Indebtedness for Money
Borrowed owing to the Borrower or any other Principal Domestic Subsidiary of,
any Principal Domestic Subsidiary which owns any Principal Property; provided,
that Principal Property shall in any event not include any property, facility or
Principal Domestic Subsidiary determined by the Board of Directors not to be of
material importance to the operations of the Borrower and the Principal Domestic
Subsidiaries taken as a whole.
"Production Payment": any arrangement providing for the sale, transfer
or other disposition of (a) minerals (including coal and hydrocarbons) until the
transferee thereof shall realize therefrom a specified amount of money (however
determined) or a specified amount of such minerals (however determined) or (b)
any interest in minerals (including coal and hydrocarbons) of the character
commonly referred to as a "production payment."
"Rating Agencies": collectively, S&P and Moody's.
<PAGE>
"Rating I", "Rating II", "Rating III", "Rating IV" and "Rating V": the
respective Ratings set forth below:
S&P Moody's
Rating I AA- or higher Aa3 or higher
Rating II Lower than AA- Lower than Aa3 but
but higher than or higher than or
equal to A+ equal to A1
Rating III Lower than A+ Lower than A1 but
but higher than or higher than or equal
equal to A- to A3
Rating IV Lower than A- but Lower than A3 but higher
higher than or equal than or equal to
to BBB+ Baa1
Rating V BBB or lower Baa2 or lower
; provided, that if on any day the Ratings of the Rating Agencies do not
coincide for any rating category, the higher Rating will be the applicable
Rating for purposes of determining the Applicable Margin and the Facility Fee
Rate with respect to any Interest Period or quarterly period, as the case may
be.
"Ratings": the ratings of the Rating Agencies applicable to the
long-term senior unsecured debt of the Borrower, as announced by the Rating
Agencies.
"Reference Lenders": Chase, The Bank of Nova Scotia and Morgan Guaranty
Trust Company of New York.
"Register": as defined in subsection 9.6(d).
"Regulation U": Regulation U of the Board of Governors of the Federal
Reserve System as in effect from time to time.
"Reorganization": with respect to any Multiemployer Plan, the condition
that such plan is in reorganization within the meaning of Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section 4043(c) of
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .12, .13, .14, .16, .18, .19 or .20 of PBGC Reg. SS
2615.
"Required Lenders": at any time, Lenders the Commitment Percentages of
which aggregate at least 66-2/3%.
"Requirement of Law": as to any Person, any applicable law, treaty,
rule or regulation or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject.
"Responsible Officer": the chief executive officer, the president or
any vice-president of the Borrower or, with respect to financial matters, the
chief financial officer, any vice-president with responsibility primarily for
accounting or financial matters, the treasurer or the controller of the
Borrower.
<PAGE>
"Revolving Credit Loans": as defined in subsection 2.1.
"Revolving Credit Note": as defined in subsection 2.2.
"Sale and Lease-Back Transactions": any arrangement with any Person
providing for the leasing by the Borrower or a Principal Domestic Subsidiary of
any Principal Property (except for temporary leases for a term of not more than
three years), title to which property has been or is to be sold or transferred
by the Borrower or such Principal Domestic Subsidiary to such Person, except for
arrangements with any Governmental Authority of the United States of America or
any of its territories or possessions entered into for the purpose of financing
all or any part of the purchase price or the cost of constructing or improving
the property subject to such arrangement.
"Single Employer Plan": any Plan which is covered by Title IV of ERISA,
but which is not a Multiemployer Plan.
"S&P": Standard & Poor's Ratings Service, a division of the McGraw-Hill
Companies, Inc.
"Subsidiary": as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having ordinary
voting power (other than stock or such other ownership interests having such
power only by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise qualified, all references to a "Subsidiary" or
to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries
of the Borrower.
"Terminating Lender": as defined in subsection 2.20(a)(i).
"Termination Date": June 25, 2002 or such later date to which the
Termination Date may be extended pursuant to subsection 2.20.
"Total Capitalization": at any date, the sum of Consolidated Tangible
Net Worth at such date and Indebtedness for Money Borrowed of the Borrower and
its consolidated subsidiaries determined in accordance with GAAP, on a
consolidated basis, at such date.
"Tranche": the reference to Eurodollar Loans the then current Interest
Period with respect to which begins on the same date and ends on the same later
date (whether or not such Loans shall originally have been made on the same
day).
"Transferee": as defined in subsection 9.6(h).
"Type": as to any Revolving Credit Loan, its nature as an ABR Loan or a
Eurodollar Loan.
<PAGE>
1.2 Other Definitional Provisions. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in the Notes or any certificate or other document made or delivered
pursuant hereto.
(b) As used herein and in the Notes, and any certificate or other
document made or delivered pursuant hereto, accounting terms relating to the
Borrower and its Subsidiaries not defined in subsection 1.1 and accounting terms
partly defined in subsection 1.1, to the extent not defined, shall have the
respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Revolving Credit Commitments. (a) Subject to the terms and
conditions hereof, each Lender severally agrees to make revolving credit loans
("Revolving Credit Loans") to the Borrower from time to time during the
Commitment Period in an aggregate principal amount at any one time outstanding
not to exceed the amount of such Lender's Commitment provided that no Revolving
Credit Loan shall be made if, after giving effect thereto, the aggregate
outstanding principal amount of Revolving Credit Loans and CAF Advances would
exceed the Commitments. During the Commitment Period the Borrower may use the
Commitments by borrowing, prepaying the Revolving Credit Loans in whole or in
part, and reborrowing, all in accordance with the terms and conditions hereof.
(b) The Revolving Credit Loans may from time to time be (i) Eurodollar
Loans, (ii) ABR Loans or (iii) a combination thereof, as determined by the
Borrower and notified to the Administrative Agent in accordance with subsections
2.3 and 2.8, provided that no Revolving Credit Loan shall be made as a
Eurodollar Loan after the day that is one month prior to the Termination Date.
2.2 Revolving Credit Notes. The Revolving Credit Loans made by each
Lender shall be evidenced by a promissory note of the Borrower, substantially in
the form of Exhibit A-1, with appropriate insertions as to payee, date and
principal amount (a "Revolving Credit Note"), payable to the order of such
Lender and in a principal amount equal to the lesser of (a) the amount of the
initial Commitment of such Lender and (b) the aggregate unpaid principal amount
of all Revolving Credit Loans made by such Lender. Each Lender is hereby
authorized to record the date, Type and amount of each Revolving Credit Loan
made by such Lender, each continuation thereof, each conversion of all or a
portion thereof to another Type, the date and amount of each payment or
prepayment of principal thereof and, in the case of Eurodollar Loans, the length
of each Interest Period with respect thereto, on the schedule annexed to and
constituting a part of its Revolving Credit Note, and any such recordation shall
constitute prima facie evidence of the accuracy of the information so recorded;
provided, however, that the failure to make any such recordation shall not
affect the obligations of the Borrower hereunder or under any Revolving Credit
Note. Each Revolving Credit Note shall (x) be dated the Closing Date, (y) be
stated to mature on the Termination Date and (z) provide for the payment of
interest in accordance with subsection 2.10.
<PAGE>
2.3 Procedure for Revolving Credit Borrowing. The Borrower may borrow
under the Commitments during the Commitment Period on any Business Day, provided
that the Borrower shall give the Administrative Agent irrevocable notice (which
notice must be received by the Administrative Agent prior to 1:00 P.M., New York
City time, (a) three Business Days prior to the requested Borrowing Date, if all
or any part of the requested Revolving Credit Loans are to be initially
Eurodollar Loans or (b) on the requested Borrowing Date, otherwise), specifying
(i) the amount to be borrowed, (ii) the requested Borrowing Date, (iii) whether
the borrowing is to be of Eurodollar Loans, ABR Loans or a combination thereof
and (iv) if the borrowing is to be entirely or partly of Eurodollar Loans, the
amount of each such Eurodollar Loan and the length of the initial Interest
Period therefor. Each borrowing under the Commitments shall be in an aggregate
amount equal to (x) in the case of ABR Loans, $5,000,000 or a whole multiple of
$1,000,000 in excess thereof (or, if the then Available Commitments are less
than $5,000,000, such lesser amount) and (y) in the case of Eurodollar Loans,
$5,000,000 or a whole multiple of $1,000,000 in excess thereof. Upon receipt of
any such notice from the Borrower, the Administrative Agent shall promptly
notify each Lender thereof. Each Lender will make the amount of its pro rata
share of each borrowing available to the Administrative Agent for the account of
the Borrower at the office of the Administrative Agent specified in subsection
9.2 prior to 2:00 P.M., New York City time, on the Borrowing Date requested by
the Borrower in funds immediately available to the Administrative Agent. Such
borrowing will then be made available to the Borrower by the Administrative
Agent crediting the account of the Borrower on the books of such office with the
aggregate of the amounts made available to the Administrative Agent by the
Lenders and in like funds as received by the Administrative Agent.
2.4 CAF Advances. (a) The Borrower may borrow CAF Advances from time to
time on any Business Day during the period from the Closing Date until the date
occurring 14 days prior to the Termination Date in the manner set forth in this
subsection 2.4 and in amounts such that the aggregate amount of Revolving Credit
Loans and CAF Advances outstanding at any time shall not exceed the aggregate
amount of the Commitments at such time. Prior to the Closing Date, the Borrower
will have borrowed existing CAF Advances as set forth on Schedule IV. As of the
Closing Date, such existing CAF Advances shall be deemed to be CAF Advances
under this Agreement.
(b) (i) The Borrower shall request CAF Advances by delivering a CAF
Advance Request to the Administrative Agent, not later than 12:00 Noon (New York
City time) four Business Days prior to the proposed Borrowing Date (in the case
of a LIBOR Rate CAF Advance Request), and not later than 10:00 A.M. (New York
City time) one Business Day prior to the proposed Borrowing Date (in the case of
a Fixed Rate CAF Advance Request). Each CAF Advance Request may solicit bids for
CAF Advances in an aggregate principal amount of $5,000,000 or increments of
$1,000,000 in excess thereof and for not more than three alternative maturity
dates for such CAF Advances. The maturity date for each CAF Advance shall be not
less than 7 days nor more than 360 days after the Borrowing Date therefor (and
in any event not after the Termination Date). The Administrative Agent shall
promptly notify each Lender by facsimile transmission of the contents of each
CAF Advance Request received by it.
<PAGE>
(ii) In the case of a LIBOR Rate CAF Advance Request, upon receipt
of notice from the Administrative Agent of the contents of such CAF Advance
Request, any Lender that elects, in its sole discretion, to do so, shall
irrevocably offer to make one or more CAF Advances at the LIBOR Rate plus or
minus a margin determined by such Lender in its sole discretion for each such
CAF Advance. Any such irrevocable offer shall be made by delivering a CAF
Advance Offer to the Administrative Agent, before 10:30 A.M. (New York City
time) three Business Days before the proposed Borrowing Date, setting forth the
maximum amount of CAF Advances for each maturity date, and the aggregate maximum
amount for all maturity dates, which such Lender would be willing to make (which
amounts may, subject to subsection 2.4(a), exceed such Lender's Commitment) and
the margin above or below the LIBOR Rate at which such Lender is willing to make
each such CAF Advance; the Administrative Agent shall advise the Borrower before
11:15 A.M. (New York City time) three Business Days before the proposed
Borrowing Date, of the contents of each such CAF Advance Offer received by it.
If the Administrative Agent in its capacity as a Lender shall, in its sole
discretion, elect to make any such offer, it shall advise the Borrower of the
contents of its CAF Advance Offer before 10:15 A.M. (New York City time) three
Business Days before the proposed Borrowing Date.
(iii) In the case of a Fixed Rate CAF Advance Request, upon receipt
of notice from the Administrative Agent of the contents of such CAF Advance
Request, any Lender that elects, in its sole discretion, to do so, shall
irrevocably offer to make one or more CAF Advances at a rate of interest
determined by such Lender in its sole discretion for each such CAF Advance. Any
such irrevocable offer shall be made by delivering a CAF Advance Offer to the
Administrative Agent, before 9:30 A.M. (New York City time) on the proposed
Borrowing Date, setting forth the maximum amount of CAF Advances for each
maturity date, and the aggregate maximum amount for all maturity dates, which
such Lender would be willing to make (which amounts may, subject to subsection
2.4(a), exceed such Lender's Commitment) and the rate of interest at which such
Lender is willing to make each such CAF Advance; the Administrative Agent shall
advise the Borrower before 10:15 A.M. (New York City time) on the proposed
Borrowing Date of the contents of each such CAF Advance Offer received by it. If
the Administrative Agent in its capacity as a Lender shall, in its sole
discretion, elect to make any such offer, it shall advise the Borrower of the
contents of its CAF Advance Offer before 9:15 A.M. (New York City time) on the
proposed Borrowing Date.
(iv) The Borrower shall before 11:45 A.M. (New York City time)
three Business Days before the proposed Borrowing Date (in the case of CAF
Advances requested by a LIBOR Rate CAF Advance Request) and before 10:45 A.M.
(New York City time) on the proposed Borrowing Date (in the case of CAF Advances
requested by a Fixed Rate CAF Advance Request) either, in its absolute
discretion:
(A) cancel such CAF Advance Request by giving the Administrative Agent
telephone notice to that effect, or
<PAGE>
(B) accept one or more of the offers made by any Lender or Lenders
pursuant to clause (ii) or clause (iii) above, as the case may be, by giving
telephone notice to the Administrative Agent (immediately confirmed by delivery
to the Administrative Agent of a CAF Advance Confirmation) of the amount of CAF
Advances for each relevant maturity date to be made by each Lender (which amount
for each such maturity date shall be equal to or less than the maximum amount
for such maturity date specified in the CAF Advance Offer of such Lender, and
for all maturity dates included in such CAF Advance Offer shall be equal to or
less than the aggregate maximum amount specified in such CAF Advance Offer for
all such maturity dates) and reject any remaining offers made by Lenders
pursuant to clause (ii) or clause (iii) above, as the case may be; provided,
however, that (x) the Borrower may not accept offers for CAF Advances for any
maturity date in an aggregate principal amount in excess of the maximum
principal amount requested in the related CAF Advance Request, (y) if the
Borrower accepts any of such offers, it must accept offers strictly based upon
pricing for such relevant maturity date and no other criteria whatsoever and (z)
if two or more Lenders submit offers for any maturity date at identical pricing
and the Borrower accepts any of such offers but does not wish to (or by reason
of the limitations set forth in subsection 2.4(a) or in clause (x) of the
proviso, cannot) borrow the total amount offered by such Lenders with such
identical pricing, the Borrower shall accept offers from all of such Lenders in
amounts allocated among them pro rata according to the amounts offered by such
Lenders (unless such pro rata allocation would result in a violation of the
requirement that CAF Advances made by a Lender on a Borrowing Date for each
relevant maturity date shall be in a principal amount of $5,000,000 or an
integral multiple of $1,000,000 in excess thereof, in which event the Borrower
shall be permitted to make such allocations on a basis other than pro rata to
the extent necessary to comply with such requirement).
(v) If the Borrower notifies the Administrative Agent that a CAF
Advance Request is cancelled pursuant to clause (iv) (A) above, the
Administrative Agent shall give prompt telephone notice thereof to the Lenders,
and the CAF Advances requested thereby shall not be made.
(vi) If the Borrower accepts pursuant to clause (iv) (B) above one
or more of the offers made by any Lender or Lenders, the Administrative Agent
shall promptly notify each Lender which has made such an offer, of the aggregate
amount of such CAF Advances to be made on such Borrowing Date for each maturity
date and of the acceptance or rejection of any offers to make such CAF Advances
made by such Lender. Each Lender which is to make a CAF Advance shall, before
12:00 Noon (New York City time) on the Borrowing Date specified in the CAF
Advance Request applicable thereto, make available to the Administrative Agent
at its office set forth in subsection 9.2 the amount of CAF Advances to be made
by such Lender, in immediately available funds. The Administrative Agent will
make such funds available to the Borrower as soon as practicable on such date at
the Administrative Agent's aforesaid address. As soon as practicable after each
Borrowing Date, the Administrative Agent shall notify each Lender of the
aggregate amount of CAF Advances advanced on such Borrowing Date and the
respective maturity dates thereof.
<PAGE>
(c) Within the limits and on the conditions set forth in this
subsection 2.4, the Borrower may from time to time borrow under this subsection
2.4, repay pursuant to paragraph (d) below, and reborrow under this subsection
2.4.
(d) The Borrower shall repay to the Administrative Agent for the
account of each Lender which has made a CAF Advance (or the CAF Advance Assignee
in respect thereof, as the case may be) on the maturity date of each CAF Advance
(such maturity date being that specified by the Borrower for repayment of such
CAF Advance in the related CAF Advance Request) the then unpaid principal amount
of such CAF Advance. The Borrower shall not have the right to prepay any
principal amount of any CAF Advance.
(e) The Borrower shall pay interest on the unpaid principal amount of
each CAF Advance from the Borrowing Date to the stated maturity date thereof, at
the rate of interest determined pursuant to paragraph (b) above (calculated on
the basis of a 360 day year for actual days elapsed), payable on the interest
payment date or dates specified by the Borrower for such CAF Advance in the
related CAF Advance Request as provided in the CAF Advance Note evidencing such
CAF Advance. If all or a portion of the principal amount of any CAF Advance
shall not be paid when due (whether at the stated maturity, by acceleration or
otherwise), such overdue principal amount shall, without limiting any rights of
any Lender under this Agreement, bear interest from the date on which such
payment was due at a rate per annum which is 2% above the rate which would
otherwise be applicable pursuant to the CAF Advance Note evidencing such CAF
Advance until the scheduled maturity date with respect thereto as set forth in
the CAF Advance Note evidencing such CAF Advance, and for each day thereafter at
a rate per annum which is 2% above the ABR until paid in full (as well after as
before judgment).
(f) The CAF Advances made by each Lender shall be evidenced initially
by a promissory note of the Borrower, substantially in the form of Exhibit A-2
with appropriate insertions (a "Grid CAF Advance Note"), payable to the order of
such Lender and representing the obligation of the Borrower to pay the unpaid
principal amount of all CAF Advances made by such Lender, with interest on the
unpaid principal amount from time to time outstanding of each CAF Advance
evidenced thereby as prescribed in subsection 2.4(e). Each Lender is hereby
authorized to record the date and amount of each CAF Advance made by such
Lender, the maturity date thereof, the date and amount of each payment of
principal thereof and the interest rate with respect thereto on the schedule
annexed to and constituting part of its Grid CAF Advance Note, and any such
recordation shall constitute prima facie evidence of the accuracy of the
information so recorded; provided, however, that the failure to make any such
recordation shall not affect the obligations of the Borrower hereunder or under
any Grid CAF Advance Note. Each Grid CAF Advance Note shall be dated the Closing
Date, and each CAF Advance evidenced thereby shall bear interest for the period
from and including the Borrowing Date thereof on the unpaid principal amount
thereof from time to time outstanding at the applicable rate per annum
determined as provided in, and such interest shall be payable as specified in,
subsection 2.4(e).
<PAGE>
(g) Amounts advanced by a Lender pursuant to this subsection 2.4 on a
Borrowing Date which have the same maturity date and interest rate shall be
deemed to constitute one CAF Advance so long as such amounts remain evidenced by
the Grid CAF Advance Note of such Lender; any such Lender that wishes such
amounts to constitute more than one CAF Advance and to have each such CAF
Advance evidenced by a separate promissory note payable to such Lender,
substantially in the form of Exhibit A-3 with appropriate insertions as to
Borrowing Date, principal amount and interest rate (an "Individual CAF Advance
Note"), shall notify the Administrative Agent and the Borrower by facsimile
transmission of the respective principal amounts of the CAF Advances (which
principal amounts shall not be less than $5,000,000 for any of such CAF
Advances) to be evidenced by each such Individual CAF Advance Note. Not later
than three Business Days after receipt of such notice, the Borrower shall
deliver to such Lender an Individual CAF Advance Note payable to the order of
such Lender in the principal amount of each such CAF Advance and otherwise
conforming to the requirements of this Agreement. Upon receipt of such
Individual CAF Advance Note, such Lender shall endorse on the Schedule attached
to its Grid CAF Advance Note the transfer of such CAF Advance from its Grid CAF
Advance Note to such Individual CAF Advance Note.
2.5 Fees. (a) The Borrower will pay to the Administrative Agent for the
account of each Lender a facility fee computed for each day during the
Commitment Period at a rate per annum equal to the Facility Fee Rate in effect
for such day on the amount of the Commitment of such Lender, payable quarterly
in arrears on the last day of each March, June, September and December and on
the Termination Date or such earlier date on which the Commitments shall
terminate as provided herein, commencing on the first of such dates to occur
after the date hereof.
