SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
Commission file number 1-9916
Freeport-McMoRan Copper & Gold Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 74-2480931
(state or other (I.R.S. Employer
jurisdiction Identification Number)
of incorporation
or organization)
1615 Poydras Street, New Orleans, Louisiana 70112
Registrant's telephone number, including area code:
(504) 582-4000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
- ------------------- ----------------------------
Class A Common Stock par value New York Stock Exchange and
$0.10 per share Australian Stock Exchange
Class B Common Stock par value New York Stock Exchange and
$0.10 per share Australian Stock Exchange
Depositary Shares representing New York Stock Exchange
0.05 shares of 7% Convertible
Exchangeable Preferred Stock,
par value $0.10 per share
Depositary Shares representing New York Stock Exchange
0.05 shares of Step-Up
Convertible Preferred
Stock, par value
$0.10 per share
Depositary Shares representing New York Stock Exchange
0.05 shares of Gold-Denominated
Preferred Stock, par value
$0.10 per share
Depositary Shares, Series II, New York Stock Exchange
representing 0.05 shares of
Gold-Denominated Preferred
Stock, Series II, par value
$0.10 per share
Depositary Shares representing New York Stock Exchange
0.025 shares of Silver-
Denominated Preferred Stock,
par value $0.10 per share
9-3/4% Senior Notes due 2001 of New York Stock Exchange
P.T. ALatieF Freeport Finance
Company B.V., guaranteed
by the registrant
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
---
The aggregate market value of all classes of voting stock
(common and preferred) held by non-affiliates of the registrant
on March 8, 1996 was approximately $6,832,931,000.
On March 8, 1996 there were issued and outstanding
77,180,781 shares of Class A Common Stock and 118,246,493 shares
of Class B Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to stockholders
for the year ended December 31, 1995 are incorporated by
reference into Parts II and IV of this Report and portions of the
Proxy Statement dated March 21, 1996 submitted to the
registrant's stockholders in connection with its 1996 Annual
Meeting to be held on April 30, 1996 are incorporated by
reference into Part III of this Report.
TABLE OF CONTENTS
Page
Part I..........................................................1
Items 1. and 2. Business and Properties.........................1
General....................................................1
Relationship with Freeport-McMoRan Inc.....................1
Republic of Indonesia......................................2
Contracts of Work..........................................3
Relationship with The RTZ Corporation......................3
Gresik Smelter.............................................4
Ore Reserves...............................................4
Mining Operations..........................................5
Exploration................................................6
Milling and Production.....................................6
Infrastructure Improvements................................7
Marketing..................................................8
Competition................................................9
Environmental Matters......................................9
Credit Facilities.........................................10
Employees of PT-FI and Relationship with
FM Services Company...................................10
Item 3. Legal Proceedings.....................................11
Item 4. Submission of Matters to a Vote of Security Holders...11
Executive Officers of the Registrant..................12
Part II........................................................12
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters...................................12
Item 6. Selected Financial Data...............................12
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................12
Item 8. Financial Statements and Supplementary Data...........12
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..................12
Part III.......................................................13
Item 10. Directors and Executive Officers of the Registrant...13
Item 11. Executive Compensation...............................13
Item 12. Security Ownership of Certain Beneficial Owners and
Management...........................................13
Item 13. Certain Relationships and Related Transactions.......13
Part IV........................................................14
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K.............................................14
Signatures....................................................S-1
Index to Financial Statements.................................F-1
Report of Independent Public Accountants......................F-1
Exhibit Index.................................................E-1
PART I
Items 1 and 2. Business and Properties.
General
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation
("FCX" or the "Company"), is one of the world's largest copper
and gold companies in terms of reserves and production, and
believes that it has one of the lowest cost copper producing
operations in the world, taking into account customary by-product
credits for related gold and silver production.
FCX's principal operating subsidiary is P.T. Freeport
Indonesia Company ("PT-FI"), a limited liability company
organized under the laws of the Republic of Indonesia and
domesticated in Delaware. PT-FI engages in the exploration for
and development, mining and processing of ore containing copper,
gold and silver in Irian Jaya, Indonesia pursuant to an agreement
(a "Contract of Work" or "COW") with the government of the
Republic of Indonesia (the "Indonesian Government") and in the
worldwide marketing of concentrates containing these metals. FCX
owns directly an 81.28% interest in PT-FI. Of the remaining
18.72%, 9.36% is owned by each of the Indonesian Government and
P.T. Indocopper Investama Corporation, an Indonesian limited
liability company ("PT-II"), in which FCX owns a 49% interest,
giving FCX an aggregate 85.87% ownership interest in PT-FI. PT-
FI's operations are located in the remote rugged highlands of the
Sudirman Mountain Range in the province of Irian Jaya, Indonesia,
located on the western half of the island of New Guinea. The PT-
FI COW permits extensive exploration, mining and production
activities in an original 24,700 acre area, referred to as "Block
A," and an exploration area originally consisting of 6.5 million
acres, referred to as "Block B." See "Contracts of Work." PT-FI's
largest mine, Grasberg, was discovered in Block A in 1988 and
contains the largest single gold reserve and one of the three
largest open-pit copper reserves in the world.
Through P.T. IRJA Eastern Minerals Corporation ("Eastern
Mining"), FCX holds an additional COW in Irian Jaya covering an
approximately 2.5 million acre exploration area. Eastern Mining
was formed in 1994 for the purpose of acquiring, holding and
developing the Eastern Mining COW. FCX owns 90% of the
outstanding common stock of Eastern Mining through a wholly-owned
subsidiary, and the remaining 10% is owned by PT-II, giving FCX
an aggregate 94.9% ownership interest in Eastern Mining.
FCX is also engaged in the smelting and refining of copper
concentrates in Spain through its indirect, wholly-owned
subsidiary, Rio Tinto Minera, S.A. ("RTM"). During 1995, PT-FI
supplied RTM with approximately 182,000 tons of copper
concentrate and is expected to supply approximately 428,000 tons
in 1996, providing for approximately 40% and an estimated 50%,
respectively, of RTM's requirements in those years. RTM has
essentially completed construction of the expansion of its
smelter production capacity from 180,000 to approximately 270,000
tons of metal per year, which should enable RTM to achieve
significant unit cost efficiencies and is expected to bring RTM's
cash costs into the smelter industry's lowest quartile worldwide.
The expanded annual production rate should be realized by mid-
1996.
Relationship with Freeport-McMoRan Inc.
Until mid-1995, FCX was a majority-owned subsidiary of
Freeport-McMoRan Inc., a Delaware corporation listed on the New
York Stock Exchange ("FTX"). In July 1995, the Board of
Directors of FTX declared and paid a distribution to holders of
its common stock of all of the 117,909,323 Class B common shares
of FCX owned by FTX. Prior to the distribution, the FCX
stockholders approved changes to FCX capital structure and voting
rights that, among other things, provided holders of FCX Class B
Common Stock with the right to elect 80% of the FCX directors and
provided holders of FCX Class A Common Stock and holders of FCX
preferred stock, voting together, with the right to elect the
balance of such directors. Except for voting rights the two
classes of FCX common stock are identical.
The distribution was the final step in a restructuring of
FTX, as a result of which FTX no longer owns any interest in FCX.
In connection with the restructuring, FTX also sold an aggregate
of 23.9 million shares of FCX Class A Common Stock to
subsidiaries of The RTZ Corporation PLC ("RTZ"), which also
acquired (i) the right to nominate a number of FCX directors
proportionally equal to RTZ's percentage ownership of all
outstanding shares of Class A and Class B Common Stock and (ii)
significant beneficial interests in the PT-FI and Eastern Mining
COWs in return for its agreement to fund substantial exploration
and expansion costs. See "Relationship with The RTZ
Corporation," below.
In order to ensure the tax free nature of the distribution
of FCX Class B Common Stock, FCX has agreed that, unless it
obtains an opinion of tax counsel or supplemental letter ruling
from the Internal Revenue Service that the tax free nature of the
distribution would not be adversely affected, (a) until July 17,
2000 it will not initiate or support any action that would change
the manner in which its directors are elected and (b) until July
17, 1997 it will (i) not issue any shares of any class of
preferred stock that would not entitle its holders to vote
together with the Class A Common Stock and the existing classes
of preferred stock in the election of directors, (ii) not dispose
of any PT-FI common stock, subordinated promissory notes or
production payment loans held by it on July 17, 1995, (iii) take
no affirmative step to merge, liquidate or, except in the
ordinary course of business, sell any of its assets, (iv) use its
best efforts to cause PT-FI to remain the operator under the 1991
COW (See "Contracts of Work") and continue its business in a
substantially changed manner, or (v) subject to certain permitted
conditions, not redeem or reacquire shares of Class B Common Stock.
FCX and FTX also agreed to transition certain management
services to FCX by July 17, 1996. See "Employees of PT-FI and
Relationship with FM Services Company."
Republic of Indonesia
The Republic of Indonesia consists of more than 17,000
islands stretching 3,000 miles across the equator from Malaysia
to Australia and is the fourth most populous nation in the world
with almost 200 million citizens. Following many years of Dutch
colonial rule, Indonesia gained independence in 1945 and now has
a presidential republic system of government in which
parliamentary and presidential elections are held every five
years. President Suharto, who assumed power in 1966 and is now
74, was re-elected in 1993 to a sixth consecutive five-year term
expiring in 1998.
Maintaining a good relationship with the Indonesian
Government is of particular importance to the Company because its
principal operations are located in Indonesia. PT-FI's mining
complex was Indonesia's first copper mining project and was the
first major foreign investment in Indonesia following the
economic development program instituted by the Suharto
administration in 1967. PT-FI works closely with the central,
provincial and local governments in development efforts in the
vicinity of its operations. The Company operates in Indonesia
through PT-FI by virtue of the PT-FI COW and through Eastern
Mining by virtue of the Eastern Mining COW, both of which have
30-year terms, provide for two 10-year extensions under certain
conditions, and govern PT-FI's and Eastern Mining's rights and
obligations relating to taxes, exchange controls, repatriation
and other matters. Both COWs were concluded pursuant to the 1967
Foreign Capital Investment Law, which expresses Indonesia's
foreign investment policy and provides basic guarantees of
remittance rights and protection against nationalization, a
framework for economic incentives and basic rules regarding other
rights and obligations of foreign investors.
PT-FI's mining operations are located in the Indonesian
province of Irian Jaya, which occupies the western half of the
island of New Guinea and became part of Indonesia during the
early 1960s. The area surrounding PT-FI's mining development is
sparsely populated by primitive indigenous tribes and former
residents of more populous areas of Indonesia, some of whom have
resettled in Irian Jaya under the Indonesian Government's
transmigration program. Certain members of the indigenous
population oppose Indonesian rule over Irian Jaya, and several
small separatist groups seek political independence for the
province. Sporadic attacks on civilians by the separatists and
sporadic but highly publicized conflicts between separatists and
the Indonesian military have led to allegations of human rights
violations. PT-FI personnel have not been involved in those
conflicts, although the Indonesian military occasionally has
exercised its right to appropriate transportation and other
equipment of PT-FI, and some of that equipment allegedly has been
used by the military in its security operations.
On March 10 and 12, 1996, there were disturbances in the
mining town of Tembagapura and the port town of Timika, respect-
ively, in which area tribesmen engaged in acts of vandalism that
resulted in damage to Company property currently estimated to be
less than $5.0 million. Although the Company's mining and milling
facilities were not damaged, the Company closed the mine and mill
for three days as a precautionary measure, and promptly restored
both to full production after the Indonesian Government increased
the military presence in the area. Concentrate shipments to
customers were not interrupted. Initial reports indicate that the
disturbance was triggered by a false report that a tribesman had
died after being struck by a Company-owned vehicle.
Company executives, Indonesian Government officials and
tribal leaders have met on several occasions since these
disturbances to discuss issues related to development at and
around the mine site, the effect of development on the indige-
nous people, and the opportunities available to the indigenous
people to participate in and benefit from that development.
Spokespersons for the tribal groups have indicated that they
seek greater participation by their tribes in the development of
the region, including more job opportunities, better access to
job training and education, preferences for native-born Irianese
and changes to the Company's community development and security
operations. The Company is currently evaluating these requests
and has agreed to provide responsive proposals within 30 days.
PT-FI's policy has been to operate in Irian Jaya in
compliance with all Indonesian laws and in a manner that improves
the lives of the indigenous population. PT-FI incurs significant
costs associated with its social and cultural activities. Such
activities include comprehensive job training programs, basic
education programs, extensive malaria control and general public
health programs, agricultural assistance programs, a business
incubator program to encourage the local people to establish
their own small scale businesses, cultural preservation programs,
and charitable donations. The Company anticipates that PT-FI will
continue to provide financial support for these programs in the
future.
As a result of the recent meetings with tribal leaders
described above, the Company, with the help of the Indonesian
Government, is considering a redistribution of these community
development programs and redefining who should be their primary
beneficiaries. Management believes that the Company's historical
commitment to the area, improved dialogue with the indigenous
population, and increased military presence should ensure that
the mine and mill operations will not be disrupted in the future.
FCX maintains political risk insurance that covers a portion
of its interest in PT-FI. The insurance is primarily designed to
cover certain breach of contract risks. For information regarding
a recent effort by the Overseas Private Investment Corporation to
cancel certain of the Company's political risk insurance, see
"Environmental Matters."
Contracts of Work
The PT-FI COW covers both Block A, which was originally the
subject of a 1967 COW between PT-FI's predecessor and the
Indonesian Government, and Block B, to which PT-FI gained rights
in 1991. The initial term of the PT-FI COW expires in December
2021 with provisions for two 10-year extensions under certain
conditions. Pursuant to the PT-FI COW, PT-FI is required to
relinquish its rights to portions of Block B in amounts equal to
25% of the original 6.5 million acres at the end of each of three
specified periods over a period of four to seven years, depending
on extensions requested by PT-FI and granted by the Indonesian
Government. The acreage to be released is determined by PT-FI
and need not be contiguous. PT-FI relinquished approximately 1.7
million acres in December 1994 and approximately 1.6 million
acres in December 1995. The final 25% relinquishment will occur
in 1996, unless extended as expected until December 1998 or
later. In order to determine which acreage to relinquish
pursuant to these requirements, PT-FI has conducted an active
exploration program since early 1992, focusing both on what PT-FI
believes to be the most promising exploration opportunities in
Block B and on identifying areas that appear to hold the least
promise.
In August 1994, Eastern Mining was granted the Eastern
Mining COW covering approximately 2.5 million acres in three
separate blocks adjacent to Block B. The Eastern Mining COW
provides for a four to seven year exploratory term and 30-year
term for actual mining operations with provisions for two 10-year
extensions under certain conditions. Like the PT-FI COW, the
Eastern Mining COW requires Eastern Mining to relinquish its
right to portions of the Eastern Mining COW area determined by
Eastern Mining in amounts equal to 25% of the approximately 2.5
million acres covered thereby at the end of each of three
specified periods. The first relinquishment was scheduled to
occur on August 15, 1995, but was extended by the Indonesian
Government until August 15, 1996.
Relationship with The RTZ Corporation
In connection with the restructuring described above, in May
and July 1995 subsidiaries of RTZ purchased from FTX an aggregate
of 23.9 million shares of FCX Class A Common Stock (approximately
12% of the then outstanding FCX common stock). Pursuant to that
transaction, RTZ acquired the right to nominate for election by
FCX's stockholders the number of directors that is
proportionately equal to the percentage ownership by RTZ and its
subsidiaries of all outstanding shares of FCX Class A and Class B
Common Stock, subject to certain limitations. FCX agreed to
accept such nominations and refrain from taking any action that
may hinder the election of such nominees. If the number of
directors of FCX is reduced to less than ten, RTZ and its
subsidiaries will have the right to nominate no less than one
director to be elected by holders of Class A Common Stock and FCX
preferred stock, provided that RTZ continues to hold at least
approximately 21.5 million shares of Class A Common Stock. FCX
has appointed two persons nominated by RTZ to serve as interim
directors until the next election.
RTZ also has certain rights to require the registration of
its FCX stock and to acquire additional shares of FCX stock
necessary to maintain its proportionate ownership interest in the
event of a sale by FCX of shares of Class A or Class B Common
Stock.
The Company and RTZ have agreed, subject to Indonesian
Government approval and execution of definitive agreements, to
establish joint ventures pursuant to which RTZ will acquire an
undivided 40% interest in the Eastern Mining COW and an undivided
40% interest in future production expansions and certain
developmental activities in the areas covered by the PT-FI COW.
Under these agreements, RTZ and the Company have established an
exploration committee to approve exploration expenditures and RTZ
has agreed to fund up to $100 million of exploration costs
approved by the exploration committee in the areas covered by the
PT-FI COW and the Eastern Mining COW, including $30.8 million
incurred in 1995. Further exploration costs mutually agreed upon
in these areas will be borne 60% by the Company and 40% by RTZ.
RTZ has agreed to fund a minimum of $10 million of exploration
expenditures in the Eastern Mining COW area and $40 million of
exploration expenditures in Block A of the PT-FI COW.
The Company and RTZ have completed a preliminary feasibility
study and have commenced a detailed feasibility study of the
expansion of PT-FI's mining and milling capacity to 190,000
metric tons of ore per day ("MTPD"). Any such expansion will be
subject to the approval of the Indonesian Government, which has
previously approved an expansion to 160,000 MTPD. Under its
proposed arrangements with FCX, following commencement of
concentrate production from expansions of PT-FI's existing mining
and milling capacity financed by RTZ, RTZ will have a 40%
interest in production exceeding specified annual amounts of
copper, gold and silver estimated to be produced from the first
118,000 MTPD of ore mined each year through approximately 2021.
For such expansion projects, subsidiaries of RTZ will provide up
to $750 million for defined costs, of which 40% will be funded
directly and 60% will be lent to PT-FI. Such loan will be non-
recourse except as to incremental revenues attributable to such
expansion projects. The parties will share incremental cash flow
attributable to such expansion projects on the basis of 60% to
PT-FI and 40% to RTZ. PT-FI will assign to RTZ its interest in
such incremental cash flow until RTZ has received a return from
such assigned interest equal to the funds lent to PT-FI plus
interest based on RTZ's cost of borrowing.
Gresik Smelter
The PT-FI COW requires PT-FI, under certain conditions, to
conduct a study of the feasibility of a copper smelting facility
in Indonesia and, if deemed economically viable by PT-FI and the
Indonesian Government, to construct or cause such smelter to be
constructed. The feasibility study was completed in 1995 and PT-
FI, Mitsubishi Materials Corporation ("Mitsubishi") and Fluor
Daniel Asia, Inc. ("Fluor") have concluded an agreement providing
PT-FI with a 20% ownership interest in a copper smelter/refinery
to be constructed at Gresik, East Java, Indonesia having a design
capacity of 200,000 metric tons of copper cathode per year. The
project remains subject to financing and certain Indonesian
Government approvals; however, project engineering has commenced
and it is anticipated that construction will begin by mid-1996
and be completed by mid-1998.
It is anticipated that PT-FI will provide all of the Gresik
smelter's copper concentrate requirements at market rates;
however, for the first 15 years of operations, PT-FI has agreed
that treatment and refining charges will not fall below an
established minimum rate. PT-FI has also agreed to assign, if
necessary, any dividends payable out of the joint venture to
support a 13% annual return to Mitsubishi for the first 20 years
of commercial operations. Additionally, Fluor has an option,
exercisable on the third anniversary of commercial operations, to
require PT-FI to purchase its interest for an amount representing
a 10% annual return on Fluor's investment.
Ore Reserves
All of PT-FI's proved and probable reserves, including the
Grasberg deposit, lie within Block A. In 1995, PT-FI increased
its proved and probable reserves by approximately 800 million
tons of ore (as used herein "ton" refers to a metric ton ("MT"),
which is equivalent to 2,204.62 pounds on a dry weight basis). As
a result, PT-FI's total estimated proved and probable recoverable
reserves as of December 31, 1995 increased since December 31,
1994, net of 1995 production, by 12.3 billion pounds of copper
(44%), 12.5 million ounces of gold (32%) and 30.3 million ounces
of silver (38%). PT-FI's estimated proved and probable
recoverable reserves, on a 100% basis, as of December 31, 1995
were 40.3 billion pounds of copper, 52.1 million ounces of gold
and 111.1 million ounces of silver. RTZ does not participate in
year-end 1994 ore reserves, but with limited exceptions will
participate with respect to new reserves discovered thereafter
within the PT-FI COW and Eastern Mining COW areas pursuant to the
joint ventures described under "Relationship with The RTZ
Corporation."
The Grasberg deposit contains the largest single gold
reserve and is one of the three largest open-pit copper reserves
of any mine in the world. The Grasberg deposit contains combined
open pit and underground proved and probable ore reserves as of
December 31, 1995 of 1.76 billion tons at an average grade of
1.11% copper, 1.21 grams of gold per ton and 3.21 grams of silver
per ton, representing an increase, net of 1995 production, in
recoverable copper, gold and silver of 11.7 billion pounds of
copper (50%), 11.8 million ounces of gold (31%) and 27 million
ounces of silver (46%) over December 31, 1994 amounts.
The increase in proved and probable reserves at the Grasberg
deposit is largely the result of a drilling program that has
provided data from the surface to a depth of approximately 2,850
meters above sea level. PT-FI currently is driving an adit (the
"Amole adit") to the center point of the currently delineated
Grasberg ore body at the approximately 2,900 meter elevation
level. The Amole adit is expected to be completed in 1996 and
will facilitate additional deep exploration to further delineate
the extent of the Grasberg deposit below the 2,850 meter level.
The Company's reserves as of December 31, 1994 and 1995
included herein have been verified by Independent Mining
Consultants, Inc., and such reserve information has been included
herein in reliance upon the authority of said firm as experts in
mining, geology and reserve determination.
Reserve amounts represent estimates only. Reserves may not
conform to geological or other expectations, so that the volume
and grade of reserves recovered and the rates of production may
be more or less than anticipated. Because ore bodies do not
contain uniform grades of minerals, ore recovery rates will vary
from time to time, resulting in variations in volumes of minerals
sold from period to period. Further, market price fluctuations in
copper and gold and changes in operating and capital costs may
render certain ore reserves uneconomic to develop.
Mining Operations
Mines in Production. PT-FI currently has two mines in
operation: the Grasberg and the Intermediate Ore Zone (the
"IOZ"), both within Block A. Open pit mining of the Grasberg ore
body commenced in January 1990, and by 1995 Grasberg mine output
totaled approximately 39.4 million tons of ore, providing
approximately 94% percent of PT-FI's total ore production. The
IOZ is an underground block cave operation that came into
production in the first half of 1994. The production level is at
the 3,550 meter elevation level, approximately 150 meters below
the Ertsberg East deposit, which was depleted in the second half
of 1994. In 1995 output from the IOZ mine totaled approximately
2.5 million tons of ore.
Mines in Development. Three other significant ore bodies,
referred to as the Deep Ore Zone ("DOZ"), the DOM and the Big
Gossan, are located in Block A. These ore bodies are currently at
various stages of development, and are carried as proved and
probable reserves.
The DOZ ore body lies vertically below the IOZ. Initial
production from the DOZ ore body commenced in 1989 but was
suspended in favor of production from the Grasberg deposit.
Production is anticipated to recommence after depletion of the
overlying IOZ reserve after 1998.
The DOM ore body lies approximately 1,200 meters southeast
of the depleted Ertsberg East deposit. Pre-production development
was completed as the Grasberg began open pit production in 1990,
and all maintenance, warehouse and service facilities are in
place. Production at the DOM ore body was deferred as a result of
the increasing reserves and production capabilities of the
Grasberg.
The Big Gossan ore body is located approximately 1,000
meters southwest of the original Ertsberg deposit. Initial
underground development of the ore body began in 1993 when
tunnels were driven from the mill area into the ore zone at the
2,900 meter elevation level. A variety of stoping methods will be
used to mine the deposit, with production expected to commence as
other underground mines are depleted. Over 200 drill holes have
been completed, with proved and probable ore reserves now
calculated at 37.3 million tons at an average grade of 2.69%
copper, 1.02 grams of gold per ton and 16.42 grams of silver per
ton.
Location and Mining Risks. The remote location of PT-FI's
mining operations has required FCX to overcome special
engineering difficulties and develop extensive infrastructure
facilities to enable the operations to be virtually self-
sufficient. The area is subject to considerable rainfall, which
has led to periodic floods and mud slides. The mine site is also
in an active seismic area, and earth tremors have been
experienced from time to time. None of these factors has caused
personal injury to PT-FI employees or significant property damage
not covered by insurance or any significant interruptions to
production, although no assurance can be given that delays,
injury or damage will not occur in the future. PT-FI also is
subject to the usual risks encountered in the mining industry,
including unexpected geological conditions resulting in cave-ins,
floodings and rock-bursts and unexpected changes in rock
stability conditions. PT-FI has substantial insurance involving
such amounts and types of coverage as it believes are appropriate
for its exploration, development, mining and processing
activities in Indonesia.
Exploration
In addition to continued delineation of the Grasberg deposit
and other deposits discussed under "Ore Reserves" and "Mining
Operations," PT-FI is continuing its exploration program within
Block A. Drilling at Lembah Tembaga, approximately one kilometer
southwest of the Grasberg deposit, has identified an inferred
resource that may contain up to 100 million tons with an average
grade of approximately 1.25% copper and .5 grams of gold per ton.
Exploration drilling continues at other targets including the IOZ
Extension, Guru East, Idenberg, Kucing Liar, Amole, Wabu and Kay,
and surface geological evaluations continue to develop targets at
the S. Wanagon, Zaaghan Ridge, VN, Wanagon, and DOMSE prospects.
Exploration of Block B has indicated more than 70
exploration targets, and follow-up exploration of these anomalies
is now in progress. PT-FI has focused its Block B drilling in an
area 35 kilometers north of the Grasberg deposit in an area
called the Hitalipa District. Although the area requires
additional exploratory drilling, initial results indicate a large
mineralized district that covers approximately 75,000 acres, as
compared to the original 24,700-acre Block A. Because of its size
and number of geologic leads, the Hitalipa District is likely to
be explored for many years. Drilling results are being
interpreted, and no assurance can be given that any of these new
areas contain commercially exploitable mineral deposits.
FCX's exploration expenditures declined from $40.4 million
in 1994 to $13.9 million in 1995, reflecting RTZ's agreement to
pay 100% of the first $100 million of approved exploration
expenses after May 1995. Aggregate 1995 exploration expenditures
of PT-FI, Eastern Mining and RTZ at Blocks A and B and the
Eastern Mining COW area were $44.7 million, of which RTZ's share
was $30.8 million. RTZ's agreement to fund the next $100 million
exploration expenses is expected to be fulfilled by mid to late
1997 assuming currently anticipated exploration expenditures for
1996 and 1997.
Milling and Production
Most of the ore from PT-FI's mines moves by a conveyor
system to a series of ore passes through which it drops to the
mill site, which is located approximately 2,900 meters above sea
level. At the mill ore is crushed and ground, and the powdered
ore is mixed in tanks with water and small amounts of chemical
reagents and continuously agitated with air. During this physical
separation process, copper-bearing particles rise to the top of
the tanks from which they are skimmed and thickened. The
concentrate leaves the mill site as a thickened concentrate
slurry, consisting of approximately 65% solids by weight, and is
pumped through two 115 kilometer pipelines to the port site
facility at Amamapare where it is filtered, dried and stored for
shipping. Ships are loaded at dock facilities at the port site
until they draw their maximum water, then move to deeper water,
where loading is completed from shuttling barges.
During 1995, recovery rates averaged 85% of the copper
content, 74.3% of the gold content and 63.2% of the silver
content of the ore processed, compared to 83.7%, 72.8% and 64.7%,
respectively, during 1994.
In the second quarter of 1995 PT-FI completed the latest
phase of its expansion of overall mining and milling capacity.
During the fourth quarter of 1995, FCX produced 283.6 million
pounds of copper and 416,600 ounces of gold resulting from record
ore throughput of an average 126,800 MTPD, as compared to an
average of 111,900 MTPD for the full 1995 year and 72,500 MTPD in
1994. This expanded production and higher gold credits reduced
FCX's total cash production costs to $0.15 per pound, or 64% less
than in the fourth quarter of 1994. In 1995 PT-FI achieved
record copper production of 978 million recoverable pounds,
approximately 38% more than in 1994, and record gold production
of 1,310,400 recoverable ounces, approximately 67% more than in
1994.
Infrastructure Improvements
The location of PT-FI's operations in a remote and
undeveloped area requires that such operations be virtually self-
sufficient. In addition to the mining facilities described above,
the facilities originally constructed by or with the
participation of PT-FI include an airport, a port, a 119
kilometer road, an aerial tramway, a hospital and two town sites
with housing, schools and other facilities sufficient to support
approximately 14,000 persons.
In 1993, PT-FI commenced the first phase of a long-term
enhanced infrastructure program (or "EIP") designed to provide
the infrastructure needed for PT-FI's operations, to enhance the
living conditions of PT-FI's employees, and to develop and
promote the growth of local and other third party activities and
enterprises in Irian Jaya. The full EIP includes plans for
various commercial, residential, educational, retail, medical,
recreational, environmental and other infrastructure facilities
to be constructed over a ten- to twenty-year period. Depending on
the long-term growth of PT-FI's operations, the total cost of the
EIP could range between $500 million and $750 million. FCX
anticipates that the first phase, which includes various
residential, community and commercial facilities, will be
completed by mid-1996.
In 1993, PT-FI and P.T. ALatieF Nusakarya Corporation, an
Indonesian investor ("ALatieF"), entered into a joint venture
agreement to acquire and operate certain existing infrastructure
assets and new EIP assets. ALatieF is a member of an affiliated
group of corporations that is among the largest retail and
property management groups in Indonesia. Pursuant to the joint
venture agreement, PT-FI agreed to sell approximately $270
million of infrastructure assets to P.T. ALatieF Freeport
Infrastructure Corporation ("AFIC") and to P.T. ALatieF Freeport
Hotel Corporation ("AFHC"). AFIC and AFHC are Indonesian limited
liability companies owned one-third by PT-FI and two -thirds by
ALatieF. Approximately $195 million of infrastructure assets
were sold by PT-FI in 1994, and AFIC is expected to purchase an
additional $75 million of infrastructure assets in the first half
of 1996, subject to Indonesian Government approval. Funding for
the AFIC and AFHC purchases is being provided by equity
contributions from PT-FI and ALatieF ($90 million) and debt
financing ($180 million). The debt financing consists of a $60
million bank loan that is guaranteed by PT-FI and $120 million of
senior notes issued by a subsidiary of FCX and guaranteed by FCX.
The acquired assets will be made available to PT FI and its
employees and designees under arrangements that will provide
ALatieF with a guaranteed minimum rate of return on its
investment.
In 1994 and 1995 PT-FI sold, in three separate transactions,
its existing and newly constructed power generation and
transmission assets and certain other power-related assets to
P.T. Puncakjaya Power, an Indonesian limited liability company
("PJP"), owned by subsidiaries of Duke Energy Corp. ("DE") (30%)
and PowerLink Corporation ("PL") (30%), and by PT-FI (30%) and
P.T. Prasarana Nusantara Jaya ("PNJ") (10%). The first sale,
representing the majority of the existing assets, was completed
in December 1994 for $100 million. The final two sales occurred
during 1995 for an aggregate of $115 million. Pursuant to these
transactions, PJP is responsible for providing electrical power
services required by PT-FI at its mining, milling and support
operations, and DE, PL and PNJ will receive a guaranteed minimum
rate of return on their investments.
In 1995 PT-FI sold its interest in certain aircraft and
helicopters and its existing and newly constructed aviation
support facilities for approximately $48 million to P.T. Airfast
Aviation Facilities Company, an Indonesian limited liability
company ("AVCO"), owned by P.T. Airfast Indonesia ("Airfast")
(45%), P.T. Giga Haksa ("GH") (30%) and PT-FI (25%). Pursuant to
an agreement entered into in connection with the sale, AVCO is
responsible for providing helicopter support services required by
PT-FI within Block A and Block B as well as the substantial
majority of passenger and freight air transport services required
by PT-FI between Timika and designated points in Indonesia and
Australia. The agreement provides that Airfast and GH will
receive a guaranteed minimum rate of return on their investments.
In 1995 PT-FI also sold certain construction equipment, port
facilities and marine, logistics and related assets for $100
million to P.T. ALatieF P&O Port Development Company, an
Indonesian limited liability company ("APPDC"), owned by ALatieF
(50%) and P&O Singapore Pte. Ltd. ("P&O") (50%). Pursuant to an
agreement entered into in connection with the sale, APPDC is
required to make the transferred construction equipment available
for use by PT-FI and its contractors and to provide port services
required by PT-FI. The agreement provides that ALatieF and P&O
will receive a guaranteed minimum rate of return on their
investments.
Marketing
PT-FI supplies copper concentrates, which contain
significant gold and silver components, primarily to Asian,
European and North and South American smelters and international
trading companies. All of PT-FI's concentrate sales are made in
United States dollars. Substantially all of PT-FI's budgeted
production of copper concentrates is sold under long-term
contracts, pursuant to which the selling price is based on world
metals prices (generally the LME settlement prices for Grade A
copper) less certain allowances. Under these contracts initial
billing occurs at the time of shipment and final settlement on
the copper portion generally occurs three months after arrival
based on average LME prices during the third month following
arrival. Gold generally is sold at the London Bullion Market
Association average price for the month of shipment. Revenues
from concentrate sales are recorded net of royalties, treatment
and refining costs and the impact of derivative financial
instruments used to hedge against risks from copper and gold
price fluctuations. Per unit royalty payments to the Indonesian
Government increase with increased copper values and range from
1.5% to 3.5% of copper prices at the time of shipment, net of
delivery costs and treatment and refining charges. A 1% royalty
is paid to the Indonesian Government on gold and silver sales.
Treatment and refining costs represent payments to smelters and
refiners and are either fixed or in certain cases float with the
price of copper. A small portion of PT-FI's budgeted production
of copper concentrates, and any production in excess of budgeted
amounts, is sold in the spot market.
PT-FI has obtained commitments, including commitments from
RTM, for essentially all of its expected 1996 concentrate sales,
which are currently estimated to yield approximately 1.1 billion
pounds of copper and 1.65 million ounces of gold. 1996 gold sales
are anticipated to reflect management's expectation of producing
greater than mine life gold grades during the year; however,
first-quarter 1996 production will be adversely affected by the
anticipated mining of lower grade ore. Sales of copper and gold
also will be reduced in the first quarter of 1996 from those in
the fourth quarter of 1995 by the timing of concentrate
shipments. In addition, at December 31, 1995, copper sales
totaling 249 million pounds, which were recorded in 1995 at an
average price of $1.20 per pound, remained to be contractually
priced and are subject to price adjustments during the first
quarter of 1996. As a result of these factors, the Company
expects its operating results during the first quarter of 1996 to
be considerably below comparable results for the first and last
quarters of 1995.
Approximately 12% and 16% of PT-FI's total concentrate sales
in 1995 and 1994, respectively, were to RTM. Upon completion of
RTM's smelter expansion and completion of the proposed Gresik
smelter discussed under "Gresik Smelter," FCX anticipates that
approximately 26% and 38% of PT-FI's copper concentrates (based
upon assumed production of 125,000 MTPD) will be sold to RTM and
the Gresik smelter, respectively, at market prices.
Because FCX's revenues are derived primarily from the sale
of concentrates containing copper, gold and silver, FCX's
earnings are directly related to market prices for copper, gold
and, to a lesser extent, silver. Prices for such minerals
historically have fluctuated widely and are affected by numerous
economic and political factors beyond FCX's control. The Company
has purchased derivative financial instruments designed to
establish a minimum price of $.90 per pound for essentially all
its anticipated copper production in 1996 and a portion of its
anticipated production in 1997.
Competition
PT-FI competes with other mining companies in the sale of
its mineral concentrates and the recruitment and retention of
qualified personnel. Some competing companies possess financial
resources equal to or greater than those of PT-FI. Management
believes that PT-FI is one of the lowest cost copper producers in
the world, taking into account credits for related gold and
silver production.
Environmental Matters
Mining operations on the scale of PT-FI's operations in
Irian Jaya involve significant environmental challenges,
primarily related to the disposition of tailings, which are the
crushed rock material resulting from the physical separation of
commercially valuable minerals from the ore. The Company has an
extensive, ongoing management system for the disposal of tailings
in connection with discharging them into a river system
downstream from its milling operations. PT-FI is in the process
of completing a levee system, as part of its Indonesian
Government-approved Tailings and River Management Plan, to
minimize the impact of the tailings on the environment by
containing them in a controlled deposition area that ultimately
will be reclaimed and revegetated. The capital cost of
constructing the levee system is estimated to be approximately
$25 million.
The Company also has performed an environmental impact
assessment of a proposed production expansion to 160,000 MTPD and
related infrastructure improvements. The assessment was
conducted, and the management and monitoring plans were
developed, by a team of independent environmental experts and
were approved by the Indonesian Government. The Indonesian
Government's approval process for the management and monitoring
plans was challenged by an Indonesian environmental activist
group in early 1995, but an Indonesian administrative court ruled
against the challenge in October 1995, and the ruling is now on
appeal. Management believes that the challenge is without merit
and will have no material effect upon FCX, PT-FI or any of their
respective assets or operations. The Company and RTZ have
commenced a detailed feasibility study of a further expansion to
190,000 MTPD, which will require modifications to the
environmental impact assessment and Indonesian Governmental
approval, which management believes can be obtained.
Management believes that PT-FI's operations are being
conducted pursuant to all necessary permits and in compliance
with all applicable Indonesian environmental laws, rules and
regulations. Management also believes that its current operations
have not had, and that its expanded operation will not have, a
significant adverse impact on the environment. However, in the
last year various groups have expressed heightened concerns about
the environmental impact of PT-FI's operations, and in October
1995, the Overseas Private Investment Corporation ("OPIC"), a
quasi-governmental agency of the United States, sought to
terminate the Company's $100 million political risk insurance,
citing, among other things, environmental concerns about PT-FI's
expanded operations. The Company believes that there was neither
a factual nor a legal basis for OPIC's action and has submitted
the matter to arbitration even though the availability of the
insurance is not financially material to the Company.
In 1995, at the suggestion of the Indonesian Minister of the
Environment, PT-FI volunteered to participate in independent
environmental and social/cultural audits of its Irian Jaya
operations under a program monitored by the Indonesian
Government. The audits are being conducted by Dames & Moore and
Labatt Anderson, respectively, which are internationally
recognized environmental consulting firms based in the United
States. The results of the environmental and social/cultural
audits are expected to be submitted to the Indonesian Government
in the first and second quarters of 1996, respectively.
Management believes that RTM's facilities and operations are
in compliance with all applicable Spanish environmental laws,
rules and regulations. RTM recently completed modifications to
and expanded its sulfuric acid plants, which has resulted in
significant reductions in air emissions. In addition, RTM expects
to realize significant additional environmental improvements upon
completion of other projects currently under way.
The Indonesian and Spanish governments may periodically
revise their environmental laws and regulations or adopt new
ones, and the effects on the Company's operations of new or
revised regulations cannot be predicted.
Credit Facilities
In connection with the restructuring described under
"Relationship with Freeport-McMoRan Inc.," in July 1995 an FTX
credit agreement in which PT-FI participated was modified to
become a separate bank credit facility for PT-FI (the "PT-FI Bank
Credit Facility") and a new bank credit facility was arranged for
FCX and PT-FI (the "FCX Bank Credit Facility" and, together with
the PT-FI Bank Credit Facility, the "Credit Facilities"). The
PT-FI Bank Credit Facility provides $550 million of credit,
matures in December 1999, and is guaranteed by FCX. The FCX Bank
Credit Facility provides $200 million of credit, all of which is
available to FCX (and will become available to PT-FI upon receipt
of certain approvals from the Indonesian Government), and matures
in December 1999. The Credit Facilities are subject to a
borrowing base, redetermined at least annually, which establishes
maximum aggregate borrowing limits for FCX and PT-FI. The Credit
Facilities place restrictions on, among other things, additional
borrowings, the creation of liens by FCX, PT-FI and certain of
FCX's other subsidiaries and require FCX and PT-FI to maintain
minimum working capital levels and specified earnings to interest
coverage ratios and include various other covenants that are
customary for credit facilities of this type. PT-FI has assigned
its existing and future sales contracts and pledged its rights
under the PT-FI COW, accounts receivable and other assets as
security for its borrowings under the Credit Facilities. FCX has
pledged 50.1% of the issued and outstanding capital stock of PT-
FI as security for its borrowings under the FCX Bank Credit
Facility and as security for its guarantee of PT-FI's obligations
under the PT-FI Bank Credit Facility and has agreed that such
pledged capital stock shall at all times consist of at least
50.1% of the issued and outstanding capital stock of PT-FI.
Pursuant to an intercreditor arrangement, the capital stock of
PT-FI pledged by FCX to secure its obligations under the Credit
Facilities also secures guarantees by FCX of obligations of a
subsidiary and a former affiliate that as of December 31, 1995
aggregated $210 million and consisted of the 9/% Senior
Guaranteed Notes due 2001 and $90 million of committed credit
available to the former affiliate.
Additional information regarding the credit facilities and
borrowings of FCX, PT-FI, RTM and ALatieF is set forth in Notes 7
and 10 to the audited financial statements appearing on pages 30
and 31, and pages 32 through 34, respectively, of the Annual
Report, which is incorporated herein by reference.
Employees of PT-FI and Relationship with FM Services Company
As of December 31, 1995, PT-FI had a total of 7,511
employees (approximately 95% Indonesian), compared with 6,074
employees (approximately 94% Indonesian) at year-end 1994. In
addition, as of December 31, 1995, PT-FI had approximately 6,600
contract workers, most of whom were Indonesian. Approximately
35% of PT-FI's Indonesian employees are members of the All
Indonesia Workers' Union, which operates under Indonesian
Government supervision and is party to a labor agreement covering
PT-FI's hourly-paid Indonesian employees that expires on
September 30, 1997. PT-FI experienced no work stoppages in 1995,
and relations with the union have generally been good. As of
December 31, 1995, RTM had a total of 770 employees, of which
approximately 55% are covered by union contracts. RTM
experienced limited work stoppages in 1995, but relations with
these unions have also generally been good.
Prior to January 1, 1996, FCX had no employees. Until mid-
1995, FCX was a majority-owned subsidiary of FTX, and in order to
permit United States citizens engaged full time in PT-FI's and
RTM's businesses to participate in FTX's employee benefit plans,
such persons were employed by a United States subsidiary of FTX.
Prior to January 1, 1996, FCX, PT-FI and FTX were parties to a
Management Services Agreement (the "Management Agreement")
pursuant to which FTX furnished executive, administrative,
financial, accounting, legal, tax, sales and similar services to
FCX and PT-FI.
Since January 1, 1996, with limited exceptions, former
employees of FTX engaged full-time in the business of FCX, PT-FI
or RTM have become employees of FCX, and former employees of FTX
providing the services formerly provided by FTX under the
Management Agreement have become employees of FM Services
Company, a Delaware corporation 50% owned by each of FTX and FCX
("FMS"). Since January 1, 1996, FMS has furnished services to
FCX similar to those historically provided by FTX to FCX. FCX
reimburses FMS, at its cost, including allocated overhead, for
such services on a monthly basis.
Item 3. Legal Proceedings.
Although FCX may be from time to time involved in various
legal proceedings of a character normally incident to the
ordinary course of its business, the management of FCX believes
that potential liability in any such pending or threatened
proceedings would not have a material adverse effect on the
financial condition or results of operations of FCX. FCX,
through FTX, maintains liability insurance to cover some, but not
all, potential liabilities normally incident to the ordinary
course of its business as well as other insurance coverages
customary in its business, with such coverage limits as
management deems prudent.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Executive Officers of the Registrant.
Certain information as of March 8, 1996 about the executive
officers of FCX, including their position or office with FCX and
PT-FI, is set forth in the following table and accompanying text:
Name Age Position or Office
---- --- ----------------------
James R. Moffett 57 Director, Chairman of the
Board and Chief Executive
Officer of FCX.
President Commissioner of
PT-FI.
Richard C. Adkerson 49 Executive Vice President
of FCX. Director and
Executive Vice President
of PT-FI.
Thomas J. Egan 51 Senior Vice President of
FCX.
Charles W. Goodyear 38 Senior Vice President of
FCX. Commissioner of
PT-FI.
Hoediatmo Hoed 56 President Director of
PT-FI.(1)
W. Russell King 46 Senior Vice President of
FCX.
Rene L. Latiolais 53 Director and Vice
Chairman of the Board of
FCX. Commissioner of
PT-FI.
------------------
(1) Mr. Hoed is deemed by FCX to be an executive officer for
purposes of this report because of his position and
responsibilities as an officer of PT-FI. Mr. Hoed holds no
position with FCX. Mr. Hoed has informed FCX that he
intends to retire effective March 28, 1996. Adrianto
Machribie, an Executive Vice President of PT-FI, has been
nominated to succeed Mr. Hoed as President Director of PT-
FI.
-------------------
All of the Executive Officers have served FCX, FTX, or PT-FI in
various executive capacities for at least the last five years.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
The information set forth under the caption "FCX Class A and
Class B Common Shares" and "Class A and Class B Common Share
Dividends", on the inside back cover of the Annual Report is
incorporated herein by reference. As of March 8, 1996, there
were 12,438 and 18,137 record holders of FCX's Class A and Class
B common stock, respectively.
Item 6. Selected Financial Data.
The information set forth under the caption "Selected
Financial and Operating Data," on page 12 of the Annual Report is
incorporated herein by reference.
FCX's ratio of earnings to fixed charges for each of the
years 1991 through 1995, inclusive, was 4.5x, 6.5x, 3.6x, 7.5x
and 6.0x respectively. For this calculation, earnings consist of
income from continuing operations before income taxes, minority
interests and fixed charges. Fixed charges include interest and
that portion of rent deemed representative of interest.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The information set forth under the caption "Management's
Discussion and Analysis of Financial Condition and Results of
Operations," on pages 13 through 19 of the Annual Report is
incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data.
The financial statements of FCX, the notes thereto and the
report thereon of Arthur Andersen LLP, appearing on pages 21
through 37 and the report of management on page 20 of the Annual
Report is incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Not applicable.
PART III
Items 10. Directors and Executive Officers of the Registrant.
The information set forth under the caption "Information
About Nominees and Directors" of the Proxy Statement submitted to
the stockholders of the registrant in connection with its 1996
Annual Meeting to be held on April 30, 1996 is incorporated
herein by reference.
Items 11. Executive Compensation.
The information set forth under the captions "Director
Compensation" and "Executive Officer Compensation" of the Proxy
Statement submitted to the stockholders of the registrant in
connection with its 1996 Annual Meeting to be held on April 30,
1996 is incorporated herein by reference.
Items 12. Security Ownership of Certain Beneficial Owners and
Management.
The information set forth under the captions "Stock
Ownership of Directors and Executive Officers" and "Stock
Ownership of Certain Beneficial Owners" of the Proxy Statement
submitted to the stockholders of the registrant in connection
with its 1996 Annual Meeting to be held on April 30, 1996 is
incorporated herein by reference.
Items 13. Certain Relationships and Related Transactions.
The information set forth under the caption "Certain
Transactions" of the Proxy Statement submitted to the
stockholders of the registrant in connection with its 1996 Annual
Meeting to be held on April 30, 1996 is incorporated herein by
reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K.
(a)(1). Financial Statements.
---------------------
Reference is made to the Index to Financial Statements
appearing on page F-1 hereof.
(a)(2). Financial Statement Schedules.
------------------------------
Reference is made to the Index to Financial Statements
appearing on page F-1 hereof.
(a)(3). Exhibits.
--------
Reference is made to the Exhibit Index beginning on
page E-1 hereof.
(b). Reports on Form 8-K.
---------------------
During the last quarter of the period covered by this
report, FCX filed one report on Form 8-K dated November
2, 1995 reporting an event under Item 5 thereof. No
financial statements were filed in connection with such
report.
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities and
Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly
authorized, on March 27, 1996.
FREEPORT-McMoRan COPPER & GOLD INC.
By: /s/ James R. Moffett
----------------------------
James R. Moffett
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1934, this
report has been signed below by the following persons on behalf
of the registrant and in the capacities indicated on March 27,
1996.
Signature Title
------------ -------
/s/ James R. Moffett Chairman of the Board, Chief
---------------------------- Executive Officer and Director
James R. Moffett (Principal Executive Officer)
* Executive Vice President and
---------------------------- Chief Financial Officer
Richard C. Adkerson (Principal Financial Officer)
* Controller - Financial
---------------------------- Reporting (Principal
John T. Eads Accounting Officer)
*
---------------------------- Director
Robert W. Bruce III
*
---------------------------- Director
R. Leigh Clifford
*
---------------------------- Director
Thomas B. Coleman
*
---------------------------- Director
Bobby E. Cooper
*
---------------------------- Director
Robert A. Day
*
---------------------------- Director
Leland O. Erdahl
*
---------------------------- Director
William B. Harrison, Jr.
*
---------------------------- Director
Henry A. Kissinger
*
---------------------------- Director
Bobby Lee Lackey
*
---------------------------- Director
Rene L. Latiolais
*
---------------------------- Director
Gabrielle K. McDonald
*
---------------------------- Director
George A. Mealey
*
---------------------------- Director
George Putnam
*
---------------------------- Director
B.M. Rankin, Jr.
*
---------------------------- Director
Wolfgang F. Siegel
*
---------------------------- Director
Eiji Umene
*
---------------------------- Director
J. Taylor Wharton
*
---------------------------- Director
Ward W. Woods, Jr.
*By: /s/ James R. Moffett
-----------------------
James R. Moffett
Attorney-in-Fact
The financial statements of FCX, the notes thereto, and the
report thereon of Arthur Andersen LLP, appearing on pages 21
through 37, inclusive, of FCX's 1995 Annual Report to
stockholders are incorporated by reference.
The financial statement schedules listed below should be
read in conjunction with such financial statements contained in
FCX's 1995 Annual Report to stockholders.
Page
Report of Independent Public Accountants F-1
III-Condensed Financial Information of Registrant F-2
Schedules other than those listed above have been omitted
since they are either not required, not applicable or the
required information is included in the financial statements or
notes thereto.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited, in accordance with generally accepted
auditing standards, the financial statements as of December 31,
1995 and 1994 and for each of the three years in the period ended
December 31, 1995 included in Freeport-McMoRan Copper & Gold
Inc.'s annual report to stockholders incorporated by reference in
this Form 10-K, and have issued our report thereon dated January
23, 1996. Our audits were made for the purpose of forming an
opinion on those statements taken as a whole. The schedule
listed in the index above is the responsibility of the Company's
management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the
basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a
whole.
Arthur Andersen LLP
New Orleans, Louisiana,
January 23, 1996
<PAGE> F-1
FREEPORT-McMoRan COPPER & GOLD INC.
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
December 31,
--------------------------
1995 1994
---------- ----------
(In Thousands)
Assets
Cash and short-term investments $ 93 $ 171
Interest receivable 11,885 12,676
Notes receivable from PT-FI 1,208,007 1,338,611
Investment in PT-FI and PTII 386,956 271,339
Investment in RTM 67,374 81,386
Other assets 47,201 14,988
---------- ----------
Total assets $1,721,516 $1,719,171
========== ==========
Liabilities and Stockholders' Equity
Accounts payable and accrued
liabilities $ 14,883 $ 28,070
Long-term debt 318,000 190,000
Other liabilities and
deferred credits 6,952 6,119
Mandatory redeemable
preferred stock 500,007 500,007
Stockholders' equity 881,674 994,975
---------- ----------
Total liabilities and
stockholders' equity $1,721,516 $1,719,171
========== ==========
STATEMENTS OF INCOME
Years Ended December 31,
-------------------------------------
1995 1994 1993
---------- ---------- ---------
(In Thousands)
Income from investment in PT-FI
and PTII, net of PT-FI
tax provision $ 293,279 $ 111,822 $ 53,861
Net loss from
investment in RTM (37,787) (6,309) (15,666)
Elimination of
intercompany profit (24,851) 3,005 (6,610)
General and
administrative expenses (7,534) (7,253) (5,207)
Depreciation and
amortization (3,819) (3,711) (2,397)
Interest expense (15,027) (10,259) (8,017)
Interest income on
PT-FI notes receivable:
Zero coupon
exchangeable notes - 352 19,175
Promissory notes 28,130 21,094 9,292
8.235% convertible 13,333 14,033 14,036
Step-up perpetual
convertible 20,203 26,256 12,785
Gold and silver
production payment loans 23,636 20,222 4,055
Other expense, net (3,664) (7,424) (406)
Provision for income taxes (32,281) (31,587) (24,085)
---------- ---------- ----------
Net income 253,618 130,241 50,816
Preferred dividends (54,153) (51,838) (28,954)
---------- ---------- ----------
$ 199,465 $ 78,403 $ 21,862
========== ========== ==========
The footnotes contained in FCX's 1995 Annual Report to
stockholders are an integral part of these statements.
<PAGE> F-2
FREEPORT-McMoRan COPPER & GOLD INC.
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOW
Years Ended December 31,
-------------------------------------
1995 1994 1993
---------- ---------- ----------
(In Thousands)
Cash flow from
operating activities:
Net income $ 253,618 $ 130,241 $ 50,816
Adjustments to reconcile
net income to net cash
provided by operating activities:
Income from investment
in PT-FI and PTII (293,279) (111,822) (53,861)
Net loss from investment
in RTM 37,787 6,309 15,666
Elimination of
intercompany profit 24,851 (3,005) 6,610
Dividends received
from PT-FI and PTII 161,144 147,465 132,048
Accretion of note
receivable from
PT-FI, net - - (9,104)
Depreciation and
amortization 3,819 3,711 2,397
(Increase) decrease
in accounts receivable (4,501) (24,240) -
Increase (decrease)
in accounts payable (296) (4,648) (646)
Other (3,755) 1,654 (5,959)
---------- ---------- ----------
Net cash provided by
operating activities 179,388 145,665 137,967
---------- ---------- ----------
Cash flow from investing
activities:
Received from Government
of Indonesia - 2,247 6,288
Investment in RTM (23,622) (36,365) (43,642)
Investment in Freeport
Copper Company (25,000) - -
Other (26,860) (8) -
---------- ---------- ----------
Net cash used in
investing activities (75,482) (34,126) (37,354)
---------- ---------- ----------
Cash flow from financing activities:
Cash dividends paid:
Class A common stock (51,318) (38,316) (33,298)
Class B common stock (86,245) (85,187) (85,277)
Special preference stock (15,673) (15,708) (15,708)
Step-Up preferred stock (17,500) (17,500) (5,590)
Mandatory redeemable
preferred stock (17,417) (13,614) (1,683)
Proceeds from sale of:
Preferred stock - 252,985 561,090
9 3/4% senior notes - 116,276 -
Net proceeds from debt 128,000 70,000 -
Proceeds from FTX - 88,280 20,650
Repayment to FTX (800) (99,750) (8,380)
Loans to PT-FI 124,485 (369,261) (706,750)
Purchase of FCX common
shares (177,755) - -
Other 10,239 - -
---------- ---------- ----------
Net cash used in
financing activities (103,984) (111,795) (274,946)
---------- ---------- ----------
Net decrease in cash and
short-term investments (78) (256) (174,333)
Cash and short-term investments
at beginning of year 171 427 174,760
---------- ---------- ----------
Cash and short-term investments
at end of year $ 93 $ 171 $ 427
========== ========== ==========
Interest paid $ 23,237 $ 7,788 $ 213
========== ========== ==========
Taxes paid $ 34,871 $ 29,871 $ 22,723
========== ========== ==========
The footnotes contained in FCX's 1995 Annual Report to
stockholders are an integral part of these statements.
<PAGE> F-3
Freeport-McMoRan Copper & Gold Inc.
EXHIBIT INDEX
Sequentially
Exhibit Numbered
Number Page
------- ------------
2.1 Agreement, dated as of May 2, 1995 by
and between FTX and FCX and The RTZ
Corporation PLC, RTZ Indonesia Limited,
and RTZ America, Inc. (the "RTZ
Agreement"). Incorporated by reference
to Exhibit 2.1 to the Current Report on
Form 8-K of FTX dated as of May 26,
1995.
2.2 Amendment dated May 31, 1995 to the RTZ
Agreement. Incorporated by reference to
Exhibit 2.1 to the Quarterly Report on
Form 10-Q of FTX for the quarter ended
June 30, 1995.
2.3 Distribution Agreement dated as of July
5, 1995 between FTX and FCX.
Incorporated by reference to Exhibit 2.1
to the Quarterly Report on Form 10-Q of
FTX for the quarter ended September 30,
1995 (the "FTX 1995 Third Quarter Form
10-Q").
3.1 Composite copy of the Certificate of
Incorporation of FCX. Incorporated by
reference to Exhibit 3.1 to the
Quarterly Report on Form 10-Q of FCX for
the quarter ended June 30, 1995 (the
"FCX 1995 Second Quarter Form 10-Q").
3.2 By-Laws of FCX, as amended.
Incorporated by reference to Exhibit 3.2
to the FCX 1995 Second Quarter Form 10-
Q.
4.1 Certificate of Designations of the 7%
Convertible Exchangeable Preferred Stock
(the "Special Preference Stock") of FCX.
Incorporated by reference to Exhibit
4.1 to the FCX 1995 Second Quarter Form
10-Q.
4.2 Deposit Agreement dated as of July 21,
1992 among FCX, Chemical Mellon
Shareholder Services, L.L.C., as
Depositary, and holders of depositary
receipts ("Depositary Receipts")
evidencing certain Depositary Shares,
each of which, in turn, represents 0.05
shares of Special Preference Stock.
Incorporated by reference to Exhibit 2
to the Form 8 Amendment No. 1 dated July
16, 1992 (the "Form 8 Amendment") to the
Application for Registration on Form 8-A
of FCX dated July 2, 1992.
4.3 Form of Depositary Receipt.
Incorporated by reference to Exhibit 1
to the Form 8 Amendment.
4.4 Certificate of Designations of the
Step-Up Convertible Preferred Stock of
FCX. Incorporated by reference to
Exhibit 4.2 to the FCX 1995 Second
Quarter Form 10-Q.
4.5 Deposit Agreement dated as of July 1,
1993 among FCX, Chemical Mellon
Shareholder Services, L.L.C., as
Depositary, and holders of depositary
receipts ("Step-Up Depositary Receipts")
evidencing certain Depositary Shares,
each of which, in turn, represents 0.05
shares of Step -Up Convertible Preferred
Stock. Incorporated by reference to
Exhibit 4.5 to the Annual Report on Form
10-K of FCX for the fiscal year ended
December 31, 1993 (the "FCX 1993 Form
10-K").
4.6 Form of Step-Up Depositary Receipt.
Incorporated by reference to Exhibit 4.6
to the FCX 1993 Form 10-K.
4.7 Certificate of Designations of the
Gold-Denominated Preferred Stock of FCX.
Incorporated by reference to Exhibit
4.3 to the FCX 1995 Second Quarter Form
10-Q.
4.8 Deposit Agreement dated as of August 12,
1993 among FCX, Chemical Mellon
Shareholder Services, L.L.C., as
Depositary, and holders of depositary
receipts ("Gold -Denominated Depositary
Receipts") evidencing certain Depositary
Shares, each of which, in turn,
represents 0.05 shares of
Gold-Denominated Preferred Stock.
Incorporated by reference to Exhibit 4.8
to the FCX 1993 Form 10-K.
4.9 Form of Gold-Denominated Depositary
Receipt. Incorporated by reference to
Exhibit 4.9 to the FCX 1993 Form 10-K.
4.10 Certificate of Designations of the
Gold-Denominated Preferred Stock, Series
II (the "Gold -Denominated Preferred
Stock II") of FCX. Incorporated by
reference to Exhibit 4.4 to the FCX 1995
Second Quarter Form 10-Q.
4.11 Deposit Agreement dated as of January
15, 1994, among FCX, Chemical Mellon
Shareholder Services, L.L.C., as
Depositary, and holders of depositary
receipts ("Gold -Denominated II
Depositary Receipts") evidencing certain
Depositary Shares, each of which, in
turn, represents 0.05 shares of
Gold-Denominated Preferred Stock II.
Incorporated by reference to Exhibit 4.2
to the Quarterly Report on Form 10 -Q of
FCX for the quarter ended March 31, 1994
(the "FCX 1994 First Quarter Form
10-Q").
4.12 Form of Gold-Denominated II Depositary
Receipt. Incorporated by reference to
Exhibit 4.3 to the FCX 1994 First
Quarter Form 10-Q.
4.13 Certificate of Designations of the
Silver-Denominated Preferred Stock of
FCX. Incorporated by reference to
Exhibit 4.5 to the FCX 1995 Second
Quarter Form 10-Q.
4.14 Deposit Agreement dated as of July 25,
1994 among FCX, Chemical Mellon
Shareholder Services, L.L.C., as
Depositary, and holders of depositary
receipts ("Silver -Denominated Depositary
Receipts") evidencing certain Depositary
Shares, each of which, in turn,
initially represents 0.025 shares of
Silver-Denominated Preferred Stock.
Incorporated by reference to Exhibit 4.2
to the July 15, 1994 Form 8-A.
4.15 Form of Silver-Denominated Depositary
Receipt. Incorporated by reference to
Exhibit 4.1 to the July 15, 1994, Form
8-A.
4.16 $550 million Composite Restated Credit
Agreement dated as of July 17, 1995 (the
"PT-FI Credit Agreement") among PT -FI,
FCX, the several financial institutions
that are parties thereto (the "PT -FI
Banks"), First Trust of New York,
National Association, as PT-FI Trustee
(the "PT -FI Trustee"), and Chemical
Bank, as administrative agent and FCX
collateral agent (the "PT -FI Bank
Agent") and the Chase Manhattan Bank
(National Association), as documentary
agent.
4.17 Credit Agreement dated as of June 30,
1995 among PT-FI, FCX, the several
financial institutions that are parties
thereto, First Trust of New York,
National Association, as PT-FI Trustee,
Chemical Bank, as administrative agent,
and The Chase Manhattan Bank (National
Association), as documentary agent.
Incorporated by reference to Exhibit 4.2
to the FCX 1995 Third Quarter Form 10-Q.
4.18 Term Loan and Working Capital Agreement
dated as of November 4, 1994 (the "RTML
Term Loan") among Rio Tinto Metal, S.A.
("RTML"), the Lenders and Barclays Bank
PLC as Agent (the "Agent").
Incorporated by reference to Exhibit
4.21 to the FCX 1994 Form 10-K.
4.19 Amendment No. 1 dated as of March 7,
1995 to the RTML Term Loan among RTML,
the Lenders and the Agent. Incorporated
by reference to Exhibit 4.22 to the FCX
1994 Form 10-K.
10.1 Contract of Work dated December 30, 1991
between The Government of the Republic
of Indonesia and PT-FI. Incorporated by
reference to Exhibit 10.20 to the FCX
1991 Form 10-K.
10.2 Contract of Work dated August 15, 1994
between The Government of the Republic
of Indonesia and P.T. IRJA Eastern
Minerals Corporation.
10.3 Concentrate Sales Agreement dated as of
December 30, 1990 between FII and Dowa
Mining Co., Ltd., Furukawa Co., Ltd.,
Mitsubishi Materials Corporation, Mitsui
Mining & Smelting Co., Ltd., Nittetsu
Mining Co., Ltd., Nippon Mining Co.,
Ltd. and Sumitomo Metal Mining Co.,
Ltd. (Confidential information omitted
and filed separately with the Securities
and Exchange Commission (the
"Commission").) Incorporated by
reference to Exhibit 10.3 to the Annual
Report on Form 10 -K of FCX for the
fiscal year ended December 31, 1990.
10.4 Joint Venture and Shareholder's
Agreement entered into as of October 25,
1995 between Mitsubish Materials
Corporation, PT-FI and Fluor Daniel
Asia, Inc.
Executive Compensation Plans and
Arrangements (Exhibits 10.5 through
10.14)
10.5 Annual Incentive Plan of FCX.
10.6 1995 Long-Term Performance Incentive
Plan of FCX.
10.7 FCX Performance Incentive Awards
Program.
10.8 FCX President's Award Program.
10.9 FCX Adjusted Stock Award Plan.
Incorporated by reference to Exhibit
4(c) to the Registration Statement on
Form S-8 of FCX as filed with the
Commission on October 6, 1995
(Registration No. 33-63267).
10.10 FCX 1995 Stock Option Plan.
Incorporated by reference to Exhibit
4(c) to the Registration Statement on
Form S-8 of FCX as filed with the
Commission on October 6, 1995
(Registration No. 33-63269).
10.11 FCX 1995 Stock Option Plan for Non-
Employee Directors. Incorporated by
reference to Exhibit 4(c) to the
Registration Statement on Form S-8 of
FCX as filed with the Commission on
October 6, 1995 (Registration No. 33-
63271).
10.12 Financial Counseling and Tax Return
Preparation and Certification Program of
FCX.
10.13 FM Services Company Performance
Incentive Awards Program.
10.14 Financial Counseling and Tax Return
Preparation and Certification Program of
FM Services Company.
10.15 Credit Agreement dated as of June 30,
1995 among FM Properties Operating Co.
("FMPOC"), FTX, FCX, certain banks,
Chemical Bank, as Administrative Agent
and Collateral Agent, and The Chase
Manhattan Bank (National Association),
as Documentary Agent. Incorporated by
reference to Exhibit 4.2 to the FTX 1995
Third Quarter Form 10-Q.
10.16 FCX Guaranty Agreement dated as of July
17, 1995. Incorporated by reference to
Exhibit 4.4 to the FCX 1995 Third
Quarter Form 10-Q.
10.17 Second Amended and Restated Note
Agreement dated as of June 30, 1995
among FMPOC, FTX, FCX, Chemical Bank,
and Hibernia National Bank, individually
and as Agent. Incorporated by reference
to Exhibit 4.4 to the FTX 1995 Third
Quarter Form 10-Q.
10.18 First Amendment to Second Amended and
Restated Note Agreement dated as of
December 31, 1995 among FMPOC, FTX, FCX,
Hibernia National Bank, and Chemical
Bank, as agent.
12.1 FCX Computation of Ratio of Earnings to
Fixed Charges.
13.1 Those portions of the 1995 Annual Report
to stockholders of FCX which are
incorporated herein by reference.
21.1 Subsidiaries of FCX.
23.1 Consent of Arthur Andersen LLP dated
March 26, 1996.
23.2 Consent of Independent Mining
Consultants, Inc. dated March 26, 1996.
24.1 Certified resolution of the Board of
Directors of FCX authorizing this report
to be signed on behalf of any officer or
director pursuant to a Power of
Attorney.
24.2 Powers of Attorney pursuant to which
this report has been signed on behalf of
certain officers and directors of FCX.
27.1 FCX Financial Data Schedule.
EXHIBIT 4.16
CREDIT AGREEMENT entered into as of
October 27, 1989, as amended through the Fifth Amendment
(the "Amendment Agreement") dated as of the Fifth Amendment
Closing Date (as defined below) among P.T. FREEPORT
INDONESIA COMPANY, a limited liability company organized
under the laws of Indonesia and also domesticated in
Delaware ("FI"), FREEPORT-McMoRan COPPER & GOLD INC., a
Delaware corporation ("FCX" or the "Guarantor"), the
undersigned banks (collectively, the "Banks"), FIRST TRUST
OF NEW YORK, NATIONAL ASSOCIATION (as successor to Morgan
Guaranty Trust Company of New York), acting as trustee for
the Banks under the FI Trust Agreement (in such capacity,
the "FI Trustee") and, acting in the capacity of FI Trustee,
as security agent for the Banks under the FI Security
Documents (as herein defined), for purposes of Article VIII
hereof only, CHEMICAL BANK, a New York banking corporation
("Chemical"), as administrative agent for the Banks (in such
capacity, the "Administrative Agent"), and as FCX collateral
agent for the Banks (in such capacity, the "FCX Collateral
Agent") under the FCX Collateral Agreement referred to
below, and THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION),
a national banking association ("Chase"), as documentary
agent for the Banks (the "Documentary Agent"; the
Administrative Agent, the FCX Collateral Agent and the
Documentary Agent being referred to herein as the "Agents").
FI and FCX have requested the Banks to extend
credit on a secured basis to FI in order to enable FI to
borrow on a revolving credit basis at any time and from time
to time prior to the Maturity Date (as herein defined). The
aggregate principal amount of all revolving credit loans at
any time outstanding hereunder shall not exceed
$550,000,000. The proceeds of such borrowings are to be
used for general corporate purposes, including, without
limitation, the financing of acquisitions.
The Banks are willing to make secured loans to FI
upon the terms and subject to the conditions hereinafter set
forth, including the guarantee by FCX of the loans to FI.
NOW, THEREFORE, in consideration of the premises
and of the mutual covenants herein contained, the parties
hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.1. Definitions. As used in this Agree-
ment, the following terms have the meanings indicated (any
term defined in this Article I or elsewhere in this Agree-
ment in the singular and used in this Agreement in the
plural shall include the plural, and vice versa):
"Administrative Questionnaire" means an
Administrative Questionnaire in the form of Exhibit C to the
FCX Credit Agreement.
"Affiliate" means, when used with respect to a
specified Person, another Person that directly, or
indirectly through one or more intermediaries, Controls or
is Controlled by or is under common Control with the Person
specified.
"Airfast Assets" means certain specified aircraft
and airport facilities sold by FI to Avco pursuant to the
Airfast Documents.
"Airfast Documents" means the agreements governing
the Airfast Transaction as in effect on the Fifth Amendment
Closing Date and as amended from time to time as permitted
by Section 5.2(o).
"Airfast Obligations" mean all obligations of FI
relating to the Airfast Transaction.
"Airfast Transaction" means the sale and leaseback
transaction between FI and Avco relating to the Airfast
Assets, the related financing and FI's equity investment of
up to $2,000,000 in Avco, substantially on the terms
described in the Airfast Documents.
"ALatieF" means P.T. ALatieF Nusakarya
Corporation, an Indonesian limited liability company.
"ALatieF-FI Assets" means the non-mining
infrastructure facilities as described in the ALatieF-FI
Joint Venture Agreement.
"ALatieF Documents" means the agreements governing
the sale and leaseback transaction between ALatieF-FI and
FI, including the related financing arrangements under the
Chase-ALatieF Agreement and the B.V. Notes, as in effect on
the Fifth Amendment Closing Date and as amended from time to
time as permitted by Section 5.2(o).
"ALatieF-FI" means P. T. ALatieF Freeport
Infrastructure Corporation, the joint venture company
organized under the laws of Indonesia by FI and ALatieF
pursuant to the ALatieF-FI Joint Venture Agreement.
"ALatieF-FI Joint Venture Agreement" means the
Joint Venture Agreement made and entered into on March 11,
1993, between FI and ALatieF, as in effect on the Fifth
Amendment Closing Date and as amended as permitted by
Section 5.2(o) from time to time.
"ALatieF-FI Obligations" mean all obligations of
FI and FCX relating to the ALatieF-FI Transaction, including
FCX's Guarantee of the BV Notes and FI's Guarantee of the
Chase-ALatieF Agreement obligations, FI's obligations under
the intercompany notes relating to the B.V. Notes and FI's
obligations under the related master services agreements.
"ALatieF-FI Transaction" means the sale and
leaseback transaction between FI and ALatieF relating to the
ALatieF-FI Assets, including the related financing
arrangements, as in effect on the Fifth Amendment Closing
Date and as amended from time to time as permitted by
Section 5.2(o).
"Alternate Base Rate" means for any day, a rate
per annum (rounded upwards, if not already a whole multiple
of 1/100 of 1%, to the next higher 1/100 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 for such day
plus 1/2 of 1%. For purposes hereof, the term "Prime Rate"
means the rate of interest per annum publicly announced from
time to time by Chemical as its prime rate in effect at its
principal office in the City of New York; each change in the
Prime Rate shall be effective on the date such change is
publicly announced as being effective. "Base CD Rate" means
the sum of (x) the product of (i) the Three-Month Secondary
CD Rate and (ii) Statutory Reserves and (y) the Assessment
Rate. "Three-Month Secondary CD Rate" means, 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 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. "Federal Funds Effective Rate" means, 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 for any reason
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 Alternate Base Rate 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 Alternate Base Rate due to a change in the
Prime Rate, the Three-Month Secondary CD Rate or the Federal
Funds Effective Rate shall be effective on the effective
date of such change in the Prime Rate, the Three-Month
Secondary CD Rate or the Federal Funds Effective Rate,
respectively.