(b) The Borrower will pay to the Administrative Agent for its own
account in connection with the utilization by the Borrower of the CAF Advance
procedures pursuant to subsection 2.4, an auction fee in the amount previously
agreed in writing between the Borrower and the Administrative Agent, such fee to
be paid concurrently with the delivery of each CAF Advance Request.
(c) The Borrower will pay to the Administrative Agent for its own
account such other fees in the amounts and on the dates as have been previously
agreed in writing between the Borrower and the Administrative Agent.
2.6 Termination or Reduction of Commitments. The Borrower shall have
the right, upon not less than five Business Days' written notice to the
Administrative Agent, to terminate the Commitments or, from time to time, to
reduce the amount of the Commitments. Any such reduction shall be in an amount
equal to $5,000,000 or a whole multiple thereof and shall reduce permanently the
Commitments then in effect. The Administrative Agent shall promptly send a copy
of any notices of reduction or termination of the Commitments to each of the
Lenders.
<PAGE>
2.7 Optional Prepayments. The Borrower may at any time and from time to
time prepay the ABR Loans and the Eurodollar Loans, in whole or in part, without
premium or penalty, by giving irrevocable notice to the Administrative Agent at
or before 1:00 P.M. on the third Business Day prior to prepayment, such notice
specifying the date and amount of prepayment and whether the prepayment is of
Eurodollar Loans, ABR Loans or a combination thereof, and, if of a combination
thereof, the amount allocable to each. Upon receipt of any such notice the
Administrative Agent shall promptly notify each Lender thereof. If any such
notice is given, the amount specified in such notice shall be due and payable on
the date specified therein, together with any amounts payable pursuant to
subsection 2.17; provided that any Lender entitled to claim any amounts payable
pursuant to subsection 2.17 shall have provided the Borrower with a certificate,
through the Administrative Agent, setting forth in reasonable detail such
amounts.
2.8 Conversion and Continuation Options. (a) The Borrower may elect
from time to time to convert Eurodollar Loans to ABR Loans, by giving the
Administrative Agent at least two Business Days' prior irrevocable notice of
such election, provided that any such conversion of Eurodollar Loans may only be
made on the last day of an Interest Period with respect thereto. The Borrower
may elect from time to time to convert ABR Loans to Eurodollar Loans by giving
the Administrative Agent at least three Business Days' prior irrevocable notice
of such election. Any such notice of conversion to Eurodollar Loans shall
specify the length of the initial Interest Period or Interest Periods therefor.
Upon receipt of any such notice the Administrative Agent shall promptly notify
each Lender thereof. All or any part of outstanding Eurodollar Loans and ABR
Loans may be converted as provided herein, provided that (i) no Loan may be
converted into a Eurodollar Loan when any Event of Default has occurred and is
continuing and the Administrative Agent has or the Required Lenders have
determined that such a conversion is not appropriate and (ii) no Loan may be
converted into a Eurodollar Loan after the date that is one month prior to the
Termination Date.
(b) Any Eurodollar Loans may be continued as such upon the expiration
of the then current Interest Period with respect thereto by the Borrower giving
the Administrative Agent at least three Business Days' prior irrevocable notice
of the length of the next Interest Period to be applicable to such Loans,
provided that no Eurodollar Loan may be continued as such (i) when any Event of
Default has occurred and is continuing and the Administrative Agent has or the
Required Lenders have determined that such a continuation is not appropriate or
(ii) after the date that is one month prior to the Termination Date and
provided, further, that if the Borrower shall fail to give any required notice
as described above in this paragraph or if such continuation is not permitted
pursuant to the preceding proviso such Loans shall be automatically converted to
ABR Loans on the last day of such then expiring Interest Period.
<PAGE>
( c) Any notice required by this subsection 2.8 to be given to the
Administrative Agent on any Business Day must be received by the Administrative
Agent prior to 11:00 A.M., New York City time, on such Business Day.
2.9 Minimum Amounts and Maximum Number of Tranches. All borrowings,
conversions and continuations of Loans hereunder and all selections of Interest
Periods hereunder shall be in such amounts and be made pursuant to such
elections so that, after giving effect thereto, the aggregate principal amount
of the Loans comprising each Tranche shall be equal to $5,000,000 or a multiple
of $1,000,000 in excess thereof. The Borrower shall be entitled to maintain no
more than ten Tranches at any one time.
2.10 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall
bear interest for each day during each Interest Period with respect thereto at a
rate per annum equal to the Eurodollar Rate determined for such day plus the
Applicable Margin.
(b) Each ABR Loan shall bear interest at a rate per annum equal to the
ABR.
( c) If all or a portion of (i) the principal amount of any Revolving
Credit Loan, (ii) any interest payable thereon or (iii) any facility fee or
other amount payable hereunder shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), such overdue amount shall bear interest
at a rate per annum which is (x) in the case of overdue principal, the rate that
would otherwise be applicable thereto pursuant to the foregoing provisions of
this subsection plus 2% or (y) in the case of overdue interest, facility fee or
other amount, the ABR plus 2%, in each case from the date of such non-payment
until such amount is paid in full (as well after as before judgment).
(d) Interest on each Revolving Credit Loan shall be payable in arrears
on each Interest Payment Date, provided that interest accruing pursuant to
paragraph (c) of this subsection shall be payable from time to time on demand.
(e) Interest on CAF Loans will be payable as provided in subsection
2.4.
2.11 Computation of Interest and Fees. (a) Whenever interest is
accruing at the ABR, calculated on the basis of the Prime Rate, such interest,
shall be calculated on the basis of a 365- (or 366-, as the case may be) day
year for the actual days elapsed; and, otherwise, interest shall be calculated
on the basis of a 360-day year for the actual days elapsed. Facility fees shall
be calculated on the basis of a 360-day year for the actual days elapsed. The
Administrative Agent shall as soon as practicable notify the Borrower and the
Lenders of each determination of a Eurodollar Rate. Any change in the interest
rate on a Loan resulting from a change in the ABR shall become effective as of
the opening of business on the day on which such change becomes effective. The
Administrative Agent shall as soon as practicable notify the Borrower and the
Lenders of the effective date and the amount of each such change in interest
rate.
<PAGE>
(b) Each determination of an interest rate by the Administrative Agent
pursuant to any provision of this Agreement shall be conclusive and binding on
the Borrower and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of the Borrower, deliver to the
Borrower a statement showing the quotations used by the Administrative Agent in
determining any interest rate pursuant to subsection 2.10(a).
(c ) If any Reference Lender shall for any reason no longer have a
Commitment, such Reference Lender shall thereupon cease to be a Reference
Lender, and if, as a result, there shall only be one Reference Lender remaining,
the Administrative Agent (after consultation with the Borrower and the Lenders)
shall, by notice to the Borrower and the Lenders, designate another Lender as a
Reference Lender so that there shall at all times be at least two Reference
Lenders.
(d) Each Reference Lender shall use its best efforts to furnish
quotations of rates to the Administrative Agent as contemplated hereby. If any
of the Reference Lenders shall be unable or shall otherwise fail to supply such
rates to the Administrative Agent upon its request, the rate of interest shall,
subject to the provisions of subsection 2.12, be determined on the basis of the
quotations of the remaining Reference Lenders or Reference Lender.
2.12 Inability to Determine Interest Rate. If prior to the first day of
any Interest Period the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that, by reason
of circumstances affecting the relevant market, adequate and reasonable means do
not exist for ascertaining the Eurodollar Rate for such Interest Period, the
Administrative Agent shall give notice thereof by telephone or facsimile
transmission to the Borrower and the Lenders as soon as practicable thereafter.
If such notice is given (x) any Eurodollar Loans requested to be made on the
first day of such Interest Period shall be made as ABR Loans, (y) any Loans that
were to have been converted on the first day of such Interest Period to
Eurodollar Loans shall be converted to or continued as ABR Loans and (z) any
outstanding Eurodollar Loans shall be converted, on the first day of such
Interest Period, to ABR Loans. Until such notice has been withdrawn by the
Administrative Agent, no further Eurodollar Loans shall be made or continued as
such, nor shall the Borrower have the right to convert Loans to Eurodollar
Loans.
<PAGE>
2.13 Pro Rata Treatment and Payments. (a) Each borrowing by the
Borrower of Revolving Credit Loans, each payment by the Borrower on account of
any facility fee hereunder and any reduction of the Commitments of the Lenders
shall be made pro rata according to the respective Commitment Percentages of the
Lenders. Each payment (other than prepayments) by the Borrower on account of
principal of and interest on the Loans shall be made pro rata according to the
respective amounts then due and owing. Each prepayment in respect of the
Revolving Credit Loans shall be made pro rata according to the respective
outstanding principal amounts of Revolving Credit Loans then held by the
Lenders. All payments (including prepayments) to be made by the Borrower
hereunder and under the Notes, whether on account of principal, interest, fees
or otherwise, shall be made without set off or counterclaim and shall be made
prior to 12:00 Noon, New York City time, on the due date thereof to the
Administrative Agent, for the account of the Lenders entitled thereto, at the
Administrative Agent's office specified in subsection 9.2, in Dollars and in
immediately available funds. The Administrative Agent shall distribute such
payments to the Lenders promptly upon receipt in like funds as received. If any
payment hereunder becomes due and payable on a day other than a Business Day,
such payment shall be extended to the next succeeding Business Day, and, with
respect to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension.
(b) Unless the Administrative Agent shall have been notified in writing
by any Lender prior to a borrowing that such Lender will not make the amount
that would constitute its share of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. If such amount is not made available to the Administrative
Agent by the required time on the Borrowing Date therefor, such Lender shall pay
to the Administrative Agent, on demand, such amount with interest thereon at a
rate equal to the daily average Federal Funds Effective Rate for the period
until such Lender makes such amount immediately available to the Administrative
Agent. A certificate of the Administrative Agent submitted to any Lender with
respect to any amounts owing under this subsection shall be conclusive in the
absence of manifest error. If such Lender's share of such borrowing is not made
available to the Administrative Agent by such Lender within three Business Days
of such Borrowing Date, the Administrative Agent shall also be entitled to
recover such amount with interest thereon at the rate per annum applicable to
ABR Loans hereunder, on demand, from the Borrower.
<PAGE>
2.14 Illegality. Notwithstanding any other provision herein, if the
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof shall make it unlawful for any Lender to make or maintain
Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such
Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and
convert ABR Loans to Eurodollar Loans shall forthwith be cancelled and (b) such
Lender's Revolving Credit Loans then outstanding as Eurodollar Loans, if any,
shall be converted automatically to ABR Loans on the respective last days of the
then current Interest Periods with respect to such Revolving Credit Loans or
within such earlier period as required by law. If any such conversion of a
Eurodollar Loan occurs on a day which is not the last day of the then current
Interest Period with respect thereto, the Borrower shall pay to such Lender such
amounts, if any, as may be required pursuant to subsection 2.17.
2.15 Requirements of Law. (a) If the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof or compliance
by any Lender with any request or directive (whether or not having the force of
law) from any central bank or other Governmental Authority made subsequent to
the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever with
respect to any Eurodollar Loan made by it, or change the basis of taxation of
payments to such Lender of principal, interest, fees of any other amount payable
in respect thereof (except for Non-Excluded Taxes covered by subsection 2.16 and
changes in taxes imposed on or measured by the overall net income of such Lender
or its lending office for such Loan);
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by, deposits
or other liabilities in or for the account of, advances, loans or other
extensions of credit by, or any other acquisition of funds by, any office of
such Lender which is not otherwise included in the determination of the
Eurodollar Rate hereunder; or
(iii) shall impose on such Lender any other condition (except for
any condition covered by clauses (i) or (ii) above and not specifically excluded
from the coverage of such clauses by the terms thereof);
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or to reduce any amount receivable
hereunder in respect thereof, then, in any such case, the Borrower shall
promptly pay such Lender, upon its demand, any additional amounts necessary to
compensate such Lender for such increased cost or reduced amount receivable. If
any Lender becomes entitled to claim any additional amounts pursuant to this
subsection, it shall promptly notify the Borrower in writing, through the
Administrative Agent, of the event by reason of which it has become so entitled;
provided, that the Borrower shall not be required to compensate a Lender for
costs in respect of any period beginning before the date which is 120 days prior
to the date on which the Borrower receives notice that such costs have been
imposed, or if such costs have been imposed retroactively, the period beginning
on such earlier date on which such costs shall have become effective (excluding,
however, any portion of such period which is after the date of adoption of or
change in the relevant Requirement of Law and more than 120 days prior to the
date on which the Borrower had received notice that such costs had been
imposed). A certificate as to any additional amounts payable pursuant to this
subsection submitted by such Lender, through the Administrative Agent, to the
Borrower shall be conclusive in the absence of manifest error.
<PAGE>
(b) If any Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof does or shall have the effect of
reducing the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder to a level below that which such Lender
or such corporation could have achieved but for such change or compliance
(taking into consideration such Lender's or such corporation's policies with
respect to capital adequacy) by an amount deemed by such Lender to be material,
then from time to time, after submission by such Lender to the Borrower (with a
copy to the Administrative Agent) of a written request therefor, the Borrower
shall pay to such Lender such additional amount or amounts as will compensate
such Lender for such reduction.
( c) Covenants of the Borrower in this subsection 2.15 shall survive
the termination of this Agreement and the payment of the Notes and all other
amounts payable hereunder.
2.16 Taxes. (a) All payments made by the Borrower under this Agreement
and the Notes shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority ("Taxes"), excluding (i) Taxes imposed on the
Administrative Agent or any Lender as a result of a present or former connection
between the Administrative Agent or such Lender and the jurisdiction of the
Governmental Authority imposing such Tax or any political subdivision or taxing
authority thereof or therein (other than any such connection arising solely from
the Administrative Agent or such Lender having executed, delivered or performed
its obligations or received a payment under, or enforced, this Agreement or the
Notes) and (ii) Taxes imposed by the United States on any Lender other than as a
result of a Change in Law relating to such Lender (any such non-excluded Taxes,
"Non-Excluded Taxes"). If any Taxes are required to be withheld from any amounts
payable to the Administrative Agent or any Lender hereunder or under the Notes,
(A) the Borrower or the Administrative Agent shall withhold and deduct any such
Taxes from such amounts, (B) the Borrower or the Administrative Agent shall pay
to or deposit with the appropriate taxing authority in a timely manner the full
amount of Taxes so withheld or deducted, (C) the Borrower or the Administrative
Agent shall reasonably promptly send to the Administrative Agent or such Lender
a certified copy of an original official receipt received by the Borrower (or
other documentation reasonably acceptable to the Administrative Agent or such
Lender) showing payment thereof, and (D) if such Taxes are Non-Excluded Taxes,
the amounts so payable to the Administrative Agent or such Lender shall be
increased to the extent necessary to yield to the Administrative Agent or such
Lender (after payment of all Non-Excluded Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement and the Notes, provided, however, that the Borrower shall not be
required to increase any such amounts payable to any Lender that is not
organized under the laws of the United States of America or a state thereof if
such Lender fails to comply with the requirements of paragraph (b) of this
subsection. If the Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the Administrative Agent the
required documentary evidence set forth in clause (C) above, the Borrower shall
indemnify the Administrative Agent and the Lenders for any incremental Taxes,
interest or penalties that may become payable by the Administrative Agent or any
Lender as a result of any such failure. The agreements in this subsection shall
survive the termination of this Agreement and the payment of the Notes and all
other amounts payable hereunder.
<PAGE>
(b) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof shall:
(i) on or prior to the date such Lender becomes a Lender hereunder
deliver to the Borrower and the Administrative Agent (A) two duly completed and
accurate copies of United States Internal Revenue Service Form 1001 or 4224, or
successor applicable form, as the case may be, and (B) an Internal Revenue
Service Form W-8 or W-9, or successor applicable form, as the case may be;
(ii) deliver to the Borrower and the Administrative Agent two
further duly completed and accurate copies of any such form or certification on
or before the date that any such form or certification expires or becomes
obsolete and after the occurrence of any event requiring a change in the most
recent form previously delivered by it to the Borrower; and
(iii) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by the Borrower or the
Administrative Agent;
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender so advises the Borrower and the
Administrative Agent. Such Lender shall certify (i) in the case of a Form 1001
or 4224, that it is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes and (ii) in
the case of a Form W-8 or W-9, that it is entitled to an exemption from United
States backup withholding tax. As provided in subsection 9.6(i), each Person
that shall become a Lender pursuant to subsection 9.6 and that is not
incorporated under the laws of the United States of America or any state thereof
shall, upon the effectiveness of the related transfer, be required to provide
all of the forms and statements required pursuant to this subsection. In
addition, each Lender shall, upon the written request of the Borrower, provide
the Borrower with such other forms, certificates or documentation as may be
reasonably necessary to claim any exemption from, or reduced rate of, Taxes for
which the Borrower is liable under this subsection 2.16; provided that such
action shall not cause the imposition on such Lender of any material additional
costs or legal, regulatory or administrative burdens. If an event occurs after
the date on which any form, certificate or documentation is submitted by a
Lender that renders such item or the information set forth therein incorrect,
such Lender shall promptly notify the Borrower and the Administrative Agent in
writing of such incorrectness.
<PAGE>
(c) For purposes of this subsection 2.16, "Change in Law" shall mean,
with respect to any Lender, a change in the Code, the Treasury Regulations
thereunder or any official interpretation thereof (or any officially proposed
changes in the interpretation thereof) or an amendment or revocation of an
applicable United States income tax treaty after the date such Lender acquired
its Notes.
2.17 Indemnity. The Borrower agrees to indemnify each Lender and to
hold each Lender harmless from any loss or expense which such Lender may sustain
or incur as a consequence of (a) default by the Borrower in making a borrowing
of, conversion into or continuation of Eurodollar Loans after the Borrower has
given a notice requesting the same in accordance with the provisions of this
Agreement, (b) default by the Borrower in making any prepayment of a Eurodollar
Loan after the Borrower has given a notice thereof in accordance with the
provisions of this Agreement or (c) the making of a prepayment of Eurodollar
Loans on a day which is not the last day of an Interest Period with respect
thereto. Such indemnification may include an amount equal to the excess, if any,
of (i) the amount of interest which would have accrued on the amount so prepaid,
or not so borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
such Interest Period (or, in the case of a failure to borrow, convert or
continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Loans provided
for herein (excluding, however, the Applicable Margin included therein, if any)
over (ii) the amount of interest (as reasonably determined by such Lender) which
would have accrued to such Lender on such amount by placing such amount on
deposit for a comparable period with leading banks in the interbank eurodollar
market. This covenant shall survive the termination of this Agreement and the
payment of the Notes and all other amounts payable hereunder.
2.18 Eurocurrency Liabilities. The Borrower agrees to pay to each
Lender which requests compensation under this subsection 2.18 (by notice to the
Borrower), on the last day of each Interest Period with respect to any
Eurodollar Loan made by such Lender, so long as such Lender shall be required to
maintain reserves against "Eurocurrency liabilities" under Regulation D of the
Board of Governors of the Federal Reserve System (or, so long as such Lender may
be required by such Board of Governors or by any other Governmental Authority to
maintain reserves against any other category of liabilities which includes
deposits by reference to which the interest rate on Eurodollar Loans is
determined as provided in this Agreement or against any category of extensions
of credit or other assets of such Lender which includes any Eurodollar Loans),
an additional amount (determined by such Lender and notified to the Borrower)
representing such Lender's calculation or, if an accurate calculation is
impracticable, reasonable estimate (using such reasonable means of allocation as
such Lender shall determine) of the actual costs, if any, incurred by such
Lender during such Interest Period as a result of the applicability of the
foregoing reserves to such Eurodollar Loans, which amount in any event shall not
exceed the product of the following for each day of such Interest Period:
<PAGE>
(a) the principal amount of the Eurodollar Loans made by such
Lender to which such Interest Period relates outstanding on such day; and
(b) the difference between (x) a fraction the numerator of
which is the Eurodollar Rate (expressed as a decimal) applicable to such
Eurodollar Loan and the denominator of which is one minus the maximum rate
(expressed as a decimal) at which such reserve requirements are imposed by such
Board of Governors or other Governmental Authority on such date minus (y) such
numerator; and
( c) a fraction the numerator of which is one and the
denominator of which is 360.
2.19 Actions of the Lenders. (a) Each Lender shall take all reasonable
action (including, without limitation, providing to the Borrower any forms,
documents, or certificates) necessary to avoid or minimize any amounts which
might otherwise be payable pursuant to subsection 2.15 or 2.16 or the effect of
any event referred to in subsection 2.14 including, without limitation,
designating a different lending office; provided that such action shall not
cause the imposition on such Lender of any material additional costs or legal,
regulatory or administrative burdens.