"Applicable LIBO Rate" means on a per annum basis,
in respect of any LIBO Rate Loan, for each day during the
Interest Period for such Loan, the sum of (i) the LIBO Rate
as determined by the Administrative Agent plus (ii) the
Applicable Margin.
"Applicable Margin" means, with respect to any
LIBO Rate Loan or Reference Rate Loan, or with respect to
the Commitment Fees, as the case may be, the applicable
percentage set forth on Schedule I hereto under the caption
"LIBOR Spread", "ABR Spread" or "Fee Percentage", as the
case may be, based upon the ratings by S&P and Moody's,
respectively, applicable on such date to the Index Debt.
For purposes of the foregoing, (i) if either Moody's or S&P
shall not have in effect a rating for the Index Debt (other
than by reason of the circumstances referred to in the last
sentence of this definition), then such rating agency shall
be deemed to have established a rating of BB-/Ba3 unless
such rating agency shall have in effect a rating for senior
subordinated unsecured, non-credit enhanced, long-term
indebtedness for borrowed money of FCX, in which case such
rating, increased by two categories, shall be used as the
Index Debt rating of such rating agency so long as such
rating agency has in effect such a rating and does not have
in effect a rating for Index Debt; (ii) if the ratings
established or deemed to have been established by Moody's
and S&P for the Index Debt shall fall within different
categories, the Applicable Margin shall be based on the
higher of the two ratings; and (iii) if the ratings
established or deemed to have been established by Moody's
and S&P for the Index Debt shall be changed (other than as a
result of a change in the rating system of Moody's or S&P),
such change shall be effective as of the date on which it is
first announced by the applicable rating agency. Each
change in the Applicable Margin shall apply during the
period commencing on the effective date of such change and
ending on the date immediately preceding the effective date
of the next such change. If the rating system of Moody's or
S&P shall change, or if either such rating agency shall
cease to be in the business of rating corporate debt
obligations, FI and the Banks shall negotiate in good faith
to amend this definition to reflect such changed rating
system or the non-availability of ratings from such rating
agency and, pending the effectiveness of any such amendment,
the Applicable Margin shall be determined by reference to
the rating most recently in effect prior to such change or
cessation.
"Applicable Percentage" of any Bank means the
percentage set opposite such Bank's name on Schedule II
hereto, as modified from time to time as provided hereby.
"Applicable Reference Rate" means, on a per annum
basis in respect of any Reference Rate Loan, for any day,
the sum of the Alternate Base Rate, plus the Applicable
Margin.
"Assessment Rate" means, with respect to each day
during an Interest Period, the annual rate (rounded upwards,
if not already a whole multiple of 1/100 of l%, to the next
highest whole multiple of 1/100 of 1%) most recently
estimated by the Administrative Agent as the then current
net annual assessment rate that will be employed in
determining amounts payable by Chemical to the Federal
Deposit Insurance Corporation or any successor ("FDIC") for
the FDIC's insuring time deposits made in Dollars at offices
of Chemical in the United States.
"Assigned Agreements" means the Contract of Work
and the Concentrate Sales Agreements.
"Available Borrowing Base" means the then
effective Borrowing Base minus the aggregate outstanding
principal amount of all Borrowing Base Debt.
"Avco" means P.T. Airfast Aviation Facilities
Company, an Indonesian joint venture company owned by P.T.
Airfast Indonesia, P.T. Giga Haksa and FI.
"Bank" means each bank signatory hereto and its
successors and permitted assigns under Section 10.3.
"Board" means the Board of Governors of the
Federal Reserve System of the United States.
"Borrower" means FI.
"Borrowing Base" has the meaning assigned to such
term in Article II.
"Borrowing Base Certificate" has the meaning
assigned to such term in Article II.
"Borrowing Base Debt" means the sum, without
duplication, of (i) FI Borrowing Base Debt plus (ii) FCX
Borrowing Base Debt, all as of the date of calculation. In
addition, any preferred stock issued by FI or FCX or a
Restricted Subsidiary with mandatory redemption payments or
put rights prior to the Maturity Date shall also be
considered Borrowing Base Debt until the next
redetermination of the Borrowing Base.
"Borrowing Date" means, with respect to any Loan,
the date on which such Loan is disbursed.
"Business Day" means any day other than a
Saturday, Sunday or a day on which banks in New York City
are authorized or required by law to close; provided,
however, that when used in connection with a LIBO Rate Loan,
the term "Business Day" shall also exclude any day on which
banks are not open for dealings in Dollar deposits in the
London interbank market.
"B.V. Notes" has the meaning assigned to such term
in Section 5.2(g)(iii).
"Capitalized Lease Obligation" means the obliga-
tion of any Person to pay rent or other amounts under a
lease of (or other agreement conveying the right to use)
real and/or personal property which obligation is, or in
accordance with GAAP (including Statement of Financial
Accounting Standards No. 13 of the Financial Accounting
Standards Board) is required to be, classified and accounted
for as a capital lease on a balance sheet of such Person
under GAAP, and for purposes of this Agreement the amount of
such obligation shall be the capitalized amount thereof
determined in accordance with GAAP.
"Caterpillar" means Caterpillar Financial Services
Corporation.
"Caterpillar Assets" has the meaning assigned to
such term in Section 5.2(g)(iv).
"Caterpillar Documents" means the documentation
governing the Caterpillar Transaction, as in effect on the
Fifth Amendment Closing Date and as amended from time to
time as permitted by Section 5.2(o).
"Caterpillar Obligations" has the meaning assigned
to such term in Section 5.2(g)(iv).
"Caterpillar Transaction" has the meaning assigned
to such term in Section 5.2(g)(iv).
A "Change in Control" shall be deemed to have
occurred if (a) any Person or group (within the meaning of
Rule 13d-5 of the SEC as in effect on the date hereof) shall
own directly or indirectly, beneficially or of record,
shares representing 30% or more of the aggregate ordinary
voting power represented by the issued and outstanding
capital stock of FCX; or (b) a majority of the seats (other
than vacant seats) on the board of directors of FCX shall at
any time be occupied by Persons who were not (i) members of
the board of directors of FCX on the Fifth Amendment Closing
Date, (ii) appointed as, or nominated for election as,
directors by a majority of directors who are (x) referred to
in clause (i) and (y) other directors who are appointed or
nominated in accordance with this clause (ii) or
(iii) nominated or appointed by RTZ America, RTZ Indonesia
or any Affiliate of either thereof pursuant to its
participation in the Restructuring as contemplated by the
Letter Agreement dated as of March 7, 1995, between RTZ
America and FTX and FCX and the Stock Purchase Agreement.
"Chase-ALatieF Agreement" means the Credit
Agreement dated as of December 15, 1993, between ALatieF-FI,
the financial institutions named therein and The Chase
Manhattan Bank (National Association), as Agent.
"Circle C Agreement" means the Credit Agreement
dated as of February 6, 1992, as amended, by and between
Circle C Land Corp. and TCB.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time.
"Commitment" means, with respect to each Bank, the
Commitment of such Bank hereunder to make revolving loans as
set forth on Schedule II hereto, or in the Commitment
Transfer Supplement pursuant to which such Bank assumed its
Commitment, as the same may be permanently terminated or
reduced from time to time pursuant to Section 3.7 and
pursuant to assignments by such Bank pursuant to
Section 10.3. The Commitment of each Bank shall
automatically and permanently terminate on the Maturity
Date.
"Commitment Fee" has the meaning assigned to such
term in Section 3.6(a).
"Commitment Termination Date" has the meaning
assigned to such term in Section 3.6(a).
"Commitment Transfer Supplement" means a
Commitment Transfer Supplement entered into by a Bank and an
assignee, and accepted by the Administrative Agent, in the
form of Exhibit D or such other form as shall be approved by
the Administrative Agent.
"Concentrate Sales Agreements" means all contracts
and agreements with respect to the sale or disposition of
ores or minerals produced by the mining, concentrating and
related operations conducted by FI pursuant to the Contract
of Work, as such agreements may be amended and in effect
from time to time.
"Contract of Work" shall mean the Contract of Work
made December 30, 1991, between the Ministry of Mines of the
Government of the Republic of Indonesia, acting for and on
behalf of the Government of the Republic of Indonesia, and
FI, together with any related Implementation Agreement or
Memorandum of Understanding with such Ministry of Mines
acting on behalf of the Government of the Republic of
Indonesia, as such agreement may be implemented,
supplemented or amended as permitted hereby from time to
time.
"Control" means the possession, directly or
indirectly, of the power to direct or cause the direction of
the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise,
and "Controlling" and "Controlled" shall have meanings
correlative thereto.
"Corporate Group Facility" means this Agreement
and the FCX Credit Agreement.
"Corporate Group Loan Exposure" means the sum of
Loan Exposure plus FCX Credit Agreement Loan Exposure.
"Corporate Group Loans" means the Loans made
hereunder and the FCX Credit Agreement Loans made under the
FCX Credit Agreement.
"Corporate Group Notes" means the Promissory Notes
and the FCX Agreement Notes.
"Credit Event" means the making of a Loan.
"Debt" of any Person means, without duplication,
(a) all obligations of such Person for borrowed money,
(b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all
obligations of such Person for the unearned balance of any
payment received under any contract outstanding for 180
days, (d) all obligations of such Person under conditional
sale or other title retention agreements relating to
property or assets purchased by such Person, (e) all
obligations of such Person issued or assumed as the deferred
purchase price of property or services (excluding trade
accounts payable and accrued obligations incurred in the
ordinary course of business so long as the same are not 180
days overdue or, if overdue, are being contested in good
faith and by appropriate proceedings), (f) all Debt of
others secured by (or for which the holder of such Debt has
an existing right, contingent or otherwise, to be secured
by) any Lien on property owned or acquired by such Person,
whether or not the obligations secured thereby have been
assumed, (g) all Guarantees by such Person of Debt of
others, (h) all Capitalized Lease Obligations of such
Person, (i) all recourse obligations of such Person with
respect to sales of accounts receivable which would be shown
under GAAP on the balance sheet of such Person as a
liability, (j) all obligations of such Person as an account
party (including reimbursement obligations to the issuer of
a letter of credit) in respect of bankers' acceptances and
letters of credit Guaranteeing Debt and (k) all
non-contingent obligations of such Person as an account
party (including reimbursement obligations to the issuer of
a letter of credit) in respect of letters of credit other
than those referred to in clause (j) above. The Debt of any
Person shall include the Debt of any partnership in which
such Person is a general partner but shall exclude
obligations under leases which are characterized as
Operating Leases.
"Default" means any event or condition which upon
the giving of notice or lapse of time or both would become
an Event of Default.
"Depositary" means Chase in its capacity as
Depositary under the FI Trust Agreement for the Sales
Proceeds Account and the Special Account.
"Dollars" or "$" means United States Dollars.
"Domestic Office" means, for any Bank, the
Domestic Office set forth for such Bank on the signature
pages hereof, unless such Bank shall designate a different
Domestic Office by notice in writing to the Administrative
Agent, FI and FCX.
"EBITDA" means, for any fiscal quarter, the sum of
FI's or FCX's, as applicable (a) consolidated net income
(loss) after taxes (before deducting minority interests in
net income (loss) of consolidated subsidiaries, but
disregarding all extraordinary or unusual noncash items in
calculating such net income); (b) consolidated interest paid
or accrued on the Loans to FI or FCX, as applicable, and on
other consolidated Debt of FI (including, in the case of FI,
intercompany Debt owed to FCX) or FCX, as applicable, during
such quarter and deducted in determining consolidated net
income; (c) consolidated depreciation, depletion and
amortization charges deducted in computing FI's or FCX's, as
applicable, consolidated net income; and (d) provision for
income taxes deducted in computing FI's or FCX's, as
applicable, consolidated net income; provided that such
calculations of items (a) through (d) will exclude items
relating to Nonrestricted Subsidiaries.
"EBITDA Ratio" means at the end of any fiscal
quarter, the cumulative sum, for the four consecutive fiscal
quarters ending with such quarter, for FI or FCX, as
applicable, of (a) EBITDA to (b) consolidated interest
expense and capitalized interest paid or accrued on
consolidated Debt of FI (including, in the case of FI,
intercompany Debt owed to FCX) or FCX, as applicable,
including the Corporate Group Loans and outstanding
intercompany Debt, during such period; provided that such
calculations of items (a) and (b) will exclude items
relating to Nonrestricted Subsidiaries.
"environment" shall mean ambient air, surface
water and groundwater (including potable water, navigable
water and wetlands), the land surface or subsurface strata
or as otherwise defined in any Environmental Law.
"Environmental Claim" means any written notice of
violation, claim, demand, order, directive, cost recovery
action or other cause of action by, or on behalf of, any
Governmental Authority or any Person for damages, injunctive
or equitable relief, personal injury (including sickness,
disease or death), Remedial Action costs, tangible or
intangible property damage, natural resource damages,
nuisance, pollution, any adverse effect on the environment
caused by any Hazardous Material, or for fines, penalties or
restrictions, resulting from or based upon: (a) the
existence, or the continuation of the existence, of a
Release (including sudden or non-sudden, accidental or non-
accidental Releases); (b) exposure to any Hazardous
Material; (c) the presence, use, handling, transportation,
storage, treatment or disposal of any Hazardous Material; or
(d) the violation of any Environmental Law or Environmental
Permit.
"Environmental Law" means any and all applicable
treaties, laws, rules, regulations, codes, ordinances,
orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any
Governmental Authority, relating in any way to the
environment, preservation or reclamation of natural
resources, the management, Release or threatened Release of
any Hazardous Material or to health and safety matters (and,
in the case of FI, the equivalent substances to which the
Contract of Work or the environmental Governmental Rules of
Indonesia apply), including the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended
by the Superfund Amendments and Reauthorization Act of 1986,
42 U.S.C. Section 9601 et seq. (collectively "CERCLA"), the
Solid Waste Disposal Act, as amended by the Resource Conser-
vation and Recovery Act of 1976 and Hazardous and Solid
Amendments of 1984, 42 U.S.C. Section 6901 et seq., the
Federal Water Pollution Control Act, as amended by the Clean
Water Act of 1977, 33 U.S.C. Section 1251 et seq., the Clean
Air Act of 1970, as amended 42 U.S.C. Section 7401 et seq.,
the Toxic Substances Control Act of 1976, 15 U.S.C. Section
2601 et seq., the Occupational Safety and Health Act of 1970,
as amended, 29 U.S.C. Section 651 et seq., the Emergency
Planning and Community Right-to-Know Act of 1986, 42 U.S.C.
Section 11001 et seq., the Safe Drinking Water Act of 1974,
as amended, 42 U.S.C. Section 300(f) et seq., the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801 et seq.,
and any similar or implementing state or local law, and all
amendments or regulations promulgated thereunder.
"Environmental Permit" means any permit, approval,
authorization, certificate, license, variance, filing or
permission required by or from any Governmental Authority
pursuant to any Environmental Law.
"Equity Payment" means (i) any dividend on, or
purchase, redemption or other payment, whether in cash or in
kind, in respect of, the capital stock of FCX or FI as
applicable, (ii) purchases by FI of capital stock of FCX and
(iii) purchases by FCX of capital stock of FI.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time.
"ERISA Affiliate" means any trade or business
(whether or not incorporated), that together with FI and
FCX, is treated as a single employer under Section 414(b) or
(c) of the Code or, solely for purposes of Section 302 of
ERISA and Section 412 of the Code, is treated as a single
employer under Section 414 of the Code.
"ERISA Event" means (i) any "reportable event", as
defined in Section 4043 of ERISA or the regulations issued
thereunder, with respect to a Plan; (ii) the adoption of any
amendment to a Plan that would require the provision of
security pursuant to Section 401(a)(29) of the Code; (iii)
the existence with respect to any Plan of an "accumulated
funding deficiency" (as defined in Section 412 of the Code),
whether or not waived; (iv) the incurrence of any liability
under Title IV of ERISA with respect to any Plan or
Multiemployer Plan, other than any liability for
contributions not yet due or payment of premiums not yet
due; (v) the receipt by FI, FCX or any ERISA Affiliate from
the PBGC of any notice relating to the intention of the PBGC
to terminate any Plan or Plans or to appoint a trustee to
administer any Plan; (vi) the receipt by FI, FCX or any
ERISA Affiliate of any notice concerning the imposition of
Withdrawal Liability or a determination that a Multiemployer
Plan is, or is expected to be, insolvent or in
reorganization, within the meaning of Title IV of ERISA; and
(vii) any other similar event or condition with respect to a
Plan or Multiemployer Plan that could reasonably result in
liability of FI or FCX.
"Event of Default" means any Event of Default
defined in Article VII.
"FCX" means Freeport-McMoRan Copper & Gold Inc., a
Delaware corporation.
"FCX Agent" means Chemical as administrative agent
for the FCX Lenders under the FCX Credit Agreement.
"FCX Agreement Notes" means the promissory notes
of FCX issued to the FCX Lenders pursuant to the FCX Credit
Agreement.
"FCX Borrowing Base Debt" means (i) all Debt of
FCX (including Loans to FCX but including only one-half of
the principal amount of Subordinated Debt of FCX and
excluding (x) all Debt, the proceeds of which were on-loaned
to FI giving rise to Debt which constitutes FI Borrowing
Base Debt, and (y) the Guarantee referred to in Section
5.2(g)(ix)), minus FCX Free Cash divided by (ii) FCX's
direct and indirect percentage ownership interest in FI.
"FCX Collateral Agent" means Chemical in its
capacity as FCX Collateral Agent for the Banks, the FI
Lenders, the FM Lenders, the Pel-Tex Bank Lenders, TCB and
the holders of the BV Notes under the FCX Pledge Agreements.
"FCX Credit Agreement" means the Credit Agreement
dated as of June 30, 1995, among FI, FCX, the FCX Lenders,
the FI Trustee, Chemical, as the administrative agent and
Chase, as the documentary agent, as the same may be amended
and in effect from time to time.
"FCX Credit Agreement Loan" means any loan made by
the FCX Lenders pursuant to the FCX Credit Agreement.
"FCX Credit Agreement Loan Exposure" means the
aggregate amount of unpaid principal of all FCX Credit
Agreement Loans made by the FCX Lenders.
"FCX Credit Agreement Total Commitment" means
$200,000,000, the committed amount under the FCX Credit
Agreement, as the same may be permanently terminated or
reduced from time to time.
"FCX Credit Event" means the making of an FCX
Credit Agreement Loan.
"FCX/FMPO Guarantee" means the Guaranty Agreement
dated as of the Fifth Amendment Closing Date, as such
agreement may be amended and in effect from time to time, by
FCX in respect of the Circle C Agreement, the FM Credit
Agreement and the Pel-Tex Agreement (as such term is defined
in the FCX Intercreditor Agreement).
"FCX Free Cash" means the lesser of (i) the then
outstanding FCX Borrowing Base Debt (calculated without
subtracting FCX Free Cash) and (ii) 95% of all amounts above
$30,000,000 held by FCX on an unconsolidated basis in
unencumbered cash or unencumbered Permitted Investments.
"FCX Indonesian Pledge Agreement" means the pledge
agreement substantially in the form of Exhibit E-2 to the
FCX Credit Agreement between FCX and the FCX Collateral
Agent pursuant to which FCX creates a perfected first
priority security interest under Indonesian law in 50.1% (on
a fully diluted basis) of the capital stock of FI for the
ratable benefit of the Banks, the holders of the B.V. Notes,
the FM Lenders, the Pel-Tex Lenders, TCB and the FI Lenders.
"FCX Intercreditor Agreement" means the
Intercreditor Agreement entered into as of the Fifth
Amendment Closing Date in the form of Exhibit H to the FCX
Credit Agreement, among the Administrative Agent on behalf
of the Banks, the FM Agent on behalf of the FM Lenders,
Hibernia National Bank as agent for the Pel-Tex Lenders, the
FCX Agent on behalf of the FCX Lenders, TCB and Chemical, as
FCX Collateral Agent, as such agreement may be further
amended and in effect from time to time.
"FCX Lenders" means the banks party to the FCX
Credit Agreement.
"FCX Pledge Agreements" means the FCX U.S. Pledge
Agreement and the FCX Indonesian Pledge Agreement.
"FCX U.S. Pledge Agreement" means the pledge
agreement substantially in the form of Exhibit E-1 to the
FCX Credit Agreement between FCX and the FCX Collateral
Agent pursuant to which FCX creates a perfected first
priority security interest under U.S. law in 50.1% (on a
fully diluted basis) of the capital stock of FI for the
ratable benefit of the Banks, the holders of the B.V. Notes,
the FM Lenders, the Pel-Tex Lenders, TCB and the FI Lenders.
"FI Agent" means Chemical as agent for the FI
Lenders under this Agreement.
"FI Agreement Notes" means the promissory notes of
FI issued to the FI Lenders pursuant to this Agreement.
"FI Borrowing Base Debt" means, without
duplication, (x) all Debt of FI, including the Corporate
Group Loans to FI but excluding all outstanding indebtedness
under the RTZ Loan Agreement and Subordinated Debt of FI to
the extent (a) in the case of Subordinated Debt from FI to
FCX reflecting preferred stock of FCX without mandatory
redemption provisions prior to the Maturity Date, the
principal and interest on such Subordinated Debt was
deducted from cash flows during the remaining period until
the Maturity Date in the most recent Borrowing Base
Certificate and (b) in the case of other Subordinated Debt
of FI, all scheduled principal and interest thereon were
deducted from cash flows in the most recent Borrowing Base
Certificate (provided further that if principal and interest
on any Subordinated Debt is not reflected in the most recent
Borrowing Base Certificate, 50% of the principal amount of
such Subordinated Debt shall be included as FI Borrowing
Base Debt), minus (y) FI Free Cash.
"FI Collateral and Rights" has the meaning
assigned to such term in Section 5.2(o).
"FI Free Cash" means the lesser of (i) the then
outstanding FI Borrowing Base Debt (calculated without
subtracting FI Free Cash) and (ii) 95% of all amounts above
$30,000,000 held by FI on an unconsolidated basis in
unencumbered cash or unencumbered Permitted Investments.
"FI Intercreditor Agreement" means the
Intercreditor Agreement entered into as of the RTZ Closing
Date in the form to be agreed pursuant to Section 10.17
among the Administrative Agent on behalf of the Banks, the
FCX Agent on behalf of the FCX Lenders, RTZ Lender, PT-RTZ
and the FI Trustee, as such agreement may be further amended
and in effect from time to time.
"FI Obligations" has the meaning assigned to such
term in Section 9.1.
"FI Product" means ores or minerals produced by
the FI Project or otherwise obtained from the Mining Area
(as defined in the Contract of Work) and any kinds of
products, including, without limitation, concentrates,
produced from such ores or minerals.
"FI Project" means the mining, concentrating and
related operations conducted or to be conducted by FI in
Irian Jaya, Indonesia, pursuant to the Contract of Work.
"FI Receivables Purchase Agreement" means any
agreement entered into by FI with respect to the sale by FI
of accounts receivable.
"FI Security Documents" means the FI Trust
Agreement, the Surat Kuasa, the Fiduciary Transfer, the
Fiduciary Assignment, the Fiduciary Power and all Uniform
Commercial Code financing statements and their Indonesian
equivalents required to be filed hereunder or under the FI
Security Documents.
"FI Trust Agreement" means the Interim FI Trust
Agreement or the Final FI Trust Agreement, as then
applicable.
"FI Trustee" means First Trust of New York,
National Association, or any successor trustee, as trustee
for the Banks and the FCX Lenders pursuant to the FI Trust
Agreement and, in such capacity, as security agent for the
Banks and the FCX Lenders under the FI Security Documents.
"Fiduciary Assignment" means the Interim Fiduciary
Assignment or the Final Fiduciary Assignment, as then
applicable.
"Fiduciary Power" means the Interim Fiduciary
Power or the Final Fiduciary Power, as then applicable.
"Fiduciary Transfer" means the Interim Fiduciary
Transfer or the Final Fiduciary Transfer, as then
applicable.
"Fifth Amendment Closing Date" has the meaning
assigned to such term in Section 2(b) of the Amendment
Agreement.
"Final FI Trust Agreement" means the Trust
Agreement dated as of May 15, 1970, among FI, PT-RTZ, the
Depositary and the FI Trustee (as successor to Morgan
Guaranty Trust Company of New York), as amended in the form
to be agreed pursuant to Section 10.17 and as attached as
Exhibit G-1 to the FCX Credit Agreement as of the RTZ
Closing Date and as further amended and in effect from time
to time thereafter.
"Final Fiduciary Assignment" means the Fiduciary
Assignment of Accounts Receivable (the Penyerahan Hak Atas
Tagihan) dated December 30, 1991, granted by FI to the FI
Trustee, as the same may be amended in the form to be agreed
pursuant to Section 10.17 and as attached as Exhibit G-5 to
the FCX Credit Agreement as of the RTZ Closing Date and as
further amended and in effect from time to time thereafter.
"Final Fiduciary Power" means the Power of
Attorney to Establish Fiduciary Transfer (Kuasa Untuk
Memasang Penyerahan Hak Milik Fidusia) dated December 30,
1991, granted by FI to the FI Trustee (the "Amended
Fiduciary Power"), as the same may be amended in the form to
be agreed pursuant to Section 10.17 and as attached as
Exhibit G-4 to the FCX Credit Agreement as of the RTZ
Closing Date and as further amended and in effect from time
to time thereafter.
"Final Fiduciary Transfer" means the Fiduciary
Transfer of Assets (Penyerahan Hak Secara Fidusia) dated
December 30, 1991, granted by FI to the FI Trustee, as the
same may be amended and in the form to be agreed pursuant to
Section 10.17 and as attached as Exhibit G-3 to the FCX
Credit Agreement as of the RTZ Closing Date and as further
amended and in effect from time to time thereafter.
"Final Surat Kuasa" means the Surat Kuasa (Power
of Attorney) dated December 30, 1991, granted by FI to the
FI Trustee as the same may be amended in the form to be
agreed pursuant to Section 10.17 and as attached as
Exhibit G-2 to the FCX Credit Agreement as of the RTZ
Closing Date and as further amended and in effect from time
to time thereafter.
"Financial Officer" of any corporation means the
principal financial officer, principal accounting officer,
treasurer, assistant treasurer or controller of such corpo-
ration.
"FM Agent" means Chemical as administrative agent
for the FM Lenders.
"FM Credit Agreement" means the Credit Agreement
dated as of June 30, 1995, among FM Properties, FTX, FCX,
the banks party thereto, the FM Agent and Chase, as
documentary agent for such banks, as the same may be amended
or replaced from time to time.
"FM Lenders" means the banks party to the FM
Credit Agreement.
"FM Properties" means FM Properties Operating Co.,
a Delaware general partnership whose partners are FTX and FM
Properties, Inc.
"FRP" means Freeport-McMoRan Resource Partners,
Limited Partnership, a Delaware limited partnership.
"FTX" means Freeport-McMoRan Inc., a Delaware
corporation.
"GAAP" has the meaning assigned to such term in
Section 1.2.
"Governmental Authority" means any United States
or Indonesian Federal, state, local or any foreign court or
governmental agency, authority, instrumentality or
regulatory body.
"Governmental Rule" means any statute, law,
treaty, rule, code, ordinance, regulation, permit,
certificate or order of any Governmental Authority or any
judgment, decree, injunction, writ, order or like action of
any court, arbitrator or other judicial or quasijudicial
tribunal.
"Guarantee" means, with respect to any Person, any
obligation, contingent or otherwise, of such Person
guaranteeing or having the economic effect of guaranteeing
any Debt or obligation of any other Person in any manner,
whether directly or indirectly, and including, without
limitation, any agreement or obligation (i) to pay dividends
or other distributions upon the stock of such other Person,
or any obligation of such other Person, direct or indirect,
(ii) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or obligation or to
purchase (or advance or supply funds for the purchase of)
any security for the payment of such Debt, obligation,
dividend or distribution, (iii) to purchase or lease
property, securities or services for the purpose of assuring
the owner of such Debt or obligation or the holder of such
stock of the payment of such Debt, obligation, dividend or
distribution including, without limitation, any take-or-pay
contract or agreement to buy a minimum amount or quantity of
production or to provide an operating subsidy which, in each
case, is utilized for a third party financing, or (iv) to
maintain working capital, equity capital or any other
financial statement condition of the primary obligor, so as
to enable the primary obligor to pay such Debt, obligation,
dividend or distribution; provided, however, that the term
Guarantee shall not include any endorsement for collection
or deposit in the ordinary course of business.
"Hazardous Materials" means all explosive or
radioactive substances or wastes, hazardous or toxic
substances or wastes, pollutants, solid, liquid or gaseous
wastes, including petroleum or petroleum distillates,
asbestos or asbestos containing materials, polychlorinated
biphenyls ("PCBs") or PCB-containing materials or equipment,
radon gas, infectious or medical wastes and all other
substances or wastes of any nature regulated pursuant to any
Environmental Law.
"Hedge Agreement" means any interest rate,
currency or commodity swap, cap, floor or collar agreement
or similar hedging arrangement providing for the transfer or
mitigation of interest rate, commodity price or currency
value or exchange rate risks, either generally or under
specific contingencies.
"Implementation Agreement" means the
Implementation Agreement dated as of May 2, 1995, between
FCX and RTZ as approved by the Banks (it being understood
and agreed that the form of the documents attached thereto
as Exhibits, including without limitation the Participation
Agreement, the RTZ Loan Agreement and any assignment of FI's
interest in the Contract of Work or the FI Project, are
subject to the approval of the Banks pursuant to Section
10.17) and in effect on the Fifth Amendment Closing Date and
as amended from time to time as permitted by Section 5.3.
"Index Debt" means the senior, unsecured, non-
credit enhanced, long-term indebtedness for borrowed money
of FCX, or if no such indebtedness of FCX is then rated by
Moody's or S&P, the B.V. Notes so long as the B.V. Notes are
rated by Moody's and S&P.
"Indocopper Shareholders Agreement" means the
Amended and Restated Shareholders Agreement dated as of
November 12, 1992, by and among P.T. Indocopper Investama
Corporation, FCX, certain individuals and P.T. Bakrie
Investindo.
"Indonesian Taxes" means all present and future
income, franchise, stamp, property and other taxes, levies,
imposts, deductions, charges, compulsory loans and
withholdings whatsoever imposed, assessed, levied or
collected by Indonesia or any political subdivision or
taxing authority thereof or therein or any association or
organization of which Indonesia may be a member (but
excluding taxes or other similar governmental charges, fees
or assessments imposed upon the net income of, or any
franchise taxes imposed on, the Administrative Agent, the FI
Trustee or any Bank (or Transferee) which has its principal
office in Indonesia or a branch office in Indonesia, unless
and to the extent attributable to the enforcement of any
rights hereunder or under any FI Security Document with
respect to an Event of Default), together with interest
thereon and penalties, fines and surcharges and other
liabilities with respect thereto, if any, on or in respect
of this Agreement, the Loans to FI, the FI Security
Documents, the Assigned Agreements or the Corporate Group
Notes of FI, the execution enforcement, registration,
recordation, notarization, or other formalization, of any
thereof, and any payments of principal, interest, charges,
fees or other amounts made on, under or in respect of any
thereof.
"Interest Payment Date" means (i) as to any
Reference Rate Loan, the next succeeding March 31, June 30,
September 30 or December 31 (subject to Section 3.16), or if
earlier, the Maturity Date, and (ii) as to any LIBO Rate
Loan, the last day of the Interest Period applicable to such
Loan (and, in the case of any Interest Period of more than
three months' duration, the date that would be the last day
of such Interest Period if such Interest Period were of
three months' duration) and the date of any continuation or
conversion of such Loan as or into a Loan of the same or a
different type.
"Interest Period" means (i) as to any LIBO Rate
Loan, the period commencing on the date of such LIBO Rate
Loan or on the last day of the immediately preceding
Interest Period applicable to such Loan, as the case may be,
and ending on the numerically corresponding day (or, if
there is no numerically corresponding day, on the last day)
in the calendar month that is 1, 2, 3 or 6 months
thereafter, as FI may elect, and (ii) as to any Reference
Rate Loan, the period commencing on the date of such
Reference Rate Loan or on the last day of the immediately
preceding Interest Period applicable to such Loan, as the
case may be, and ending on the earliest of (x) the next
succeeding March 31, June 30, September 30 or December 31,
(y) the Maturity Date and (z) the date such Loan is prepaid
or converted as permitted hereby; provided, however, that
(1) if any Interest Period would end on a day that shall not
be a Business Day, such Interest Period shall be extended to
the next succeeding Business Day unless, with respect to
LIBO Rate Loans only, such next succeeding Business Day
would fall in the next calendar month, in which case such
Interest Period shall end on the next preceding Business
Day, (2) no Interest Period with respect to any Loan shall
end later than the Maturity Date and (3) interest shall
accrue from and including the first day of an Interest
Period to but excluding the last day of such Interest
Period.
"Interim FI Trust Agreement" means the Trust
Agreement dated as of May 15, 1970, among FI, the Depositary
and the FI Trustee (as successor to Morgan Guaranty Trust
Company of New York), as amended in the form of Exhibit F-1
to the FCX Credit Agreement as of the Fifth Amendment
Closing Date and as further amended and in effect from time
to time prior to the RTZ Closing Date.
"Interim Fiduciary Assignment" means the Fiduciary
Assignment of Accounts Receivable (the Penyerahan Hak Atas
Tagihan) dated December 30, 1991, granted by FI to the FI
Trustee, as the same may be amended in the form of
Exhibit F-5 to the FCX Credit Agreement as of the Fifth
Amendment Closing Date and as further amended and in effect
from time to time prior to the RTZ Closing Date.
"Interim Fiduciary Power" means the Power of
Attorney to Establish Fiduciary Transfer (Kuasa Untuk
Memasang Penyerahan Hak Milik Fidusia) dated December 30,
1991, granted by FI to the FI Trustee (the "Amended
Fiduciary Power"), as the same may be amended in the form of
Exhibit F-4 to the FCX Credit Agreement as of the Fifth
Amendment Closing Date and as further amended and in effect
from time to time prior to the RTZ Closing Date.
"Interim Fiduciary Transfer" means the Fiduciary
Transfer of Assets (Penyerahan Hak Secara Fidusia) dated
December 30, 1991, granted by FI to the FI Trustee, as the
same may be amended and in the form of Exhibit F-3 to the
FCX Credit Agreement as of the Fifth Amendment Closing Date
and as further amended and in effect from time to time prior
to the RTZ Closing Date.
"Interim Surat Kuasa" means the Surat Kuasa (Power
of Attorney) dated December 30, 1991, granted by FI to the
FI Trustee as the same may be amended in the form of
Exhibit F-2 to the FCX Credit Agreement as of the Fifth
Amendment Closing Date and as further amended and in effect
from time to time prior to the RTZ Closing Date.
"Jaya Power" means P.T. Puncakjaya Power, a
limited liability company organized under Indonesian law,
the shareholders of which are FI and Affiliates of Duke
Energy Corp., PowerLink Corporation and P.T. Austindo
Nusantara Jaya.
"LIBO Rate" means, with respect to any LIBO Rate
Loan for any Interest Period, an interest rate per annum
(rounded upwards, if not already a whole multiple of 1/100
of 1%, to the next higher 1/100 of 1%) equal to the
arithmetic average of the respective rates per annum at
which Dollar deposits approximately equal in principal
amount to the Reference Banks' portions of such LIBO Rate
Loan and for a maturity equal to the applicable Interest
Period are offered in immediately available funds to the
principal London offices of the Reference Banks in the
London Interbank Market at approximately 11:00 a.m., London
time, two Business Days prior to the commencement of such
Interest Period.
"LIBO Rate Loan" means any Loan for which interest
is determined, in accordance with the provisions hereof, at
the Applicable LIBO Rate.
"LIBOR Office" means, for any Bank, the LIBOR
Office set forth for such Bank on the signature pages hereof
or as otherwise notified in writing to the Agent and FI,
unless such Bank shall designate a different LIBOR Office by
notice in writing to the Administrative Agent and FI.
"Lien" means with respect to any asset, (a) a
mortgage, deed of trust, lien, pledge, encumbrance, charge
or security interest in or on such asset, (b) the interest
of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement
relating to such asset, (c) in the case of securities, any
purchase option, call or similar right of a third party with
respect to such securities and (d) other encumbrances of any
kind, including, without limitation, production payment
obligations.
"Loan" means any loan made pursuant to
Section 3.1.
"Loan Documents" means the Amendment Agreement,
the Corporate Group Facilities, the Corporate Group Notes,
the FCX Pledge Agreements, the FCX Intercreditor Agreement,
the FI Intercreditor Agreement, the FI Security Documents
and all other agreements, certificates and instruments now
or hereafter entered into in connection with any of the
foregoing, in each case as amended and modified from time to
time.
"Loan Exposure" means the aggregate amount of
unpaid principal of all Loans made by the Banks.
"Major Concentrate Sales Agreement" means any
Concentrate Sales Agreement with aggregate sales during the
term thereof of at least $75,000,000.
"Margin Stock" has the meaning assigned to such
term in Regulation U.
"Material Adverse Effect" means (a) a materially
adverse effect on the business, assets, operations,
prospects or condition, financial or otherwise, of FI or
FCX, as applicable, and their Subsidiaries taken as a whole,
(b) material impairment of the ability of FI or FCX, as
applicable, or any of their Subsidiaries to perform any of
its obligations under any Loan Document to which it is or
will be a party or (c) material impairment of the rights of
or benefits available to the Banks under any Loan Document.
"Maturity Date" means December 31, 1999, or, if
earlier, the date of termination of the Commitments pursuant
to the terms hereof.
"Memorandum of Understanding" means the Memorandum
of Understanding dated as of December 27, 1991, between the
Ministry of Mines and Energy of the Government of the
Republic of Indonesia, and FI as amended, modified or
supplemented as permitted hereby from time to time.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a multiemployer plan as
defined in Section 4001(a)(3) of ERISA to which FI, FCX or
any ERISA Affiliate is making or accruing an obligation to
make contributions, or has within any of the preceding five
plan years made or accrued an obligation to make
contributions.
"Net Proceeds" means (i) the gross fair market
value of the consideration or other amounts payable to or
receivable by FI or any Restricted Subsidiary of FI in
respect of any Net Proceeds Transaction less (ii) the
amount, if any, of all taxes (but only to the extent such
Person reasonably estimates that such taxes will be paid on
the date of the next tax filing by such Person or such
affiliate of such Person), and reasonable and customary
fees, commissions, costs and other expenses (other than
those payable to FI or FCX or any Restricted Subsidiary)
which are incurred in connection with such Net Proceeds
Transaction and are payable by the seller or the transferor
of the assets or property subject to such Net Proceeds
Transaction, but only to the extent not already deducted in
arriving at the amount referred to in clause (i), and less
(iii) amounts used within 120 days from the date of closing
or effectiveness of the Net Proceeds Transaction by the
seller or transferor to purchase other assets used in the
business of it and its Wholly Owned Restricted Subsidiaries
and not pledged or encumbered to any other Person.
"Net Proceeds Transactions" means any sales,
transfers, distributions or other dispositions (including by
merger or consolidation) of assets or properties (including
any capital or other equity interests) owned by FI or its
Restricted Subsidiaries, but excluding (a) the ALatieF
Transaction, the PFT Transaction, the P&O Transaction, the
Airfast Transaction and the Waste Water Transaction, (b)
sale and leaseback transactions permitted by
Section 5.2(g)(vi), (c) dispositions of obsolete or worn-out
property or real estate not used or useful in its business,
(d) permitted transfers of assets from FI or FCX to a
Restricted Subsidiary or from a Restricted Subsidiary to FI
or FCX or another Restricted Subsidiary, (e) sales or other
dispositions of Nonrestricted Subsidiaries or interests
therein, (f) sales or other dispositions by Nonrestricted
Subsidiaries of their assets, (g) direct sales of equity by
FI or a Restricted Subsidiary of FI, (h) sales of accounts
receivable, (i) transfers of assets pursuant to permitted
sale and leaseback transactions and (j) the granting of the
RTZ Interests to PT-RTZ as contemplated by the Participation
Agreement.
"1994 Form l0-K" has the meaning assigned to such
term in Section 4.1(e).
"Nonrestricted Subsidiary" means (i) any of the
Subsidiaries listed on Schedule III to the FCX Credit
Agreement as a Nonrestricted Subsidiary, (ii) any Subsidiary
of any Nonrestricted Subsidiary and (iii) any surviving
corporation (other than FI or FCX or a Restricted
Subsidiary) into which any of such corporations referred to
in clause (i) or (ii) is merged or consolidated, subject to
Section 5.2(c), and (iv) any Subsidiary organized after the
date of this Agreement for the purpose of acquiring the
stock or assets of another Person or for start-up ventures
or exploration programs or activities and designated as a
Nonrestricted Subsidiary by FCX at the time of its
organization. By written notice to the Administrative
Agent, FCX may (x) declare any Nonrestricted Subsidiary to
be a Restricted Subsidiary and such former Nonrestricted
Subsidiary shall thereafter be deemed to be a Restricted
Subsidiary for all purposes of this Agreement or (y) at any
time other than when a Default or Event of Default has
occurred and is continuing or would exist after giving
effect to such declaration, in any fiscal year, declare one
or more Restricted Subsidiaries, the interest of FCX in all
of which has an equity value or loan investment of less than
$5,000,000 in the aggregate, to be a Nonrestricted
Subsidiary and any such former Restricted Subsidiary shall
thereafter be deemed to be a Nonrestricted Subsidiary for
all purposes of this Agreement.
"Operating Lease" means any lease other than a
lease giving rise to a Capitalized Lease Obligation.
"Participation Agreement" means the Participation
Agreement between FI and PT-RTZ as approved by the Banks
pursuant to Section 10.17 and in effect on the RTZ Closing
Date and as amended from time to time as permitted by
Section 5.3.
"PBGC" means the Pension Benefit Guaranty Corpora-
tion referred to and defined in ERISA.
"Pel-Tex Lenders" has the meaning assigned to such
term in the FCX Intercreditor Agreement.
"Permitted Investments" means (a) certificates of
deposit of, or other bank accounts with, banks (or with
their branches) having a short-term deposit rating issued by
Moody's of P-l; (b) investments in readily marketable money
market funds having assets in excess of one billion dollars,
which assets have an average life of less than one year and
an average quality of at least "A" as rated by S&P or
Moody's; and (c) commercial paper rated A-1 by S&P or P-l by
Moody's.
"Permitted Secured Hedge" means any Hedge
Agreement between FI or FCX and any Bank that shall be
ratably secured pursuant to (x) the FCX Pledge Agreements,
in the case of such Hedge Agreements with FCX, or (y) in the
case of any such Hedge Agreements with FI, the FI Security
Documents.
"Person" means any natural person, corporation,
partnership, joint venture, trust, incorporated or
unincorporated association, joint stock company, government
(or an agency or political subdivision thereof) or other
entity of any kind.
"PFT Assets" means certain specified power
generation and transmission assets sold by FI to Jaya Power
pursuant to the PFT Documents.
"PFT Documents" means the agreements governing the
PFT Transaction as in effect on the Fifth Amendment Closing
Date and as amended from time to time as permitted by
Section 5.2(o).
"PFT Obligations" mean all the obligations of FI
relating to the PFT Transaction.
"PFT Transaction" means FI's sale of the PFT
Assets to Jaya Power, the related financing transaction for
such purchase, the entering into various contracts relating
to the supply and purchase of the electric power generated
from the PFT Assets and the making by FI an equity
investment of up to $17,750,000 in Jaya Power, all
substantially on the terms described in the PFT Documents.
"Plan" means any employee pension benefit plan
(other than a Multiemployer Plan) which is subject to the
provisions of Title IV of ERISA or Section 412 of the Code
and in respect of which FI, FCX or any ERISA Affiliate is
(or, if such plan were terminated, would under Section 4069
of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Policies", with respect to the Administrative
Agent and any Bank in connection with determinations
relating to the Borrowing Base, means the normal policy
guidelines on price parameters, cost escalations and
discount and other factors and technical assumptions
customarily used by the Administrative Agent or such Bank in
evaluating energy and natural resource-related credits.
"Portfolio Investments" means customary portfolio
cash management investments made pursuant to prudent cash
management practices.
"Power Facilities Transfer" means, collectively,
each transfer by FI of electric power generation and
transmission facilities with arrangements providing for the
continued supply of electric power to the FI Project, all as
required by the PFT Documents.
"P&O" means ALatieF P&O Port Development Company,
a joint venture company incorporated in Indonesia with
shareholdings by P&O Australia Limited, ALatieF and certain
other Persons.
"P&O Assets" means certain specified port
facilities, construction and maintenance-related assets
transferred by FI to P&O pursuant to the P&O Documents.
"P&O Documents" means the agreements governing the
sale and leaseback transaction between FI and P&O as in
effect on the Fifth Amendment Closing Date and as amended
from time to time as permitted by Section 5.2(o).
"P&O Obligations" mean all obligations of FI
relating to the P&O Transaction.
"P&O Transaction" means FI's sale of the P&O
Assets to P&O, the entering into of various contracts
relating to the use by FI of the P&O Assets and the related
financing, all substantially as provided in the P&O
Documents.
"Promissory Notes" means the promissory notes of
FI and FCX referred to in Section 3.4.
"Properties" has the meaning assigned such term in
Section 4.1(n)(1).
"PT-RTZ" means a limited liability company
organized under the laws of Indonesia and a wholly owned
subsidiary of RTZ.
"Reference Banks" means Chemical and Chase.
"Reference Rate Loan" means any Loan for which
interest is determined, in accordance with the provisions
hereof, at the Applicable Reference Rate.
"Register" has the meaning assigned such term in
Section 10.3(d).
"Regulation D" means Regulation D of the Board as
from time to time in effect and all official rulings and
interpretations thereunder or thereof.
"Regulation G" means Regulation G of the Board as
from time to time in effect and all official rulings and
interpretations thereunder or thereof.
"Regulation U" means Regulation U of the Board as
from time to time in effect and all official rulings and
interpretations thereunder or thereof.
"Regulation X" means Regulation X of the Board as
from time to time in effect and all official rulings and
interpretations thereunder or thereof.
"Release" means any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping, disposing, depositing,
dispersing, emanating or migrating of any Hazardous Material
in, into, onto or through the environment.
"Remedial Action" means (a) "remedial action" as
such term is defined in CERCLA, 42 U.S.C. Section 9601(24),
and (b) all other actions required by any Governmental
Authority or voluntarily undertaken to: (i) cleanup, remove,
treat, abate or in any other way address any Hazardous
Material in the environment; (ii) prevent the Release or
threat of Release, or minimize the further Release of any
Hazardous Material so it does not migrate or endanger or
threaten to endanger public health, welfare or the
environment; or (iii) perform studies and investigations in
connection with, or as a precondition to, (i) or (ii) above.
"Required Banks" means, subject to Section
10.7(b), at any time Banks having Commitments representing
at least 66-2/3% of the aggregate Commitments hereunder or,
if the Commitments have been terminated, Banks holding Loans
representing at least 66 2/3% of the aggregate principal
amount of the Loans.
"Responsible Officer" of any corporation means any
executive officer or Financial Officer of such corporation
and any other officer or similar official thereof responsi-
ble for the administration of the obligations of such corpo-
ration in respect of this Agreement.
"Restricted Subsidiary" means FI and any other
Subsidiary of FCX or FI that is not a Nonrestricted
Subsidiary.
"Restructuring" means the transactions between FTX
and FCX (on the one hand) and RTZ, RTZ Indonesia and RTZ
America (on the other hand) pursuant to the Stock Purchase
Agreement, and the distribution on a generally tax free
basis (subject to exceptions approved by the Administrative
Agent and the Documentary Agent) by FTX to its shareholders
of the shares of FCX, thereby leaving FTX as a holding
company for FRP and leaving FCX as the publicly held holding
company for FI, together with arrangements required by or
effectuated in connection with such distribution with
respect to existing contractual agreements and indebtedness
of FTX, FRP, FCX and FI, all on terms substantially the same
as those disclosed in writing to the Banks prior to the
Fifth Amendment Closing Date or otherwise satisfactory to
the Required Banks (including all tax, accounting, corporate
and partnership matters).
"RTZ" means the RTZ Corporation PLC, a company
organized under the laws of England.
"RTZ America" means RTZ America, Inc., a Delaware
corporation and a wholly owned subsidiary of RTZ.
"RTZ Closing Date" has the meaning assigned to
such term in Section 6.1(c).
"RTZ Collateral" means FI's 60% share of
Incremental Expansion Cashflow (as defined in the
Participation Agreement) pledged to RTZ Lender as
contemplated by the RTZ Loan Agreement.
"RTZ Indonesia" means RTZ Indonesia Limited, a
company organized under the laws of England and a wholly
owned subsidiary of RTZ.
"RTZ Interests" means the interests of PT-RTZ in
the Contract of Work and in the Joint Operations, Sole Risk
Programmes of RTZ and the Joint Account Assets (as such
terms are defined in the Participation Agreement) as
permitted by Section 5.3, the FI Intercreditor Agreement and
the FI Trust Agreement.
"RTZ Lender" means a company to be organized
pursuant to the Participation Agreement under the laws of
England and a wholly owned subsidiary of RTZ.
"RTZ Loan Agreement" means the Loan Agreement
between the RTZ Lender and FI as approved by the Banks
pursuant to Section 10.17 and in effect on the RTZ Closing
Date and as amended from time to time as permitted by
Section 5.3.
"RTZ Transactions" means the transactions
contemplated by the Implementation Agreement, the
Participation Agreement and the RTZ Loan Agreement as
described in Schedule VII to the FCX Credit Agreement and as
otherwise approved by the Banks pursuant to Section 10.17.
"Sales Proceeds Account" has the meaning assigned
to such term in the FI Trust Agreement.
"S&P" means Standard & Poor's Ratings Group, a
division of McGraw-Hill, Inc.
"SEC" means the Securities and Exchange Commis-
sion.
"Special Account" has the meaning assigned to such
term in the FI Trust Agreement.
"Specified Assets" means those assets released
from the Lien of the FI Security Documents and transferred
by FI as required by the Specified Documents.
"Specified Documents" mean the Airfast Documents,
the ALatieF-FI Documents, the Caterpillar Documents, the PFT
Documents, the P&O Documents and the Waste Water Documents.
"Specified Obligations" mean the Airfast
Obligations, the ALatieF-FI Obligations, the Caterpillar
Obligations, the PFT Obligations, the P&O Obligations and
the Waste Water Obligations.
"Specified Transactions" mean the Airfast
Transaction, the ALatieF-FI Transaction, the Caterpillar
Transaction, the PFT Transaction, the P&O Transaction and
the Waste Water Transaction.
"Statutory Reserves" means a fraction (expressed
as a decimal), the numerator of which is the number one and
the denominator of which is the number one minus the
aggregate of the maximum reserve percentages (including,
without limitation, any marginal, special, emergency or
supplemental reserves) expressed as a decimal established by
the Board and any other banking authority, domestic or
foreign, to which the Administrative Agent or any Bank
(including any branch, Affiliate, or other funding office
making or holding a Loan) is subject (a) with respect to the
Base CD Rate (as such term is used in the definition of
"Alternate Base Rate"), for new negotiable nonpersonal time
deposits in Dollars of over $100,000 with maturities
approximately equal to the applicable Interest Period, and
(b) with respect to the LIBO Rate, for Eurocurrency
Liabilities (as defined in Regulation D). Such reserve
percentages shall include, without limitation, those imposed
under Regulation D. Statutory Reserves shall be adjusted
automatically on and as of the effective date of any change
in any reserve percentage.
"Stock Purchase Agreement" means the Agreement
dated as of May 2, 1995, by and between FTX, FCX, RTZ, RTZ
Indonesia and RTZ America as approved by the Banks and in
effect on the Fifth Amendment Closing Date and as amended
from time to time as permitted by Section 5.3.
"Subordinated Debt" means Debt of FI which is
subordinated to the Corporate Group Loans on terms approved
by the Administrative Agent.
"Subsidiary" means as to any Person, any
corporation at least a majority of whose securities having
ordinary voting power for the election of directors (other
than securities having such power only by reason of the
happening of a contingency) are at the time owned by such
Person and/or one or more other Subsidiaries of such Person
and any partnership (other than joint ventures for which the
intention under the applicable agreements, including
operating agreements, if any, is that such joint ventures be
partnerships solely for purposes of the Code) in which such
Person or a Subsidiary of such Person is a general partner;
provided that unless otherwise specified, "Subsidiary" means
a Subsidiary of FCX.
"Surat Kuasa" means the Interim Surat Kuasa or the
Final Surat Kuasa, as then applicable.
"TCB" means Texas Commerce Bank National
Association, a national banking association.
"Third Party" has the meaning assigned to such
term in Section 5.2(l).
"Total Commitment" means the sum of all the then
effective Commitments.
"Transfer Effective Date" has the meaning assigned
to such term in each Commitment Transfer Supplement.
"Transferee" means any Participant or Purchasing
Bank, as such terms are defined in Section 10.3.
"Waste Water" means P.T. Agumar Rust Indonesia, a
joint venture company incorporated in Indonesia with
shareholdings by Rust International Holding Inc. and Agumar
Lingkungan Mulia Company.
"Waste Water Assets" means certain specified waste
water facilities and assets to be transferred to Waste
Water, which assets are to be released from the Lien of the
FI Security Documents as contemplated by Section 5.2(r) and
Section 8.1(j).
"Waste Water Documents" means the agreements
governing the sale and leaseback transaction between FI and
Waste Water on the terms approved by the Administrative
Agent pursuant to the Section 5.2(r), and as amended from
time to time as permitted by Section 5.2(o).
"Waste Water Obligations" mean all obligations of
FI relating to the Waste Water Transaction.
"Waste Water Transaction" means FI's sale of the
Waste Water Assets to Waste Water, the entering into of
various contracts relating to the use by FI of the Waste
Water Assets and the related financing, all substantially as
provided in the Waste Water Documents.
"Wholly Owned Restricted Subsidiary" means any
Subsidiary all of the stock of which is at the time owned by
FCX, FI and/or one or more other Wholly Owned Restricted
Subsidiaries of either of them.
"Withdrawal Liability" means liability to a
Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.2. Accounting Terms. Except as other-
wise herein specifically provided, each accounting term used
herein shall have the meaning given it under United States
generally accepted accounting principles in effect from time
to time (with such changes thereto as are approved or
concurred in from time to time by FI's or FCX's independent
public accountants, as applicable) applied on a basis
consistent with those used in preparing the financial
statements referred to in Section 5.1(a) ("GAAP"); provided,
however, that each reference in Section 5.2 hereof, or in
the definition of any term used in Section 5.2 hereof, to
GAAP shall mean generally accepted accounting principles as
in effect on the Fifth Amendment Closing Date and as applied
by FI or FCX in preparing the financial statements referred
to in Section 4.1(e). In the event any change in GAAP
materially affects any provision of this Agreement, the
Banks, FCX and FI agree that they shall negotiate in good
faith in order to amend the affected provisions in such a
way as will restore the parties to their respective
positions prior to such change, and until such amendment
becomes effective FCX's and FI's compliance with such
provisions shall be determined on the basis of GAAP as in
effect immediately before such change in GAAP became
effective.
SECTION 1.3. Section, Article, Exhibit and
Schedule References, etc. Unless otherwise stated, Section,
Article, Exhibit and Schedule references made herein are to
Sections, Articles, Exhibits or Schedules, as the case may
be, of this Agreement. Whenever the context may require,
any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes"
and "including" shall be deemed to be followed by the phrase
"without limitation". Except as otherwise expressly
provided herein, any reference in this Agreement to any Loan
Document shall mean such document as amended, restated,
supplemented or otherwise modified from time to time.
ARTICLE II
Borrowing Base Determinations
SECTION 2.1. Annual Determination of Borrowing
Base. As of the Fifth Amendment Closing Date, and until the
next redetermination of the Borrowing Base, the Borrowing
Base shall be $2,000,000,000. FI shall, on or prior to
April 1 in each year commencing with 1996, furnish to each
Bank a Borrowing Base Certificate dated as of April 1 of
such year. Such Borrowing Base Certificate shall have
attached thereto (A) a report on the operations, results and
outlook for the FI Project prepared by FI and satisfactory
to the Administrative Agent and (B) a schedule setting forth
the projected ownership interest of FI and FCX in each of
the Restricted Subsidiaries and FCX's projected ownership
interest in FI and the projected cash flow associated with
the FI Project and the assets of each of the Restricted
Subsidiaries of FI (an update of such schedule shall also be
required to be delivered to each Bank on or prior to each
Borrowing Base redetermination). On or prior to the May 1
following the receipt by each Bank of such annual Borrowing
Base Certificate, the Administrative Agent shall determine,
based upon the information (including information as to
projected cash flows) contained in such Borrowing Base
Certificate and the reports and schedules attached thereto
and on the Administrative Agent's Policies, a borrowing base
calculation for FI (the "Borrowing Base") based on the
projected future cash flow associated with the assets of FI.
The recommended Borrowing Base as determined by the
Administrative Agent shall be promptly communicated to the
Banks together with the list of the Nonrestricted
Subsidiaries (if any) included in such calculation. The
Banks shall promptly consider and approve or disapprove the
recommended Borrowing Base in writing and upon approval of
such recommendations by the Required Banks by written notice
to the Administrative Agent, such approved amount shall
constitute the then effective Borrowing Base. In the event
that the Administrative Agent's recommended Borrowing Base
is not approved by the Required Banks, the Administrative
Agent shall work with the Banks to agree upon a revised
Borrowing Base acceptable to Banks sufficient to constitute
the Required Banks. Such determination of the Borrowing
Base by the Administrative Agent and such approval or
nonapproval by the Required Banks of the effective Borrowing
Base shall be based on their respective Policies. Each such
determination (and each redetermination as provided for
below) of the Borrowing Base shall remain in effect until
the next succeeding calculation and approval of the
Borrowing Base in the manner provided in this Article II.
SECTION 2.2. Redetermination of Borrowing Base.
It is hereby acknowledged and agreed by FI if at any time
(I) FI does not furnish a Borrowing Base Certificate on the
required date and as required by Section 2.1, (II) as
provided in Section 2.3, after giving effect to a proposed
Equity Payment, the Available Borrowing Base shall be below
$125,000,000, (III) FCX, FI or any Restricted Subsidiary
shall be required to make any mandatory prepayment,
acquisition, repurchase or defeasance of the B.V. Notes or
(IV) the Required Banks provide written notice to the
Administrative Agent prior to September 1 of any year that,
in their reasonable opinion, circumstances have arisen since
the most recent calculation of the Borrowing Base that would
cause a material decrease in the Borrowing Base if it were
to be recalculated on the date of such notice, then in any
such case the Required Banks shall have the right to
redetermine the Borrowing Base to be effective for the
remainder of the period originally to have been covered by
the Borrowing Base then in effect, at whatever amount they
deem appropriate in their best judgment, based on all
information reasonably available to them at such time. Not
more than twice in any calendar year FI and FCX may request
by written notice to the Administrative Agent a
redetermination of the Borrowing Base in accordance with the
procedures provided in Section 2.1.
SECTION 2.3. Redetermination Based on Equity
Payments. If FI or FCX shall determine to make an Equity
Payment (other than (x) FCX's purchase of FI stock and
(y) scheduled mandatory redemption payments or dividends on
preferred stock either (a) taken into account in the most
recent Borrowing Base Certificate or (b) which constitutes
Borrowing Base Debt), and if after giving effect to such
proposed Equity Payment the Available Borrowing Base would
then be less than $125,000,000, then (i) FI or FCX, as
applicable, shall provide written notice to the
Administrative Agent 15 days (or earlier if practicable)
prior to the date of the proposed Equity Payment, together
with a calculation of the Available Borrowing Base after
giving effect to such proposed Equity Payment, and (ii) the
Required Banks may redetermine the Borrowing Base taking
into account such proposed Equity Payment; provided,
however, that nothing shall preclude FI or FCX, as
applicable, from making such Equity Payment if otherwise
permitted by Section 5.2(q).
SECTION 2.4. Grace Period for Compliance with
Section 2.1 upon Borrowing Base Redeterminations. If FI is
out of compliance with Section 3.1 or FI or FCX is out of
compliance with Section 5.2(b) either (x) subsequent to an
Equity Payment as a result of a redetermination of the
Borrowing Base pursuant to clause (II) of Section 2.2 by the
Required Banks (as distinct from any other cause, including
additional incurrences of Debt by FI and FCX or otherwise)
or (y) as a result of a redetermination of the Borrowing
Base pursuant to Section 2.1 or clause (IV) of Section 2.2,
then so long as no other Default or Event of Default shall
have occurred and be continuing, FI and FCX shall have
90 days from the date of such redetermination (90 days from
the later of the date of such redetermination and the date
of such Equity Payment, in the case of a redetermination
pursuant to clause (II) of Section 2.2) in which to come
into compliance with Section 3.1 and 5.2(b), and during such
90-day period may continue or convert (without any increase
in principal amount) existing Loans pursuant to
Section 3.10, but not for periods extending beyond such
90-day period until FCX or FI is in compliance, and until
FCX or FI comes in compliance with Sections 3.1 and 5.2(b),
FCX and FI and the Restricted Subsidiaries shall not incur
any additional Debt. No such 90-day grace period shall be
applicable to any redetermination of the Borrowing Base
pursuant to clause (I) of Section 2.2 or to any reduction of
the Borrowing Base pursuant to Section 2.5.
SECTION 2.5. Reduction of Borrowing Base from
Sales of Assets. Upon receipt by FI or FCX or a Restricted
Subsidiary of the Net Proceeds from any Net Proceeds
Transaction, the Borrowing Base shall be immediately and
automatically reduced for the period remaining until the
next succeeding redetermination of the Borrowing Base
pursuant to Section 2.1 or 2.2 by the amounts indicated
below on the basis of the then cumulative Net Proceeds
received from all Net Proceeds Transactions since the last
redetermination of the Borrowing Base as follows:
(i) until such cumulative Net Proceeds exceed
$175,000,000, by 50% of such Net Proceeds;
(ii) when such cumulative Net Proceeds exceed
$175,000,000 but not $350,000,000, by 75% of such Net
Proceeds in excess of $175,000,000; and
(iii) after such cumulative Net Proceeds exceed
$350,000,000, by 100% of such Net Proceeds in excess of
$350,000,000.
SECTION 2.6. Nonreviewability of Borrowing Base
Redetermination. It is hereby acknowledged and agreed by FI
that each such determination and redetermination of the
Borrowing Base by the Administrative Agent and/or Required
Banks shall be made in their sole and absolute discretion
and shall be final, binding on and nonreviewable by FI and
none of the Administrative Agent or any Bank shall be
required to disclose to FI its Policies.
ARTICLE III
The Loans
SECTION 3.1. Revolving Credit Facility. Upon the
terms and subject to the conditions and relying upon the
representations and warranties herein set forth, each Bank,
severally and not jointly, agrees to make Loans to FI, at
any time and from time to time until the earlier of the
Maturity Date and the termination of the Commitment of such
Bank in accordance with the terms hereof, in an aggregate
principal amount at any one time outstanding not to exceed
such Bank's Applicable Percentage of the then effective
unused Total Commitment on the Borrowing Date for such Loan.
Within the foregoing limits, FI may borrow, repay and
reborrow, prior to the Maturity Date, Loans subject to the
terms, provisions and limitations set forth herein;
provided, however, that no borrowing shall be made hereunder
(except for continuations or conversions of existing Loans
during any applicable 90-day period referred to in Sec-
tion 2.4 without increase in the principal amount of such
Loans) if (x) the aggregate principal amount of all the
Corporate Group Loans would exceed the sum of the FCX Credit
Agreement Total Commitment and the Total Commitment or (y)
Borrowing Base Debt would exceed the Borrowing Base.
SECTION 3.2. Loans. (a) The Loans made by the
Banks to FI on any one date shall be in an aggregate
principal amount which is (i) an integral multiple of
$1,000,000 and not less than $5,000,000 or (ii) equal to the
remaining available balance of the applicable Commitments.
The Loans by each Bank to FI made after the Fifth Amendment
Closing Date shall be made against an appropriate Promissory
Note, payable to the order of such Bank in the amount of its
Commitment, executed by FI, as referred to in Section 3.4.
(b) Each Loan shall be either a Reference Rate
Loan or a LIBO Rate Loan as FI may request pursuant to
Section 3.3. Subject to the provisions of Sections 3.3 and
3.10, Loans of more than one type may be outstanding at the
same time.
(c) Each Bank shall make its portion, as
determined under Section 3.14, of each Loan hereunder on the
proposed date thereof by paying the amount required to the
Administrative Agent in New York, New York in immediately
available funds not later than 2:00 p.m., New York City
time, and the Administrative Agent shall by 3:00 p.m.,
New York City time, credit the amounts so received to the
general deposit account of FI with the Administrative Agent
or, if Loans shall not be made on such date because any
condition precedent to a borrowing herein specified is not
met, return the amounts so received to the respective Banks.
Unless the Administrative Agent shall have received notice
from a Bank prior to the date of any Loan that such Bank
will not make available to the Administrative Agent such
Bank's portion of such Loan, the Administrative Agent may
assume that such Bank has made such portion available to the
Administrative Agent on the date of such Loan in accordance
with this paragraph (c) and the Administrative Agent may, in
reliance upon such assumption, make available to FI on such
date a corresponding amount. If the Administrative Agent
shall have so made funds available, then to the extent that
such Bank shall not have made such portion available to the
Administrative Agent, such Bank and FI severally agree to
repay to the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for
each day from the date such amount is made available to FI
until the date such amount is repaid to the Administrative
Agent at an interest rate equal to (i) in the case of FI,
the interest rate applicable at the time to the Loans
comprising such borrowing and (ii) in the case of such Bank,
a rate determined by the Administrative Agent to represent
its cost of overnight or short-term funds (which
determination shall be conclusive absent manifest error).
If such Bank shall repay to the Administrative Agent such
corresponding amount, such amount shall constitute such
Bank's Loan for purposes of this Agreement.
SECTION 3.3. Notice of Loans. (a) FI shall give
the Administrative Agent irrevocable telephonic (promptly
confirmed in writing), written, telecopy or telex notice in
the form of Exhibit B with respect to each Loan (i) in the
case of a LIBO Rate Loan, not later than 10:30 a.m., New
York City time, three Business Days before a proposed
borrowing, and (ii) in the case of a Reference Rate Loan,
not later than 10:30 a.m., New York City time, on the date
of a proposed borrowing. Such notice shall be irrevocable
(except that in the case of a LIBO Rate Loan, FI may,
subject to Section 3.13, revoke such notice by giving
written or telex notice thereof to the Administrative Agent
not later than 10:30 a.m., New York City time, two Business
Days before such proposed borrowing) and shall in each case
refer to this Agreement and specify (1) whether the Loan
then being requested is to be a Reference Rate Loan or LIBO
Rate Loan, (2) the date of such Loan (which shall be a
Business Day) and amount thereof, and (3) if such Loan is to
be a LIBO Rate Loan, the Interest Period or Interest Periods
(which shall not end after the Maturity Date) with respect
thereto. If no election as to the type of Loan is specified
in any such notice by FI, such Loan shall be a Reference
Rate Loan. If no Interest Period with respect to any LIBO
Rate Loan is specified in any such notice by FI, then FI
shall be deemed to have selected an Interest Period of one
month's duration. The Administrative Agent shall promptly
advise the other Banks of any notice given by FI pursuant to
this Section 3.3(a) and of each Bank's portion of the
requested Loan.
(b) FI may continue or convert all or any part of
any Loan as or into a Loan of the same or a different type
in accordance with Section 3.10 and subject to the
limitations set forth herein. If FI shall not have
delivered a borrowing notice in accordance with this
Section 3.3 prior to the end of the Interest Period then in
effect for any Loan requesting that such Loan be converted
or continued as permitted hereby, then FI shall (unless FI
has notified the Administrative Agent, not less than three
Business Days prior to the end of such Interest Period, that
such Loan is to be repaid at the end of such Interest
Period) be deemed to have delivered a borrowing notice
pursuant to Section 3.3 requesting that such Loan be
converted into or continued as a Reference Rate Loan of
equivalent amount.
(c) Notwithstanding any provision to the contrary
in this Agreement, FI shall not in any notice of borrowing
under this Section 3.3 request any LIBO Rate Loan which, if
made, would result in more than 20 separate LIBO Rate Loans
of any Bank. For purposes of the foregoing, Loans having
different Interest Periods, regardless of whether they
commence on the same date, shall be considered separate
Loans.
SECTION 3.4. Promissory Notes. (a) The Loans
made by each Bank to FI shall be evidenced by a Promissory
Note duly executed on behalf of FI, dated the Fifth
Amendment Closing Date, in substantially the form attached
hereto as Exhibit A, payable to the order of such Bank in a
principal amount equal to its Commitment. The outstanding
principal balance of each Loan, as evidenced by such
Promissory Note, shall be payable on the Maturity Date.
Each Note shall bear interest from the date of the first
borrowing hereunder on the outstanding principal balance
thereof, as provided in Section 3.5.
(b) Each Bank shall maintain in accordance with
its usual practice an account or accounts evidencing the
indebtedness to such Bank resulting from each Loan made by
such Bank from time to time, including the amounts of
principal and interest payable and paid such Bank from time
to time under this Agreement. Each Bank shall, and is
hereby authorized by FI to, endorse on the schedule attached
to the Promissory Note delivered by FI to such Bank (or on a
continuation of such schedule attached to such Promissory
Note and made a part thereof), or otherwise record in such
Bank's internal records, an appropriate notation evidencing
the date and amount of each Loan from such Bank to FI, as
well as the date and amount of each payment and prepayment
with respect thereto; provided, however, that the failure of
any Bank to make such a notation or any error in such a
notation shall not affect the obligation of FI to repay the
Loans made by such Bank in accordance with the terms of this
Agreement and such Promissory Note.
(c) The Administrative Agent shall maintain
accounts for (i) the type of each Loan made and the Interest
Period applicable thereto, (ii) the amount of any principal
or interest due and payable or to become due and payable
from FI to each Bank hereunder and (iii) the amount of any
sum received by the Administrative Agent hereunder from FI
and each Bank's share thereof.
(d) The entries made in the accounts maintained
pursuant to paragraphs (b) and (c) of this Section 3.4 shall
be prima facie evidence of the existence and amounts of the
obligations therein recorded; provided, however, that the
failure of any Bank or the Administrative Agent to maintain
such accounts or any error therein shall not in any manner
affect the obligations of FI to repay the Loans in
accordance with their terms.
SECTION 3.5. Interest on Loans. (a) Subject to
the provisions of Section 3.8, each Reference Rate Loan
shall bear interest at a rate per annum (computed on the
basis of the actual number of days elapsed over a year of
365 or 366 days, as the case may be, when determined by
reference to the Prime Rate, and over a year of 360 days at
all other times), equal to the Applicable Reference Rate.
(b) Subject to the provisions of Section 3.8,
each Loan which is a LIBO Rate Loan shall bear interest at a
rate per annum (computed on the basis of the actual number
of days elapsed over a year of 360 days) equal to the
Applicable LIBO Rate for the Interest Period in effect for
such Loan.
(c) Interest on each Loan shall be payable on
each applicable Interest Payment Date. The Applicable
Reference Rate and the Applicable LIBO Rate shall be
determined by the Administrative Agent, and such
determination shall be conclusive absent manifest error.
The Administrative Agent shall promptly advise FI and each
Bank of such determination.
SECTION 3.6. Fees. (a) On the last Business Day
of each March, June, September and December, and on the
Maturity Date, FI shall pay each Bank, through the
Administrative Agent, in immediately available funds, a
commitment fee (a "Commitment Fee") from and including
June 25, 1993, through and including the Maturity Date on
(i) with respect to any quarter (or shorter period
commencing with June 25, 1993, or ending on the date
immediately preceding the Fifth Amendment Closing Date)
prior to the Fifth Amendment Closing Date, the average daily
unused amount of such Bank's Commitment (as defined in and
calculated in accordance with this Agreement as in effect
prior to the Fifth Amendment Closing Date), if any, equal to
1/4 of 1% per annum, (ii) with respect to any quarter after
November 24, 1994 until the Fifth Amendment Closing Date,
the amount set forth in and pursuant to (and not in
duplication of) Section 3.6(a) of the FCX Credit Agreement
and (iii) commencing on the Fifth Amendment Closing Date,
the rate set forth in Schedule I hereto.