(b) At any time when an event referred to in subsection 2.14
has occurred, or the payment of increased amounts pursuant to subsection 2.15 or
2.16 to any Lender is required, if the Borrower shall provide a Person
reasonably acceptable to the Administrative Agent willing to purchase the
Revolving Credit Notes held by such Lender and assume the Commitment of such
Lender, such Lender shall transfer its Revolving Credit Notes and its Commitment
to such Person, pursuant to documentation reasonably satisfactory to such
Lender, such Person, the Borrower and the Administrative Agent, on any Business
Day specified by the Borrower not earlier than 7 Business Days after the
Borrower shall have provided such Person, in exchange for a purchase price equal
to the principal amount of such Revolving Credit Notes thereon to such date,
together with accrued interest and all other amounts that would be payable with
respect to such Revolving Credit Notes if such purchase were a prepayment under
subsection 2.7. Upon such transfer such Lender shall be relieved of its
Commitment and other obligations to the Borrower hereunder.
2.20 Extension of Termination Date. (a)(i) The Borrower may request, in
a notice given as herein provided to the Administrative Agent and each of the
Lenders during the 30 day period commencing on the date that is 13 months prior
to the Termination Date then in effect (the "Existing Termination Date"), that
the Termination Date be extended, which notice shall specify the new Termination
Date (which shall be 12 months after the Existing Termination Date) to be in
effect following such extension (the "Requested Termination Date"); provided,
however, that the Borrower may request only two such extensions of the
Termination Date. Each Lender, acting in its sole discretion, shall, not later
than a date 20 days after its receipt of any such notice from the Borrower,
notify the Borrower and the Administrative Agent in writing of its election to
extend or not to extend the Termination Date with respect to its Commitment. Any
Lender which shall not timely notify the Borrower and the Administrative Agent
of its election to extend the Termination Date shall be deemed to have elected
not to extend the Termination Date with respect to its Commitment (any Lender
who timely notifies the Borrower and the Administrative Agent of an election not
to extend its commitment and any Lender so deemed to have elected not to extend
its commitment being referred to as a "Terminating Lender"). The election of any
Lender to agree to a requested extension shall not obligate any other Lender to
agree.
<PAGE>
(ii) If and only if Lenders holding Commitments that aggregate at
least 66-2/3% of the aggregate amount of the Commitments, on the date of the
notice delivered by the Borrower pursuant to subparagraph (i) above (including
Commitments of all Terminating Lenders on such date) shall have agreed during
the 20 day period referred to in such subparagraph (i) to extend the Existing
Termination Date, then (A) the Commitments of the Lenders other than Terminating
Lenders (the "Continuing Lenders") shall, subject to the other provisions of
this Agreement, be extended to the Requested Termination Date specified in the
notice from the Borrower, and as to such Lenders the term "Termination Date", as
used herein shall on and after the date as of which the requested extension is
effective mean such Requested Termination Date, provided that if such date is
not a Business Day, then such Requested Termination Date shall be the next
preceding Business Day and (B) the Commitments of the Terminating Lenders shall
continue until the Existing Termination Date, and shall then terminate, and as
to the Terminating Lenders, the term "Termination Date", as used herein, shall
continue to mean such Existing Termination Date.
(b) In the event that the Termination Date shall have been
extended for the Continuing Lenders in accordance with paragraph (a) above and,
in connection with such extension, there are Terminating Lenders, the Borrower
may, at its own expense, require any Terminating Lender to transfer and assign
in whole or in part, without recourse (in accordance with subsection 9.6) all or
part of its interests, rights and obligations under this Agreement to an
assignee (which assignee may be another Lender, if another Lender accepts such
assignment) that shall assume such assigned obligations and that shall agree
that its Commitment will expire on the Termination Date in effect for Continuing
Lenders pursuant to such paragraph (a); provided, however, that (i) the Borrower
shall have received a written consent of the Administrative Agent in the case of
an assignee that is not a Lender (which consent shall not unreasonably be
withheld) and (ii) the assigning Lender shall have received from the Borrower or
such assignee full payment in immediately available funds of the principal of
and interest accrued to the date of such payment on the Loans made by it
hereunder to the extent that such Loans are subject to such assignment and all
other amounts owed to it hereunder (including any amounts that would be payable
to the assigning Lender pursuant to subsection 2.17 if such assignment were,
instead, a prepayment of the Loans of such Lender). Any such assignee's initial
Termination Date shall be the Termination Date in effect at the time of such
assignment for the Continuing Lenders. The Borrower shall not have any right to
require a Lender to assign any part of its interests, rights and obligations
under this Agreement pursuant to this paragraph (b) unless it has notified such
Lender of its intention to require the assignment thereof at least ten days
prior to the proposed assignment date.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into this
Agreement and to make the Loans, the Borrower hereby represents and warrants to
the Administrative Agent and each Lender that:
<PAGE>
3.1 Financial Condition. The consolidated balance sheet of the Borrower
and its consolidated subsidiaries as at December 31, 1996 and the related
consolidated statements of income and of cash flows for the fiscal year ended on
such date, reported on by Price Waterhouse, copies of which have heretofore been
furnished to each Lender, are complete and correct and present fairly the
consolidated financial condition of the Borrower and its consolidated
subsidiaries as at such dates, and the consolidated results of their operations
and their consolidated cash flows for the fiscal years then ended. The unaudited
consolidated balance sheet of the Borrower and its consolidated subsidiaries as
at March 31, 1997 and the related unaudited consolidated statements of income
and of cash flows for the three-month period ended on such date, certified by a
Responsible Officer, copies of which have heretofore been furnished to each
Lender, are complete and correct and present fairly the consolidated financial
condition of the Borrower and its consolidated Subsidiaries as at such date, and
the consolidated results of their operations and their consolidated cash flows
for the three-month period then ended (subject to normal year-end audit
adjustments). All such financial statements, including the related schedules and
notes thereto, have been prepared in accordance with GAAP applied consistently
throughout the periods involved (except as approved by such accountants or
Responsible Officer, as the case may be, and as disclosed therein).
3.2 No Change. No event or circumstance has occurred or is existing
which has resulted in, or after giving effect to the reasonably projected
outcome or effect thereof will result in, a Material Adverse Change.
3.3 Corporate Existence. The Borrower (a) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, (b) has the corporate power and authority, and the legal right, to
own and operate its property, to lease the property it operates as lessee and to
conduct the business in which it is currently engaged and (c) is duly qualified
as a foreign corporation and in good standing under the laws of each
jurisdiction where its ownership, lease or operation of property or the conduct
of its business requires such qualification except to the extent that the
failure to be so qualified would not result in a Material Adverse Change.
<PAGE>
3.4 Corporate Power; Authorization; Enforceable Obligations. The
Borrower has the corporate power and authority, and the legal right, to make,
deliver and perform the Loan Documents and to borrow hereunder and has taken all
necessary corporate action to authorize the borrowings on the terms and
conditions of this Agreement and the Notes and to authorize the execution,
delivery and performance of the Loan Documents. No consent or authorization of,
filing with, notice to or other act by or in respect of, any Governmental
Authority or any other Person is required in connection with the borrowings
hereunder or with the execution, delivery, performance, validity or
enforceability of the Loan Documents except such as have been obtained or made
and are in full force and effect. This Agreement has been, and each Note will
be, duly executed and delivered on behalf of the Borrower. This Agreement
constitutes, and each Note when executed and delivered will constitute, a legal,
valid and binding obligation of the Borrower enforceable against the Borrower in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).
3.5 No Legal Bar. The execution, delivery and performance of the Loan
Documents, the borrowings hereunder and the use of the proceeds thereof will not
violate the Certificate of Incorporation or By-Laws of the Borrower or any
Requirement of Law or Contractual Obligation of the Borrower or of any of its
Principal Domestic Subsidiaries and will not result in, or require, the creation
or imposition of any Lien on any of its or their respective properties or
revenues pursuant to any provision of such Certificate of Incorporation or
By-Laws or any such Requirement of Law or Contractual Obligation.
3.6 No Material Litigation. No litigation, investigation or proceeding
of or before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Borrower, overtly threatened by or against the Borrower or any
of its Principal Domestic Subsidiaries or against any of its or their respective
properties or revenues (a) with respect to any of the Loan Documents or any of
the transactions contemplated hereby or thereby, or (b) which after giving
effect to the reasonably projected outcome or effect thereof, will result in a
Material Adverse Change.
3.7 No Default. Neither the Borrower nor any of its Principal Domestic
Subsidiaries is in default under or with respect to any of its Contractual
Obligations in any respect which has resulted in or, after giving effect to the
reasonably projected outcome or effect thereof, will result in, a Material
Adverse Change. No Default or Event of Default has occurred and is continuing.
3.8 Ownership of Property; Liens. Each of the Borrower and its
Principal Domestic Subsidiaries has good record and marketable title in fee
simple to, or a valid leasehold interest in, all its real property, and good
title to, or a valid leasehold interest in, all its other property, and none of
such property is subject to any Lien except as permitted by subsection 6.2
except to the extent that the absence of such title or leasehold interest has
not resulted in, and after giving effect to the reasonably projected outcome or
effect thereof, will not result in, a Material Adverse Change.
3.9 Compliance with Law. The Borrower and each of its Principal
Domestic Subsidiaries is in compliance with all Requirements of Law and
Contractual Obligations except to the extent that the failure to comply
therewith has not resulted in, and, after giving effect to the reasonably
projected outcome or effect thereof, will not result in, a Material Adverse
Change.
<PAGE>
3.10 Taxes. Each of the Borrower and its Principal Domestic
Subsidiaries has filed or caused to be filed all tax returns which, to the
knowledge of the Borrower, are required to be filed and has paid all taxes shown
to be due and payable on said returns or on any assessments made against it or
any of its property and all other taxes, fees or other charges imposed on it or
any of its property by any Governmental Authority (other than any the amount or
validity of which are currently being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with GAAP have been
provided on the books of the Borrower or its Principal Domestic Subsidiaries, as
the case may be) and, to the knowledge of the Borrower, no tax Lien (other than
a Lien for Taxes that are not yet due and payable) has been filed, with respect
to any such tax, fee or other charge which, in any case, has resulted in, or
after giving effect to the reasonably projected outcome or effect thereof will
result in, a Material Adverse Change.
3.11 Federal Regulations. No part of the proceeds of any Loans will be
used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation U of the Board of
Governors of the Federal Reserve System as now and from time to time hereafter
in effect or for any purpose which violates the provisions of the Regulations of
such Board of Governors. If requested by any Lender or the Administrative Agent,
the Borrower will furnish to the Administrative Agent and each Lender a
statement to the foregoing effect in conformity with the requirements of FR Form
U-1 referred to in said Regulation U.
3.12 ERISA. Neither a Reportable Event nor an "accumulated funding
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) nor any other event has occurred during the five-year period prior to the
date on which this representation is made or deemed made with respect to any
Plan which has resulted in or, after giving effect to the reasonably projected
outcome or effect thereof, will result in, a Material Adverse Change.
3.13 Investment Company Act; Other Regulations. The Borrower is not an
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. The
Borrower is not subject to regulation under any Federal or state statute or
regulation which limits its ability to incur indebtedness of the type being
incurred by it pursuant to this Agreement.
3.14 Subsidiaries. Set forth in Schedule II is a complete and accurate
list showing all Subsidiaries (other than inactive Subsidiaries) existing as of
the date of this Agreement, designating certain Subsidiaries as Principal
Domestic Subsidiaries and showing the jurisdiction of incorporation of each
Principal Domestic Subsidiary and the percentage of the outstanding shares of
Capital Stock of such Subsidiaries owned (directly or indirectly) by the
Borrower or any Subsidiary. All of the outstanding Capital Stock of each
Principal Domestic Subsidiary has been validly issued, is fully paid and
non-assessable and is owned by the Borrower or one or more of the Principal
Domestic Subsidiaries free and clear of all Liens. Each Principal Domestic
Subsidiary is duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation.
3.15 Purpose of Loans. The proceeds of the Loans shall be used by the
Borrower for its general corporate purposes, including working capital and
acquisitions.
<PAGE>
3.16 Environmental Matters. Except as disclosed in the Borrower's
Annual Report on Form 10-K for fiscal year 1996 or on Schedule III, to the best
knowledge of the Borrower, the Borrower and each Principal Domestic Subsidiary
has complied with all applicable Environmental Laws, except for failures to
comply which have not resulted in, and after giving effect to the reasonably
projected outcome or effect thereof will not result in, a Material Adverse
Change. Except as disclosed in the Borrower's Annual Report on Form 10-K for
fiscal year 1996 or on Schedule III, to the best knowledge of the Borrower,
there are no events, conditions or circumstances involving the Borrower, any of
its Principal Domestic Subsidiaries or any Subsidiaries of such Principal
Domestic Subsidiaries with respect to management of any Materials of
Environmental Concern, environmental pollution or contamination or employee
health or safety which have resulted in, or after giving effect to the
reasonably projected outcome or effect thereof will result in, a Material
Adverse Change.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions to Effectiveness; Closing Date. The obligations
hereunder of each Lender and of the Administrative Agent shall become effective
upon the satisfaction of the following conditions precedent:
(a) Loan Documents. The Administrative Agent shall have received
(i) this Agreement, executed and delivered by a duly authorized officer of the
Borrower and each Lender, with a counterpart for each Lender and (ii) for the
account of each Lender, each of the Notes conforming to the requirements hereof
and executed by a duly authorized officer of the Borrower.
(b) Compliance Certificate. The Administrative Agent shall have
received, with a counterpart for each Lender, a certificate of the Borrower,
dated as of the date of this Agreement, substantially in the form of Exhibit C,
with appropriate insertions and attachments, reasonably satisfactory in form and
substance to the Administrative Agent, executed by the President or any Vice
President and the Secretary or any Assistant Secretary of the Borrower.
(c ) Corporate Proceedings of the Borrower. The Administrative
Agent shall have received, with a counterpart for each Lender, a copy of the
resolutions, in form and substance satisfactory to the Administrative Agent, of
the Board of Directors of the Borrower authorizing (i) the execution, delivery
and performance of this Agreement and the other Loan Documents to which it is a
party and (ii) the borrowings contemplated hereunder, certified by the Secretary
or an Assistant Secretary of the Borrower as of the date of this Agreement,
which certificate shall be in form and substance reasonably satisfactory to the
Administrative Agent and shall state that the resolutions thereby certified have
not been amended, modified, revoked or rescinded.
<PAGE>
(d) Borrower Incumbency Certificate. The Administrative Agent shall
have received, with a counterpart for each Lender, a Certificate of the
Borrower, dated as of the date of this Agreement, as to the incumbency and
signature of the officers of the Borrower executing any Loan Document reasonably
satisfactory in form and substance to the Administrative Agent, executed by the
President or any Vice President and the Secretary or any Assistant Secretary of
the Borrower.
(e) Corporate Documents. The Administrative Agent shall have
received, with a counterpart for each Lender, true and complete copies of the
certificate of incorporation and by-laws of the Borrower, certified as of the
date of this Agreement as complete and correct copies thereof by the Secretary
or an Assistant Secretary of the Borrower.
(f) Fees. The Administrative Agent shall have received such fees
payable on or before the Closing Date as have been agreed to in writing by the
Borrower and the Administrative Agent.
(e) Legal Opinions. The Administrative Agent shall have received,
with a counterpart for each Lender an executed legal opinion of (i) Debevoise &
Plimpton, special counsel to the Borrower, substantially in the form of Exhibit
B-1 and (ii) Scott A. Crozier, Esq., General Counsel to the Borrower,
substantially in the form of Exhibit B-2. Such legal opinions shall cover such
other matters incident to the transactions contemplated by this Agreement as the
Administrative Agent may reasonably require.
(h) Existing Credit Agreement. Except for existing CAF Advances
listed on Schedule IV, the Borrower shall have paid in full all of its
indebtedness and obligations under the Existing Credit Agreement (or shall pay
such indebtedness and obligations with all or a portion of the proceeds of the
initial Loans hereunder), and all commitments of the banks under the Existing
Credit Agreement shall have been cancelled.
(i) Additional Matters. All other documents and legal matters in
connection with the transactions contemplated by this Agreement shall be
reasonably satisfactory in form and substance to the Administrative Agent and
its counsel. If the Administrative Agent intends to request any documents other
than those described above in this subsection 4.1 in connection with the Closing
Date, it will make such request to the Borrower not later than three days before
the Closing Date.
4.2 Conditions to Each Loan. The agreement of each Lender to make any
Loan requested to be made by it on any date (including, without limitation, its
initial Loan whether or not made on the Closing Date) is subject to the
satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the representations and
warranties made by the Borrower and the Subsidiaries in or pursuant to the Loan
Documents shall be true and correct in all material respects on and as of such
date as if made on and as of such date (other than, in the case of any Loan made
after the Closing Date, the representation and warranty contained in subsection
3.2).
<PAGE>
(b) No Default. No Default or Event of Default shall have occurred
and be continuing on such date or after giving effect to the Loans requested to
be made on such date.
(c) Additional Matters. All corporate and other proceedings, and
all documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement and the other Loan Documents shall
be reasonably satisfactory in form and substance to the Administrative Agent,
and the Administrative Agent shall have received such other documents and legal
opinions in respect of any aspect or consequence of the transactions
contemplated hereby or thereby as it shall reasonably request.
Each borrowing by the Borrower hereunder shall constitute a representation and
warranty by the Borrower as of the date of such Loan that the conditions
contained in this subsection 4.2 have been satisfied.
SECTION 5. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Note remains outstanding and unpaid or any other amount is owing to
any Lender or the Administrative Agent hereunder, the Borrower shall:
5.1 Financial Statements. Furnish to each Lender:
(a) as soon as available, but in any event within 100 days after
the end of each fiscal year of the Borrower, a copy of the consolidated balance
sheet of the Borrower and its consolidated subsidiaries as at the end of such
year and the related consolidated statements of income and retained earnings and
of cash flows for such year, setting forth in each case in comparative form the
figures for the previous year, reported on without a "going concern" or like
qualification or exception, or qualification arising out of the scope of the
audit, by Price Waterhouse or other independent certified public accountants of
nationally recognized standing; and
(b) as soon as available, but in any event not later than 55 days
after the end of each of the first three quarterly periods of each fiscal year
of the Borrower, the unaudited consolidated balance sheet of the Borrower and
its consolidated subsidiaries as at the end of such quarter and the related
unaudited consolidated statements of income and retained earnings and of cash
flows of the Borrower and its consolidated subsidiaries for such quarter and the
portion of the fiscal year through the end of such quarter, setting forth in
each case in comparative form the figures for the previous year, certified by a
Responsible Officer as being fairly stated in all material respects (subject to
normal year-end audit adjustments);
all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
<PAGE>
5.2 Certificates; Other Information. Furnish to each Lender:
(a) concurrently with the delivery of the financial statements
referred to in subsection 5.1(a), a certificate of the independent certified
public accountants reporting on such financial statements stating that in making
the examination necessary therefor no knowledge was obtained of any Default or
Event of Default (including calculations demonstrating compliance with Section
6.1), except as specified in such certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsections 5.1(a) and 5.1(b), a certificate of a Responsible
Officer stating that, to the best of such Officer's knowledge, the Borrower
during such period has observed or performed all of its covenants and other
agreements, and satisfied every condition, contained in this Agreement and in
the Notes to be observed, performed or satisfied by it (including calculations
demonstrating compliance with Section 6.1), and that such Officer has obtained
no knowledge of any Default or Event of Default except as specified in such
certificate;
( c) within ten days after the same are sent, copies of all
financial statements and reports which the Borrower sends to its stockholders,
and within ten days after the same are filed, copies of all financial statements
and periodic financial reports which the Borrower may make to, or file with, the
Securities and Exchange Commission or any successor or analogous Governmental
Authority; and
(d) promptly, such additional financial and other information as
any Lender may from time to time reasonably request.
5.3 Payment of Obligations. Pay, discharge or otherwise satisfy, in all
material respects, and cause its Principal Domestic Subsidiaries to pay,
discharge or otherwise satisfy, in all material respects, at or before maturity
or otherwise in accordance with reasonable business practices, all its material
obligations of whatever nature; provided, that the Borrower or its Principal
Domestic Subsidiaries, as the case may be, may contest its obligations in good
faith by appropriate proceedings if it maintains reserves in conformity with
GAAP with respect thereto.