(b) [Intentionally left blank.]
(c) All Commitment Fees under this Section 3.6
shall be computed on the basis of the actual number of days
elapsed in a year of 365 or 366 days, as the case may be.
The Commitment Fees due to each Bank shall cease to accrue
on the earlier of the Maturity Date and the termination of
the Commitment of such Bank pursuant to Section 3.7.
(d) FI agrees to pay to the Administrative Agent,
for its own account pursuant hereto and to the FCX Credit
Agreement, on May 15th of each year, an agency fee (the
"Agency Fee") as agreed between FI and the Administrative
Agent.
SECTION 3.7. Maturity and Reduction of
Commitments. (a) Upon at least five days' prior written,
telecopied or telex notice to the Administrative Agent, FI
may without penalty at any time in whole permanently
terminate, or from time to time permanently reduce, the
Total Commitment, ratably among the Banks in accordance with
the amounts of their respective Commitments; provided,
however, that each partial reduction of the Commitment
Amount shall be in a minimum principal amount of $5,000,000
and an integral multiple of $1,000,000; provided further,
that the Total Commitment may not be reduced to an amount
which is less than the aggregate principal amount of all
Loans outstanding after such reduction.
(b) On the Maturity Date the Commitments shall
automatically terminate and any outstanding Loans shall be
due and payable in full.
SECTION 3.8. Interest on Overdue Amounts;
Alternative Rate of Interest. (a) If FI shall default in
the payment of the principal of or interest on any Loan or
any other amount becoming due hereunder or under any other
Loan Document, by acceleration or otherwise, FI shall on
demand from time to time pay interest, to the extent
permitted by law, on such defaulted amount up to the date of
actual payment (after as well as before judgment):
(i) in the case of the payment of principal of or
interest on a LIBO Rate Loan, at a rate 2% above the rate
which would otherwise be payable under Section 3.5(b) until
the last date of the Interest Period then in effect with
respect to such Loan and thereafter as provided in
clause (ii) below; and
(ii) in the case of the payment of principal of or
interest on a Reference Rate Loan or any other amount
payable hereunder (other than principal of or interest on
any LIBO Rate Loan to the extent referred to in clause (i)
above), at a rate 2% above the Applicable Reference Rate.
(b) In the event, and on each occasion, that on
the day two Business Days prior to the commencement of any
Interest Period for a LIBO Rate Loan the Administrative
Agent shall have determined (which determination shall be
conclusive and binding upon FI absent manifest error) that
(i) Dollar deposits in the requested principal amount of
such LIBO Rate Loan are not generally available in the
London Interbank Market, (ii) the rates at which Dollar
deposits are being offered will not adequately and fairly
reflect the cost to any Bank of making or maintaining such
LIBO Rate Loan during such Interest Period or
(iii) reasonable means do not exist for ascertaining the
Applicable LIBO Rate, the Administrative Agent shall as soon
as practicable thereafter give written, telecopied or telex
notice of such determination to FI and the other Banks, and
any request by FI for the making of a LIBO Rate Loan
pursuant to Section 3.3 or 3.10 shall, until the
Administrative Agent shall have advised FI and the Banks
that the circumstances giving rise to such notice no longer
exist, be deemed to be a request for a Reference Rate Loan;
provided, however, that if the Administrative Agent makes
the determination specified in (ii) above, at the option of
FI such request shall be deemed to be a request for a
Reference Rate Loan only from such Bank referred to in (ii)
above; provided further, however, that such option shall not
be available to FI if the Administrative Agent makes the
determination specified in (ii) above with respect to three
or more Banks. Each determination of the Administrative
Agent hereunder shall be conclusive absent manifest error.
SECTION 3.9. Prepayment of Loans. (a) FI shall
have the right at any time and from time to time to prepay
any of its Loans, in whole or in part, subject to the
requirements of Section 3.13 but otherwise without premium
or penalty, upon prior written or telex notice to the
Administrative Agent by 10:30 a.m., New York City time, on
the date of such prepayment; provided, however, that each
such partial prepayment shall be in a minimum amount of
$5,000,000 and an integral multiple of $1,000,000.
(b) In the event of any termination of the
Commitments, FI shall repay or prepay all its outstanding
Loans on the date of such termination. On the date of any
partial reduction of the Commitments pursuant to
Section 3.7, FI shall pay or prepay so much of the Loans as
shall be necessary in order that the aggregate principal
amount of the Loans (after giving effect to any other
prepayment of Loans on such date) outstanding will not
exceed the Total Commitment immediately following such
reduction.
(c) If required by Section 2.4, FI shall repay
the outstanding Loans in such amount as may be necessary so
that, no later than the relevant date required by
Section 2.4 for compliance with Sections 3.1 and 5.2(b), the
aggregate Borrowing Base Debt (after giving effect to any
other prepayment of Corporate Group Loans on such date) is
less than or equal to the Borrowing Base after giving effect
to such reduction; provided, however, that if such reduction
in the Borrowing Base is a result of any sales, transfers,
distributions, or other dispositions of assets or properties
(including, without limitation, shares of any capital stock
or other equity interests of any Restricted Subsidiary)
other than in the ordinary course of business, such 90-day
grace period will not apply with respect to the required
mandatory prepayment. During any such applicable 90-day
period, continuations or conversions of Loans in accordance
with Section 3.10 are permitted; provided that the Interest
Periods for such continued or converted borrowings do not
extend beyond such 90-day period unless the condition
requiring prepayments pursuant to this Section 3.9(c) shall
no longer exist.
(d) All prepayments under this Section shall be
subject to Section 3.13. Each notice of prepayment
delivered pursuant to paragraph (a) above shall specify the
prepayment date and the principal amount of each Loan (or
portion thereof) to be prepaid, shall be irrevocable and
shall commit FI to prepay such Loan by the amount stated
therein on the date stated therein. All prepayments shall
be applied first to Reference Rate Loans and then to LIBO
Rate Loans and shall be accompanied by accrued interest on
the principal amount being prepaid to the date of
prepayment. Any amounts prepaid may be reborrowed to the
extent permitted by the terms of this Agreement.
SECTION 3.10. Continuation and Conversion of
Loans. FI shall have the right, subject to the provisions
of Section 3.8, (i) on three Business Days' prior
irrevocable notice by FI to the Administrative Agent, to
continue or convert any type of Loans as or into LIBO Rate
Loans, or (ii) with irrevocable notice by FI to the
Administrative Agent by 10:30 a.m. on the date of such
proposed continuation or conversion, to continue or convert
any type of Loans as or into Reference Rate Loans, in each
case subject to the following further conditions:
(a) each continuation or conversion shall be made
pro rata as to each type of Loan of FI to be continued or
converted among the Banks in accordance with the respective
amounts of their Commitments and the notice given to the
Administrative Agent by FI shall specify the aggregate
principal amount of Loans to be continued or converted;
(b) in the case of a continuation or conversion of
less than all Loans of FI, the Loans continued or converted
shall be in a minimum aggregate principal amount of
$5,000,000 and an integral multiple of $1,000,000;
(c) accrued interest on each Loan (or portion
thereof) being continued or converted shall be paid by FI at
the time of continuation or conversion;
(d) the Interest Period with respect to any Loan
made in respect of a continuation or conversion thereof
shall commence on the date of the continuation or
conversion;
(e) any portion of a Loan maturing or required to
be prepaid in less than one month may not be continued or
converted into a LIBO Rate Loan;
(f) a LIBO Rate Loan may be continued or converted
on the last day of the applicable Interest Period and,
subject to Section 3.13, on any other day;
(g) no Loan (or portion thereof) may be continued
or converted into a LIBO Rate Loan if, after such
continuation or conversion, an aggregate of more than 20
separate LIBO Rate Loans of any Bank would result,
determined as set forth in Section 3.3(c);
(h) no Loan shall be continued or converted if
such Loan by any Bank would be greater than the amount by
which its Commitment exceeds the amount of its other Loans
at the time outstanding or if such Loan would not comply
with the other provisions of this Agreement; and
(i) any portion of a LIBO Rate Loan which cannot
be converted into or continued as a LIBO Rate Loan by reason
of clause (e) or (g) above shall be automatically converted
at the end of the Interest Period in effect for such Loan
into a Reference Rate Loan.
The Administrative Agent shall communicate the information
contained in each irrevocable notice delivered by FI
pursuant to this Section 3.10 to the other Banks promptly
after its receipt of the same.
The Interest Period applicable to any LIBO Rate
Loan resulting from a continuation or conversion shall be
specified by FI in the irrevocable notice of continuation or
conversion delivered pursuant to this Section 3.10;
provided, however, that if no such Interest Period for a
LIBO Rate Loan shall be specified, FI shall be deemed to
have selected an Interest Period of one month's duration.
For purposes of this Section 3.10, notice received
by the Administrative Agent from FI after 10:30 a.m., New
York time, on a Business Day shall be deemed to be received
on the immediately succeeding Business Day.
SECTION 3.11. Reserve Requirements; Change in
Circumstances. (a) FI shall pay to each Bank on the last
day of each Interest Period for any LIBO Rate Loan so long
as such Bank may be required to maintain reserves against
Eurocurrency Liabilities as defined in Regulation D of the
Board (or so long as such Bank may be required to maintain
reserves against any other category of liabilities which
includes deposits by reference to which the interest rate on
any LIBO Rate Loan is determined as provided in this
Agreement or against any category of extensions of credit or
other assets of such Bank which includes any LIBO Rate Loan)
an additional amount (determined by such Bank and notified
to FI), equal to the product of the following for each
affected LIBO Rate Loan for each day during such Interest
Period:
(i) the principal amount of such affected LIBO
Rate Loan outstanding on such day; and
(ii) the remainder of (x) the product of Statutory
Reserves on such date times the Applicable LIBO Rate on such
day minus (y) the Applicable LIBO Rate on such day; and
(iii) 1/360.
Each Bank shall separately bill FI directly for all amounts
claimed pursuant to this Section 3.11(a).
(b) Notwithstanding any other provision herein,
if after the Fifth Amendment Closing Date any change in
condition or applicable law or regulation or in the
interpretation or administration thereof (whether or not
having the force of law and including, without limitation,
Regulation D of the Board) by any Governmental Authority
charged with the administration or interpretation thereof
shall occur which shall:
(i) subject any Bank (which shall for the purpose
of this Section include any assignee or lending office of
any Bank) to any tax of any kind whatsoever with respect to
its LIBO Rate Loans or other fees or amounts payable
hereunder or change the basis of taxation of any of the
foregoing (other than taxes (including Non-Excluded Taxes)
described in Section 3.17 and other than any franchise tax
or tax or other similar governmental charges, fees or
assessments based on the overall net income of such Bank by
the U.S. Federal government or by any jurisdiction in which
such Bank maintains an office, unless the presence of such
office is solely attributable to the enforcement of any
rights hereunder or under any security document with respect
to an Event of Default);
(ii) impose, modify or deem applicable any reserve,
special deposit or similar requirement against assets of,
deposits with or for the account of or credit extended by
any Bank;
(iii) impose on any such Bank or the London
Interbank Market any other condition affecting this
Agreement or LIBO Rate Loans made by such Bank; or
(iv) impose upon any Bank any other condition with
respect to any amount paid or to be paid by any Bank with
respect to its LIBO Rate Loans or this Agreement;
and the result of any of the foregoing shall be to increase
the cost to any Bank of making or maintaining its LIBO Rate
Loans or Commitment hereunder, or to reduce the amount of
any sum (whether of principal, interest or otherwise)
received or receivable by such Bank or to require such Bank
to make any payment, in respect of any such Loan, in each
case by or in an amount which such Bank in its sole judgment
shall deem material, then FI to which such Loan was made
shall pay to such Bank on demand such an amount or amounts
as will compensate the Bank for such additional cost,
reduction or payment.
(c) If any Bank shall have determined that the
applicability of any law, rule, regulation, agreement or
guideline adopted after the Fifth Amendment Closing Date
regarding capital adequacy, or any change after the Fifth
Amendment Closing Date in any such law, rule, regulation,
agreement or guideline (whether such law, rule, regulation,
agreement or guideline has been adopted) or in the
interpretation or administration of any of the foregoing by
any Governmental Authority charged with the interpretation
or administration thereof, or compliance by any Bank (or any
lending office of such Bank) or any Bank's holding company
with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such
Governmental Authority made or issued after the Fifth
Amendment Closing Date, has or would have the effect of
reducing the rate of return on such Bank's capital or on the
capital of such Bank's holding company, if any, as a
consequence of this Agreement or the Loans made pursuant
hereto to a level below that which such Bank or such Bank's
holding company could have achieved but for such
applicability, adoption, change or compliance (taking into
consideration such Bank's policies and the policies of such
Bank's holding company with respect to capital adequacy) by
an amount deemed by such Bank to be material, then from time
to time FI shall pay to such Bank such additional amount or
amounts as will compensate such Bank or such Bank's holding
company for any such reduction suffered.
(d) If and on each occasion that a Bank makes a
demand for compensation pursuant to paragraph (a), (b) or
(c) above, or under Section 3.17 (it being understood that a
Bank may be reimbursed for any specific amount under only
one such paragraph or Section) FI may, upon at least three
Business Days' prior irrevocable written or telex notice to
each of such Bank and the Administrative Agent, in whole
permanently replace the Commitment of such Bank; provided
that such notice must be given not later than the 90th day
following the date of a demand for compensation made by such
Bank; and provided that FI shall replace such Commitment
with the Commitment of a commercial bank satisfactory to the
Administrative Agent. Such notice from FI shall specify an
effective date for the termination of such Bank's Commitment
which date shall not be later than the 180th day after the
date such notice is given. On the effective date of any
termination of such Bank's Commitment pursuant to this
clause (d), FI shall pay to the Administrative Agent for the
account of such Bank (A) any Commitment Fees on the amount
of such Bank's Commitment so terminated accrued to the date
of such termination, (B) the principal amount of any
outstanding Loans held by such Bank plus accrued interest on
such principal amount to the date of such termination and
(C) the amount or amounts requested by such Bank pursuant to
clause (a), (b) or (c) above or Section 3.17, as applicable.
FI will remain liable to such terminated Bank for any loss
or expense that such Bank may sustain or incur as a
consequence of such Bank's making any LIBO Rate Loan or any
part thereof or the accrual of any interest on any such Loan
in accordance with the provisions of this Section 3.11(d) as
set forth in Section 3.13. Upon the effective date of
termination of any Bank's Commitment pursuant to this
Section 3.11(d) such Bank shall cease to be a "Bank"
hereunder; provided that no such termination of any such
Bank's Commitment shall affect (i) any liability or
obligation of FI or any other Bank to such terminated Bank
which accrued on or prior to the date of such termination or
(ii) such terminated Bank's rights hereunder in respect of
any such liability or obligation.
(e) A certificate of a Bank (or Transferee)
setting forth such amount or amounts as shall be necessary
to compensate such Bank (or Transferee) as specified in
paragraph (a), (b) or (c) (and, in the case of (c), such
Bank's holding company) above or Section 3.17, as the case
may be, shall be delivered as soon as practicable to FI, and
in any event within 90 days of the change giving rise to
such amount or amounts, and shall be conclusive absent
manifest error. FI shall pay each Bank the amount shown as
due on any such certificate within 15 days after its receipt
of the same. In preparing such a certificate, each Bank may
employ such assumptions and allocations of costs and
expenses as it shall in good faith deem reasonable. The
failure of any Bank (or Transferee) to give the required 90-
day notice shall excuse FI from its obligations to pay
additional amounts pursuant to such Sections incurred for
the period that is 90 days or more prior to the date such
notice was required to be given.
(f) Failure on the part of any Bank to demand
compensation for any increased costs or reduction in amounts
received or receivable or reduction in return on capital
within the 90 days required pursuant to Section 3.11(e)
shall not constitute a waiver of such Bank's rights to
demand compensation for any increased costs or reduction in
amounts received or receivable or reduction in return on
capital for any period after the date that is 90 days prior
to the date of the delivery of demand for compensation. The
protection of this Section 3.11 shall be available to each
Bank regardless of any possible contention of invalidity or
inapplicability of the law, regulation or condition which
shall have occurred or been imposed. FI shall not be
required to make any additional payment to any Bank pursuant
to Section 3.11(a) or (b) in respect of any such cost,
reduction or payment that could be avoided by such Bank in
the exercise of reasonable diligence, including a change in
the lending office of such Bank if possible without material
cost to such Bank. Each Bank agrees that it will promptly
notify FI and the Administrative Agent of any event of which
the responsible account officer shall have knowledge which
would entitle such Bank to any additional payment pursuant
to this Section 3.11. FI agrees to furnish promptly to the
Administrative Agent official receipts evidencing any
payment of any tax.
SECTION 3.12. Change in Legality. (a) Notwith-
standing anything to the contrary herein contained, if after
the Fifth Amendment Closing Date any change in any law or
regulation or in the interpretation thereof by any
Governmental Authority charged with the administration or
interpretation thereof shall make it unlawful for any Bank
to make or maintain any LIBO Rate Loan or to give effect to
its obligations as contemplated hereby with respect to any
LIBO Rate Loan, then, by written notice to FI and to the
Administrative Agent, such Bank may:
(i) declare that LIBO Rate Loans will not
thereafter (for the duration of such unlawfulness or
impracticality) be made by such Bank hereunder, whereupon FI
shall be prohibited from requesting LIBO Rate Loans from
such Bank hereunder unless such declaration is subsequently
withdrawn; and
(ii) require that all outstanding LIBO Rate Loans
made by it be converted to Reference Rate Loans, in which
event (A) all such LIBO Rate Loans shall be automatically
converted to Reference Rate Loans as of the end of the
applicable Interest Period, unless an earlier conversion
date is legally required, (B) all payments and prepayments
of principal which would otherwise have been applied to
repay the converted LIBO Rate Loans shall instead be applied
to repay the Reference Rate Loans resulting from the
conversion of such LIBO Rate Loans and (C) the Reference
Rate Loans resulting from the conversion of such LIBO Rate
Loans shall be prepayable only at the times the converted
LIBO Rate Loans would have been prepayable, notwithstanding
the provisions of Section 3.9.
(b) Before giving any notice to FI and the
Administrative Agent pursuant to this Section 3.12, such
Bank shall designate a different LIBOR Office if such
designation will avoid the need for giving such notice and
will not in the judgment of such Bank, be otherwise
disadvantageous to such Bank. For purposes of
Section 3.12(a), a notice to FI by any Bank shall be
effective on the date of receipt by FI.
SECTION 3.13. Indemnity. FI shall indemnify each
Bank against any funding, redeployment or similar loss or
expense which such Bank may sustain or incur as a
consequence of (a) any event, other than a default by such
Bank in the performance of its obligations hereunder, which
results in (i) such Bank receiving or being deemed to
receive any amount on account of the principal of any LIBO
Rate Loan prior to the end of the Interest Period in effect
therefor (any of the events referred to in this clause (i)
being called a "Breakage Event") or (ii) any Loan to be made
by such Bank not being made after notice of such Loan shall
have been given by FI hereunder or (b) any default in the
making of any payment or prepayment of any amount required
to be made hereunder. In the case of any Breakage Event,
such loss shall include an amount equal to the excess, as
reasonably determined by such Bank, of (i) its cost of
obtaining funds for the Loan which is the subject of such
Breakage Event for the period from the date of such Breakage
Event to the last day of the Interest Period in effect (or
which would have been in effect) for such Loan over (ii) the
amount of interest (as reasonably determined by such Bank)
that would be realized by such Bank in reemploying the funds
so paid, prepaid or converted or not borrowed, continued or
converted by making a LIBO Rate Loan in such principal
amount and with a maturity comparable to such period. A
certificate of any Bank setting forth any amount or amounts
which such Bank is entitled to receive pursuant to this
Section shall be delivered to FI and shall be conclusive
absent manifest error.
SECTION 3.14. Pro Rata Treatment. Except as
permitted under any of Sections 3.8(b), 3.11, 3.12, 3.13,
3.17 or 3.18, each borrowing under each type of Loan, each
payment or prepayment of principal of the Loans, each
payment of interest on the Loans, each other reduction of
the principal or interest outstanding under the Loans,
however achieved, including by setoff by any Person, each
payment of the Commitment Fees, each reduction of the
Commitments and each conversion or continuation of Loans
shall be allocated pro rata among the Banks in the
proportions that their respective Commitments bear to the
Total Commitment (or, if such Commitments shall have expired
or been terminated, in accordance with the respective
principal amounts of their outstanding Loans). Each Bank
agrees that in computing such Bank's portion of any
borrowing to be made hereunder, the Administrative Agent
may, in its discretion, round each Bank's percentage of such
borrowing to the next higher or lower whole Dollar amount.
SECTION 3.15. Sharing of Setoffs. Each Bank
agrees that if it shall, through the exercise of a right of
banker's lien, setoff or counterclaim against FI or pursuant
to a secured claim under Section 506 of Title 11 of the
United States Code or other security or interest arising
from, or in lieu of, such secured claim, received by such
Bank under any applicable bankruptcy, insolvency or other
similar law or otherwise, or by any other means obtain
payment (voluntary or involuntary) in respect of any Loan of
FI held by it as a result of which the unpaid principal
portion of the Loans of FI held by it shall be
proportionately less than the unpaid principal portion of
the Loans of FI held by any other Bank (other than as
permitted under any of Section 3.8(b), 3.11, 3.12, 3.13,
3.17 or 3.18), it shall be deemed to have simultaneously
purchased from such other Bank at face value, and shall
promptly pay to such other Bank the purchase price for, a
participation in the Loans of FI held by such other Bank, so
that the aggregate unpaid principal amount of the Loans of
FI and participation in Loans of FI held by each Bank shall
be in the same proportion to the aggregate unpaid principal
amount of all Loans of FI then outstanding as the principal
amount of the Loans of FI held by it prior to such exercise
of banker's lien, setoff or counterclaim was to the
principal amount of all Loans of FI outstanding prior to
such exercise of banker's lien, setoff or counterclaim or
other event; provided, however, that if any such purchase or
purchases or adjustments shall be made pursuant to this
Section 3.15 and the payment giving rise thereto shall
thereafter be recovered, such purchase or purchases or
adjustments shall be rescinded to the extent of such
recovery and the purchase price or prices or adjustment
restored without interest. To the fullest extent permitted
by applicable law, FI expressly consents to the foregoing
arrangements and agrees that any Bank holding a
participation in a Loan of FI deemed to have been so
purchased may exercise any and all rights of banker's lien,
setoff or counterclaim with respect to any and all moneys
owing by FI to such Bank as fully as if such Bank had made a
Loan directly to FI in the amount of such participation.
SECTION 3.16. Payments. (a) Except as otherwise
provided in this Agreement, all payments and prepayments to
be made by FI to the Banks hereunder, whether on account of
Commitment Fees, payment of principal or interest on the
Promissory Notes or other amounts at any time owing
hereunder or under any other Loan Document, shall be made to
the Administrative Agent at its office at 270 Park Avenue,
New York, New York, for the account of the several Banks in
immediately available funds. All such payments shall be
made to the Administrative Agent as aforesaid not later than
10:30 a.m., New York City time, on the date due; and funds
received after that hour shall be deemed to have been
received by the Administrative Agent on the following
Business Day.
(b) As promptly as possible, but no later than
2:00 p.m., New York City time, on the date of each
borrowing, each Bank participating in the Loans made on such
date shall pay to the Administrative Agent such Bank's
Applicable Percentage of such Loan plus, if such payment is
received by the Administrative Agent after 2:00 p.m., New
York City time, on the date of such borrowing, interest at a
rate per annum equal to the rate in effect on such day,
quoted by the Administrative Agent at its office at 270 Park
Avenue, New York, New York, for the overnight "sale" to such
Bank of Federal funds. At the time of, and by virtue of,
such payment, such Bank shall be deemed to have made its
Loan in the amount of such payment. The Administrative
Agent agrees to pay any moneys, including such interest, so
paid to it by the lending Banks promptly, but no later than
3:00 p.m., New York City time, on the date of such
borrowing, to FI in immediately available funds.
(c) If any payment of principal, interest,
Commitment Fee or any other amount payable to the Banks
hereunder or under any Promissory Note shall fall due on a
day that is not a Business Day, then such due date shall be
extended to the next succeeding Business Day (except in the
case of payments of principal of or interest on LIBO Rate
Loans, in which case such payment shall be made on the next
preceding Business Day if the next succeeding Business Day
would fall in the next calendar month), and interest shall
be payable on principal in respect of such extension.
(d) Unless the Administrative Agent shall have
been notified by FI prior to the date on which any payment
or prepayment is due hereunder (which notice shall be
effective upon receipt) that FI does not intend to make such
payment or prepayment, the Administrative Agent may assume
that FI has made such payment or prepayment when due and the
Administrative Agent may in reliance upon such assumption
(but shall not be required to) make available to each Bank
on such date an amount equal to the portion of such assumed
payment or prepayment such Bank is entitled to hereunder,
and, if FI has not in fact made such payment or prepayment
to the Administrative Agent, such Bank shall, on demand,
repay to the Administrative Agent the amount made available
to such Bank, together with interest thereon in respect of
each day during the period commencing on the date such
amount was made available to such Bank and ending on (but
excluding) the date such Bank repays such amount to the
Administrative Agent, at a rate per annum equal to the rate,
determined by the Administrative Agent to represent its cost
of overnight or short-term funds (which determination shall
be conclusive absent manifest error).
(e) All payments of the principal of or interest
on the Loans or any other amounts to be paid to any Bank or
the Administrative Agent under this Agreement or any of the
other Loan Documents shall be made in Dollars, without
reduction by reason of any currency exchange expense.
SECTION 3.17. U.S. Taxes. (a) Any and all
payments by FI hereunder shall be made, in accordance with
Section 3.16, free and clear of and without deduction for
any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities
with respect thereto imposed by the United States or any
political subdivision thereof, excluding taxes imposed on
the net income of an Agent or any Bank (or Transferee) and
franchise taxes of an Agent or any Bank (or Transferee), as
applicable, as a result of a connection between the
jurisdiction imposing such taxes and such Agent or such Bank
(or Transferee), as applicable, other than a connection
arising solely from such Agent or such Bank (or Transferee),
as applicable, having executed, delivered, performed its
obligations or received a payment under, or enforced, this
Agreement (all such nonexcluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being
hereinafter referred to as "Non-Excluded Taxes"). If FI
shall be required by law to deduct any Non-Excluded Taxes
from or in respect of any sum payable hereunder to the Banks
(or any Transferee) or an Agent, (i) the sum payable shall
be increased by the amount necessary so that after making
all required deductions (including deductions applicable to
additional sums payable under this Section 3.17) such Bank
(or Transferee) or such Agent (as the case may be) shall
receive an amount equal to the sum it would have received
had no such deductions been made, (ii) FI shall make such
deductions and (iii) FI shall pay the full amount deducted
to the relevant taxing authority or other Governmental
Authority in accordance with applicable law; provided,
however, that no Transferee of any Bank shall be entitled to
receive any greater payment under this Section 3.17 than
such Bank would have been entitled to receive with respect
to the rights assigned, participated or otherwise
transferred unless such assignment, participation or
transfer shall have been made at a time when the
circumstances giving rise to such greater payment did not
exist.
(b) In addition, FI agrees to bear and to pay to
the relevant Governmental Authority in accordance with
applicable law any current or future stamp or documentary
taxes or any other similar excise taxes, charges or similar
levies that arise from any payment made hereunder or from
the execution, delivery, registration or enforcement of, or
otherwise with respect to, this Agreement or any other Loan
Document and any property taxes that arise from the
enforcement of this Agreement or any other Loan Document
("Other Taxes").
(c) FI will indemnify each Bank (or Transferee)
and each Agent for the full amount of Non-Excluded Taxes and
Other Taxes (including Non-Excluded Taxes or Other Taxes
imposed on amounts payable under this Section 3.17) paid by
such Bank (or Transferee) or such Agent, as the case may be,
and any liability (including penalties, interest and
expenses (including reasonable attorney's fees and
expenses)) arising therefrom or with respect thereto. A
certificate as to the amount of such payment or liability
prepared by a Bank or Agent, or the Administrative Agent on
behalf of such Bank or Agent, absent manifest error, shall
be final, conclusive and binding for all purposes. Such
indemnification shall be made within 30 days after the date
the Bank (or Transferee) or the Agent, as the case may be,
makes written demand therefor.
(d) Within 30 days after the date of any payment
of Non-Excluded Taxes or Other Taxes by FI to the relevant
Governmental Authority, FI will furnish to the
Administrative Agent, at its address referred to on the
signature page, the original or a certified copy of a
receipt issued by such Governmental Authority evidencing
payment thereof.
(e) At the time it becomes a party to this
Agreement or a Transferee, each Bank (or Transferee) that is
organized under the laws of a jurisdiction outside the
United States shall (in the case of a Transferee, subject to
the immediately succeeding sentence) deliver to FI either a
valid and currently effective Internal Revenue Service
Form 1001 or Form 4224 or, in the case of a Bank (or
Transferee) claiming exemption from U.S. Federal withholding
tax under Section 871(h) or 881(c) of the Code with respect
to payments of "portfolio interest", a Form W-8, or any
subsequent version thereof or successors thereto, (and if
such Bank (or Transferee) delivers a Form W-8, a certificate
representing that such Bank (or Transferee) is not a bank
for purposes of Section 881(c) of the Code, is not a
10-percent shareholder (within the meaning of
Section 871(h)(3)(B) of the Code) of FI and is not a
controlled foreign corporation related to FI (within the
meaning of Section 864(d)(4) of the Code)), properly
completed and duly executed by such Bank (or Transferee)
establishing that such payment is (i) not subject to United
States Federal withholding tax under the Code because such
payment is effectively connected with the conduct by such
Bank (or Transferee) of a trade or business in the United
States or (ii) totally exempt from (or in case of a
Transferee, entitled to a reduced rate of) United States
Federal withholding tax. Notwithstanding any other
provision of this Section 3.17(e), no Transferee shall be
required to deliver any form pursuant to this
Section 3.17(e) that such Transferee is not legally able to
deliver. In addition, each Bank (or Transferee) shall
deliver such forms promptly upon the obsolescence or
invalidity of any form previously delivered, but only, in
such case, to the extent such Bank (or Transferee) is
legally able to do so.
(f) Notwithstanding anything to the contrary
contained in this Section 3.17, FI shall not be required to
pay any additional amounts to any Bank (or Transferee) in
respect of United States Federal withholding tax pursuant to
paragraph (a) above if the obligation to pay such additional
amounts would not have arisen but for a failure by such Bank
(or Transferee) to comply with the provisions of
paragraph (e) above.
(g) Any Bank (or Transferee) claiming any
additional amounts payable pursuant to this Section 3.17
shall use reasonable efforts (consistent with legal and
regulatory restrictions) to file any certificate or document
requested by FI or to change the jurisdiction of its
applicable lending office if the making of such a filing or
change would avoid the need for or reduce the amount of any
such additional amounts which may thereafter accrue and
would not, in the sole determination of such Bank, be
otherwise disadvantageous to such Bank (or Transferee).
(h) Without prejudice to the survival of any
other agreement contained herein, the agreements and
obligations contained in this Section 3.17 shall survive the
payment in full of the principal of and interest on all
Loans made hereunder.
(i) Nothing contained in this Section 3.17 shall
require any Bank (or Transferee) or the Administrative Agent
to make available any of its income tax returns (or any
other information that it deems to be confidential or
proprietary).
SECTION 3.18. Indonesian Taxes. (a) FI shall
pay when due all Indonesian Taxes.
(b) FI shall indemnify the Administrative Agent,
the FI Trustee and each Bank (or Transferee) against, and
shall reimburse the Administrative Agent, the FI Trustee and
each Bank (or Transferee) upon demand for, any Indonesian
Taxes paid by the Administrative Agent, the FI Trustee or
such Bank (or Transferee), and any loss, liability, claim or
expense (including interest, penalties, fines, surcharges
and legal fees) which the Administrative Agent, the FI
Trustee or such Bank (or Transferee) may incur at any time
arising out of or in connection with any failure of FI to
make any payments of Indonesian Taxes; provided, however,
that no Transferee of any Bank shall be entitled to receive
any greater payment under this Section 3.18 than such Bank
would have been entitled to receive with respect to the
rights assigned, participated or otherwise transferred
unless such assignment, participation or transfer shall have
been made at a time when the circumstances giving rise to
such greater payment did not exist. A certificate as to the
amount of such payment or liability prepared by a Bank (or
Transferee), or the Administrative Agent on its behalf,
absent manifest error, shall be final, conclusive and
binding for all purposes. Such indemnification shall be
made within 30 days after the date the Bank (or Transferee)
or the Administrative Agent, as the case may be, makes
written demand therefor.
(c) Except as otherwise expressly provided in
paragraph (f) below, all payments on account of the
principal of or interest on the Loans made to FI, the
Promissory Notes of FI and all other amounts payable by FI
to or for the account of any Bank (or Transferee) or the
Administrative Agent hereunder (including amounts payable
under Section 3.18(a) or 3.18(b)) or to or for the FI
Trustee under the FI Security Documents and to any of them
under any other Loan Document shall be made in Dollars free
and clear of and without reduction by reason of any
Indonesian Taxes all of which shall be for the account of
and paid in full when due by FI. In the event that FI is
required by any applicable law, decree or regulation to
deduct or withhold Indonesian Taxes from any amounts payable
on, under or in respect of this Agreement or any other Loan
Document, FI or FCX, as the case may be, shall make the
required deduction or withholding, promptly pay the amount
of such Indonesian Taxes to the appropriate taxing
authorities and pay to the Administrative Agent such
additional amounts as may be required, after the deduction
or withholding of Indonesian Taxes (including deductions
applicable to additional sums payable under this
Section 3.18), to enable each Bank (or Transferee), the FI
Trustee or the Administrative Agent to receive from FI on
the due date thereof, an amount equal to the full amount
stated to be payable to such Bank (or Transferee), the FI
Trustee or the Administrative Agent under this Agreement or
any other applicable Loan Document.
(d) Without in any way affecting FI's obligations
under the other provisions of this Section 3.18, FI shall
furnish to the Administrative Agent the originals or
certified copies of all tax receipts issued by the relevant
taxing authority in respect of each payment, deduction or
withholding of Indonesian Taxes required to be made by
applicable laws or regulations, within 45 days after the
date on which such payment is made, and FI shall, at the
request of any Bank (or Transferee), the FI Trustee or the
Administrative Agent, promptly furnish to such Bank (or
Transferee), the FI Trustee or the Administrative Agent any
other information, documents and receipts that such Bank (or
Transferee), the FI Trustee or the Administrative Agent may
require to establish to its satisfaction that full and
timely payment has been made of all Indonesian Taxes
required to be paid hereunder.
(e) FI will notify the Banks (through the
Administrative Agent) promptly upon becoming aware of the
application or imposition, or scheduled future application
or imposition, of Indonesian Taxes; and each Bank (if not
theretofore notified by FI) will notify FI of any such
application or imposition which becomes known to its
officers then supervising the Loans of such Bank hereunder
as part of their normal duties, and of any change of its
lending office or establishment or closing of a branch in
Indonesia by such Bank which would give rise to the
application or imposition of Indonesian Taxes.
(f) Each Bank (or Transferee) having its
principal office and applicable lending office outside of
Indonesia (a "Non-Indonesian Lender") shall use reasonably
diligent efforts to deliver to FI appropriate forms, duly
completed, evidencing such Non-Indonesian Lender's
entitlement under the applicable treaty to a reduced rate of
withholding (which, in the case of any Non-Indonesian Lender
that is organized under the laws of the United States or any
State thereof including the District of Columbia, shall be
Internal Revenue Service Form 6166 (or any successor form
thereto)) on or prior to the 90th day following the (A) the
date hereof or (B) in the case of any such Non-Indonesian
Lender that is a Transferee, the date such Non-Indonesian
Lender becomes a Transferee. Following delivery by a Non-
Indonesian Lender to FI of the appropriate form referenced
in the preceding sentence of this Section 3.18(f), duly
completed, FI is authorized to file such form with the
appropriate Indonesian taxing authorities in order to obtain
a reduced rate of withholding with respect to payments of
interest to such Non-Indonesian Lender.
Each Non-Indonesian Lender shall use reasonably
diligent efforts to deliver to FI such certificates, forms
or other documents as may be necessary under any other
provision of applicable law (including any amendment,
modification or supplement to Form 6166 or such analogous
form referred to in the second preceding sentence) to reduce
the withholding rate with respect to payments of interest on
Loans of such Non-Indonesian Lender on or by the 90th day
following the date on which FI shall have delivered to such
Non-Indonesian Lender written notice of the existence of
such provision of applicable law together with a copy
thereof (accompanied by a verified English translation if
such provision of applicable law is not in English); pro-
vided, however, that such Non-Indonesian Lender shall not be
required to deliver any such certificate, form or other
document that would, in the reasonable judgment of such Non-
Indonesian Lender, be otherwise disadvantageous to such Non-
Indonesian Lender; and provided further that such Non-
Indonesian Lender shall have no obligation to deliver any
such certificates, forms or other documents that it is not
legally able to deliver or with respect to information
deemed by such Non-Indonesian Lender to be confidential or
proprietary.
If any Non-Indonesian Lender shall have failed to
comply with requirements of this Section 3.18(f) and the
effect of such failure is to cause the rate of withholding
with respect to payments of interest on such Non-Indonesian
Lender's Loans to be higher than that which would have been
applicable had such certificates, forms or other documents
been delivered to the applicable Indonesian taxing
authority, then any withholding tax indemnity payment to any
such Non-Indonesian Lender by FI pursuant to this
Section 3.18 shall be computed as if such certificates,
forms or other documents had been so delivered.
ARTICLE IV
Representations and Warranties
SECTION 4.1. Representations and Warranties. As
of the Fifth Amendment Closing Date and each other date upon
which such representations and warranties are required to be
made or deemed made pursuant to Section 6.1(i), (i) FCX and
FI jointly and severally represent and warrant with respect
to FI and (ii) FCX represents and warrants with respect to
FCX, in each case to each of the Banks, as follows:
(a) Organization, Powers. FI is duly organized
and validly existing under the laws of the Republic of
Indonesia and is duly domesticated under the laws of the
State of Delaware. FCX is duly organized, validly existing
and in good standing under the laws of the State of
Delaware. Each of FCX and FI (i) has the requisite power
and authority to own its property and assets and to carry on
its business as now conducted and as proposed to be
conducted, and (ii) is qualified to do business in every
jurisdiction where such qualification is required, except
where the failure so to qualify would not have a material
adverse effect on its condition, financial or otherwise.
Each of FCX and FI has the power to execute, deliver and
perform its obligations under this Agreement and the other
Loan Documents to which it is or is to be a party, and FI
has the power to borrow hereunder and to execute and deliver
any Promissory Notes to be delivered by it. Each of FCX and
FI has all requisite corporate power, and has all material
governmental licenses, authorizations, consents and
approvals necessary to own its own assets and carry on its
business as now being or as proposed to be conducted.
(b) Authorization. The execution, delivery and
performance of this Agreement (including, without
limitation, performance of the obligations set forth in
Sections 5.1(k) and 5.1(n)) and the other Loan Documents to
which FI or FCX are or are to be, a party and the borrowings
hereunder (i) have been duly authorized by all requisite
corporate and, if required, stockholder, action on the part
of FI or FCX, as the case may be, and (ii) will not
(A) violate (x) any Governmental Rule or the certificate or
articles of incorporation or other constitutive documents or
the By-laws or regulations of such Person or (y) any
provisions of any indenture, agreement or other instrument
to which such Person is a party, or by which such Person or
any of their respective properties or assets are or may be
bound, (B) be in conflict with, result in a breach of or
constitute (alone or with notice or lapse of time or both) a
default under any indenture, agreement or other instrument
referred to in (ii)(A)(y) above or (C) result in the
creation or imposition of any lien, charge or encumbrance of
any nature whatsoever upon any property or assets of such
Person, except as contemplated by the FCX Pledge Agreements
and the FI Security Documents.
(c) Governmental Approvals. Except for those
consents, approvals and registrations listed on Schedule IV
to the FCX Credit Agreement, each of which has been obtained
and is in full force and effect, or will be obtained and be
in full force and effect on the RTZ Closing Date (as
indicated in Part III of Schedule IV to the FCX Credit
Agreement), no registration with or consent or approval of,
or other action by, any Governmental Authority is or will be
required in connection with the execution, delivery and
performance by FI or FCX, as appropriate, of this Agreement
or any other Loan Document to which it is, or is to be, a
party or the borrowings hereunder by FI. Other than routine
authorizations, permissions or consents which are of a minor
nature and which are customarily granted in due course after
application or the denial of which would not materially
adversely affect the business, financial condition or
operations of FCX or FI, such Person has all franchises,
licenses, certificates, authorizations, approvals or
consents from all national, state and local governmental and
regulatory authorities required to carry on its business as
now conducted and as proposed to be conducted.
(d) Enforceability. This Agreement and each of
the other Loan Documents to which it is a party constitutes
a legal, valid and binding obligation of FI and FCX, as
applicable, in each case enforceable in accordance with its
respective terms (subject, as to the enforcement of remedies
against such Person, to applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws
affecting creditors' rights against such Person generally in
connection with the bankruptcy, reorganization or insolvency
of such Person or a moratorium or similar event relating to
such Person).
(e) Financial Statements. FCX and FI have
heretofore furnished to each of the Banks their consolidated
balance sheets and statements of operations and changes in
retained earnings and cash flow as of and for the fiscal
years ended December 31, 1993 and 1994, all audited and
certified by Arthur Andersen LLP, independent public
accountants, included in FCX's Annual Report on Form 10-K
for the year ended December 31, 1994 (the "1994 Form 10-K"),
and unaudited consolidated balance sheets and statements of
operations and cash flow as of and for the fiscal quarter
ended March 31, 1995 included in FCX's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1995. In
addition, FI has heretofore furnished to each of the Banks
consolidated balance sheets and statements of operations and
cash flow for FI as of and for the fiscal years ended
December 31, 1993 and 1994, all audited and certified by
Arthur Andersen LLP and unaudited consolidated balance
sheets and statements of operations and cash flow for FI as
of and for the fiscal quarter ended March 31, 1995. All
such balance sheets and statements of operations and cash
flow present fairly the financial condition and results of
operations of FCX and its Subsidiaries or of FI and its
Subsidiaries, as applicable, as of the dates and for the
periods indicated. Such financial statements and the notes
thereto disclose all material liabilities, direct or
contingent, of FCX and its Subsidiaries or of FI and its
Subsidiaries, as applicable, as of the dates thereof which
are required to be disclosed in the footnotes to financial
statements prepared in accordance with GAAP. The financial
statements referred to in this Section 4.1(e) have been
prepared in accordance with GAAP. There has been no
material adverse change since December 31, 1994, in the
businesses, assets, operations, prospects or condition,
financial or otherwise, of (i) FCX, (ii) FI, (iii) FCX and
its Subsidiaries taken as a whole or (iv) FI and its
Subsidiaries taken as a whole.
(f) Litigation; Compliance with Laws; etc.
(i) Except as disclosed in the 1994 Form 10-K and any
subsequent reports filed as of 20 days prior to the Fifth
Amendment Closing Date with the SEC on Form 10-Q or Form 8-K
which have been delivered to the Banks, there are no
actions, suits or proceedings at law or in equity or by or
before any governmental instrumentality or other agency or
regulatory authority now pending or, to the knowledge of FCX
or FI, threatened against or affecting FCX or FI or any
Subsidiary or the businesses, assets or rights of FCX or FI
or any Subsidiary (i) which involve this Agreement or any of
the other Loan Documents or any of the transactions
contemplated hereby or thereby or the collateral for the
Loans or (ii) as to which there is a reasonable possibility
of an adverse determination and which, if adversely
determined, could, individually or in the aggregate,
materially impair the ability of FCX or FI to conduct its
business substantially as now conducted, or materially and
adversely affect the businesses, assets, operations,
prospects or condition, financial or otherwise, of FCX or
FI, or impair the validity or enforceability of, or the
ability of FCX or FI to perform its obligations under this
Agreement or any of the other Loan Documents to which it is
a party.
(ii) Neither FCX, FI nor any Subsidiary is in
violation of any law, or in default with respect to any
judgment, writ, injunction, decree, rule or regulation of
any court or governmental agency or instrumentality, where
such violation or default could result in a Material Adverse
Effect.
(g) Title, etc. FCX, FI and their Subsidiaries
have good and valid title to their respective material
properties, assets and revenues (exclusive of oil, gas and
other mineral properties on which no development or
production activities are being conducted following
discovery of commercially exploitable reserves), free and
clear of all Liens except such Liens as are permitted by
Section 5.2(d) and except for covenants, restrictions,
rights, easements and minor irregularities in title which do
not individually or in the aggregate interfere with the
occupation, use and enjoyment by FCX or FI, as the case may
be, or the respective Subsidiary of such properties and
assets in the normal course of business as presently
conducted or materially impair the value thereof for use in
such business. FI has the requisite licenses under the
Governmental Rules of Indonesia to use the real property on
which it conducts its business.
(h) Federal Reserve Regulations; Use of Proceeds.
(i) Neither FCX, FI nor any Subsidiary is engaged
principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing
or carrying Margin Stock.
(ii) No part of the proceeds of the Loans will be
used, whether directly or indirectly, and whether
immediately, incidentally or ultimately, for any purpose
which entails a violation of, or which is inconsistent with,
the provisions of the Regulations of the Board, including,
without limitation, Regulations G, U or X thereof.
(iii) FI will use the proceeds of all Loans made to
it for its ongoing general corporate purposes and for
acquisition transactions (subject to Section 4.1(h)(ii)).
(iv) FI warrants that, as of each date when this
representation is made or deemed made, not more than 25% of
the value of the assets directly or indirectly securing the
Loans and Permitted Secured Hedges constitutes Margin Stock.
(i) Taxes. FCX, FI and their Subsidiaries have
filed or caused to be filed all material Federal, state,
local and foreign tax (including Indonesian) returns which
are required to be filed by them, and have paid or caused to
be paid all taxes shown to be due and payable on such
returns or on any assessments received by any of them, other
than any taxes or assessments the validity of which FCX, FI
or any Subsidiary is contesting in good faith by appropriate
proceedings, and with respect to which FCX, FI or such
Subsidiary shall, to the extent required by GAAP, have set
aside on its books adequate reserves.
(j) Employee Benefit Plans. FCX, FI and each of
their ERISA Affiliates is in compliance in all material
respects with the applicable provisions of ERISA and the
Code and the regulations and published interpretations
thereunder. No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other
such ERISA Events, could materially and adversely affect the
financial condition and operations of FCX, FI and the ERISA
Affiliates, taken as a whole. The present value of all
benefit liabilities under each Plan, determined on a plan
termination basis (based on those assumptions used for
financial disclosure purposes in accordance with Statement
of Financial Accounting Standards No. 87 of the Financial
Accounting Standards Board ("SFAS 87") did not, as of the
last annual valuation date applicable thereto, exceed by
more than $5,000,000 the value of the assets of such Plan,
and the present value of all benefit liabilities of all
underfunded Plans, determined on a plan termination basis
(based on those assumptions used for financial disclosure
purposes in accordance with SFAS 87) did not, as of the last
annual valuation dates applicable thereto, exceed by more
than $5,000,000 the value of the assets of all such
underfunded Plans.
(k) Investment Company Act. Neither FCX, FI nor
any Subsidiary is an "investment company" as defined in, or
subject to regulation under, the Investment Company Act of
1940, as amended from time to time.
(l) Public Utility Holding Company Act. Neither
FCX, FI nor any Subsidiary is a "holding company", or a
"subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company", within the meaning of the
Public Utility Holding Company Act of 1935, as amended from
time to time.
(m) Subsidiaries. Schedule III to the FCX Credit
Agreement constitutes a complete and correct list, as of the
Fifth Amendment Closing Date or the date of any update
thereof required by Section 5.1(a)(5), of all Restricted
Subsidiaries with at least $1,000,000 in total assets,
indicating the jurisdiction of incorporation or organization
of each corporation or partnership and the percentage of
shares or units owned on such date directly or indirectly by
FCX in each. Each entity shown as a parent company owns on
such date, free and clear of all Liens (other than the Liens
required or permitted by Section 4.1(o)), the percentage of
voting shares or partnership interests outstanding of its
Subsidiaries shown on Schedule III to the FCX Credit
Agreement and all such shares or partnership interests are
validly issued and fully paid.
(n) Environmental Matters. (1) The properties
owned or operated by FCX and FI and their Subsidiaries (the
"Properties") and all operations of FCX and FI and their
Subsidiaries are in compliance, and in the last three years
have been in compliance, with all Environmental Laws and all
necessary Environmental Permits have been obtained and are
in effect, except to the extent that such non-compliance or
failure to obtain any necessary permits, in the aggregate,
could not reasonably be expected to result in a Material
Adverse Effect;
(2) there have been no Releases or threatened
Releases at, from, under or proximate to the Properties or
otherwise in connection with the operations of FCX, FI or
their Subsidiaries, which Releases or threatened Releases,
in the aggregate, could reasonably be expected to result in
a Material Adverse Effect;
(3) neither FCX, FI nor any of their Subsidiaries
has received any notice of an Environmental Claim in
connection with the Properties or the operations of FCX, FI
or their Subsidiaries or with regard to any Person whose
liabilities for environmental matters FCX, FI or their
Subsidiaries has retained or assumed, in whole or in part,
contractually, by operation of law or otherwise, which, in
the aggregate, could reasonably be expected to result in a
Material Adverse Effect, nor do FCX, FI or their
Subsidiaries have reason to believe that any such notice
will be received or is being threatened; and
(4) Hazardous Materials have not been transported
from the Properties, nor have Hazardous Materials been
generated, treated, stored or disposed of at, on or under
any of the Properties in a manner that could give rise to
liability under any Environmental Law, nor have FCX, FI or
their Subsidiaries retained or assumed any liability,
contractually, by operation of law or otherwise, with
respect to the generation, treatment, storage or disposal of
Hazardous Materials, which transportation, generation,
treatment, storage or disposal, or retained or assumed
liabilities, in the aggregate, could reasonably be expected
to result in a Material Adverse Effect.
(o) Security Documents. The Liens created by the
FI Security Documents are in full force and effect and
constitute first priority (except for Liens expressly
permitted by Section 5.2(d)), perfected security interests
in favor of the FI Trustee for the ratable benefit of the
Banks and the FCX Lenders in the property and assets stated
to be subject to each such FI Security Document and for the
RTZ Lender in the RTZ Collateral. The FCX Pledge Agreements
are effective to create in favor of the FCX Collateral
Agent, for the ratable benefit of the Lenders (as such term
is defined in the FCX Intercreditor Agreement) and the
holders of the B.V. Notes, a legal, valid and enforceable
security interest in the stock of FI owned by FCX and
pledged thereunder, the certificates for such shares have
been delivered to the FCX Collateral Agent and the FCX
Pledge Agreements constitute a fully perfected first
priority Lien on, and security interests in, all right,
title and interest of FCX thereunder in such stock and the
proceeds thereof, in each case prior and superior inright to
any other Person.
(p) Assigned Agreements. Schedule V to the FCX
Credit Agreement (as updated from time to time as required
hereby) is a complete and correct list of each currently
effective Major Concentrate Sales Agreement (copies of which
have heretofore been furnished to the Administrative Agent).
FI is not in default in any material respect in its
obligations under any Assigned Agreement nor is any
counterparty to any such agreement in default in its
obligations in any respect that could materially and
adversely affect the ability of FI to perform its
obligations under the Loan Documents.
(q) No Material Misstatements. No information,
report (including any Borrowing Base Certificate and any
exhibit, schedule or other attachment thereto or other
document delivered in connection therewith), financial
statement, exhibit or schedule prepared or furnished by FI
or FCX to the Administrative Agent or any Bank in connection
with this Agreement or any of the other Loan Documents or
included therein or any information provided to Cravath,
Swaine & Moore in connection with the preparation of the
environmental due diligence summary memorandum referred to
in Section 6.1(a)(xii) contained or contains any material
misstatement of fact or omitted or omits to state any
material fact necessary to make the statements therein, in
the light of the circumstances under which they were made,
not misleading.
ARTICLE V
Covenants
SECTION 5.1. Affirmative Covenants of FCX and FI.
FCX and FI covenant and agree with each Bank and Agent and
the FI Trustee that from and after the Fifth Amendment
Closing Date and so long as this Agreement shall remain in
effect and until the Commitments have been terminated and
the principal of and interest on each Loan, all fees and all
other expenses or amounts payable under any Loan Document
shall have been paid in full, that, without the prior
written consent of the Required Banks:
(a) Financial Statements, etc. FCX and FI shall
furnish each Bank (or, as provided below, the Administrative
Agent):
(1) within 95 days after the end of each
fiscal year, a consolidated balance sheet of FCX or FI, as
the case may be, and its Subsidiaries as at the close of
such fiscal year and consolidated statements of operation
and changes in retained earnings and cash flow of it and its
Subsidiaries for such year, with the opinion thereon of
Arthur Andersen LLP or other independent public accountants
of national standing selected by it to the effect that such
consolidated financial statements fairly present the
financial condition and results of operations of FCX or FI,
as the case may be, on a consolidated basis in accordance
with GAAP consistently applied, except as disclosed in such
auditor's report;
(2) within 50 days after the end of each of
the first three quarters of each of its fiscal years, a
consolidated balance sheet of FCX or FI, as the case may be,
and its Subsidiaries as at the end of such quarter and
consolidated statements of income of it and its Subsidiaries
for such quarter and for the period from the beginning of
the fiscal year to the end of such quarter, certified by the
Treasurer or other authorized financial or accounting
officer of FCX as fairly presenting the financial condition
and results of operations of FI or FCX on a consolidated
basis in accordance with GAAP consistently applied, subject
to normal year-end audit adjustments;
(3) promptly after their becoming available,
(a) copies of all financial statements, reports and proxy
statements which FCX or FI shall have sent to its public
stockholders generally and, in the case of FI, will furnish
to the Administrative Agent copies of all notices to or from
its stockholders alleging or claiming a breach or default
relating to their shareholding in FI or with respect to any
matter which could reasonably be expected to have an adverse
effect on the FI Collateral and Rights, (b) copies of all
registration statements (excluding registration statements
relating to employee benefit plans) and regular and periodic
reports, if any, which FCX or FI shall have filed with the
SEC, or any governmental agency substituted therefor, and
(c) if requested by any Bank, copies of each annual report
filed with any governmental agency pursuant to ERISA with
respect to each Plan of FCX or FI or any of the
Subsidiaries;
(4) promptly upon the occurrence of any
Default or Event of Default, the occurrence of any default
under any other Loan Document, the commencement of any
proceeding regarding FCX, FI or any of their Subsidiaries
under any Federal or state bankruptcy law, any other
development that has resulted in, or could reasonably be
expected to result in, a Material Adverse Effect, notice
thereof, describing the same in reasonable detail;
(5) on the Fifth Amendment Closing Date and
at the time of provision of the financial statements
referred to in clauses (1) and (2) above, an update of
Schedule III to the FCX Credit Agreement to correct, add or
delete any required information;
(6) in the case of FI, a copy to the
Administrative Agent of all notices alleging or claiming a
breach or default or with respect to any matter which could
reasonably be expected to have an adverse effect upon the FI
Collateral and Rights (i) by or to Indonesian Governmental
Authorities in connection with the FI Project or pursuant to
the Contract of Work or the Memorandum of Understanding and
(ii) by or to FI or its Affiliates pursuant to the Specified
Documents, and a copy of any proposed amendment to the
Contract of Work, Memorandum of Understanding or any
Specified Documents prior to execution and delivery thereof;
(7) all documents, notices and other material
required to be provided to the Administrative Agent or the
Banks by Section 5.3; and
(8) from time to time, such further
information regarding the business, affairs and financial
condition of FCX, FI or any Subsidiary as any Bank may
reasonably request.
At the time FCX or FI furnishes financial statements
pursuant to the foregoing clauses (1) and (2), FCX or FI, as
the case may be, will also furnish each Bank a certificate
by its Treasurer or other authorized Financial Officer
setting forth the calculation of: (A) its current ratio as
determined in accordance with Section 5.2(e), (B) its EBITDA
Ratio as determined in accordance with Section 5.2(f) and
(C) the compliance of FI and FCX with Section 5.2(b), and
FCX or FI, as the case may be, will also furnish a
certificate by its Treasurer or other authorized Financial
Officer certifying that no Default or Event of Default has
occurred, or if such a Default or Event of Default has
occurred, specifying the nature and extent thereof and any
corrective action taken or proposed to be taken with respect
thereto.
(b) Taxes and Claims. FCX and FI shall, and
shall cause each of their Subsidiaries to, pay and discharge
all taxes, assessments and governmental charges or levies,
imposed upon it or upon its income or profits, or upon any
property belonging to it, prior to the date on which
material penalties attach thereto; provided that neither
FCX, FI nor any Subsidiary shall be required to pay any such
tax, assessment, charge or levy, the payment of which is
being contested in good faith by proper proceedings and with
respect to which FCX, FI or such Subsidiary shall have, to
the extent required by GAAP, set aside on its books adequate
reserves and such contest operates to suspend collection of
the contested obligation, tax, assessment or charge and
enforcement of a Lien.
(c) Maintenance of Existence; Conduct of
Business. FCX and FI shall each preserve and maintain its
corporate existence and all its rights, privileges and
franchises necessary or desirable in the normal conduct of
its business; provided that nothing herein shall prevent any
transaction permitted by Section 5.2(c).
(d) Compliance with Applicable Laws. FCX and FI
shall, and shall cause each of their Subsidiaries to, comply
with the requirements of all applicable laws, rules,
regulations and orders of any Governmental Authority, a
breach of which would materially and adversely affect its
consolidated financial condition or business, except where
contested in good faith and by proper proceedings and with
respect to which FCX and FI or such Subsidiary shall have,
to the extent required by GAAP, set aside on its books
adequate reserves.
(e) Litigation. FCX and FI shall promptly give
to each Bank notice in writing of all litigation and all
proceedings before any governmental or regulatory agencies
or arbitration authorities affecting FCX, FI or any
Subsidiary except those which, if adversely determined, do
not relate to the Loan Documents and which would not have a
material adverse effect on the business, assets, operations
or financial condition of FCX or FI or the ability of FCX or
FI to comply with their obligations under the Loan
Documents.
(f) ERISA. FCX and FI shall, and shall cause
each of their Subsidiaries to, comply in all material
respects with the applicable provisions of ERISA and the
Code and furnish to the Administrative Agent (i) as soon as
possible, and in any event within 30 days after any
Responsible Officer of FCX or FI or any ERISA Affiliate
knows or has reason to know that, any ERISA Event has
occurred that alone or together with any other ERISA Event
could reasonably be expected to result in liability of FCX
or FI in an aggregate amount exceeding $25,000,000 or
requires payment exceeding $10,000,000 in any year, a
statement of a Financial Officer of FCX or FI setting forth
details as to such ERISA Event and the action that FCX or FI
proposes to take with respect thereto.
(g) Compliance with Environmental Laws;
Preparation of Environmental Reports. (i) FCX and FI shall
comply, and cause their Subsidiaries and all lessees and
other Persons occupying the Properties to comply, in all
material respects with all Environmental Laws and
Environmental Permits applicable to its operations and
Properties; obtain and renew all material Environmental
Permits necessary for its operations and Properties; and
conduct any Remedial Action in accordance with Environmental
Laws; provided, however, that neither FCX, FI nor any of
their Subsidiaries shall be required to undertake any
Remedial Action to the extent that its obligation to do so
is being contested in good faith and by proper proceedings
and appropriate reserves are being maintained with respect
to such circumstances.
(ii) If a default caused by reason of a breach of
Section 4.1(n) or 5.1(g)(i) shall have occurred and be
continuing, at the request of the Required Banks through the
Administrative Agent, FCX and FI shall provide to Banks
within 45 days after such request, at the expense of FCX and
FI, an environmental site assessment report for the
Properties (which are the subject of such default) prepared
by an environmental consulting firm acceptable to the
Administrative Agent, indicating the presence or absence of
Hazardous Materials and the estimated cost of any compliance
or Remedial Action in connection with such Properties.
(h) Security. (i) FI at all times shall comply
with the provisions of the FI Security Documents and
maintain in full force and effect all the rights, powers and
benefits of the FI Trustee under the FI Security Documents
in accordance with their terms, including (x) the validity
and effectiveness of the powers of attorney granted by the
Surat Kuasa and the Fiduciary Power and the fiduciary
transfers effectuated by the Fiduciary Transfer and the
Fiduciary Assignment and (y) maintenance of the security
interest of the FI Trustee in the collateral required to be
subjected to the Liens created by the FI Security Documents
as a perfected first priority (second priority, with respect
to the RTZ Collateral so long as the RTZ Loan is
outstanding) security interest as provided therein, subject
only to the releases of specific assets as and to the extent
required by Section 8.1(j) and
(ii) FCX at all times shall comply with the provisions
of the FCX Pledge Agreements and maintain in full force and
effect all the rights, powers and benefits of the FCX
Collateral Agent under the FCX Pledge Agreements in
accordance with their respective terms, including
maintenance of the security interest of the FCX Collateral
Agent in the collateral required to be subject to the Liens
created by the FCX Pledge Agreements as a perfected first
priority security interest as provided therein.
(i) Insurance. FCX, FI and each Restricted
Subsidiary shall (i) keep its insurable properties
adequately insured at all times; (ii) maintain such other
insurance, to such extent and against such risks, including
fire, flood and other risks insured against by extended
coverage, as is customary with companies in the same or
similar businesses; (iii) maintain in full force and effect
public liability insurance against claims for personal
injury or death or property damage occurring upon, in, about
or in connection with the use of any properties owned,
occupied or controlled by it in such amount as it shall
reasonably deem necessary; and (iv) maintain such other
insurance as may be required by law. The proceeds of any
political risk insurance of FCX or FI shall be applied
promptly to the prepayment of the Loans to FI and the loans
to FI and FCX pursuant to the FCX Agreement (it being
understood that the allocation of such prepayments among
such Loans shall be determined solely by FCX). Prepayments
pursuant to this Section 5.1(i) shall not be subject to
Section 3.13 unless the occurrence that entitles FCX to such
insurance proceeds results in an Event of Default.
(j) Access to Premises and Records. FCX, FI and
each Subsidiary shall maintain financial records in
accordance with GAAP, and, at all reasonable times and as
often as any Bank may reasonably request, permit
representatives of any Bank to have access to its financial
records and its premises and to the records and premises of
any of its Subsidiaries and to make such excerpts from and
copies of such records as such representatives deem
necessary and to discuss its affairs, finances and accounts
with its officers and its independent certified public
accountants or other parties preparing consolidated or
consolidating statements for it or on its behalf.
(k) Concentrate Sales Agreements. FI will
(i) promptly advise the Administrative Agent and the FI
Trustee of any changes to the information set forth on
Schedule V to the FCX Credit Agreement and promptly assign
all Concentrate Sales Agreements and the proceeds from all
FI Receivables Purchase Agreements in effect from time to
time to the FI Trustee under, and in accordance with,
Article III of the FI Trust Agreement, require the
counterparties thereto to make all payments to FI thereunder
directly to the Sales Proceeds Account, and (ii) furnish to
the Administrative Agent and the FI Trustee copies of each
Major Concentrate Sales Agreement and FI Receivables
Purchase Agreement entered into after the Fifth Amendment
Closing Date, and each amendment, waiver or supplement to
any Concentrate Sales Agreement which after such amendment,
waiver or supplement would be a Major Concentrate Sales
Agreement, in each case promptly after the execution and
delivery thereof. FI may permit Concentrate Sales
Agreements to expire or terminate in accordance with their
terms.
(l) Protection of Contract Rights. FI will not
terminate, suspend, amend or grant waivers of any provisions
of any of the Assigned Agreements without the prior written
consent of the Required Banks; provided, however, that FI
may amend or waive provisions in any Concentrate Sales
Agreement so long as such amendment or waiver will not
materially adversely affect the business, financial
condition or operations of FI or any rights of the FI
Trustee or the Banks. FI will promptly furnish to the Banks
and the Administrative Agent copies of any amendments to or
waivers or supplements of the Assigned Agreements. FI shall
take all steps necessary or advisable to protect its rights
(and the rights of the FI Trustee) under the Assigned
Agreements.
(m) Source of Interest. FI (i) will conduct its
business so that interest paid on the Loans of FI to any
Bank (or Transferee) which is not a "related person" to FI
within the meaning of Section 861(c)(2)(B) of the Code as in
effect on the Fifth Amendment Closing Date will be deemed to
be income from sources without the United States within the
meaning of Sections 861(a)(1)(A) and 861(c) of the Code as
in effect on the Fifth Amendment Closing Date and (ii) will
use its best efforts (without undue cost) to conduct its
business so that interest paid on the Loans of FI to any
Bank (or Transferee) which is not a related person to FI
within the meaning of Section 861(c)(2)(B) of the Code (as
it may be amended or substituted after the Fifth Amendment
Closing Date) will be deemed to be income from sources
without the United States within the meanings of Sections
861(a)(1)(A) and 861(c) of the Code (as it may be amended or
substituted after the Fifth Amendment Closing Date).
(n) Further Assurances. FI and FCX shall, and
shall cause their Subsidiaries to, execute any and all
further documents, financing statements, agreements and
instruments, and take all further actions (including filing
Uniform Commercial Code financing statements and any
Indonesian equivalents), which may be required under
applicable law, or which the Required Banks, the
Administrative Agent, the Documentary Agent or the FI
Trustee may reasonably request, in order to effectuate the
transactions contemplated by this Agreement and the other
Loan Documents including without limitation the FCX Pledge
Agreements and the FI Security Documents, and in order to
grant, preserve, protect and perfect the validity and first
priority of the security interests created by the FI
Security Documents and the FCX Pledge Agreements. FCX and
FI agree to provide such evidence as the Agents or the FI
Trustee shall reasonably request as to the perfection and
priority status of each such security interest and Lien.
(o) Covenants Regarding FI. FCX shall cause FI
to perform the covenants relating to it set forth in
Sections 5.1 and 5.2.
SECTION 5.2. Negative Covenants of FCX and FI.
Each of FCX and FI covenants and agrees with each Bank that,
from and after the Fifth Amendment Closing Date and so long
as this Agreement shall remain in effect and until the
Commitments have been terminated and the principal of and
interest on each Loan, all fees and all other expenses or
amounts payable under any Loan Document have been paid in
full, that, without the prior written consent of the
Required Banks:
(a) Conflicting Agreements. FCX and FI shall not
and shall cause their Restricted Subsidiaries not to enter
into any agreement containing any provision which would be
violated or breached by the performance of their obligations
under any Loan Document or under any instrument or document
delivered or to be delivered by them hereunder or thereunder
or in connection herewith or therewith, including any
agreement with any Person which would prohibit or restrict
(i) in the case of FI and the other Restricted Subsidiaries
the payments of dividends or other distributions or (ii) the
ability of such entities to create Liens on any of their
assets (other than as provided in Sections 7.2.5 and 7.3 of
the Participation Agreement and other than on assets which
are subject to Liens permitted pursuant to paragraphs (i)
with respect to such required margin deposits only, (ii),
(iii), (iv), (vi), (vii) and (ix) of Section 5.2(d) and
extensions and renewals and replacements thereof to the
extent permitted pursuant to Section 5.2(d)(x)).
(b) Borrowing Base Limits. Except to the extent
expressly permitted by Section 2.4 or Section 3.9(c), FCX
and FI shall not at any time permit the sum of all Borrowing
Base Debt to exceed the then effective Borrowing Base.
(c) Consolidation or Merger; Disposition of
Assets and Capital Stock. FCX and FI shall not, and shall
not permit any Restricted Subsidiary to, merge into or
consolidate with any Person, or sell, lease, transfer or
otherwise dispose of (in one transaction or a series of
transactions) (A) in the case of FCX, stock in FI
constituting at least 50.1% of the ownership of FI on a
fully diluted basis and (B) in the case of FI and its
Restricted Subsidiaries, all or any substantial part of its
assets (whether now owned or hereafter acquired) or any
capital stock of any Restricted Subsidiary, except for
(i) dispositions of accounts receivable and dispositions of
investment instruments and inventory in the ordinary course
of business; provided that the proceeds of any sale of
accounts receivable by FI or its Restricted Subsidiaries are
deposited in the Sales Proceeds Account, (ii) dispositions
of obsolete or worn-out property, or real estate not used or
useful in its business, (iii) subject to the last sentence
of Section 5.2(j) and to Section 5.2(p) and to FI itself at
all times retaining its rights to the Contract of Work and
tangible assets sufficient for FI's production activities
from which revenues from scheduled production of the 10-K
Reserves referred to in Schedule VII to the FCX Credit
Agreement are pledged to (or for the benefit of) the Banks,
dispositions of assets by FI or its Restricted Subsidiaries
to another Restricted Subsidiary of FI or to FI,
(iv) subject to Section 5.2(l), dispositions of assets by FI
or its Restricted Subsidiaries to a Third Party, (v) to the
extent permitted by Sections 5.2(j) and 5.2(q), the payment
of dividends in cash or in kind by FCX, FI or any Restricted
Subsidiary, whether now owned or hereafter acquired, (vi)
permitted sale and leaseback transactions, (vii) the
transactions comprising the Restructuring, (viii)
investments in Portfolio Investments and dispositions
thereof, and (ix) the transfer of the RTZ Interests to PT-
RTZ as permitted by Section 5.3, the FI Intercreditor
Agreement and the FI Trust Agreement, except that:
(w) FCX, FI or any Restricted Subsidiary may
merge or liquidate any corporation (other than, in the case
of a Restricted Subsidiary, FI or FCX) into itself;
(x) any Restricted Subsidiary (other than FI)
may be merged into any other corporation; provided that such
corporation, immediately following such merger, shall be
deemed a Restricted Subsidiary;
(y) FI and the Restricted Subsidiaries may
engage in sale and leaseback transactions (including sale
and leaseback transactions which initially take the form of
a purchase money transaction in that title to the equipment
passes through FI or a Restricted Subsidiary prior to being
held by the lessor in the sale and leaseback transaction)
for assets with a cumulative aggregate fair market value not
in excess of $50,000,000 and FI may, subject to Section
5.2(r), consummate the transfer of the Waste Water Assets as
required by the Waste Water Documents and the transfer of
the remaining PFT Assets and ALatieF-FI Assets as required
by the PFT Documents and the ALatieF-FI Documents,
respectively, and the transfer in respect of Contract Area
Block B referred to in Section 8.1(j) subject to the
conditions precedent thereto set forth in Section 8.1(j);
and
(z) subject to Sections 2.5 (to the extent
that such transaction is a Net Proceeds Transaction) and
5.2(j) and in addition to the other transactions expressly
permitted by the other provisions of this Section 5.2(c) and
by Section 5.2(r), FCX, FI or any Restricted Subsidiary may
sell or otherwise dispose of (including by merger or
consolidation) any assets or securities of any Subsidiary
other than stock of FI owned by FCX representing at least
50.1% of the voting stock of FI on a fully diluted basis
pledged pursuant to the FCX Pledge Agreements and other than
assets of FI and its Restricted Subsidiaries, pledged to the
FI Trustee pursuant to the FI Security Documents except to
the extent permitted by clause (y) above and by
Section 5.2(r);
provided, however, that in the case of a merger permitted by
clause (w) above, immediately thereafter and giving effect
thereto, FCX, FI or, as the case may be, a Restricted
Subsidiary would be the surviving corporation and, in the
case of a merger permitted by clause (w) or clause (x) above
or of any disposition of assets or securities permitted by
clause (y) or (z) above, no Default or Event of Default
would, immediately thereafter and giving effect thereto,
have occurred and be continuing. Each sale or other
disposition permitted by clause (z) above shall be permitted
only if FCX, FI or the respective Restricted Subsidiary
shall receive fair consideration therefor, as determined by
the Board of Directors of FCX, FI or of such Restricted
Subsidiary, as the case may be, and certified by its
Treasurer or another of its Financial Officers to the
Administrative Agent.
(d) Liens. FCX and FI shall not, nor shall they
permit any of their Restricted Subsidiaries to, create,
incur, assume, or suffer to exist any Lien upon any of its
respective properties, revenues or assets (including stock
or other securities of any Person, including any
Subsidiary), now owned or hereafter acquired, except:
(i) required margin deposits on permitted
Hedge Agreements, surety and appeal bonds and materialmen's,
suppliers', tax and other like Liens arising in the ordinary
course of FCX's, FI's or such Restricted Subsidiary's
business securing obligations which are not overdue or are
being contested in good faith by appropriate proceedings and
as to which adequate reserves have been set aside on its
books to the extent required by GAAP, Liens arising in
connection with workers' compensation, unemployment
insurance and progress payments under government contracts,
and other Liens incident to the ordinary conduct of FCX's,
FI's or such Restricted Subsidiary's business or the
ordinary operation of property or assets and not incurred in
connection with the obtaining of any Debt or Guarantee;
(ii) Liens on assets or properties not owned
as of the Fifth Amendment Closing Date by FCX, FI or any
Restricted Subsidiary securing only purchase money Debt of
FCX or such Restricted Subsidiary permitted by
Section 5.2(g)(v), which Liens are limited to the specific
property the purchase of which is financed by such Debt;
(iii) Liens, existing at the time of the
acquisition by FCX, FI or any Restricted Subsidiary of the
majority of the capital stock or all the assets of any other
corporation or existing at the time of the merger of any
such corporation into FCX, FI or a Restricted Subsidiary, on
such capital stock or assets so acquired or on the assets of
the corporation so merged into FCX, FI or such Restricted
Subsidiary; provided, however, that such acquisition or
merger (and the discharge of such Liens referred to in the
immediately succeeding proviso) shall not otherwise result
in an Event of Default or Default; and provided further that
all such Liens shall be discharged within 180 days after the
date of the respective acquisition or merger;
(iv) Liens on the Caterpillar Assets to the
extent required by the Caterpillar Documents;
(v) Liens in favor of the Collateral Agent
(for the equal and ratable benefit of the Lenders (as
defined in the FCX Intercreditor Agreement) and the holders
of the B.V. Notes as provided in the FCX Pledge Agreements,
and Liens in favor of the Banks, the FCX Lenders and the FI
Trustee under the FI Security Documents, all as contemplated
by Section 4.1(o);
(vi) Liens on FI's interests in Jaya Power
securing the financing for such respective Specified
Transactions;
(vii) Liens (which Lien in any such case is
limited to the property leased thereunder) of lessors of
property (in such capacity) leased by FCX, FI or a
Restricted Subsidiary (x) pursuant to the Capitalized Lease
Obligations arising under the Specified Transactions,
(y) pursuant to an Operating Lease and (z) to the extent
permitted by Section 5.2(g)(vii) pursuant to other sale and
leaseback transactions entered into after the Fifth
Amendment Closing Date, the resulting Capitalized Lease
Obligations.
(viii) zoning restrictions, easements,
rights-of-way, restrictions on use of real property and
other similar encumbrances incurred in the ordinary course
of business which, in the aggregate, are not substantial in
amount and do not materially detract from the value of the
property subject thereto or interfere with the ordinary
conduct of the business of FCX, FI or any of their
Subsidiaries;
(ix) as permitted by Section 5.3, the RTZ
Interests and the first priority Lien of RTZ Lender on the
RTZ Collateral; and
(x) extensions, renewals and replacements of
Liens referred to in paragraphs (i), (ii), (iv), (v), (vi),
(vii), (viii) and (ix) of this Section 5.2(d); provided that
any such extension, renewal or replacement Lien shall be
limited to the property or assets covered by the Lien
extended, renewed or replaced and that the obligations
secured by any such extension, renewal or replacement Lien
shall be in an amount not greater than the amount of the
obligations secured by the Lien extended, renewed or
replaced.
(e) Current Ratios. FCX and FI shall not fail to
maintain, as of the last day of each fiscal quarter,
consolidated current assets (excluding Nonrestricted
Subsidiaries) in an amount at least equal to the amount of
its consolidated current liabilities (excluding
Nonrestricted Subsidiaries). For purposes hereof,
consolidated current assets and consolidated current
liabilities shall be determined in accordance with GAAP,
except that (i) investments in shares of corporations (other
than shares which are, and which are held as, marketable
securities) and advances to Nonrestricted Subsidiaries and
other firms or companies in which FCX or FI has a material
investment, direct or indirect, or which have a direct or
indirect material investment in FCX or FI shall not be
included in current assets; (ii) current assets shall be
increased by the available portion of the Commitments which,
under the terms of this Agreement, will, if not sooner
terminated or drawn down by FI, remain outstanding for at
least twelve months following the time of determination; and
(iii) the current portion of long-term Debt shall not be
included in current liabilities.
(f) EBITDA Ratios. FCX and FI shall not permit
its EBITDA Ratio to be less than 2.00 to 1.00 at the end of
any fiscal quarter.
(g) Debt. Neither FCX, FI nor any Restricted
Subsidiary shall incur, create, assume or permit to exist
any Debt of any of them except:
(i) Corporate Group Loans;
(ii) the Specified Obligations, including the
Capitalized Lease Obligations with respect to the PFT
Assets, the ALatieF-FI Assets, the P&O Assets, the Airfast
Assets and the Waste Water Assets;
(iii) $120,000,000 of aggregate principal
amount of P.T. ALatieF Freeport Finance Company B.V.'s
Senior Notes due 2001 (the 'B.V. Notes'), the Guarantee by
FCX of the B.V. Notes and the PT-FI Note (as defined in the
B.V. Registration Statement).
(iv) up to $70,000,000 aggregate principal
amount of borrowings from Caterpillar by FCX, and the
Guarantee thereof by FI (together with such Debt, the
"Caterpillar Obligations"), such guarantee to be secured by
certain specified heavy equipment of FI and related spare
parts (the "Caterpillar Assets") released or required to be
released from the lien of the FI Security Documents, all
substantially on the terms set forth in the Caterpillar
Documents (the "Caterpillar Transaction");
(v) purchase money indebtedness (excluding
sale and leaseback transactions which initially take the
form of a purchase money transaction in that title to the
equipment passes through FI or a Restricted Subsidiary prior
to being held by the lessor in the sale and leaseback
transaction) of FCX, FI and any Restricted Subsidiary
secured by Liens permitted by Section 5.2(d)(ii) not in
excess of the purchase price of the related asset in each
individual case and with an outstanding aggregate principal
amount for all such purchase money debt not at any time in
excess of $50,000,000;
(vi) Capitalized Lease Obligations (including
those resulting from sale and leaseback transactions) of
FCX, FI or any Restricted Subsidiary entered into after the
Fifth Amendment Closing Date (other than with respect to the
Specified Assets) with an outstanding aggregate principal
amount not at any time in excess of $50,000,000;
(vii) Guarantees by FCX of Debt of FM
Properties and Circle C not in excess of an aggregate
principal amount of $90,000,000 pursuant to the FCX/FMPO
Guarantee, secured pursuant to the FCX Intercreditor
Agreement by the FCX Pledge Agreements, and extensions,
renewals, replacements and refundings thereof;
(viii) up to $450,000,000 principal amount of
Debt of FI plus accrued commitment fees and interest to the
RTZ Lender pursuant to the RTZ Loan Agreement;
(ix) the Guarantee by FCX pursuant to the
Implementation Agreement of FI's obligations under the
Transaction Agreements (as such term is defined in the
Implementation Agreement); and
(x) other unsecured Debt of FCX, FI and the
Restricted Subsidiaries if, after giving effect to the
incurrence thereof, no Default or Event of Default would
occur or be continuing (including under Section 5.2(b)).
(h) Preferred Stock. FCX, FI and the Restricted
Subsidiaries shall not voluntarily redeem any preferred
stock issued by any them except for common stock of the
issuer (with cash for fractional shares).
(i) Scope of FI's Business. Neither FI nor FCX
will materially alter the nature of the business and
activities in which it is engaged as of the Fifth Amendment
Closing Date.
(j) Ownership of FI. FCX shall not at any time
directly or indirectly own shares of voting stock or
interests having on a fully diluted basis less than 50.1%
ownership interest in FI, which shares are pledged to the
FCX Collateral Agent pursuant to the FCX Pledge Agreements
(FCX hereby agreeing to cause additional shares of FI to be
pledged to the FCX Collateral Agent as necessary to remain
in full compliance at all times). FCX shall own its
interests in FI, free and clear of all Liens, except for the
Liens of the FCX Pledge Agreements. FCX shall promptly
notify the Administrative Agent in the event there occurs
any significant decrease in its percentage ownership of FI
below that indicated in the most recent Borrowing Base
Certificate or any decrease in such percentage interest
below 50.1%. The ownership by FCX of common stock of FI
shall be direct and not through any intervening entity,
except for the percentage of common stock held by FCX on the
Fifth Amendment Closing Date through P.T. Indocopper
Investama Corporation.
(k) Fiscal Year. FCX and FI shall not change its
fiscal year to end on any date other than December 31.
(l) Investments in Nonrestricted Subsidiaries and
Persons Not Subsidiaries. FCX, FI and their Restricted
Subsidiaries shall not make or permit to exist (x) any
Guarantee by it or a Restricted Subsidiary of the Debt of
any Person (other than FM Properties Co., to the extent
permitted by Section 5.2(g)(vii)) which is not FCX or a
Restricted Subsidiary, including Nonrestricted Subsidiaries,
FTX and FRP (each such Person being a "Third Party"), or
(y) any loans or advances to, or purchase any stock, other
securities or evidences of indebtedness of, or permit to
exist any investment (whether by transfer of assets or
otherwise) or acquire any investment whatsoever in or make
any Guarantee with respect to any such loans, advances,
purchases, investments or acquisitions of interest with
respect to, or any other payment for the benefit of, any
Third Parties the aggregate outstanding amount of which
under clauses (x) and (y) at any time exceeds by more than
$75,000,000 the largest aggregate amount thereof outstanding
at any time in the preceding fiscal year of FI, but only so
long as no Default or Event of Default (including under
Section 5.2(b)) shall have occurred or be continuing as of
the effective date of such transaction and after giving
effect thereto; provided that, notwithstanding the
provisions of clauses (x) and (y) above, FCX, FI and the
Restricted Subsidiaries may invest in Portfolio Investments,
FCX may enter into and perform the FCX/FMPO Guarantee and FI
may consummate the Waste Water Transaction and transfer the
remaining ALatieF-FI Assets, PFT Assets and P&O Assets as
required by the ALatieF Documents, the PFT Documents and the
P&O Documents, respectively, each of which shall not be
included in the calculation of such $75,000,000 annual
limit.
(m) Federal Reserve Regulations. FCX and FI will
not, and will cause their Subsidiaries not to, use the
proceeds of any Loan in any manner that would result in a
violation of, or be inconsistent with, the provisions of
Regulations G, U or X.
(n) FI Transfers. FI shall not make any
contribution or transfer of any substantial portion of its
assets to FCX or any Restricted Subsidiary other than
(i) permitted cash dividends to FCX and (ii) to a Wholly
Owned Restricted Subsidiary of FI all the equity in which
shall be pledged pursuant to the FI Security Documents to
the FI Collateral Agent as additional security for the Loans
to FI.
(o) Specified Transactions. FCX and FI shall not
(i) enter into any amendment or modification of any of the
Specified Documents which would have an adverse effect upon
the rights and remedies of the Administrative Agent, the FI
Trustee and the Banks under the Loan Documents or the
collateral therefor (the "FI Collateral and Rights") or
impair the ability of FCX, FI or the Restricted Subsidiaries
to perform all of their respective obligations under the
Loan Documents; (ii) make, or permit any Restricted
Subsidiary to make, any voluntary prepayment of any of the
Specified Obligations (including the B.V. Notes and any
other Debt incurred in connection with such Specified
Transaction) or directly or indirectly, with or from any
funds or assets provided, directly or indirectly, by FCX, FI
or any Restricted Subsidiary beyond those expressly
permitted by Section 5.2(1) (collectively, "Restricted
Assets"), in any such case during the continuance of any
Default or Event of Default or, if, after giving effect to
any such voluntary prepayment (x) any Default or Event of
Default would then exist or result from such transaction or
(y) except for refinancings thereof on terms that are not
more restrictive on, or less favorable to, FI, if the
Available Borrowing Base would be less than $125,000,000;
(iii) make, or permit any Restricted Subsidiary to make, any
voluntary repurchase of the PFT Assets, the ALatieF Assets,
the P&O Assets, the Airfast Assets or the Waste Water Assets
directly or indirectly from or with any Restricted Asset
during the continuance of any Default or Event of Default
or, if, after giving effect to any such voluntary
repurchase, (x) any Default or Event of Default would then
exist or result from such transaction or (y) if the
Available Borrowing Base would be less than $125,000,000 nor
shall FCX and FI grant or provide (or permit any Restricted
Subsidiary to grant or provide) any additional security or
collateral to secure any Specified Obligations (other than
as required under the Specified Documents with respect to
substitution or replacement of existing collateral) and
other than the transfer of the remaining ALatieF-FI Assets,
P&O Assets and PFT Assets as required by the ALatieF
Documents, the P&O Documents and the PFT Documents.
(p) Transactions with Affiliates. Other than the
transactions constituting the Restructuring, FCX, FI and
their Restricted Subsidiaries' shall not sell or transfer
any property or assets to, or purchase or acquire any
property or assets from, or otherwise engage in any other
transactions with, any of its Affiliates, except that as
long as no Default or Event of Default shall have occurred
and be continuing, FCX, FI or any Restricted Subsidiary may
engage in any of the foregoing transactions (i) in the case
of a transaction between FCX, FI or a Restricted Subsidiary
of FI and a non-Wholly Owned Restricted Subsidiary, FI has
determined that such transaction is in the best interests of
FI and (ii) in the case of any other transaction between
FCX, FI or a Restricted Subsidiary and an Affiliate which is
not a Restricted Subsidiary, at prices and on terms and
conditions not less favorable to FI or such Restricted
Subsidiary than could be obtained on an arm's-length basis
from unrelated third parties.
(q) Equity Payments. FCX and FI shall not make
an Equity Payment if there is then continuing any Default or
Event of Default (or a Default or Event of Default would
result therefrom or exist after giving effect thereto),
including pursuant to Section 5.2(b).
(r) Covenants Regarding Waste Water. FI shall
not consummate the Waste Water Transaction until such time
as (i) the Administrative Agent has received and given
written approval of the Waste Water Documents to which FI,
FCX or any Restricted Subsidiary is a party or with respect
to which FI, FCX or any Restricted Subsidiary has any direct
or indirect obligation or liability, each such approval to
be conditioned upon the satisfactory factoring of such
financing and/or obligations into the calculation of
Borrowing Base Debt and (ii) the Administrative Agent has
entered into an agreement with the secured bank lenders to
Waste Water recognizing and agreeing not to contest such
lenders liens on the Waste Water Assets in exchange for a
reciprocal agreement by such lenders with respect to the
Liens of the FI Security Documents (and the Banks hereby
authorize the Administrative Agent to enter into such
agreements).
(s) Hedge Transactions. FCX, FI and the
Restricted Subsidiaries will enter into or become obligated
with respect to Hedge Agreements only in the ordinary course
of business to hedge or protect against actual or reasonably
anticipated exposures and not for speculation.
SECTION 5.3. Covenants Relating to RTZ
Transaction. FCX and FI shall not, directly or indirectly
enter into (i) any amendment or modification of (x) the
Stock Purchase Agreement or the Implementation Agreement
from and after the Fifth Amendment Closing Date, (y) any
amendment or modification of the Participation Agreement or
the RTZ Loan Agreement from and after the RTZ Closing Date
or (z) any other material agreement in connection therewith,
at any time, in each case other than pursuant to documents
approved by the Required Banks (the Stock Purchase
Agreement, the Implementation Agreement, the Participation
Agreement, the RTZ Loan Agreement and such other approved
material agreements being, collectively, the "RTZ
Documents") which would have an adverse effect upon the FI
Collateral and Rights or impair the ability of any of FCX,
FI or the Restricted Subsidiaries to perform all of their
respective obligations under the Loan Documents (including
under this Section 5.3); or (ii) if any Default or Event of
Default shall have occurred and be continuing or would
result therefrom, make payment of the Debt under the
RTZ Loan Agreement with or from any funds or assets other
than Incremental Expansion Cashflow (as defined in the
Participation Agreement). Without the prior written
approval of the Required Banks, FI shall not (i) consent to
any "Closedown" (as such term is defined in the
Participation Agreement) or any amendment, modification or
waiver of Section 10.5 of the Participation Agreement,
(ii) consent to any assignment by RTZ, RTZ Lender or PT-RTZ
of the RTZ Documents or their respective obligations
thereunder, (iii) waive any material condition to closing
under the Implementation Agreement, (iv) agree to or
effectuate any alternative arrangements pursuant to Section
11 of the Implementation Agreement, (v) waive any material
default by RTZ under the RTZ Documents or (vi) resign as the
Operator under the Participation Agreement. Subject to the
penultimate sentence of this Section 5.3, FI and its
Restricted Subsidiaries shall not cause or permit any assets
of it or its Restricted Subsidiaries to be or become Joint
Account Assets under the Participation Agreement for other
than full fair market compensation nor shall FCX and FI
grant or provide (or permit any Restricted Subsidiary to
grant or provide) any additional security or collateral to
secure any obligation to RTZ or its Affiliates (including
obligations under the RTZ Loan Agreement) other than the
transfer of the RTZ Interests as required by the
Participation Agreement and the grant of a first priority
security interest to RTZ Lender in the RTZ Collateral, in
each case subject to the terms of the FI Intercreditor
Agreement and the FI Trust Agreement. FI and its Restricted
Subsidiaries shall not engage in any transaction (other than
the RTZ Transactions) or dealing with, or assign or transfer
any assets to, PT-RTZ or any of its Affiliates other than on
an arm's-length basis. FI shall promptly provide to the
Administrative Agent copies of all annual financial reports
and budgets pursuant to the Participation Agreement and all
other material notices and reports under the RTZ Documents.
FI shall also conduct Joint Operations (as defined in the
Participation Agreement) in a manner which does not prevent
or adversely affect, and at all times shall retain rights
under the Contract of Work and tangible assets sufficient
for, FI's production activities from which revenues from
scheduled production of the 10-K Reserves referred to in
Schedule VII to the FCX Credit Agreement are pledged to the
Banks. Subject to the foregoing and the other terms of the
Loan Documents (including Section 10.17), FI and FCX may
enter into and perform their obligations under the
RTZ Documents.
ARTICLE VI
Conditions of Credit
SECTION 6.1. Conditions Precedent to Each Credit
Event. Each Credit Event shall be subject to the following
conditions precedent:
(i) the representations and warranties on the part
of FXC and FI contained in the Loan Documents shall be true
and correct in all material respects at and as of the date
of such Credit Event as though made on and as of such date;
(ii) the Administrative Agent shall have received a
notice of such borrowing as required by Section 3.3;
(iii) no Event of Default shall have occurred and be
continuing on the date of such Credit Event or would result
from such Credit Event;
(iv) there shall have been no amendments to the
Certificate of Incorporation, Articles of Association or
Certificate of Domestication, as applicable, or the By-laws
of FCX or FI since the date of the Certificate furnished by
FI pursuant to Section 6(a) of the Amendment Agreement,
other than amendments, if any, copies of which have been
furnished to the Administrative Agent; and
(v) except as permitted by the proviso to Section
5.2(c), there shall be no proceeding for the dissolution or
liquidation of FCX or FI or any proceeding to revoke the
Certificate of Incorporation or Articles of Association of
FCX or FI or its respective corporate existence, which is
pending or, to the knowledge of FCX or FI, threatened
against or affecting FCX or FI.
SECTION 6.2. Representations and Warranties with
Respect to Credit Events. Each Credit Event shall be deemed
a representation and warranty by FCX and FI that the
conditions precedent to such Credit Event, unless otherwise
waived in accordance herewith, shall have been satisfied.
ARTICLE VII
Events of Default
SECTION 7.1. Events of Default. If any of the
following acts or occurrences (an "Event of Default") shall
occur and be continuing:
(a) default for three or more days in the payment
when due of any principal of any Corporate Group Note; or
(b) default for five or more days in the payment
when due of any interest on any Corporate Group Note, or of
any other amount payable under any Loan Document; or
(c) any representation or warranty made or deemed
made in or in connection with any Loan Document or in any
certificate, letter or other writing or instrument furnished
or delivered to the Agents, the FCX Agent, the FI Trustee,
the FCX Collateral Agent, any Bank or any FI Lender pursuant
hereto or to the FCX Credit Agreement shall prove to have
been incorrect in any material respect when made or
effective or reaffirmed and repeated, as the case may be; or
(d) default by FI or FCX in the due observance or
performance of any covenant, condition or agreement in
Sections 5.1(a)(4) with respect to notices of Defaults or
Events of Default, 5.1(c), 5.1(h) or 5.1(k) of either this
Agreement or the FCX Credit Agreement, other than the
covenant to preserve and maintain all of such Person's
rights, privileges and franchises desirable in the normal
conduct of its business; or
(e) default by FI or FCX in the due observance or
performance of any covenant, condition or agreement in
Section 5.2 or 5.3 of this Agreement or in Section 5.2 or
5.3 of the FCX Credit Agreement (other than, in each case,
Section 5.2(k)); or
(f) default by FI or FCX in the due observance or
performance of any other covenant, condition or agreement in
any Corporate Group Facility or in any other Loan Documents
which shall remain unremedied for 30 days after written
notice thereof shall have been given to such Person by any
Bank; or
(g) FI, FCX or any Restricted Subsidiary shall
(i) voluntarily commence any proceeding or file any petition
seeking relief under Title 11 of the United States Code, as
now constituted or hereafter amended, or any other Federal
or state bankruptcy, insolvency, liquidation or similar law
or, in the case of FI, any such law of Indonesia,
(ii) consent to the institution of, or fail to contravene in
a timely and appropriate manner, any proceeding or the
filing of any petition described in clause (h) below,
(iii) apply for or consent to the appointment of a receiver,
trustee, custodian, sequestrator or similar official for FI,
FCX or such Restricted Subsidiary or for a substantial part
of its property or assets, (iv) file an answer admitting the
material allegations of a petition filed against it in any
such proceeding, (v) make a general assignment for the
benefit of creditors, (vi) become unable, admit in writing
its inability or fail generally to pay its debts as they
become due or (vii) take any action for the purpose of
effecting any of the foregoing; or
(h) an involuntary proceeding shall be commenced or
an involuntary petition shall be filed in a court of
competent jurisdiction seeking (i) relief in respect of FI,
FCX or any Restricted Subsidiary, or of a substantial part
of the property or assets of FCX, FI or any Restricted
Subsidiary, under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other Federal or
state bankruptcy, insolvency, receivership or similar law
or, in the case of FI, any such law of Indonesia, (ii) the
appointment of a receiver, trustee, custodian, sequestrator
or similar official for FI, FCX or any Restricted Subsidiary
or for a substantial part of the property of FI, FCX or any
Restricted Subsidiary or (iii) the winding-up or liquidation
of FI, FCX or any Restricted Subsidiary; and such proceeding
or petition shall continue undismissed for 60 days, or an
order or decree approving or ordering any of the foregoing
shall continue unstayed and in effect for 30 days; or
(i) default shall be made with respect to (x) any
Hedge Agreements or (y) any Debt of FI, FCX or any
Restricted Subsidiary if the effect of any such default
shall be to accelerate, or to permit the holder or obligee
of any such obligation or Debt (or any trustee on behalf of
such holder or obligee) to accelerate (with or without
notice or lapse of time or both), the maturity of Debt
and/or the payment of any net termination value in respect
of Hedge Agreements in an aggregate amount in excess of
$10,000,000; or any payment of principal or interest and/or
of any payment due under a Hedge Agreement, regardless of
amount, on any Hedge Agreement or Debt of FI, FCX or a
Restricted Subsidiary in an aggregate principal amount (or
in the case of a Hedge Agreement, with a net termination
value) in excess of $10,000,000, shall not be paid when due,
whether at maturity, by acceleration or otherwise (after
giving effect to any period of grace specified in the
instrument evidencing or governing such Debt or other
obligation); or
(j) an ERISA Event shall have occurred with respect
to any Plan or Multi-Employer Plan that, when taken together
with all other ERISA Events, reasonably could be expected to
result in liability of FI, FCX and/or any Restricted
Subsidiary and FI's and FCX's ERISA Affiliates in an
aggregate amount exceeding $25,000,000 or requires payments
exceeding $10,000,000 in any year; or
(k) a final judgment for the payment of money in
excess of $10,000,000 shall be rendered by a court or other
tribunal against FI, FCX or any Restricted Subsidiary and
shall remain undischarged for a period of 45 consecutive
days during which execution of such judgment shall not have
been stayed effectively; or any action shall be legally
taken by a judgment creditor to levy upon assets or
properties of FI, FCX or any Restricted Subsidiary to
enforce any such judgment; or
(l) the security interest in the Contract of Work
granted in the FI Trust Agreement or any other security
interest granted under any other FI Security Document shall
be deemed to be invalid or fail to be in full force and
effect or the Contract of Work shall be terminated or
otherwise fail to be in full force and effect or shall be
amended without the consent of the Required Banks in any
manner which materially and adversely affects the rights and
benefits granted to the FI Trustee and the Banks under the
FI Security Documents; or the Ministry of Mines and Energy
of Indonesia (or any successor entity) or the Government of
Indonesia shall have taken any action in contravention of
the Contract of Work which materially adversely affects FI's
ability to perform its obligations under any Corporate Group
Facility or the rights and benefits granted to the FI
Trustee under any FI Security Document; or
(m) any Governmental Authority shall condemn, seize,
nationalize, assume the management of or appropriate any
material portion of FI's property, assets or revenues
(either with or without payment of compensation); or
(n) any default or other event shall occur with
respect to any of the Specified Documents which would (with
or without the passage of time or the giving of notice)
permit acceleration or require prepayment of any of the
Specified Obligations other than with respect to a casualty
event or condemnation affecting the related Specified
Assets, permit foreclosure upon the related Specified Assets
or require FI to repurchase the related Specified Assets; or
(o) any security interest purported to be created by
the FCX Pledge Agreements shall cease to be, or shall be
asserted by FI, FCX or any of their Affiliates not to be, a
valid, perfected, first priority security interest in the
securities, assets or properties covered thereby, except to
the extent that any such loss of perfection or priority
results from the failure of the FCX Collateral Agent to
maintain possession of certificates representing securities
pledged under the FCX Pledge Agreements to the extent that
such pledged securities are certificated securities; or
(p) FI shall resign as "Operator" under the
Participation Agreement or an "Event of Default" under the
RTZ Loan Agreement or an "Event of Resignation" under the
Participation Agreement (or any event or condition which
with or without the passage of time or the giving of notice
would constitute such an "Event of Default" or an "Event of
Resignation") shall occur and be continuing; or
(q) there shall have occurred a Change in Control;
then, and in any such event (other than an event with
respect to FI or FCX described in paragraph (g) or (h)
above), and at any time thereafter during the continuance of
such event, the Administrative Agent may, and at the request
of the Required Banks shall, by written or telegraphic
notice to FI and FCX, take one or more of the following
actions at the same or different times: (i) declare the
Total Commitment to be terminated, whereupon the Total
Commitment shall forthwith terminate; (ii) declare all sums
then owing by FI under the Promissory Notes or otherwise
owing hereunder to be forthwith due and payable, whereupon
all such sums shall become and be immediately due and
payable without presentment, demand, protest or other notice
of any kind, all of which are hereby expressly waived by FI,
anything contained herein or in any Promissory Note to the
contrary notwithstanding or (iii) exercise any or all the
remedies then available under the FI Security Documents or
the FCX Pledge Agreements; provided, however, that upon the
occurrence of any event described in paragraph (g) or (h) of
this Section 7.1 as to which FI or FCX is the entity
involved, all sums then owing by FI to the Banks upon the
Promissory Notes or otherwise hereunder shall, without any
declaration or other action by any Bank hereunder, be
immediately due and payable and the Total Commitment
hereunder shall be immediately terminated without
presentment, demand, protest or notice of any kind, all of
which are expressly waived by FI, anything contained herein
or in any Promissory Note to the contrary notwithstanding.
Promptly following the making of any such declaration, the
Administrative Agent shall give notice thereof to FI but
failure to do so shall not impair the effect of such
declaration.
ARTICLE VIII
The Agents and the FI Trustee
SECTION 8.1. The Agents and the FI Trustee.
(a) For convenience of administration and to expedite the
transactions contemplated by this Agreement, Chemical is
hereby appointed as Administrative Agent and FCX Collateral
Agent for the Banks under this Agreement and the FCX Pledge
Agreements, Chase is hereby appointed as the Documentary
Agent for the Banks under this Agreement and First Bank,
National Association is hereby appointed as FI Trustee for
the Banks under the FI Security Documents. Each Bank
(i) confirms and agrees to be bound by the terms of the FI
Trust Agreement and (ii) agrees that the FI Trustee in
accepting appointment and in acting as security agent under
the FI Security Documents shall be entitled to all the
rights, immunities, privileges, protections, exculpations,
indemnifications, liens and other benefits applicable to its
acting as trustee under the FI Trust Agreement. None of the
Agents shall have any duties or responsibilities with
respect hereto except those expressly set forth herein or in
the other Loan Documents. Each Bank, and each subsequent
holder of any Promissory Note by its acceptance thereof,
hereby irrevocably appoints and expressly authorizes the
Agents, without hereby limiting any implied authority, to
take such action as the Agents may deem appropriate on its
behalf and to exercise such powers under this Agreement as
are specifically delegated to such Person by the terms
hereof, together with such powers as are reasonably
incidental thereto. The Administrative Agent is hereby
expressly authorized by the Banks, without hereby limiting
any implied authority, (a) to receive on behalf of the Banks
all payments of principal of and interest on the Loans and
all other amounts due to the Banks hereunder, and promptly
to distribute to each Bank its proper share of each payment
so received; (b) to give notice on behalf of the Banks to FI
and FCX of any Event of Default specified in this Agreement
of which the Administrative Agent has actual knowledge
acquired in connection with its agency hereunder or as
directed by the Required Banks; and (c) to distribute to
each Bank copies of all notices, financial statements and
other materials delivered by FI or FCX pursuant to this
Agreement as received by the Administrative Agent. Without
limiting the generality of the foregoing, the FCX Collateral
Agent is hereby expressly authorized to execute any and all
documents (including releases) with respect to the
collateral under the FCX Pledge Agreements and the rights of
the secured parties with respect thereto, as contemplated by
and in accordance with the provisions of this Agreement and
the FCX Pledge Agreements. Each of the Administrative Agent
and the FCX Collateral Agent may exercise any of its duties
hereunder by or through their respective agents, officers or
employees. In addition, each Bank hereby irrevocably
authorizes and directs (i) the FCX Collateral Agent to
enter, on behalf of each of them, into the FCX Pledge
Agreements and the FCX Intercreditor Agreement as
contemplated pursuant to this Agreement, (ii) the
Administrative Agent to enter, on behalf of each of them,
into the FI Intercreditor Agreement and the FCX
Intercreditor Agreement as contemplated pursuant to this
Agreement and (iii) the FI Trustee to enter, on behalf of
each of them, into the FI Security Documents, and in each
case agrees to be bound by the terms thereof.
(b) None of the Agents or any of their respective
directors, officers, agents or employees shall be liable as
such for any action taken or omitted to be taken by any of
them except for its or his own gross negligence or wilful
misconduct, or be responsible for any statement, warranty or
representation herein or the contents of any document
delivered in connection herewith, or be required to
ascertain or to make any inquiry concerning the performance
or observance by FCX or FI or any other party of any of the
terms, conditions, covenants or agreements contained in any
Loan Document. The Agents shall not be responsible to the
Banks or the holders of the Notes for the due execution,
genuineness, validity, enforceability or effectiveness of
this Agreement, the Notes or any other Loan Documents or
other instruments or agreements. The Administrative Agent
may deem and treat the payee of any Promissory Note as the
owner thereof for all purposes hereof until it shall have
received from the payee of such Promissory Note notice,
given as provided herein, of the transfer thereof in
compliance with Section 10.3. The Agents shall in all cases
be fully protected in acting, or refraining from acting, in
accordance with written instructions signed by the Required
Banks and, except as otherwise specifically provided herein,
such instructions and any action or inaction pursuant
thereto shall be binding on all the Banks and each
subsequent holder of any Promissory Note. Each Agent shall,
in the absence of knowledge to the contrary, be entitled to
rely on any instrument or document believed by it in good
faith to be genuine and correct and to have been signed or
sent by the proper Person or Persons. None of the Agents
nor any of their respective directors, officers, employees
or agents shall have any responsibility to FI, FCX or any
other party on account of the failure of or delay in
performance or breach by any Bank of any of its obligations
hereunder or to any Bank on account of the failure of or
delay in performance or breach by any other Bank or FI, FCX
or any other party of any of their respective obligations
hereunder or under any other Loan Document or in connection
herewith or therewith. Each of the Agents may execute any
and all duties hereunder by or through agents or employees
and shall be entitled to rely upon the advice of legal
counsel selected by it with respect to all matters arising
hereunder and shall not be liable for any action taken or
suffered in good faith by it in accordance with the advice
of such counsel. The Banks hereby acknowledge that none of
the Agents shall be under any duty to take any discretionary
action permitted to be taken by it pursuant to the
provisions of this Agreement unless it shall be requested in
writing to do so by the Required Banks.
(c) To the extent that any Agent shall not be
reimbursed by FI or FCX for any costs, liabilities or
expenses incurred in such capacity or, to the extent the FI
Trustee shall not be reimbursed by FI or FCX for any costs,
liabilities or expenses incurred in its capacity as trustee
under the FI Trust Agreement (including in its capacity as
security agent under the FI Security Documents), each Bank
agrees (i) to reimburse such Agent or the FI Trustee, as
applicable, on demand, in the amount of its Applicable
Percentage Commitments hereunder) of any expenses incurred
for the benefit of the Banks by such Agent or the FI
Trustee, as applicable, including counsel fees and compensa-
tion of agents and employees paid for services rendered on
behalf of the Banks and (ii) to indemnify and hold harmless
each Agent, the FI Trustee and any of their directors,
officers, employees or agents, on demand, in the amount of
such Applicable Percentage, from and against any and all
liabilities, taxes, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on,
incurred by or asserted against it in its capacity as Agent
or FI Trustee for the Banks, as applicable, or any of them
in any way relating to or arising out of this Agreement or
any other Loan Document or any action taken or omitted by it
or any of them under this Agreement or any other Loan
Document; provided, however, that no Bank shall be liable to
an Agent or the FI Trustee for any portion of such
liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements
resulting from the gross negligence or wilful misconduct of
such Agent or FI Trustee, as applicable, or of its
directors, officers, employees or agents.
(d) With respect to the Loans made by it hereunder
and the Promissory Notes issued to it, each Agent in its
individual capacity and not as Agent shall have the same
rights and powers as any other Bank and may exercise the
same as though it were not an Agent, and the Agents and
their Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with FI, FCX or any
Subsidiary or other Affiliate thereof as if it were not an
Agent.
(e) Subject to the appointment and acceptance of a
successor Agent as provided below, any Agent may resign at
any time by giving written notice thereof to the Banks, FI
and FCX. Upon any such resignation, the Required Banks
shall have the right to appoint, and FI and FCX shall have
the right to approve (such approval not to be unreasonably
withheld or delayed) a successor Administrative Agent, FCX
Collateral Agent or Documentary Agent, as the case may be.
If no successor Agent, FCX Collateral Agent or Documentary
Agent, as the case may be, shall have been so appointed and
approved and shall have accepted such appointment, within
30 days after the retiring Agent's giving of notice of
resignation, then the retiring Person may, on behalf of the
Banks, appoint a successor Administrative Agent, FCX
Collateral Agent or Documentary Agent, as the case may be,
which shall be a Bank with an office in New York, New York,
having a combined capital and surplus of at least
$500,000,000 or an Affiliate of any such Bank. Upon the
acceptance of any appointment as Administrative Agent, FCX
Collateral Agent or Documentary Agent hereunder by a
successor Administrative Agent, FCX Collateral Agent or
Documentary Agent, as the case may be, such successor
Administrative Agent, FCX Collateral Agent or Documentary
Agent shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of the retiring
Agent, and the retiring Agent shall from and after such date
be discharged from its duties and obligations hereunder.
After any such retiring Agent's resignation hereunder as
Administrative Agent, FCX Collateral Agent or Documentary
Agent, as applicable, the provisions of this Article VIII
and Section 10.4 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was
acting as the Administrative Agent, FCX Collateral Agent or
Documentary Agent, as applicable.
(f) The Administrative Agent and the Documentary
Agent shall be responsible for supervising the preparation,
execution and delivery of this Agreement and the other
agreements and instruments contemplated hereby, any
amendment or modification thereto and the closing of the
transactions contemplated hereby and thereby. In addition,
the Administrative Agent shall assist the FCX Collateral
Agent and the FI Trustee in the performance of its duties as
may be reasonably requested by the FCX Collateral Agent or
the FI Trustee from time to time.
(g) The obligations of the Administrative Agent,
the FI Trustee, the FCX Collateral Agent and the Documentary
Agent shall be separate and several and neither of them
shall be responsible or liable for the acts or omissions of
the other, except, to the extent that any such Agent serves
in more than one agency capacity, such Agent shall be
responsible for the acts and omissions relating to each such
agency function.
(h) Without the prior written consent of the
Required Banks but subject to Section 10.7(b), the
Administrative Agent and the FCX Collateral Agent will not,
except as contemplated by Section 8.1(j), consent to any
modification, supplement or waiver of the FI Intercreditor
Agreement, the FCX Intercreditor Agreement or (except as
required by the FCX Intercreditor Agreement) the FCX Pledge
Agreements, and the FI Trustee will not consent to any
modification, supplement or waiver of the FI Security
Documents.
(i) Each Bank acknowledges that it has,
independently and without reliance upon the Agents or any
other Bank and based on such documents and information as it
has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without
reliance upon the Agents or any other Bank and based on such
documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or
not taking action under or based upon this Agreement or any
other Loan Document, any related agreement or any document
furnished hereunder or thereunder.
(j) Notwithstanding any other provision of this
Section 8.1, the Administrative Agent will, at the request
of FI, instruct the FI Trustee to release (or to subordinate
such interest) from the FI Trust Agreement and the other FI
Security Documents (and enter into an amendment to the FI
Trust Agreement and the other FI Security Documents and
execute such other instruments as may be necessary in
connection therewith) any interest of the FI Trustee in (i)
the rights of FI under the Contract of Work in respect of
all or any part of Contract Area Block B (as defined in the
Contract of Work), without further consent by the Required
Banks if, in the opinion or opinions of counsel acceptable
to the Administrative Agent and in the opinion of the
Administrative Agent, such release is to be effected without
impairing or adversely affecting (a) the Lien and interest
of the FI Trustee stated to be created in the rights of FI
under the Contract of Work in respect of Contract Area Block
A (as defined in the Contract of Work) and the FI Project
(to the extent it includes the mining, concentrating,
transportation, shipping and related operations of FI in
respect of FI Product obtained or produced from Contract
Area Block A) by the FI Trust Agreement and the other FI
Security Documents, the Memorandum of Understanding and the
Contract of Work or (B) the rights of FI relating to
ownership and operation of the FI Project (to the extent it
includes the mining, concentrating, transportation, shipping
and related operations of FI in respect of FI Product
obtained or produced from Contract Area Block A), (ii) the
property and rights to be transferred pursuant to the Waste
Water Transfer, (iii) the remaining property and rights to
be transferred after the Fifth Amendment Closing Date to
complete the ALatieF-FI Transfer and the PFT Transfer,
(iv) upon receipt by the Administrative Agent of a
certificate from a Financial Officer of FI specifying the
asset to be released and the related transaction and
certifying that after giving effect thereto, no Default or
Event of Default shall occur or be continuing, specific
physical assets (which may either be released from the Lien
of the FI Security Documents or excluded from the after-
acquired property clauses of the FI Security Documents) (x)
as required to be released to provide additional collateral
for the Caterpillar Obligations, as a result of decreases in
the value of the Caterpillar Assets, but not in excess of
$10,000,000 (valued as provided in the Caterpillar
Documents) in the aggregate for all such additional
collateral provided during the term of the Caterpillar
Obligations and (y) to allow sales, secured financings,
capital leases and sale and leaseback transactions expressly
permitted hereby and (v) on and after the RTZ Closing Date,
upon receipt by the Administrative Agent of a certificate
from a Financial Officer specifying the asset to be released
and the related transaction and certifying that after giving
effect thereto, no Default or Event of Default shall occur
or be continuing, the RTZ Interests as permitted by
Section 5.3 (which may either be released from the Lien of
the FI Security Documents or excluded from the after-
acquired property clauses of the FI Security Documents;
provided, however, that in the case of the RTZ Collateral,
the Lien of the FI Trustee in favor of the Banks and the FI
Lenders shall be subordinated to become a second priority
lien on the RTZ Collateral subject to the first priority
Lien of the RTZ Lender thereon on the terms of the Final FI
Trust Agreement and the FI Intercreditor Agreement).
ARTICLE IX
Guarantee
SECTION 9.1. Guarantee. As consideration for the
Banks' obligations to lend to FI hereunder, FCX hereby
unconditionally and irrevocably guarantees, as a primary
obligor and not merely as a surety, the due and punctual
payment of (x) the principal of and interest on each Loan to
FI, when and as due, whether at maturity, by acceleration,
by notice of prepayment or otherwise, (y) all other monetary
obligations of FI to the Banks, the Agents and the FI
Trustee under this Agreement and the other Loan Documents
and (z) all amounts owing by FI to any Bank pursuant to any
Permitted Secured Hedge with FI (collectively, the "FI
Obligations"). FCX further agrees that the FI Obligations
may be extended or renewed, in whole or in part, without
notice or further assent from it, and that it will remain
bound upon its guarantee notwithstanding any extension or
renewal of any such FI Obligation.
FCX waives presentment to, demand of payment from
and protest to FI of any of the FI Obligations, and also
waives notice of acceptance of its guarantee and notice of
protest for nonpayment. The obligations of FCX under this
Section 9.1 shall not be affected by (a) the failure of any
Bank, any Agent or the FI Trustee to assert any claim or
demand or to enforce any right or remedy against FI under
the provisions of this Agreement or otherwise; (b) any
rescission, waiver, amendment or modification of any of the
terms or provisions of this Agreement, any Promissory Note
any guarantee or any other agreement; (c) the release of any
security held by any Bank, any Agent or the FI Trustee for
the Obligations guaranteed by it or any of them; or (d) the
failure of any Bank, any Agent or the FI Trustee to exercise
any right or remedy against any other guarantor of the FI
Obligations.
FCX further agrees that its guarantee constitutes a
guarantee of payment when due and not of collection, and
waives any right to require that any resort be had by any
Bank, any Agent or the FI Trustee to any security held for
payment of the FI Obligations or to any balance of any
deposit account or credit on the books of such Bank in favor
of FI or any other Person.
The obligations of FCX under this Section 9.1 shall
not be subject to any reduction, limitation, impairment or
termination for any reason, including, without limitation,
any claim of waiver, release, surrender, alteration or
compromise, and shall not be subject to any defense or
setoff, counterclaim, recoupment or termination whatsoever
by reason of the invalidity, illegality or unenforceability
of the FI Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of FCX under
this Section 9.1 shall not be discharged or impaired or
otherwise affected by the failure of any Bank, any Agent or
the FI Trustee to assert any claim or demand or to enforce
any remedy under this Agreement, any Promissory Note, any
guarantee or any other agreement, by any waiver or
modification of any thereof, by any default, failure or
delay, wilful or otherwise, in the performance of the FI
Obligations, or by any other act or omission which may or
might in any manner or to any extent vary the risk of FCX,
or otherwise operate as a discharge of FCX as a matter of
law or equity.
FCX further agrees that its guarantee shall continue
to be effective or be reinstated, as the case may be, if at
any time payment, or any part thereof, of principal of or
interest on any Obligation guaranteed by it (including,
without limitation, any payment pursuant to this guarantee)
is rescinded or must otherwise be restored by any Bank, any
Agent or the FI Trustee upon the bankruptcy or reorganiza-
tion of FI or otherwise.
In furtherance of the foregoing and not in limita-
tion of any other right which any Bank, any Agent or the FI
Trustee may have at law or in equity against FCX by virtue
hereof, upon the failure of FI to pay any of the FI
Obligations when and as the same shall become due, whether
at maturity, by acceleration, after notice of prepayment or
otherwise, FCX hereby promises to and will, upon receipt of
written demand by any Bank, any Agent or the FI Trustee,
forthwith pay, or cause to be paid, to the Administrative
Agent for distribution to the Banks, the Agents or the FI
Trustee, as appropriate, in cash the amount of such unpaid
FI Obligations, and at such time as all such FI Obligations
owing to such Bank, such Agent, or the FI Trustee as
applicable, have been indefeasibly paid in full and its
Commitment terminated, such Bank shall, in a reasonable
manner, assign the amount of such FI Obligations owed to it
and paid by FCX pursuant to this guarantee to FCX, such
assignment to be pro tanto to the extent to which the FI
Obligations in question were discharged by FCX or make such
other disposition thereof as FCX shall direct (all without
recourse to such Bank, such Agent or the FI Trustee, as
applicable, and without any representation or warranty by
such Bank, such Agent or the FI Trustee, as applicable).
Upon payment by FCX of any sums to a Bank, an Agent
or the FI Trustee as provided above in this Section 9.1, all
rights of FCX against FI arising as a result thereof by way
of right of subrogation or otherwise shall in all respects
be subordinated and junior in right of payment to the prior
indefeasible payment in full of all the FI Obligations to
the Banks, the Agents and the FI Trustee and all the FI
Obligations and shall not be exercised by FCX prior to
indefeasible payment in full of all Corporate Group Loans
and termination of the Commitments and the commitments under
the FCX Credit Agreement.
ARTICLE X
Miscellaneous
SECTION 10.1. Notices. Notices and other com-
munications provided for herein shall be in writing and
shall be delivered by hand or overnight or same day courier
service or mailed or sent by telex, telecopy, graphic
scanning or other telegraphic communications equipment of
the sending party to the appropriate party's address set
forth on the signature pages hereof. All notices and other
communications given to any party hereto in accordance with
the provisions of this Agreement shall be deemed to have
been given on the date of receipt if hand delivered or three
days after being sent by registered or certified mail,
postage prepaid, return receipt requested, if by mail, or
upon receipt if by any telecopy, telegraphic or telex
communications equipment, in each case addressed to such
party as provided in this Section 10.1 or in accordance with
the latest unrevoked direction from such party. Any notice
delivered to FCX hereunder shall be deemed also to have been
given to FI, and such notice shall be deemed to have been
given to FI on the day it is deemed to have been given to
FCX.
SECTION 10.2. Survival of Agreement. All cove-
nants, agreements, representations and warranties made by FI
or FCX herein and in the certificates or other instruments
prepared or delivered in connection with this Agreement
shall be considered to have been relied upon by the Banks,
the Agents and the FI Trustee and shall survive the making
by the Banks of the Loans and the execution and delivery to
the Banks of the Promissory Notes evidencing such Loans
regardless of any investigation made by the Banks or on
their behalf, and shall continue in full force and effect as
long as the principal of or any accrued interest on any
Corporate Group Note, any Commitment Fee or any other fee or
amount payable under the Corporate Group Notes or the
Corporate Group Facility is outstanding and unpaid and so
long as the Commitments or the commitments under the FCX
Credit Agreement have not been terminated.
SECTION 10.3. Successors and Assigns;
Participation; Purchasing Banks. (a) This Agreement shall
be binding upon and inure to the benefit of FI, FCX, the
Banks, the Agents, the FI Trustee and all future holders of
the Promissory Notes, and their respective successors and
assigns, except that neither FI or FCX may assign, delegate
or transfer any of its rights or obligations under this
Agreement without the prior written consent of each Bank.
Any Bank may at any time pledge or assign all or any portion
of its rights under this Agreement and the Promissory Notes
issued to it to a Federal Reserve Bank to secure extensions
of credit by such Federal Reserve Bank to such Bank;
provided that no such pledge or assignment shall release a
Bank from any of its obligations hereunder or substitute any
such Federal Reserve Bank for such Bank as a party hereto.
(b) Any Bank may, in accordance with applicable
law, at any time sell to one or more banks or other entities
("Participants") participating interests in all or a portion
of any Loan owing to such Bank, any Promissory Note held by
such Bank, any Commitment of such Bank or any other interest
of such Bank hereunder. In the event of any such sale by a
Bank of participating interests to a Participant, such
Bank's obligations under this Agreement to the other parties
to this Agreement shall remain unchanged, such Bank shall
remain solely responsible for the performance thereof, such
Bank shall remain the holder of any such Promissory Note for
all purposes under this Agreement and FI and the Agents
shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under
this Agreement. FI and FCX agree that if amounts
outstanding under this Agreement and the Promissory Notes
are due and unpaid, or shall have been declared due 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 Promissory Note
to the same extent as if the amount of its participating
interest were owing directly to it as a Bank under this
Agreement or any Promissory Note; provided that such right
of setoff shall be subject to the obligation of such
Participant to share with the Banks, and the Banks agree to
share with such Participant, as provided in Section 3.15.
FI and FCX also agree that each Participant shall be
entitled to the benefits of Sections 3.11, 3.12, 3.13, 3.15,
3.17, 3.18 and 10.5 with respect to its participation in the
Commitments and the Loans outstanding from time to time as
if it were a Bank; provided that no Participant shall be
entitled to receive any greater payment pursuant to such
Sections than the transferor Bank would have been entitled
to receive in respect of the amount of the participation
transferred by such transferor Bank to such Participant
unless such participation shall have been made at a time
when the circumstances giving rise to such greater payment
did not exist; and provided that the voting rights of any
Participant would be limited to amendments, modifications or
waivers decreasing any fees payable hereunder or the amount
of principal of or the rate at which interest is payable on
the Loans, extending any scheduled principal payment date or
date fixed for the payment of interest on the Loans,
changing or extending the Commitments or release of all or
substantially all the collateral for the Loans.
(c) Any Bank may, in accordance with applicable law
and subject to Section 10.3(h), at any time assign by
novation all or any part of its rights and obligations under
this Agreement (including all or a portion of its Commitment
and the Loans at the time owing to it and the Promissory
Notes held by it) (I) to any Bank or any Affiliate thereof,
without FI's and FCX's consent, or (II) to one or more
additional banks or financial institutions (any such entity
referred to in clause (I) or (II) being a "Purchasing Bank")
with the consent of the Administrative Agent, FI and FCX,
such consent not to be unreasonably withheld (it being
understood that FI and FCX may withhold their consent to a
Purchasing Bank (i) which is not a commercial bank or
savings and loan institution or (ii) which would, as of the
effective date of such assignment, be entitled to claim
compensation under Section 3.11 which the transferor Bank
would not be entitled to claim as of such date), pursuant to
a Commitment Transfer Supplement in the form of Exhibit D,
executed by such Purchasing Bank and such transferor Bank
(and, in the case of a Purchasing Bank that is not then a
Bank or an Affiliate thereof, by FI and the Administrative
Agent), and delivered for its recording in the Register to
the Administrative Agent, together with the Promissory Notes
subject to such assignment, the registration and processing
fee required by Section 10.3(e) and an Administrative
Questionnaire for the Purchasing Bank if it is not already a
Bank. Assignments shall be by novation only and a
proportionate interest in the Loans and Commitments to both
FI and FCX (and the related Promissory Notes) must be
assigned. Upon such execution, delivery and recording (and,
if required, consent of FI, FCX and the Administrative
Agent), from and after the Transfer Effective Date
determined pursuant to such Commitment Transfer Supplement
(which shall be at least five days after the execution and
delivery thereof), (x) the Purchasing Bank thereunder shall
(if not already a party hereto) be a party hereto and have
the rights and obligations of a Bank hereunder with a
Commitment as set forth in such Commitment Transfer
Supplement, and (y) the transferor Bank thereunder shall, to
the extent assigned by such Commitment Transfer Supplement,
be released from its obligations under this Agreement (and,
in the case of a Commitment Transfer Supplement covering all
or the remaining portion of a transferor Bank's rights and
obligations under this Agreement, such transferor Bank shall
cease to be a party hereto). Such Commitment Transfer
Supplement shall be deemed to amend this Agreement
(including Schedule II hereto) to the extent, and only to
the extent, necessary to reflect the addition of such
Purchasing Bank (if not already a party hereto) and the
resulting adjustment of Applicable Percentages arising from
the purchase by such Purchasing Bank of all or a portion of
the rights and obligations of such transferor Bank under
this Agreement and the Promissory Notes. On or prior to the
Transfer Effective Date determined pursuant to such
Commitment Transfer Supplement, FI, at its own expense,
shall execute and deliver to the Administrative Agent in
exchange for the surrendered Promissory Note a new
Promissory Note to the order of such Purchasing Bank in an
amount equal to the Commitment assumed by it pursuant to
such Commitment Transfer Supplement and, if the transferor
Bank has retained a Commitment hereunder, a new Promissory
Note to the order of the transferor Bank in an amount equal
to the Commitment retained by it hereunder. Such new
Promissory Notes shall be dated the Fifth Amendment Closing
Date and shall otherwise be in the form of the Promissory
Notes replaced thereby. The Promissory Notes surrendered by
the transferor Bank shall be returned by the Administrative
Agent to FI marked "canceled".
(d) The Administrative Agent, acting solely for
this purpose as an agent of FI, shall maintain at one of its
offices in The City of New York a copy of each Commitment
Transfer Supplement delivered to it and a register (the
"Register") for the recordation of the names and addresses
of the Banks and the Commitment of, and principal amount of
the Loans owing to, each Bank from time to time. The
entries in the Register shall be conclusive, in the absence
of manifest error, and the parties hereto 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 parties hereto at any reasonable time and from time
to time upon reasonable prior notice.
(e) Upon its receipt of a Commitment Transfer
Supplement executed by a transferor Bank and a Purchasing
Bank (and, in the case of a Purchasing Bank that is not then
a Bank or an affiliate thereof, by FI 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
Commitment Transfer Supplement and (ii) on the Transfer
Effective Date determined pursuant thereto record the
information contained therein in the Register and give
notice of such acceptance and recordation to the Banks and
FI.
(f) Subject to Section 10.15, FI and FCX authorize
each Bank to disclose to any Participant or Purchasing Bank
(each, a "Transferee") and any prospective Transferee any
and all financial and other information in such Bank's
possession concerning FI, FCX and its Affiliates which has
been delivered to such Bank by or on behalf of FI or FCX
pursuant to this Agreement or which has been delivered to
such Bank by or on behalf of FI or FCX in connection with
such Bank's credit evaluation of FI, FCX and their
Affiliates prior to becoming a party to this Agreement.
(g) If, pursuant to this Section 10.3, any interest
in this Agreement or any Promissory 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 Bank shall immediately notify the
Administrative Agent of such transfer, describing the terms
thereof and indicating the identity and country of residence
of each Transferee. Such transferor Bank or Transferee
shall indemnify and hold harmless FI and the Administrative
Agent from and against any tax, interest, penalty or other
expense that FI and the Administrative Agent may incur as a
consequence of any failure to withhold United States taxes
applicable because of any transfer or participation
arrangement that is not fully disclosed to them as required
hereunder.
(h) By executing and delivering a Commitment
Transfer Supplement, the transferor Bank thereunder and the
Purchasing Bank thereunder shall be deemed to confirm to and
agree with each other and the other parties hereto as
follows: (i) such transferor Bank warrants that it is the
legal and beneficial owner of the interest being assigned
thereby free and clear of any adverse claim and that its
Commitment, and the outstanding balance of its Loans, in
each case without giving effect to assignments thereof which
have not become effective, are as set forth in such
Commitment Transfer Supplement, (ii) except as set forth in
(i) above, such transferor Bank makes no representation or
warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in
connection with this Agreement, or the execution, legality,
validity, enforceability, genuineness, sufficiency or value
of this Agreement, any other Loan Document or any other
instrument or document furnished pursuant hereto, or the
financial condition of FI, FCX or any Subsidiary or the
performance or observance by FI, FCX or any Subsidiary of
any of its obligations under this Agreement, any other Loan
Document or any other instrument or document furnished
pursuant hereto; (iii) such Purchasing Bank represents and
warrants that it is legally authorized to enter into such
Commitment Transfer Supplement; (iv) such Purchasing Bank
confirms that it has received a copy of this Agreement,
together with copies of the most recent financial
statements, if any, delivered pursuant to Section 5.1 and
such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to
enter into such Commitment Transfer Supplement; (v) such
Purchasing Bank will independently and without reliance upon
the Agents, such transferor Bank or any other Bank and based
on such documents and information as it shall deem
appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this
Agreement; (vi) such Purchasing Bank appoints and authorizes
the Agents to take such action as agent on its behalf and
the FI Trustee to take such action as FI Trustee on its
behalf and to exercise such respective powers under this
Agreement and the other Loan Documents as are delegated to
the Agents or the FI Trustee, as applicable, by the terms
hereof, together with such powers as are reasonably
incidental thereto; and (vii) such Purchasing Bank agrees
that it will perform in accordance with their terms all the
obligations which by the terms of this Agreement are
required to be performed by it as a Bank.
(i) Notwithstanding anything in this Section 10.3
to the contrary, without the prior written consent of the
Administrative Agent, no Bank which is an FCX Lender shall
(except as permitted by paragraph (a) of this Section 10.3
regarding assignments to Federal Reserve Banks) make any
such assignment of its interests hereunder unless it shall
also assign, to the same assignee, the same proportion of
its interest in and commitment and loans outstanding under
the FCX Credit Agreement.
SECTION 10.4. Expenses of the Banks; Indemnity.
(a) FI and FCX agree, jointly and severally, to pay all
out-of-pocket expenses reasonably incurred by the Agents in
connection with the preparation and administration of this
Agreement, the Promissory Notes and the other Loan Documents
or with any amendments, modifications or waivers of the
provisions hereof or thereof (whether or not the
transactions hereby contemplated shall be consummated) or
reasonably incurred by the Agents or any Bank in connection
with the enforcement or protection of their rights in
connection with this Agreement and the other Loan Documents
or with the Loans made or the Promissory Notes issued
hereunder (whether through negotiations, legal proceedings
or otherwise), including, but not limited to, the reasonable
fees and disbursements of Cravath, Swaine & Moore, special
counsel for the Agents, and Mochtar, Karuwin & Komar,
special Indonesian counsel to the Agents, and, in connection
with such enforcement or protection, the reasonable fees and
disbursements of other counsel for any Bank. FI and FCX
further jointly and severally agree that they shall
indemnify the Banks, the FI Trustee and the Agents from and
hold them harmless against any documentary taxes,
assessments or charges made by any Governmental Authority by
reason of the execution and delivery of or in connection
with the performance of this Agreement, any of the
Promissory Notes or any of the other Loan Documents.
Further, FI and FCX jointly and severally agree to pay, and
to protect, indemnify and save harmless each Bank, each
Agent, the FI Trustee and each of their respective officers,
directors, shareholders, employees, agents and servants from
and against, any and all losses, liabilities (including
liabilities for penalties), actions, suits, judgments,
demands, damages, costs or expenses (including, without
limitation, attorneys' fees and expenses) in connection with
any investigative, administrative or judicial proceeding,
whether or not such Bank or Agent or the FI Trustee shall be
designated a party thereto of any nature arising from or
relating to (i) the execution or delivery of this Agreement
or any other Loan Document or any agreement or instrument
contemplated thereby, the performance by the parties thereto
of their respective obligations thereunder or the
consummation of the transactions contemplated hereby and
thereby (including the Restructuring and the RTZ
Transactions) or (ii) the use of the proceeds of the Loans;
and FI and FCX also jointly and severally agree to pay, and
to protect, indemnify and save harmless each Bank, each
Agent, the FI Trustee and each of their respective officers,
directors, shareholders, employees, agents and servants from
and against, any and all losses, liabilities (including
liabilities for penalties), actions, suits, judgments,
demands, damages, costs or expenses (including, without
limitation, attorneys' fees and expenses in connection with
any investigative, administrative or judicial proceeding,
whether or not such Bank or Agent or the FI Trustee shall be
designated a party thereto) of any nature arising from or
relating to any actual or alleged presence or Release of
Hazardous Materials on any property owned or operated by FI
and FCX or any of the Subsidiaries, or any Environmental
Claim related in any way to FI or FCX or the Subsidiaries or
arising from or in connection with the environmental due
diligence summary memorandum referred to in
Section 6.1(a)(xii); provided that any such indemnity
referred to in this sentence shall not, as to any
indemnified Person, be available to the extent that such
losses, claims, damages, liabilities or related expenses are
determined by a court of competent jurisdiction by final and
non appealable judgment to have resulted from the gross
negligence or wilful misconduct of such indemnified Person.
If any action, suit or proceeding arising from any of the
foregoing is brought against any Bank, any Agent, the FI
Trustee or other Person indemnified or intended to be
indemnified pursuant to this Section 10.4, FI and FCX, to
the extent and in the manner directed by such indemnified
party, will resist and defend such action, suit or
proceeding or cause the same to be resisted and defended by
counsel designated by FI and FCX (which counsel shall be
satisfactory to such Bank, such Agent, the FI Trustee or
other Person indemnified or intended to be indemnified). If
FI or FCX shall fail to do any act or thing which it has
covenanted to do hereunder or any representation or warranty
on the part of FI or FCX contained in this Agreement shall
be breached, any Bank, the FI Trustee or any Agent may (but
shall not be obligated to) do the same or cause it to be
done or remedy any such breach, and may expend its funds for
such purpose. Any and all amounts so expended by any Bank,
the FI Trustee or any Agent shall be repayable to it by FI
and FCX immediately upon such Bank's, the FI Trustee's or
such Agent's demand therefor.
(b) The provisions of this Section 10.4 shall
remain operative and in full force and effect regardless of
the expiration of the term of this Agreement, the
consummation of the transactions contemplated hereby or
thereby, the repayment of any of the Loans or any Promissory
Notes, the invalidity or unenforceability of any term or
provision of this Agreement, any other Loan Document or any
Promissory Note, or any investigation made by or on behalf
of any Bank, the FI Trustee or any Agent. All amounts due
under this Section 10.4 shall be payable on written demand
therefor.
SECTION 10.5. Right of Setoff. If an Event of
Default shall have occurred and be continuing and the Loans
shall have been accelerated or any Bank shall have requested
the Administrative Agent to declare the Loans immediately
due and payable pursuant to Article VII, then each Bank is
hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand,
provisional or final) at any time held and other
indebtedness at any time owing by such Bank to or for the
credit or the account of FI or FCX against any of and all
the obligations of FI or FCX now or hereafter existing under
this Agreement and the Promissory Notes held by such Bank,
irrespective of whether or not such Bank shall have made any
demand under this Agreement or such Promissory Notes and
although such obligations may be unmatured. Each Bank
agrees promptly to notify FI or FCX after any such setoff
and application made by such Bank, but the failure to give
such notice shall not affect the validity of such setoff and
application. The rights of each Bank under this Section
10.5 are in addition to other rights and remedies
(including, without limitation, other rights of setoff)
which such Bank may have.
SECTION 10.6. APPLICABLE LAW. THIS AGREEMENT AND
THE PROMISSORY NOTES SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 10.7. Waivers; Amendments. (a) No failure
or delay of any Bank, any Agent or the FI Trustee in
exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of
any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the
exercise of any other right or power. The rights and
remedies of the Banks, the Agents and the FI Trustee
hereunder and under the other documents and agreements
entered into in connection herewith are cumulative and not
exclusive of any rights or remedies which they would other-
wise have. No waiver of any provision of this Agreement or
any Promissory Note or any other such document or agreement
or consent to any departure by FI or FCX therefrom shall in
any event be effective unless the same shall be authorized
as provided in paragraph (b) below, and then such waiver or
consent shall be effective only in the specific instance and
for the purpose for which given. No notice or demand on FI
or FCX in any case shall entitle FI or FCX to any other or
further notice or demand in similar or other circumstances.
Each holder of any of the Promissory Notes shall be bound by
any amendment, modification, waiver or consent authorized as
provided herein, whether or not such Promissory Note shall
have been marked to indicate such amendment, modification,
waiver or consent. To the extent that FI may now or
hereafter be entitled, in any jurisdiction in which judicial
proceedings may at any time be commenced with respect to
this Agreement, to claim for itself or its property, assets
or revenues any immunity (whether by reason of sovereignty
or otherwise) from suit, jurisdiction of any court,
attachment prior to judgment, setoff, execution of a
judgment or from any other legal process or remedy, and to
the extent that there may be attributed to FI such an
immunity (whether or not claimed), FI hereby irrevocably
agrees not to claim and hereby irrevocably waives such
immunity.
(b) Neither this Agreement nor any provision hereof
may be waived, amended or modified except pursuant to an
agreement or agreements in writing entered into by FI, FCX
and the Required Banks; provided, however, that, no such
agreement shall (i) change the principal amount of, or
extend or advance the maturity of or any date for the
payment of any principal of or interest on, any Promissory
Note (including, without limitation, any such payment
pursuant to Section 3.7(b) or paragraph (b), (c) or (d) of
Section 3.9), or waive or excuse any such payment or any
part thereof, or change the rate of interest on any
Promissory Note, without the written consent of each holder
affected thereby, (ii) change or extend the Commitment of
any Bank without the written consent of such Bank, or change
any fees to be paid to any Bank or the Administrative Agent
hereunder without the written consent of such Bank or the
Agent, as applicable, (iii) amend or modify the provisions
of this Section 10.7, Section 3.8, Sections 3.11 through
3.15, Section 10.4 or Section 10.17 or Article IX or the
definition of "Required Banks", without the written consent
of each Bank, (iv) release the collateral granted as
security for the FI Obligations under the FI Security
Documents or the Collateral granted under the FCX Pledge
Agreements (except as expressly required hereby or thereby),
without the written consent of each Bank or (v) release FCX
of its obligations under Article IX without the written
consent of each Bank; and provided further that no such
agreement shall amend, modify or otherwise affect the rights
or duties of any Agent hereunder without the written consent
of such Agent. Each Bank and holder of any Promissory Note
shall be bound by any modification or amendment authorized
by this Section 10.7 regardless of whether its Promissory
Notes shall be marked to make reference thereto, and any
consent by any Bank or holder of a Promissory Note pursuant
to this Section shall bind any Person subsequently acquiring
a Promissory Note from it, whether or not such Promissory
Note shall be so marked.
SECTION 10.8. Severability. In the event any one
or more of the provisions contained in this Agreement or in
the Promissory Notes should be held invalid, illegal or
unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein
or therein shall not in any way be affected or impaired
thereby. The parties shall endeavor in good-faith negotia-
tions to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 10.9. Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall
constitute an original but all of which when taken together
shall constitute but one contract, and shall become effec-
tive when copies hereof which, when taken together, bear the
signatures of each of the parties hereto shall be delivered
or mailed to the Administrative Agent, FCX and FI.
SECTION 10.10. Headings. Article and Section
headings and the Table of Contents used herein are for
convenience of reference only and are not to affect the
construction of, or to be taken into consideration in
interpreting, this Agreement.
SECTION 10.11. Entire Agreement. This Agreement,
the other Loan Documents, the fee letters between the Agents
and FI and the exhibits and schedules hereto contain the
entire agreement among the parties hereto with respect to
the Loans and the related transactions. Any previous
agreement among the parties with respect to the subject
matter hereof is superseded by this Agreement, such fee
letters and the other Loan Documents. Nothing in this
Agreement or in the other Loan Documents, expressed or
implied, is intended to confer upon any party other than the
parties hereto any rights, remedies, obligations or
liabilities under or by reason of this Agreement or the
other Loan Documents.
SECTION 10.12. WAIVER OF JURY TRIAL, ETC.
(A) EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY
HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.12.
(b) Except as prohibited by law, each party hereto
hereby waives any right it may have to claim or recover in
any litigation referred to in paragraph (a) of this Section
10.12 any special, indirect, exemplary, punitive or
consequential damages or any damages other than, or in
addition to, actual damages.
(c) Each party hereto (i) certifies that no
representative, agent or attorney of any Bank has repre-
sented, expressly or otherwise, that such Bank would not, in
the event of litigation, seek to enforce the foregoing
waivers and (ii) acknowledges that it has been induced to
enter into this Agreement or any other document, as appli-
cable, by, among other things, the mutual waivers and
certifications herein.
SECTION 10.13. Interest Rate Limitation.
Notwithstanding anything herein or in the Promissory Notes
to the contrary, if at any time the interest rate applicable
to any Loan, together with all fees, charges and other
amounts which are treated as interest on such Loan under
applicable law (collectively the "Charges"), as provided for
herein or in any other document executed in connection
herewith, or otherwise contracted for, charged, received,
taken or reserved by any Bank, shall exceed the maximum
lawful rate (the "Maximum Rate") which may be contracted
for, charged, taken, received or reserved by such Bank in
accordance with applicable law, the rate of interest on such
Loan payable under the Promissory Note held by such Bank,
together with all Charges payable to such Bank, shall be
limited to the Maximum Rate and, to the extent lawful, the
interest and Charges that would have been payable in respect
of such Loan but were not payable as a result of the
operation of this Section 10.13 shall be cumulated and the
interest and Charges payable to such Bank in respect of
other Loans or periods shall be increased (but not above the
Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to
the date of repayment, shall have been received by such
Bank.
SECTION 10.14. JURISDICTION; CONSENT TO SERVICE OF
PROCESS. (A) EACH OF FCX AND FI HEREBY IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE
NONEXCLUSIVE JURISDICTION OF ANY NEW YORK STATE COURT OR
FEDERAL COURT OF THE UNITED STATES OF AMERICA SITTING IN NEW
YORK CITY, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE
PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES
THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING
MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR, TO
THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF
THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED
IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY
OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT
SHALL AFFECT ANY RIGHT THAT ANY BANK, ANY AGENT OR THE FI
TRUSTEE MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY AGAINST FI OR FCX OR ITS PROPERTIES IN THE COURTS OF
ANY JURISDICTION.
(B) FCX AND FI HEREBY IRREVOCABLY AND UNCONDI-
TIONALLY WAIVE, TO THE FULLEST EXTENT THEY MAY LEGALLY AND
EFFECTIVELY DO SO, ANY OBJECTION WHICH THEY MAY NOW OR HERE-
AFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY IN ANY NEW YORK STATE
OR FEDERAL COURT. EACH OF THE PARTIES HERETO HEREBY IRREVO-
CABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH
ACTION OR PROCEEDING IN ANY SUCH COURT.
(C) EACH PARTY TO THIS AGREEMENT IRREVOCABLY
CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR
NOTICES IN SECTION 10.1. NOTHING IN THIS AGREEMENT WILL
AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
SECTION 10.15. Confidentiality. Each Bank agrees
(which agreement shall survive the termination of this
Agreement) that financial information, information from
FCX's and its Subsidiaries' books and records, information
concerning FCX's and its Subsidiaries' trade secrets and
patents and any other information received from FCX and its
Subsidiaries hereunder shall be treated as confidential by
such Bank, and each Bank agrees to use its best efforts to
ensure that such information is not published, disclosed or
otherwise divulged to anyone other than employees or
officers of such Bank and its counsel and agents; provided
that it is understood that the foregoing shall not apply to:
(i) disclosure made with the prior written author-
ization of FI or FCX, as applicable;
(ii) disclosure of information (other than that received
from FCX or FI and their Subsidiaries prior to or under this
Agreement) already known by, or in the possession of, such
Bank without restrictions on the disclosure thereof at the
time such information is supplied to such Bank by FCX or FI
or a Subsidiary hereunder;
(iii) disclosure of information which is required by
applicable law or to a governmental agency having
supervisory or regulatory authority over any party hereto;
(iv) disclosure of information in connection with any
suit, action or proceeding in connection with the
enforcement of rights hereunder or in connection with the
transaction contemplated hereby or thereby;
(v) disclosure to any bank (or other financial
institution) which may acquire a participation or other
interest in the Loans or rights of any Bank hereunder;
provided that such bank (or other financial institution)
agrees to maintain any such information to be received in
accordance with the provisions of this Section 10.15;
(vi) disclosure by any party hereto to any other party
hereto or their counsel or agents;
(vii) disclosure by any party hereto to any entity or to
any subsidiary of such an entity which owns, directly or
indirectly, more than 50% of the voting stock of such party,
or to any affiliate and/or direct or indirect subsidiary of
such party; or
(viii) disclosure of information that prior to such
disclosure has become public knowledge through no violation
of this Agreement.