5.4 Conduct of Business and Maintenance of Existence. Continue to
engage in businesses of the same general types as now conducted by it and
preserve, renew and keep in full force and effect its corporate existence and
take all reasonable action to maintain all rights, privileges and franchises
necessary or desirable in the normal conduct of its business except that nothing
in this subsection 5.4 shall prevent (a) the Borrower from discontinuing any
business if, in the opinion of the Board of Directors, such discontinuance is in
the best interests of the Borrower and not disadvantageous in any material
respect to any Lender or the holder of any Note or (b) the abandonment,
modification or termination of rights, privileges and franchises of the
Borrower, if, in the opinion of the Board of Directors, such abandonment,
modification or termination is in the best interests of the Borrower and not
disadvantageous in any material respect to any Lender or the holder of any Note.
<PAGE>
5.5 Compliance With Laws, etc. Use commercially reasonable efforts to
comply, and to cause each Principal Domestic Subsidiary to comply, in all
material respects with all Requirements of Law and Contractual Obligations
except to the extent that failure to so comply would not, in the reasonable
judgment of the Borrower, be expected to result in a Material Adverse Change,
provided, however, that neither the Borrower nor any Principal Domestic
Subsidiary shall be required to comply with any Requirements of Law or
Contractual Obligations if the applicability or validity thereof shall currently
be contested in good faith by appropriate proceedings.
5.6 Maintenance of Property; Insurance. Keep all Principal Properties
in good working order and condition except that nothing in this subsection 5.6
shall prevent the Borrower or any of its Principal Domestic Subsidiaries from
discontinuing the operation and maintenance of any of its Principal Properties
if, in the opinion of the Board of Directors of the Borrower, such
discontinuance is in the best interest of the Borrower and not disadvantageous
in any material respect to any Lender or the holder of any Note; maintain, and
cause each Principal Domestic Subsidiary to maintain, with financially sound and
reputable insurance companies insurance on all its property of a character
usually insured by companies similarly situated and operating like properties in
at least such amounts and against at least such risks as are usually insured
against in the same general area by companies engaged in the same or a similar
business; and furnish to each Lender, upon written request, full information as
to the insurance carried. The Borrower and any Principal Domestic Subsidiary may
self-insure (which term shall include insurance by an affiliated insurance
company) against any of the risks required to be insured against pursuant to
this subsection 5.6 so long as such self-insurance is not excessive in the light
of self-insurance by companies similarly situated and operating like properties,
provided, in the case of any insurance required by law, that such risk is
permitted to be self-insured under applicable law and such self-insurance
complies with applicable law.
5.7 Inspection of Property; Books and Records; Discussions. Keep, and
cause each Principal Domestic Subsidiary to keep, proper books of records and
account in which full, true and correct entries in conformity with GAAP and all
Requirements of Law shall be made of all dealings and transactions in relation
to its business and activities; and permit, and cause any Principal Domestic
Subsidiary to permit, representatives of any Lender, at such Lender's own
expense, to visit and inspect any of its properties and examine and make
abstracts from any of its books and records at any reasonable time and as often
as may reasonably be desired and, after reasonable notice to the Borrower, to
discuss the business, operations, properties and financial and other condition
of the Borrower and its Principal Domestic Subsidiaries with officers and
employees of the Borrower and its Principal Domestic Subsidiaries and with its
independent certified public accountants.
5.8 Notices. Promptly give notice to the Administrative Agent and each
Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Borrower or any of its Subsidiaries or (ii) litigation,
investigation or proceeding which may exist at any time between the Borrower or
any of its Subsidiaries and any Governmental Authority, unless in either case,
the Borrower has determined that such event has not resulted in, or after giving
effect to the reasonably projected outcome or effect thereof will not result in,
a Material Adverse Change; and
<PAGE>
(c ) the following events, as soon as possible and in any event
within 30 days after the Borrower knows or has reason to know thereof: (i) the
occurrence or reasonably expected occurrence of any Reportable Event with
respect to any Plan, a failure to make any required contribution to a Plan, the
creation of any Lien in favor of the PBGC or a Plan or any withdrawal from, or
the termination, Reorganization or Insolvency of, any Multiemployer Plan or (ii)
the institution of proceedings or the taking of any other action by the PBGC or
the Borrower or any Commonly Controlled Entity or any Multiemployer Plan with
respect to the withdrawal from, or the terminating, Reorganization or Insolvency
of, any Plan which with respect to the events in clause (i) or (ii),
individually or in the aggregate, could reasonably be expected to involve an
amount of $15,000,000 or more.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower proposes to take with respect thereto.
SECTION 6. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Note remains outstanding and unpaid or any other amount is owing to
any Lender or the Administrative Agent hereunder, the Borrower shall not:
6.1 Financial Condition Covenants.
(a) Maintenance of Tangible Net Worth. Permit Consolidated Tangible
Net Worth at any time to be less than $1,100,000,000.
(b) Indebtedness for Money Borrowed to Total Capitalization. Permit
the ratio of Indebtedness for Money Borrowed of the Borrower and its
consolidated subsidiaries, determined on a consolidated basis in accordance with
GAAP, to Total Capitalization at any time to be greater than 0.5:1.
6.2 Limitation on Mortgages, Sale and Leaseback, etc.
(a) The Borrower will not, nor will it permit any Principal
Domestic Subsidiary to, (i) issue, assume or guarantee any Indebtedness for
Money Borrowed, if such Indebtedness for Money Borrowed is secured by a
mortgage, pledge, security interest or lien (any mortgage, pledge, security
interest or lien being hereinafter in this subsection 6.2 referred to as a
"mortgage" or "mortgages") upon, or (ii) directly or indirectly secure any
outstanding Indebtedness for Money Borrowed by a mortgage upon, any Principal
Property now owned or hereinafter acquired; provided, however, that the
foregoing restriction shall not apply to:
<PAGE>
(i) mortgages on any Principal Property acquired, constructed
or improved by the Borrower or any Principal Domestic Subsidiary after the date
of this Agreement which are created or assumed contemporaneously with, or within
90 days after, such acquisition, construction or improvement to secure or
provide for the payment of any part of the purchase price of such property or
the cost of such construction or improvement incurred after the date of this
Agreement, or, in addition to mortgages contemplated by clause (ii) below,
mortgages on any Principal Property existing at the time of acquisition thereof,
provided, that in the case of any such acquisition, construction or improvement
the mortgage shall not apply to any property theretofore owned by the Borrower
or any Principal Domestic Subsidiary, other than in the case of any such
construction or improvement, any theretofore unimproved real property on which
the property so constructed, or the improvement, is located;
(ii) mortgages on any Principal Property acquired from a
corporation which is merged with or into the Borrower or a Principal Domestic
Subsidiary;
(iii) mortgages to secure Indebtedness for Money Borrowed of a
Principal Domestic Subsidiary to the Borrower or to another Principal Domestic
Subsidiary;
(iv) any extension, renewal or replacement (or successive
extensions, renewals or replacements), in whole or in part, of any mortgage
referred to in the foregoing clauses (i) to (iii), inclusive; provided, however,
that the principal amount of Indebtedness for Money Borrowed secured thereby
shall not exceed the principal amount of Indebtedness for Money Borrowed so
secured at the time of such extension, renewal or replacement, and that such
extension, renewal or replacement shall be limited to all or part of the
property which secured the mortgage so extended, renewed or replaced (plus
improvements on such property); and
(v) the issuance, assumption or guarantee of secured
Indebtedness for Money Borrowed which would otherwise be subject to the
foregoing restrictions of this subsection 6.2(a) in an aggregate amount which,
together with all other such Indebtedness for Money Borrowed of the Borrower and
its Principal Domestic Subsidiaries and the Attributable Debt in respect of Sale
and Lease-Back Transactions (other than Sale and Lease-Back Transactions
permitted because the Borrower would be entitled to incur Indebtedness for Money
Borrowed secured by a mortgage on the property to be leased pursuant to the
provisions of this subsection 6.2 and other than Sale and Lease-Back
Transactions the proceeds of which have been applied in accordance with the
limitations on Sale and Lease-Back Transactions set forth in subsection 6.2(c)
below) does not at the time exceed 10% of Consolidated Tangible Net Worth.
(b) For the purposes of this subsection 6.2, the following types of
transactions, among others, shall not be deemed to create Indebtedness for Money
Borrowed secured by a mortgage:
(i) Production Payments; and
(ii) mortgages in favor of the United States of America, any
of its territories or possessions, or any State thereof, or any department,
agency, instrumentality or political subdivision of any thereof, or any
department, agency or instrumentality of any such political subdivision, to
secure partial progress, advance or other payments pursuant to any contract or
statute or to secure any indebtedness incurred for the purpose of financing all
or any part of the purchase price or the cost of constructing or improving the
property subject to such mortgages.
<PAGE>
(c ) The Borrower will not, nor will it permit any Principal
Domestic Subsidiary to, enter into any Sale and Lease-Back Transaction, unless
the proceeds of such sale or transfer are at least equal to the fair value (as
determined by the Board of Directors) of such property and either (i) the
Borrower or such Principal Domestic Subsidiary would be entitled to incur
Indebtedness for Borrowed Money secured by a mortgage on the property to be
leased pursuant to this subsection 6.2 or (ii) the Borrower shall, and in any
such case the Borrower covenants that it will, apply an amount equal to the fair
value (as determined by the Board of Directors) of the property so leased to the
retirement (other than any mandatory retirement), within 90 days of the
effective date of any such Sale and Lease-Back Transaction, of Indebtedness for
Money Borrowed of the Borrower or such Principal Domestic Subsidiary which by
its terms matures at, or is extendible or renewable at the option of the obligor
to, a date more than twelve months after the date of the creation of such
Indebtedness for Money Borrowed and which ranks prior to or on a parity with the
Loans; provided, however that the Borrower or any Principal Domestic Subsidiary
may enter into any Sale and Lease-Back Transaction which would otherwise be
subject to the foregoing restrictions of this subsection 6.2(c) if the amount of
the Attributable Debt in respect of such Sale and Lease-Back Transactions for
such transaction, together with all secured Indebtedness for Money Borrowed of
the Borrower and its Principal Domestic Subsidiaries and all other Attributable
Debt in respect of Sale and Lease-Back Transactions existing at such time (other
than Sale and Lease-Back Transactions permitted because the Borrower would be
entitled to incur Indebtedness for Money Borrowed secured by a mortgage on the
property to be leased and other than Sale and Lease-Back Transactions the
proceeds of which have been applied in accordance with the clause (ii) of this
subsection), does not at the time exceed 10% of Consolidated Tangible Net Worth.
SECTION 7. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Note when
due in accordance with the terms thereof or hereof; or the Borrower shall fail
to pay any interest on any Note, or any other amount payable hereunder, within
five Business Days after any such interest or other amount becomes due in
accordance with the terms thereof or hereof; or
(b) Any representation or warranty made or deemed made by the
Borrower herein or which is contained in any certificate, document or financial
or other statement furnished by it at any time under or in connection with this
Agreement shall prove to have been incorrect in any material respect on or as of
the date made or deemed made; or
(c ) The Borrower shall default in the observance or performance of
any agreement contained in Section 6; or
(d) The Borrower shall default in the observance or performance of
any other agreement contained in this Agreement (other than as provided in
paragraphs (a) through (c) of this Section), and such default shall continue
unremedied for a period of 30 days after notice thereof has been given to the
Borrower in accordance with this Agreement; or
<PAGE>
(e) The Borrower or any of its Principal Domestic Subsidiaries
shall (i) default in any payment of principal of or interest of any Indebtedness
for Money Borrowed (other than the Notes), beyond the period of grace (not to
exceed 30 days), if any, provided in the instrument or agreement under which
such Indebtedness for Money Borrowed was created (except for any such payments
on account of Indebtedness for Money Borrowed in an aggregate amount at any one
time of up to $20,000,000); or (ii) default in the observance or performance of
any other agreement or condition relating to any such Indebtedness for Money
Borrowed (except for any such Indebtedness in an aggregate principal amount at
any one time of up to $20,000,000) or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition is to
cause, or to permit the holder or holders of such Indebtedness for Money
Borrowed (or a trustee or agent on behalf of such holder or holders) to cause,
with the giving of notice if required, such Indebtedness for Money Borrowed to
become due prior to its stated maturity; or
(f) (i) The Borrower or any of its Principal Domestic Subsidiaries
shall commence any case, proceeding or other action (A) under any existing or
future law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an order for
relief entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or its
debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator
or other similar official for it or for all or any substantial part of its
assets, or the Borrower or any of its Principal Domestic Subsidiaries shall make
a general assignment for the benefit of its creditors; or (ii) there shall be
commenced against the Borrower or any of its Principal Domestic Subsidiaries any
case, proceeding or other action of a nature referred to in clause (i) above
which (A) results in the entry of an order for relief or any such adjudication
or appointment or (B) remains undismissed, undischarged or unbonded for a period
of 60 days; or (iii) there shall be commenced against the Borrower or any of its
Principal Domestic Subsidiaries any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar process
against all or any substantial part of its assets which results in the entry of
an order for any such relief which shall not have been vacated, discharged, or
stayed or bonded pending appeal within 60 days from the entry thereof; or (iv)
the Borrower or any of its Principal Domestic Subsidiaries shall take any action
in furtherance of, or indicating its consent to, approval of, or acquiescence
in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) the
Borrower or any of its Principal Domestic Subsidiaries shall generally not, or
shall be unable to, or shall admit in writing its inability to, pay its debts as
they become due; or
<PAGE>
(g) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan,
(ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived, shall exist with respect to any Plan or any Lien in favor
of the PBGC or a Plan shall arise on the assets of the Borrower or any Commonly
Controlled Entity, (iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee shall be
appointed, to administer or to terminate, any Single Employer Plan, which
Reportable Event or commencement of proceedings or appointment of a trustee is,
in the reasonable opinion of the Required Lenders, likely to result in the
termination of such Plan for purposes of Title IV of ERISA, (iv) any Single
Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the
Borrower or any Commonly Controlled Entity shall, or in the reasonable opinion
of the Required Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or
(vi) any other event or condition shall occur or exist with respect to a Plan;
and in each case in clauses (i) through (vi) above, such event or condition,
together with all other such events or conditions, if any, has resulted in, or
after giving effect to the reasonably projected outcome or effect thereof will
result in, a Material Adverse Change; or
(h) One or more judgments or decrees shall be entered against the
Borrower or any of its Principal Domestic Subsidiaries involving in the
aggregate a liability (not paid or fully covered by insurance) of $30,000,000 or
more, and all such judgments or decrees shall not have been vacated, discharged,
stayed or bonded pending appeal within 60 days from the entry thereof; or
<PAGE>
(i) This Agreement or any of the Notes shall, at any time while any
Note shall remain unpaid or any Lender shall have any Commitment hereunder,
cease to be in full force and effect or shall be declared to be null and void,
or the validity or enforceability thereof shall be contested by the Borrower, or
the Borrower shall deny that it has any or further liability or obligation under
this Agreement or any of the Notes;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to the Borrower,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement and the Notes shall immediately become due and payable, and (B) if
such event is any other Event of Default, either or both of the following
actions may be taken: (i) with the consent of the Required Lenders, the
Administrative Agent may, or upon the request of the Required Lenders, the
Administrative Agent shall, by notice to the Borrower declare the Commitments to
be terminated forthwith, whereupon the Commitments shall immediately terminate;
and (ii) with the consent of the Required Lenders, the Administrative Agent may,
or upon the request of the Required Lenders, the Administrative Agent shall, by
notice to the Borrower, declare the Loans hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement and the Notes to be
due and payable forthwith, whereupon the same shall immediately become due and
payable. Except as expressly provided above in this Section, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
SECTION 8. THE ADMINISTRATIVE AGENT
8.1 Appointment. Each Lender hereby irrevocably designates and appoints
The Chase Manhattan Bank as the Administrative Agent of such Lender under this
Agreement and the other Loan Documents, and each Lender irrevocably authorizes
The Chase Manhattan Bank, as the Administrative Agent for such Lender, to take
such action on its behalf under the provisions of this Agreement and the other
Loan Documents and to exercise such powers and perform such duties as are
expressly delegated to the Administrative Agent by the terms of this Agreement
and the other Loan Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the
Administrative Agent.
<PAGE>
8.2 Delegation of Duties. The Administrative Agent may execute any of
its duties under this Agreement and the other Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agents or attorneys
in-fact selected by it with reasonable care.
8.3 Exculpatory Provisions. Neither the Administrative Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates
shall be (i) liable for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with this Agreement or any other Loan
Document (except for its or such Person's own gross negligence or willful
misconduct) or (ii) responsible in any manner to any of the Lenders for any
recitals, statements, representations or warranties made by the Borrower or any
officer thereof contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Administrative Agent under or in connection with, this
Agreement or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or the Notes or any
other Loan Document or for any failure of the Borrower to perform its
obligations hereunder or thereunder. The Administrative Agent shall not be under
any obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of the Borrower.
8.4 Reliance by Administrative Agent. The Administrative Agent shall be
entitled to rely, and shall be fully protected in relying, upon any Note,
writing, resolution, notice, consent, certificate, affidavit, letter, telecopy,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Borrower), independent accountants and other experts
selected by the Administrative Agent. The Administrative Agent may deem and
treat the payee of any Note as the owner thereof for all purposes unless a
written notice of assignment, negotiation or transfer thereof shall have been
filed with the Administrative Agent. The Administrative Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Loan Document unless it shall first receive such advice or concurrence of
the Required Lenders as it deems appropriate or it shall first be indemnified to
its satisfaction by the Lenders against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action.
The Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement and the Notes and the other Loan
Documents in accordance with a request of the Required Lenders, and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all the Lenders and all future holders of the Notes.
<PAGE>
8.5 Notice of Default. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Administrative Agent has received notice from a Lender or
the Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event that
the Administrative Agent receives such a notice, the Administrative Agent shall
give notice thereof to the Lenders. The Administrative Agent shall take such
action with respect to such Default or Event of Default as shall be reasonably
directed by the Required Lenders; provided that unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders.
8.6 Non-Reliance on Administrative Agent and Other Lenders. Each Lender
expressly acknowledges that neither the Administrative Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates has made
any representations or warranties to it and that no act by the Administrative
Agent hereinafter taken, including any review of the affairs of the Borrower,
shall be deemed to constitute any representation or warranty by the
Administrative Agent to any Lender. Each Lender represents to the Administrative
Agent that it has, independently and without reliance upon the Administrative
Agent or any other Lender, and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of the Borrower and made its own decision to make its Loans
hereunder and enter into this Agreement. Each Lender also represents that it
will, independently and without reliance upon the Administrative 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 analysis, appraisals
and decisions in taking or not taking action under this Agreement and the other
Loan Documents, and to make such investigation as it deems necessary to inform
itself as to the business, operations, property, financial and other condition
and creditworthiness of the Borrower. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, the Administrative Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of the Borrower which may come into
the possession of the Administrative Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates.
8.7 Indemnification. The Lenders agree to indemnify the Administrative
Agent in its capacity as such (to the extent not reimbursed by the Borrower and
without limiting the obligation of the Borrower to do so), ratably according to
their respective Commitment Percentages in effect on the date on which
indemnification is sought under this subsection (or, if indemnification is
sought after the date upon which the Commitments shall have terminated and the
Loans shall have been paid in full, ratably in accordance with their Commitment
Percentages immediately prior to such date), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Notes)
be imposed on, incurred by or asserted against the Administrative Agent in any
way relating to or arising out of this Agreement, any of the other Loan
Documents or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or any action taken or omitted
by the Administrative Agent under or in connection with any of the foregoing;
provided that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the Administrative
Agent's gross negligence or willful misconduct. The agreements in this
subsection shall survive the payment of the Notes and all other amounts payable
hereunder.
<PAGE>
8.8 Administrative Agent in Its Individual Capacity. The Administrative
Agent and its Affiliates may make loans to, accept deposits from and generally
engage in any kind of business with the Borrower as though the Administrative
Agent were not the Administrative Agent hereunder and under the other Loan
Documents. With respect to its Loans made or renewed by it and any Note issued
to it, the Administrative Agent shall have the same rights and powers under this
Agreement and the other Loan Documents as any Lender and may exercise the same
as though it were not the Administrative Agent, and the terms "Lender" and
"Lenders" shall include the Administrative Agent in its individual capacity.
8.9 Successor Administrative Agent. The Administrative Agent may resign
as Administrative Agent upon 10 days' notice to the Lenders. If the
Administrative Agent shall resign as Administrative Agent under this Agreement
and the other Loan Documents, then the Required Lenders shall appoint from among
the Lenders a successor agent for the Lenders, which successor agent shall be
approved by the Borrower, whereupon such successor agent shall succeed to the
rights, powers and duties of the Administrative Agent, and the term
"Administrative Agent" shall mean such successor agent effective upon such
appointment and approval, and the former Administrative Agent's rights, powers
and duties as Administrative Agent shall be terminated, without any other or
further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement or any holders of the Notes. After any retiring
Administrative Agent's resignation as Administrative Agent, the provisions of
this subsection shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Administrative Agent under this Agreement and the
other Loan Documents.