SECTION 10.16. Judgment Currency. The
specification of payment in Dollars and in New York City,
New York, with respect to amounts payable to any Bank (or
Transferee), any Agent or the FI Trustee hereunder and under
the other Loan Documents is of the essence, and Dollars
shall be the currency of account in all events. The payment
obligations of FI or FCX under this Agreement or any other
Loan Document shall not be discharged by an amount paid in
another currency or in another place, whether pursuant to a
judgment or otherwise, to the extent that the amount so paid
on conversion to Dollars and transfer to New York City under
normal banking procedures does not yield the amount of
Dollars in New York City due hereunder. If for the purpose
of obtaining judgment in any court it is necessary to
convert a sum due hereunder in Dollars into another currency
(the "second currency"), the rate of exchange which shall be
applied shall be that at which in accordance with normal
banking procedures the Administrative Agent could purchase
Dollars with the second currency on the Business Day next
preceding that on which such judgment is rendered. The
obligation of FI and FCX in respect of any such sum due from
it to any Agent, the FI Trustee or any Bank (or Transferee)
hereunder or under any other Loan Document (an "entitled
person") shall, notwithstanding the rate of exchange
actually applied in rendering such judgment, be discharged
only to the extent that on the Business Day following
receipt by such entitled person of any sum adjudged to be
due hereunder or under any other Loan Document in the second
currency such entitled person may in accordance with normal
banking procedures purchase in the free market and transfer
to New York City Dollars with the amount of the second
currency so adjudged to be due; and FI and FCX hereby agree,
as a separate obligation and notwithstanding any such
judgment, jointly and severally to indemnify such entitled
person against, and to pay such entitled person on demand,
in Dollars in New York City, the difference between the sum
originally due to such entitled person in Dollars and the
amount of Dollars so purchased and transferred.
SECTION 10.17 RTZ Transaction. The Agents and the
Banks acknowledge that FCX and FI have agreed pursuant to
the Implementation Agreement to enter into the RTZ
Transaction, a summary description of which is set forth in
Schedule VII to the FCX Credit Agreement. The Banks, FCX
and FI each agree, as promptly as possible after the
Restructuring, to begin negotiations to agree on mutually
satisfactory documentation to implement the RTZ Transaction,
including the Participation Agreement, the RTZ Loan
Agreement, the FI Intercreditor Agreement, the Final FI
Trust Agreement, the other Final FI Security Documents and
other documentation to be entered into by FI in connection
with the foregoing, all such agreements to be in form and
substance satisfactory to the Agents and each Bank, to FI
and to PT-RTZ and RTZ Lender. The Final FI Security
Documents shall include the Final Surat Kuasa (power of
attorney) enabling the FI Trustee, inter alia, to appoint an
operator (which, except in circumstances to be agreed upon,
would be PT-RTZ or an affiliate thereof) to replace FI as
operator in certain circumstances. Each of the Agents, the
Banks, FCX and FI acknowledge that the Final FI Trust
Agreement will not terminate prior to termination of the
Participation Agreement.
SECTION 10.18. Fifth Amendment Closing Date. This
Agreement, as amended herein, shall be effective on the
Fifth Amendment Closing Date.
SECTION 10.19. Execution of Composite Agreement.
Pursuant to Section 11 of the Amendment Agreement, FI, FCX
and the Agents, by their execution and delivery of this
execution version of the Composite Agreement, have caused
this Composite Agreement to become the Amended Credit
Agreement as contemplated by the Amendment Agreement.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective officers
thereunto duly authorized, as of the date first above
written.
P.T. FREEPORT INDONESIA COMPANY,
by
/s/ R. Foster Duncan
Name:R. Foster Duncan
Title:Treasurer
1615 Poydras Street
New Orleans, Louisiana 70112
Attention:R. Foster Duncan
Treasurer
Telex: 8109515386
Telephone: 504-582-4628
Telecopy: 504-582-4511
FREEPORT-McMoRan COPPER & GOLD INC.,
by
/s/ R. Foster Duncan
Name:R. Foster Duncan
Title:Treasurer
1615 Poydras Street
New Orleans, Louisiana 70112
Attention:R. Foster Duncan
Treasurer
Telex: 8109515386
Telephone: 504-582-4628
Telecopy: 504-582-4511
FIRST TRUST OF NEW YORK, NATIONAL
ASSOCIATION (for purposes of
Article VIII only), as FI Trustee,
by
/s/ P. J. Crowley
Name: P. J. Crowley
Title: Vice President
Addresses for Notices:
First Trust of New York, National
Association
100 Wall Street
New York, New York 10004
Telephone: 212-361-2505
Telecopy: 212-809-5459
CHEMICAL BANK, individually and as FTX
Collateral Agent and Administrative
Agent,
by
/s/ Ronald Potter
Name:Ronald Potter
Title:Managing Director
DOMESTIC OFFICE AND LIBOR OFFICE:
270 Park Avenue
New York, New York 10017
Attention:Ralph Iskander
Telephone: 212-270-3977
Telecopy: 212-270-4711
with a copy to Stuart Miller
Chemical Bank
270 Park Avenue
New York, New York 10017
Telephone:212-270-3523
Telecopy:212-270-2625
with copies to:
Agent Bank Services
140 East 45th Street
New York, New York 10017
Attention:Hilma Gabbidon
Telephone:212-622-0693
Telex:353006 ABSCNYK
Telecopy:212-622-0002
THE CHASE MANHATTAN BANK (National
Association), individually and as
Documentary Agent,
by
/s/ Alexander S. Rapetski II
Name:Alexander S. Rapetski II
Title:Vice President
DOMESTIC OFFICE AND LIBOR OFFICE:
Two Chase Manhattan Plaza
(5th Floor)
New York, NY 10081
Attention: Vilma Francis
Assistant Treasurer
Telephone: 212-552-7883
Telecopy: 212-552-1368
ABN AMRO BANK,
by
/s/ Cheryl I. Lipshutz
Name:Cheryl I. Lipshutz
Title:Vice President
by
/s/ H. Gene Shiels
Name:H. Gene Shiels
Title:Vice President
DOMESTIC OFFICE AND LIBOR OFFICE:
Three Riverway, Suite 1700
Houston, TX 77056
Attention: Mr. Gene Shiels
Telephone: 713-964-3326
Telecopy: 713-621-5801
ADDRESS FOR NOTICES:
Three Riverway, Suite 1700
Houston, TX 77056
Attention: Mr. Gene Shiels
Telephone: 713-964-3326
Telecopy: 713-621-5801
BANK OF TOKYO TRUST COMPANY,
by
/s/ Victor Bulzacchelli
Name:Victor Bulzacchelli
Title:Vice President & Manager
DOMESTIC OFFICE AND LIBOR OFFICE:
1251 Avenue of the Americas
New York, NY 10116-3138
Attention: Ms. Elizabeth Tocchini
Telephone: 212-782-4319
Telecopy: 212-782-6440
ADDRESS FOR NOTICES:
1251 Avenue of the Americas
New York, NY 10116-3138
Attention: Ms. Elizabeth Tocchini
Telephone: 212-782-4319
Telecopy: 212-782-6440
cc: Mr. Victor Bulzacchelli
Telephone: 212-782-4325
Telecopy: 212-782-6440
by
/s/ David E. Roberts
Name: David E. Roberts
Title: Associate Director
DOMESTIC OFFICE AND LIBOR OFFICE
222 Broadway
New York, NY 10038
Attention: Mr. David Roberts
Telephone: 212-412-7678
Telecopy: 212-412-7589
ADDRESS FOR NOTICES:
222 Broadway
New York, NY 10038
Attention: Mr. David Roberts
Telephone: 212-412-7678
Telecopy: 212-412-7589
DEUTSCHE BANK, AG, New York and/or
Cayman Islands Branches,
by
/s/ Brett A. Parker
Name:Brett A. Parker
Title:Assistant Vice President
by
/s/ Surendra V. Shah
Name: Surendra V. Shah
Title: Vice President
DOMESTIC OFFICE AND LIBOR OFFICE:
31 W. 52nd Street, 24th Floor
New York, NY 10019
Attention: Mr. Brett Parker
Telephone: 212-474-8289
Telecopy: 212-474-8256
ADDRESS FOR NOTICES:
31 W. 52nd Street, 24th Floor
New York, NY 10019
Attention: Mr. Brett Parker
Telephone: 212-474-8289
Telecopy: 212-474-8256
THE FUJI BANK, LIMITED, HOUSTON
AGENCY,
by
/s/ Kenichi Tatara
Name:Kenichi Tatara
Title:Vice President and Manager
DOMESTIC OFFICE AND LIBOR OFFICE:
1221 McKinney Street, Suite 4100
Houston, TX 77010
Attention: Ms. Kim Wood/
Mr. Charles vanRavenswaay
Telephone: 713-759-1800
Telecopy: 713-759-0048
ADDRESS FOR NOTICES:
1221 McKinney Street, Suite 4100
Houston, TX 77010
Attention: Ms. Kim Wood/
Mr. Charles vanRavenswaay
Telephone: 713-759-1800
Telecopy: 713-759-0048
INDUSTRIAL BANK OF JAPAN, LIMITED,
by
/s/ Robert W. Ramage, Jr.
Name:Robert W. Ramage, Jr.
Title:Senior Vice President
DOMESTIC OFFICE AND LIBOR OFFICE:
245 Park Avenue, 23rd Floor
New York, NY 10167-0037
Attention: Mr. John Dippo
Telephone: 212-309-6689
Telecopy: 212-692-9075
ADDRESS FOR NOTICES:
245 Park Avenue, 23rd Floor
New York, NY 10167-0037
Attention: Mr. John Dippo
Telephone: 212-309-6689
Telecopy: 212-692-9075
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED,
by
/s/ John J. Sullivan
Name:John J. Sullivan
Title:Joint General Manager
DOMESTIC OFFICE AND LIBOR OFFICE:
165 Broadway
New York, NY 10006
Attention: Mr. Robert Pacifici
Telephone: 212-335-4801
Telecopy: 212-608-3452
ADDRESSES FOR NOTICES:
165 Broadway
New York, NY 10006
Attention: Robert Pacifici
Telephone: 212-335-4801
Telecopy: 212-608-3452
cc: 2200 Ross Avenue
Suite 4700 West
Dallas, Texas 75201
Attention: Mr. Doug A. Whiddon
Telephone: 214-969-5352
Telecopy: 214-969-5357
MORGAN GUARANTY TRUST COMPANY OF NEW
YORK,
by
/s/ John Kowalczuk
Name:John Kowalczuk
Title:Vice President
DOMESTIC OFFICE AND LIBOR OFFICE:
60 Wall Street
New York, NY 10260-0060
Attention: Mr. John Kowalczuk
Telephone: 212-648-7612
Telecopy: 212-648-5014
ADDRESS FOR NOTICES:
60 Wall Street
New York, NY 10260-0060
Attention: Mr. John Kowalczuk
Telephone: 212-648-7612
Telecopy: 212-648-5014
NATIONAL WESTMINSTER BANK PLC,
by
/s/ Ian Plester
Name:Ian Plester
Title:Vice President
NATIONAL WESTMINSTER BANK PLC
(NASSAU BRANCH),
by
/s/ Ian Plester
Name: Ian Plester
Title:Vice President
DOMESTIC OFFICE AND LIBOR OFFICE:
175 Water Street
New York, NY 10038-4924
Attention: Mr. Robert Passarello
Telephone: 212-602-4149
Telecopy: 212-602-4118
ADDRESS FOR NOTICES:
175 Water Street
New York, NY 10038-4924
Attention: Mr. Ian Plester
Telephone: 212-602-4332
Telecopy: 212-602-4500
THE BANK OF NOVA SCOTIA,
by
/s/ F. C. H. Ashby
Name:F. C. H. Ashby
Title:Senior Manager Loan
Operations
DOMESTIC OFFICE AND LIBOR OFFICE:
600 Peachtree, N.E., Suite 2700
Atlanta, GA 30308
Attention: Mr. Claude Ashby
Telephone: 404-877-1500
Telecopy: 404-888-8998
ADDRESS FOR NOTICES:
1100 Louisiana, Suite 3000
Houston, TX 77002
Attention: Mr. Paul Gonin
Telephone: 713-752-0900
Telecopy: 713-752-2425
ARAB BANKING CORPORATION (B.S.C.),
by
/s/ Wahid O. Bugaighis
Name:Wahid O. Bugaighis
Title:First Vice President
DOMESTIC OFFICE AND LIBOR OFFICE:
245 Park Avenue, 31st Floor
New York, NY 10167
Attention: Loan Manager
Telephone: 212-850-0600
Telecopy: 212-599-8385
ADDRESS FOR NOTICES:
245 Park Avenue, 31st Floor
New York, NY 10167
Attention: Loan Manager
Telephone: 212-850-0600
Telecopy: 212-599-8385
600 Travis Street
Texas Commerce Tower, Suite 1900
Houston, TX 77002
Attention: Mr. Stephen Plauche
Telephone:713-227-8444
Telecopy:713-227-6507
BANQUE PARIBAS,
by
/s/ Brian Malone
Name:Brian Malone
Title:Vice President
by
/s/ Barton D. Schouest
Name: Barton D. Schouest
Title:Group Vice President
DOMESTIC OFFICE AND LIBOR OFFICE:
1200 Smith Street, Two Allen Center
Suite 3100
Houston, TX 77002
Attention: Ms. Leah Evans
Telephone: 713-659-4811
Telecopy: 713-659-3832
ADDRESS FOR NOTICES:
1200 Smith Street, Two Allen Center
Suite 3100
Houston, TX 77002
Attention: Mr. Brian Malone
Telephone: 713-659-4811
Telecopy: 713-659-3832
1200 Smith Street, Two Allen Center
Suite 3100
Houston, TX 77002
Attention: Ms. Leah Evans
Telephone: 713-659-4811
Telecopy: 713-659-3832
CHRISTIANIA BANK,
by
/s/ Jahn O. Roising
Name:Jahn O. Roising
Title:First Vice President
by
/s/ Debra Ives
Name:Debra Ives
Title:Vice President
DOMESTIC OFFICE AND LIBOR OFFICE:
11 West 42nd Street, 17th Floor
New York, NY 10036
Attention: Mr. Jahn Roising
Telephone: 212-827-4820
Telecopy: 212-827-4888
ADDRESS FOR NOTICES:
11 West 42nd Street, 17th Floor
New York, NY 10036
Attention: Mr. Jahn Roising
Telephone: 212-827-4837
Telecopy: 212-827-4888
THE MITSUI TRUST AND BANKING COMPANY
LTD,
by
/s/ Shigero Tsujimoto
Name:Shigero Tsujimoto
Title:Senior Vice President &
Manager
DOMESTIC OFFICE AND LIBOR OFFICE:
One World Financial Center, 21st Floor
200 Liberty Street
New York, NY 10281
Attention: Mr. Paul Dellova, Jr.
Telephone: 212-341-0469
Telecopy: 212-945-4170
ADDRESS FOR NOTICES:
One World Financial Center, 21st Floor
200 Liberty Street
New York, NY 10281
Attention: Mr. Paul Dellova, Jr.
Telephone: 212-341-0469
Telecopy: 212-945-4170
LENDER:WESTDEUTSCHE LANDESBANK
GIROZENTRALE,
by
/s/ Richard R. Newman
Name:Richard R. Newman
Title:Vice President
by
/s/ R. Carino
Name:R. Carino
Title:Associate
DOMESTIC OFFICE AND LIBOR OFFICE:
1211 Avenue of the Americas
New York, New York 10036
Attention: Mr. Richard Newman
Telephone: 212-852-6120
Telecopy: 212-852-6300
ADDRESS FOR NOTICES:
1211 Avenue of the Americas
New York, New York 10036
Attention: Mr. Richard Newman
Telephone: 212-852-6120
Telecopy: 212-852-6300
YASUDA TRUST AND BANKING COMPANY,
by
/s/ Neil T. Chau
Name:Neil T. Chau
Title:First Vice President
DOMESTIC OFFICE AND LIBOR OFFICE:
666 Fifth Avenue
Suite 801
New York, NY 10103
Attention: Winnie Tang/Wai Wang
Telephone: 212-373-5760/5761
Telecopy: 212-373-5797
ADDRESS FOR NOTICES:
285 Peachtree Center Avenue NE
Suite 2104 - Marquis Two
Atlanta, GA 30303
Attention: Mr. Price Chenault
Telephone: 404-584-7807
Telecopy: 404-584-7816
P.T. BANK RAKYAT INDONESIA (PERSERO),
by
/s/ Kemas M. Arief
Name:Kemas M. Arief
Title:General Manager
by
/s/ David W. Opdyke
Name:David W. Opdyke
Title:Deputy General Manager
DOMESTIC OFFICE AND LIBOR OFFICE:
430 Park Avenue
New York, NY 10022
Attention: Mr. David W. Opdyke
Telephone: 212-750-0222
Telecopy: 212-750-0648
ADDRESS FOR NOTICES:
430 Park Avenue
New York, NY 10022
Attention: Mr. David W. Opdyke
Telephone: 212-750-0222
Telecopy: 212-750-0648
FIRST NATIONAL BANK OF COMMERCE,
by
/s/ J. Keith Short
Name:J. Keith Short
Title:Vice President
DOMESTIC OFFICE AND LIBOR OFFICE:
210 Baronne Street
New Orleans, LA 70112
Attention: Mr. J. Keith Short
Telephone: 504-561-1361
Telecopy: 504-561-1316
ADDRESS FOR NOTICES:
210 Baronne Street
New Orleans, LA 70112
Attention: Mr. J. Keith Short
Telephone: 504-561-1361
Telecopy: 504-561-1316
NBD BANK,
by
/s/ George R. Schanz
Name:George R. Schanz
Title:Vice President
DOMESTIC OFFICE AND LIBOR OFFICE:
611 Woodward Avenue
Detroit, MI 48226
Attention: Mr. George Schanz
Telephone: 313-225-3191
Telecopy: 313-225-2649
ADDRESS FOR NOTICES:
611 Woodward Avenue
Detroit, MI 48226
Attention: Mr. George Schanz
Telephone: 313-225-3191
Telecopy: 313-225-2649
N M ROTHSCHILD & SONS LIMITED,
by
/s/ William Lamarque
Name:William Lamarque
Title:Director
by
/s/ Andrew Wright
Name: Andrew Wright
Title: Manager
DOMESTIC OFFICE AND LIBOR OFFICE:
New Court
St. Swithin's Lane
London
EC4P 4DU
Attention: Mr. Mark Turner
Telephone: 0171-280-5672
Telecopy: 0171-280-5139
ADDRESS FOR NOTICES:
New Court
St. Swithin's Lane
London
EC4P 4DU
Attention: Mr. Andrew Wright
Telephone: 0171-280-5110
Telecopy: 0171-280-5139
SOCIETE GENERALE, SOUTHWEST AGENCY,
by
/s/ James R. Shelton
Name:James R. Shelton
Title:Vice President
DOMESTIC OFFICE AND LIBOR OFFICE:
2001 Ross Avenue
Trammell Crow Center, Suite 4800
Dallas, TX 75201
Attention: Ms. Tequlla English
Telephone: 214-979-2777
Telecopy: 214-979-1104
ADDRESS FOR NOTICES:
1111 Bagby, Suite 2020
Houston, TX 77002
Attention: Mr. James Shelton
Telephone: 713-759-6330
Telecopy: 713-650-0824
Additional Banks:BANK OF AMERICA
ILLINOIS,
by
/s/ Ronald E. McKaig
Name:Ronald E. McKaig
Title:Vice President
DOMESTIC OFFICE AND LIBOR OFFICE:
231 S. LaSalle Street, 10th Floor
Chicago, IL 60697
Attention: Mr. Thomas Pearson
Telephone: 312-828-3100
Telecopy: 312-987-5614
ADDRESS FOR NOTICES:
231 South LaSalle Street, 10th Floor
Chicago, IL 60697
Attention: Mr. Thomas Pearson
Telephone: 312-828-3100
Telecopy: 312-987-5614
THE MITSUBISHI BANK, LIMITED HOUSTON
AGENCY,
by
/s/ Takeshi Yokokawa
Name:Takeshi Yokokawa
Title:Joint General Manager
DOMESTIC OFFICE AND LIBOR OFFICE:
1100 Louisiana Street, Suite 2800
Houston, TX 77002-5216
Attention: Mr. David Denbina
Telephone: 713-655-3805
Telecopy: 718-658-0116
ADDRESS FOR NOTICES:
1100 Louisiana Street, Suite 2800
Houston, TX 77002-5216
Attention: Ms. Barrie Hogue
Telephone: 713-655-3835
Telecopy: 713-658-0116
BANK OF MONTREAL,
by
/s/ Michael P. Sassos
Name:Michael P. Sassos
Title:Director
DOMESTIC OFFICE AND LIBOR OFFICE:
430 Park Avenue
New York, NY 10022
Attention: Mr. Michael P. Sassos
Telephone: 212-605-1645
Telecopy: 212-605-1451
ADDRESS FOR NOTICES:
430 Park Avenue
New York, NY 10022
Attention: Mr. Michael P. Sassos
Telephone: 212-605-1645
Telecopy: 212-605-1451
DRESDNER BANK AG, NEW YORK BRANCH AND
GRAND CAYMAN BRANCH,
by
/s/ Joseph A. Di Rocco
Name:Joseph A. Di Rocco
Title:Assistant Vice President
by
/s/ Ramesh Raman
Name:Ramesh Raman
Title:Assistant Vice President
DOMESTIC OFFICE AND LIBOR OFFICE:
75 Wall Street
New York, NY 10005
Attention: Mr. Joseph Di Rocco
Telephone: 212-574-0210
Telecopy: 212-574-0129
ADDRESS FOR NOTICES:
75 Wall Street
New York, NY 10005
Attention: Mr. Joseph Di Rocco
Telephone: 212-574-0210
Telecopy: 212-574-0129
THE SANWA BANK, LIMITED, DALLAS
AGENCY,
by
/s/ L. J. Perenyi
Name:L. J. Perenyi
Title:Vice President
DOMESTIC OFFICE AND LIBOR OFFICE:
2830 NationsBank Plaza, LB 165
901 Main Street
Dallas, TX 75202-3714
Attention: Mr. Lad Perenyi
Telephone: 214-744-5555
Telecopy: 214-741-6535
ADDRESS FOR NOTICES:
2830 NationsBank Plaza, LB 165
901 Main Street
Dallas, TX 75202-3714
Attention: Mr. Lad Perenyi
Telephone: 214-744-5555
Telecopy: 214-741-6535
SUMITOMO BANK,
by
/s/ Harumitsu Seki
Name:Harumitsu Seki
Title:General Manager
DOMESTIC OFFICE AND LIBOR OFFICE:
700 Louisiana, Suite 1750
Houston, TX 77002
Attention: Mr. Brian Brown
Telephone: 713-238-8270
Telecopy: 713-759-0200
ADDRESS FOR NOTICES:
700 Louisiana, Suite 1750
Houston, TX 77002
Attention: Mr. Brian Brown
Telephone: 713-238-8270
Telecopy: 713-759-0200
AUSTRALIA AND NEW ZEALAND BANKING
GROUP LIMITED, CAYMAN ISLANDS BRANCH,
by
/s/ Paul Clifford
Name:Paul Clifford
Title:Vice President
DOMESTIC OFFICE AND LIBOR OFFICE:
1177 Avenue of the Americas
New York, NY 10036-2798
Attention: Mr. Paul Clifford
Telephone: 212-801-9713
Telecopy: 212-801-9859
ADDRESS FOR NOTICES:
1177 Avenue of the Americas
New York, NY 10036-2798
Attention: Mr. Paul Clifford
Telephone: 212-801-9713
Telecopy: 212-801-9859
DAI-ICHI KANGYO BANK, LTD. NEW YORK
BRANCH,
by
/s/ Koji Fujiwara
Name:Koji Fujiwara
Title:Assistant Vice President
DOMESTIC OFFICE AND LIBOR OFFICE:
1 World Trade Center, Suite 4911
New York, NY
Attention: Ms. Anne Marie Neverin
Telephone: 212-432-6643
Telecopy: 212-912-1879
ADDRESS FOR NOTICES:
1100 Louisiana, Suite 4940
Houston, TX 77002
Attention: Mr. Kelton Glasscock
Telephone: 713-654-5055
Telecopy: 713-654-1667
NORINCHUKIN BANK,
by
/s/ Kimikazu Noumi
Name:Kimikazu Noumi
Title:General Manager
DOMESTIC OFFICE AND LIBOR OFFICE:
245 Park Avenue, 29th Floor
New York, NY 10167
Attention: Mr. Takahiko Ishihara
Telephone: 212-949-7188
Telecopy: 212-697-5754
ADDRESS FOR NOTICES:
245 Park Avenue, 29th Floor
New York, NY 10167
Attention: Mr. Takahiko Ishihara
Telephone: 212-949-7188
Telecopy: 212-697-5754
REPUBLIC NATIONAL BANK OF NEW YORK,
by
/s/ Richard J. Ward
Name:Richard J. Ward
Title:Vice President
DOMESTIC OFFICE AND LIBOR OFFICE:
Fifth Avenue at 40th Street
New York, NY 10018
Attention: Mr. Richard J. Ward
Telephone: 212-525-6476
Telecopy: 212-525-6581
ADDRESS FOR NOTICES:
Fifth Avenue at 40th Street
New York, NY 10018
Attention: Mr. Richard J. Ward
Telephone: 212-525-6476
Telecopy: 212-525-6581
THE ROYAL BANK OF SCOTLAND PLC,
by
/s/ Russell M. Gibson
Name:Russell M. Gibson
Title:Vice President & Deputy
Manager
DOMESTIC OFFICE AND LIBOR OFFICE:
88 Pine Street, 26th Floor
Wall Street Plaza
New York, NY 10005-1801
Attention: Mr. Russell M. Gibson
Telephone: 212-269-1706
Telecopy: 212-480-0791
ADDRESS FOR NOTICES:
88 Pine Street, 26th Floor
Wall Street Plaza
New York, NY 10005-1801
Attention: Mr. Russell M. Gibson
Telephone: 212-269-1706
Telecopy: 212-480-0791
THE TOKAI BANK, LIMITED,
by
/s/ Stuart M. Schulman
Name:Stuart M. Schulman
Title:Senior Vice President
DOMESTIC OFFICE AND LIBOR OFFICE:
55 E. 52nd Street
Park Avenue Plaza
New York, NY 10055
Attention: Mr. Daniel Higgins
Telephone: 212-339-1182
Telecopy: 212-754-2171
ADDRESS FOR NOTICES:
55 E. 52nd Street
Park Avenue Plaza
New York, NY 10055
Attention: Ms. Eva Cordova
Telephone: 212-339-1145
Telecopy: 212-754-2170
PT BANK NEGARA INDONESIA (PERSERO),
by
/s/ Dewa Gde. Suthapa
Name:Dewa Gde. Suthapa
Title:General Manager
DOMESTIC OFFICE AND LIBOR OFFICE:
One Exchange Plaza
55 Broadway, 5th Floor
New York, NY 10006
Attention: Mr. Dewa Gde. Suthapa
Telephone: 212-943-4750
Telecopy: 212-344-5723
ADDRESS FOR NOTICES:
One Exchange Plaza
55 Broadway, 5th Floor
New York, NY 10006
Attention: Mr. Dewa Gde. Suthapa
Telephone: 212-943-4750
Telecopy: 212-344-5723
BANK AUSTRIA,
by
/s/ R. Tenhave
Name:R. Tenhave
Title:Senior Vice President
by
/s/ Paul Deerin
Name:Paul Deerin
Title:Vice President
DOMESTIC OFFICE AND LIBOR OFFICE:
565 Fifth Avenue
New York, NY 10017
Attention: Mr. Paul Deerin
Telephone: 212-880-1033
Telecopy: 212-880-1040
ADDRESS FOR NOTICES:
565 Fifth Avenue
New York, NY 10017
Attention: Mr. Paul Deerin
Telephone: 212-880-1033
Telecopy: 212-880-1040
BANQUE NATIONALE DE PARIS,
by
/s/ John L. Stacy
Name:John L. Stacy
Title:Vice President
DOMESTIC OFFICE AND LIBOR OFFICE:
333 Clay Street, Suite 3400
Houston, TX 77002
Attention: Mr. John L. Stacy
Telephone: 713-951-1222
Telecopy: 713-659-1414
ADDRESS FOR NOTICES:
333 Clay Street, Suite 3400
Houston, TX 77002
Attention: Mr. John L. Stacy
Telephone: 713-951-1222
Telecopy: 713-659-1414
THE DAIWA BANK LIMITED,
by
/s/ Joel Limjap
Name:Joel Limjap
Title:Vice President
DOMESTIC OFFICE AND LIBOR OFFICE:
666 5th Avenue, 3rd Floor
New York, NY 10103
Attention: Mr. Joel Limjap
Telephone: 212-554-7043
Telecopy: 212-649-7641
ADDRESS FOR NOTICES:
666 5th Avenue, 3rd Floor
New York, NY 10103
Attention: Mr. Joel Limjap
Telephone: 212-554-7043
Telecopy: 212-649-7641
HIBERNIA NATIONAL BANK,
by
/s/ Bruce Ross
Name:Bruce Ross
Title:Vice President
DOMESTIC OFFICE AND LIBOR OFFICE:
313 Carondelet Street
New Orleans, LA 70130
Attention: Mr. Bruce Ross
Telephone: 504-533-5806
Telecopy: 504-533-2060
ADDRESS FOR NOTICES:
313 Carondelet Street
New Orleans, LA 70130
Attention: Mr. Bruce Ross
Telephone: 504-533-5806
Telecopy: 504-533-2060
SAKURA BANK,
by
/s/ Akira Hara
Name:Akira Hara
Title:Senior Vice President and
General Manager
DOMESTIC OFFICE AND LIBOR OFFICE:
1100 Louisiana, Suite 2900
Houston, TX 77002
Attention: Senior Manager, C&PFII
Telephone: 713-754-7200
Telecopy: 713-659-1404
ADDRESS FOR NOTICES:
1100 Louisiana, Suite 2900
Houston, TX 77002
Attention: Senior Manager, C&PFII
Telephone: 713-754-7200
Telecopy: 713-659-1404
UNION BANK OF SWITZERLAND, Houston
Agency,
by
/s/ Dan Boyle
Name:Dan Boyle
Title:Vice President
by
/s/ Evans Swann
Name:Evans Swann
Title:Managing Director
DOMESTIC OFFICE AND LIBOR OFFICE:
1100 Louisiana, Suite 4500
Houston, TX 77002
Attention: Mr. Dan Boyle
Telephone: 713-655-6500
Telecopy: 713-655-6555
ADDRESS FOR NOTICES:
1100 Louisiana, Suite 4500
Houston, TX 77002
Attention: Mr. Dan Boyle
Telephone: 713-655-6500
Telecopy: 713-655-6555
With a copy to:
Union Bank of Switzerland, New York
Branch
299 Park Avenue
New York, NY 10171-0026
Attention: Mr. James Broadus
Telephone: 212-821-3227
Telecopy: 212-821-3259
Departing Banks:COMMERZBANK
Aktiengesellschaft, Atlanta Agency,
by
/s/ H. Yergey
Name:H. Yergey
Title:Vice President
by
/s/ C. Rost
Name:C. Rost
Title:Assistant Treasurer
DOMESTIC OFFICE AND LIBOR OFFICE:
Promenade 2, Suite 3500
1230 Peachtree Street, N.E.
Atlanta, GA 30309
Attention: Mr. Harry Yergey
Telephone: 404-888-6533
Telecopy: 404-888-6539
ADDRESS FOR NOTICES:
Promenade 2, Suite 3500
1230 Peachtree Street, N.E.
Atlanta, GA 30309
Attention: Mr. Harry Yergey
Telephone: 404-888-6533
Telecopy: 404-888-6539
MELLON BANK,
by
/s/ Mary Ellen Usher
Name:Mary Ellen Usher
Title:Vice President
DOMESTIC OFFICE AND LIBOR OFFICE:
1100 Louisiana, Suite 3600
Houston, TX 77002
Attention: Mr. Sushim Shah
Telephone: 713-759-3050
Telecopy: 713-650-3409
ADDRESS FOR NOTICES:
1100 Louisiana, Suite 3600
Houston, TX 77002
Attention: Mr. Sushim Shah
Telephone: 713-759-3050
Telecopy: 713-650-3409
EXHIBIT 10.2
CONTRACT OF WORK
BETWEEN
THE GOVERNMENT OF THE REPUBLIC OF INDONESIA
AND
PT IRJA EASTERN MINERALS CORPORATION
CONTENTS
ARTICLE Page
INTRODUCTION 1
1. DEFINITIONS 4
2. APPOINTMENT AND RESPONSIBILITY OF THE COMPANY 9
3. MODUS OPERANDI 11
4. CONTRACT AREA 13
5. GENERAL SURVEY PERIOD 16
6. EXPLORATION PERIOD 18
7. REPORTS AND SECURITY DEPOSIT 21
8. FEASIBILITY STUDIES PERIOD 26
9. CONSTRUCTION PERIOD 30
10. OPERATING PERIOD 32
11. MARKETING 39
12. IMPORT AND RE-EXPORT FACILITIES 43
13. TAXES AND OTHER FINANCIAL OBLIGATIONS OF THE COMPANY 46
14. RECORDS, INSPECTION AND WORK PROGRAM 57
15. CURRENCY EXCHANGE 60
16. SPECIAL RIGHTS OF THE GOVERNMENT 63
17. EMPLOYMENT AND TRAINING OF INDONESIAN NATIONALS 64
18. ENABLING PROVISIONS 67
19. FORCE MAJEURE 72
20. DEFAULT 74
21. SETTLEMENT OF DISPUTES 76
22. TERMINATION 78
23. COOPERATION OF THE PARTIES 83
24. PROMOTION OF NATIONAL INTEREST 86
25. REGIONAL COOPERATION IN REGARD TO
ADDITIONAL INFRASTRUCTURE 88
26. ENVIRONMENTAL MANAGEMENT AND PROTECTION 92
27. LOCAL BUSINESS DEVELOPMENT 94
28. MISCELLANEOUS PROVISIONS 99
29. ASSIGNMENT 102
30. FINANCING 103
31. TERM 104
32. GOVERNING LAW 105
ANNEX "A" - CONTRACT AREA 106
ANNEX "B" - MAP OF CONTRACT AREA 108
ANNEX "C" - LIST OF OUTSTANDING MINING AUTHORIZATIONS
AND NATURE RESERVES 109
ANNEX "D" - DEADRENT FOR VARIOUS STAGES OF ACTIVITIES 110
ANNEX "E" - FEASIBILITY STUDY REPORT 111
ANNEX "F" - ROYALTY TARIFF 113
ANNEX "G" - IMPLEMENTATION OF ROYALTY TARIFF 118
ANNEX "H"- RULES FOR COMPUTATION OF INCOME TAX 120
CONTRACT OF WORK
This Agreement, made and entered into in Jakarta, in the
Republic of Indonesia, on the 15th day of August
1994 by and between the Government of the Republic of
Indonesia, represented herein by the Minister of Mines and
Energy of the Government of the Republic of Indonesia
(hereinafter called the "Government") and PT. IRJA EASTERN
MINERALS CORPORATION (a judicial body incorporated in
Indonesia by Notarial Deed Numbered 14 dated August 1st
1994, Decree of Minister of Justice Numbered
C2.12.165.HT.01.01.TH.04 dated 1994) (hereinafter called
the "Company"), all of the shares of which at the time of its
incorporation are owned by:
1. With respect to 80% (eighty) percent of the shares:
EASTERN MINING COMPANY, INC., a company incorporated by
virtue of the law of the State of Delaware, United States
of America, whose address in the United States of America
is at 1615 Poydras Street, New Orleans, LA 70012, with
mailing address in Indonesia is at Plaza 89, 5th Floor,
Jl. H.R. Rasuna Said Kav. X-7 No. 6, Jakarta 12940
(hereinafter called "Eastern");
2. With respect to 10% (ten percent) of the shares:
PT. INDOCOPPER INVESTAMA CORPORATION, a judicial body
incorporated in Indonesia by Notarial Deed Numbered: 89
dated December 23, 1991, made before Muhani Salim, Notary
in Jakarta, which the latest amendment made before S.P.
Henry Shidki, Notary in Jakarta, under No. 113 dated
November 12, 1992, approved by Decree of Minister of
Justice No. C2- 9468.HT.01.04.TH.92 dated November 19,
1992 whose address is at Wisma Bakrie, 6th Floor, Jl. HR
Rasuna Said Kav. B-1, Jakarta 12920 (hereinafter called
"Indocopper");
3. With respect to 10% (ten) percent of the shares:
PT. SEDTCO GANESHA, a judicial body incorporated in
Indonesia by Notarial Deed Numbered 56 dated March 21, 1984
made before Anna Sunarhadi, Notary in Jakarta, which the
latest amendment made before R.N. Sinulingga, Notary in
Jakarta, under No. 483, dated October 1991, approved
by Decree of Minister of Justice No. C2-
6723.HT.01.01.Th. 91 dated November 16, 1991 whose
address is at Lippo Plaza, 3rd Floor, Jl. Jend.
Sudirman Kav. 25, Jakarta 12920 (hereinafter called
"Setdco").
<PAGE> -1-
WITNESSETH THAT:
A. All Mineral resources contained in the territories of the
Republic of Indonesia, including the offshore areas, are
the national wealth of the Indonesian Nation.
B. The Government desires to encourage and promote the
exploration and development of the Mineral resources of
Indonesia. The Government is also desirous of facilitating
the development of ore deposits if commercial quantities
are found to exist and the operation of Mining enterprises
in connection therewith.
C. The Government, through the operation of Mining
enterprises, is desirous of creating growth centers for
regional development, creating more employment
opportunities, encouraging and developing local business
and ensuring that skills, know-how and technology are
transferred to Indonesian nationals, acquiring basic data
regarding and related to the country's Mineral resources
and preserving and rehabilitating the natural Environment
for further development of Indonesia.
D. The Company as an indirect Subsidiary of Freeport-McMoRan
Inc., a Delaware corporation, and a Subsidiary of Freeport-
McMoRan Copper & Gold Inc., a Delaware corporation, has and
has access to the information, knowledge, experience and
proven technical and financial capability and other
resources to undertake a program of General Survey,
Exploration, Feasibility Study, Development, Construction,
Mining, Processing and Marketing with respect to the
Contract Area, and is ready and willing to proceed thereto
under the terms and subject to the conditions set forth in
this Agreement.
E. The Government and the Company recognize that the Contract
Area (as hereinafter defined) is located in an extremely
remote area with a difficult environment and that,
accordingly, the Company may be required to develop special
facilities and to carry out special functions for the
fulfillment of this Agreement.
<PAGE> -2-
F. The Government and the Company are willing to cooperate
in developing the Mineral resources hereinafter described
on the basic provisions hereof and of the laws and
regulations of the Republic of Indonesia, specifically
Law No. 11 of 1967 on the Basic Provisions of Mining
(Undang-Undang Pokok Pertambangan) and Law No. 1 of 1967
on Foreign Capital Investment (Undang-Undang Penanaman
Modal Asing) and its amendment Law No. 11 of 1970 and the
relevant laws and regulations pertaining thereto.
NOW, THEREFORE, in consideration of the mutual promises,
covenants and conditions hereinafter set out to be performed
and kept by the Parties hereto, and intending to be legally
bound hereby, it is stipulated and agreed between the Parties
hereto as follows:
<PAGE> -3-
ARTICLE 1
DEFINITIONS
The terms set forth below shall have the meanings therein
set forth, respectively, wherever the same shall appear in
this Agreement and whether or not the same shall be
capitalized.
1. "Affiliate" of any Person means any other Person that
directly, or indirectly through one or more
intermediaries, controls or is controlled by or is under
common control with, such Person. "Control" (including
the terms "controlled by" and "under common control with"
and "controls") means the possession, directly or
indirectly, of the ability to direct the management and
policies of a Person. Without limiting the generality of
the above, such ability is presumed to exist in a Person
if it holds, directly or indirectly, 25% or more of the
outstanding voting shares of another Person.
2. "Associated Minerals" with respect to a particular
Mineral means Minerals which geologically occur together
with, are inseparable by Mining from and must necessarily
be Mined and Processed together with such Mineral.
3. "Beneficial Use" means a use of the Environment or any
element or segment of the Environment that is conducive
to public benefit, welfare, safety or health and which
requires protection from the effects of waste discharges,
emissions and deposits.
4. "Contract Area" means that area described in Annex "A",
Annex "B", and Article 4.1 of this Agreement.
5. "Contract Properties" with respect to any Mining Area,
means, for the purposes of Article 22, the property of
the Company in Indonesia which is located in such Mining
Area or any Project Area related to such Mining Area.
<PAGE> -4-
6. "Covered Employee" means any person, including an
Expatriate Individual, who is employed or engaged by the
Company or one of its Subsidiaries or Affiliates or
subcontractors.
7. "Department", unless the context otherwise indicates,
means that Government agency charged from time to time
with the administration of the Indonesian Mining laws and
regulations.
8. "Enterprise" means all activities of the Company provided
for in this Agreement or contemplated by this Agreement,
including the General Survey, Exploration, evaluation,
development, construction, Mining, operating, Processing,
selling and all other activities by the Company for the
purposes of or in connection with this Agreement.
9. "Environment" means physical and chemical factors of the
surroundings of human beings, including land, water,
atmosphere, climate, sound, odors, tastes and biological
factors of animals and plants and the social factors of
aesthetics.
10. "Expatriate Individuals" or "Expatriates" means
individuals who are non-Indonesian nationals.
11. "Exploration" means the search for Minerals using
geological, geophysical and geochemical methods,
including the use of boreholes, test pits, trenches,
surface or underground headings, drifts or tunnels in
order to locate the presence of economic Mineral deposits
and to find out their nature, shape and grade, and
"Explore" has a corresponding meaning.
12. "Exploration Areas" means the portions of the Contract
Area which are selected for Exploration as a result of
the General Survey of the Contract Area by the Company
during the General Survey Period provided for in
paragraph 2 of Article 3, or the entire retained area
after the completion of the General Survey Period and any
extension thereto.
13. "Foreign Currency" means any currency other than Rupiah.
<PAGE> -5-
14. "General Survey" means an investigation or a preliminary
Exploration carried out along certain broad features of
an area for surface indications of mineralization.
15. "Government" means the Government of the Republic of
Indonesia, its Ministers, Ministries, Departments,
Agencies and Instrumentalities, and all Regional,
Provincial or District Authorities.
16. "Indonesian Participant" means an Indonesian citizen, an
Indonesian legal entity controlled by Indonesian citizens
or such other Indonesian legal entity as qualifies as an
Indonesian participant under applicable regulations, or
the Government of the Republic of Indonesia.
17. "Minerals" means all natural deposits and natural
accumulations containing chemical elements of all kinds,
either in elemental form or in association or chemical
combination with other metallic or non-metallic elements.
18. "Mining" means recovery activities aimed at the economic
exploitation of one or more identified deposits of
Minerals, and "Mine" has a corresponding meaning.
19. "Mining Areas" means all those territories within the
Contract Area which have been identified by the Company
as containing a potentially economic mineral deposit or
deposits which the Company selects for Mining development
and designates by latitude and longitude on maps and by
description upon or before the expiration of the
Feasibility Studies Period with respect to an Exploration
Area, as one in which the Company shall propose to
commence Mining, subject to paragraph 2 of Article 16,
provided that a Mining Area may be expanded by agreement
of the Department and the Company if as a result of
further Exploration and Mining it becomes apparent that
inclusion of adjacent lands would advance the purposes of
this Agreement by permitting the Mining of the Minerals
identified with respect to such deposits or Associated
Minerals.
<PAGE> -6-
20. "Minister", unless the context otherwise indicates, means
that person who is acting at any given time as the
Minister of the Department of Mines and Energy.
21. "Person" means any individual, partnership, corporation,
wherever organized or incorporated, and all other
judicially distinct entities and associations, whether or
not incorporated.
22. "Pollution" means any direct or indirect alteration of
the physical, thermal, chemical, biological or
radioactive properties of any part of the Environment by
the discharge, emission or deposit of Wastes so as to
affect any Beneficial Use materially and adversely, or to
cause a condition which is hazardous or potentially
hazardous to public health, safety or welfare, or to
animals, birds, wildlife, fish or aquatic life, or to
plants, and "Pollute" has a corresponding meaning.
23. "Precious Metal" means gold, silver, platinum or
palladium.
24. "Processing" means treatment of Mineral ore after it has
been Mined to produce a marketable Mineral concentrate or
a further refined Mineral Product, and "Process" has a
corresponding meaning.
25. "Products" means all ores, Minerals, concentrates,
precipitates and metals, including refined products,
obtained as a result of Mining or Processing, after
deducting any quantities thereof which are lost,
discarded, destroyed or used in research, testing,
Mining, Processing or transportation.
26. "Project Area" means, with respect to any Mining Area, an
area outside such Mining Area designated as a Project
Area and delineated in a feasibility study report for
Mining development by the Company as necessary or
desirable for the Processing facilities and other
infrastructure facilities related to such Mining
development, including any additions to any such area
required for Mining development or Processing.
<PAGE> -7-
27. "Rupiah" means the currency that constitutes legal tender
in Indonesia.
28. "SIPP" ( A Preliminary Survey License ) means the
license granted by the Department which allows the
applicants to the Contract of Work to carry out a
Preliminary Survey prior to the formal signing of the
Contract of Work. The "SIPP" license is awarded by the
Department upon written request by the applicants.
29. "Subsidiary" of any Person means any corporation
controlled by such Person through the direct or indirect
ownership of fifty percent or more of the issued shares
having power to vote or any partnership or joint venture
controlled by such Person.
30. "Waste" includes any matter whether liquid, solid,
gaseous or radioactive, which is discharged, emitted, or
deposited in the Environment in such volume, consistency
or manner as to cause a material and adverse alteration
of the Environment.
<PAGE> -8-
ARTICLE 2
APPOINTMENT AND RESPONSIBILITY OF THE COMPANY
1. The Company is hereby appointed the sole contractor for the
Government with respect to the Contract Area. In
particular, the Company shall be granted the sole rights to
Explore for Minerals in the Contract Area, to Mine any
deposit of Minerals found in the Mining Area, to Process,
store, and transport by any means certain Minerals
extracted therefrom, to market, sell or dispose of all the
Products of such Mining and Processing, inside and outside
Indonesia, and to perform all other operations and
activities which may be necessary or convenient in
connection therewith, with due observance of the
requirements of this Agreement. In consideration for the
grant of such rights, the Company shall perform the work
and carry out the obligations imposed on it by this
Agreement, including, without limitation, the obligation to
make expenditures as provided in paragraph 2 of Article 5,
in paragraph 5 of Article 6 and in paragraph 5 of Article
7, the obligation to pay taxes and other charges to the
Government as provided in Article 12 and 13 and the
obligation to adhere to the Mining standards described in
Article 10 and to the Environmental, safety and health
standards described in Article 26.
2. Notwithstanding paragraph 1 of this Article 2, the Company
shall not Mine any radioactive minerals, hydrocarbon
compounds, nickel, tin or coal without first obtaining the
approval of the Department, and industrial minerals without
first obtaining the approval of the Government.
3. The Company shall have the sole control and management of
all of the Company's activities under this Agreement and
the Company shall have full responsibility therefor and
shall assume all risk with respect thereto in accordance
with the terms and conditions of this Agreement. Without
in any way detracting from the Company's responsibilities
and obligations hereunder, the Company may engage
registered subcontractors, whether or not Affiliates of the
Company, for the execution
<PAGE> -9-
of such phases of its operation as the Company deems
appropriate, including contracting for construction of
facilities and for necessary technical, management and
administrative services. In the event that such services
are contracted from Affiliates, the charges therefor, to
the extent they affect any amounts payable to the
Government pursuant to the terms of this Agreement, shall
comply with the provisions of Article 13 and of Annex "H"
to this Agreement.
4. The Company shall take all reasonable measures to prevent
damage to the rights and property of the Government or
third parties. In the event of negligence on the part of
the Company or its agents or of any registered
subcontractor carrying on operations or activities for the
Company under this Agreement, the Company or such
registered subcontractor, as the case may be, shall be
liable for such negligence in accordance with the laws of
Indonesia.
<PAGE> -10-
ARTICLE 3
MODUS OPERANDI
1. The Company is incorporated under the laws of the Republic
of Indonesia and domiciled in Indonesia, and shall be
subject to the laws and the jurisdiction of courts in
Indonesia which normally have jurisdiction over
corporations doing business or incorporated therein. The
Company shall maintain in Jakarta a principal office for
receipt of any notification or other official or legal
communication.
2. The Company contemplates a program for the Enterprise,
divided into five periods:
i) the "General Survey Period";
ii) the "Exploration Period";
iii) the "Feasibility Studies Period";
iv) the "Construction Period"; and
v) the "Operating Period";,
as such terms are defined in this Agreement.
It is understood that different parts of the Contract Area
may be treated as separate projects which become subject to
different provisions of this Agreement at different times
because of the different periods of activities applicable
to the individual Exploration and Mining Areas.
3. The Company may contract for necessary technical,
management and administrative services, provided that it
shall not be released from any of its obligations
hereunder. In the event that such services are contracted
from Affiliates, such services shall be obtained only at a
charge not more than a non-affiliated party with equivalent
qualifications to perform such services would charge for
provision of such services to equivalent standards. All
such charges should be fair and reasonable and accounted
for in accordance with generally accepted accounting
principles consistently applied. The Company shall produce
on request by the Department evidence verifying all such
charges.
<PAGE> -11-
4. The Company undertakes to conduct all activities hereunder
in the manner and subject to the conditions of Article 2 of
this Agreement and to continue such activities, during the
General Survey, Exploration, Feasibility Study and
Construction Periods of this Agreement without suspension
or interruption of all of the Company's activities, subject
to Article 19 and Article 22, during the term of this
Agreement, provided that such activities may be interrupted
or suspended with the concurrence of the Department. Any
such suspension or interruption of all of the Company's
activities with the concurrence of the Department shall
extend the time periods otherwise applicable with respect
to any of the affected Periods specified in this Agreement.
If such interruption or suspension of all of the Company's
activities continues for more than 365 days and is due to
reasons other than force majeure as provided in Article 19
and the Department has not concurred regarding such
interruption or suspension, then the Government shall be
entitled to declare a default under Article 20. The
Company agrees to keep the Department informed of any
interruption or suspension. Any such interruption or
suspension shall not affect the mutual rights and
obligations of the Parties hereto under this Agreement.
<PAGE> -12-
ARTICLE 4
CONTRACT AREA
1. Contract Area is the area defined in Annex "A" to this
Agreement as changed by reductions and extensions as the
case may be in accordance with this Agreement, excluding
therefrom,
(i) Mining Authorizations granted by the Department
for Category "A" and "B" Minerals (as defined in
Annex "C"), and
(ii) Mining Authorizations granted by the Government
for Category "C" Minerals (as defined in Annex
"C"),
(iii) People Mining's right,
declared before the date of the letter of approval in
principle by the Department of the award of the Contract
Area, and as set forth in Annex "C" attached to and hereby
made part of this Agreement.
2. In the event that any areas covered by Mining Authorization
which were excluded from the Contract Area by the
definition thereof or which on the date of the letter of
approval in principle by the Department of the award of the
Contract Area had a common boundary with the Contract Area
lapse, are cancelled or are relinquished, or by any means
the area of such Authorizations becomes vacant, or any such
area otherwise becomes available, then the Company shall
have, upon application, the right of first refusal to have
such area included in the Contract Area, unless the
Government to grants People's Mining Rights on such area.
Any area so included shall fall into the earliest Period
which then applies to any part of the then existing
Contract Area.
3. The Company may, by written application to the Department,
relinquish all or any part of the Contract Area at any time
and from time to time during the term of this Agreement.
Any such application shall be submitted with a
relinquishment
<PAGE> -13-
report stating all technical and geological findings the
Company has made with respect to the relinquished areas and
the reasons for the relinquishment, supported by field data
of activities undertaken in those areas. All basic data
with respect to the relinquished areas shall be submitted
to the Department and become the property of the
Government. The Company through relinquishment (including
relinquishment pursuant to this paragraph, paragraph 5 of
Article 5 and paragraph 2 of Article 6), shall reduce the
Contract Area:
(i) on or before the end of the General Survey
Period, to not more than seventy-five percent
(75%) of the original Contract Area;
(ii) on or before the second anniversary of the end of
the General Survey Period, to not more than fifty
percent (50%) of the original Contract Area; and
(iii) on or before the end of the Exploration Period,
to not more than twenty-five percent (25%) of the
original Contract Area.
Except as provided in paragraph 5 of this Article 4, the
Company shall not be required by the terms of this
Agreement to relinquish more than 75% of the original
Contract Area. Any such relinquishment shall be without
prejudice to any obligation or liability imposed by or
incurred under this Agreement prior to the effective date
of such relinquishment.
4. The Company shall conduct work within the Contract Area
with the objective of delineating new deposits within the
Contract Area for development during the full term of this
Contract. The Company's development plans shall include
the intended capacity of each mining and processing
operation and any further evaluation work required as
provided in the Feasibility Study and other Exploration
activities.
<PAGE> -14-
5. If the Company has no future plan to conduct Exploration or
development activities with respect to an area within the
Contract Area, or to use such area in connection with other
development activities, or if the Company discovers a
deposit of a Mineral as to which it has no current or
contingent plans to develop (and such area may be used or
such deposit developed by other Persons in a manner which
does not interfere with the rights of the Company under
this Agreement or the activities of the Company permitted
hereby), then, if so required by the Government, the
Company shall relinquish such area or deposit, together
with all the basic geological, exploration, metallurgical
and other data related thereto.
<PAGE> -15-
ARTICLE 5
GENERAL SURVEY PERIOD
1. The Company shall commence, as soon as possible and not
later than six months after the signing of this Agreement,
a General Survey of the Contract Area to determine in what
parts of the Contract Area deposits of Minerals are most
likely to occur. The "General Survey Period" shall end on
that date which shall be 12 (twelve) months after such
commencement. The Department, upon request by the Company,
will grant an extension of 12 (twelve) months for the
General Survey Period for the purpose of completing the
activities to be carried out by it during such Period.
2. By the end of the General Survey Period, including the SIPP
Period, the Company shall have spent, with respect to the
Contract Area, not less than two million United States
Dollars (US$ 2,000,000.00) on field expenditure. Such
expenditures may include general organizational overhead
and administrative expenses directly connected with field
activities under this Agreement.
3. If at the expiration of eighteen months from the date of
the signing of this Agreement or any time there after, it
appears to the Department that the Company has seriously
neglected its obligations with respect to minimum
expenditures as provided in paragraph 2 of this Article,
the Department may require the Company to deliver to the
Department a guarantee to a sum which shall not exceed the
total outstanding expenditure obligations remaining
unfulfilled. Such guarantee in the form of a bond or a
Banker's Guarantee may at the end of the three year period
commencing on the date of the signing of this Agreement be
forfeited to the Government to the extent that the Company
shall have failed to fulfill such expenditure obligations.
Except to the extent of any such forfeiture, such guarantee
shall be released at the end of such three year period.
<PAGE> -16-
4. In connection with the Company's obligations under this
Article, the Company shall submit to the Department, within
two months after the end of the General Survey Period, a
report setting forth the items and amounts of expenditure
during such Period. The Company shall be prepared to
support such report with reasonable documentation of
expenditures should the Department so request.
5. The Company may at any time discontinue the General Survey
with respect to any part or parts of the Contract Area on
the grounds that the continuation of such General Survey is
no longer commercially feasible or practical and shall
apply in writing to the Department in accordance with
paragraph 3 of Article 4 for the relinquishment of such
part or parts of the Contract Area. The Contract Area
shall thereby be reduced to the area which remains after
such relinquishment.
6. If, at any time or times during the General Survey Period,
after the Company has discovered deposits of Minerals in
any part or parts of the Contract Area and has decided to
proceed into the Exploration Period with respect to one or
more of such deposits, it shall submit a written notice and
explanation to such effect to the Department and shall
establish one or more Exploration Areas with respect to
such deposit or deposits and begin the Exploration thereof
without affecting its rights and obligations under this
Agreement in respect of other portions of the Contract
Area.
<PAGE> -17-
ARTICLE 6
EXPLORATION PERIOD
1. Upon completion of the General Survey, the Company shall
commence the "Exploration Period". During the Exploration
Period, the Company shall carry out an Exploration program.
The Exploration program shall include, without limitation,
such detailed geology, geophysics and geochemistry and such
sampling, pitting, and drilling activities as the Company
considers appropriate.
2. The Company may at any time discontinue Exploration in any
Exploration Area on the grounds that the continuation of
such Exploration is no longer commercially feasible or
practical and shall apply in writing to the Department in
accordance with paragraph 3 of Article 4 for the
relinquishment of such Exploration Area from the Contract
Area. The Contract Area shall thereby be reduced to the
area which remains after such relinquishment.
3. If at any time prior to the end of the Exploration Period
the Company discovers one or more deposits of Minerals of
apparent commercial grade and quantity in any Exploration
Area and decides to proceed with further evaluation
thereof, it shall submit a written notice to such effect to
the Department and enter into the Feasibility Studies
Period with respect to such Exploration Area without
affecting its rights and obligations under this Agreement
in respect of the balance of the Contract Area.
Accordingly, the Exploration Period:
(i) shall commence immediately following the end of
the General Survey Period; and
(ii) shall end 36 (thirty-six) months thereafter;
provided that, with respect to any Exploration
Area, it shall end at such earlier date as the
Feasibility Studies Period shall have begun with
respect to such Exploration Area; and
<PAGE> -18-
(iii) The Department upon request by the Company, will
twice grant an extension of 12 (twelve) months
each for the Exploration Period, subject to the
Company's performing its obligations
satisfactorily in accordance with this Agreement.
4. Prior to the end of the Exploration Period, the Company
shall give notice to the Department stating whether or not
the Company desires to proceed into the Feasibility Study
Period with respect to any Exploration Area. Should the
Company give notice to the Department that it does not wish
to proceed into the Feasibility Studies Period with respect
to any Exploration Area, such notice shall constitute an
application in writing to the Department in accordance with
paragraph 3 of Article 4 for the relinquishment of such
Exploration Area from the Contract Area. In such a case,
the Company shall turn over to the Department:
(i) maps indicating all places in such Exploration
Area in which the Company shall have drilled
holes or sunk pits,
(ii) copies of logs of such drill holes and pits and
of assay results with respect to any analyzed
samples recovered therefrom, and
(iii) copies of any geological or geophysical and
geochemical maps of the Exploration Area which
shall have been prepared by the Company.
Any such relinquishment shall be without prejudice to any
obligation or liability imposed by or incurred under this
Agreement prior to the effective date of such
relinquishment.
5. During the Exploration Period, the Company shall spend not
less than six million United States Dollars (US$
6,000,000.00) on further Exploration activities with
respect to the Contract Area. Any expenditure incurred by
the Company during the General Survey Period (including the
SIPP Period) which is greater than the minimum amount
required pursuant to paragraph 2 of Article 5 shall be
credited against and reduce the
<PAGE> -19-
minimum amount which the Company is required to spend
during the Exploration Period. Such expenses may include
general organizational overhead and administrative expenses
directly connected with field activities under this
Agreement. If at the expiration of 24 (twenty-four) months
from the date of the commencement of the Exploration Period
or any time thereafter, it appears to the Department that
the Company has seriously neglected its obligation with
respect to minimum expenditures as provided in this
paragraph, the Department may require the Company to
deliver to the Department a guarantee in the form of a bond
or a banker's guarantee to a sum which shall not exceed the
total outstanding expenditure obligations remaining
unfulfilled. Such guarantee may, at the end of the
Exploration Period, be forfeited to the Government to the
extent that the Company shall have failed to fulfill such
expenditure obligations. Except to the extent of any such
forfeiture, such guarantee shall be released at the end of
the Exploration Period.
<PAGE> -20-
ARTICLE 7
REPORTS AND SECURITY DEPOSIT
1. The Company shall keep the Government informed through the
Department by submitting quarterly progress reports on the
Enterprise and other related activities subject to this
Agreement. The quarterly progress reports shall include
comprehensive data on General Survey, Exploration,
Employment and Expenditures. These progress reports shall
be submitted within 30 (thirty) days after the end of each
calendar quarter plus any part of a calendar quarter that
remains following the date of signing of this Agreement,
and be in such form as the Department may from time to time
prescribe. These quarterly progress reports relating to
Exploration activities shall include:
(i) the results of geological and geophysical
investigation and proving of deposits of Minerals
in the Contract Area and the sampling of such
deposits;
(ii) the results of any general reconnaissance of the
various sites of proposed operations and
activities under this Agreement;
(iii) information concerning the selection of routes
from any Mining Area to a suitable harbor for the
export of Product;
(iv) information concerning the planning of suitable
permanent settlements, including information on
suitable water supplies for permanent settlements
and other facilities;
(v) such other plans and information as to the
progress of the Company's activities in the
Contract Area as the Department may from time to
time require;
<PAGE> -21-
(vi) statements of expenditures during the General
Survey, Exploration, Feasibility Studies, and
Construction Periods; and
(vii) lists of employment and training conducted.
2. Within one year after the beginning of the Feasibility
Studies Period with respect to any Exploration Area, the
Company will also file with the Department a summary of its
geological and metallurgical investigations and all
geological, geophysical, topographic and hydrographic data
obtained from the General Survey and Exploration and a
sample representative of each principal type of
Mineralization encountered in its investigations of such
Exploration Area.
3. No later than the eighth anniversary of the date of the
signing of this Agreement, the Company shall submit to
Department a general geological map of the whole Contract
Area (as then constituted) on the scale of 1:250,000 with
attendant reports based on the Company's geological
observations; such geological map need only contain the
observations of rock types and their distribution and
structure which have been made by the Company during the
General Survey and Exploration Periods.
4. On or before the delivery of the geological map referred to
in paragraph 3 of this Article, the Company shall also
submit to the Department :
(i) maps indicating all places in the Contract Area
in which the Company shall have drilled holes or
sunk pits,
(ii) copies of logs of such drill holes and pits and
of assay results with respect to any analyzed
samples recovered therefrom ,
(iii) copies of any geophysical maps of the Contract
Area which shall have been prepared by the
Company, and
<PAGE> -22-
(iv) all other information directly relevant to the
Company's Exploration activities under this
Agreement which the Department may reasonably
request and which is, or with the exercise of
reasonable efforts by the Company would be,
within the Company's control in order to appraise
the Company's investigation activities under this
Agreement.
5. The Company shall within 30 (thirty) days after the date of
signing of this Agreement establish for the benefit of the
Government in a bank in Indonesia approved by the
Department an interest-bearing escrow account in the amount
of three hundred thousand United States Dollars (US $
300,000.00) less any amount already deposited on the
granting of SIPP, plus a Banker's Guarantee in the amount
of seven hundred thousand United States Dollars (US $
700,000.00), is hereinafter called the "Security Deposit".
The Security Deposit shall be released by the Government as
to 50% (fifty percent) thereof after:
(i) the expiration of the General Survey Period;
(ii) the submission as specified in paragraph 1 of
this Article of four consecutive quarterly
progress reports to the Department or where the
General Survey Period is completed in less than
one year, quarterly reports covering such lesser
period, provided that where the General Survey
Period has been agreed to have commenced prior to
the date of signing of this Agreement, report(s)
covering this earlier period shall count towards
satisfaction of this obligation ; and
(iii) either:
(a) satisfactory performance (according to the
Minister's judgment) for such General Survey
Period, or
<PAGE> -23-
(b) the expenditure by the Company in such
General Survey Period of five hundred
thousand United States Dollars (US$
500,000.00) on the Contract Area.
The remaining fifty percent (50%) of this Security Deposit
will be released by the Government when the geological map
referred to in paragraph 3 of this Article has been
submitted to and approved by the Department which approval
the Department shall not unreasonably withhold or delay.
In the event that the Company does not satisfy the above
mentioned requirement within eight (8) years after the date
of signing of this Agreement, the balance of the said
Security Deposit shall automatically be forwarded to the
Government Treasury and the Company shall have no further
claim thereon. Interest on the Security Deposit shall
accrue for the benefit of the Company.
6. Except as otherwise provided in this paragraph 6, the
Government has title to all data and reports submitted by
the Company to the Department or the Government pursuant to
the provisions of this Agreement. Such data and reports
will be treated as strictly confidential by the Government
to the extent that the Company shall so request; provided,
however, that data belonging to the public domain (because
of having been published in generally accessible literature
or of its mainly scientific rather than commercial value,
such as geological and geophysical data) and data which has
been published pursuant to laws and regulations of
Indonesia or of a foreign country in which a shareholder
may be domiciled (such as the yearly report of public
bodies or companies) shall not be subject to the foregoing
restrictions; provided further that the term "data" as used
in this paragraph shall include (without limitation) any
and all documents, maps, plans, worksheets and other
technical data and information, as well as data and
information concerning financial and commercial matters.
In respect of data relating solely to the areas
relinquished by the Company from the Contract Area pursuant
to Article 4, the foregoing restrictions shall cease to
apply as from the
<PAGE> -24-
date of relinquishment of such areas. In addition, where
this Agreement has been terminated pursuant to Article 20
or Article 22, the foregoing restrictions shall cease to
apply.
Notwithstanding the foregoing, exclusive know-how of the
Company, its registered subcontractors or Affiliates
contained in data or reports submitted by the Company to
the Department or the Government pursuant to the provisions
of this Agreement and which shall have been identified as
such by the Company, shall only be used by the Government
in relation to the administration of this Agreement and
shall not be disclosed by the Government to third parties
without the prior written consent of the Company. Such
exclusive know-how, as long as it remains exclusive
know-how of the Company, its registered subcontractors or
Affiliates as the case may be, remains the sole property of
the Company, its registered subcontractors or Affiliates as
the case may be. The provisions of this paragraph shall
survive the termination of this Agreement in accordance
with laws and regulations from time to time in effect
relating to intellectual property. If any such exclusive
know-how is not patentable in accordance with such laws,
the Company may request the Government not to disclose such
know-how for a period of not less than 3 (three) years
after termination of this Agreement.
<PAGE> -25-
ARTICLE 8
FEASIBILITY STUDIES PERIOD
1. The Feasibility Studies Period with respect to any
Exploration Area shall commence on the date the Company
submits a written request to the Department as provided in
paragraph 3 of Article 6 with respect to such Exploration
Area and shall end upon the commencement of the
Construction Period with respect to such Exploration Area
as hereinafter provided.
2. As soon as the Feasibility Studies Period has begun with
respect to any Exploration Area, the Company shall commence
studies to determine the feasibility of commercially
developing the deposit or the deposits of minerals within
such Exploration Area. The Company will be allowed a period
of 12 (twelve) months to complete such studies and to
select and delineate and determine the size of 1 (one) or
more Mining Areas. Each such Mining Area shall include at
least 1 (one) deposit with respect to which the Company
plans to commence construction and Mining operations. The
Government may for one of the reasons specified in
paragraph 2 of Article 16, object to the area proposed as
a Mining Area within three (3) months of the Company's
designation of such Mining Area. The Government and the
Company agree to consult in good faith in an attempt to
overcome any such objections. If after a period of three
(3) months from the date of notification of such objection
by the Government, there has been no resolution of the
matter, then either party may proceed to resolve the matter
in accordance with Article 21 paragraph 1. In the event
that the objection by the Government to any area designed
by the Company as a Mining Area is upheld, and thereafter
during the term of this Agreement it is determined that
Mining is permissible within such area, the Company shall
have the right to carry on such Mining in preference to any
other Person.
After the completion of such Feasibility Studies with
respect to a proposed Mining Area, the Company shall submit
a Feasibility Study Report in the form set out in Annex
"E",
<PAGE> -26-
which shall contain calculations and reasons for the
technical and economical feasibility of conducting Mining
operations within such proposed Mining Area supported by
data, as specified in Annex "E", calculations, drawings,
maps and other relevant information leading toward the
decision whether or not to proceed with such Mining
operations. The Feasibility Study Report with respect to
any proposed Mining Area shall include the then intended
capacity of each proposed Mining and Processing operation
within such Mining Area and any further evaluation work or
further Exploration then deemed to be required.
If the Company considers that the data required and other
necessary matters are not sufficiently available to come to
a final decision within the initial Feasibility Studies
Period with respect to any Exploration Area or if the
Department raises objections to any proposed Mining Area as
set out above, the Company may seek the approval of the
Department to the extension for twelve months of such
Feasibility Studies Period, provided that such request for
extension of the Feasibility Studies Period is submitted to
the Department no later than the eighth anniversary of the
date of the signing of this Agreement.
3. At any time during the Feasibility Studies Period with
respect to any proposed Mining Area, the Company may submit
a written application to the Department that it desires to
proceed with the construction of a Mine within such
proposed Mining Area and facilities to be used by the
Company in its operation.
Upon approval of that application, the Company shall
commence and, with reasonable diligence, execute to
completion the design of the Mine and related facilities
and, subject to completion of the design of the Mine and
related facilities, shall submit supply the same for the
approval of the Department together with an estimate of
the cost of such Mine and related facilities and a time
schedule for the construction thereof which time schedule
shall, to the extent economically and practically feasible,
provide for completing the construction of such Mine and
related facilities within thirty-six (36) months after the
approval of the designs and
<PAGE> -27-
time schedule for construction of such Mine and related
facilities. Within three (3) months after submission of
the design and time schedule, the Department shall notify
the Company of its approval (which will not be unreasonably
withheld) or disapproval thereof, for one of the reasons
specified in paragraph 2 of Article 16. In the event of
disapproval, the Company shall be notified by the
Department of the cause for disapproval and the Department
and the Company shall consult in a good faith to attempt to
remove the cause for such disapproval. If, after a period
of three (3) months from the notification of such
disapproval, there has been no resolution of the matter
then either party may proceed to resolve the matter in
accordance with Article 21 paragraph 1.
4. The Feasibility Study Report as described in Annex "E" with
respect to a proposed Mining Area shall include
Environmental impact studies into the effects of the
operation of the Enterprise on the Environment and shall be
prepared in accordance with the terms of reference set out
in Article 26. Such studies shall be carried out in
consultation with appropriately qualified independent
consultants retained by the Company and approved by the
Government, which approval will not be unreasonably
withheld.
5. The Company shall collaborate with and keep the Department
informed by regular reports as to the progress and results
of and costs incurred in respect of the investigations and
studies and shall as and when the Department may reasonably
require furnish the Department with the investigations and
studies referred to in paragraph 4 above and with copies of
all relevant findings made and reports prepared by the
Company.
6. The Company shall, at the completion of all the
investigations and studies, submit to the Department a
final report stating the results of and the costs incurred
in respect of the investigations and studies and the
Company's analysis of and its conclusions and projections
in respect of those results, and such other information
relating to the Enterprise or the
<PAGE> -28-
Mining Area which is in the possession of the Company and
which the Department may reasonably request.
7. Subject to the provisions of paragraph 6 of Article 7, all
reports and information supplied to the Government under
this Article shall be treated as confidential, with the
exception of those required for use by the Government for
the national interest, provided that (and subject as
aforesaid), if this Agreement is terminated pursuant to
Article 22 hereof, the reports and information shall become
the property of the Government and may be used by the
Government in such manner as it thinks fit.
<PAGE> -29-
ARTICLE 9
CONSTRUCTION PERIOD
1. Following receipt from the Department of approval with
respect to the design and time schedule provided for in
paragraph 3 Article 8 with respect to any Mining Area, the
Company shall, in accordance with such time schedule,
commence construction of the Mine and related facilities
and use its best efforts, subject to the provisions of
Article 19, to execute the same to completion in accordance
with the time schedule referred to in the said paragraph 3.
If such time schedule proves unworkable, the Company may
submit to the Department a revised time schedule for the
Department's approval.
2. The facilities to be constructed during the Construction
Period with respect to any Mining Area may include such of
the following as are appropriate:
(i) Mining facilities and equipment;
(ii) facilities and equipment to treat and beneficiate
the Mineral ore coming from the Mine so as to
produce saleable Products;
(iii) port facilities, which may include docks,
harbors, piers, jetties, dredges, breakwaters,
terminal facilities, workshops, storage areas,
warehouses and loading and unloading equipment;
(iv) transportation and communication facilities,
which may include roads, bridges, vessels,
ferries, airports, landing strips and landing
pads for aircraft, hangars, garages, canals,
aerial tramways, pipelines, pumping stations,
radio and telecommunications facilities,
telegraph and telephone facilities and lines;
<PAGE> -30-
(v) townsites, which may include dwellings, stores,
schools, hospitals, theaters and other buildings,
facilities and equipment for personnel of the
Enterprise, including dependents of such
personnel;
(vi) power, water and sewage facilities, which may
include power plants (which may be hydroelectric,
steam, gas or diesel), power lines, dams,
watercourses, drains, water supply systems and
systems for disposing of tailings, plant wastes
and sewage;
(vii) miscellaneous facilities, which may include
machine shops, foundries and repair shops; and
(viii) all such additional or other facilities, plant
and equipment as the Company may consider
necessary or convenient for the operations of the
Enterprise related to such new Mining Area or for
providing services or carrying on activities
ancillary or incidental thereto.
<PAGE> -31-
ARTICLE 10
OPERATING PERIOD
1. Upon completion of the construction of the Mine and related
facilities provided for in Article 9 with respect to any
Mining Area , the Company shall commence operation of such
Mining Area for which such facilities have been
constructed.
2. The Company shall conduct Mining operations and any
activity of the Enterprise with respect to a Mining Area,
for the duration of the Operating Period of such Mining
Area. The Operating Period for such Mining Area shall be
deemed to commence on the first day of the calendar month
following the first calendar month during which the average
daily throughput is at least seventy percent (70%) of the
design capacity of the facilities constructed for the
purpose of Mining the deposit or deposits in such Mining
Area, but not later than the date falling six (6) months
after the date of completion of such facilities. The
Operating Period for each Mining Area shall continue for 30
(thirty) years beginning at the commencement of the
Operating Period for the first Mining operation, or such
longer period as the Department, on the written application
of the Company, may approve. The commencement of the
Operating Period shall not occur more than eight (8) years
(or such longer period as may result from extensions
granted by the Department for the completion of succeeding
stages under this Agreement) from the commencement of the
General Survey Period allowed for the whole Contract Area.
3. The Company shall process ore to produce a marketable
concentrate. The Company will work towards and assist the
Government in achieving the policy of the establishment of
downstream metals processing facilities in Indonesia in
relation to smelting, refining and/or associated processing
if, according to recognized economic, technical and
scientific standards, the Minerals to be mined by the
Company are of sufficient tonnages and are Minerals
amenable to smelting, refining or associated processing,
and provided it is
<PAGE> -32-
economically and practically feasible to do so. If and
when any such processing facilities (other than a copper
processing facility) are constructed, the Parties agree to
discuss thereafter and consider, in good faith, the
feasibility of subsequent additional processing facilities
which may be in the form of increases in the capacity of
the existing facilities or the establishment of facilities
previously not in existence.
In the event that there is no copper smelter operating or
under construction in Indonesia on or before the fifth
anniversary of the date that the first Mining Area under
this Agreement has entered the Operating Period, then the
Company shall prepare or cause to be prepared a feasibility
study with respect to a possible copper smelter in
Indonesia. The feasibility study so prepared shall be
subject to the Government's review and to a mutual
determination by the Government and the Company as to the
economic viability of such a smelter. Such smelter would
be located at such place within Indonesia as would be most
advantageous to its economic viability. Should such a
smelter be built by the Company or a wholly-owned
Subsidiary, it would constitute a part of the Enterprise
hereunder.
4. The Company shall submit to the Department copies of
studies relating to the feasibility of establishing those
facilities (as described in paragraph 3 of this Article) in
Indonesia prepared by the Company in consultation with an
agency acceptable to the Government.
5. The Company acknowledges the Government's policy to
encourage the domestic processing of all of its natural
resources into final products where feasible. The Company
further acknowledges the Government's desire that a copper
smelter and refinery be established in Indonesia and agrees
that it will make available copper concentrates derived
from the Contract Area for such smelter and refinery so
established in Indonesia as provided below.
During any period during which Processing and refining
facilities have not been established in Indonesia by or on
<PAGE> -33-
behalf of the Company, or any wholly-owned Subsidiary, but
have been established in Indonesia by any other Person, the
Company shall, if it is then producing Products from the
Contract Area and if it is requested to do so by the
Department, sell such Products to such other Person at
prices and terms no less favorable to such Person than
those that could be obtained by the Company from other
purchasers of the same quantity and quality and at the same
time and the same or equivalent places and times of
delivery, provided that the respective contractual terms
and conditions given by the Company to such other Person
shall be no less favorable to the Company.
With respect to the first copper smelter established in
Indonesia by anyone other than the Company or a wholly-
owned Subsidiary of the Company, the quantity of copper
concentrates derived from the Contract Area which the
Company shall make available on the terms set out above
shall be a portion (such portion to be determined by
prorating the quantity of copper concentrates produced by
the Company to the total quantity of copper concentrates
produced in Indonesia) of the quantity of copper
concentrates necessary to satisfy the domestic demand in
Indonesia for refined copper and to permit economic scale
of such project assuming that such project is otherwise
feasible, and further subject to the limitation that the
quantity required shall not be so great as to jeopardize
the sound financial, operating or marketing requirements of
the Company. In making sales to a copper smelter or
refining facility in Indonesia, the Company will not be
treated more adversely, from the standpoint of Governmental
laws and regulations, than if it had sold such Mined
Products as export goods. The obligation of the Company to
sell its Products to another Person pursuant to this
paragraph 5 is subject to any financing agreements, sales
contracts or any smelting and refining contracts entered
into by the Company prior to the establishment of such
facilities by such other Person or any financing agreements
entered into pursuant to paragraph 2 of Article 30.
In the event that during the five year period following the
fifth anniversary of the date that the first Mining Area in
<PAGE> -34-
the Contract Area has entered the Operating Period, a
copper smelter and refinery facility to be located in
Indonesia has not been established or is not in the process
of being constructed by any Person, then, subject to the
mutual determination by the Government and the Company as
to the economic viability of such smelter and refinery, the
Company shall undertake or cause to be undertaken the
establishment of a copper smelter and refinery in Indonesia
to comply with the policy of the Government.
6. The Company is, subject to the rights of third parties,
hereby granted all necessary licenses and permits to
construct and operate the facilities contemplated by this
Agreement in accordance with laws and regulations and such
reasonable safety regulations relating to design,
construction and operation as may from time to time be in
force and of general applicability in Indonesia.
7. The Company shall submit to the Department the following
Reports as to operations within each Mining Area :
(i) a biweekly statistical report beginning with the
first two weeks following the commencement of the
Operating Period, which shall set forth the
amount of material Mined, Processed and exported;
(ii) a monthly report beginning with the first month
following the commencement of the Operating
Period, which shall set forth the number and
describe the location of the active operations
during the preceding month and a brief
description of the work in progress at the end of
the month and of the work contemplated during the
following month.
(iii) a quarterly report beginning with the first
quarter following the commencement of the
Operating Period with respect to each Mining Area
concerning the progress of its operations in such
Mining Area, which report shall describe in
reasonable detail the Mining activities carried
on in such Mining
<PAGE> -35-
Area, including the number of workmen employed in
such Mining Area as of the end of the quarter in
question and a description of the work in
progress at the end of the quarter in question
and of work contemplated during the following
quarter; and
(iv) an annual report beginning with the first
complete year following the commencement of the
Operating Period with respect to each Mining Area
which shall include:
(a) a description in reasonable detail of
the Mining activities carried on in
such Mining Area;
(b) the total volume of ores, kind-by-kind,
broken down into volumes Mined, volumes
transported from the Mines and their
corresponding destination, volumes
stockpiled at the Mines or elsewhere in
Indonesia, volumes sold or committed
for export (whether actually shipped
from Indonesia or not), volumes
actually shipped from Indonesia (with
full details as to purchaser,
destination and terms of sale); and
(c) work accomplished and work in progress
at the end of the year in question with
respect to all of the installations and
facilities related to such Mining Area,
together with a full description of all
work programmed for the ensuing year
with respect to such installations and
facilities, including a detailed report
of all investment actually made or
committed during the year in question
and all investment committed for the
ensuing year or years.
<PAGE> -36-
(v) the Company shall also furnish the
Department all other information related to
the Company's activities under this
Agreement of whatever kind and which is or
could, by the exercise of reasonable efforts
by the Company, have been within the control
of the Company which the Department may
request in order that the Department may be
fully appraised of the Company's activities.
Biweekly reports shall be submitted in eightfold within two
weeks after the end of the two week period in question.
Monthly and quarterly reports shall be submitted in
eightfold within thirty (30) days of the end of the month
or quarter in question. Annual reports shall be submitted
in eightfold within ninety (90) days of the end of the year
in question.
8. The Company shall be in full and effective control and
management of all matters relating to the operation of the
Enterprise including the production and marketing of its
Products. The Company may make expansions, modifications,
improvements and replacements of the Enterprise's
facilities, and may add additional new facilities, as the
Company shall consider necessary for the operation of the
Enterprise or for the provision of services or activities
ancillary or incidental to the Enterprise. All such
expansions, modifications, improvements, replacements and
new additional facilities shall be considered part of the
project facilities.
9. The Company accepts the rights and obligations to conduct
operations and activities in accordance with the terms of
this Agreement. The Company shall conduct all such
operations and activities in a good technical manner in
accordance with such good and acceptable international
Mining engineering standards and practices as are
economically and technically feasible, and in accordance
with the modern and accepted scientific and technical
principles. In accordance with such standards, the Company
undertakes to use its best efforts to optimize the Mining
recovery of ore from proven reserves and metallurgical
recovery of Minerals from the ore to the extent it is
economically and technically feasible to do so, using
<PAGE> -37-
appropriate modern and effective techniques, materials and
methods designed to achieve minimum wastage and maximum
safety as provided in the applicable laws and regulations
of Indonesia from time to time in effect. The Company
shall use its best efforts to conduct all operations and
activities under this Agreement so as to minimize loss of
natural resources, and to protect natural resources against
unnecessary damage.
10. The Government will authorize the Company to freely select
the vessels and other transportation facilities to be used
in connection with imports and exports of articles under
this Agreement. In addition, the Company shall have the
right at all times to purchase from vendors of its choice
all equipment, materials and supplies necessary for the
operations of the Company hereunder, and to enter into
arrangements to make use of any facilities belonging to
other Persons(whether or not Affiliates of the Company)
upon such terms and subject to such conditions, including
terms of payment, as to ownership and otherwise, as it
deems appropriate; provided that the Department shall have
the right to object to specific vendors or specific
arrangements on the basis of national security or foreign
policy concerns of the Government. In any case where the
Government is the sole economic source of supply for any
article or commodity necessary for the Enterprise, adequate
supplies of such article or commodity shall be made
available for sale to the Company at prices not greater
than the fair market value thereof.
<PAGE> -38-
ARTICLE 11
M A R K E T I N G
1. The Company shall have the right to export the Products
obtained from its operations under this Agreement, subject
to the obligations set forth in paragraph 5 of Article 10.
Any such export shall be on such credit terms as the
Company deems appropriate for marketing its Products, and
neither the Company nor any of the purchasers of such
Products shall be required by the Government to obtain
letters of credit or other credit documents at any bank or
other institutions in Indonesia or elsewhere in connection
with marketing such Products, or otherwise. Without in any
way limiting the Company's basic right to export its
Products, such export will be subject to the reporting and
other non-monetary provisions of the export laws and
regulations of Indonesia from time to time in effect and to
the provisions of paragraph 2 of this Article. Subject to
any pre-existing contracts for the sale of Products to
others, and the obligation to make available concentrates
in order to satisfy the Company's obligations under
paragraph 5 of Article 10, the Company shall give priority
to satisfying domestic Indonesian requirements for use of
its Products in Indonesia. Sales to Indonesian customers
will be on terms and at prices which are competitive with
those provided to non-Indonesian customers.
2. The Company shall sell the Products in accordance with
generally accepted international business practices, and
use its best efforts to do so at prices and on terms of
sale which will maximize the economic return from the
operations hereunder, giving effect to world market
conditions and other circumstances prevailing at the time
of sale or contract; provided that the Government shall
have the right, on a basis which is of general
applicability and non-discriminatory as to the Company, to
prohibit the sale or export of Minerals or Products if such
sale or export would be contrary to the international
obligations of the Government or to external political
considerations affecting the national interest of
Indonesia. In the event of such prohibition (other than a
<PAGE> -39-
quota requirement imposed pursuant to an International
Commodity Marketing Agreement), if the Company is unable to
find alternative markets on equivalent terms and
conditions, the Company shall be given assistance and
cooperation by the Government to overcome the possible
consequences of such prohibition.
3. To the extent deemed necessary by the Company to secure
financing for the Enterprise hereunder or to comply with
its obligations to the lenders thereunder, however, the
Company shall have the right , subject to paragraph 2 of
this Article 11, to enter into long-term contracts for the
sale of its Products hereunder subject to the obligations
set forth in paragraph 5 of Article 10 and in paragraph 1
of this Article 11.
4. In the event that sales are made or contracted to be made
to Affiliates, the prices to be paid therefor, to the
extent they affect any amounts payable to the Government
pursuant to the terms of this Agreement, shall comply with
the provisions of Article 13 and, to the extent applicable,
of Annex "H" to this Agreement. The Company shall submit
to the Government any proposed contract of sale to an
Affiliate for approval as complying with the foregoing
provisions. If it does so, and the Government approves
the contract, the contract shall be deemed for purposes
hereof to comply with the foregoing provisions. In any
event sales commitments with Affiliates shall be made only
at prices based on or equivalent to arm's length sales and
in accordance with such terms and conditions at which such
agreement would be made if the parties had not been
Affiliates, with due allowance for normal selling discounts
or commissions. Such discounts or commissions allowed the
Affiliates must be no greater than the prevailing rates so
that such discounts or commissions will not reduce the net
proceeds of sales to the Company below those which it would
have received if the parties had not been Affiliates. No
selling discounts or commissions shall be allowed an
Affiliate in respect of sales for consumption by it.
Within ninety days after the end of each calendar year, the
Company will deliver to the Department a report describing
in such reasonable detail as the Department may reasonably
request all
<PAGE> -40-
sales contracts entered into during the preceding
calendar year with Affiliates in accordance with the
provisions of this paragraph 4.
5. If the Government believes that any figures related to
sales to Affiliates and used in computing any amounts
payable to the Government hereunder are not in
accordance with the provisions of paragraph 4 of this
Article (or, if such sales were pursuant to a contract,
theretofore approved pursuant to the provisions of such
paragraph 4, are not in accordance with such contract),
the Government may within twenty - four months after the
calendar quarter in which such Products were sold, but
not thereafter, so advise the Company in writing. The
Company shall submit evidence of the correctness of the
figures within forty-five days after receipt of such
advice. Within forty-five days after receipt of such
evidence, the Department may give notice to the Company
in writing that it is still not satisfied with the
correctness of the figures and, within ten days after
receipt of such notice by the Company, a Committee,
consisting of one representative of and appointed by the
Government and one representative of and appointed
by the Company, shall be constituted to review the
issue. The Committee shall meet as soon as
convenient at a mutually agreeable place in Indonesia and
if the members of the Committee do not reach agreement
within twenty days after their appointment or such
longer period as the Government and the Company mutually
agree, the representatives shall appoint a third
member of the Committee, who shall be a person of
international standing in jurisprudence and shall be
familiar with the international Mineral industry. The
Committee, after reviewing all the evidence, shall
determine whether the figures used by the Company or any
other figures are in accordance with paragraph 4 of this
Article (or an approved contract, as the case may be).
The decision of two members of the Committee shall be
binding upon the Parties. Failure of two
representatives to appoint a third member of the Committee
shall require the issue to be submitted to arbitration
pursuant to this paragraph, appropriate retroactive
adjustment shall be made in conformity with the
Committee's decision. The Company and the Government
each shall pay the expenses of
<PAGE> -41-
its own member on the Committee and one half of all other
expenses of the Committee's proceedings.
6. In the event that the Company produces a concentrate
containing any Precious Metals which are easily
recoverable, the Company shall, if it is economically
feasible, make maximum efforts to recover such Precious
Metals.
7. In the event of a sale of copper concentrates, gold or
silver to an Affiliate or to the domestic market or to the
Government's designated agency, it is understood that,
unless otherwise agreed by the Parties, the price of such
Products shall be determined on the basis of a formula
price which is generally used in the sale of comparable
products among unrelated parties.
8. If at any stage in the course of its marketing arrangement,
the Company refines, or takes delivery of gold or silver
refined from its Products, then such gold and silver will
be in a form and bear marks which will make it acceptable
in the international precious metals markets. For gold,
this means the London Gold Market; for silver this means
the London Silver Market.
<PAGE> -42-
ARTICLE 12
IMPORT AND RE-EXPORT FACILITIES
1. The Company may import into Indonesia capital goods,
equipment (including but not limited to laboratory and
computer equipment located outside its field operations),
machinery (including spare parts), vehicles (except for
sedan cars and station wagons), aircraft, vessels, other
means of transport, supplies, safety equipment, explosives
(in accordance with prevailing laws and regulations), raw
materials, and chemicals being items needed for use in the
Mining, Exploration, Feasibility Study, construction,
production and supporting technical activities of the
Enterprise. All such imports (excluding foodstuffs,
wearing apparel and other vital necessities for the
personal needs of the Company's employees and their
dependents) shall be exempt from import duties and obtain
full relief from and postponement of payment of value added
tax (VAT) (excluding VAT on spare parts) payable in
accordance with the prevailing laws and regulations for the
duration of the period commencing as from the date of
signing of this Agreement up to and including the tenth
year of the Operating Period. For any equipment directly
used to support its technical operations, such as
laboratory and computer equipment located outside its field
operations, the tax exemptions or tax reliefs shall be the
same as above. In case the Company is operating more than
one Mining Area, this tenth year of the Operating Period
shall be computed from the date of the commencement of
operation of the first Mining Area.
2. The provisions of this Article shall also be applicable to
Persons engaged as registered subcontractors of the Company
to carry on work or perform services with respect to the
Enterprise.
3. The exemption from import duties and relief from and
postponement of value added tax (VAT) as referred to in
paragraph 1 of this Article shall apply only to the extent
that the imported goods are not produced or manufactured in
Indonesia or that locally produced or manufactured products
<PAGE> -43-
are not available on a competitive time, cost and quality
basis without duty or tax, provided that for the purpose of
comparing the costs of imports and the cost of goods
manufactured or produced in Indonesia a premium (not in
excess of twelve and one-half percent) shall be applied to
the cost of imports.
4. Any equipment and materials (which must be clearly
identified) imported by the Company or registered
subcontractor(s) of the Company for the exclusive purpose
of providing services to the Company and intended to be
re-exported will be exempted from import duties, value
added tax and other levies. If such equipment and
materials shall not have been re-exported by the time for
re-export (as established at the time of import), the
Company or the registered subcontractor(s) of the Company,
as the case may be, shall, unless extended or exempted for
reasons acceptable to the Government, pay import duties,
value added tax and other levies not paid upon entry in
accordance with then existing law. The Company shall be
responsible for proper implementation of its registered
subcontractor(s) obligations under this Article.
5. Any item imported by the Company or its registered sub-
contractor(s) pursuant to this Article which is no longer
needed for the Exploration, Mining and Processing
activities of the Company may be sold outside Indonesia and
re-exported free from export taxes and other customs duties
(excluding income tax/capital gains tax) and value added
tax after compliance with laws and regulations which shall
at the time of such sale be in force and of general
application in Indonesia. No imported item shall be sold
domestically or used otherwise than in connection with the
Enterprise except after compliance with import laws and
regulations which are at the time of such import in force
and of general application in Indonesia.
6. In view of the fact that goods and services will have to be
imported from abroad and that various parts of the Contract
Area are remote, for all practical purposes, from presently
existing seaports and other ports of entry for customs
purposes, the Government will consider establishing such
<PAGE> -44-
seaport or port of entry and the requisite customs office
thereat as the Company shall reasonably request from time
to time; in consideration thereof, each such customs office
so established at the request of the Company shall be
furnished and maintained by the Company at its expense and
according to the existing rules and regulations.
7. During the period within which the Company is allowed to
import free from duties and value added tax, the Company
shall submit to the Department, not later than November 15
of each year, a list of equipment and material to be
imported during the next calendar year to enable the
Department to review and to approve the various items to be
imported for the Enterprise. Notwithstanding the
foregoing, the Company may request (stating the cause) the
Department to amend the list of equipment and material as
required during the year.
8. Personal effects (including household and living equipment
and goods) belonging to a Covered Employee who is an
Expatriate shall be freely exportable and shall be exempt
from import or re-export licenses, fees and duties, in
accordance with prevailing laws and regulations.
9. Except as otherwise specifically provided in this Article,
the Company shall duly observe import restrictions and
prohibitions and rules and procedures of general
application.
<PAGE> -45-
ARTICLE 13
TAXES AND OTHER FINANCIAL OBLIGATIONS OF THE COMPANY
Subject to the terms of this Agreement, the Company shall pay to
the Government and fulfill its tax liabilities, including its
obligation as tax collector, as hereinafter provided:
(i) Deadrent in respect of the Contract Area or the Mining
Area;
(ii) Royalties in respect of the Company's production of
Minerals;
(iii) Income taxes in respect of income received or accrued
by the Company;
(iv) Personal income tax (PPh. Article 21);
(v) Obligation to withhold income taxes in respect of
payment of dividend, interest, including remuneration,
due to loans payment warranty, rents, royalties, and
other income related to the utilization of property,
remuneration on technical and management services as
well as other service;
(vi) Value Added Tax (PPN) and Sales Tax on Luxury Goods
(PPn BM) on import and delivery of taxable goods and
or services;
(vii) Stamp duty on the documents;
(viii) Import duty on goods imported into Indonesia;
(ix) Land and Building Tax (PBB) in respect of:
(a) the Contract Area or the Mining Area; and
(b) the utilization of land area and buildings in
where the Company constructs facilities for its
Mining operations.
<PAGE> -46-
(x) Levies, taxes, charges and duties imposed by Local
Government in Indonesia which have been approved by
the Central Government;
(xi) General administrative fees and charges for facilities
or services rendered and special rights granted by the
Government to the extent that such fees and charges
have been approved by the Central Government.
(xii) Duty on register and transfer of ownership certificate
on ships, as well as motor vehicles in Indonesia.
The Company shall not be subject to any other taxes, duties,
levies, contributions, charges or fees now or hereafter levied
or imposed or approved by the Government other than those
provided for in this Article and elsewhere in this Agreement.
1. Deadrent in respect of the Contract Area or the Mining
Area.
The Company shall pay, in Rupiah, or in such other
currencies as may be mutually agreed, an annual amount of
money as deadrent to be measured by the number of hectares
included in the Contract Area or Mining Area respectively,
calculated on January 1st and July 1st of each Year, such
payments to be made in advance and in two installments each
payable within thirty (30) days after the said dates during
the term of this Agreement and payable as stipulated in
Annex "D" attached hereto.
2. Royalties in respect of the Company's production of
Minerals.
(i) The Company shall pay royalties in respect of the
products (as defined in Annex "F" and detailed in
Annex "G") from the Mining Area, to the extent that
such products are products for which value according
to general practice is paid or payable to the Company
by a buyer. Royalties shall be paid in Rupiah or such
other currency as may be mutually agreed and shall be
paid on or before the last day of the month following
each calendar quarter. Each payment shall be
accompanied by a statement showing in reasonable
detail the basis of computation of royalties due in
respect of the production of the Company during the
preceding calendar quarter.
<PAGE> -47-
Royalties will be computed from the rates specified in
Annex "F" as follows:
a) the tonnage or quantity by weight used in the
computation shall be based on final product
produced by the Company. In the case of
concentrates or ore bullion, the quantity by
weight of each mineral, and or metal subject to
royalty shall be properly determined by
internationally accepted assay methods.
b) the Government shall (upon written request by the
Company) specify the royalty tariff in column 5
of Annex "F" for those minerals which no tariff
reference is given.
(ii) The Company undertakes that any mining, processing or
treatment of ore prior to domestic sale or export
shipment by the Company shall be conducted in
accordance with such generally accepted international
standards as are economically and technically
feasible, and in accordance with such standards the
Company undertakes to use all reasonable efforts to
optimize the mining recovery of ore from proven
reserves and metallurgical recovery of products
from the ore provided it is economically and
technically feasible to do so, and shall submit
evidence to the Department of compliance with this
undertaking. Royalty shall be payable annually in
lump sum on any industrial minerals derived from the
Enterprise and used for the Company's construction
purposes such as but not limited to roads,
bridges, railways, port facilities, airports,
community buildings, housing or any other
infrastructure used in relation to the Enterprise
the amount of which will be negotiated between the
Company and the regional Government
(iii) If, in the opinion of the Government, the Company is
failing without good cause to recover products at the
recovery rate indicated in the feasibility study, it
may give notice in writing to the Company.
Within three (3) months of the receipt of this notice
the Company shall either:
<PAGE> -48-
a) Commence work to improve its mining method,
treatment and processing facilities to the
reasonable satisfaction of the Government,
provided that the Company shall in no event be
obliged to conduct mining, processing or
treatment activities otherwise than as provided
in Article 13.2 (ii);
b) submit to the Government evidence in
justification of its performance in accordance
with sub-paragraph (ii) of this Article 13
paragraph 2. In the event that the Government
remains unsatisfied with the Company's
performance in mining ore from the proven reserve
and recovering products from the ore, the
Government shall have the right to commission
independent technical studies to determine a fair
average recovery rate taking into account the
nature of the proven reserve and the ore and the
economic and technical feasibility of achieving
increased recovery by the Company in accordance
with sub-paragraph (ii) of this Article 13
paragraph 2. Such studies shall be carried out
by internationally recognized consultants
appointed by the Government and agreed to by the
Company. The Government and the Company shall
have the right to prepare submissions to the
consultants. If the said consultants find that
the performance of the Company's operations is
not satisfactory, then the cost shall be borne by
the Company. If it is found that the
performance of the Company's obligations is
satisfactory, then the cost shall be borne by the
Government. If following the completion of such
studies, the Company fails within a reasonable
period to achieve the recovery rate indicated by
such studies, the Government shall have the
right, if the Company is not then observing its
undertaking in sub-paragraph (ii) of this
Article 13 paragraph 2, to increase the royalty
applicable to such products in proportion to the
extent that the recovery of such products by
the Company falls short of the fair average rate
indicated by such studies. But at no time shall
the payment of
<PAGE> -49-
such increased royalty free the
Company from the obligation to observe its
undertaking in sub-paragraph (ii) of this Article
13 paragraph 2.
3. Income taxes with respect to the Taxable Income of the
Company:
(i) The Company shall pay Income Tax on income, that is
any increase in economic ability received or accrued
by the Company, whether originating from within or
outside Indonesia, in whatever name and form,
including but not limited to gross profit from
business, dividends, interest and royalties; and the
tax rates to be charged for the duration of this
Agreement shall be as follows:
(a) Fifteen percent (15%) for taxable income up to
Rp 10,000,000 (ten million Rupiah);
(b) Twenty five percent (25%) for taxable income
exceeding Rp 10,000,000 (ten million Rupiah), up
to Rp 50,000,000 (fifty million Rupiah);
(c) Thirty five percent (35%) for taxable income
exceeding Rp 50,000,000 (fifty million Rupiah).
(ii) To calculate taxable income, the rules for
computation of income tax as provided for in Annex "H"
attached to and made part of this Agreement shall
apply. Except as otherwise stipulated in this
Agreement, the rules provided in Income Tax Law 1984,
Law No. 6 Year 1983, and its implementation
regulations, shall apply.
4. Personal income tax (PPh Article 21)
(i) The Company has liability to withhold and remit income
tax on income related to work, including remuneration
and pension paid to employees of the Company as
Domestic tax payers according to Article 21 of the
Income Tax Law 1984.
<PAGE> -50-
(ii) Expatriate Individuals who are employed or engaged by
the Company who are present in Indonesia for less than
183 (one hundred eighty three) days in any twelve
month period shall be subject to income tax through
withholding tax by the Company based on Article 26 of
the Income Tax Law 1984, with a rate of 20% (twenty
percent) or such lower percentage due to the
enforcement of any relevant Tax Treaty on the gross
income, for services conducted in Indonesia. The
income tax of such Expatriate Individuals which is
taxable in Indonesia include all kind of remuneration
paid to them for services rendered in Indonesia.
(iii) Expatriate individuals who are employed or engaged by
the Company and who are present in Indonesia for more
than 183 (one hudnred and eighty three) days in any
twelve month period or intending to reside in
Indonesia, shall be subject to income tax through
withholding tax by the Company based on Article 21 of
the Income Tax Law 1984, from the income paid to the
Company's employees with consideration being given to
the regulations relating to deductible income. The
income of such Expatriate Individuals shall include
all kinds of remuneration paid to them by the Company,
due regard to the intended agreement in paragraph 7 of
Annex "H".
5. Income taxes on dividends, interest, rents, royalties, and
other income related to the utilization of property and
compensation paid for technical services, management
services and other services.
The Company in accordance with the Income Tax Law 1994 and
regulation prevailing at the date of the signing of this
Agreement is obliged to withhold and remit to the
Government income taxes at a rate specified in this Article
or such lower rate due to the enforcement of relevant Tax
Treaty as follows:
(i) Dividends, interest in whatever form including loan
payment warranty;
(ii) Rents, royalties and other income related to the
utilization of property;
<PAGE> -51-
(iii) Compensation paid for technical services or managerial
services and other services performed in Indonesia.
The rate of such withholding tax in force as from the date of
signing of this Agreement are:
(a) fifteen percent (15%) in the case of payments of
dividends, interest, rents, royalties, and other
income related to the use of property paid to the
domestic tax payer.
(b) nine percent (9%) on compensation paid for technical
and managerial services performed in Indonesia in the
case of payment performed to the domestic tax payer.
(c) twenty percent (20%) or any lower due to the
enforcement of relevant Tax Treaty in the case of such
income paid to foreign tax payer.
6. Value Added Tax (VAT) and/or Sales Tax for Luxury Goods
according to the Value Added Tax Law 1984 and its
implementation regulations either which have been passed or
shall be passed after this Agreement.
Due regard to the general liability aimed in Value Added
Tax Law 1984 and all of its implementation regulations, the
Company has liabilities:
(i) To report its business to be solidified as
Taxable firm.
(ii) As a taxable firm to collect and remit Value
Added Tax on delivery of Products (Output Tax) at
a rate of ten percents (10%) or other rates in
accordance with Value Added Tax Law 1984 and its
implementation regulations.
(iii) As tax collector to collect and remit Value Added
Tax and/or Sales on Luxury Goods based on Decree
of the President of the Republic of Indonesia
Number 56 Year 1988 or other similar decree.
<PAGE> -52-
(iv) The Company is subject to the Value Added Tax
and/or Sales Tax on Luxury Goods, on import, or
purchasing taxable goods or obtaining taxable
services which is based on Value Added Tax Law
1984 and its implementation regulations subject
to Value Added Tax and/or Sales Tax on Luxury
Goods.
(v) Limited to the importing or obtaining taxable
goods in the form of machinery, equipment, and
factory equipment, are granted postponement of
payment on Value Added Tax and/or Sales Tax on
Luxury Goods in accordance with the prevailing
regulation.
(vi) Value Added Tax paid on import or domestic
obtianing of taxable goods or services (Input
Tax) are creditable to Output Tax in accordance
with provided Value Added Tax Law 1984 and its
implementation regulations.
(vii) In case of Input Tax is greater than Output Tax
for a certain tax period, overpayment of the
Input Tax can be compensated with the Output Tax
for the following tax period or a refund may be
requested. The refund will be made within the
latest time period of one (1) month since the
refund request accepted in the Notification
Letter.
7. Stamp Duty on Documents.
The Company is levied to Stamp Duty in accordance with the
provisions stipulated in the Law No. 13 Year 1985 regarding
Stamp Duty.
8. Import Duty on goods imported into Indonesia.
(i) Exemption and tax reliefs on import of capital goods,
equipment and machinery and supplies are granted to
the Company based on Law No. 1 Year 1967 concerning
Foreign Capital Investment as amended by Law No. 11
Year 1970 as provided in Article 12 above.
(ii) Import of other goods into Indonesian customs
including personal effects shall be subject to the
prevailing law and regulation.
<PAGE> -53-
(iii) Excise Tax on tobacco and liquor are subject to
taxation in accordance with the rules of prevailing
legislation.
9. Land and Building Tax (PBB).
The Company shall pay Land and Building Tax (PBB), in
Rupiah or in such other currencies as may be mutually
agreed, as follows:
(i) During pre-production Periods (General Survey,
Exploration, Feasibility Studies and Construction),
the Company shall pay Land and Building Tax an amount
equal to the amount of deadrent as stated in Article
13 paragraph (1) of this Agreement.
(ii) During the operation/production Period, the Company
shall pay Land and Building Tax an amount equal to the
amount of deadrent plus an amount of 0.5% X 30% of
gross revenues from mining operation.
(iii) During the Contract Period, the Company shall also pay
Land and Building Tax on land/water and building
outside or inside the Contract Area/Mining Area used
by the Company for its facilities which are closed to
the public, an amount to be measured by the number of
square metres of land/water and floor space and type
of the building in accordance with the provisions of
Law No. 12 Year 1985 and the classification and the
amount of NJOP stipulated by the District Head Office
of the Directorate General of Taxation.
(iv) Imposition and payment of Land and Building Tax for
Contract Area/Mining Area during pre-production Period
as stipulated in sub paragraph (i) above, follows the
rules regulated for deadrent.
(v) Imposition and payment of Land and Building Tax for
Contract Area/Mining Area during the
operation/production Period and for land/water and
building used by the Company, follows the imposition
rules stipulated in sub paragraph (i) and sub
paragraph (ii) above, and prevailing rules for Land
and Building Tax payment generally in force.
<PAGE> -54-
10. The Company shall pay levies and taxes, charges, and duties
imposed by Regional Government in Indonesia which have been
approved by the Central Government in accordance with the
prevailing laws and regulations at rates and calculated in
a manner not greater than the amount calculated based on
laws and regulations in force at the date of signing of
this Agreement.
11. The Company shall pay general administrative fees and
charges for facilities or services and special rights
granted by the Regional Government to the extent that such
fees and charges have been approved by the Central
Government.
12. Tax on the transfer of ownership right.
The Company shall pay tax on transfer of ownership rights
for:
(i) Motor vehicles levied by the Local Government where
the vehicles are registered at a rate accordance with
the relevant Regional Government regulations.
(ii) Registration certificate and transfer of ships or sea
transportation means operating in Indonesia.
Tax compliance of the Company and its subsidiaries or its
Affiliates in connection with formal and material tax
obligations such as Tax Identification Number, Tax
Return, Tax payment, reporting, etc. and rights on
taxation namely tax objection to amount of tax, refund, tax
credit, compensation and penalties are subject to
provisions provided in Law Number 6 Year 1983 concerning
General Tax Provisions and Procedures, Income Tax Law 1984,
Value Added Tax Law 1984, Law Number 12 Year 1985
concerning Land and Building Tax, Law Number 13 Year 1985
on Stamp Duty and all of its implementation regulations.
<PAGE> -55-
In determining the Company's net taxable income, sound,
consistent and generally accepted accounting principles as
usually used in the mining industry shall be employed,
provided, however, that where more than one accounting
practice is found by the Government to prevail with regard
to the particular item, the Government shall consult with
the Company in relation to such particular item. Without
limiting the generally of the foregoing, for accounting
purposes, the Government shall in no event be bound by the
Company's characterization of any transaction with an
Affiliate as stated by the Company. In the event that the
Government has determined an unreasonable situation or not
in accordance with general practice followed by independent
parties in similar transactions on a certain payment,
deduction, charges for expenses or other transaction with
an Affiliate for the purposes of determining the Company's
income tax, the Government shall substitute the payment,
deduction, charges for expenses or other transactions which
would have prevailed had the transaction occurred between
independent parties.
<PAGE> -56-
ARTICLE 14
RECORDS, INSPECTION AND WORK PROGRAM
1. The Company shall always conduct and maintain in Indonesia,
precise, complete, and systematic technical records and
compose financial records showing a true and fair view of
all of its operations and the status of proven, probable
and possible ore reserves, including mining, processing,
transportation and marketing records in accordance with
generally accepted accounting principles, stated in Rupiah
or in equivalent United States Dollars. The financial and
other records may be presented in English and US Dollar
contiguous with its conversion in Rupiah.
Tax Return (SPT) with its appendices and tax payment
liability shall be maintained in Indonesian language and
Rupiah currency.
The Company is obliged to keep its book and records, and
its principle document and other document relating to their
operation for ten (10) years.
The Company shall furnish to the Government annual
financial statements consisting of a balance sheet and a
statement of income and all such other financial
information in accordance with generally accepted
accounting principles in Indonesia and all such other
information concerning its operations in reasonable detail
and such detail as the Government may reasonably request.
2. The Government and its authorized representatives have the
right to review and audit such financial statement within
five (5) years after the end of such fiscal year. In the
event of the Government does not issue any assessment for
additional tax payment within such five (5) year period,
the right of Government shall be expired (invalidated),
except the tax payer is condemned for criminal act as
referred to in Article 13 paragraph (7) and Article 15
paragraph (4) Law No. 6 Year 1983.
3. The Government and its authorized representatives may enter
upon the Contract Area and any other place of business of
the Company to inspect its operation at any time from time
to time during regular business hours. The Company shall
render necessary assistance to enable the representatives
to inspect such technical and financial records relating to
the Company's
<PAGE> -57-
operation and shall give said representatives
such information as the said representatives may reasonably
request. The representatives shall conduct such inspection
on their own risk and shall avoid interference to the
normal operations of the Company.
4. The Company shall submit to the Government not later than
November fifteenth (15th) or February fifteenth (15th) of
each year during the term of this Agreement its work
program, budget plan, sales contract and marketing/sales
plan for the following year in sufficient detail to permit
the Government to review such physical, financial and
marketing/sales program and determine whether they are in
accordance with the Company's obligations under this
Agreement. A work program and budget for the first year of
this Agreement shall be submitted as soon as possible after
the signing of this Agreement.
5. In addition, the following shall be delivered to the
Ministry:
(i) Conformed copies of all sales, management, commercial
and financial agreements concluded with Affiliates and
independent parties and all other agreements concluded
with Affiliates, to be submitted within one month
after conclusion;
(ii) Monthly reports setting forth the quantities and
qualities of ore produced, shipped, sold, utilized or
otherwise disposed of and the prices obtained.
The Company shall furnish to the Government all other
information of whatever kind relative to the Enterprise
which the latter may request, which is, or could by the
exercise of reasonable efforts by the Company have been,
within the control of the Company in order that the
Government may be fully appraised of the Company's
exploration and exploitation activities.
6. All information mentioned in paragraph 5 of this Article
furnished to the Government shall be either in English or
Indonesian and all financial data shall be recorded in
Rupiah or United States of America currency and records
shall also be kept of conversion rates applied to the
original currency.
<PAGE> -58-
7. The Company shall maintain all original records and reports
relating to its activities and operations under this
Agreement including all documents relating to financial and
commercial transactions with independent parties and
Affiliates in its principal office in Indonesia. These
records and reports shall be open to inspection by the
Government through an authorized representative. Such
reports and records shall be maintained in Indonesian or
English and all financial data shall be recorded in Rupiah
or United States of America currency and the records shall
also be kept of conversion rates applied to the original
currency.
8. The Company shall require the Company's co-participants,
Affiliates and sub-contractors to the extent that such co-
participant, Affiliate, or subcontractor carries out
operations and activities in furtherance of the Company's
obligations, activities and operations under this
Agreement, to keep all financial statements, records, data
and information necessary to enable the Company to observe
the provisions of this Article 14.
9. Without prejudice to paragraph 6 of Article 7, any
information supplied by the Company shall (except with the
written consent of the Company which shall not be
unreasonably withheld) be treated by all persons in the
service of the Government of the Republic of Indonesia as
confidential, but the Government shall nevertheless be
entitled at any time to make use of any information
received from the Company for the purpose of preparing and
publishing aggregated returns and general reports on the
extent of ore prospecting or ore mining operations in
Indonesia and for the purpose of any arbitration or
litigation between the Government and the Company.
10. All records, reports, plans, maps, charts, accounts and
information which the Company is or may from time to time
be required to supply under the provisions of this
Agreement shall be supplied at the expense of the Company.
<PAGE> -59-
ARTICLE 15
CURRENCY EXCHANGE
1. All investment remittances into Indonesia for the purpose
of any expenditures to be made in Indonesia shall be
deposited into a foreign investment account (the "PMA
Account") established at one or more foreign exchange banks
in Indonesia. All such investment remittances shall be
used in accordance with the prevailing investment
regulations applicable to foreign investment law companies
established under the Foreign Investment Law, Law No. 1 of
1967, and its amendment Law No. 11 of 1970. The conversion
or sale of foreign exchange originating from the PMA
foreign currency account is to be done with foreign
exchange banks and not necessarily so with Bank Indonesia.
2. The Company shall be granted the right to transfer abroad,
in any currency it may desire, funds in respect of the
following items, provided that such transfers are effected
in accordance with the prevailing laws and regulations and
at prevailing rates of exchange generally applicable to
commercial transactions:
(i) Net operating profits of the Company in
proportion to the shareholding of any
non-Indonesian investor;
(ii) Repayment of loan principal and the interest
thereon, insofar as it is a part of the Company's
investment which has been approved by the
Government;
(iii) Allowance for depreciation of the capital assets
generally applicable to foreign investment
companies established under the Foreign
Investment Law, Law No. 1 of 1967, as amended;
(iv) Proceeds from sales of shares sold pursuant to
paragraph 3 of Article 24;
<PAGE> -60-
(v) Expenses for Expatriates employed by the Company
and their families and for training of Indonesian
personnel abroad;
(vi) Debts of the Company denominated in foreign
currency, including debts owed to contractors and
sellers of equipment and raw materials, or for
commissions;
(vii) Technical assistance fees;
(viii) License fees;
(ix) Agency commissions payable to third parties
abroad;
(x) Payments to foreign suppliers of the Company, to
the extent that the purchases of foreign goods
and services, including management and related
services, are necessary for the operation of the
Company or the Enterprise;
(xi) Repatriation of capital on the liquidation of the
Company, or resulting from capital restructuring
approved by the Government; and
(xii) Any other foreign exchange facilities provided
from time to time to foreign investment companies
established under the Foreign Investment Law, Law
No. 1 of 1967, as amended or provided by any
regulations adopted pursuant thereto or by any
other laws or regulations.
3. The proceeds of sales of Minerals and any Products derived
from them can be used as the Company sees fit. Without
prejudicing the foregoing rights of the Company, the
Company agrees that with regard to the proceeds of the
Company's export sales it shall comply with laws and
regulations from time to time in force, except as Bank
Indonesia and the company may otherwise agree. The terms
and conditions of any such agreement between Bank Indonesia
and the Company shall not be less favorable than those
contained in any other similar agreements by Bank Indonesia
and other Mining companies now or hereafter in effect.
<PAGE> -61-
4. The Company in the exercise and performance of its rights
and obligations set forth in this Agreement shall be
authorized to pay abroad, in any currency it may desire,
without conversion into Rupiah, for the goods and services
it may require and to defray abroad, in any currency it may
desire, any other expenses incurred for operations under
this Agreement.
5. All Expatriates who are Covered Employees in any capacity
shall have the right to freely retain or dispose of outside
of Indonesia any of their funds located outside Indonesia;
freely transfer outside of Indonesia any of their personal
funds located in Indonesia and shall be entitled to import
into Indonesia such foreign currencies as may be required
for their needs.
6. In respect of other matters of foreign currency arising in
any way out of or in connection with this Agreement, the
Company shall be entitled to receive treatment no less
favorable to the Company than that accorded to any other
Mining Company carrying on operations in Indonesia.
7. Subject to the foregoing paragraphs of this Article 15, the
Company shall comply with all financial reporting and
approval requirements applicable to foreign investment law
companies established under the Foreign Investment Law, Law
No. 1 of 1967.
8. The Company shall forward financial reports in accordance
with the procedures required by Bank Indonesia.
<PAGE> -62-
ARTICLE 16
SPECIAL RIGHTS OF THE GOVERNMENT
1. The Company and its shareholders agree that they will not,
without the Goverment's prior approval :
(i) amend the Articles of Association of the Company;
(ii) change the basic nature of the business of the
Company;
(iii) voluntarily liquidate or wind up the Company;
(iv) merge or consolidate the Company with any other
Company;
(v) pledge or otherwise use as security the Minerals in
the Contract Area.
2. The Government reserves the right to withhold its approval
of plans and designs relating to construction, operation,
expansion, modification and replacement of facilities of
the Enterprise in the Contract Area which may
disproportionately and unreasonably damage the surrounding
Environment or limit its further development potential or
significantly disrupt the socio-political stability in the
area or be adverse to the interests of national security.
3. The Government shall have the right of access to the
Contract Area as provided in paragraph 3 of Article 14.
<PAGE> -63-
ARTICLE 17
EMPLOYMENT AND TRAINING
OF INDONESIAN PARTICIPANTS
1. The Company shall employ Indonesian personnel, giving
preference to local residents, to the maximum extent
practicable consistent with efficient operations,
subject to the provisions of the laws and regulations
which may from time to time be in force in Indonesia.
2. The Company shall not be restricted in its assignment
or discharge of personnel; provided, however, that
subject to the foregoing requirements, the terms and
conditions of such assignment and discharge or
disciplining of Indonesian personnel shall be carried
out in compliance with the laws and regulations of
Indonesia which at the time are generally applied.
3. The Company shall seek to provide direct Indonesian
participation in the Enterprise through the inclusion
of Indonesian nationals in the management of the
Company and among the members of its Board of
Directors. To this end at least one seat on the Board
of Directors will continuously be occupied by an
Indonesian national from the date of incorporation of
the Company. The Company will also train Indonesian
nationals to occupy other responsible positions.
4. The Company shall conduct a comprehensive training
program for Indonesian personnel in Indonesia and,
subject to the approval of the Government, in other
countries and carry out such program for training and
education in order to meet the requirement for various
classifications of full time employment for its
operations in Indonesia within the shortest
practicable period of time. The Company shall also
conduct a program to acquaint all Expatriate employees
and registered subcontractors with the laws and
customs of Indonesia.
<PAGE> -64-
5. The Company and its registered subcontractors may bring
into Indonesia such Expatriate Individuals as in the
Company's judgement are required to carry out its
operations efficiently; provided however, that the Minister
may make known to the Company, and the Company shall duly
observe, objections based on grounds of national security
or foreign policy of the Government. At the Company's
request (which shall be accompanied by information
concerning the education, experience and other
qualifications of the individuals concerned) and in
compliance with the rules and regulations in effect from
time to time, the Government will make arrangement for the
acquisition of all necessary permits, (including entry and
exit permits, work permits, visas and such other permits,
as may be required); in this connection the Company shall
periodically submit its manpower requirement plans,
manpower report, training program and training report in
the framework the Indonesianization process to the
Department.
6. The Company agrees that there shall at all times be equal
treatment, facilities and opportunities among employees in
the same job classification with respect to salaries,
facilities and opportunities within the Mining industry
regardless of nationality and the Company shall duly
observe the existing manpower laws and regulations which
may from time to time be in force in Indonesia.
Notwithstanding the foregoing, it shall not be a violation
to give preference as to opportunity to Indonesians in
light of the policy of the Government to increase the
employment of Indonesians to the maximum extent possible,
nor to pay Expatriates brought into Indonesia pursuant to
paragraph 5 of this Article at a higher rate than local
employees in situations where, with respect to a given job
classification, there is a need to employ such Expatriates.
7. The Company acknowledges that pursuant to Law No. 14 of
1969, employees of the Company have the right to form a
trade union for purposes of collective bargaining with the
Company. The
<PAGE> -65-
Company. The Company acknowledges that it may be required
from time to time to enter into collective bargaining with
such trade union. Therefore the Company is obliged to
morally support the employees to form the union and to
liaise with
8. Prior to the establishment of a permanent
settlement,the Company shall furnish free medical care
and attention to all its employees working in the
Contract Area as is reasonable and shall maintain or
have available adequate medical services at least
commensurate with such services provided in similar
circumstances in Indonesia. If the Company
establishes a permanent settlement in connection with
a Mining Area or a Project Area related to such Mining
Area, the Company shall furnish such free medical
care and attention to all its employees and all
Government officials requested by the Company working
in such Mining Area or Project Area as is reasonable
and shall establish a staff and maintain a dispensary,
clinic or hospital which shall be reasonably adequate
under the circumstances according to the prevailing
laws and regulations of Indonesia.
9. If in connection with a Mining Area or a Project Area
related to such Mining Area, the Company establishes a
permanent settlement incorporating families for the
employees associated with the Enterprise, the Company
shall provide, free of charge, primary and secondary
education facilities for the children of all employees
working in such Mining Area or Project Area. Rules,
regulations and standards of general application for
comparable education facilities in Indonesia
established by the Department of Education and Culture
shall be followed.
<PAGE> -66-
ARTICLE 18
ENABLING PROVISIONS
1. The Government will grant the Company the necessary rights
and will take such other action as may be desirable to
achieve the mutual objectives of this Agreement. The
Company shall have the following rights:
(i) the sole right to enter the Contract Area or any
Mining Area for the purposes of this Agreement, to
make drill holes, test pits and excavations, and to
take and remove, without royalty or other charge,
samples for assays and for metallurgical, pilot plant
and laboratory research purposes, including bulk
samples for such purposes; provided that the Company
shall have received the approval by the Department
prior to the export of any such samples, to be given
in advance on a yearly basis, and shall pay any
royalties applicable thereto.
(ii) to enter upon and remain within the Contract Area and
the Project Areas (related to the Contract Area
(including portions of the air space and shore line),
subject to the right of the Department to object to
any Mining Area as provided in paragraph 2 of Article
8. The Company shall recognize the items referred to
in Article 16 of Law No. 11 of 1967, subject to the
provision of paragraph 2 of the said Article 16.
2. In carrying out its activities under this Agreement, the
Company, subject to the laws and regulations from time to
time in effect in Indonesia, shall have the right to
construct facilities as it deems necessary, provided that:
(i) in connection with the use of land by the Company for
construction of facilities as provided in this
<PAGE> -67-
Agreement, the Company shall pay the usual surveying
and registration fees charged by the Land Registration
Office. In acquiring titles to land outside any
Mining Area, the Company shall comply with laws and
regulations of general application from time to time
in effect.
(ii) in connection with the activities of the Company, but
subject to the provisions of Article 13, the Company
shall pay generally applicable fees and charges for
services performed, facilities provided and special
rights granted by the Government; provided that such
services, facilities and rights are requested by the
Company.
3. Subject to laws and regulations which may from time to time
be in force in Indonesia, and subject also to the
provisions of paragraph 2 of Article 25 and paragraph 2 of
Article 16, the Company may at any time file with the
Department a plan or plans and may thereafter file
additional or amended plans covering:
(i) the Mining Area or Areas in which the Company proposes
to construct facilities related to production;
(ii) all other areas in which the Company proposes to
construct any other facilities necessary for the
Enterprise and the location of all such rights in and
over land including easements, right of way and rights
to lay or pass on, over or under land, any roads,
railways, pipes, pipelines, sewers, drains, wires,
lines or similar facilities as may be necessary for
the Enterprise; and
(iii) all other areas in which the Company shall have the
right to construct such additional facilities as the
Company deems necessary or convenient for the
Enterprise.
<PAGE> -68-
The Government shall thereupon make arrangements for the
Company to utilize and remain within all such areas and
such land covered by such plans (or such comparable areas
as may be agreed between the Government and the Company)
and to exercise the other rights specified above with
respect to each such area. The use and occupancy of any
areas covered by such plans shall not be subject to payment
by the Company of any charges or fees other than those
specified elsewhere in this Agreement. The plans filed
pursuant to this paragraph shall, to the extent
practicable, give description in sufficient detail to
permit precise identification of the designated areas. The
Government shall assist the Company in arrangements for any
necessary resettlement of local inhabitants whose
resettlement from any part of the Contract Area or the
Project Areas is necessary and the Company shall pay for
the resettlement and give reasonable compensation for any
dwelling, privately owned lands (including such land
ownership based on any Indonesian customs or customary
laws, generally or locally applicable), privately owned
crops and flora or other improvements in existence on any
such parts which are taken or damaged by the Company in
connection with its activities under this Agreement.
4. Subject to the non-monetary provisions laid down in
generally applicable central Government, regional
Government and Provincial laws and regulations from time to
time in effect, and to the payments provided for in Article
13 of this Agreement but to no other payments to the
Government, and without prejudice to the rights of private
parties created prior to the beginning of the Construction
Period and to payments of reasonable compensation to any
such private party holding rights created prior to the
beginning of the Construction Period as may be customary in
the Contract Area, the Company at its own expense may take
and use from the Contract Area or Project Area such timber
(for construction purposes), soil, stone, sand, gravel,
lime, water, other products and materials as are necessary
for or are to be used
<PAGE> -69-
by the Enterprise. In doing so, and except as otherwise
provided in this Agreement, the Company shall observe the
existing regulations in effect on the date of the signing
of this Agreement governing the exploitation and use of
said natural resources.
5. The Company shall also have the right, in compliance with
existing rules and regulations in effect on the date of the
signing of this Agreement, to clear away and remove such
timber, overburden and other obstructions as may be
necessary or desirable for the Mining, construction of
facilities and any other operations of the Company under
this Agreement, provided that the Company shall take into
account other rights granted by the Government such as
grazing, timber cutting and cultivation rights, and rights
of way, by conducting its operations under this Agreement
so as to interfere as little as possible with such rights.
6. The Company may, at its own expense, also take and use any
of such products and materials from other areas outside the
Contract Area or any Project Area subject to the rights of
other parties, to the approval of the Government, and to
the payment of such compensation as may be agreed between
the Company and such other parties or the Government and in
accordance with the prevailing laws and regulations in
effect on the date of the signing of this Agreement.
7. At the request of the Company, the Government shall co-
operate in a joint endeavor to alleviate any interference
which may arise from others operating under conflicting
rights.
8. The Company and the Government recognize that the existing
and proposed operations hereunder are to be carried out in
an extremely remote area with a difficult environment and
that, accordingly, the Company may be required to develop
special facilities and carry out special functions for the
fulfillment
<PAGE> -70-
of this Agreement. In recognition of the added burdens and
expenses to be borne by the Company and the additional
services to be performed by the Company as a result of the
location of its activities in a difficult environment, the
Government recognizes that appropriate arrangement may be
required to minimize the adverse economic and operational
costs resulting from the administration of the laws and
regulations of the Government from time to time in effect,
and in construing the Company's obligations to comply with
such laws and regulations.
<PAGE> -71-
ARTICLE 19
FORCE MAJEURE
1. Any failure by the Government or by the Company to carry
out any of its obligations under this Agreement shall not
be deemed a breach of contract or default if such failure
is caused by force majeure, that party having taken all
appropriate precautions, due care and reasonable
alternative measures with the objectives of avoiding such
failure and of carrying out its obligations under this
Agreement. If any activity is delayed, curtailed or
prevented by force majeure, then anything in this Agreement
to the contrary notwithstanding, the time for carrying out
the activity thereby affected and the term of this
Agreement specified in Article 31 shall each be extended
for a period equal to the total of the periods during which
such causes or their effects were operative, and for such
further periods, if any, as shall be necessary to make good
the time lost as a result of such force majeure. For the
purposes of this Agreement, force majeure shall include
among other things: war, insurrection, civil disturbance,
blockade, sabotage, embargo, strike and other labor
conflict, riot, epidemic, earthquake, storm, flood, or
other adverse weather conditions, explosion, fire,
lightning, adverse order or direction of any government de
jure or de facto or any instrumentality or subdivision
thereof, act of God or the public enemy, breakdown of
machinery having a major effect on the operation of the
Enterprise and any cause (whether or not of the kind
<PAGE> -72-
hereinbefore described) over which the affected party has
no reasonable control and which is of such a nature as to
delay, curtail or prevent timely action by the party
affected.
2. The party whose ability to perform its obligations is
affected by force majeure shall notify as soon as
practicable the other party thereof in writing, stating the
cause, and the parties shall endeavor to do all reasonable
acts and things within their power to remove such cause;
provided, however, that neither party shall be obligated to
resolve or terminate any disagreement with third parties,
including labor disputes, except under conditions
acceptable to it or pursuant to the final decision of any
arbitral, judicial or statutory agencies having
jurisdiction to finally resolve the disagreement. As to
labor disputes, the Company may request the Government to
co-operate in a joint endeavor to alleviate any conflict
which may arise.
<PAGE> -73-
ARTICLE 20
D E F A U L T
1. Subject to provisions of Article 19 of this Agreement, in
the event that the Company is found to be in default in the
performance of any provision of this Agreement, the
Government, as its remedy under this Agreement, shall give
the Company written notice thereof (which notice must state
that it is pursuant to this Article) and the Company shall
have a period of a maximum 180 (one hundred and eighty)
days after receipt of such notice to correct such default.
The actual time within which to correct such default shall
be stipulated in the said written notice in each individual
case as may be reasonable under the circumstances
considering the nature of the default. In the event the
Company corrects such default within such period, this
Agreement shall remain in full force and effect without
prejudice to any future right of the Government in respect
of any future default. In the event the Company does not
correct such default within the time stipulated in the
notice, the Government shall have the right to terminate
this Agreement in accordance with the provisions of Article
22 as the case may be.
A failure by the Company to comply with a non-material or
non- substantive provision of this Agreement relating to
one or more Mining Areas, and not to all Mining Areas or to
the Enterprise as a whole, shall not be considered to be a
default under this Article 20. In the event of such
failure, after
<PAGE> -74-
notice to the Company in accordance with the preceding
paragraph and failure by the Company to correct such
failure in accordance therewith, the Government shall have
the right to close such Mining Areas or any part thereof
and to require the Company to relinquish such Mining Areas
or such parts.
2. Notwithstanding the provision of paragraph 1 of this
Article, in the event the Company shall be found to be in
default in the making of any payment of money to the
Government which the Company is required to make pursuant
to Article 12 or Article 13, the period within which the
Company must correct such default shall be 30 (thirty) days
after the receipt of notice thereof. The penalty for late
payment shall be an interest charge on the amount in
default from the date the payment was due, at the rate of
the New York prime interest rate in effect at the date of
default plus 4% (four percent). This or other penalties
provided for in this Article may not be taken as deductions
in the calculation of taxable income.
3. The Company shall not be deemed to be in default in the
performance of any provision of this Agreement concerning
which there is any dispute between the parties until such
time as all disputes concerning such provision, including
any contention that the Company is in default in the
performance thereof or any dispute as to whether the
Company was provided a reasonable opportunity to correct a
default, have been settled as provided in Article 21.
<PAGE> -75-
ARTICLE 21
SETTLEMENT OF DISPUTES
1. The Government and the Company hereby consent to submit all
disputes between the parties hereto arising, before or
after termination hereof, out of this Agreement or the
application hereof or the operations hereunder, including
contentions that a party is in default in the performance
of its obligations hereunder, for final settlement, either
by conciliation, if the parties wish to seek an amicable
settlement by conciliation, or to arbitration. Where the
parties seek an amicable settlement of a dispute by
conciliation, the conciliation shall take place in
accordance with the UNCITRAL Conciliation Rules contained
in resolution 35/52 adopted by the United Nations General
Assembly on 4 December, 1980 and entitled "Conciliation
Rules of the United Nations Commission on International
Trade Law" as at present in force. Where the Parties
arbitrate, the dispute shall be settled by arbitration in
accordance with the UNCITRAL Arbitration Rules contained in
resolution 31/98 adopted by the United Nations General
Assembly on 15 December, 1976 and entitled "Arbitration
Rules of the United Nations Commission on International
Trade Law" as at present in force. The foregoing provisions
of this paragraph do not apply to tax matters which are
subject to the jurisdiction of Majelis Pertimbangan Pajak
(The Consultative Board of Taxes). The language to be used
in conciliation and arbitration proceedings shall be the
English language, unless the parties otherwise agree.
<PAGE> -76-
2. Before the Government or the Company institutes an
arbitration proceeding under the UNCITRAL Arbitration
Rules, it will use its best endeavors to resolve the
dispute through consultation and use of administrative
remedies; provided that the Company shall not be obligated
to pursue any such remedies for more than 90 (ninety) days
after it has notified the Government of an impending
dispute if such remedies involve a request or application
to the Government or any of its departments or
instrumentalities.
3. Conciliation or arbitration proceedings conducted pursuant
to this Article shall, if appropriate arrangements can be
made, be held in Jakarta, Indonesia, unless the parties
agree upon another location or unless the aforesaid rules
or the procedures thereunder otherwise require. The
provisions of this Article shall continue in force
notwithstanding the termination of this Agreement. An
award pursuant to any such arbitration proceedings shall be
enforceable against and binding upon the parties hereto,
and shall be specifically enforceable in Indonesia, whether
or not the proceedings have been held in Indonesia.
<PAGE> -77-
ARTICLE 22
TERMINATION
1. At any time during the term of this Agreement, after having
used all reasonable diligence in its endeavor to conduct
its activities under this Agreement, if in the Company's
opinion the Enterprise is not workable, the Company shall
consult with the Department and may thereafter submit a
written notice to terminate this Agreement. Such notice
shall be accompanied with all relevant data and information
related to the Company's activities under this Agreement
which have not been previously submitted to the Department,
including but not limited to documents, maps, plans,
worksheets and other technical data and information.
Within a period not later than 6 (six) months from the date
the Company submits the notice to terminate, the Department
shall by written notice to the Company either (i) confirm
such termination, or (ii) specify the particular data
and/or information required by this paragraph which the
Company has not furnished and which the Department has
determined must be furnished prior to termination of this
Agreement.
This Agreement shall terminate and the Company shall be
relieved of all further obligations under this Agreement
upon the earlier to occur of (a) the date of the
Department's written confirmation of termination; (b) 90
(ninety) days after the date on which the Company submits
to the Department the data and/or information required by
the Department as
<PAGE> -78-
provided in subsection (ii) of the preceding paragraph; or
(c) the date which is 6 (six) months after the Company
submitted its notice of termination to the Department if
the Department does not give any written notice regarding
termination within such 6 (six) months period.
2. If termination occurs during the General Survey or
Exploration Periods, the Company shall have a period of 6
(six) months within which to sell, remove or otherwise
dispose of its property in Indonesia and to furnish the
Government with the information to be turned over to it in
respect of the work which the Company has performed to the
date of the giving of the aforementioned notice. Any
property not so removed or otherwise disposed of shall
become the property of the Government without any
compensation to the Company.
3. If termination occurs during the Feasibility Studies
Period, all property of the Company, movable and immovable,
located in the Contract Area shall be offered for sale to
the Government, which shall have an option, valid for 30
(thirty) days from the date of such offer, to buy all such
property at a fair and reasonable market price from the
Company payable in United States Dollars or in any currency
freely convertible in Indonesia and through a bank to be
agreed upon by both parties within 90 (ninety) days after
acceptance by the Government of such offer. If the
Government does not accept such offer within the said 30
(thirty) day period, the Company may sell, remove or
otherwise dispose of any or all of such property during a
period of 6 (six) months after the expiration of such
offer. Any property not so sold, removed
<PAGE> -79-
or otherwise disposed of shall become the property of
the Government without any compensation to the Company.
4. If termination occurs during the Construction Period, all
property of the Company, both movable and immovable,
located in the Contract Area shall in the first instance be
offered for sale to the Government which shall have an
option, valid for 30 (thirty) days from the date of such
offer, to buy all such property at a fair and reasonable
market price from the Company payable in United States
Dollars or in any currency freely convertible in Indonesia
and through a bank to be agreed upon by both Parties within
90 (ninety) days after acceptance by the Government of such
offer. If the Government does not accept such offer within
the said 30 (thirty) day period, the Company may sell,
remove or otherwise dispose of any or all of such property
during a period of 12 (twelve) months after the expiration
of such offer. Any property not so sold, removed or
otherwise disposed of shall become the property of the
Government without any compensation to the Company.
5. If termination occurs during the Operating Period, or by
reason of the expiration of the term of this Agreement, all
property of the Company, both movable and immovable,
located in the Contract Area shall be offered for sale to
the Government at cost or market value whichever is the
lower, but in no event lower than the depreciated book
value. The Government shall have an option, valid for 30
(thirty) days from the date of such offer, to buy all such
property at the agreed value payable in United States
Dollars or in any
<PAGE> -80-
currency freely convertible in Indonesia
and through a bank to be agreed upon by both Parties within
90 (ninety) days after acceptance by the Government of such
offer. If the Government does not accept such offer within
the said 30 (thirty) day period, the Company may sell,
remove or otherwise dispose of any or all of such property
during a period of 12 (twelve) months after the expiration
of such offer. Any property not so sold removed or
otherwise disposed of shall become the property of the
Government without any compensation to the Company.
6. It is agreed, however, that any property of the Company in
Indonesia, movable or immovable, as shall at the
termination of this Agreement be in use for public purposes
such as roads, schools and/or hospitals, with their
equipment, shall immediately become the property of the
Government without any compensation to the Company; and the
Company shall recognize the items referred to in paragraph
(c) of sub-paragraph 1 of Article 24 of Law No. 11, 1967
relating to safety and the right to excavate, and
paragraphs 3, 4, 5 of Article 46 of Government Regulations
No. 32 of 1969.
7. All sales, removals or disposals of the Company's property
pursuant to the termination of this Agreement shall be
effected according to the prevailing laws, and regulations;
any gain or loss from sale or disposal as relating to the
written down book value shall be determined in accordance
with Article 13 of this Agreement. All values shall be
based on generally accepted accounting principles.
<PAGE> -81-
8. Rights and obligations which have come into effect prior to
the termination of this Agreement and rights and
obligations relating to transfer of currencies and
properties which have not yet been completed at the time of
such termination shall continue in effect for the time
necessary or appropriate fully to exercise such rights and
discharge such obligations. Additionally, the Company shall
be granted the right to transfer abroad all or any proceeds
of sale received under this Article 22 subject to the
requirement of paragraph 2 of Article 15.
<PAGE> -82-
ARTICLE 23
COOPERATION OF THE PARTIES
1. The Parties to this Agreement agree that they will at all
times use their best efforts to carry out the provisions of
this Agreement to the end that the Enterprise may at all
times be conducted with efficiency and for the optimum
benefit of the Parties.
2. The Company agrees to plan and conduct all operations under
this Agreement in accordance with the standards and
requirements imposed elsewhere in this Agreement for the
sound and progressive development of the Mining industry in
Indonesia, to give at all times full consideration to the
aspirations and welfare of the people of the Republic of
Indonesia and to the development of the Nation, and to
cooperate with the Government in promoting the growth and
development of the Indonesian economic and social
structure, and subject to the provisions of this Agreement,
at all times to comply with the laws and regulations of
Indonesia.
3. At any time during the term of this Agreement, upon request
by either party, the Government and the Company may consult
with each other:
(a) to determine whether in the light of all relevant
circumstances, the financial or other provisions of
this Agreement need revision in order to ensure the
continued viability of the Enterprise. Such
circumstances shall include the conditions under which
the mineral,
<PAGE> -83-
production is carried out such as the
size, location and overburden of mineral deposits, the
quality of the mineral, the market conditions for the
mineral, the prevailing purchasing power of money and
the terms and conditions prevailing for comparable
mineral ventures. In reaching agreement on any
revision of this Agreement pursuant to this paragraph
3, both parties shall ensure that no revision of this
Agreement shall prejudice the Company's ability to
retain financial credibility abroad and to raise
finance by borrowing internationally in a manner and
on terms normal to the mining industry, and
(b) Such consultation shall be carried out in a spirit of
cooperation with due regard to the intent and
objectives of the respective parties. Both parties
desire to realize the success of the Enterprise for
the benefit of its shareholders and the people of the
Republic of Indonesia, the development of the Nation,
the growth and development of the economic and social
structure, the continued operation of the Company and
the development of the mineral resources of the
Republic of Indonesia.
4. The Department, on behalf of the Government agrees that
during the term of this Agreement the Government,
consistent with Law No. 1 of 1967 on Foreign Capital
Investment, (i) will take no action which is inconsistent
with the provisions of this Agreement so as to adversely
affect the conduct of the Enterprise hereunder, including,
without limitation, any
<PAGE> -84-
action of condemnation or nationalization of the Enterprise
or any part thereof, and (ii) will at all times cooperate
with the Company in handling all administrative actions and
determinations relating to the Enterprise in the most
expeditious manner consistent with orderly procedures.
<PAGE> -85-
ARTICLE 24
PROMOTION OF NATIONAL INTEREST
1. In the conduct of its activities under this Agreement the
Company shall, consistent with its rights and obligations
elsewhere under this Agreement, give preference to
Indonesian consumers' requirements for its Products and the
Company and its Affiliates and subcontractors shall, in
good faith to the fullest practicable extent, utilize
Indonesian manpower, services and raw materials produced
from Indonesian sources and products manufactured in
Indonesia to the extent such services and products are
available on a competitive time, cost and quality basis,
provided that in comparing prices of goods produced or
manufactured in Indonesia to the price of imported goods
there shall be added a premium (not in excess of twelve and
a half percent) and other expenses (excluding VAT) incurred
up to the time the imported goods are landed in Indonesia.
2. The Company shall offer for sale to Indonesian
Participants, on the basis of the fair market value
thereof, an amount of shares which, after giving effect to
such sale, directly or indirectly, will result in the
Company being in compliance with the requirements of
Government Regulation No. 20 of 1994 as such requirements
apply from time to time to share ownership in Foreign
Capital Investment Companies.
<PAGE> -86-
3. If the Company requires additional equity capital for the
enterprise, the Company may obtain such capital by sales to
any person even though such sales may increase the
proportionate ownership of the Company's capital stock by
person who are not Indonesians Participants; provided that
the Company shall at all times thereafter be in compliance
with the requirements of Government Regulation No. 20 of
1994.
4. In the event of an increase in the share capital of the
Company, the Indonesian Participants shall be entitled to
subscribe for new shares in proportion to their existing
shareholding so as to give them the opportunity to maintain
their existing proportionate shareholding in the Company;
provided that the foregoing shall not apply to shares which
the Company lists on any Indonesian stock exchange.
5. In no event shall shares held by Indonesian Participants be
treated less favorably than those held by any others.
6. The Indonesian Participants shall be entitled to appoint
members of the Board of Commissioners of the Company in
proportion to their shareholding in the Company, but the
Company shall not be required to increase the number of
members of its Board of Commissioners beyond 10 (ten)
simply to maintain absolute proportionality of the members
of the Board of Commissioners appointed by the foreign
participant(s) and by the Indonesian Participants.
<PAGE> -87-
ARTICLE 25
REGIONAL COOPERATION IN REGARD TO
ADDITIONAL INFRASTRUCTURE
1. The Company shall at all times cooperate with the
Government in utilizing its best efforts to plan and
coordinate its activities, and proposed future projects in
the Contract Area or the Project Areas in conjunction with
regional development either provincial or in the villages.
Living accommodation and facilities and working conditions
provided by the Company for its operations shall be of a
Government standard commensurate with those of good
employers operating in Indonesia.
2. In relation to the region, the Company shall endeavor to
assist the Government in maximizing the economic and social
benefits generated by the Enterprise in the Contract Area
in respect to:
(i) coordinating such benefits with local and regional
infrastructure studies undertaken by the Government
together with any benefits generated by other
interested local, foreign and international public and
private entities; and
(ii) assisting and advising the Government, when requested,
in its planning of the infrastructure and regional
development which the Company may deem useful to the
Enterprise and to existing and future industries and
activities in the area of the Enterprise.
<PAGE> -88-
3. The Company shall allow the public and the Government to
use any wharf and harbor installations, air strips or roads
which have been constructed by the Company pursuant to this
Agreement and which are located outside the Mining Areas
and the related Project Areas provided that;
(i) any such use shall be subject to such regulations and
limitations as the Company will reasonably impose, and
shall in no event adversely affect or interfere with
the Company's operations hereunder and
(ii) the Company shall be entitled to impose such charges
therefor as shall be appropriate to reflect the cost
of maintaining such facilities and, with respect to
any commercial use of such facilities, the capital
cost thereof.