SECTION 9. MISCELLANEOUS
<PAGE>
9.1 Amendments and Waivers. Neither this Agreement, any Note, nor any
terms hereof or thereof may be amended, supplemented or modified except in
accordance with the provisions of this subsection. The Required Lenders may, or,
with the written consent of the Required Lenders, the Administrative Agent may,
from time to time, (a) enter into with the Borrower written amendments,
supplements or modifications hereto and to the Notes for the purpose of adding
any provisions to this Agreement, the Notes or the other Loan Documents or
changing in any manner the rights of the Lenders or of the Borrower hereunder or
thereunder or (b) waive, on such terms and conditions as the Required Lenders or
the Administrative Agent, as the case may be, may specify in such instrument,
any of the requirements of this Agreement or the Notes or any Default or Event
of Default and its consequences; provided, however, that no such waiver and no
such amendment, supplement or modification shall (i) reduce the amount or extend
the scheduled date of maturity of any Note or of any installment thereof, or
reduce the stated rate of any interest or fee payable hereunder or extend the
scheduled date of any payment thereof or increase the amount or extend the
expiration date of any Lender's Commitment, in each case without the consent of
each Lender affected thereby, or (ii) amend, modify or waive any provision of
this subsection or reduce the percentage specified in the definition of Required
Lenders, or consent to the assignment or transfer by the Borrower of any of its
rights and obligations under this Agreement and the other Loan Documents, in
each case without the written consent of all the Lenders, or (iii) amend, modify
or waive any provision of Section 8 without the written consent of the then
Administrative Agent. Any such waiver and any such amendment, supplement or
modification shall apply equally to each of the Lenders and shall be binding
upon the Borrower, the Lenders, the Administrative Agent and all future holders
of the Notes. In the case of any waiver, the Borrower, the Lenders and the
Administrative Agent shall be restored to their former position and rights
hereunder and under the outstanding Notes and any other Loan Documents, and any
Default or Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other Default
or Event of Default, or impair any right consequent thereon.
9.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand, or three days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, addressed as follows in the case of the Borrower and the
Administrative Agent, and as set forth in Schedule I in the case of the other
parties hereto, or to such other address as may be hereafter notified by the
respective parties hereto and any future holders of the Notes:
<PAGE>
The Borrower Phelps Dodge Corporation
2600 North Central Avenue
Phoenix, Arizona 85004-3014
Attention: Rodney A. Prokop
Telecopy: (602) 234-4887
The Administrative
Agent: Chase Agency Services Corp.
One Chase Manhattan Plaza
New York, New York 10081
Reference: Phelps Dodge Corporation
Attention: Donna Schurmann or
Laura Rebecca
Telecopy: (212) 552-7490
with a copy to: The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, New York 10081
Attention: James Ramage
Telecopy: (212) 552-7784
provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to subsection 2.3, 2.4, 2.6, 2.7, 2.8, 2.13 or 2.20
shall not be effective until received.
9.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder or under the other Loan Documents
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.
9.4 Survival of Representations and Warranties. All representations and
warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the Notes and the
making of the Loans hereunder.
<PAGE>
9.5 Payment of Expenses and Taxes; Indemnities. The Borrower agrees (a)
to pay or reimburse the Administrative Agent for all its out-of-pocket costs and
expenses incurred in connection with the development, preparation and execution
of, and any amendment, supplement or modification to, this Agreement, the Notes
and any other documents prepared in connection herewith or therewith, and the
consummation and administration of the transactions contemplated hereby and
thereby, including, without limitation, the fees and disbursements of counsel to
the Administrative Agent, (b) to pay or reimburse each Lender and the
Administrative Agent for all its costs and expenses incurred in connection with
the enforcement or preservation of any rights under this Agreement, the Notes
and any such other documents, including, without limitation, the fees and
disbursements of counsel to the Administrative Agent and to the several Lenders,
and (c) to pay, indemnify, and hold each Lender and the Administrative Agent
harmless from, any and all recording and filing fees and any and all liabilities
with respect to, or resulting from any delay in paying, stamp, excise and
similar taxes, if any, which may be payable or determined to be payable in
connection with the execution and delivery of, or any amendment, supplement or
modification of, or any waiver or consent under or in respect of, this
Agreement, the Notes and any such other documents, and (d) to pay, indemnify,
and hold each Lender and the Administrative Agent harmless from and against any
and all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever with respect to the execution, delivery, enforcement, performance and
administration of this Agreement, the Notes and any such other documents,
including, without limitation, any of the foregoing relating to the violation
of, noncompliance with or liability under, any Environmental Law applicable to
the operations of the Borrower, any of its Subsidiaries or any Principal
Property (all the foregoing in this clause (d), collectively, the "indemnified
liabilities"), provided, that the Borrower shall have no obligation hereunder to
the Administrative Agent or any Lender with respect to indemnified liabilities
arising from (i) the gross negligence or willful misconduct of the
Administrative Agent or any such Lender, (ii) legal proceedings commenced
against the Administrative Agent or any such Lender by any security holder or
creditor thereof arising out of and based upon rights afforded any such security
holder or creditor solely in its capacity as such or (iii) legal proceedings
commenced by any Bank, the Administrative Agent or any Transferee (as defined in
subsection 9.6(h)) against any other Bank, the Administrative Agent or any other
Transferee. The agreements in this subsection shall survive repayment of the
Notes and all other amounts payable hereunder.
9.6 Successors and Assigns; Participations; Purchasing Lenders. (a)
This Agreement shall be binding upon and inure to the benefit of the Borrower,
the Lenders, the Administrative Agent, all future holders of the Notes, and
their respective successors and assigns, except that the Borrower may not assign
or transfer any of its rights or obligations under this Agreement without the
prior written consent of each Lender.
<PAGE>
(b) Any Lender may, in the ordinary course of its commercial
banking business and in accordance with applicable law, at any time sell to one
or more banks or other entities ("Participants") participating interests in any
Loan owing to such Lender, any Note held by such Lender, any Commitment of such
Lender or any other interest of such Lender hereunder. In the event of any such
sale by a Lender of participating interests to a Participant, such Lender's
obligations under this Agreement to the other parties to this Agreement shall
remain unchanged, such Lender shall remain solely responsible for the
performance thereof, such Lender shall remain the holder of any such Note for
all purposes under this Agreement, such Lender shall be solely responsible for
any withholding taxes or any filing or reporting requirements relating to such
Participant and shall indemnify and hold harmless the Borrower and the
Administrative Agent and their respective successors, permitted assigns,
officers, directors, employees, agents and representatives for and against any
Taxes (including interest and penalties thereon and additions thereto), losses,
costs and expenses incurred in connection with such withholding taxes or filing
or reporting requirements, and the Borrower and the Administrative Agent shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement. The Borrower agrees that
if amounts outstanding under this Agreement and the Notes are due or unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall be deemed to have the
right of setoff in respect of its participating interest in amounts owing under
this Agreement and any Note to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement or any Note; provided, that, in purchasing such participating
interest, such Participant shall be deemed to have agreed to share with the
Lenders the proceeds thereof as provided in subsection 9.7(a) as fully as if it
were a Lender hereunder. All amounts payable by the Borrower to such Lender
under subsection 2.15, 2.17, 2.18 and 9.5 shall be determined as if such Lender
had not sold or agreed to sell such participation.
(c ) Any Lender may, in the ordinary course of its commercial
banking business and in accordance with applicable law, at any time assign, (i)
so long as, to the knowledge of the assignor Lender, such assignment will not,
and there is no substantial likelihood that in the future it will, result in
adverse consequences to the Borrower including without limitation payment
obligations under Sections 2.15 and 2.16, to any Lender or any Affiliate thereof
or, (ii) with the consent of the Borrower and the Administrative Agent (which
consent in each case shall not be unreasonably withheld) to one or more banks or
other entities ("CAF Advance Assignees") any CAF Advance owing to such Lender
and any Individual CAF Advance Note held by such Lender evidencing such CAF
Advance, pursuant to a CAF Advance Assignment executed by the assignor Lender
and the CAF Advance Assignee. Upon such execution, from and after the date of
such CAF Advance Assignment, the CAF Advance Assignee shall, to the extent of
the assignment provided for in such CAF Advance Assignment, be deemed to have
the same rights and benefits of payment and enforcement with respect to such CAF
Advance and Individual CAF Advance Note and the same rights of setoff and
obligation to share pursuant to subsection 9.7 as it would have had if it were a
Lender hereunder; provided, that unless such CAF Advance Assignment shall
otherwise specify and a copy of such CAF Advance Assignment shall have been
delivered to the Administrative Agent for its acceptance and recording in the
Register in accordance with subsection 9.6(d), the assignor thereunder shall act
as collection agent for the CAF Advance Assignee thereunder, and the
<PAGE>
Administrative Agent shall pay all amounts received from the Borrower which are
allocable to the assigned CAF Advance or Individual CAF Advance Note directly to
such assignor without any further liability to such CAF Advance Assignee. A CAF
Advance Assignee under a CAF Advance Assignment shall not, by virtue of such CAF
Advance Assignment, become a party to this Agreement or have any rights to
consent to or refrain from consenting to any amendment, waiver or other
modification of any provision of this Agreement or any related document;
provided, that (x) the assignor under such CAF Advance Assignment and such CAF
Advance Assignee may, in their discretion, agree between themselves upon the
manner in which such assignor will exercise its rights under this Agreement and
any related document, and (y) if a copy of such CAF Advance Assignment shall
have been delivered to the Administrative Agent for its acceptance and recording
in the Register in accordance with subsection 9.6(d), neither the principal
amount of, the interest rate on, nor the maturity date of any CAF Advance or
Individual CAF Advance Note assigned to the CAF Advance Assignee thereunder will
be modified without the written consent of such CAF Advance Assignee. If a CAF
Advance Assignee has caused a CAF Advance Assignment to be recorded in the
Register in accordance with subsection 9.6(d), such CAF Advance Assignee may
thereafter, in the ordinary course of its business and in accordance with
applicable law, assign such Individual CAF Advance Note to any Lender, to any
affiliate or subsidiary of such CAF Advance Assignee or to any other financial
institution that has total assets in excess of $1,000,000,000 and that in the
ordinary course of its business extends credit of the type evidenced by such
Individual CAF Advance Note, and the foregoing provisions of this paragraph (c)
shall apply, mutatis mutandis, to any such assignment by a CAF Advance Assignee.
Except in accordance with the preceding sentence, CAF Advances and Individual
CAF Advance Notes may not be further assigned by a CAF Advance Assignee, subject
to any legal or regulatory requirement that the CAF Advance Assignee's assets
must remain under its control.
(d) Upon its receipt of a CAF Advance Assignment executed by an
assignor Lender and a CAF Advance Assignee, together with payment to the
Administrative Agent of a registration and processing fee of $3,500, the
Administrative Agent shall promptly accept such CAF Advance Assignment, record
the information contained therein in a register (the "Register") and give notice
of such acceptance and recordation to the assignor Lender, the CAF Advance
Assignee and the Borrower.
(e) Any Lender may, in the ordinary course of its commercial
banking business and in accordance with applicable law, at any time and from
time to time assign (i) so long as, to the knowledge of the assignor Lender,
such assignment will not, and there is no substantial likelihood that in the
future it will, result in adverse consequences to the Borrower including without
limitation payment obligations under Sections 2.15 and 2.16, to any Lender or
any Affiliate thereof or, (ii) with the consent of the Borrower and the
Administrative Agent (which in each case shall not be unreasonably withheld), to
another bank or financial institution ("an Assignee") all or any part of its
rights and obligations under this Agreement and the Notes pursuant to an
Assignment and Acceptance, substantially in the form of Exhibit E, executed by
<PAGE>
such Assignee, such assigning Lender (and, in the case of an Assignee that is
not then a Lender or an Affiliate thereof, by the Borrower and the
Administrative Agent) and delivered to the Administrative Agent for its
acceptance and recording in the Register. Upon such execution, delivery,
acceptance and recording, from and after the effective date determined pursuant
to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party
hereto and, to the extent provided in such Assignment and Acceptance, have the
rights and obligations of a Lender hereunder with a Commitment as set forth
therein, and (y) the assigning Lender thereunder shall, to the extent provided
in such Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Lender's rights and obligations under this
Agreement, such assigning Lender shall cease to be a party hereto).
(f) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and, in the case of an Assignee that is not
then a Lender or an affiliate thereof, by the Borrower and the Administrative
Agent) together with payment to the Administrative Agent of a registration and
processing fee of $3,500, the Administrative Agent shall (i) promptly accept
such Assignment and Acceptance and (ii) on the effective date determined
pursuant thereto record the information contained therein in the Register and
give notice of such acceptance and recordation to the Lenders and the Borrower.
On or prior to such effective date, the Borrower, at its own expense, shall
execute and deliver to the Administrative Agent (in exchange for the Revolving
Credit Note of the assigning Lender) a new Revolving Credit Note to the order of
such Assignee in an amount equal to the Commitment assumed by it pursuant to
such Assignment and Acceptance and, if the assigning Lender has retained a
Commitment hereunder, a new Revolving Credit Note, to the order of the assigning
Lender in an amount equal to the Commitment, retained by it hereunder. Such new
Notes shall be dated the Closing Date, and shall otherwise be in the form of the
Note replaced thereby.
(g) The Administrative Agent shall maintain at its address referred
to in subsection 9.2 a copy of each CAF Advance Assignment and each Assignment
and Acceptance delivered to it and a register (the "Register") for the
recordation of (i) the names and addresses of the Lenders and the Commitment of,
and principal amount of the Loans owing to, each Lender from time to time, and
(ii) with respect to each CAF Advance Assignment delivered to the Administrative
Agent, the name and address of the CAF Advance Assignee and the principal amount
of each CAF Advance owing to such CAF Advance Assignee. The entries in the
Register shall be conclusive, in the absence of manifest error, and the
Borrower, the Administrative Agent and the Lenders may treat each Person whose
name is recorded in the Register as the owner of the Loan recorded therein for
all purposes of this Agreement. The Register shall be available for inspection
by the Borrower or any Lender or CAF Advance Assignee at any reasonable time and
from time to time upon reasonable prior notice.
<PAGE>
(h) The Borrower authorizes each Lender to disclose to any
Participant, CAF Advance Assignee or Assignee (each, a "Transferee") and any
prospective Transferee any and all financial information in such Lender's
possession concerning the Borrower and its Affiliates which has been delivered
to such Lender by or on behalf of the Borrower pursuant to this Agreement or
which has been delivered to such Lender by or on behalf of the Borrower in
connection with such Lender's credit evaluation of the Borrower and its
Affiliates prior to becoming a party to this Agreement. Notwithstanding the
foregoing, without the prior written consent of the Borrower, no Lender may
disclose to any Participant or CAF Advance Assignee or any proposed Transferee
information which has been designated in writing by the Borrower to such Lender
as non-public information. The Borrower agrees to respond promptly to any
request by a Lender pursuant to the preceding sentence for the Borrower's
consent to disclose non-public information and agrees to give such consent
unless it has reason to believe that the proposed recipient of such information
would not treat such information in a confidential manner or unless the Borrower
otherwise deems that a banking relationship with such proposed recipient would
be detrimental to its interests or inconsistent with its corporate policy as
determined by the Borrower. The Borrower agrees to be reasonable in making
determinations pursuant to this paragraph (h). In addition, no such non-public
information shall be disclosed by any Lender to any Participant, CAF Advance
Assignee or proposed Transferee unless such Participant, CAF Advance Assignee or
proposed Transferee shall have agreed in writing for the benefit of the Borrower
to comply with the requirements of this paragraph (h) as if it were a Lender.
(i) If, pursuant to this subsection, any interest in this Agreement
or any Note is transferred to any Transferee which is organized under the laws
of any jurisdiction other than the United States or any State thereof, the
transferor Lender shall cause such Transferee, concurrently with the
effectiveness of such transfer, (i) to represent to the transferor Lender (for
the benefit of the transferor Lender, the Administrative Agent and the Borrower)
that under applicable law and treaties no taxes will be required to be withheld
by the Administrative Agent, the Borrower or the transferor Lender with respect
to any payments to be made to such Transferee in respect of the Loans, (ii) to
furnish to the transferor Lender (and, in the case of any Purchasing Lender and
any CAF Advance Assignee registered in the Register, the Administrative Agent
and the Borrower) the documents and certifications required by subsection
2.16(b) to be furnished by each Lender that is an original party hereto and
(iii) to agree (for the benefit of the transferor Lender, the Administrative
Agent and the Borrower) to furnish the transferor Lender (and, in the case of
any Purchasing Lender and any CAF Advance Assignee registered in the Register,
the Administrative Agent and the Borrower) the documents and certifications
required by subsection 2.16(b) to be furnished by each Lender that is an
original party hereto subsequent to the date of effectiveness of such transfer.
<PAGE>
(j) Nothing herein shall prohibit any Lender from pledging or
assigning any Note to any Federal Reserve Bank in accordance with applicable
law.
9.7 Adjustments; Set-off. (a) If any Lender (a "benefitted Lender")
shall at any time receive any payment of all or part of its Loans, or interest
thereon, or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings of the nature
referred to in Section 7(f), or otherwise), in a greater proportion than any
such payment to or collateral received by any other Lender, if any, in respect
of such other Lender's Loans, or interest thereon, such benefitted Lender shall
purchase for cash from the other Lenders a participating interest in such
portion of each such other Lender's Loan, or shall provide such other Lenders
with the benefits of any such collateral, or the proceeds thereof, as shall be
necessary to cause such benefitted Lender to share the excess payment or
benefits of such collateral or proceeds ratably with each of the Lenders;
provided, however, that if all or any portion of such excess payment or benefits
is thereafter recovered from such benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders provided
by law, each Lender shall have the right, without prior notice to the Borrower,
any such notice being expressly waived by the Borrower to the extent permitted
by applicable law, upon any amount becoming due and payable by the Borrower
hereunder or under the Notes (whether at the stated maturity, by acceleration or
otherwise) to set-off and appropriate and apply against such amount any and all
deposits (general or special, time or demand, provisional or final), in any
currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by such Lender or any branch or agency
thereof to or for the credit or the account of the Borrower. Each Lender agrees
promptly to notify the Borrower and the Administrative Agent 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.
9.8 Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts (including by
telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. A set of the copies of this Agreement
signed by all the parties shall be lodged with the Borrower and the
Administrative Agent.
9.9 Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
<PAGE>
9.10 Integration. This Agreement and the other Loan Documents
represent the agreement of the Borrower, the Administrative Agent and the
Lenders with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Administrative Agent or any
Lender relative to subject matter hereof not expressly set forth or referred to
herein or in the other Loan Documents.
9.11 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
NEW YORK.
9.12 Submission To Jurisdiction; Waivers. The Borrower hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the Notes, or for recognition and
enforcement of any judgment in respect thereof, to the non-exclusive general
jurisdiction of the Courts of the State of New York, the courts of the United
States of America for the Southern District of New York, and appellate courts
from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c ) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to the
Borrower at its address set forth in subsection 9.2 or at such other address of
which the Administrative Agent shall have been notified pursuant thereto; and
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction.
9.13 Acknowledgements. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution
and delivery of this Agreement and the Notes;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to the Borrower arising out of or in
connection with this Agreement or any of the other Loan Documents, and the
relationship between Administrative Agent and Lenders, on one hand, and the
Borrower, on the other hand, in connection herewith or therewith is solely that
of debtor and creditor; and
( c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated hereby
among the Lenders or among the Borrower and the Lenders.
9.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT AND
THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR THE NOTES AND FOR ANY
COUNTERCLAIM THEREIN.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
PHELPS DODGE CORPORATION
By:
------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK,
as Administrative Agent and as a
Lender
By:
------------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA
By:
------------------------------
Name:
Title:
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
By:
------------------------------
Name:
Title:
BANK OF AMERICA ILLINOIS
By:
------------------------------
Name:
Title:
<PAGE>
BARCLAYS BANK PLC
By:
------------------------------
Name:
Title:
CIBC INC.
By:
------------------------------
Name:
Title:
CITIBANK, N.A.
By:
------------------------------
Name:
Title:
DEUTSCHE BANK AG, NEW YORK
AND/OR CAYMAN ISLANDS BRANCHES
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
WELLS FARGO BANK, N.A.