4. The Company shall maintain and be responsible for the
maintenance of all roads in the Mining Areas.
5. All roads constructed by the Company outside the Mining
Areas, to the extent used by the public, and in accordance
with paragraph 1 of this Article 25, shall be public roads
for the purposes of the provisions of the traffic laws and
regulations which may be from time to time in effect in
Indonesia. To the extent that the plans and designs for the
Enterprise as approved by the Government so provide and
thereafter from time to time, the Government will make such
special regulations under the traffic laws as it considers
necessary or desirable for the proper safety of the users
of the said roads.
<PAGE> -89-
6. If the Company's use of the existing public roads results
in or is likely to result in significant damage or
deterioration, the Company shall pay to the Government or
other authority having control over the roads the cost (or
an equitable proportion thereof having regard to the use of
such roads by others) of preventing or making good such
damages or deterioration or of upgrading to a standard
necessary having regard to the increased traffic. In
addition, the Government or other authority having control
over any such road may require the Company to pay a
maintenance user charge based upon what is fair and
reasonable having regard to the continuing cost (excluding
any profit to the Government or such other authority) of
operation and maintenance of that road and the use of that
road by others. In lieu of making such payments, the
Company will have the right to elect to maintain at its own
expense any such road needed by it for its operations
hereunder.
7. In the event that the Government is unable to provide
adequate telecommunications facilities, the Company may, in
accordance with rules and regulations from time to time in
effect in Indonesia, install and operate such
telecommunications facilities; provided that it shall allow
the Government and the public to use such facilities on the
following terms: (i) any such use shall be subject to such
regulations and limitations as the Company will reasonably
impose, and shall in no event adversely affect or interfere
with the Company's operations hereunder and (ii) the
Company shall be entitled to impose such charges therefor
as will be appropriate to reflect the cost of maintaining
and operating such facilities and, with respect to any
commercial use of such facilities, the capital cost
thereof.
<PAGE> -90-
8. In the event that prior to any such installation by the
Company, adequate telecommunications facilities can be
provided by the Government, the Company shall be obliged to
use the Government's network and pay reasonable standard
charges for telecommunications services.
9. The Company may at its own cost, in accordance with the
laws and regulations from time to time in effect in
Indonesia, construct and establish and develop camps or
permanent facilities sufficient to service the needs of the
Enterprise.
<PAGE> -91-
ARTICLE 26
ENVIRONMENTAL MANAGEMENT AND PROTECTION
1. The Company shall, in accordance with prevailing
Environmental protection and natural preservation laws and
regulations of Indonesia from time to time in effect, use
its best efforts to conduct its operations under this
Agreement so as to minimize harm to the Environment and
utilize recognized modern Mining industry practices to
protect natural resources against unnecessary damage, to
minimize Pollution and harmful emissions into the
Environment, to dispose of Waste in a manner consistent
with good Waste disposal practices, and in general to
provide for the health and safety of its employees and the
local community. The Company shall not take any acts which
may unnecessarily and unreasonably block or limit the
further development of the resources of the area in which
it operates.
2. The Company shall, according to laws and regulations
existing from time to time, install and utilize such
internationally recognized modern safety devices, and shall
observe such internationally recognized modern safety
precautions as are provided and observed under conditions
and operations comparable to those undertaken by the
Company under this Agreement, including measures designed
to prevent and control fires.
3. The Company shall, in accordance with prevailing laws and
regulations, include in the Feasibility Study for each
Mining Area an Environmental impact study which analyzes
the
<PAGE> -92-
potential impact of its operations on land, water, air,
biological resources and human settlements. The
Environmental impact statement will also outline measures
which the Company intends to use to mitigate adverse
impacts.
<PAGE> -93-
ARTICLE 27
LOCAL BUSINESS DEVELOPMENT
1. The Company shall, to the extent reasonably and
economically practicable, having regard to the nature of
the particular goods and services, promote, support,
encourage and lend assistance to Indonesian nationals
desirous of establishing enterprises and businesses
providing goods and services for the Enterprise and for the
permanent settlement(s) (if any) constructed by the Company
and the residents thereof, and shall generally promote,
support, encourage and assist the establishment and
operation of local enterprises outside any Mining Area.
2. The Company shall make maximum use of Indonesian sub-
contractors where services are available from them at
competitive prices and of comparable standards with those
obtainable from elsewhere, whether inside or outside
Indonesia.
3. Insofar as it is practicable the Company shall give first
preference in its assistance hereunder to landowners in and
other people originating from the area of the Enterprise.
4. Except as otherwise agreed by the Department, the Company
shall, at the commencement of the Feasibility Studies
Period with respect to an Exploration Area, appoint, for
such period as is reasonably necessary, a member of its
staff who has had experience within Indonesia of the
establishment, control and
<PAGE> -94-
day-to-day running of enterprises controlled and run by
Indonesians who shall:
(i) identify activities related to the Enterprise
including the provision of goods and services as
described above which can be carried on by Indonesian
nationals or local enterprises ;
(ii) advise and assist Indonesian nationals desirous of
carrying on those activities or of establishing
enterprises to do the same; and
(iii) implement, or assist in the implementation of, the
Business Development Program as hereinafter described
on behalf of the Company.
The staff member appointed for this purpose shall be a full
time employee of the Company.
5. The Company shall, directly or indirectly, provide funds
for, and assist in the development of a Business and
Community Development Program designed to assist
Indonesian Participants in the province in which the
Enterprise is located, which Program shall be submitted to
the Government as part of the Company's feasibility study
report as described in Annex "E".
6. Except as otherwise agreed by the Government, the Business
Development Program will make provision as far as is
practicable for the following (except to the extent of
activities to be carried out directly by the Company):
<PAGE> -95-
(i) enterprises involved in the supply and maintenance of
Mining equipment and the provision of consumable
supplies;
(ii) subcontracting to self - employed equipment operators
for road construction and maintenance;
(iii) subcontracting of site preparation, construction and
maintenance of houses, Government buildings,
industrial facilities and other works and buildings
and facilities to be established, including
concreting, welding, tank constructions, steel
fabrication, plumbing, electrical work and timberwork;
(iv) enterprises involved in town services such as sewerage
and garbage collection, treatment and disposal,
passenger transport, freight carriage of consumer
items and stevedoring (except in relation to the
shipping of the Products of the Mine);
(v) enterprises involved in trade stores, supermarkets,
other retail outlets, canteens, restaurants, taverns,
cinemas, social clubs, cleaning and laundry, and
vehicle maintenance and repair facilities;
(vi) enterprises involved in the supply of fresh fruits,
vegetables, meat and fish; and
(vii) other activities agreed to by the Company and the
Government;
<PAGE> -96-
7. Except as otherwise agreed by the, Government the Business
Development Program shall also include details of:
(i) the time schedule for its implementation;
(ii) those additional activities which could be established
by Indonesian nationals;
(iii) those activities in which the Company intends to
commence operating but which will be transferred to
Indonesian nationals at a later date, on a commercial
basis; and
(iv) any facilities by way of training, technical or
financial assistance which can be made available to
facilitate the smooth transition of ownership and
operation to Indonesian nationals.
8. Except as otherwise agreed by the Government, the Business
Development Program shall be reviewed annually by the
Company, in consultation with the Government, and may be
altered by mutual consent between the Company and the
Government with a view to securing the maximum benefit to
Indonesian nationals and local enterprises from the
operations of the Company and the carrying out of the
Enterprise.
9. Except as otherwise agreed by the Department, the Company
shall consult from time to time with representatives of the
Government and furnish the Government at quarterly
intervals with a report concerning the following:
(i) the implementation of the training and manpower
aspects of the Business Development Program;
<PAGE> -97-
(ii) the implementation of provisions relating to local
purchasing of supplies; and
(iii) the implementation of provisions relating to local
business development.
10. The Government agrees to assist the Company in securing
appropriate land rights to allow the Company to accomplish
the foregoing.
<PAGE> -98-
ARTICLE 28
MISCELLANEOUS PROVISIONS
1. Each of the parties agrees to execute and deliver all such
further instruments, and to do and perform all such further
acts and things, as shall be necessary or convenient to
carry out the provisions of this Agreement.
2. Any notice, request, waiver, consent, approval and other
communication required or permitted under this Agreement
shall be in writing and shall be deemed to have been duly
given or made when it shall be delivered by hand or by
mail, telegram, cable or radiogram, with postage or
transmission charges fully prepaid, to the party to which
it is required or permitted to be given or made at such
party's address hereinafter specified, or at such other
addresses as such party shall have designated by notice to
the party giving such notice or making such request:
To the Government addressed to :
The Ministry of Mines and Energy of the
Republic of Indonesia
c/o. The Director General of Mines
Jalan Jenderal Gatot Subroto Kav. 49
JAKARTA - INDONESIA
<PAGE> -99-
To the Company at its principal office in Jakarta with one
copy by airmail, telegram, telex, cable, radiogram, or
facsimile with postage or transmission charges fully
prepaid to:
P.T. Irja Eastern Minerals Corporation.
Plaza, 5th floor
Jl.H.R.Rasuna Said Kav.X-7 No.6
Jakarta 12940
with a copy to:
Eastern Mining Company, Inc.
c/o Freeport-McMoRan Copper & Gold Inc.
1615 Poydras Street
New Orleans, LA 70112
or such other address as the Company may notify from time
to time.
3. The Minister or his designee may take any action or give
any consent on behalf of the Government which may be
necessary or convenient under or in connection with this
Agreement for its better implementation and any action so
taken or consent so given shall be binding upon the
Government and any instrumentality or subdivision thereof.
4. When required by the context of this Agreement, each number
(singular or plural) shall include all numbers and each
gender shall include all genders. The headings appearing
in this Agreement are not to be construed as
<PAGE> -100-
interpretations of the text or provisions herof, but are
intended only for convinience of reference.
5. The terms of this Agreement (including the Annexes hereto)
constitute the entire agreement between the Parties hereto
and no previous communications, representations or
agreements, either oral or written between the Parties
hereto with respect to the subject matter therof shall vary
the terms of this Agreement.
6. Unless the context otherwise expressly requires, where
reference is made in this Agreement to the laws or
regulations of Indonesia such reference shall be to the
laws and regulations of Indonesia generally applicable to
foreign Mining companies in Indonesia in force from time to
time.
7. Where an approval or consent or concurrence of the
Department or the Government of Indonesia or any
subdivision or instrumentality thereof is required, and
where an application is made by the Company to the
Government of Indonesia under this Agreement such approval
or consent will not be unreasonably withheld or delayed.
Furthermore, if within 3 (three) months after a written
application or request, the Company has not received any
objection in writing from the Government, such application
or request shall be deemed to be approved or accepted.
<PAGE> -101-
ARTICLE 29
A S S I G N M E N T
1. This Agreement may not be transferred or assigned
(including for the purpose of financing) in whole or in
part, without the prior written consent of the Department;
provided, however that where the Department consents to a
transfer or assignment, the Company shall not be relieved
from any of its obligations hereunder except to the extent
that the transferee or assignee shall assume such
obligations.
2. The shareholders in the Company shall not transfer shares
in the Company without the prior written consent of the
Department which decision will not be unreasonably withheld
or delayed; provided that the written consent of the
Department shall not be required in the case of:
(a) a transfer of shares pursuant to Article 24;
(b) shares listed on an Indonesian stock exchange; or
(c) a transfer by a shareholder of all or some of its
shares to Freeport-McMoRan Copper & Gold Inc. or an
Affiliate thereof.
<PAGE> -102-
ARTICLE 30
FINANCING
1. The Company shall have sole responsibility for financing
the Enterprise and shall maintain sufficient capital to
carry out its obligations under this Agreement. The Company
may determine the extent to which the financing shall be
accomplished through issuance of shares of the Company or
through borrowings by the Company, provided that from the
start of the Construction Period the Company shall endeavor
to maintain a ratio of shareholder's capital to third party
borrowings so as to reasonably assure the continuing
solvency of the Company for the benefit of the Government,
the lenders and the shareholders.
2. Any long term borrowing by the Company under this Agreement
shall be on such repayment terms and at such effective
rates of interest (including discounts, compensating
balances and other costs of obtaining such borrowings) as
are reasonable and appropriate for Mining companies in
circumstances then prevailing in the international money
markets after complying with existing procedures for
obtaining foreign loans.
3. For the purpose of securing financing, the Company may
mortgage, pledge or otherwise encumber its assets, subject
to paragraph 1 of Article 29.
<PAGE> -103-
ARTICLE 31
T E R M
1. This Agreement shall become effective on the date set out
at the beginning of this Agreement.
2. Subject to the provisions herein contained, this Agreement
shall continue in force until the expiration of the last
Operating Period for a Mining Area and for such additional
period, if any, for which this Agreement shall be renewed
or otherwise extended. The Company shall be entitled to
apply for two successive ten year extensions subject to
Department approval. The Department will not unreasonably
withhold or delay such approval. Such application by the
Company may be made at any time during the term of this
Agreement, including any prior extension.
<PAGE> -104-
ARTICLE 32
GOVERNING LAW
1. Except as otherwise expressly provided herein, this
Agreement, its implementation and operation shall be
governed and construed and interpreted in accordance
with the laws of the Republic of Indonesia which are
presently in force. This Agreement shall have the
force and effect of law for both the Company and the
Government.
2. This Agreement has been drawn up in both the
Indonesian and English languages and both texts are
valid. In the event of any divergency between the two
texts, however, the English text shall prevail and
shall be considered the official text.
In witness whereof, the Parties hereto have caused this
Agreement to be duly executed as of the date appearing at
the beginning of this Agreement.
FOR THE GOVERNMENT OF THE
REPUBLIC OF INDONESIA,
By : ____________________________
Minister of Mines and Energy
FOR P.T. EASTERN MINING COMPANY
By : ___________________________
<PAGE> -105-
EXHIBIT 10.4
______________________________________________________________
JOINT VENTURE AND SHAREHOLDERS' AGREEMENT
between
MITSUBISHI MATERIALS CORPORATION
and
P.T. FREEPORT INDONESIA COMPANY
and
FLUOR DANIEL ASIA, INC.
entered into as of October 25, 1995
______________________________________________________________
JOINT VENTURE AND SHAREHOLDERS' AGREEMENT
THIS JOINT VENTURE AND SHAREHOLDERS' AGREEMENT is made as
of this 25th day of October 1995 between MITSUBISHI MATERIALS
CORPORATION ("MMC"), a company organized and existing under
the laws of Japan; P.T. FREEPORT INDONESIA COMPANY ("FI"), a
company established under the laws of the Republic of
Indonesia which is also domesticated in the State of Delaware,
U.S.A.; and FLUOR DANIEL ASIA, INC. ("FLUOR"), a company
organized and existing under the laws of the State of
California, U.S.A. (sometimes referred to individually as
" Party" and together as the "Parties").
WHEREAS, as described in " Gresik Smelter Project -
Equity Partner's Philosophy," the Parties have agreed in
principle to work together in a spirit of good faith and
cooperation to develop, construct, own and operate a 200,000
metric ton per annum copper smelter and refinery to be located
at Gresik, East Java, Indonesia (the "Project");
WHEREAS, the Parties have entered into that certain
Project Planning Agreement dated May 12, 1995 (the "Project
Planning Agreement") concerning the preparation of a
feasibility study for the Project;
WHEREAS, consistent with and in furtherance of the terms
of the Project Planning Agreement, the Parties desire to form
a foreign investment company under the provisions of Law No. 1
of 1967, as amended, and other applicable laws of the Republic
of Indonesia (the "Project Company") to implement the
Project;
NOW, THEREFORE, in consideration of the mutual promises
and covenants hereinafter set forth, the Parties hereby agree
as follows:
ARTICLE 1. DEFINITIONS AND INTERPRETATION.
1.1 Definitions. The following capitalized terms shall have
the meanings in this Agreement as set forth below:
"AIP" shall mean that certain Agreement in Principle dated
January 6, 1995 between MMC, Freeport-McMoran Copper & Gold
Inc., a corporation organized under the laws of the State of
Delaware, U.S.A. ("FCX") and Fluor Daniel Wright Ltd., a
company organized and existing under the laws of the Province
of British Columbia, Commonwealth of Canada.
"Auditor" means any independent firm of certified public
accountants of good international repute, appointed by Project
Company and approved by a General Meeting of Shareholders.
"Basic Proportions" means the proportions in which the
Parties own shares in the Project Company as set forth in
Section 3.2 and any subsequent modifications, supplements or
amendments thereto.
"Concentrate Purchase and Sale Agreement" means the agreement
in form and substance approved in writing by all of the
Parties to be entered into between Project Company and FI
pursuant to which FI will sell to Project Company, and Project
Company will purchase from FI, 100% of the copper concentrates
required for the operation of the Facilities, and any
subsequent modifications, supplements or amendments thereto.
"EPC Agreement" means the agreement in form and substance
approved in writing by all of the Parties to be entered into
between Project Company and FLUOR or one of more of its
Affiliates as the main contractor for the engineering,
procurement and construction of the Facilities for the
Project, and any subsequent modifications, supplements or
amendments thereto.
"Feasibility Study Expenses" shall have the meaning as
defined in the Project Planning Agreement.
"Lease Agreement" means the agreement in form and substance
approved in writing by all of the Parties to be entered into
between the Project Company and PG pursuant to which PG will
lease land to the Project Company required for the Facilities,
and any subsequent modifications, supplements or amendments
thereto.
"Major Contracts" means (i) the MMC Offshore Marketing
Services Agreement, (ii) the PG Sulfuric Acid Agreement, (iii)
the Lease Agreement, (iv) the MMC Offshore Operation and
Technical Assistance Agreement, (v) the MMC License Agreement,
(vi) the Concentrate Purchase and Sale Agreement,(vii) the
Project Financing Agreements, (viii) the EPC Agreement(s)
(including major subcontracts), and (ix) the PG Facilities
Agreement.
"MMC License Agreement" means the agreement in form and
substance approved in writing by all of the Parties to be
entered into between Project Company and MMC and/or one or
more of its Affiliate(s) pursuant to which MMC and/or one or
more of its Affiliates(s) will grant to Project Company a
license of the Mitsubishi Process, and any subsequent
modifications, supplements or amendments thereto.
"MMC Offshore Marketing Services Agreement" means the
agreement in form and substance approved in writing by all of
the Parties to be entered into between Project Company and MMC
pursuant to which MMC will market products produced by the
Project Company, and any subsequent modifications, supplements
or amendments thereto.
"MMC Offshore Operation and Technical Assistance Agreement"
means the agreement in form and substance approved in writing
by all of the Parties to be entered into between Project
Company and MMC and/or one or more of its Affiliates pursuant
to which MMC and/or its Affiliates will provide management
services to the Project Company, and any subsequent
modifications, supplements or amendments thereto.
"MSK" means Mitsubishi Corporation, a company organized and
existing under the laws of Japan.
"NMM" means Nippon Mining and Metals, Co., Ltd., a company
organized and existing under the laws of Japan.
"Penalty Interest Rate" means with respect to amounts to be
paid by a Party in U.S. Dollars, the published prime
commercial lending rate of at The Chase Manhattan Bank,
National Association, from the due date of the payment as
changed from time to time, plus 2% (such rate to be adjusted
simultaneously with each change in such prime commercial
lending rate) and calculated on the basis of a 365 days year
and actual days elapsed.
"PG" means P.T. Petrokimia Gresik (Persero), a State owned
Indonesian limited liability company.
"PG Facilities Agreement" means the agreement in form and
substance approved in writing by all of the Parties to be
entered into between Project Company and PG pursuant to which
PG will provide the use of certain facilities to the Project
Company, and any subsequent modifications, supplements or
amendments thereto.
"PG Sulfuric Acid Agreement" means the agreement in form and
substance approved in writing by all of the Parties to be
entered into between Project Company and PG pursuant to which
PG will purchase from the Project Company, and Project Company
will sell to PG the Project Company's sulfuric acid output
and any subsequent modifications, supplements or amendments
thereto.
"PMA Account" means the Indonesian bank account established
by the Project Company and into which shall be deposited all
amounts contributed by each Party to the Project Company for
Shares issued by the Project Company to such Party, or for
Subordinated Loans made by such Party to the Project Company.
"Production Date" means the date on which the Project begins
commercial operation (as commercial operation is defined in
the Project Loans).
"Project Loans" mean the loan agreements in form and
substance approved in writing by all of the Parties to be
entered into between Project Company and its lenders in
regards to financing of the Project.
"ROI" means the Republic of Indonesia.
"Shareholder" means a person who owns shares in the Project
Company.
"Share" or "Shares" means a share of common stock in the
Project Company.
"Subordinated Loans" means a loan made by any Shareholder to
the Company which by its terms is expressly made subordinate
to the Project Loans.
"Subsidiary" means any entity in which a Party to this
Agreement holds, directly or indirectly, through one or more
intermediaries, beneficial ownership of fifty percent (50%) or
more of the voting shares or equity interests.
"Transfer" means any pledge, mortgage, hypothecation,
encumbrance, assignment, sale, conveyance or disposition,
whether voluntarily, by operation of law, at judicial sale or
otherwise.
1.2 Construction
a) In this Agreement, unless the context otherwise
requires, the singular shall include the plural and
vice versa and reference to a gender shall include
any other gender.
b) Any reference herein to a Section or Sections is a
reference to the referenced Section or Sections of
this Agreement unless otherwise specifically
provided.
ARTICLE 2. ESTABLISHMENT OF PROJECT COMPANY
2.1 Organization and Registration. The Parties shall use
their best efforts to have the Project Company organized and
registered promptly under the laws of the ROI. The cost of the
Notary who will review the Articles of Association prior to
their submission to the ROI Ministry of Justice shall be
treated as a preincorporation expense.
2.2 Articles of Association. At the time of organization and
registration of Project Company, the Parties shall cause
Project Company to register the Articles of Association in the
form attached hereto as Attachment "A," unless otherwise
required by the ROI Ministry of Justice and approved in
writing by all the Parties. The Parties acknowledge that the
provisions of this Agreement are more detailed in certain
respects than the Articles of Association and the Parties
agree that in such cases the more detailed provisions of this
Agreement, as among the Parties, shall be applicable. In the
event of any conflict between the provisions of this Agreement
and the Articles of Association, this Agreement shall control
and the Parties shall to the extent permitted by applicable
law amend the Articles of Association to the extent of any
such conflict, so as to be consistent with the provisions of
this Agreement.
2.3 Ratification by Project Company. The Parties shall cause
the Project Company to ratify and agree to be bound by this
Agreement as if it were a party hereto and to carry out the
management and administration and its businesses in accordance
with the terms and conditions of this Agreement, and to
perform all obligations intended under this Agreement to be
undertaken or performed by the Project Company.
ARTICLE 3. CAPITAL, SHARES, AND SUBORDINATED LOANS
3.1 Initial Authorized Capital/Shares/Par Value. The Project
Company shall be incorporated with an initial authorized
capital (the "Initial Authorized Capital") of Rp
191,275,000,000 (One Hundred Ninety-One Billion, Two Hundred
Seventy-Five Million Rupiah) [US$ 87,500,000 (Eighty-Seven
Million, Five Hundred Thousand United States Dollars)], to be
divided into Shares of par value Rp218,600 (Two Hundred
Eighteen Thousand, Six Hundred Rupiah) [US$100 (One Hundred
United States Dollars)] each.
3.2 Subscription for Initial Issued Capital. The initial
issuance of authorized capital (the "Initial Issued Capital")
shall be Rp 191,275,000,000 (One Hundred Ninety-One Billion,
Two Hundred Seventy-Five Million Rupiah [US$87,500,000
(Eighty-Seven Million, Five Hundred Thousand United States
Dollars)], represented by Eight Hundred Seventy-Five Thousand
(875,000) Shares. The Parties agree to subscribe for and
accept the Shares of the Initial Issued Capital in the
following ratio:
Party Number of Shares Subscription Basic
Amount Proportion
- -------- ----------------- ------------- ----------
MMC 612,500 US$61,250,000 70%
FI 175,000 US$17,500,000 20%
FLUOR 87,500 US $8,750,000 10%
3.3 Initial Payment for Initial Issued Capital. Provided that
all conditions precedent to such payment as set forth in
Section 3.8 have been satisfied, each Party shall pay ten
percent (10%) of the subscription amount for the Initial
Issued Capital specified in Section 3.2 within fourteen (14)
days after approval of the Articles of Association by the ROI
Ministry of Justice. Payment shall be made in cash in U.S.
Dollars, in a lump sum into the PMA Account or Accounts
without any right of set-off.
3.4 Payment of the Initial Issued Capital Subscription
Balance. In accordance with the Financial Plan and the
provisions of this Agreement, the Board of Directors may,
subject to approval by the General Meeting of Shareholders,
call further payments by the Parties for the Initial Issued
Capital until the Shares subscribed to in Section 3.2 are
fully paid-up. The Board of Directors may call such payments,
subject to approval by the General Meeting of Shareholders,
in U.S. Dollars at such times and in such amounts as may be
necessary to meet the expenditures of the Project Company in
accordance with the Financial Plan. On each call for further
payment, each Party shall pay in cash in the amount due
without any right of set-off within thirty (30) days from the
date of the notice into the PMA Account or Accounts of
Project Company opened for that purpose without any right of
setoff. All Shares subscribed for in Section 3.2 must be fully
paid up on or before the Production Date in accordance with
the Financial Plan.
3.5 Increase of Authorized Capital Amount Prior to Production
Date. Notwithstanding the Articles of Association, prior to
the Production Date the Board of Directors may resolve, in
accordance with the Financial Plan and the provisions of this
Agreement and subject to approval by the General Meeting of
Shareholders, that the Project Company shall increase its
authorized capital amount and/or the amount of Subordinated
Loans at such times and in such amounts as may be necessary to
meet the expenditures of the Project Company in accordance
with the Financial Plan. Upon approval by the General Meeting
of Shareholders, the shares representing the increased
authorized capital amount and/or the additional Subordinated
Loans shall be offered to and subscribed to and/or lent by
each of the Parties in its Basic Proportion. Each Party shall
pay in cash in U.S. Dollars, without any right of set-off, the
amount due into the PMA Account or Accounts of Project Company
opened for that purpose within fourteen (14) days after
approval of the amendment of the Articles of Association by
the ROI Ministry of Justice.
3.6 Making of Subordinated Loans. In addition to the capital
subscriptions set forth in Sections 3.2 and 3.5, as such time
or times as set by the Board of Directors and approved by the
General Meeting of Shareholders in accordance with the
Financial Plan and the Project Loans, each Shareholder agrees
to make Subordinated Loans to the Project Company in U.S.
Dollars in the following aggregate principal amounts:
Party Principal Amount Basic
Proportion
- ------- ---------------- ----------
MMC US$96,250,000 70%
FI US$27,500,000 20%
FLUOR US$13,750,000 10%
The terms of the Subordinated Loans, including the Loan
period(s), the interest rate(s), repayment terms,
subordination, priority, etc. shall be determined by the Board
of Directors in accordance with the Financial Plan and the
Project Loans, and approved by a General Meeting of
Shareholders.
3.7 Default in Payment of Subscription or Making of
Subordinated Loans.
a) If any Party (in this Section, hereinafter called
the "Defaulting Party") fails to fulfill any of its
obligations (i) to make subscription payments for the Initial
Authorized Capital, (ii) to make subscription payments for
additional Shares issued as a result of an increase in
authorized capital prior to the Production Date, or (iii) to
make a Subordinated Loan when due, the Project Company or any
non-defaulting Party may immediately serve notice on the
Defaulting Party, with copies to all other Parties, declaring
the Defaulting Party to be in default and requiring it to
remedy such default in full within ten (10) days of the date
of the notice. Interest on overdue amounts shall be payable
by the Defaulting Party to Project Company at the Penalty
Interest Rate from the date payment was due until paid. All
the rights, but not the obligations, of the Defaulting Party
as a Shareholder, lender of Subordinated Loans, and Party to
this Agreement shall be suspended for as long as such default
is unremedied or until the Party ceases to be a Shareholder
and/or lender of Subordinated Loans.
b) Upon the expiration of the ten (10) day period
described in Section 3.7(a) without remedy of the default,
each non-defaulting Party shall have the right to acquire all
or any portion of the Shares held by the Defaulting Party and
assume all or any portion of the Subordinated Loans held by
the Defaulting Party by giving notice thereof within thirty
(30) days. If the total number of Shares or total amount of
Subordinated Loans for which such notice has been given
exceeds the total number of Shares or Subordinated Loans held
by the Defaulting Party then each Party giving notice (in this
Section, hereinafter called "Accepting Party") may acquire at
least the number of Shares and may assume at least the amount
of Subordinated Loans that bears the same ratio to the total
number of Shares or Subordinated Loans (as the case may be) of
the Defaulting Party that such Accepting Party's Basic
Proportion bears to the aggregate Basic Proportions of all the
Accepting Parties. The Defaulting Party shall transfer the
appropriate number of its Shares and assign the appropriate
amount of its Subordinated Loans to each of the Accepting
Parties within ten (10) days of receipt of such notice from
the Accepting Party. The purchase price for the Shares to be
paid by the Accepting Party shall be fifty percent (50%) of
the aggregate amount paid up on such Shares by the Defaulting
Party, or the book value of such Shares as determined by the
Auditor, whichever is less. The Accepting Party shall also pay
to the Project Company the unpaid balance of any Shares that
are not fully paid. The purchase price for the Subordinated
Loans shall be fifty percent (50%) of the aggregate
outstanding principal and interest then due on the
Subordinated Loans to the Defaulting Party. In either case the
purchase price shall be paid on the date the Accepting Party
receives the Shares or the assignment of the Subordinated
Loans from the Defaulting Party, or, in the case of the
Shares, as soon thereafter as the book value may be determined
by the Auditor.
c) If the total number of Shares or the total amount of
the Subordinated Loans accepted or assumed by the Accepting
Parties is less than the total number of Shares owned or total
amount of outstanding Subordinated Loans held by the
Defaulting Party, the Defaulting Party shall be required to
sell any remaining Shares and assign any remaining
Subordinated Loans to a third party, designated by the Board
of Directors and approved by a General Meeting of
Shareholders, for the same price and payment terms as provided
in Section 3.7 (b) in the case of Transfer to an Accepting
Party. The third party shall also pay to the Project Company
the unpaid balance of any Shares that are not fully paid. For
the execution of such sale of Shares and assignment of
Subordinated Loans to a third party, the Board of Directors
shall be empowered for and on behalf of the Defaulting Party
to apply to, appear before, submit information, obtain
approval from the competent authorities and to take any other
action to accomplish the above Transfer of Shares and
Subordinated Loans.
3.8 Conditions to Payment of Subscriptions and Making of
Subordinated Loans.
The Parties' obligation to make subscription payments and
Subordinated Loans in accordance with Sections 3.3, 3.4, 3.5,
and 3.6 shall be subject to the satisfaction of the conditions
listed in Section 3.1 of the Project Planning Agreement.
ARTICLE 4. PREEMPTIVE RIGHTS
4.1 Increase in Authorized Capital After the Production Date.
If, after the Production Date, the Board of Directors shall
determine that the Project Company should increase its
authorized capital, the Board of Directors shall give notice
to the Shareholders and set a General Meeting of Shareholders
for approval of the authorized capital increase. If approved
by the General Meeting of Shareholders, the increase in the
authorized capital of the Project Company shall take effect
when the Articles of Association are duly amended and, when
necessary, any Government approvals have been obtained.
4.2 Preemptive Rights of Parties. Each Party shall be
entitled to subscribe for its proportionate share of any
additional Shares issued by the Project Company as a result of
an increase in the authorized capital as specified in Section
4.1. Upon receipt of notice from the Board of Directors of
Project Company's intention to issue additional Shares, each
Party shall notify the Project Company within thirty (30) days
whether it intends to purchase its proportionate Share of the
additional Shares to be issued. If the total number of Shares
for which the Parties have exercised such pre-emptive right
exceeds the total number of Shares to be issued, then each
Party exercising such pre-emptive right may acquire at least
the number of Shares that bears the same ratio to the total
number of Shares to be issued that such Party's Basic
Proportion bears to the aggregate Basic Proportion of all
Parties giving such notice.
4.3 Consequences of Failure to Subscribe for Full
Proportionate Share. Should any Party elect not to subscribe
for its full proportionate share of the Shares then being
offered (a "Non-Subscribing Party"), then such Non-
Subscribing Party shall thereafter have no greater rights than
any person or entity not a Party to this Agreement to
subscribe for Shares later offered by the Project Company. In
the event any Party fails to notify the Board of Directors in
writing within such thirty (30) day period that it will
subscribe to all of its proportionate share of the new Shares
to be issued, or notifies the Board of Directors in writing
that it will not subscribe to such new Shares or will
subscribe to fewer new Shares than those to which it is
entitled, then the Board of Directors shall first offer such
Shares (the "Non-Subscribing Party Shares") to the other
Parties. Each Party receiving such notice shall have thirty
(30) days to notify the Project Company whether it desires to
purchase its proportionate share of the Non-Subscribing Party
Shares. If the total number of Non-Subscribing Party Shares
desired by the other Parties exceeds the total number of Non-
Subscribing Party Shares to be issued, then each Party
desiring Non-Subscribing Party Shares may acquire at least the
number of Non-Subscribing Party Shares that bears the same
ratio to the total number of Non-Subscribing Party Shares to
be issued that such Party's Basic Proportion bears to the
aggregate Basic Proportion of all Parties giving such notice;
provided that should any Party
accept in writing less than the number of Shares to which he
would be entitled under the foregoing, such Party shall be
entitled only to the number of Shares it has so accepted, and
the remaining Shares shall be divided proportionately as above
among those Parties who have accepted more than the number of
Shares to which they would be entitled in accordance with the
foregoing. If the other Parties do not subscribe for Non-
Subscribing Party Shares within the time limits established
above, then the Board of Directors may offer such Shares to
third parties, with the prior approval of a General Meeting of
Shareholders.
ARTICLE 5. TRANSFER OF SHARES OR SUBORDINATED LOANS
5.1 Approval Required for Transfer. Except as otherwise
provided herein, or except as may be approved in writing by
all of the Parties, none of the Parties nor any person acting
by authority of or for any of the Parties shall Transfer any
or all of its right, title or interest in its respective
Shares or its Subordinated Loans, all such right, title and
interest of each of the Parties being personal and
non-transferable and non-assignable except as otherwise
specified in this Agreement.
5.2 Prohibition on Certain Transfers. Except as specifically
provided herein, no Shareholder shall Transfer any interest in
its Shares or its Subordinated Loans prior to the Production
Date. Nor shall any Party, without the written consent of the
other Parties or except in the case of a Transfer pursuant to
Section 5.4 or 5.8, make any Transfer as a result of which
either the transferring Party or its transferee shall own less
than five percent (5%) of all Shares of the Project Company
then issued.
5.3 Right of First Offer.
a) No Party (a "Transferring Party") shall Transfer any
of its Shares or Subordinated Loans to any third
party, unless it shall have first offered to sell
such Shares and assign such Subordinated Loans by
written notice to all the other Parties and the Board
of Directors. The written notice shall contain a
description of the number of Shares offered for sale
and the amount and terms of the Subordinated Loans
offered for assignment, the price sought by the
Transferring Party, and any other material
information necessary for the other Parties to make
an informed decision whether to purchase the Shares
and/or assume the Subordinated Loans.
b) Within (30) thirty days following receipt of the
notice from the Transferring Party, each Party shall
give written notice to all other Parties and the
Board of Directors of its decision whether to
purchase all or any portion of such Shares and/or
assume all or any portion of such Subordinated Loans.
If the total number of Shares for which Parties have
exercised such right exceeds the total number of
Shares offered, or the total amount of Subordinated
Loans for which Parties have exercised such right
exceeds the total amount of Subordinated Loans
offered, then each Party exercising such right may
acquire at least the number of Shares and assume at
least the amount of Subordinated Loans that bears the
same ratio to the total number of Shares or
Subordinated Loans offered that such Party's Shares
or Subordinated Loans bear to the total number of
Shares or Subordinated Loans of all Parties
exercising such right; provided that should any Party
accept in writing less than the number of Shares or
amount of Subordinated Loans to which he would be
entitled under the foregoing, such Party shall be
entitled only to the number of Shares or amount of
Subordinated Loans it has so accepted, and the
remaining Shares and Subordinated Loans offered for
Transfer shall be divided proportionately as above
among those Parties who have accepted more than the
number of Shares or amount of Subordinated Loans to
which they would be entitled in accordance with the
foregoing.
c) Notwithstanding the right of first offer stated in
Section 5.3 a) and b), in the event that the total
number of Shares or Subordinated Loans accepted in
writing as provided in Section 5.3 b) is less than
all of the Shares or Subordinated Loans offered for
Transfer, the Transferring Party may:
i) withdraw in whole or in part its offer to
Transfer the number of Shares and amount of
Subordinated Loans offered; or
ii) Transfer (A) all of the Shares and/or
Subordinated Loans offered (including those
accepted), or (B) if the Transferring Party so
determines, only Transfer those Shares or
Subordinated Loans that were not accepted by
the other Parties. In either case, the
Transfer shall be made only to a third party
who is financially responsible and of generally
recognized good business repute at terms no
more favorable than offered to the Parties,
after the Transferring Party has notified the
other Parties of the identity of the proposed
purchaser and the terms of the proposed
Transfer, and after the Transferring Party has
received the consent of the General Meeting of
Shareholders, and any Government approvals
required for the proposed Transfer.
5.4 Consent to Certain Transfers by MMC and FLUOR.
a) Notwithstanding the provisions of Sections 5.1, 5.2
and 5.3 or the Articles of Association, MMC shall
have the absolute right to Transfer up to nineteen
and nine-tenths percent (19.9%) in total of the
issued Shares of the Project Company and an
equivalent amount of the Subordinated Loans to MSK
and/or NMM, and/or, subject to the transferee being
of financial standing acceptable to the other
Parties, in their reasonable determination, any other
Japanese company(ies) engaging in the copper smelting
business or trading business, provided that the
transferee company(ies) agree to be bound to all of
the terms and conditions hereof and the Articles of
Association. N o guarantees or other support from MMC
shall be required to effectuate such Transfer of
Shares and Subordinated Loans by MMC. Each Party
agrees to vote in favor of such Transfer at a General
Meeting of Shareholders at the request of MMC.
b) Notwithstanding the provisions of Sections 5.1, 5.2
and 5.3 or the Articles of Association, at any time
within three (3) years and three and one-half (3-
1/2) years after the Production Date, FLUOR shall
have the absolute right to Transfer its issued Shares
of the Project Company and its Subordinated Loans to
FI. N o guarantees or other support from FLUOR shall
be required to effectuate such Transfer of Shares and
Subordinated Loans by FLUOR. Each Party agrees to
vote in favor of such Transfer at a General Meeting
of Shareholders at the request of FLUOR.
5.5 Consent to Certain Transfers to Subsidiaries.
Notwithstanding the provisions of Section 5.1, 5.2 and 5.3 or
the Articles of Association, any Party shall have the right to
Transfer its Shares and Subordinated Loans to a Subsidiary,
provided that either of the following conditions are met:
a) such Subsidiary shall be of financial standing acceptable
to the other Parties (which acceptance shall not be
unreasonably withheld); or
b) the transferring Party shall remain jointly and severally
liable for its obligations assumed under this Agreement.
Notwithstanding the above:
c) without the written consent of the other Parties or
except in the case of a Transfer pursuant to Section 5.4
or 5.8, no Party shall make any Transfer as a result of
which either the transferring Party or its Subsidiary
shall own less than five percent (5%) of all Shares of
the Project Company then issued; and
d) no such Subsidiary shall cease to be a fifty percent
(50%) or more owned Subsidiary of a Party without first
transferring all of the said Shares and Subordinated
Loans to the Party or to another fifty percent (50%) or
more owned Subsidiary of the Party.
5.6 Consent to Share Pledges in Connection With the Project
Loans. Notwithstanding the provisions of Section 5.1, 5.2 and
5.3 or the Articles of Association, the Parties hereby consent
to a hypothecation or pledge of Shares if such hypothecation
or pledge is required in connection with the execution or
performance of the Project Loans.
5.7 Party's Right to Assign Shareholder Rights and
Subordinated Loans. Should applicable laws, regulations or
decrees of the ROI at any time limit the ability of any Party
to fully exercise the rights granted to it pursuant to this
Agreement and the Articles of Association, then such Party
shall have the right to assign all of the rights and
privileges conferred upon it under this Agreement and the
Articles of Association to any other person or entity
qualified to hold its Shares and Subordinated Loans (the
"Qualified Transferee") and such Qualified Transferee shall
be entitled to all of the privileges and to exercise all of
the rights of such Party; provided, however, that such
Qualified Transferee shall agree to be bound to all of the
terms and conditions hereof.
5.8 Mandatory Participation by a Third Party in the Share
Capital of the Project Company.
a) If, in the sole discretion of the Board of Directors,
it becomes necessary in connection with the
acquisition of the land for the Project, in
connection with obtaining financing for the Project,
or in order to comply with Indonesian laws,
regulations and decrees, for a third party to acquire
an interest in the share capital of the Project
Company (the "Third Party Shareholder"), the Parties
agree that Shares and Subordinated Loans shall be
tendered to the Third Party Shareholder in accordance
with the procedure set forth in this Section 5.8.
b) Before the Project Company issues new Shares to a
Third Party Shareholder, if so requested by the Board
of Directors FLUOR shall first make an irrevocable
tender in writing to Transfer to the Third Party
Shareholder the number and type of Shares and amount
and type of Subordinated Loans specified by the Board
of Directors at the amount actually paid for the
Shares by FLUOR, plus the outstanding principal
amount and accrued interest of the Subordinated
Loans. FLUOR shall send a copy of the tender to the
other Parties and the Board of Directors. The tender
shall be open for ninety (90) days from receipt by
the Third Party Shareholder and the Board of
Directors. If accepted by the Third Party
Shareholder, FLUOR shall promptly Transfer the Shares
and assign the Subordinated Loans to the Third Party
Shareholder upon receipt of payment therefor.
c) If (i) the mandatory participation by the Third Party
Shareholder is required within three (3) years after
the Production Date, and (ii) FLUOR no longer owns
any issued Shares nor holds any Subordinated Loans,
then, before the Project Company shall issue new
Shares to a Third Party Shareholder, if so requested
by the Board of Directors, FI shall make an
irrevocable tender in writing to Transfer to the
Third Party Shareholder the number and type of Shares
and the amount and type of Subordinated Loans
specified by the Board of Directors at the amount
actually paid for the Shares by FI plus the
outstanding principal amount and accrued interest of
the corresponding portion of the Subordinated Loans.
FI shall send a copy of the tender to the other
Parties and the Board of Directors. The tender shall
be open for ninety (90) days from receipt by the
Third Party Shareholder and the Board of Directors.
If accepted by the Third Party Shareholder, FI shall
promptly Transfer the Shares and Subordinated Loans
to the Third Party Shareholder upon receipt of
payment therefor. In the event that FI is required to
Transfer Shares to a Third Party Shareholder in
accordance with this subsection c) and if, as a
result, FI retains ten percent (10%) or more of the
issued Shares of the Company , the other Parties agree
to revise the Articles of Association and any
affected provisions of this Agreement as necessary
such that FI shall retain, despite such forced
Transfer of Shares, the shareholder veto rights it
had prior to the Transfer pursuant to the Articles of
Association. Furthermore, in the case of a forced
transfer of Shares from FI to a Third Party
Shareholder in accordance with this subsection c)
where FI retains ten percent (10%) or more of the
issued Shares of the Company , pending formal
amendment of the Articles of Association and this
Agreement, the Parties agree that FI shall continue
to have the same veto rights specified in the
Articles of Association as though it were an owner of
twenty percent (20%) of the issued Shares of the
Project Company.
d) In the event of a forced Transfer in accordance with
Subsections 5.8 b) or c), the transferring Party
shall transfer to the Third Party Shareholder good
and marketable title to the Shares and Subordinated
Loans, and shall, prior to the Transfer, be
responsible to satisfy in full any liens, pledges, or
other encumbrances on the Shares and Subordinated
Loans other than liens, pledges or encumbrances
arising in connection with the Project Loans.
5.9 New Shareholder to Become Bound by this Agreement.
Any transferor of Shares and Subordinated Loans shall,
before the transfer is effected, cause the transferee (other
than the Parties) to submit to all the other Parties a written
confirmation and agreement in a form reasonably satisfactory
to all such Parties to the effect that the transferee
acknowledges all the provisions of this Agreement and agrees
to be bound by and to comply with all the provisions
applicable to the transferor as if the transferee were
originally a party to this Agreement.
5.10 Obligations Continuing. In the event any of the Parties
ceases to own Shares and hold Subordinated Loans, such Party
shall cease to be a Party to this Agreement and shall
thereafter not be entitled to any rights or benefits under
this Agreement. However, such Party shall not be released
from any outstanding obligations hereunder (including the
Party's duty of Confidentiality as stated in Article 18), in
the Major Contracts or under any guarantee unless the
guarantee obligation is duly assumed by the transferee and the
transferor is released with the written consent of the other
Parties.
ARTICLE 6. BOARD OF DIRECTORS; PRESIDENT DIRECTOR.
The Project Company shall be managed by a Board of
Directors to be elected at the General Meeting of
Shareholders. The Board of Directors shall consist of not
less than three (3) and not more than fourteen (14) Directors.
The initial number of Directors shall be three (3), but shall
be increased shortly after establishment of the Project
Company to eleven (11). Each Shareholder who holds nine
percent (9%) or more of the issued Shares shall have the right
to nominate one or more Directors. The number of Directors
that each such Shareholder shall have the right to nominate
shall be calculated by first dividing the Shareholder's
percentage ownership of all issued and outstanding Shares of
the Project Company by the number nine (9), then rounding any
resulting fraction up or down to the nearest whole integer(a
resulting fraction of one-half shall be rounded up). Each
Party covenants and agrees to vote as a Shareholder so as to
elect as Directors the individuals nominated by each
Shareholder who is entitled to do so. Each nominating Party
shall cause its nominated individual(s) to abide by the terms
and conditions of this Agreement. MMC shall have the right to
designate one of the Directors it nominates to be the
President Director.
ARTICLE 7. BOARD OF COMMISSIONERS; PRESIDENT COMMISSIONER.
The Project Company shall have a Board of Commissioners
to be elected at the General Meeting of Shareholders. The
Board of Commissioners shall consist of not less than three
(3) and not more than five (5) Commissioners. The initial
number of Commissioners shall be four (4). Each Shareholder
who holds twenty percent (20%) or more of the issued Shares
shall have the right to nominate one or more Commissioners.
The number of Commissioners that each such Shareholder shall
have the right to nominate shall be calculated by first
dividing the Shareholder's percentage ownership of all issued
Shares of the Project Company by the number twenty (20), then
rounding any resulting fraction up or down to the nearest
whole integer (a resulting fraction of one-half shall be
rounded up). Each Party covenants and agrees to vote as a
Shareholder so as to elect as Commissioners the individuals
nominated by each Shareholder who is entitled to do so. Each
nominating Party shall cause its nominated individual(s) to
abide by the terms and conditions of this Agreement. MMC shall
have the right to designate one of the Commissioners it
nominates to be the President Commissioner.
ARTICLE 8. GENERAL PROVISIONS RELATING TO DIRECTORS AND
COMMISSIONERS
8.1 Dismissal. Each nominating Party may at any time by
advising the other Shareholders request the dismissal of such
Directors or Commissioners as have been so nominated by it and
request the replacement of such dismissal Directors or
Commissioners by other nominated individual(s). Each Party
hereby covenants and agrees to vote as a Shareholder so as to
appoint the selected replacements and dismiss the selected
Directors or Commissioners as the case may be.
8.2 Vacancy. In the event that the office of a Director or
Commissioner becomes vacant by reason of death, resignation,
removal or otherwise, the Parties agree to cause the election
of a successor from nominees of that Party which originally
nominated the Director or Commissioner concerned.
ARTICLE 9. DIVIDEND POLICY
The Project Company shall declare and distribute by way
of dividends all profits legally available for that purpose
after setting aside such reserves as may be required by law or
by the General Meeting of Shareholders as provided in the
Articles of Association.
ARTICLE 10. EXECUTION OF AGREEMENTS; PREINCORPORATION
EXPENSES
10.1 Execution of Agreements. Immediately upon the
incorporation and registration of the Project Company, or at
such later date as the Board of Directors may decide, the
Parties shall cause the Project Company to execute and deliver
each of the Major Contracts to which it is a party and
concurrently each Party shall execute and deliver each of the
Major Contracts to which it is a party; provided that in each
case each such Party's obligation to enter into such Major
Contracts shall be subject to such documentation being in form
and substance satisfactory to it after negotiation in good
faith in accordance with the principles set forth in this
Agreement.
10.2 Reimbursement of Incorporation Expenses. All pre-
incorporation costs and expenses of the Project Company
approved by the Board of Directors and reasonably incurred in
connection with the incorporation of the Project Company,
including but not limited to legal and notarial fees, shall be
borne by the Project Company. All other expenses incurred by
any Party in connection herewith or otherwise relating to the
Project shall be borne by the Party so incurring such expenses
or shall be reimbursed by the Project Company in accordance
with the Project Planning Agreement.
10.3 Reimbursement of Feasibility Study Expenses. Promptly
after its formation and subject to the availability of funds,
the Project Company shall reimburse any Party which has
subscribed and fully paid in cash for its proportionate number
of Shares in the capital of the Project Company for all
Feasibility Study Expenses actually paid by such Party
pursuant to the terms of the Project Planning Agreement.
ARTICLE 11. FINANCING
11.1 Financial Plan. As soon as feasible after the execution
of this Agreement, the Parties shall cause the Project Company
to adopt a Financial Plan (the "Financial Plan"), which shall
have been approved in writing by all of the Parties and which
shall contain a detailed plan of the financial requirements of
the Project and the funding thereof for a period of three (3)
years. In addition, not later than November 1st of each year,
the Board of Directors shall prepare and provide to the
Shareholders for their approval an annual operating and
capital budget. For reference purposes only in relation to the
annual budgets, the Board of Directors shall also prepare a
rolling three (3) year business plan. The rolling three (3)
year plan shall not require the approval of a General Meeting
of Shareholders.
11.2 Financing and Guarantees. The Parties confirm that the
Project Company shall use its best efforts to procure on the
basis of its own resources the funds and financial facilities
it requires in accordance with the approved Financial Plan, by
using its assets as security. In the event, however, that the
Project Company lenders require Shareholder guarantees,
Shareholder loans, Subordinated Loans or other forms of
Shareholder support ("Shareholder Support"), such Shareholder
Support shall be provided by the Parties severally, and not
jointly, shall be proportionate to their respective Basic
Proportions at the time of provision of any such Shareholder
Support and upon such terms and conditions as all of the
Parties shall mutually agree, and, in no event shall exceed a
total of US$300,000,000 for all Parties in the aggregate. If
any Party fails to fulfill any of its obligations to provide
Shareholder Support pursuant to this Article after all Parties
have agreed to the form and substance of such Shareholder
Support to be provided, such Party shall be deemed to be a
Defaulting Party within the meaning of Section 3.7 hereof and
the provisions of such Section shall apply mutatis mutandis
with respect to such failure and such Defaulting Party.
11.3 Share and Subordinated Loan Transfers. In the event that
any Party Transfers its Shares and/or Subordinated Loans in
the Project Company, the transferor shall arrange that its
guarantee or loan obligations shall be duly assumed by the
transferee consistent with the percentage of the Shares and
amount of Subordinated Loans Transferred, unless such
transferee is prohibited or precluded from providing any
guarantee or making such loan(s) under the laws, regulations
and policies of the ROI, in which case the transferring Party
shall continue to assume its guarantee or loan obligations.
Article 12. COVENANTS
12.1 General. Each of the Parties agrees and covenants that
it will work diligently on all major aspects of the Project
including, but not limited to, facility design, securing of
financing, start-up and operation of the Project.
12.2 Governmental Approvals. Each of the Parties agrees and
covenant that it shall during the term of this Agreement exert
its best efforts to procure all of the required government
approvals and licenses for the establishment and continuance
of the Project Company and the attainment of the Project
Company's objectives, including but not limited to all
authorizations required under the Foreign Capital Investment
Law and regulations.
12.3 Execution Of Other Agreements. Each of the Parties
covenants and agrees to enter into and execute such other
documents as are necessary to give full effect to the
provisions of this Agreement.
12.4 Competition With The Project Company. Each Party may,
from time to time, be engaged in businesses which are directly
or indirectly in competition with the business of the Project
Company. While the Parties intend that each Party shall be
free to compete with each other Party and with the Project
Company, the Parties agree that none of the Project
Information or other information which has been obtained
concerning the Project or the Project Company shall be used by
any Party to the detriment of the other Parties or the Project
Company.
12.5 MMC Guaranteed Return. FI and FLUOR each agree that to
the extent the Project does not provide an average annual
simple return (after Indonesian taxes) of thirteen percent
(13%) on MMC's total capital contribution (which shall include
its Subordinated Loans) to the Project Company (the "Target
Return") during the first twenty (20) years after the
Production Date (the "Return Adjustment Period"), then (a) FI
will assign to MMC up to one hundred percent (100%) of any
returns it may be entitled to receive from the Project and (b)
FLUOR will assign to MMC up to fifty percent (50%) of any
returns it may be entitled to receive from the Project, with
such assignments to be prorated based on a 20:5 ratio as
between FI and FLUOR, until such time as MMC has achieved an
average annual simple return equal to the Target Return;
provided, however, that if MMC's average annual simple return
shall at any time exceed the Target Return during the Return
Adjustment Period, then MMC shall assign such excess returns
based on a 20:5 ratio to FI and FLUOR until such time as FI
and FLUOR have been reimbursed for all amounts which FI and
FLUOR previously assigned to MMC.
ARTICLE 13. TERM OF THIS AGREEMENT
This Agreement shall remain in force and effect as long
as Project Company continues to exist, unless earlier
terminated as provided for in this Agreement.
ARTICLE 14. DEFAULT
14.1 Default. Any of the following will constitute a Default:
(a) If any of the Parties shall be declared insolvent or
bankrupt, or make an assignment or other arrangement
for the benefit of creditors;
(b) If any of the Parties shall be dissolved or
liquidated; or
(c) If any of the Parties shall at any time be in
default in any material respect in the performance
of any of its obligations under this Agreement or
otherwise commit any material breach of this
Agreement, and such default or breach shall continue
for a period of sixty (60) days after a written
notice demanding rectification of such default or
breach has been given by Project Company or any
other Party to the Defaulting Party, and, provided
further, such Default has been acknowledged by the
Defaulting Party or confirmed by an arbitrator's
judgment as provided in Article 16.
14.2 Effect of Default. Upon the occurrence of a Default,
without prejudice to any other rights and remedies of the Non-
defaulting Parties or Party, the rights of the Defaulting
Party under this Agreement shall be suspended pending sale of
the Defaulting Party's Shares as provided in Section 14.3 or
for so long as the Default is unrectified.
14.3 Share Purchase Right. In the event of a Default after
the establishment of Project Company, each of the Non-
defaulting Parties shall have the right to purchase all or any
part of the Shares and assume all or any part of the
Subordinated Loans held by the Defaulting Party, at the price
determined in accordance with Section 14.4, by giving notice
("an Exercise Notice") thereof to all the Parties within
sixty (60) days after the Default occurs. If the total number
of Shares and amount of Subordinated Loans for which Parties
have exercised such right exceeds the total number of Shares
and Subordinated Loans offered, then each Shareholder
exercising such right may acquire at least the number of
Shares and amount of Subordinated Loans that bears the same
ratio to the total number of Shares and Subordinated Loans
held by the Defaulting Party that such Party's Basic
Proportion bears to
the aggregate Basic Proportions of all Parties exercising such
right; provided that should any Party accept in writing less
than the number of Shares and/or Subordinated Loans to which
it would be entitled under the foregoing, such Party shall be
entitled only to the number of Shares and/or Subordinated
Loans it has so accepted, and the remaining Shares and
Subordinated Loans offered for sale or assignment shall be
divided proportionately as above among those Parties who have
accepted more than the number of Shares and/or Subordinated
Loans to which they would be entitled in accordance with the
foregoing. If the total number of Shares or Subordinated Loans
for which Parties have exercised such right is less than the
total number of Shares or Subordinated Loans offered, then the
Board of Directors may offer such Shares or Subordinated Loans
to third parties, with the prior approval of a General Meeting
of Shareholders.
14.4 Share Price. For the purpose of the Transfer of the
Shares and Subordinated Loans as stated in Section 14.3 above,
the sale and purchase price of the Shares and Subordinated
Loans shall be at (i) the then book value of such Shares and
the outstanding principal and accrued interest of the
Subordinated Loans as determined by the Auditor in the case of
Subsections 14.1 (a) through (b) above, or (ii) seventy-five
percent (75%) of the par value of such Shares or seventy-five
percent (75%) of the then book value of such Shares as
determined by the Auditor, whichever is less, and seventy-five
percent (75%) of the outstanding principal and accrued
interest of the Subordinated Loans in the case of Subsection
14.1(c) above.
14.5 Share and Subordinated Loan Transfer. Within thirty (30)
days after the Share and Subordinated Loans purchase price is
determined in accordance with Section 14.4:
(a) the Defaulting Party shall:
(i) execute and deliver to the purchaser the
relevant documents required to transfer the
Shares and assign the Subordinated Loans;
(ii) deliver to the purchaser the share
certificate(s) (if any) relating to the Shares
and loan and security documents relating to
the Subordinated Loans;
(iii) deliver to the purchaser a letter of
resignation from each of the Director(s) and
Commissioner(s) appointed or elected on its
nomination with a waiver of all claims for
compensation for loss of office;
(iv) deliver to the purchaser a bank check for one
half of the amount of any stamp or other
transfer tax or duty payable in respect of the
Transfer of the Shares and Subordinated Loans,
failing which the purchaser may deduct such
sum from the purchase price of the Shares and
Subordinated Loans;
(v) deliver to the purchaser all books and records
of the Project Company in its possession or in
the possession of Director(s) or
Commissioner(s) thereof elected or appointed
on its nomination;
(vi) co-operate with the purchaser in the orderly
transfer of the Shares and Subordinated Loans
and, where appropriate, control and management
of the business and affairs of the Project
Company to the purchaser.
(b) the purchasing Party shall deliver to the Defaulting
Party a bank check for the purchase price of the
Shares and Subordinated Loans less any deduction in
respect of stamp or other tax or duty in accordance
with subparagraph (a)(iv) of this Section 14.5.
ARTICLE 15. EFFECT OF TERMINATION AND DISSOLUTION
Termination of this Agreement for any cause shall not
release the Parties from any liability which at the time of
termination has already accrued or which thereafter may accrue
in respect of any act or omission prior to such termination.
Further, any such termination hereof shall in no way affect
the survival of rights and obligations of the Parties which
are expressly stated elsewhere in this Agreement to survive
termination hereof. To the extent necessary to give effect to
the termination provisions of this Agreement, the Parties
hereby waive the provisions of Article 1266 of the Indonesian
Civil Code to the extent they require judicial approval of the
termination of contracts.
ARTICLE 16. DISPUTE RESOLUTION
16.1 Amicable Settlement. Any dispute arising out of or in
connection with this Agreement or its performance, including
the validity, scope, meaning, construction, interpretation,
application, breach or termination hereof, shall to the extent
possible be settled amicably by negotiation and discussion
between the Parties. Any Party wishing to invoke the right to
conduct such settlement negotiations shall give written notice
to the other Parties of the substance of the dispute and
propose a schedule of conferences to resolve the matter.
16.2 Arbitration Rules. Any such dispute not settled by
amicable agreement within sixty (60) days of receipt of the
written notice described in Section 16.1 (or such other period
as may be agreed by all Parties in writing in any specific
case) it shall be finally settled by arbitration in Singapore
as an international arbitration under the auspices of the
Singapore International Arbitration Centre and applying the
UNCITRAL Arbitration Rules. In the event of a conflict between
the UNCITRAL Arbitration Rules and the terms of this
Agreement, the terms of this Agreement shall govern.
Documents may be submitted in either English or Japanese
without the need for translation.
16.3 Arbitrators. Any arbitration hereunder shall be
conducted in both the English and Japanese languages before a
panel of three arbitrators. Each arbitrator shall preferably
be fluent in both English and Japanese, but if fluent in only
one of such language, an interpreter shall be retained and
paid for by the Parties equally. The arbitrators shall be
appointed in accordance with the following provisions:
(a) where only two Parties are involved in the dispute,
each Party shall appoint one arbitrator and the two
arbitrators so appointed shall select the third
arbitrator (who shall not be a resident or national
of the same country as either of the Parties
involved in the dispute). The third arbitrator shall
act as the presiding arbitrator;
(b) if within a period of 30 days from the date of the
notice of arbitration, a Party has failed to appoint
an arbitrator, or, the two appointed arbitrators
have failed to select the third arbitrator within 30
days after both arbitrators have been appointed, the
Chairman of the Singapore International Arbitration
Centre shall appoint such arbitrator or arbitrators
as have not been appointed; and
(c) where more than two Parties are involved in the
dispute, the Chairman of the Singapore International
Arbitration Centre shall appoint each of the three
arbitrators, and select one as the presiding
arbitrator.
16.4 Arbitration Award. The award rendered in any
arbitration commenced hereunder shall apportion the costs of
the arbitration. In accordance with Section 631 of the
Indonesian Code of Civil Procedure the arbitrators shall not
be bound by strict rules of law where they consider the
application thereof to particular matters to be inconsistent
with the spirit of this Agreement and the underlying intent of
the Parties, and as to such matters their conclusions shall
reflect their judgment of the correct interpretation of all
relevant terms hereof and the correct and just enforcement of
this Agreement in accordance with such terms.
16.5 Award to be Final and Conclusive. The award
rendered in any arbitration commenced hereunder shall be final
and conclusive, and judgment thereon may be entered in any
court having jurisdiction for its enforcement. The Parties
expressly agree to waive Article 641 of the Indonesian Code of
Civil Procedure and Articles 15 and 108 of Law No. 1 of 1950
(Supreme Court Rules), and accordingly there shall be no
appeal to any court from the decision of the panel of
arbitrators. No Party shall be entitled to commence or
maintain any action in a court of law upon any matter in
dispute until such matter shall have been submitted and
decided as herein provided and then only for the enforcement
of the board of arbitration's award.
16.6 Performance of Obligations Pending Decision.
Pending submission to the board of arbitration and thereafter
until the board of arbitration gives its award, the Parties
hereto agree that they will continue to perform all their
respective obligations under this Agreement without prejudice
to the final judgment in accordance with the said award.
16.7 Waiver of Right to Terminate Board of Arbitration.
The Parties hereto expressly agree to waive the applicability
of Article 650.2 of the Indonesian Commercial Code, so that
the appointment of the board of arbitration shall not
terminate as of the sixth month from the date of its
appointment. The mandate of the board of arbitration
reconstituted in accordance with the terms hereof shall remain
in effect until a final arbitral award has been issued by the
board of arbitration.
Article 17. REPRESENTATIONS AND WARRANTIES
17.1 Corporate Power. Each Party warrants that it has full
corporate power to enter into this Agreement and to perform
its obligations hereunder according to the terms of this
Agreement, and that it has taken all necessary corporate or
other actions to authorize its entry into and performance of
this Agreement.
17.2 Statements True. Each Party warrants that the
statements made relating to it in this Agreement are true and
accurate and that nothing further needs to be stated to
prevent such statements from being misleading.
Article 18. CONFIDENTIALITY
18.1 Confidential Treatment/Permitted Disclosures. Each of the
Parties covenants and agrees not to (a) use any of the Project
proprietary or confidential information (as herein defined),
including but not limited to proprietary and confidential
technical information such as drawings, documents,
specifications and non-public data and procedures, furnished
by any Party or its Affiliates or developed pursuant to the
AIP, the Project Planning Agreement, or this Agreement
(collectively, the ``Project Information'') for any commercial
purpose other than in connection with the Project, and (b)
divulge any Project Information to third parties without the
consent of the other Parties; except that (i) any Party may
disclose Project Information to such of its directors,
officers, employees, consultants and advisors (including
financial and legal advisors) as have a reasonable need to
know such Project Information in connection with arranging the
Project Financing Agreements and its equity participation in
the Project (in each case pursuant to a written agreement
whereby the recipient agrees to keep such Project Information
confidential); (ii) FI shall have the right to disclose such
Project Information to the Government in furtherance of its
obligations under the COW; and (iii) each other Party may
disclose Project Information as required in accordance with
applicable laws and for the due enforcement of its rights
hereunder and under the Major Contracts.
Notwithstanding the above, no Party shall be under any
obligation of confidentiality and restricted use as to any
Project Information and knowledge based thereon, which, as
evidenced by documents,
c) was in the lawful possession of the receiving party
prior to the disclosure thereof by the disclosing
party and which was not obtained by the receiving
party either directly or indirectly from the
disclosing party or another Party, or
d) is, after disclosure by the disclosing Party,
lawfully disclosed to the receiving party by a third
party having no obligation of secrecy to the
disclosing party as to the said information, or
e) is or at any time becomes available to the public
through no act, failure to act or other legal fault
of receiving party.
Specific information disclosed to a receiving party shall not
be deemed to be within the foregoing exceptions merely because
such information is embraced by more general information in
the public domain or is in the possession of receiving party.
In addition, any combination of features shall not be deemed
to be within the foregoing exceptions merely because
individual features are in the public domain or in the
possession of receiving party, but only if the combination
itself and its principles of operation are in the public
domain or in the possession of receiving party.
18.2 Implementation. Each Party further agrees to make all
reasonable efforts, and to take all reasonable precaution, to
prevent any of its employees or personnel, or any other
persons, from obtaining or making any unauthorized use of, or
effecting any disclosure of any Project Information. The
Parties shall implement this policy of confidentiality in part
by appropriate contract provisions, including but not limited
to appropriate terms in contracts of employment.
18.3 Treatment of Project Information by the Project Company.
Each Party further agrees that the Project Company shall treat
all Project Information as confidential and shall not disclose
all or any part of it to any third party or otherwise seek to
exploit all or any part of it without the prior written
consent of the Party(ies) from which it was derived.
18.4 Obligations to Survive. The obligations contained in
this Article 18 shall bind the Parties during the term of this
Agreement and shall continue to bind the Parties after this
Agreement is terminated (for whatever cause) or expires for a
period of five (5) years thereafter.
Article 19. ASSIGNMENT
Except as provided herein concerning the authorized
Transfer of Shares or Subordinated Loans, no Party may assign
any of its rights or obligations under this Agreement without
the prior written consent of the other Parties. In the event
an assignment is consented to by the other Parties, this
Agreement shall inure to the benefit of and be binding upon
such assignee and its successors or assigns, and such assignee
shall execute an appropriate document or documents as
necessary to become a Party to this Agreement.
Article 20. LAW AND INTERPRETATION
20.1 Governing Law. The provisions of this Agreement shall be
governed in all respects by and construed in accordance with
the laws of Japan.
20.2 Governing Language of this Agreement. This Agreement is
executed in the English language which shall be the governing
language despite translation into any other language(s).
20.3 Headings. The headings of the Articles and Sections in
this Agreement and table of contents shall not form part of
this Agreement and shall be disregarded in interpreting and
construing this Agreement.
Article 21. SEVERABILITY
If one or more of the provisions herein shall be void,
invalid, illegal or unenforceable in any respect under any
applicable law or decision, the validity, legality and
enforceability of the remaining provisions contained shall not
be affected or impaired in any way. Each Party hereto shall,
in any such event, execute such additional documents as the
other Party(ies) may reasonably request in order to give
valid, legal and enforceable effect to any provision hereof
which is determined to be invalid, illegal or unenforceable as
written in this Agreement.
Article 22. NOTICES
22.1 Manner of Delivery/Addresses. Except as expressly set out
in this Agreement to the contrary, all notices and other
communications to be given to a Party under this Agreement
shall be in writing in the English language and communicated
by personal delivery, mail or facsimile from one Party to the
other Party(ies) at their respective addresses as follows:
FI: P.T. Freeport Indonesia Company
Plaza 89, 5th Floor
Jl. H.R. Rasuna Said Kav. X-7 No.6
Jakarta 12940 Indonesia
Attention: President
Fax Number: 62-21-850-6736
with a copy to:
P.T. Freeport Indonesia Company
1615 Poydras Street
New Orleans, LA 70112 U.S.A.
Attention: Legal Department
Fax Number: 1-504-585-3513
MMC: Mitsubishi Materials Corporation
1-5-1 Ohtemachi
Chiyoda-ku
Tokyo 100, Japan
Attention: General Manager, Metals Division
Fax Number: 81-3-5252-5848
FLUOR: Fluor Daniel Asia, Inc.
3333 Michelson Drive
Irvine, Calif. 92730
Attention: President
Fax Number:
Subject to any express provisions contained in this Agreement
to the contrary, the notices and other communications shall be
deemed delivered when sent in the case of facsimile
transmissions or personal delivery, and ten (10) days after
sending in the case of mail.
22.2 Change of Address. Any Party hereto may at any time
change its address by written notice to the other Parties of
such change.
Article 23. FORCE MAJEURE
No Party shall be liable for any delay or failure in the
performance of any of its obligations under this Agreement to
the extent that such delay or failure is caused by Force
Majeure, provided that the Party whose performance is
prevented or delayed by such Force Majeure shall make every
good faith effort to overcome or dispel the event of Force
Majeure, and further provided that Force Majeure shall not
excuse a failure to pay money when due. For the purposes of
this Agreement, "Force Majeure" shall mean events or
circumstances beyond the reasonable control of a Party such as
lightning, fire, explosion, storm, wind, flood, tidal wave,
earthquake, tempest or other natural disasters of overwhelming
proportions or acts of God; civil commotion, rebellion, war,
sabotage, riot, strike, lock out or industrial unrest; or the
enactment of any law or regulation not existing or not
applicable on the date of this Agreement by the Government
which renders the Project economically impracticable, or the
nationalization, expropriation or compulsory acquisition of
the Project or any part thereof by the Government.
Article 24. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between
the Parties with respect to the subject matter hereof and,
with the exception of the Project Planning Agreement,
supersedes all prior agreements, understandings and
negotiations, both written and oral, between the Parties with
respect to the subject matter of this Agreement, including
without limitation the AIP. Insofar as possible this
Agreement shall be interpreted to be consistent with the
Project Planning Agreement, provided, however, that in the
event of a direct inconsistency, this Agreement shall take
precedence. No representation, inducement, promise,
understanding, condition or warranty not set forth herein has
been made or relied upon by any Party hereto.
Article 25. AMENDMENTS
This Agreement may not be modified or amended except in
writing and with the unanimous agreement of the Parties
hereto.
Article 26. NO THIRD PARTY BENEFICIARIES
Neither this Agreement nor any provision hereof is
intended to confer upon any person, firm, corporation or other
entity other than the Parties hereto any rights or remedies
hereunder.
IN WITNESS WHEREOF, the Parties have cause this Agreement to
be executed by their duly authorized representatives on the
date and year and place first written above.
Witness:
MITSUBISHI MATERIALS CORPORATION
By:
Title:
P.T. FREEPORT INDONESIA COMPANY
By:
Title:
FLUOR DANIEL ASIA, INC.
By:
Title:
EXHIBIT 10.5
ANNUAL INCENTIVE PLAN
OF FREEPORT-McMoRan COPPER & GOLD INC.
ARTICLE I
PURPOSE OF PLAN
SECTION 1.1. The purpose of the Annual Incentive Plan of
Freeport-McMoRan Copper & Gold Inc. (the "Plan") is to provide
incentives for senior executives whose performance in fulfilling
the responsibilities of their positions can have a major impact
on the profitability and future growth of Freeport-McMoRan Copper
& Gold Inc. (the "Company") and its subsidiaries.