By:
------------------------------
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, LOS ANGELES AGENCY
By:
------------------------------
Name:
Title:
<PAGE>
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By:
------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK
By:
------------------------------
Name:
Title:
SOCIETE GENERALE
By:
------------------------------
Name:
Title:
<PAGE>
Schedule II
PHELPS DODGE CORPORAT10N
PRINCIPAL DOMESTIC SUBSIDIARIES
Percentage
of Voting
Securities held
by PDC and its
Associated jurisdiction
Name Companies of Incorporation
- ---- ---------- ----------------
Accuride Corporation 100.00 Delaware
Columbian Chemicals Company 100.00 Delaware
Phelps Dodge Chino, Inc. 100.00 Delaware
Phelps Dodge Industries, Inc. 100.00 Delaware
Phelps Dodge Morenci, Inc. 100.00 Delaware
Phelps Dodge Refining Corporation 100.00 New York
<PAGE>
PHELPS DODGE CORPORATION
SUBSIDIARIES
(Other than Principal Domestic Subsidiaries)
Percentage
of Voting
Securities held
by PDC and its
Associated
Name Companies
Accuride Canada Inc. 100.00
Accuride Texas Inc. 100.00
Aislamientos Plasticos, C.A. (PLASTICA) 80.08
Ajo Improvement Company 100.00
Alambres y Cables de Panama, S.A. (ALCAP) 78.08
Alambres y Cables Venezolanos, C.A. (ALCAVE) 80.08
ALCAP Commercial, S.A. (ALCOMER) 78.08
Alcave Trading 80.08
Alicanto, S.A. 100.00
AOT, Inc. 50.00
Apache Nitrogen Products, Inc. 38.70
Arizona Community Investment Corporation 100.00
Armasa 60.52
Ashfork Mines Limited 100.00
Asian Telecommunications Products 39.99
Bisbee Queen Mining Company 65.90
Black Mountain Mineral Development (PTY) Ltd. 44.56
Burro Chief Copper Company 100.00
Busa Mining Co., Inc. 100.00
Cables Electricos Ecuatorianos, C.A. (CABLEC) 67.10
Cahosa, S.A. 78.08
Celbac, S.A. 66.63
Chino Mines Company 66.67
Cobre Cerrillos, S.A. (COCESA) 90.04
Cobre Colada Continua, C.C.C., C.A. 40.04
Cobre del Mayo, S.A. de C.V. 70.00
Cocesa Ingenieria y Construccion, S.A. (COCETEL) 63.03
Cocesa Trading 90.00
Cocetel del Plata, S.A. 59.88
Cocetel El Salvadore 63.03
Cocetel Ingenieria y Construccion, C.A. 63.03
Colada Continua Chilena 36.92
Columbian (U.K.) Limited (CUKL) 100.00
Columbian Carbon Deutschland GmbH 100.00
Columbian Cargon Europa S.R.L. 100.00
Columbian Carbon International (France), S.A. 100.00
Columbian Carbon Japan Ltd. 50.00
Columbian Carbon Philippines, Inc. 88.20
Columbian Carbon Spain, S.A. 100.00
Columbian Chemicals Canada, Ltd. 100.00
Columbian Chemicals Europa, Gmbh 100.00
Columbian Foreign Export Corporation 100.00
Columbian Holding Company 100.00
Columbian International Chemicals Corporation 100.00
Columbian International Trading Company 100.00
Columbian Technology Company 100.00
Columbian Tiszai Carbon Ltd. 60.00
Comercial ECOHSA, S.A. de C.V. 60.52
Cominesa, Ltd. 100.00
Compania Contractual Minera Candelaria 80.00
Compania Contractual Minera Ojos del Salado 100.00
CONAL, Conductores y Aluminio, C.A. 80.08
<PAGE>
CONDUCEN, S.A. 78.57
CONDUCOMER, S.A. (formerly INDELEC) 78.57
Conductores Electricos de Centro America, S.A. (CONELCA)57.57
Condutel 78.57
Corobong Mining Co., Inc. 100.00
Coronado Power & Water, Inc. 100.00
Dagma Mining Co., Inc. 100.00
Dodge & James Insurance Company, LTD. 100.00
Dongguan Keystone Elec. Wire & Cable Co.Ltd. 16.00
Dongguan Keystone Machinery Co. Ltd. 16.00
Dulugan Mining Co., Inc. 100.00
Electroconductores de Honduras, S.A. de C.V. (ECOHSA) 60.52
Elektrodraht Mureck, Phelps Dodge Eldra GmbH 51.00
Erawan Mining Limited 100.00
Fabrica de Conductores Electricos, S.A. (FACELEC) 57.57
Habirshaw Cable and Wire Corporation 100.00
Hudson International Conductors 100.00
Hudson International Conductors Japan, Ltd. 100.00
Hudson Wire - Europe, Inc. 100.00
Industria de Conductores Electricos, C.A. (ICONEL) 80.08
Iponan Mining Co., Inc. 100.00
Isulan Mining Co., Inc. 100.00
Kalahari Investments Limited 100.00
Kalayaan Realty Company, Inc. 35.28
Kasamahan Power Corporation 20.00
Kasamahan Realty Development Corp. 35.00
Keystone Electric Wire and Cable Company Limited 20.00
Kidapawan Mining Co., Inc. 100.00
Kumakata Mining Co., Inc. 100.00
Kyruso Mining Co., Inc. 100.00
Lumintao Mining Co., Inc. 100.00
Macote Mining Co., Inc. 100.00
Makilala Mining Co., Inc. 100.00
Malampay Mining Co., Inc. 100.00
Malibato Mining Co., Inc. 100.00
Mambalili Mining Co., Inc. 100.00
Marico Fluorspar (PTY) Limited 100.00
Metal Fabricators of Zambia Limited (ZAMEFA) 51.00
Minera Aguas Calientes, S.A. 100.00
Minera Cerro Lindo, S.A. 55.00
Minera Las Claditas, S.A. 85.00
Minera Pampa de Cobre, S.A. 70.00
Minera Papago, S.A. de C.V. 100.00
Minera Phelps Dodge de Colombia, Inc. 100.00
Minera Phelps Dodge del Peru S.A. 100.00
Minera Phelps Dodge Mexico, S. de R.L. de C.V. 100.00
Minera Pilares, S.A. de C.V. 49.00
MineX, Inc. 100.00
Minuet Realty Corporation 39.99
Mosega Fluorspar Works (PTY) Limited 100.00
Nesor Alloy Corporation 100.00
Norala Mining Co., Inc. 100.00
Oclaves Limited 100.00
Pacific Western Land Company 100.00
Pakham Exploration and Mining Limited 49.00
Palimbang Mining Co., Inc. 100.00
Patong Exploration and Mining Limited 49.00
PD - Siam Rod Company Limited 39.36
PD Bolivia, Inc. 100.00
PD Candelaria, Inc. 100.00
PD Cobre del Mayo, Inc. 100.00
PD Explorations, Inc. 100.00
<PAGE>
PD Indonesia Corporation 100.00
PD Las Bambas Corporation 100.00
PD Mineral Development Co (U.K.) Ltd. 100.00
PD Ojos del Salado, Inc. 100.00
PD Peru,Inc. 100.00
PD Puthep Limited 100.00
PDMTR de El Salvador 57.57
PDMTR de Guatemala 57.57
PDTL Trading Company Limited 40.00
Peru Mining Expl & Development Company 16.25
Phelps Dodge (Namibia) (Pty) Ltd. 100.00
Phelps Dodge Africa Cable Corporation 100.00
Phelps Dodge Australasia, Inc. 100.00
Phelps Dodge Chapi, Inc. 100.00
Phelps Dodge Corporation of Canada, Limited 100.00
Phelps Dodge Development Corporation 100.00
Phelps Dodge Do Brasil Mineracao LTDA 100.00
Phelps Dodge Enfield Corporation 100.00
Phelps Dodge Europa, Ltd. 100.00
Phelps Dodge Exploration Corporation 100.00
Phelps Dodge Exploration De Argentina S.A. 100.00
Phelps Dodge Exploration East, Inc. 100.00
Phelps Dodge Foundation -
Phelps Dodge Fuel Development Corporation 100.00
Phelps Dodge Hidalgo, Inc. 100.00
Phelps Dodge Industries Gesellschaft m.b.H 100.00
Phelps Dodge International Corporation 100.00
Phelps Dodge Madagascar S.A.R.L. 100.00
Phelps Dodge Mercantile Company 100.00
Phelps Dodge Mining (Pty) Limited 100.00
Phelps Dodge Mining (Zambia) Limited 100.00
Phelps Dodge Mining Services, Inc. 100.00
Phelps Dodge Molybdenum Corporation 100.00
Phelps Dodge of Africa, Ltd. 100.00
Phelps Dodge of Botswana (Pty) Ltd. 100.00
Phelps Dodge of Portugal, Ltd. 100.00
Phelps Dodge of Turkey, Inc. 100.00
Phelps Dodge Overseas Capital Corporation 100.00
Phelps Dodge Overseas Marketing Corporation 100.00
Phelps Dodge Philippines, Inc. 39.99
Phelps Dodge Sales Company, Incorporated 100.00
Phelps Dodge Thailand Limited 55.47
Phelps Dodge Tyrone, Inc. 100.00
Phelps Dodge Yantai Cable Company Limited 40.00
Phelps Dodge Yantai China Holdings Inc. 66.67
Pietersburg Iron Company (Proprietary) Limited 50.00
Pollac Mining Co., Inc. 100.00
PT Kutaraja Tembaga Raya 75.00
Puthep Limited 49.00
<PAGE>
Representaciones de Industries Venezdanas, C.A.
(REDIVENCA) 80.08
RPG Telecom, Ltd .80
Sabang Mining Co., Inc. 100.00
Savanna Development Co., Ltd. 100.00
Sevalco Limited 100.00
Seven-Up Pete Venture 72.30
Siam Electric Industries, Co. Ltd. 9.43
Skyline Estates, Inc. 100.00
Soner, Inc. 100.00
Sonoran Mining Company 100.00
Southern Peru Copper Corporation 16.25
Southern Peru Copper Sales Corporation 16.00
SPD Magnet Wire Company 50.00
St. Joseph Phelps Dodge Exploration Pty. Ltd. 50.00
Tambali Mining Co., Inc. 100.00
T.I.E. (Trading Import Export) 100.00
Thai Copper Rod Company Limited 13.09
The Morenci Water & Electric Company 100.00
Tucson, Cornelia and Gila Bend Railroad Co. 100.00
Tulipan Company, Inc. 16.25
Viohalco 2.80
Warren Company 100.00
Western Nuclear Australia Limited 100.00
Western Nuclear, Inc. 100.00
Western Nuclear Mines, Ltd. 100.00
Woodlawn Properties 33.33
<PAGE>
SCHEDULE III
ENVIRONMENTAL REPRESENTATION
As indicated in the Borrower's Form 10-K Report for the 1996 calendar
year, Phelps Dodge Corporation and its consolidated subsidiaries have been
identified as a potentially responsible party at 36 sites identified on the
National Priorities List (NPL) under the Comprehensive Environmental Response,
Compensation, and Liability Act (CERCLA) or a state equivalent. Phelps Dodge
Corporation and its consolidated subsidiaries also own or operate 13 sites
identified in the Comprehensive Environmental Response, Compensation, and
Liability Information System (CERCLIS), which consists of approximately 35,000
sites throughout the United States that are being reviewed by the EPA to
determine if they qualify for inclusion on the NPL. Among the sites being
reviewed by the EPA are mining sites or portions thereof in Arizona and New
Mexico. Some of these mining sites are owned and/or operated by Phelps Dodge
Corporation and its subsidiaries, including Phelps Dodge Morenci, Inc., Phelps
Dodge Chino, Inc., and Burro Chief Copper Company. Whether any of the CERCLIS
sites which are owned or operated by Phelps Dodge Corporation and its
subsidiaries, including the Arizona or New Mexico mining sites, will be included
on the NPL, or will become the subject of state environmental response action,
cannot be determined at this time.
<PAGE>
SCHEDULE IV
-----------
EXISTING CAF ADVANCES
Lender Amount Maturity
- ------ ------ --------
Date
- ----
Morgan Guaranty Trust Company
of New York $50,000,000 July 1, 1997
Morgan Guaranty Trust Company
of New York $25,000,000 July 16,
1997
The Chase Manhattan Bank $50,000,000 July 16,
1997
<PAGE>
SCHEDULE OF CAF ADVANCES
Date of
Transer
Date Amount Interest to Indi-
of of Interest Payment Maturity Payment vidual Author-
Loan Loan Rate Dates Date Date Note ization
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
- ---- ------ -------- ------- -------- ------- ------- -------
EXHIBIT 10.5
DEFERRED COMPENSATION PLAN
FOR THE DIRECTORS OF
PHELPS DODGE CORPORATION
<PAGE>
TABLE OF CONTENTS
ARTICLE I - PREAMBLE
ARTICLE II - DEFINITIONS
2.1 DEFINITIONS
2.2 CONSTRUCTION
ARTICLE III - ELIGIBILITY
3.1 SELECTION OF PARTICIPANTS
3.2 PARTICIPATION AGREEMENT
3.3 REVISED PARTICIPATION AGREEMENTS
ARTICLE IV - CONTRIBUTIONS
4.1 PARTICIPANT CONTRIBUTIONS
ARTICLE V - ACCELERATION OF BENEFITS
5.1 ACCELERATION OF BENEFITS
ARTICLE VI - CREDITING OF CONTRIBUTIONS AND EARNINGS
6.1 TRANSFER TO TRUSTEE; ALLOCATION OF CONTRIBUTIONS
6.2 INVESTMENT EARNINGS OR LOSSES
6.3 INVESTMENT DIRECTION
6.4 COMPANY STOCK FUND
ARTICLE VII - VESTING
7.1 VESTING
ARTICLE VIII - PAYMENT OF BENEFITS
8.1 TIME OF PAYMENT
8.2 METHOD OF PAYMENT
8.3 BENEFICIARY DESIGNATIONS
ARTICLE IX - ADMINISTRATION OF THE PLAN
9.1 ADOPTION OF TRUST
9.2 POWERS OF THE PLAN ADMINISTRATOR
9.3 CREATION OF COMMITTEE
9.4 CHAIRMAN AND SECRETARY
9.5 APPOINTMENT OF AGENTS
9.6 MARJORITY VOTE AND EXECUTION OF INSTRUMENTS
9.7 ALLOCATION OF RESPONSIBILITIES
9.8 CONFLICT OF INTEREST
9.9 ACTION TAKEN BY COMPANY
9.10 DELEGATIONS OF AUTHORITY
9.11 INDEMNIFICATION
<PAGE>
ARTICLE X - CLAIMS REVIEW PROCEDURE
10.1 CLAIMS
10.2 APPEALS
ARTICLE XI - LIMITATION ON ASSIGNMENT; PAYMENTS TO LEGALLY
INCOMPETENT DISTRIBUTEE; CORRECTIONS
11.1 ANTI-ALIENATION CLAUSE
11.2 PERMITTED ARRANGEMENTS
11.3 PAYMENT TO MINOR OR INCOMPETENT
11.4 UNDERPAYMENT OR OVERPAYMENT OF BENEFITS
ARTICLE XII - AMENDMENT, MERGER AND TERMINATION
12.1 AMENDMENT
12.2 MERGER OR CONSOLIDATION OF COMPANY
12.3 TERMINATION OF PLAN OR DISCONTINUANCE OF
CONTRIBUTIONS
ARTICLE XIII - GENERAL PROVISIONS
13.1 LIMITATION ON PARTICIPANTS' RIGHTS
13.2 STATUS OF PARTICIPANTS AS UNSECURED CREDITORS
13.3 STATUS OF TRUST FUND
13.4 UNIFORM ADMINISTRATION
13.5 HEIRS AND SUCCESSORS
13.6 NO LIABILITY FOR ACCELERATION OF PAYMENTS
<PAGE>
DEFERRED COMPENSATION PLAN
FOR THE DIRECTORS OF
PHELPS DODGE CORPORATION
ARTICLE I
---------
PREAMBLE
--------
Phelps Dodge Corporation (the "Company"), a corporation organized and
existing under the laws of the State of New York, previously adopted the
Deferred Compensation Plan for the Directors of Phelps Dodge Corporation (the
"Plan"). The Plan was most recently amended and restated in its entirety
effective December 4, 1996. The Company has now decided to amend and restate the
Plan in its entirety effective September 30, 1997 (the "Effective Date").
The purpose of this Plan is to provide non-employee directors of the
Company with the opportunity to defer a portion of their annual retainer fees
and/or meeting fees. This Plan is not intended to "qualify" for favorable tax
treatment pursuant to Section 401(a) of the Internal Revenue Code of 1986 (the
"Code") or any successor section or statute.
ARTICLE II
----------
DEFINITIONS
-----------
2.1 DEFINITIONS.
------------
When a word or phrase appears in this Plan with the initial letter
capitalized, and the word or phrase does not begin a sentence, the word or
phrase shall generally be a term defined in this Section 2.1 or in the Preamble.
The following words and phrases used in the Plan with the initial letter
capitalized shall have the meanings set forth in this Section 2.1, unless a
clearly different meaning is required by the context in which the word or phrase
is used:
(a) "Account" or "Accounts" means the accounts which may be
maintained by the Plan Administrator to reflect the interest of a Participant
under the Plan.
(b) "Beneficiary" means the person or trust that a Participant, in
his most recent written designation filed with the Plan Administrator, shall
have designated to receive his Accounts under the Plan in the event of his
death.
(c) "Board" means the Board of Directors of the Company.
(d) "Company Stock Fund" means the Investment Fund established by the
Plan Administrator pursuant to Section 6.3(e) that will be invested in Company
securities.
<PAGE>
(e) "Deferral Contributions" means the Deferral Contributions made by
a Participant pursuant to Section 4.1.
(f) "Deferral Contributions Account" means the Account maintained to
record the Deferral Contributions made by a Participant pursuant to Section 4.1.
The Deferral Contributions Account shall be divided into as many subaccounts as
the Plan Administrator deems necessary.
(g) "Director" shall mean each member of the Board who is neither an
officer nor an Employee of the Company.
(h) "Employee" means any individual classified by the Company as a
common law employee of the Company. For this purpose, the classification that is
relevant is the classification in which such individual is placed by the Company
for purposes of this Plan and the classification of such individual for any
other purpose (e.g., employment tax or withholding purposes) shall be
irrelevant. If an individual is characterized as a common law employee of the
Company by a governmental agency or court but not by the Company, such
individual shall be treated as an employee who has not been designated for
participation in this Plan.
(i) "Fees" means the sum of a Participant's annual retainer fees and
meeting fees payable to the Participant as a Director.
(j) "Investment Fund" means the investment fund or funds established
by the Plan Administrator pursuant to Section 6.3.
(k) "Participant" means any Director who elects to participate in the
Plan.
(l) "Participation Agreement" means the agreement entered into by the
Company and a Participant as set forth in Section 3.2.
(m) "Plan Administrator" means the committee designated by the
Company to carry out its responsibilities under the Plan as set forth in Section
9.3.
(n) "Plan Year" means the 12 month period beginning on each January 1
and ending on the next following December 31.
(o) "Termination Date" means the date as of which a Participant
ceases to be a Director.
(p) "Trust Agreement" means any trust agreement established pursuant
to the Plan between the Company and the Trustee or any trust agreement hereafter
established, the provisions of which are incorporated herein by reference.
(q) "Trustee" means the Trustee under the Trust Agreement.
(r) "Trust Fund" means all assets of whatsoever kind or nature held
from time to time by the Trustee pursuant to the Trust Agreement, without
distinction as to income and principal and without regard to source, (i.e.,
Participant contributions, earnings or forfeitures).
(s) "Valuation Date" means the last business day of each calendar
quarter and such other dates as the Plan Administrator may designate.
<PAGE>
2.2 CONSTRUCTION.
-------------
The masculine gender, where appearing in the Plan, shall include the
feminine gender (and vice versa), and the singular shall include the plural,
unless the context clearly indicates to the contrary. Headings and subheadings
are for the purpose of reference only and are not to be considered in the
construction of this Plan. If any provision of this Plan is determined to be for
any reason invalid or unenforceable, the remaining provisions shall continue in
full force and effect. All of the provisions of this Plan shall be construed and
enforced in accordance with the laws of the State of Arizona.
ARTICLE III
-----------
ELIGIBILITY
-----------
3.1 SELECTION OF PARTICIPANTS.
--------------------------
(a) GENERAL. Each Director, as defined in Section 2.1(g), is eligible
to participate in the Plan.
(b) NO WAITING PERIODS. A Participant need not complete any
particular period of service in order to be eligible to make Deferral
Contributions.
3.2 PARTICIPATION AGREEMENT.
------------------------
Each Participant shall enter into a Participation Agreement in such
form and at such time as the Plan Administrator shall require. The Participation
Agreement shall set forth the Participant's Deferral Contributions and indicate
the manner in which distributions are to be made from the Participant's Accounts
and when distributions are to commence. If the Participant elects to make
Deferral Contributions, the Participation Agreement also shall authorize the
reduction of the Participant's Fees in an amount equal to his Deferral
Contributions. The Participation Agreement also may set forth such other
information as the Plan Administrator shall require. The Participation Agreement
must be executed and delivered to the Plan Administrator on or before December
31st of the year preceding the Plan Year for which the election is made. Any
person who becomes a Director during a Plan Year may, not later than the 30th
day after his or her term begins, enter into a Participation Agreement and defer
payment of all or a part of his or her Fees payable for the portion of such Plan
Year following such election.
3.3 REVISED PARTICIPATION AGREEMENTS.
---------------------------------
A Participant may file a new Participation Agreement in order to
change an election made in a previously filed Participation Agreement. If the
Participant changes the amount or rate of his Deferral Contributions, the new
amount or rate of Deferral Contributions will become effective as of the end of
the Plan Year in which such new Participation Agreement is filed and only with
respect to Fees payable for services as a Director thereafter. If the new
Participation Agreement changes the method and/or timing of the commencement of
distributions, the new election will only be honored if at least one (1) full
calendar year elapses between (a) the date as of which such new Participation
Agreement is filed and (b) both (1) the date as of which a distribution would
otherwise have commenced and (2) the date as of which such distribution will
commence under such election. Notwithstanding the foregoing, such timing
restrictions shall not apply to a Participant's election to receive cash or
Company securities with respect to the portion of his Accounts invested in the
Company Stock Fund.
<PAGE>
ARTICLE IV
----------
CONTRIBUTIONS
-------------
4.1 PARTICIPANT CONTRIBUTIONS.
--------------------------
(a) GENERAL RULE. For any Plan Year, a Participant may elect to defer
a portion of the Fees otherwise payable to him. Any such deferrals shall be
expressed in whole percentages or as a specific dollar amount, as specified in
the Participant's Participation Agreement. Amounts deferred by the Participant
shall be contributed by the Company directly to the Trust, if one is
established. If a Trust is not established, such deferrals shall remain part of
the Company's general assets, but shall be accounted for separately.
(b) LIMITATIONS ON DEFERRALS. The Plan Administrator may impose
limitations on the amount of a Participant's Deferral Contributions in
accordance with such uniform rules as it may adopt from time to time.
(c) CHANGE IN CONTRIBUTIONS. A Participant may change the amount or
percentage of Deferral Contributions as of the first day of any Plan Year by
filing a new Participation Agreement or any other form permitted by the Plan
Administrator. The change shall become effective as provided in Section 3.3.
(d) SUSPENSION OF DEFERRAL CONTRIBUTIONS. A Participant may suspend
the Deferral Contributions being made from his Fees as of the first day of any
Plan Year by filing a new Participation Agreement on or before the last day of
the preceding Plan Year. If a Participant suspends his Deferral Contributions,
he or she shall be permitted to execute a new Participation Agreement and to
begin making Deferral Contributions. The Deferral Contributions made pursuant to
such new Participation Agreement may then commence in accordance with the
provisions of Section 3.3.
(f) EFFECT OF TERMINATION DATE. A Participant's Deferral
Contributions shall be discontinued upon his Termination Date. If a
Participant's Termination Date has occurred, no Deferral Contributions will be
withheld from the Participant's final Fees that are payable following the
Participant's Termination Date. If the Participant later becomes a Director, he
may reenter the Plan in accordance with the provisions of Section 3.2 that are
applicable to new Participants.
<PAGE>
ARTICLE V
---------
ACCELERATION OF BENEFITS
------------------------
5.1 ACCELERATION OF BENEFITS.
-------------------------
(a) GENERAL. A Participant may elect to receive an accelerated
withdrawal from his Deferral Contributions Account by filing an election with
the Plan Administrator on such forms as may be prescribed from time to time by
the Plan Administrator. If a Participant makes such an election, except as
otherwise provided below, the Participant shall receive a single lump sum
payment equal to 90% of the Participant's Deferral Contributions Account
balance. For purposes of determining the amount to be distributed, the
Participant's Deferral Contributions Account shall be valued as of the Valuation
Date immediately preceding the date of the withdrawal. The accelerated
withdrawal shall be paid as soon as reasonably possible following the filing of
the election by the Participant.
(b) FORFEITURE. The Participant shall forfeit the remaining 10% of
his Deferral Contributions Account as of the day on which the accelerated
withdrawal is distributed to the Participant. If a Participant's Deferral
Contribution Account is paid from a Trust, the amount forfeited pursuant to this
Section shall be used by the Company to reduce the administrative expenses of
the Trust.
(c) SUSPENSION OF PARTICIPATION. If a Participant elects to receive
an accelerated withdrawal, the Participant's right to make Deferral
Contributions shall be suspended for 12 months from the date the accelerated
withdrawal is paid to the Participant. Upon expiration of the 12 month
suspension period, the Participant shall be permitted to execute a new
Participation Agreement and to begin making Deferral Contributions. The Deferral
Contributions made pursuant to such new Participation Agreement may then
commence in accordance with the provisions of Section 3.3.
ARTICLE VI
----------
CREDITING OF CONTRIBUTIONS AND EARNINGS
---------------------------------------
6.1 TRANSFER TO TRUSTEE; ALLOCATION OF CONTRIBUTIONS.
-------------------------------------------------
If a Trust is established, all Deferral Contributions shall be
transmitted to the Trustee by the Company as soon as reasonably practicable. If
a Trust is not established, all Deferral Contributions shall be held as part of
the Company's general assets, but accounted for separately. Whether or not a
Trust is established, the Deferral Contributions shall be credited to the
Deferral Contributions Account maintained for that Participant. The Plan
Administrator may maintain subaccounts as it deems necessary or desirable. All
payments from an Account between Valuation Dates shall be charged against the
Account as of the preceding Valuation Date. The Accounts are bookkeeping
accounts only and the Plan Administrator is not in any way obligated to
segregate assets for the benefit of any Participant.
<PAGE>
6.2 INVESTMENT EARNINGS OR LOSSES.
------------------------------
As of each Valuation Date, the Plan Administrator will calculate the
positive or negative rate of return for each of the Investment Funds in
accordance with Section 6.3(c), other than the Company Stock Fund, which is
valued in accordance with Section 6.4. The Plan Administrator then will
determine the portion of the "adjusted balance" of each of the Participant's
Accounts that is invested in each of the Investment Funds and will multiply that
amount by the appropriate rate of return to arrive at the positive or negative
earnings adjustment for that Account and that Investment Fund. The earnings
adjustments so calculated shall then be allocated to the Participant's Accounts.
For this purpose, the "adjusted balance" of an Account will be the balance of
the Account as of the preceding Valuation Date less all withdrawals,
distributions and other amounts chargeable against the Account pursuant to any
other provisions of this Plan since the prior Valuation Date. The earnings
adjustments allocated to any Account shall be allocated among the subaccounts of
that Account in the same manner.
6.3 INVESTMENT DIRECTION.
---------------------
(a) INVESTMENT FUNDS. The Plan Administrator shall designate one or
more Investment Funds in which each Participant shall direct the investment of
amounts credited to his Accounts. Unless the Plan Administrator designates
otherwise, the Investment Funds available under this Plan shall include each of
the investment funds established by the plan administrator of the Phelps Dodge
Corporation Executive Supplemental Savings Plan and such other Investment Funds,
if any, designated by the Plan Administrator. The Investment Funds may be
changed from time to time by the Plan Administrator.
(b) PARTICIPANT DIRECTIONS.
(1) GENERAL. Upon becoming a Participant in the Plan, each
Participant may direct that all of the amounts attributable to his Accounts be
invested in a single investment fund or may direct fractional (percentage)
increments of his Accounts to be invested in such fund or funds as he shall
desire, on such forms and in accordance with such procedures, if any, as may be
established by the Plan Administrator. As of each Valuation Date, a Participant
may change his designations with respect to future contributions and direct
transfers among Investment Funds by filing an election with the Plan
Administrator, on a form prescribed by the Plan Administrator, or in accordance
with any other procedure designated by the Plan Administrator. The designation
will continue until changed by the timely submission of a new form.
(2) DEFAULT SELECTION. In the absence of any designation,
a Participant will be deemed to have directed the investment of his Accounts in
such Investment Funds as the Plan Administrator, in its sole and absolute
discretion, shall determine, or if a Trust is established, as the Trustee, in
its sole and absolute discretion, shall determine. Prior to the Effective Date,
the Plan only permitted Participants to invest in two Investment Funds known as
the "interest account" and the "stock account". Amounts invested in the stock
account or the interest account as of the Effective Date will continue to be
invested in those accounts (or the Investment Funds that are the successors to
such accounts in the Plan Administrator's discretion) until a Participant
directs the Plan Administrator otherwise.
(3) IMPACT OF ELECTION. The Participant's selection of
Investment Funds shall serve only as a measurement of the value of the Accounts
of a Participant pursuant to Section 6.2 and Section 6.3(c), and neither the
Plan Administrator nor the Trustee, if a Trust is established, is required to
invest a Participant's Accounts in accordance with the Participant's selections.
<PAGE>
(c) RATE OF RETURN. As soon as possible after each Valuation Date,
the Plan Administrator shall determine the rate of return, positive or negative,
experienced on each of the Investment Funds, other than the Company Stock Fund,
which is valued in accordance with Section 6.4. The rate of return determined by
the Plan Administrator in good faith and in its discretion pursuant to this
Section shall be binding and conclusive on the Participant, the Participant's
Beneficiary and all parties claiming through them. The Plan Administrator may
delegate the responsibility for calculating the rate of return and the
calculation and allocation of the investment earnings adjustments to the
Accounts to a third party.
(d) CHARGES. In the exercise of its discretion, the Plan
Administrator may charge one or more of the Participant's Accounts for the
reasonable expenses of carrying out investment instructions directly related to
the Accounts, as the Plan Administrator deems appropriate.
6.4 COMPANY STOCK FUND.
-------------------
(a) ESTABLISHMENT OF COMPANY STOCK FUND. The Plan Administrator shall
direct that one or more of the Investment Funds consist, primarily or
exclusively, of Company securities. A Participant's ability to direct
investments into or out of such Fund shall be subject to such procedures as the
Plan Administrator may prescribe from time to time to assure compliance with
Rule 16b-3 of the Securities and Exchange Act of 1934, as amended, and other
applicable requirements. Such procedures also may limit or restrict a
Participant's ability to make (or modify previously made) elections pursuant to
Sections 3.2 or 3.3.
(b) UNITS AND "MARKET VALUE PER SHARE". The Deferral Contributions
allocated to the Company Stock Fund pursuant to Section 6.3 shall be deemed to
be invested in a number of notional common shares of the Company (the "Units")
equal to the quotient of (i) the dollar amount of such Deferral Contributions
divided by (ii) the Market Value Per Share (as defined below) on the date the
Deferral Contributions then being allocated to the Company Stock Fund would
otherwise have been paid to the Participant. In the case of a transfer of any
amount from another Investment Fund to the Company Stock Fund, the amount being
transferred shall be deemed to be invested in a number of Units equal to the
quotient of (i) the dollar amount of such transfer divided by (ii) the Market
Value Per Share on the effective date of such transfer. Fractional Units shall
be credited, but shall be rounded to the nearest hundredth percentile, with
amounts equal to or greater than .005 rounded up and amounts less than .005
rounded down. The "Market Value Per Share" on any date shall mean the average of
the high and low prices per share for a common share of the Company as reported
on the Consolidated Tape of the New York Stock Exchange on such date. If such
date is not a business day or if no sale occurs on such date, Market Value Per
Share shall be determined, in the manner described above, as of the first
preceding business day on which a sale occurs. Whenever a dividend other than a
dividend payable in the form of the Company's common shares is declared with
respect to the Company's common shares, the number of Units in the Participant's
Company Stock Fund Account shall be increased by the number of Units determined
by dividing (i) the product of (A) the number of Units in the Participant's
Company Stock Fund Account on the related dividend record date and (B) the
amount of any cash dividend declared by the Company on a common share (or, in
the case of any dividend distributable in property other than common shares, the
per share value of such dividend as determined by the Company for purposes of
income tax reporting) by (ii) the Market Value Per Share on the related dividend
payment date. In the case of any dividend declared on the Company's common
shares which is payable in common shares, the Participant's Company Stock Fund
Account shall be increased by the number of Units equal to the product of (i)
the number of Units credited to the Participant's Stock Account on the related
dividend record date and (ii) the number of shares of common shares (including
any fraction thereof) distributable as a dividend on a common share. In the
event of any change in the number or kind of outstanding common shares by reason
of any recapitalization, reorganization, merger, consolidation, stock split or
any similar change affecting the common shares, other than a stock dividend as
provided above, the Board shall make an appropriate adjustment in the number of
Units credited to the Participant's Company Stock Fund Account.
<PAGE>
(c) VALUATION OF UNITS ON TRANSFER OR DISTRIBUTION. Any transfer or
cash distribution from the Participant's Company Stock Fund Account, whether to
another Investment Fund or to the Participant or his or her Beneficiary and
whether part of a lump sum distribution or an installment payment, shall be
determined by multiplying the number of Units then subject to distribution by
the Market Value Per Share on the date prior to the date as of which
distribution is to be made. In the event of a distribution from the
Participant's Company Stock Fund Account to be paid in common shares, the number
of common shares payable shall be equal to the number of whole Units subject to
such distribution. Any fractional Units will be settled in cash based on the
Market Value Per Share on the date prior to the date as of which distribution is
to be made.
(d) INSTALLMENT PAYMENTS. If a Participant elects to be paid in
substantially equal annual, quarterly or monthly installments pursuant to
Section 8.2, the number of Units subject to such distribution shall be equal to
the product of (i) the number of Units in the Company Stock Fund Account on the
date of such distribution and (ii) a fraction, the numerator of which is one (1)
and the denominator of which is the total number of installments remaining to be
paid at that time.
ARTICLE VII
-----------
VESTING
-------
7.1 VESTING.
--------
A Participant shall have a fully vested, nonforfeitable interest in
his Accounts at all times.
ARTICLE VIII
------------
PAYMENT OF BENEFITS
-------------------
8.1 TIME OF PAYMENT.
----------------
Distributions will be made to a Participant at the time elected by
the Participant in the Participation Agreement. As provided in Section 3.2 and
Section 3.3, a Participant may elect in his initial or any revised Participation
Agreement to defer the receipt of distributions until the first business day of
any Plan Year following the Plan Year in which Fees are deferred but not later
than the Plan Year in which occurs the Participant's seventy-fifth (75th)
birthday. If such an election has been made (and, if the election was made in a
revised Participation Agreement, the Participation Agreement has been in effect
for the requisite period of time provided in Section 3.3), distributions to the
Participant (or the Participant's Beneficiary in the case of death) shall be
postponed to the extent necessary to honor such election. If the Participant
fails to specify the date as of which a distribution is to commence, such
distribution shall commence on the first business day of the Plan Year
immediately following the Plan Year in which the Participant's Termination Date
occurs.
<PAGE>
8.2 METHOD OF PAYMENT.
------------------
Any payments from a Participant's Accounts shall be made either in a
lump sum in cash or in cash payments in substantially equal annual, quarterly,
or monthly installments over a period certain not exceeding 10 years, such
method of payment to be elected by the Participant in his initial Participation
Agreement or in any revised Participation Agreement that has been in effect for
the requisite period of time specified in Section 3.3. Notwithstanding the
foregoing, to the extent a Participant's Accounts are invested in the Company
Stock Fund at the time payment is to be made, payments from a Participant's
Accounts may be made in whole shares of Company securities if the Participant so
elects in his initial Participation Agreement or in any revised Participation
Agreement. Any distribution from the Company Stock Fund Account shall be made in
accordance with Sections 6.4(c) and (d). If installment payments are made, the
provisions of Sections 6.2 and 6.3 shall continue to apply to the unpaid
balance. Unless a Participant has affirmatively elected to receive payments in
installments over a period of 10 years or less and to receive payment of the
portion of his Accounts invested in the Company Stock Fund in whole shares of
Company securities, the Participant's Accounts shall be distributed in one cash
lump sum. If a Participant is married at the time a Participation Agreement, or
a revised Participation Agreement, is filed, an election to receive payments in
other than a lump sum shall be ineffective unless the Participant's spouse
consents to such election on a form prescribed by or acceptable to the Plan
Administrator for that purpose.
8.3 BENEFICIARY DESIGNATIONS.
-------------------------
In the event of the death of the Participant, the Participant's
interest in his Accounts shall be paid to the Participant's Beneficiary. Each
Participant shall have the right to designate, on forms supplied by and
delivered to the Plan Administrator, a Beneficiary or Beneficiaries to receive
his benefits hereunder in the event of the Participant's death. If the
Participant is married at the time the Beneficiary Designation is filed, the
designation will be ineffective unless the designation names the spouse as the
Beneficiary of at least 50% of the Participant's Accounts or the Participant's
spouse consents to the designation. Subject to the spousal consent requirements
noted in the preceding sentence, each Participant may change his Beneficiary
designation from time to time in the manner described above. Upon receipt of
such designation by the Plan Administrator, such designation or change of
designation shall become effective as of the date of the notice, whether or not
the Participant is living at the time the notice is received. There shall be no
liability on the part of the Company, the Plan Administrator or the Trustee, if
any, with respect to any payment authorized by the Plan Administrator in
accordance with the most recent valid Beneficiary designation of the Participant
in its possession before receipt of a more recent and valid Beneficiary
designation. If no designated Beneficiary is living when benefits become
payable, or if there is no designated Beneficiary, the Beneficiary shall be the
Participant's spouse; or if no spouse is then living, such Participant's issue,
including any legally adopted child or children, in equal shares by right of
representation; or if no such designated Beneficiary and no such spouse or issue
is living upon the death of a Participant, or if all such persons die prior to
the full distribution of such Participant's benefits, then the Beneficiary shall
be the estate of the Participant.
<PAGE>
ARTICLE IX
----------
ADMINISTRATION OF THE PLAN
--------------------------
9.1 ADOPTION OF TRUST.
------------------
The Company may, in its discretion, enter into a Trust Agreement with
the Trustee, which Trust Agreement shall form a part of this Plan and is hereby
incorporated herein by reference.
9.2 POWERS OF THE PLAN ADMINISTRATOR.
---------------------------------
(a) GENERAL POWERS OF PLAN ADMINISTRATOR. The Plan Administrator
shall have the power and discretion to perform the administrative duties
described in this Plan or required for proper administration of the Plan and
shall have all powers necessary to enable it to properly carry out such duties.
Without limiting the generality of the foregoing, the Plan Administrator shall
have the power and discretion to construe and interpret this Plan, to hear and
resolve claims relating to the Plan and to decide all questions and disputes
arising under the Plan. The Plan Administrator shall determine, in its
discretion, the status and rights of a Participant and the identity of the
Beneficiary or Beneficiaries entitled to receive any benefits payable on account
of the death of a Participant.
(b) DISTRIBUTIONS. If a Trust is established, all benefit
disbursements by the Trustee shall be made upon the instructions of the Plan
Administrator. If a Trust is not established, the Company shall make all benefit
disbursements from its general assets upon the instruction of the Plan
Administrator.
(c) DECISIONS CONCLUSIVE. The decisions of the Plan Administrator
upon all matters within the scope of its authority shall be binding and
conclusive upon all persons.
(d) REPORTING. The Plan Administrator shall file all reports and
forms lawfully required to be filed by the Plan Administrator and shall
distribute any forms, reports or statements to be distributed to Participants
and others.
(e) INVESTMENTS. If a Trust is established, the Plan Administrator
shall keep itself advised with respect to the investment of the Trust Fund and
periodically shall report to the Company regarding the investment and
reinvestment of the Trust Fund.
<PAGE>
9.3 CREATION OF COMMITTEE.
----------------------
A committee shall perform the Company's duties as Plan Administrator.
The committee shall consist of at least two members, and they shall hold office
during the pleasure of the Board. Unless and until the Company appoints other
individuals to serve on this committee, the committee members shall be the
members of the Company's Benefits Administration Committee as they may change
from time to time. The committee members shall serve without compensation but
shall be reimbursed for all expenses by the Company. The committee shall conduct
itself in accordance with the provisions of this Article IX. The members of the
committee may resign with 30 days notice in writing to the Company and may be
removed immediately at any time by written notice from the Company.
9.4 CHAIRMAN AND SECRETARY.
-----------------------
The committee shall elect a chairman from among its members and shall
select a secretary who is not required to be a member of the committee and who
may be authorized to execute any document or documents on behalf of the
committee. The secretary of the committee or his designee shall record all acts
and determinations of the committee and shall preserve and retain custody of all
such records, together with such other documents as may be necessary for the
administration of this Plan or as may be required by law.
9.5 APPOINTMENT OF AGENTS.
----------------------
The committee may appoint such other agents, who need not be members
of the committee, as it may deem necessary for the effective performance of its
duties, whether ministerial or discretionary, as the committee may deem
expedient or appropriate. The compensation of any agents who are not employees
of the Company shall be fixed by the committee within any limitations set by the
Board.
9.6 MAJORITY VOTE AND EXECUTION OF INSTRUMENTS.
-------------------------------------------
In all matters, questions and decisions, the action of the committee
shall be determined by a majority vote of its members. They may meet informally
or take any ordinary action without the necessity of meeting as a group. All
instruments executed by the committee shall be executed by a majority of its
members or by any member of the committee designated to act on its behalf.
<PAGE>
9.7 ALLOCATION OF RESPONSIBILITIES.
-------------------------------
The committee may allocate responsibilities among its members or
designate other persons to act on its behalf. Any allocation or designation,
however, must be set forth in writing and must be retained in the permanent
records of the committee.
9.8 CONFLICT OF INTEREST.
---------------------
No member of the committee who is a Participant shall take any part
in any action in connection with his participation as an individual. Such action
shall be voted or decided by the remaining members of the committee.
9.9 ACTION TAKEN BY COMPANY.
------------------------
Any action to be taken by the Company shall be taken by resolution
adopted by the Board; provided, however, that by resolution the Board may
delegate to any committee of the Board, any committee of officers or other
employees, or any officer of the Company the authority to take any actions
hereunder.
9.10 DELEGATIONS OF AUTHORITY.
-------------------------
All delegations of responsibility set forth in this document
regarding the determination of benefits and the interpretation of the terms of
the Plan confer discretionary authority upon the Plan Administrator.
9.11 INDEMNIFICATION.
----------------
To the extent permitted by law, the Company shall and does hereby
jointly and severally indemnify and agree to hold harmless its employees,
officers and directors who serve in fiduciary or other capacities with respect
to the Plan from all loss, damage, or liability, joint or several, including
payment of expenses in connection with defense against any such claim, for their
acts, omissions and conduct, and for the acts, omissions or conduct of their
duly appointed agents, which acts, omissions or conduct constitute or are
alleged to constitute a breach of such individual's fiduciary or other
responsibilities under the Act or any other law, except for those acts,
omissions, or conduct resulting from his own willful misconduct, willful failure
to act, or gross negligence; provided, however, that if any party would
otherwise be entitled to indemnification hereunder in respect of any liability
and such party shall be insured against loss as a result of such liability by
any insurance contract or contracts, such party shall be entitled to
indemnification hereunder only to the extent by which the amount of such
liability shall exceed the amount thereof payable under such insurance contract
or contracts.
<PAGE>
ARTICLE X
---------
CLAIMS REVIEW PROCEDURE
-----------------------
10.1 CLAIMS.
-------
(a) FILING OF CLAIM. A Participant or Beneficiary entitled to
benefits need not file a written claim to receive benefits. If a Participant,
Beneficiary or any other person is dissatisfied with the determination of his
benefits, eligibility, participation or any other right or interest under this
Plan, such person may file a written statement setting forth the basis of the
claim with the Plan Administrator in a manner prescribed by the Plan
Administrator. In connection with the determination of a claim, or in connection
with review of a denied claim, the claimant may examine this Plan and any other
pertinent documents generally available to Participants relating to the claim
and may submit comments in writing.
(b) NOTICE OF DECISION. A written notice of the disposition of any
such claim shall be furnished to the claimant within 30 days after the claim is
filed with the Plan Administrator, provided that the Plan Administrator may have
an additional period to decide the claim if it advises the claimant in writing
of the need for an extension and the date on which it expects to decide the
claim. The notice of disposition of a claim shall refer, if appropriate, to
pertinent provisions of this Plan, shall set forth in writing the reasons for
denial of the claim if the claim is denied (including references to any
pertinent provisions of this Plan), and where appropriate shall explain how the
claimant can perfect the claim.
10.2 APPEALS.
--------
(a) REVIEW. If the claim is denied, in whole or in part, the claimant
shall also be notified in writing that a review procedure is available.
Thereafter, within 90 days after receiving the written notice of the Plan
Administrator's disposition of the claim, the claimant may request in writing,
and shall be entitled to, a review meeting with the Plan Administrator to
present reasons why the claim should be allowed. The claimant shall be entitled
to be represented by counsel at the review meeting. The claimant also may submit
a written statement of his claim and the reasons for granting the claim. Such
statement may be submitted in addition to, or in lieu of, the review meeting
with the Plan Administrator. The Plan Administrator shall have the right to
request of and receive from a claimant such additional information, documents or
other evidence as the Plan Administrator may reasonably require. If the claimant
does not request a review meeting within 90 days after receiving written notice
of the Plan Administrator's disposition of the claim, the claimant shall be
deemed to have accepted the Plan Administrator's written disposition, unless the
claimant shall have been physically or mentally incapacitated so as to be unable
to request review within the 90 day period.
<PAGE>
(b) DECISION FOLLOWING REVIEW. A decision on review shall be rendered
in writing by the Plan Administrator ordinarily not later than 60 days after
review, and a written copy of such decision shall be delivered to the claimant.
If special circumstances require an extension of the ordinary period, the Plan
Administrator shall so notify the claimant. In any event, if a claim is not
determined within 120 days after submission for review, it shall be deemed to be
denied
(c) DECISIONS FINAL; PROCEDURES MANDATORY. To the extent permitted by
law, a decision on review by the Plan Administrator shall be binding and
conclusive upon all persons whomsoever. To the extent permitted by law,
completion of the claims procedures described in this Section shall be a
mandatory precondition that must be complied with prior to commencement of a
legal or equitable action in connection with the Plan by a person claiming
rights under the Plan or by another person claiming rights through such a
person. The Plan Administrator may, in its sole discretion, waive these
procedures as a mandatory precondition to such an action.
ARTICLE XI
----------
LIMITATION ON ASSIGNMENT; PAYMENTS TO LEGALLY
---------------------------------------------
INCOMPETENT DISTRIBUTEE; CORRECTIONS
------------------------------------
11.1 ANTI-ALIENATION CLAUSE.
-----------------------
No benefit which shall be payable under the Plan to any person shall
be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, and any attempt to anticipate,
alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose
of the same shall be void. No benefit shall in any manner be subject to the
debts, contracts, liabilities, engagements or torts of any person, nor shall it
be subject to attachment or legal process for or against any person, except to
the extent as may be required by law.
11.2 PERMITTED ARRANGEMENTS.
- ---- -----------------------
Section 11.1 shall not preclude arrangements for the withholding of
applicable taxes from benefit payments, arrangements for the recovery of benefit
overpayments, or arrangements for direct deposit of benefit payments to an
account in a bank, savings and loan association or credit union (provided that
such arrangement is not part of an arrangement constituting an assignment or
alienation).
<PAGE>
11.3 PAYMENT TO MINOR OR INCOMPETENT.
--------------------------------
Whenever any benefit which shall be payable under the Plan is to be
paid to or for the benefit of any person who is then a minor or determined by
the Plan Administrator to be incompetent by qualified medical advice, the Plan
Administrator need not require the appointment of a guardian or custodian, but
shall be authorized to cause the same to be paid over to the person having
custody of the minor or incompetent, or to cause the same to be paid to the
minor or incompetent without the intervention of a guardian or custodian, or to
cause the same to be paid to a legal guardian or custodian of the minor or
incompetent if one has been appointed or to cause the same to be used for the
benefit of the minor or incompetent.
11.4 UNDERPAYMENT OR OVERPAYMENT OF BENEFITS.
----------------------------------------
In the event that, through mistake or computational error, benefits
are underpaid or overpaid, there shall be no liability for any more than the
correct amount of benefits under the Plan. Overpayments may be deducted from
future payments under the Plan, and underpayment may be added to future payments
under the Plan. In lieu of receiving reduced benefits under the Plan, a
Participant or Beneficiary may elect to make a lump sum repayment of any
overpayment.
ARTICLE XII
-----------
AMENDMENT, MERGER AND TERMINATION
---------------------------------
12.1 AMENDMENT.
----------
The Company shall have the right at any time, by an instrument in
writing duly executed, acknowledged and delivered to the Plan Administrator, to
modify, alter or amend this Plan, in whole or in part, prospectively or
retroactively; provided, however, that the duties and liabilities of the Plan
Administrator and any Trustee hereunder shall not be substantially increased
without their written consent; and provided further that the amendment shall not
reduce any Participant's interest in the Plan, calculated as of the date on
which the amendment is adopted.
12.2 MERGER OR CONSOLIDATION OF COMPANY.
-----------------------------------
The Plan shall not be automatically terminated by the Company's
acquisition by or merger into any other employer, but the Plan shall be
continued after such acquisition or merger if the successor employer elects and
agrees to continue the Plan. All rights to amend, modify, suspend, or terminate
the Plan shall be transferred to the successor employer, effective as of the
date of the merger.
12.3 TERMINATION OF PLAN OR DISCONTINUANCE OF CONTRIBUTIONS.
-------------------------------------------------------
It is the expectation of the Company that this Plan and the payment
of contributions hereunder will be continued indefinitely. However, continuance
of the Plan is not assumed as a contractual obligation of the Company, and the
right is reserved at any time to terminate this Plan or to reduce, temporarily
suspend or discontinue contributions hereunder. If the Plan is terminated or
contributions are reduced, temporarily suspended, or discontinued, the Accounts
of the affected Participants will continue to be held pursuant to the Plan until
the date or dates on which such Accounts would have become distributable had the
Plan not been terminated or had contributions not been reduced, temporarily
suspended, or discontinued. In the exercise of its discretion, however, the Plan
Administrator may direct that the Accounts of any Participant affected by the
termination of the Plan, or the reduction, temporary suspension, or
discontinuance of contributions, be distributed as of an earlier date or dates.
<PAGE>
ARTICLE XIII
------------
GENERAL PROVISIONS
------------------
13.1 LIMITATION ON PARTICIPANTS' RIGHTS.
-----------------------------------
Participation in the Plan shall not give any Participant the right to
be retained as a Director or any right or interest in any Trust Fund or in the
general assets of the Company other than as herein provided. The Company
reserves the right to dismiss any Participant without any liability for any
claim either against the Trust Fund, except to the extent herein provided, or
against the Company.
13.2 STATUS OF PARTICIPANTS AS UNSECURED CREDITORS.
----------------------------------------------
Each Participant is an unsecured creditor of the Company and, except
for the Deferral Contributions placed in any Trust Fund as provided in this
Plan, no assets of the Company will be segregated from the general assets of the
Company for the payment of benefits under this Plan. If the Company acquires any
insurance policies or other investments to assist it in meeting its obligations
to Participants, those policies or other investments will nonetheless remain
part of the general assets of the Company.
13.3 STATUS OF TRUST FUND.
---------------------
A Trust Fund may be established to assist the Company in meeting its
obligations to the Participants and to provide the Participants with a measure
of protection in certain limited instances. In certain circumstances, the assets
of any Trust Fund may be used for the benefit of the Company's creditors and, as
a result, any such Trust Fund is considered to be part of the Company's general
assets. Benefit payments due under this Plan shall either be paid from the Trust
Fund, if any, or from the Company's general assets as directed by the Plan
Administrator. Despite the establishment of any Trust Fund, it is intended that
the Plan be considered to be "unfunded" for purposes of the Act and the Code.
13.4 UNIFORM ADMINISTRATION.
-----------------------
Whenever in the administration of the Plan any action is required by
the Plan Administrator, such action shall be uniform in nature as applied to all
persons similarly situated.
13.5 HEIRS AND SUCCESSORS.
---------------------
All of the provisions of this Plan shall be binding upon all persons
who shall be entitled to any benefits hereunder, and their heirs and legal
representatives.
<PAGE>
13.6 NO LIABILITY FOR ACCELERATION OF PAYMENTS.
------------------------------------------
Under the Plan, Participants are allowed, to a certain extent, to
designate the dates on which distributions are to be made to them. The Plan
Administrator, however, also has the right, in the exercise of its discretion,
to accelerate payments. By accepting the benefits offered by the Plan, each
Participant (and each Beneficiary claiming through a Participant) acknowledges
that the Plan Administrator may override the Participant's elections and agrees
that neither the Participant nor any Beneficiary shall have any claim against
the Plan Administrator, the Trustee, if any, or the Company if distributions are
made earlier than anticipated by the Participant due to the Plan Administrator's
exercise of its discretion to accelerate payments.
To signify its adoption of this Plan document, the Company has caused
this Plan document to be executed by a duly authorized officer of the Company on
this _____ day of _________, 1997.
PHELPS DODGE CORPORATION
By
---------------------------------
Its
--------------------------------
EXHIBIT 10.15
AMENDMENT TO
PHELPS DODGE CORPORATION 1993 STOCK OPTION
AND RESTRICTED STOCK PLAN
-------------------------
WHEREAS, Phelps Dodge Corporation (the "Corporation") adopted
the Phelps Dodge 1993 Stock Option and Restricted Plan (the "Plan"); and
WHEREAS, pursuant to Section 7 of the Plan, the Board of
Directors retained the right to amend the Plan;
NOW, THEREFORE, the Plan is amended as follows:
1. The definition of "Committee" in Section 2(h) of the Plan
is deleted in its entirety and new definition of "Committee" is inserted in lieu
thereof, to read as follows:
(h) "Committee" shall mean a Committee of the Board, which
shall consist of two or more members. Each member of the Committee
shall be a "Non-Employee Director" within the meaning of Rule 16b-3 as
promulgated under the Act, or meet any other applicable standard for
administrators under that or any similar rule which may be in effect
from time to time. Each member of the Committee shall serve at the
pleasure of the Board.
2. The definition of Retirement contained in Section 2(t) is
deleted in its entirety and a new definition is inserted in lieu thereof, to
read as follows:
(t) "Retirement" shall mean termination of a Participant's
employment on or after the Participant's normal retirement date or
early retirement under any pension or retirement plan of the
Corporation or a Subsidiary.
<PAGE>
3. Section 3.1 is amended to add a new sentence thereto,
immediately following the first sentence thereof, to read as follows:
Notwithstanding anything else contained in the preceding sentence to
the contrary, in no event may the number of Common Shares subject to
Options granted to any single Participant within any 12 month period
exceed 350,000 Common Shares, as such number may be adjusted pursuant
to Section 4.3.
4. Section 4.3 is amended to delete the third sentence thereof
in its entirety and to add a new third sentence in lieu thereof, to read as
follows:
Subject to adjustment as provided in Section 4.3 below, the total
number of Common Shares (i) which may be sold to Employees under the
Plan pursuant to Options, (ii) with respect to which Participants may
relinquish Options in order to exercise Stock Appreciation Rights
described in Section 5.7 below and (iii) that may be transferred or
issued as Restricted Stock pursuant to Section 6 shall not exceed the
sum of (A) 5,000,000 Common Shares (inclusive of the 200,000 Common
Shares authorized for issuance under the 1987 Plan by action of the
Board in December 1992) plus (B) the number of Common Shares received
by the Corporation after February 3, 1993 in payment of the exercise
price under any Option, whether issued under the Plan or a Predecessor
Plan.
5. Section 4.2 is deleted in its entirety and a new such
Section is added in lieu thereof, to read as follows:
If an Option granted hereunder or an Option granted under the 1987 Plan
which is outstanding on the date hereof expires, or is terminated or
canceled prior to its exercise or prior to exercise of any related
Stock Appreciation Right, or if shares of Restricted Stock are returned
to the Corporation pursuant to the terms of the Plan or if shares of
Restricted Stock awarded under the 1987 Plan which are still restricted
on the date hereof are returned to the Corporation prior to the time at
which a Participant's rights become nonforfeitable, the Common Shares
covered by such Option or such Stock Appreciation Right immediately
prior to such expiration or other termination or affected by such
return shall be available for future grants under the Plan.
6. Section 4.3 is amended to delete the first sentence thereof
in its entirety and to add a new first sentence in lieu thereof, to read as
follows:
The number and price of Common Shares covered by each Option, the
maximum number of Common Shares that be awarded as Options under
Section 3.1 and the total number of Common Shares that may be sold,
issued or transferred under the Plan shall be proportionately adjusted
to reflect, as deemed equitable and appropriate by the Committee, an
Adjustment Event.
<PAGE>
7. Section 9.1 is amended to delete the first sentence thereof
in its entirety and to add a new first sentence in lieu thereof, to read as
follows:
Unless the Committee otherwise determines at or after grant, an award
granted under the Plan may not be sold, transferred, pledged, assigned
or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution.
8. Section 9.2 is amended to delete the first sentence thereof
in its entirety and to add a new first sentence in lieu thereof, to read as
follows:
Instruments evidencing Options may contain such other provisions, not
inconsistent with the Plan, as the Committee deems advisable, including
a requirement that the Participant represent to the Corporation in
writing, when an Option is granted or when he receives shares upon its
exercise or at such other time as the Committee deems appropriate, that
he is accepting such Option, or receiving or acquiring such shares
(unless they are then covered by a Securities Act of 1933 registration
statement), for his own account for investment only and with no present
intention to transfer, sell or otherwise dispose of such shares except
such disposition by a legal representative as shall be required by will
or the laws of any jurisdiction in winding up the estate of the
Participant.
9. The amendments contained in Paragraph 3 shall be and become
effective, upon and subject to, approval thereof by the affirmative vote of the
holders of a majority of the shares of Common Stock present in person or
represented by proxy at the Annual Meeting of Stockholders and entitled to vote
thereon. The remaining amendments contained herein shall be effective as of
_________________.
IN WITNESS WHEREOF, the Corporation has caused this Amendment
to be executed by its duly authorized officer on the _________ day of
___________, 1997.
PHELPS DODGE CORPORATION
By:
------------------------------
Title:
---------------------------
WITNESS:
- -----------------------------------
Title:
-----------------------------
PHELPS DODGE CORPORATION AND SUBSIDIARIES
Exhibit 12
COMPUTATION OF TOTAL DEBT TO TOTAL CAPITALIZATION
- -------------------------------------------------
(Unaudited; dollars in thousands)
June 30, December 31,
1997 1996
---------- ------------
Short-term debt ................................ $ 195,900 66,500
Current portion of long-term debt .............. 48,500 38,200
Long-term debt ................................. 602,800 554,600
---------- ---------
Total debt ................................ 847,200 659,300
Minority interests in subsidiaries ............. 90,400 85,500
Common shareholders' equity .................... 2,634,900 2,755,900
---------- ---------
Total capitalization ...................... $3,572,500 3,500,700
========== =========
Ratio of total debt to total capitalization .... 23.7% 18.8%
========== =========
Exhibit 15
August 11, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
We are aware that Phelps Dodge Corporation has incorporated by reference our
report dated July 10, 1997 (issued pursuant to the provisions of Statement on
Auditing Standards No. 71) in the Prospectus constituting part of its
Registration Statements on Form S-3 (No. 33-44380) and Form S-8 (Nos. 33-26442,
33-6141, 33-26443, 33-29144, 33-19012, 2-67317, 33-34363, 33-34362, 33-62648).
We are also aware of our responsibilities under the Securities Act of 1933.
Yours very truly,
Price Waterhouse LLP
Phoenix, Arizona
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEET AT JUNE 30, 1997 AND THE
RELATED CONSOLIDATED STATEMENTS OF INCOME AND OF CASH FLOWS FOR
THE SIX MONTHS ENDED JUNE 30, 1997 OF PHELPS DODGE CORPORATION
AND ITS SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 352,100
<SECURITIES> 0
<RECEIVABLES> 515,000
<ALLOWANCES> 0
<INVENTORY> 308,100
<CURRENT-ASSETS> 1,354,700
<PP&E> 3,163,900
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,943,600
<CURRENT-LIABILITIES> 842,400
<BONDS> 602,800
0
0
<COMMON> 382,100
<OTHER-SE> 2,252,800
<TOTAL-LIABILITY-AND-EQUITY> 4,943,600
<SALES> 2,086,700
<TOTAL-REVENUES> 2,086,700
<CGS> 1,438,800
<TOTAL-COSTS> 1,438,800
<OTHER-EXPENSES> 182,300
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,600
<INCOME-PRETAX> 395,000
<INCOME-TAX> 122,400
<INCOME-CONTINUING> 272,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 272,300
<EPS-PRIMARY> 4.28
<EPS-DILUTED> 4.28
</TABLE>