ARTICLE II
ADMINISTRATION OF THE PLAN
SECTION 2.1. Subject to the authority and powers of the
Board of Directors in relation to the Plan as hereinafter
provided, the Plan shall be administered by a Committee
designated by the Board of Directors consisting of two or more
members of the Board each of whom is a "disinterested person"
within the meaning of Rule 16b-3 promulgated by the Securities
and Exchange Commission under the Securities Exchange Act of
1934. The Committee shall have full authority to interpret the
Plan and from time to time to adopt such rules and regulations
for carrying out the Plan as it may deem best; provided, however,
that the Committee may not exercise any authority otherwise
granted to it hereunder if such action would have the effect of
increasing the amount of an Award to any Covered Officer. All
determinations by the Committee shall be made by the affirmative
vote of a majority of its members, but any determination reduced
to writing and signed by a majority of the members shall be fully
as effective as if it had been made by a majority vote at a
meeting duly called and held. All decisions by the Committee
pursuant to the provisions of the Plan and all orders or
resolutions of the Board of Directors pursuant thereto shall be
final, conclusive and binding on all persons, including the
Participants, the Company and its subsidiaries and their
respective equity holders.
ARTICLE III
ELIGIBILITY FOR AND PAYMENT OF AWARDS
SECTION 3.1. Subject to the provisions of the Plan, in
each calendar year the Committee may select officers or employees
(including officers or employees who are also directors) of the
Company or any of its subsidiaries to receive Awards under the
Plan with respect to such year, and determine the amount of such
Awards.
SECTION 3.2. Subject to the provisions of the Plan,
Awards with respect to any year shall be paid to each Participant
at such time established by the Committee following the
determination of the amounts of such Awards, which payment shall
in no event be later than February 28 of the year following such
Award Year.
SECTION 3.3. Notwithstanding the provisions of Section
3.2, if, prior to the date established by the Committee for any
Award Year, a Participant shall so elect, in accordance with
procedures established by the Committee, all or any part of an
Award to such Participant with respect to such Award Year shall
be deferred and paid in one or more periodic installments, not in
excess of ten, at such time or times before or after the date of
such Participant's Termination of Employment, but not later than
ten years after such date of Termination of Employment, as shall
be specified in such election. If and only if any Award or
portion thereof is so deferred for payment after December 31 of
the year following such Award Year, such Award or portion
thereof, as the case may be, shall, commencing with January 1 of
the year following such Award Year, accrue interest at a rate
equal to the prime commercial lending rate announced from time to
time by The Chase Manhattan Bank, N.A. (compounded quarterly) or
at such other rate and in such manner as shall be determined from
time to time by the Committee. If such Participant's Termination
of Employment occurs for any reason other than death, retirement
under the Company's retirement plan, or retirement with the
consent of the Company outside the Company's retirement plan and
if, on the date of such Termination of Employment, there remain
unpaid any installments of Awards which have been deferred as
provided in this Section 3.3, the Committee may, in its sole
discretion, authorize payment to the Participant of the aggregate
amount of such unpaid installments in a lump sum, notwithstanding
such election.
SECTION 3.4. (a) Notwithstanding the provisions of
Sections 3.1, 3.2, 3.3, 4.2(a), and 4.2(b) hereof, any Award to
any Covered Officer shall be granted in accordance with the
provisions of this Section 3.4. Subject to the discretion of the
Committee as set forth in Section 4.2(c) hereof, the amount of
the Award that may be granted with respect to any calendar year
to the Covered Officer who is functioning as the chief executive
officer of the Company at the time of such grant shall be 35% of
the Plan Funding Amount for such year, the amount of the Award
that may be granted with respect to any calendar year to the
Covered Officer who is functioning as the chief operating officer
or chief financial officer of the Company at the time of such
grant shall be, as to each such individual, 20% of the Plan
Funding Amount for such year, the amount of the Award that may be
granted with respect to any calendar year to the Covered Officer
who is functioning as the chief investment officer of the Company
at the time of such grant shall be 15% of the Plan Funding Amount
for such year, and the amount of the Award that may be granted
with respect to any calendar year to the Covered Officer who is
the Vice Chairman of the Board of the Company at the time of such
grant or, if there is no such individual, any other Covered
Officer of the Company at the time of such grant shall be 10% of
the Plan Funding Amount for such year.
(b) All Awards to Covered Officers under the Plan will
be made and administered by two or more members of the Committee
who are also "outside directors" within the meaning of Section
162(m) of the Internal Revenue Code of 1986, as amended, and
rules promulgated by the Internal Revenue Service of the
Department of the Treasury thereunder.
(c) Any provision of the Plan to the contrary
notwithstanding, no Covered Officer shall be entitled to any
payment of an Award with respect to a calendar year unless the
members of the Committee referred to in Section 3.4(b) hereof
shall have certified the Plan Funding Amount for such year and
that the condition of Section 4.1 hereof has been met for such
year.
ARTICLE IV
GENERAL PROVISIONS
SECTION 4.1. Any provision of the Plan to the contrary
notwithstanding, no Award shall be made pursuant to Section 3.1
or 3.4 with respect to any calendar year if the average of the
Return on Investment for such calendar year and each of the four
preceding calendar years, after giving effect to the aggregate
amount (if any) that was awarded or credited with respect to such
prior years and the aggregate amount that would otherwise have
been so awarded or credited with respect to such calendar year,
would be less than 6%.
SECTION 4.2. (a) In determining the aggregate amount
awarded to Participants under the Plan for any calendar year, the
Committee shall consider as a guideline that the aggregate amount
of all Awards granted with respect to any calendar year should
not exceed two and one-half percent of Net Cash Provided by
Operating Activities for such year.
(b) If Managed Net Income or Total Investment of Capital
for any year shall have been affected by special factors
(including material changes in accounting policies or practices,
material acquisitions or dispositions of property, or other
unusual items) which in the Committee's judgment should or should
not be taken into account, in whole or in part, in the equitable
administration of the Plan, the Committee may, for any purpose of
the Plan, adjust Managed Net Income or Total Investment of
Capital and make payments and reductions accordingly under the
Plan; provided that the Committee shall not take any such
adjustment into account in calculating Awards to Covered Officers
if the effect of such adjustment would be to increase the Plan
Funding Amount.
(c) Notwithstanding the provisions of subparagraphs (a)
and (b) above, the amount available for the grant of Awards under
the Plan to Covered Officers with respect to a calendar year
shall be equal to the Plan Funding Amount for such year and any
adjustments made in accordance with or for the purposes of
subparagraphs (a) or (b) that would have the effect of increasing
the Plan Funding Amount shall be disregarded for purposes of
calculating Awards to Covered Officers. The Committee may, in
the exercise of its discretion, determine that the aggregate
amount of all Awards granted to Covered Officers with respect to
a calendar year shall be less than the Plan Funding Amount for
such year, but the excess of such Plan Funding Amount over such
aggregate amount of Awards granted to Covered Officers shall not
be available for any Awards to Covered Officers with respect to
future years. In addition, the Committee may, in the exercise of
its discretion, reduce or eliminate the amount of an Award to a
Covered Officer otherwise calculated in accordance with the
provisions of Section 3.4 prior to payment thereof.
SECTION 4.3. A Participant may designate in writing a
beneficiary (including the trustee or trustees of a trust) who
shall upon the death of such Participant be entitled to receive
all amounts which would have been payable hereunder to such
Participant. A Participant may rescind or change any such
designation at any time. Except as provided in this Section 4.3,
none of the amounts which may be payable under the Plan may be
assigned or transferred otherwise than by will or by the laws of
descent and distribution.
SECTION 4.4. All payments made pursuant to the Plan
shall be subject to withholding in respect of income and other
taxes required by law to be withheld, in accordance with
procedures to be established by the Committee.
SECTION 4.5. The selection of an individual for
participation in the Plan shall not give such Participant any
right to be retained in the employ of the Company or any of its
subsidiaries, and the right of the Company or any such subsidiary
to dismiss or discharge any such Participant, or to terminate any
arrangement pursuant to which any such Participant provides
services to the Company, is specifically reserved. The benefits
provided for Participants under the Plan shall be in addition to,
and shall in no way preclude, other forms of compensation to or
in respect of such Participants.
SECTION 4.6. The Board of Directors and the Committee
shall be entitled to rely on the advice of counsel and other
experts, including the independent public accountants for the
Company. No member of the Board of Directors or of the Committee
or any officers of the Company or its subsidiaries shall be
liable for any act or failure to act under the Plan, except in
circumstances involving bad faith on the part of such member or
officer.
SECTION 4.7. Nothing contained in the Plan shall prevent
the Company or any subsidiary or affiliate of the Company from
adopting or continuing in effect other compensation arrangements,
which arrangements may be either generally applicable or
applicable only in specific cases.
ARTICLE V
AMENDMENT OR TERMINATION OF THE PLAN
SECTION 5.1. The Board of Directors may at any time
terminate, in whole or in part, or from time to time amend the
Plan, provided that, except as otherwise provided in the Plan, no
such amendment or termination shall adversely affect any Awards
previously made to a Participant and deferred by such Participant
pursuant to Section 3.3. In the event of such termination, in
whole or in part, of the Plan, the Committee may in its sole
discretion direct the payment to Participants of any Awards not
theretofore paid out prior to the respective dates upon which
payments would otherwise be made hereunder to such Participants,
and in a lump sum or installments as the Committee shall
prescribe with respect to each such Participant. The Board may
at any time and from time to time delegate to the Committee any
or all of its authority under this Section 5.1.
ARTICLE VI
DEFINITIONS
SECTION 6.1. For the purposes of the Plan, the following
terms shall have the meanings indicated:
(a) Award: The grant of an award of cash by the
Committee to a Participant pursuant to Section 3.1 or 3.4.
(b) Award Year: Any calendar year or portion thereof
with respect to which an Award may be granted.
(c) Board of Directors: The Board of Directors of the
Company.
(d) Committee: The Committee designated pursuant to
Section 2.1. Until otherwise determined by the Board of
Directors, the Corporate Personnel Committee designated by such
Board shall be the Committee under the Plan.
(e) Covered Officer: At any date, (i) any individual
who, with respect to the previous taxable year of the Company,
was a "covered employee" of the Company within the meaning of
Section 162(m) of the Internal Revenue Code of 1986, as amended,
and the rules promulgated thereunder by the Internal Revenue
Service of the Department of the Treasury, provided, however, the
term "Covered Officer" shall not include any such individual who
is designated by the Committee, in its discretion, at the time of
any grant or at any subsequent time, as reasonably expected not
to be such a "covered employee" with respect to the current
taxable year of the Company and (ii) any individual who is
designated by the Committee, in its discretion, at the time of
any grant or at any subsequent time, as reasonably expected to be
such a "covered employee" with respect to the current taxable
year of the Company or with respect to the taxable year of the
Company in which any Award will be paid to such individual.
(f) Managed Net Income: With respect to any year, the
sum of (i) the net income (or net loss) of the Company and its
consolidated subsidiaries for such year as reviewed by the
Company's independent auditors and released by the Company to the
public; plus (or minus) (ii) the minority interests' share in the
net income (or net loss) of the Company's consolidated
subsidiaries for such year as reviewed by the Company's
independent auditors and released by the Company to the public;
plus (or minus) (iii) the effect of changes in accounting
principles of the Company and its consolidated subsidiaries for
such year plus (or minus) the minority interests' share in such
changes in accounting principles as reviewed by the Company's
independent auditors and released by the Company to the public.
(g) Net Cash Provided by Operating Activities: With
respect to any year, the net cash provided by operating
activities of the Company and its consolidated subsidiaries for
such year as reviewed by the Company's independent auditors and
released by the Company to the public.
(h) Net Interest Expense: With respect to any year, the
net interest expense of the Company and its consolidated
subsidiaries for such year as reviewed by the Company's
independent auditors and released by the Company to the public.
(i) Participant: An individual who has been selected by
the Committee to receive an Award.
(j) Plan Funding Amount: With respect to any year, two
and one-half percent of Net Cash Provided by Operating Activities
for such year; provided, however, that the Plan Funding Amount
for 1995 shall equal two and one-half percent of the portion of
Net Cash Provided by Operating Activities that was earned during
the portion of 1995 occurring after the distribution by Freeport-
McMoRan Inc. to its common shareholders of all of the shares of
Class B Common Stock of the Company then owned by it.
(k) Return on Investment: With respect to any year, the
result (expressed as a percentage) calculated according to the
following formula:
a + (b - c)
d
in which "a" equals Managed Net Income for such year, "b" equals
Net Interest Expense for such year, "c" equals Tax on Net
Interest Expense for such year, and "d" equals Total Investment
of Capital for such year.
(l) Tax on Net Interest Expense: With respect to any
year, the tax on the net interest expense of the Company and its
consolidated subsidiaries for such year calculated at the
appropriate statutory income tax rate for such year as reviewed
by the Company's independent auditors.
(m) Termination of Employment: Solely for purposes of
Section 3.3 hereof, the cessation of the rendering of services,
whether or not as an employee, to any and all of the following
entities: the Company, any subsidiary of the Company, Freeport-
McMoRan Inc., any subsidiary of Freeport-McMoRan Inc., McMoRan
Oil & Gas Co., any subsidiary of McMoRan Oil & Gas Co., and any
law firm rendering services to any of the foregoing entities
provided such law firm consists of at least two or more members
or associates who are or were officers of the Company or any
subsidiary of the Company.
(n) Total Investment of Capital: With respect to any
year, the sum of (i) the weighted average of the stockholders'
equity in the Company and its consolidated subsidiaries for such
year, (ii) the weighted average of the minority interests in the
consolidated subsidiaries of the Company for such year, (iii) the
weighted average of the redeemable preferred stock of the Company
for such year and (iv) the weighted average of the long-term debt
of the Company and its consolidated subsidiaries for such year,
all as shown in the quarterly balance sheets of the Company and
its consolidated subsidiaries for such year.
EXHIBIT 10.6
1995 LONG-TERM PERFORMANCE INCENTIVE PLAN
OF FREEPORT-McMoRan COPPER & GOLD INC.
ARTICLE I
PURPOSE OF PLAN
SECTION 1.1. The purposes of the 1995 Long-Term
Performance Incentive Plan of Freeport-McMoRan Copper & Gold Inc.
(the "Plan") are (i) to provide incentives for senior executives
whose performance in fulfilling the responsibilities of their
positions can have a major impact on the profitability and future
growth of Freeport-McMoRan Copper & Gold Inc. (the "Company") and
its subsidiaries and (ii) to provide for the issuance of awards
relating to performance awards issued to employees and officers
of Freeport-McMoRan Inc. ("FTX"), the Company's current parent,
in connection with the Distribution.
ARTICLE II
ADMINISTRATION OF THE PLAN
SECTION 2.1. Subject to the authority and powers of the
Board of Directors in relation to the Plan as hereinafter
provided, the Plan shall be administered by a Committee
designated by the Board of Directors consisting of two or more
members of the Board each of whom is a "disinterested person"
within the meaning of Rule 16b-3 promulgated by the Securities
and Exchange Commission under the Securities Exchange Act of
1934. The Committee shall have full authority to interpret the
Plan and from time to time to adopt such rules and regulations
for carrying out the Plan as it may deem best; provided, however,
that the Committee may not exercise any authority otherwise
granted to it hereunder if such action would have the effect of
increasing the amount of any credit to or payment from the
Performance Award Account of any Covered Officer. All
determinations by the Committee shall be made by the affirmative
vote of a majority of its members, but any determination reduced
to writing and signed by a majority of the members shall be fully
as effective as if it had been made by a majority vote at a
meeting duly called and held. All decisions by the Committee
pursuant to the provisions of the Plan and all orders or
resolutions of the Board of Directors pursuant thereto shall be
final, conclusive and binding on all persons, including but not
limited to the Participants, the Company and its subsidiaries and
their respective equity holders.
ARTICLE III
ELIGIBILITY FOR AND GRANT OF PERFORMANCE AWARDS
SECTION 3.1. Subject to the provisions of the Plan, the
Committee may from time to time select officers or employees
(including officers or employees who are also directors) of the
Company or any Subsidiary to be granted Performance Awards under
the Plan, and determine the number of Performance Units covered
by each such Performance Award. In addition, the Committee will
identify Eligible Individuals for the grant of Transition Awards.
Performance Awards may be granted at different times to the same
individual. No Performance Awards shall be granted hereunder
after December 31, 1999.
SECTION 3.2. Upon the grant of a Performance Award to a
Participant, the Company shall establish a Performance Award
Account for such Participant and shall credit to such Performance
Award Account the number of Performance Units covered by such
Performance Award.
SECTION 3.3. Subject to adjustment as provided in
Section 3.4(d), the number of Performance Units outstanding at
any time shall not exceed 3,000,000. Performance Units that
shall have been forfeited or with respect to which payment has
been made pursuant to Section 4.2 or deferred pursuant to Section
4.4 shall not thereafter be deemed to be credited or outstanding
for any purpose of the Plan and may again be the subject of
Performance Awards.
SECTION 3.4. (a) Notwithstanding the provisions of
Section 3.1, 3.2 and 3.3 hereof, with respect to any Performance
Awards granted under the Plan after December 31, 1995 the number
of Performance Units covered by an annual Performance Award that
may be granted to the Covered Officer who is functioning as the
chief executive officer of the Company at the time of such grant
shall be 110,000; the number of Performance Units covered by an
annual Performance Award that may be granted to the Covered
Officer who is functioning as the chief operating officer of the
Company at the time of such grant shall be 65,000; the number of
Performance Units covered by an annual Performance Award that may
be granted to the Covered Officer who is the Vice Chairman of the
Board of the Company at the time of such grant shall be 35,000;
and the number of Performance Units covered by an annual
Performance Award that may be granted to any other Covered
Officer shall be, as to each such individual, 30,000.
(b) Notwithstanding the provisions of Section 3.1, 3.2
and 3.3 hereof and subject to adjustment as provided in Section
3.4(d), with respect to any Transition Awards granted under the
Plan during calendar year 1995, the number of Performance Units
covered by any such Transition Award that may be granted to the
Covered Officer who is functioning as the chief executive officer
of the Company at the time of such grant shall be 400,000, in
such series as are designated on Schedule A; the number of
Performance Units covered by any such Transition Award that may
be granted to the Covered Officer who is functioning as the chief
operating officer of the Company at the time of such grant shall
be 160,000, in such series as are designated on Schedule A; the
number of Performance Units covered by any such Transition Award
that may be granted to the Vice Chairman of the Board of the
Company at the time of such grant shall be 230,000, in such
series as are designated on Schedule A; and the number of
Performance Units covered by any such Transition Award that may
be granted to any other Covered Officer shall be, as to each such
individual, 120,000, in such series as are designated on Schedule
A.
(c) All Performance Awards to Covered Officers under the
Plan will be made and administered by two or more members of the
Committee who are also "outside directors" within the meaning of
Section 162(m) of the Internal Revenue Code of 1986, as amended,
and rules promulgated by the Internal Revenue Service of the
Department of the Treasury thereunder.
(d) Upon effectiveness of the Plan, each number of
Performance Units specified in Section 3.3 and in paragraph (b)
of this Section 3.4 shall be multiplied by a fraction, the
numerator of which is the number of shares of all classes of
common stock of the Company outstanding immediately after the
Distribution, and the denominator of which is the number of
common shares of FTX outstanding immediately prior to the
Distribution.
ARTICLE IV
CREDITS TO AND PAYMENTS FROM PARTICIPANTS'
PERFORMANCE AWARD ACCOUNTS
SECTION 4.1. (a) Except as provided in paragraph (b),
subject to the provisions of the Plan, each Performance Unit in
any Performance Award Account of each Participant at December 31
of any year shall be credited, as of such December 31 of each
year in the Performance Period for such Performance Unit, with an
amount equal to the Annual Earnings Per Share (or Net Loss Per
Share) for such year; provided that, if in any year there shall
be any outstanding Net Loss Carryforward applicable to such
Performance Unit, such Net Loss Carryforward shall be applied to
reduce any amount which would otherwise be credited to or in
respect of such Performance Unit pursuant to this Section 4.1 in
such year until such Net Loss Carryforward has been fully so
applied.
(b) With respect to Performance Units outstanding on
December 31, 1995, the credit in respect of any such Performance
Unit shall equal the portion of Annual Earnings Per Share (or Net
Loss Per Share) that relates to the portion of such year
occurring after the effective date of the Distribution.
SECTION 4.2. (a) Subject to the provisions of the Plan,
amounts credited to a Participant's Performance Award Account in
respect of Performance Units shall be paid to such Participant as
soon as practicable on or after the Award Valuation Date with
respect to such Performance Units.
(b) Payments pursuant to Section 4.2(a) shall be in
cash.
(c) Notwithstanding any other provision of the Plan to
the contrary, no Covered Officer shall be entitled to any payment
with respect to any Performance Units unless the members of the
Committee referred to in Section 3.4(c) hereof shall have
certified the amount of the Annual Earnings Per Share (or Net
Loss Per Share) for each year or portion thereof in the
Performance Period applicable to such Performance Units.
SECTION 4.3. In addition to any amounts payable pursuant
to Section 4.2, the Committee may in its sole discretion
determine that there shall be payable to a former Participant a
supplemental amount not exceeding the excess, if any, of (i) the
amount determined in accordance with Section 4.1 which would have
been payable to such former Participant if the Award Valuation
Date with respect to any Performance Units granted to such
Participant had been December 31 of the first, second or third
calendar year next following the year in which such Participant's
Termination of Employment occurred (the selection of such first,
second or third calendar year to be in the sole discretion of the
Committee subject only to the last sentence of this Section 4.3)
over (ii) the amount determined in accordance with said Section
4.1 as of December 31 of the calendar year in which such
Termination of Employment actually occurred. Any such
supplemental amount so payable shall be paid in a lump sum as
promptly as practicable on or after December 31 of the calendar
year so selected by the Committee or in one or more installments
ending not later than five years after such December 31, as the
Committee may in its discretion direct. In no event shall any
payment under this Section 4.3 be made with respect to any
calendar year after the year in which such former Participant
reaches his normal retirement date under the Company's retirement
plan.
SECTION 4.4. (a) Prior to January 1 of any calendar
year in which it is anticipated that an Award Valuation Date with
respect to any Performance Units may occur, a Participant may
elect, in accordance with procedures established by the
Committee, to defer, as and to the extent hereinafter provided,
the payment of the amount, if any, which shall be paid pursuant
to Section 4.2.
(b) All payments deferred pursuant to Section 4.4(a)
shall be paid in one or more periodic installments, not in excess
of ten, at such time or times after the applicable Award
Valuation Date, but not later than ten years after such Award
Valuation Date, as shall be specified in such Participant's
election pursuant to Section 4.4(a).
(c) In the case of payments deferred as provided in
Section 4.4(a), the unpaid amounts shall, commencing with the
applicable Award Valuation Date, accrue interest at a rate equal
to the prime commercial lending rate announced from time to time
by The Chase Manhattan Bank, N.A. (compounded quarterly) or at
such other rate and in such manner as shall be determined from
time to time by the Committee. If subsequent to such
Participant's election pursuant to Section 4.4(a) such
Participant's Termination of Employment occurs for any reason
other than death, Disability, retirement under the Company's
retirement plan, or retirement with the consent of the Company
outside the Company's retirement plan, the Committee may, in its
sole discretion, pay to such Participant in a lump sum the
aggregate amount of any payments so deferred, notwithstanding
such election.
SECTION 4.5. Anything contained in the Plan to the
contrary notwithstanding:
(a) The Committee may, in its sole discretion, suspend,
permanently or for a specified period of time or until further
determination by the Committee, the making of any part or all of
the credits which would otherwise have been made to the
Performance Award Accounts of all the Participants or to such
Accounts of one or more Participants as shall be designated by
the Committee.
(b) Each Performance Unit and all other amounts credited
to a Participant's Performance Award Account in respect of such
Performance Unit shall be forfeited in the event of the Discharge
for Cause of such Participant prior to the end of the Performance
Period applicable to such Performance Unit.
(c) Each Performance Unit and all other amounts credited
to a Participant's Performance Award Account in respect of such
Performance Unit shall, unless and to the extent that the
Committee shall in its absolute discretion otherwise determine by
reason of special mitigating circumstances, be forfeited in the
event that such Participant's Termination of Employment shall
occur for any reason other than death, Disability, retirement
under the Company's retirement plan, or retirement with the
consent of the Company outside the Company's retirement plan, at
any time (except within two years after the date on which a
Change in Control shall have occurred) prior to the end of the
Performance Period applicable to such Performance Unit.
(d) If any suspension is in effect pursuant to Section
4.5(a) on a date when a credit would otherwise have been made
pursuant to Section 4.1, the amount which would have been
credited but for such suspension shall be forfeited and no
credits shall thereafter be made in lieu thereof. If the
Committee shall so determine in its sole discretion, the amounts
theretofore credited to any Performance Award Account or Accounts
shall accrue interest, during the suspension period, at a rate
equal to the prime commercial lending rate announced from time to
time by The Chase Manhattan Bank, N.A. (compounded quarterly) or
at such other rate and in such manner as shall be determined from
time to time by the Committee.
ARTICLE V
GENERAL INFORMATION
SECTION 5.1. If Net Income, Annual Earnings Per Share or
Net Loss Per Share for any year shall have been affected by
special factors (including material changes in accounting
policies or practices, material acquisitions or dispositions of
property, or other unusual items) which in the Committee's
judgment should or should not be taken into account, in whole or
in part, in the equitable administration of the Plan, the
Committee may, for any purpose of the Plan, adjust Net Income,
Annual Earnings Per Share or Net Loss Per Share, as the case may
be, for such year (and subsequent years as appropriate), or any
combination of them, and make credits, payments and reductions
accordingly under the Plan; provided, however, the Committee
shall not have the authority to make any such adjustments to
payments with respect to the Performance Awards of, or credits to
the Performance Award Accounts of, any Participant who is at such
time a Covered Officer if the effect of any such action would be
to increase the amount that would be credited to or paid from
such Performance Award Accounts.
SECTION 5.2. In addition to the adjustment specified in
Section 3.4(d), the Committee shall for purposes of Articles III
and IV make appropriate adjustments in the number of Performance
Units which shall remain subject to Performance Awards and in the
number of Performance Units which shall have been credited to
Participants' accounts, in order to reflect any merger or
consolidation to which the Company is a party or any stock
dividend, split-up, combination or reclassification of the
outstanding shares of Company Common Stock or any other relevant
change in the capitalization of the Company.
SECTION 5.3. A Participant may designate in writing a
beneficiary (including the trustee or trustees of a trust) who
shall upon the death of such Participant be entitled to receive
all amounts which would have been payable hereunder to such
Participant. A Participant may rescind or change any such
designation at any time. Except as provided in this Section 5.3,
none of the amounts which may be payable under the Plan may be
assigned or transferred otherwise than by will or by the laws of
descent and distribution.
SECTION 5.4. All payments made pursuant to the Plan
shall be subject to withholding in respect of income and other
taxes required by law to be withheld, in accordance with
procedures to be established by the Committee.
SECTION 5.5. The selection of an individual for
participation in the Plan shall not give such Participant any
right to be retained in the employ of the Company or any
Subsidiary, and the right of the Company or any such Subsidiary
to dismiss or discharge any such Participant, or to terminate any
arrangement pursuant to which any such Participant provides
services to the Company, is specifically reserved. The benefits
provided for Participants under the Plan shall be in addition to,
and shall in no way preclude, other forms of compensation to or
in respect of such Participants.
SECTION 5.6. The Board of Directors and the Committee
shall be entitled to rely on the advice of counsel and other
experts, including the independent public accountants for the
Company. No member of the Board of Directors or of the Committee
or any officers of the Company or any Subsidiary shall be liable
for any act or failure to act under the Plan, except in
circumstances involving bad faith on the part of such member or
officer.
SECTION 5.7. Nothing contained in the Plan shall prevent
the Company or any Subsidiary or affiliate of the Company from
adopting or continuing in effect other compensation arrangements,
which arrangements may be either generally applicable or
applicable only in specific cases.
ARTICLE VI
AMENDMENT OR TERMINATION OF THE PLAN
SECTION 6.1. The Board of Directors may at any time
terminate, in whole or in part, or from time to time amend the
Plan, provided that, except as otherwise provided in the Plan, no
such amendment or termination shall adversely affect the amounts
credited to the Performance Award Account of a Participant with
respect to Performance Awards previously made to such
Participant. In the event of such termination, in whole or in
part, of the Plan, the Committee may in its sole discretion
direct the payment to Participants of any amounts specified in
Article IV and not theretofore paid out, prior to the respective
dates upon which payments would otherwise be made hereunder to
such Participants, and in a lump sum or installments as the
Committee shall prescribe with respect to each such Participant.
The Board may at any time and from time to time delegate to the
Committee any or all of its authority under this Article VI.
ARTICLE VII
DEFINITIONS
SECTION 7.1. For the purposes of the Plan, the following
terms shall have the meanings indicated:
(a) Annual Earnings Per Share: With respect to any
year, the result obtained by dividing (i) Net Income for such
year by (ii) the average number of issued and outstanding shares
(excluding treasury shares and shares held by any subsidiaries)
of Class A Common Stock, par value $.10 per share, of the Company
and Class B Common Stock, par value $.10 per share, of the
Company during such year as reviewed by the Company's independent
auditors.
(b) Award Valuation Date: (I) With respect to any
Performance Units constituting a Performance Award granted after
December 31, 1995, (i) December 31 of the year in which the third
anniversary of the grant of such Performance Award to a
Participant shall occur or, (ii) if earlier, December 31 of the
year in which such Participant's Termination of Employment shall
occur, if such Termination of Employment occurs (x) within two
years after a Change in Control or (y) as a result of death,
Disability, retirement under the Company's retirement plan or
retirement with the consent of the Company outside the Company's
retirement plan and (II) with respect to any Performance Units
comprising all or a portion of any Transition Award, (i) December
31 of the applicable year corresponding to such Performance Unit,
as set forth in Schedule A hereto in respect of any Covered
Officer, and as determined by the Committee in respect of any
other Participant, provided that in the case of any Participant
such date shall not be later than December 31 of the year in
which the third anniversary of the grant of such Performance Unit
to such Participant shall occur or (ii) if earlier, December 31
of the year in which such Participant's Termination of Employment
shall occur, if such Termination of Employment occurs (x) within
two years after a Change in Control or (y) as a result of death,
Disability, retirement under the Company's retirement plan or
retirement with consent of the Company outside the Company's
retirement plan.
(c) Board of Directors: The Board of Directors of the
Company.
(d) Change in Control: A Change in Control shall be
deemed to have occurred if either (i) any person, or any two or
more persons acting as a group, and all affiliates of such person
or persons, shall, otherwise than as a result of the
Distribution, beneficially own more than 20% of all classes and
series of the Company's stock outstanding, taken as a whole, that
has voting rights with respect to the election of directors of
the Company (not including any series of preferred stock of the
Company that has the right to elect directors only upon the
failure of the Company to pay dividends) pursuant to a tender
offer, exchange offer or series of purchases or other
acquisitions, or any combination of those transactions, or (ii)
there shall be a change in the composition of the Board of
Directors of the Company at any time within two years after any
tender offer, exchange offer, merger, consolidation, sale of
assets or contested election, or any combination of those
transactions (a "Transaction"), so that (A) the persons who were
directors of the Company immediately before the first such
Transaction cease to constitute a majority of the Board of
Directors of the corporation which shall thereafter be in control
of the companies that were parties to or otherwise involved in
such first Transaction, or (B) the number of persons who shall
thereafter be directors of such corporation shall be fewer than
two-thirds of the number of directors of the Company immediately
prior to such first Transaction. A Change in Control shall be
deemed to take place upon the first to occur of the events
specified in the foregoing clauses (i) and (ii).
(e) Committee: The Committee designated pursuant to
Section 2.1. Until otherwise determined by the Board of
Directors, the Corporate Personnel Committee designated by such
Board shall be the Committee under the Plan.
(f) Company Common Stock: Class B Common Stock, par
value $0.10 per share, of the Company and such other Company or
subsidiary securities as may be designated from time to time by
the Committee.
(g) Covered Officer: At any date, (i) any individual
who, with respect to the previous taxable year of the Company,
was a "covered employee" of the Company within the meaning of
Section 162(m) of the Internal Revenue Code of 1986, as amended,
and the rules promulgated thereunder by the Internal Revenue
Service of the Department of the Treasury, provided, however, the
term "Covered Officer" shall not include any such individual who
is designated by the Committee, in its discretion, at the time of
any grant or at any subsequent time as reasonably expected not to
be such a "covered employee" with respect to the current taxable
year of the Company and (ii) any individual who is designated by
the Committee, in its discretion, at the time of any grant or at
any subsequent time as reasonably expected to be such a "covered
employee" with respect to the current taxable year of the Company
or with respect to the taxable year of the Company in which
payment from any Performance Award Account of such individual
will be made.
(h) Disability: In the case of any Participant,
disability which after the expiration of more than 26 weeks after
its commencement is determined to be total and permanent by a
physician selected by the Company and acceptable to such
Participant or his legal representatives.
(i) Discharge for Cause: Involuntary Termination of
Employment as a result of dishonesty or similar serious
misconduct directly related to the performance of duties for any
and all of the Related Entities.
(j) Distribution: The distribution by FTX to its common
stockholders of all of the Company Common Stock then owned by it.
(k) Eligible Individual: Any holder of a performance
award under the 1992 Long-Term Performance Incentive Plan of FTX
on the date of the Distribution.
(l) Net Income: With respect to any year, the sum of
(i) the net income (or net loss) of the Company and its
consolidated subsidiaries for such year as reviewed by the
Company's independent auditors and released by the Company to the
public; plus (or minus) (ii) the minority interests' share in the
net income (or net loss) of the Company's consolidated
subsidiaries for such year as reviewed by the Company's
independent auditors and released by the Company to the public;
plus (or minus) (iii) the effect of changes in accounting
principles of the Company and its consolidated subsidiaries for
such year plus (or minus) the minority interests' share in such
changes in accounting principles as reviewed by the Company's
independent auditors and released by the Company to the public.
(m) Net Loss Carryforward: With respect to any
Performance Units, (i) an amount equal to the Net Loss Per Share
for any year in the applicable Performance Period times the
number of such Performance Units then outstanding, reduced by
(ii) any portion thereof which has been applied in any prior year
as provided in Section 4.1.
(n) Net Loss Per Share: The amount obtained when the
calculation of Annual Earnings Per Share results in a number that
is less than zero.
(o) Participant: An individual who has been selected by
the Committee to receive a Performance Award and in respect of
whose Performance Award Account any amounts remain payable.
(p) Performance Award: The grant of Performance Units
by the Committee to a Participant pursuant to Section 3.1 or 3.4.
(q) Performance Award Account: An account established
for a Participant pursuant to Section 3.2.
(r) Performance Period: With respect to any Performance
Unit, the period beginning on January 1 of the year in which such
Performance Unit was granted and ending on the Award Valuation
Date for such Performance Unit provided that, with respect to
Performance Units constituting Transition Awards, the Performance
Period shall begin on the effective date of the Distribution.
(s) Performance Unit: A unit covered by Performance
Awards granted or subject to grant pursuant to Article III.
(t) Related Entities: The Company, any subsidiary of
the Company, Freeport-McMoRan Inc., any subsidiary of Freeport-
McMoRan Inc., McMoRan Oil & Gas Co., any subsidiary of McMoRan
Oil and Gas Co., and any law firm rendering services to any of
the foregoing entities provided such law firm consists of at
least two or more members or associates who are or were officers
of the Company or any subsidiary of the Company.
(u) Subsidiary: Any corporation or other entity in
which the Company possesses directly or indirectly equity
interests representing at least 50% of the total ordinary voting
power or at least 50% of the total value of all classes of equity
interests of such corporation or other entity.
(v) Termination of Employment: The cessation of the
rendering of services, whether or not as an employee, to any and
all of the Related Entities.
(w) Transition Award: A Performance Award granted to an
Eligible Individual during 1995 by way of adjustment to such
individual's FTX 1992 Long-Term Performance Incentive Plan
performance award in connection with the Distribution.
SCHEDULE A
Transition Awards
Schedule of Award Valuation Dates
for Transition Award Performance Units Granted to
Covered Officers During Calendar Year 1995
Number of Award Valuation
Covered Officer Performance Units* Date
Chief Executive Officer 100,000 (1998 series) December 31, 1998
100,000 (1997 series) December 31, 1997
100,000 (1996 series) December 31, 1996
100,000 (1995 series) December 31, 1995
Chief Operating Officer 40,000 (1998 series) December 31, 1998
40,000 (1997 series) December 31, 1997
40,000 (1996 series) December 31, 1996
40,000 (1995 series) December 31, 1995
Vice Chairman of the Board 75,000 (1998 series) December 31, 1998
75,000 (1997 series) December 31, 1997
40,000 (1996 series) December 31, 1996
40,000 (1995 series) December 31, 1995
Each Additional Covered 40,000 (1998 series) December 31, 1998
Officer 40,000 (1997 series) December 31, 1997
20,000 (1996 series) December 31, 1996
20,000 (1995 series) December 31, 1995
____________________
* To be adjusted in accordance with Section 3.4(d).
EXHIBIT 10.7
FREEPORT-MCMORAN COPPER & GOLD INC.
PERFORMANCE INCENTIVE AWARDS PROGRAM
1. Purpose. The purpose of the Performance Incentive Awards
Program (the "Plan") of Freeport-McMoRan Copper & Gold Inc. (the
"Company") is to provide greater incentives for certain key
management, professional and technical employees whose
performance in fulfilling the responsibilities of their positions
can significantly affect the performance of the Company or its
operating units. The Plan provides an opportunity to earn
additional compensation in the form of cash incentive payments
based on the employee's individual performance and on the results
achieved by the Company and by the operating or staff unit for
which the employee performs services.
2. Administration. The Plan shall be administered by the
Chairman of the Board of the Company who shall have full
authority to interpret the Plan and from time to time adopt rules
and regulations for carrying out the Plan, subject to such
directions as the Corporate Personnel Committee (the "Committee")
of the Company's Board of Directors may give, either as
guidelines or in particular cases. In connection with his
administration of the Plan, the Chairman of the Board may seek
the views and recommendations of the Company's Operating
Committee.
3. Eligibility for Participation. Each year the Chairman of
the Board shall select the key managerial, professional or
technical employees of the Company or of any of its subsidiaries
who shall be eligible for participation in the Plan during that
year. The Chairman of the Board may in his discretion make such
selection, in whole or in part, on the basis of minimum salary
levels, or position-point levels.
The selection of an employee for eligibility in a particular
year shall not constitute entitlement either to an incentive
payment under the Plan for that year or to selection for
eligibility in any subsequent year. Selection of employees for
eligibility in a particular year will ordinarily be made in
January of that year, but selection of any employee or employees
may be made at any subsequent time or times in such year.
No officer or employee shall receive any incentive payment
under the Plan for any year during which such officer or employee
was a participant in the Freeport-McMoRan Copper & Gold Inc.
Annual Incentive Plan.
4. Determination of Target Incentives. At the time each
employee is selected for eligibility in the Plan for a particular
year, the Chairman of the Board shall determine a target
incentive or a target incentive range for the employee with
respect to that year. Such incentive or range shall be
indicative of the incentive payment which the employee might
expect to receive on the basis of strong performance by such
employee, by the Company and by such employee's operating or
staff unit, having regard to such performance standards and
objectives as may be established with respect to that year.
5. Cash Incentive Payments. After the end of each year the
Chairman of the Board shall evaluate, or cause to be evaluated,
the performance of each employee selected for eligibility under
the Plan for that year, as well as the performance of the Company
and the employee's operating or staff unit. Based on such
evaluation, the Chairman of the Board shall determine whether a
cash incentive payment shall be made to such employee for that
year and, if so, the amount of such payment. The aggregate
amount of all such incentive payments shall be submitted to the
Committee for its approval. Subject to such approval, each such
payment (less applicable withholding and other taxes) shall be
made at such time established by the Chairman of the Board or the
Committee after such approval, which shall in no event be later
than February 28 of the year following the year for which the
incentive payments are made. An individual who has been awarded
an incentive payment for a particular year need not be employed
by the Company or any of its subsidiaries at the time of payment
thereof to be eligible to receive such payment. Notwithstanding
any of the foregoing to the contrary, if an individual selected
for eligibility under the Plan for a particular year should cease
to be employed by the Company and its subsidiaries for any reason
prior to the end of such year, the Chairman of the Board shall
evaluate, or cause to be evaluated, the performance of such
employee and the employee's operating or staff unit for the
portion of such year prior to such cessation of employment.
Based on such evaluation, the Chairman of the Board shall
determine whether a cash incentive payment shall be made to such
employee for that year and, if so, the amount of such payment.
The aggregate amount of all such incentive payments shall be
submitted to the Committee for its approval. Subject to such
approval, each such payment (less applicable withholding and
other taxes) shall be made at such time established by the
Chairman of the Board or the Committee after such approval, which
may be made at any time during the year for which such incentive
payments are made but shall in no event be later than February 28
of the year following such year.
6. Optional Deferral of Payments. If, prior to the date
established by the Chairman of the Board or the Committee for any
year for which incentive payments are made, an employee selected
for participation in the Plan shall so elect, in accordance with
procedures established by the Chairman of the Board, all or any
part of a cash incentive payment to such employee with respect to
such year shall be deferred and paid in one or more periodic
installments, not in excess of ten, at such time or times before
or after the date of such employee's Termination of Employment
(as hereinafter defined), but not later than ten years after such
date of Termination of Employment, as shall be specified in such
election. If and only if any cash incentive payment or portion
thereof is so deferred for payment after December 31 of the year
following the year for which the incentive payment is made, such
cash incentive payment or portion thereof, as the case may be,
shall, commencing with January 1 of the year following the year
for which the incentive payment is made, be increased at a rate
equal to the prime commercial lending rate announced from time to
time by The Chase Manhattan Bank, N.A. (compounded quarterly) or
at such other rate and in such manner as shall be determined from
time to time by the Committee. If such employee's Termination of
Employment occurs for any reason other than early or normal
retirement under the retirement plan of this corporation or
retirement with the consent of this corporation outside the
retirement plan of this corporation and if, on the date of such
Termination of Employment, there remain unpaid any installments
of cash incentive payments which have been deferred as provided
in this Section 6, the Committee or the Chairman of the Board
may, in its or his discretion, direct the payment to such
employee of the aggregate amount of such unpaid installments in a
lump sum, notwithstanding such election. Solely for purposes of
this Section 6, the term "Termination of Employment" shall mean
the cessation of the rendering of services, whether or not as an
employee, to any and all of the following entities: the Company;
any subsidiary of the Company; Freeport-McMoRan Inc.; any
subsidiary of Freeport-McMoRan Inc.; McMoRan Oil & Gas Co.; any
subsidiary of McMoRan Oil & Gas Co.; any corporation or other
entity in which any two or more of the aforementioned entities
collectively possess, directly or indirectly, equity interests
representing at least 50% of the total ordinary voting power or
at least 50% of the total value of all classes of equity
interests of such corporation or other entity; and any law firm
rendering services to any of the foregoing entities provided such
law firm consists of at least two or more members or associates
who are or were officers of the Company, any subsidiary of the
Company, Freeport-McMoRan Inc., any subsidiary of Freeport-
McMoRan Inc., McMoRan Oil & Gas Co., or any subsidiary of McMoRan
Oil & Gas Co.
7. General Provisions. The selection of an employee for
participation in the Plan shall not give such employee any right
to be retained in the employ of the Company or any of its
subsidiaries, and the right of the Company and of such subsidiary
to dismiss or discharge any such employee is specifically
reserved. The benefits provided for employees under the Plan
shall be in addition to, and in no way preclude, other forms of
compensation to or in respect of such employee.
8. Amendment or Termination. The Committee may from time to
time amend or at any time terminate the Plan.
EXHIBIT 10.8
Freeport-McMoRan Copper & Gold Inc.
President's Award Program
Purpose
The purpose of the President's Award Program (the "Program") of
Freeport-McMoRan Copper & Gold Inc. (the "Company") is to provide
an opportunity for discretionary cash rewards for those
situations where an outstanding individual contribution cannot
properly be or should not be rewarded with merit salary
increases, annual incentives, or promotion.
Administration
The Program shall be administered by the President and Chief
Operating Officer of the Company. The President shall have full
authority to interpret the provisions of the Program and to make
Awards thereunder.
Eligibility for and Payment of Awards
The following persons are eligible to receive Awards under the
Program: (i) any person providing services as an officer of the
Company or a Subsidiary (as hereinafter defined), whether or not
employed by such entity, but excluding any such person who is
also a director of the Company, (ii) any employee of the Company
or a Subsidiary, including bargaining-unit employees but
excluding any director who is also an employee of the Company or
a Subsidiary, (iii) any officer, employee, member, or associate
of an entity with which the Company has contracted to receive
executive, management, or professional services who provides
services to the Company or a Subsidiary through such arrangement,
and (iv) any member or associate of, or counsel to, a law firm
rendering services to the Company or a Subsidiary. For purposes
of the Program, "Subsidiary" shall mean (i) any corporation or
other entity in which the Company possesses directly or
indirectly equity interests representing at least 50% of the
total ordinary voting power or at least 50% of the total value of
all classes of equity interests of such corporation or other
entity and (ii) any other entity in which the Company has a
direct or indirect economic interest that is designated as a
Subsidiary by the President. Recommendations for a President's
Award must be made to, and in a manner prescribed by, the
President by senior executives of the Company. The aggregate
amount of all Awards granted with respect to any calendar year
may not exceed $350,000. The Awards can be granted and paid at
any time during the calendar year deemed appropriate by the
President.
General Provisions
The Program shall be funded from operating earnings of the
Company and shall not be deducted from any funds established for
the purpose of salary or incentive payments. The Program will
become effective upon approval by the Board of Directors of the
Company and shall continue as provided herein except as amended
or terminated by the Board of Directors.
EXHIBIT 10.12
Freeport-McMoRan Copper & Gold Inc. Financial Counseling and
Tax Return Preparation and Certification Program
1. Purpose. The purpose of the Freeport-McMoRan
Copper & Gold Inc. Financial Counseling and Tax Return
Preparation and Certification Program (the "Program") is to
enable those senior executives chosen to participate in the
Program to devote to the business activities of Freeport-
McMoRan Copper & Gold Inc. (the "Company") or its
subsidiaries the time and attention that such executives
would otherwise have had to devote to their personal
financial or tax affairs, and, in the case of the Tax Return
Preparation and Certification aspect of the Program, to
provide the Company with assurance that the tax affairs of
participating executives are properly attended to. To this
end, the Program contemplates providing professional
counseling services in the area of personal financial and
estate planning (other than investment advice) by an
independent adviser selected by each participant from among
several designated by the Company. It also contemplates the
provision of professional assistance, by a nationally
recognized public accounting firm selected by the Company,
with the preparation and filing of personal income tax
returns, followed by a certification by such firm to the
Company that all required returns have been properly
prepared and timely filed.
2. Administration. The Program shall be administered
by the Chairman of the Board of the Company who shall have
full authority to interpret the Program and from time to
time adopt rules and regulations for carrying out the
Program, subject to such directions as the Corporate
Personnel Committee (the "Committee") of the Company's Board
of Directors may give, either as guidelines or in particular
cases.
3. Eligibility for Participation. Participation in
the Financial Counseling aspect of the Program shall be
offered to the Chairman of the Board, the President and the
Senior Vice Presidents of the Company, and, in addition to
such participants in the current Long-Term Performance
Incentive Plan as may from time to time be selected by the
Chairman of the Board. The Chairman of the Board of the
Company shall also from time to time select from among the
senior executives of the Company and its divisions and
subsidiaries those individuals who are to be requested to
participate in the Tax Return Preparation and Certification
aspect of the Program. Participation in either aspect of
the Program will normally continue through the year
following each participant's retirement.
4. General Provisions. The selection of any employee
for participation in either aspect of the Program shall not
give such employee any right to be retained in the employ of
the Company or any of its subsidiaries, and the right of the
Company and of such subsidiary to dismiss or discharge any
such employee is specifically reserved. The benefits
provided for employees under either aspect of the Program
shall be in addition to, and in no way preclude, other forms
of compensation to or in respect of such employee.
5. Additional Cash Payment. An additional cash
payment shall be paid to each participant as provided herein
in order to gross-up fees paid pursuant to the Program for
tax purposes.
For participants in the Program, a cash payment shall
be paid during such tax reporting year according to the
following formula:
(the lesser of A or B) x _(C + D)
[1 - (C + D)]
in which A equals two percent of the participant's estimated
income in the current tax reporting year, to be reported by
the Company on the participant's form W-2 for such year; B
equals the amount of fees paid during such year on the
participant's behalf pursuant to the Program; C equals the
maximum federal income tax rate applicable to individuals in
effect during such year; and D equals the combined maximum
applicable state and local income tax rates applicable to
individuals in effect during such year.
6. Amendment or Termination. The Committee may from
time amend or at any time terminate the Program.
Executed this day of ,1995.
Freeport-McMoRan Copper & Gold Inc.
_______________________________
Chairman of the Board
Reviewed:
_________________________
General Counsel
EXHIBIT 10.13
FM SERVICES COMPANY
PERFORMANCE INCENTIVE AWARDS PROGRAM
1. Purpose. The purpose of the Performance Incentive Awards
Program (the "Plan") of FM Services Company (the "Company") is to
provide greater incentives for certain key management,
professional and technical employees whose performance in
fulfilling the responsibilities of their positions can
significantly affect the performance of the Company. The Plan
provides an opportunity to earn additional compensation in the
form of cash incentive payments based on the employee's
individual performance and on the results achieved by the Company
and by the staff unit for which the employee performs services.
2. Administration. The Plan shall be administered by the
Chairman of the Board of the Company who shall have full
authority to interpret the Plan and from time to time adopt rules
and regulations for carrying out the Plan, subject to such
directions as the Company's Board of Directors may give, either
as guidelines or in particular cases.
3. Eligibility for Participation. Each year the Chairman of
the Board shall select the key managerial, professional or
technical employees of the Company or of any of its subsidiaries
who shall be eligible for participation in the Plan during that
year. The Chairman of the Board may in his discretion make such
selection, in whole or in part, on the basis of minimum salary
levels, or position-point levels.
The selection of an employee for eligibility in a particular
year shall not constitute entitlement either to an incentive
payment under the Plan for that year or to selection for
eligibility in any subsequent year. Selection of employees for
eligibility in a particular year will ordinarily be made in
January of that year, but selection of any employee or employees
may be made at any subsequent time or times in such year.
4. Determination of Target Incentives. At the time each
employee is selected for eligibility in the Plan for a particular
year, the Chairman of the Board shall determine a target
incentive or a target incentive range for the employee with
respect to that year. Such incentive or range shall be
indicative of the incentive payment which the employee might
expect to receive on the basis of strong performance by such
employee, by the Company and by such employee's staff unit,
having regard to such performance standards and objectives as may
be established with respect to that year.
5. Cash Incentive Payments. After the end of each year the
Chairman of the Board shall evaluate, or cause to be evaluated,
the performance of each employee selected for eligibility under
the Plan for that year, as well as the performance of the Company
and the employee's staff unit. Based on such evaluation, the
Chairman of the Board shall determine whether a cash incentive
payment shall be made to such employee for that year and, if so,
the amount of such payment. Each such payment (less applicable
withholding and other taxes) shall be made at such time
established by the Chairman of the Board, which shall in no event
be later than February 28 of the year following the year for
which the incentive payments are made. An individual who has
been awarded an incentive payment for a particular year need not
be employed by the Company or any of its subsidiaries at the time
of payment thereof to be eligible to receive such payment.
Notwithstanding any of the foregoing to the contrary, if an
individual selected for eligibility under the Plan for a
particular year should cease to be employed by the Company and
its subsidiaries for any reason prior to the end of such year,
the Chairman of the Board shall evaluate, or cause to be
evaluated, the performance of such employee and the employee's
staff unit for the portion of such year prior to such cessation
of employment. Based on such evaluation, the Chairman of the
Board shall determine whether a cash incentive payment shall be
made to such employee for that year and, if so, the amount of
such payment. Each such payment (less applicable withholding and
other taxes) shall be made at such time established by the
Chairman of the Board, which may be made at any time during the
year for which such incentive payments are made but shall in no
event be later than February 28 of the year following such year.
6. Optional Deferral of Payments. If, prior to the date
established by the Chairman of the Board for any year for which
incentive payments are made, an employee selected for
participation in the Plan shall so elect, in accordance with
procedures established by the Chairman of the Board, all or any
part of a cash incentive payment to such employee with respect to
such year shall be deferred and paid in one or more periodic
installments, not in excess of ten, at such time or times before
or after the date of such employee's Termination of Employment
(as hereinafter defined), but not later than ten years after such
date of Termination of Employment, as shall be specified in such
election. If and only if any cash incentive payment or portion
thereof is so deferred for payment after December 31 of the year
following the year for which the incentive payment is made, such
cash incentive payment or portion thereof, as the case may be,
shall, commencing with January 1 of the year following the year
for which the incentive payment is made, be increased at a rate
equal to the prime commercial lending rate announced from time to
time by The Chase Manhattan Bank, N.A. (compounded quarterly) or
at such other rate and in such manner as shall be determined from
time to time by the Chairman of the Board. If such employee's
Termination of Employment occurs for any reason other than early
or normal retirement under the retirement plan of this
corporation or retirement with the consent of this corporation
outside the retirement plan of this corporation and if, on the
date of such Termination of Employment, there remain unpaid any
installments of cash incentive payments which have been deferred
as provided in this Section 6, the Chairman of the Board may, in
his discretion, direct the payment to such employee of the
aggregate amount of such unpaid installments in a lump sum,
notwithstanding such election. Solely for purposes of this
Section 6, the term "Termination of Employment" shall mean the
cessation of the rendering of services, whether or not as an
employee, to any and all of the following entities: the Company;
any subsidiary of the Company; Freeport-McMoRan Inc.; any
subsidiary of Freeport-McMoRan Inc.; Freeport-McMoRan Copper &
Gold Inc.; any subsidiary of Freeport-McMoRan Copper & Gold Inc.;
McMoRan Oil & Gas Co.; any subsidiary of McMoRan Oil & Gas Co.;
and any corporation or other entity in which any two or more of
the aforementioned entities collectively possess, directly or
indirectly, equity interests representing at least 50% of the
total ordinary voting power or at least 50% of the total value of
all classes of equity interests of such corporation or other
entity.
7. General Provisions. The selection of an employee for
participation in the Plan shall not give such employee any right
to be retained in the employ of the Company or any of its
subsidiaries, and the right of the Company and of such subsidiary
to dismiss or discharge any such employee is specifically
reserved. The benefits provided for employees under the Plan
shall be in addition to, and in no way preclude, other forms of
compensation to or in respect of such employee.
8. Amendment or Termination. The Board of Directors of the
Company may from time to time amend or at any time terminate the
Plan.
EXHIBIT 10.14
FM Services Company Financial Counseling and
Tax Return Preparation and Certification Program
1. Purpose. The purpose of the FM Services Company Financial
Counseling and Tax Return Preparation and Certification Program (the
"Program") is to enable those senior executives chosen to participate in
the Program to devote to the business activities of FM Services Company
(the "Company") or its subsidiaries the time and attention that such
executives would otherwise have had to devote to their personal
financial or tax affairs, and, in the case of the Tax Return Preparation
and Certification aspect of the Program, to provide the Company with
assurance that the tax affairs of participating executives are properly
attended to. To this end, the Program contemplates providing
professional counseling services in the area of personal financial and
estate planning (other than investment advice) by an independent adviser
selected by each participant from among several designated by the
Company. It also contemplates the provision of professional assistance,
by a nationally recognized public accounting firm selected by the
Company, with the preparation and filing of personal income tax returns,
followed by a certification by such firm to the Company that all
required returns have been properly prepared and timely filed.
2. Administration. The Program shall be administered by the Chairman
of the Board of the Company who shall have full authority to interpret
the Program and from time to time adopt rules and regulations for
carrying out the Program, subject to such directions as the Corporate
Personnel Committee (the "Committee") of the Company's Board of
Directors may give, either as guidelines or in particular cases.
3. Eligibility for Participation. Participation in the Financial
Counseling aspect of the Program shall be offered to the Chairman of the
Board, the President and the Senior Vice Presidents of the Company. The
Chairman of the Board of the Company shall also from time to time select
from among the senior executives of the Company and its divisions and
subsidiaries those individuals who are to be requested to participate in
the Tax Return Preparation and Certification aspect of the Program.
Participation in either aspect of the Program will normally continue
through the year following each participant's retirement.
4. General Provisions. The selection of any employee for
participation in either aspect of the Program shall not give such
employee any right to be retained in the employ of the Company or any of
its subsidiaries, and the right of the Company and of such subsidiary to
dismiss or discharge any such employee is specifically reserved. The
benefits provided for employees under either aspect of the Program shall
be in addition to, and in no way preclude, other forms of compensation
to or in respect of such employee.
5. Additional Cash Payment. An additional cash payment shall be paid
to each participant as provided herein in order to gross-up fees paid
pursuant to the Program for tax purposes.
For participants in the Program, a cash payment shall be paid during
such tax reporting year according to the following formula:
(the lesser of A or B) x _(C + D)
[1 - (C + D)]
in which A equals two percent of the participant's estimated income in
the current tax reporting year, to be reported by the Company on the
participant's form W-2 for such year; B equals the amount of fees paid
during such year on the participant's behalf pursuant to the Program; C
equals the maximum federal income tax rate applicable to individuals in
effect during such year; and D equals the combined maximum applicable
state and local income tax rates applicable to individuals in effect
during such year.
6.Amendment or Termination. The Committee may from time amend or at any
time terminate the Program.
Executed this day of , 1995.
FM Services Company
_______________________________
Chairman of the Board
Reviewed:
_________________________
General Counsel
EXHIBIT 10.18
FIRST AMENDMENT TO
SECOND AMENDED AND RESTATED NOTE AGREEMENT
THIS FIRST AMENDMENT TO SECOND AMENDED AND RESTATED NOTE
AGREEMENT (this "Amendment"), dated as of December 31, 1995,
among FM PROPERTIES OPERATING CO., a Delaware general partnership
("FM Properties"), FREEPORT-MCMORAN INC., a Delaware corporation
("FTX"), FREEPORT-McMoRan COPPER & GOLD INC., a Delaware
corporation ("FCX") (FTX and FCX, the "Guarantors"), HIBERNIA
NATIONAL BANK, a national banking association ("Hibernia") and
CHEMICAL BANK, a New York banking corporation ("Chemical")
(Hibernia and Chemical, the "Banks"), and Hibernia, as Agent for
the Banks (the "Agent").
RECITALS
A. The parties hereto have executed a Second Amended and
Restated Note Agreement, dated as of June 30, 1995 (the "Note
Agreement") relating to a $68,000,000 term loan from the Banks to
FM Properties maturing on June 30, 1996.
B. FM Properties has requested that the maturity date of
the loan be extended from June 30, 1996 to June 30, 1997, and the
Banks are willing to do so on the terms and conditions set forth
below.
C. All capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the
Note Agreement.
ARTICLE I.
AMENDMENTS TO THE NOTE AGREEMENT
1. Section 1.1 (Defined Terms) of the Note Agreement is
hereby amended to substitute the following definition:
"Termination Date" shall mean June 30, 1997 or, if
applicable, any earlier date on which the obligation to
pay the Notes in full shall mature pursuant to this
Agreement.
2. Section 1.1 (Defined Terms) of the Note Agreement is
hereby amended to add the following definitions:
"Key Assets" means the properties and assets of
the Borrower shown on Schedule III hereto.
"Net Proceeds" means the connection with any
permitted asset sale, the proceeds thereof (including
any condemnation award and any payment or settlement of
a casualty insurance claim not used to restore the
related property) in the form of cash or cash
equivalents (including any such proceeds received by
way of deferred payment of principal pursuant to a note
or installment receivable or purchase price adjustment,
receivable or otherwise, but only as and when
received), net of the following without duplication:
(i) customary and reasonable attorneys' fees,
accountants' fees, investment banking fees, brokerage
commissions, all closing costs and other customary fees
and expenses actually incurred in connection therewith
as transaction costs, and bona fide reserves and
deposits and (ii) any taxes paid or reasonably
estimated to be payable solely in respect of such
permitted asset sale as a result thereof by the owner
of such asset (after taking into account any available
tax credits or deductions).
"Non-Key Assets" means all the properties and
assets of the Borrower except for Key Assets.
3. A new Section 3.6 (Mandatory Prepayments) is hereby
added to the Note Agreement to read as follows:
3.6 Mandatory Prepayments. On July 30, 1996, FM
Properties shall pay to the Banks an amount equal to
the sum of (i) 25% of the Net Proceeds of any Key Asset
sale and (ii) 50% of the Net Proceeds of any Non-Key
Asset sale (in excess of a cumulative annual fiscal
year amount of $7,500,000), in each case arising from
sales of assets occurring during the period from
January 1, 1996 through June 30, 1996. Similarly, on
January 30, 1997, FM Properties shall pay to the Banks
an amount equal to the sum of (i) 25% of the Net
Proceeds of any Key Asset sale and (ii) 50% of the Net
Proceeds of any Non-Key Asset sale (in excess of
$7,500,000), in each case arising from sales of assets
occurring during the period from July 1, 1996 through
December 31, 1996. At the time of each payment, FM
Properties shall deliver documentation evidencing the
sale of assets and the calculation of the Net Proceeds.
4. The Notes are hereby modified to extend the maturity
dates thereof to June 30, 1997.
5. Each and every other document, agreement or instrument
which was executed in connection with or pursuant to the Note
Agreement is hereby modified to reflect the extension of the
maturity of the Notes,this Amendment to the Note Agreement and
the modification to the documents contained herein.
ARTICLE II.
CONDITIONS PRECEDENT
1. Conditions to Effectiveness. The following constitute
conditions precedent to the effectiveness of this Agreement:
(a) Amendment. The Banks shall have received this
Amendment, executed by a Responsible Officer of FM
Properties, FTX and FCX.
(b) FM Properties Partnership and Corporate
Proceedings. The Banks shall have received a
certificate of the Secretary or Assistant
Secretary of FTX, as managing general partner of
FM Properties, certifying (i) that there have been
no amendments to the partnership agreement of FM
Properties since the effective date of the Note
Agreement on June 30, 1995, and (ii) the
incumbency of the officer(s) of FTX, as managing
general partner, executing this Amendment and all
documents related hereto.
(c) Legal Opinion. The Banks shall have received an
opinion of Jones, Walker, Waechter, Poitevent,
Carrere & Denegre, or John G. Amato, counsel to FM
Properties, in form and substance satisfactory to
the Agent and addressed to the Banks.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES AND COVENANTS
1. FM Properties. FM Properties hereby certifies to the
Agent and the Banks that all of the representations and
warranties of FM Properties contained in the Note Agreement
remain true and correct as of December 31, 1995, and that no
Default under the Note Agreement has occurred and is continuing
as of December 31, 1995.
2. FTX. FTX as guarantor under the FTX Guaranty
Agreement, hereby certifies (i) that all of the representations
and warranties contained in the FTX Guaranty Agreement and in the
Note Agreement remain true and correct as of December 31, 1995;
(ii) that FTX, as guarantor under the FTX Guaranty Agreement,
hereby consents to the execution of this Amendment; and (iii)
that the FTX Guaranty Agreement remains in full force and effect
following the date of this Amendment.
3. FCX. FCX, as guarantor under the FCX Guaranty
Agreement, hereby certifies (i) that all of the representations
and warranties contained in the FCX Guaranty Agreement remain
true and correct as of December 31, 1995; (ii) that FCX, as
guarantor under the FCX Guaranty Agreement, hereby consents to
the execution of this Amendment; and (iii) that the FCX Guaranty
Agreement remains in full force and effect following the date of
this Agreement.
ARTICLE IV.
MISCELLANEOUS
1. Savings Clause. Except as specifically amended by this
Amendment, all of the other terms and conditions of the Note
Agreement shall remain in full force and effect.
2. Counterparts. This Amendment may be executed by one or
more of the parties to this Amendment on any number of separate
counterparts and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
3. Governing Law. This Amendment shall be governed by,
and construed and interpreted in accordance with, the law of the
State of Louisiana.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their proper and
duly authorized officers as of the day and year first above
written.
FM PROPERTIES OPERATING CO.
BY: FREEPORT-McMoRan INC.,
Managing General Partner
By: /s/ R. Foster Duncan
_____________________
R. Foster Duncan
Its Treasurer
FREEPORT-McMoRan INC.
By: /s/ R. Foster Duncan
_____________________
R. Foster Duncan
Its Treasurer
FREEPORT-McMoRan COPPER & GOLD INC.
By: /s/ R. Foster Duncan
_____________________
R. Foster Duncan
Its Treasurer
HIBERNIA NATIONAL BANK, as Agent
and Bank
By: /s/ Bruce L. Ross
____________________
Bruce L. Ross
Its Vice President
CHEMICAL BANK, as Bank
By: /s/ Theodore L. Parker
_______________________
Theodore L. Parker
Its Vice President
EXHIBIT 12.1
FREEPORT-McMoRan COPPER & GOLD INC.
Computation of Ratio of Earnings to Fixed Charges
Years Ended December 31,
--------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
(In Thousands)
Income from
continuing
operations $ 253,618 $ 130,241 $ 60,670 $ 129,893 $ 101,962
Add:
Provision for
income taxes 234,044 123,412 67,589 103,726 45,585
Minority
interests'
share of net
income 57,100 25,439 9,134 31,075 12,199
Interest expense 47,900 - 15,327 18,897 21,451
Rental expense
factor(a) 1,002 2,333 3,190 876 841
---------- ---------- ---------- ---------- ----------
Earnings available for
fixed charges $ 593,664 $ 281,425 $ 155,910 $ 284,467 $ 182,038
========== ========== ========== ========== ==========
Interest expense $ 47,900 $ - $ 15,327 $ 18,897 $ 21,451
Capitalized
interest 49,758 35,110 24,519 23,974 18,276
Rental expense
factor(a) 1,002 2,333 3,190 876 841
---------- ---------- ---------- ---------- ----------
Fixed charges $ 98,660 $ 37,443 $ 43,036 $ 43,747 $ 40,568
========== ========== ========== ========== ==========
Ratio of earnings to
fixed charges(b) 6.0x 7.5x 3.6x 6.5x 4.5x
==== ==== ==== ==== ====
a. Portion of rent deemed representative of an interest factor.
b. For purposes of this calculation, earnings consist of income from
continuing operations before income taxes, minority interests and
fixed charges. Fixed charges include interest and that portion
of rent deemed representative of interest.
EXHIBIT 13.1
SELECTED FINANCIAL AND OPERATING DATA
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
(Financial Data In Thousands, Except Per Share Amounts)
FINANCIAL DATA
Years Ended December 31:
Revenues $1,834,335 $1,212,284 $ 925,932 $ 714,315 $ 467,522
Operating income 594,252a 280,134b 155,319c 276,429 177,720
Net income
applicable to
common stock 199,465a 78,403b 21,862c,d 122,868 96,159e
Net income per
common share .98a .38b .11c,d .66 .53e
Dividends paid
per common share .675 .60 .60 .60 .55
Average common
shares
outstanding 204,406 205,755 197,929 187,343 182,130
At December 31:
Property, plant
and
equipment, net 2,845,625 2,360,489 1,646,603 993,412 601,675
Total assets 3,581,746 3,040,197 2,116,653 1,694,005 1,157,615
Long-term
debt, including
current portion
and short-term
borrowings 1,167,232 549,710 260,659 723,583 631,961
Mandatory
redeemable
preferred
stock 500,007 500,007 232,620 - -
Stockholders'
equity 881,674 994,975 947,927 646,457 172,545
PT-FI OPERATING DATA
Ore milled (MTPD) 111,900 72,500 62,300 57,600 38,200
Copper grade (%) 1.32 1.51 1.57 1.59 1.77
Gold grade
Grams per MT 1.39 1.31 1.46 1.35 1.23
Ounce per MT .045 .042 .047 .043 .040
Silver grade
Grams per MT 3.17 3.02 4.02 4.79 5.90
Ounce per MT .102 .097 .129 .154 .190
Recovery rate (%)
Copper 85.0 83.7 87.0 88.2 89.9
Gold 74.3 72.8 76.2 73.7 79.6
Silver 63.2 64.7 67.2 65.5 75.4
Copper (000s of recoverable pounds)
Production 978,000 710,300 658,400 619,100 466,700
Sales 985,100 700,800 645,700 651,800 439,700
Average realized
price f $1.22 $1.02 $.90 $1.03 $1.01
Sales-net of
intercompany
effect 946,900 699,900 628,800 651,800 439,700
Gold (recoverable ounces)
Production 1,310,400 784,000 786,700 641,000 420,800
Sales 1,353,400 794,700 762,900 679,300 397,900
Average realized
price $383.73 $381.13 $361.74 $340.11 $358.76
Sales-net of
intercompany
effect 1,286,200 805,600 733,300 679,300 397,900
Silver (recoverable ounces)
Production 2,303,000 1,305,400 1,541,200 1,642,500 1,567,900
Sales 2,349,400 1,335,400 1,480,900 1,804,400 1,620,900
Average realized
price $4.99 $5.08 $4.15 $3.72 $3.87
Sales-net of
intercompany
effect 2,252,200 1,326,500 1,461,800 1,804,400 1,620,900
RTM OPERATING DATA (since acquisition)
Concentrate
treated (MT) 434,400g 485,300 330,200
Anode production
(000s of
pounds) 296,000g 347,500 299,300
Cathode
production
(000s of
pounds) 258,200g 312,100 227,300
FREEPORT-McMoRan COPPER & GOLD INC.
SELECTED FINANCIAL AND OPERATING DATA
NOTES
a. Includes charges totaling $49.6 million ($26.9 million to net
income or $0.13 per share) consisting of $12.5 million for a
materials and supplies inventory reserve adjustment in connection
with the completion of PT-FI's expansion program, $29.8 million
for stock option costs resulting from the rise in common stock
prices and $7.3 million for an early retirement program.
b. Includes a $32.6 million insurance settlement gain ($17.4 million
to net income or $0.08 per share).
c. Includes charges totaling $37.1 million ($20.5 million to net
income or $0.10 per share) for restructuring and other related
costs.
d. Includes a $9.9 million cumulative charge ($0.05 per share) for
changes in accounting principle.
e. Includes a $5.8 million cumulative charge ($0.03 per share) for
the change in accounting for postretirement benefits other than
pensions and a $26.5 million ($0.15 per share) reduction in the
tax provision due to signing the COW.
f. Amounts were $1.28, $1.15 and $0.82 in 1995, 1994 and 1993,
respectively, before hedging adjustments.
g. Reflects shutdowns caused by a strike at an adjacent plant,
expansion equipment tie-ins and normal maintenance turnarounds.
FREEPORT-McMoRan COPPER & GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Freeport-McMoRan Copper & Gold Inc. (FCX) operates through its
majority-owned subsidiaries, P.T. Freeport Indonesia Company (PT-FI),
P.T. IRJA Eastern Minerals Corporation (Eastern Mining) and Rio Tinto
Minera, S.A. (RTM). PT-FI's operations involve mineral exploration
and development, mining and milling of ore containing copper, gold and
silver in Irian Jaya, Indonesia and the marketing of concentrates
containing these metals worldwide. PT-FI is also engaged in a joint
venture that expects to construct a copper smelter and refinery in
Indonesia. Eastern Mining conducts mineral exploration activities in
Irian Jaya. RTM is engaged in the smelting and refining of copper
concentrates in Spain.
A number of significant events occurred during 1995:
The distribution of majority ownership of FCX by its former parent,
Freeport-McMoRan Inc. (FTX), to FTX shareholders, which resulted in
FCX becoming financially independent from FTX with widely held shares
and substantial public float. Lower financing costs for FCX are
expected.
An alliance between FCX and The RTZ Corporation PLC (RTZ) was
established. RTZ purchased approximately 12 percent of the then
outstanding common stock of FCX from FTX. FCX and RTZ agreed to form
joint ventures in which RTZ has agreed to provide substantial funding
of future exploration, resulting in a $30.8 million reduction in 1995
exploration costs, and expansion costs and the companies will exchange
technical expertise.
PT-FI successfully completed a major expansion of its operations in
1995 and expects production to average 125,000 metric tons of ore per
day (MTPD) for 1996. Increased cash flow from the expansion led to a
50 percent increase in FCX's quarterly common stock dividend and an
open market common stock purchase program.
Exploration efforts resulted in significant additions to estimated
proved and probable mineral reserves, increasing mine life and
providing reserves to support future expansions. Exploration
activities also resulted in the discovery of areas of mineralization
with the potential for future reserve additions and prospects for
future growth.
A joint prefeasibility study with RTZ established the economic
viability of a major expansion of PT-FI's operations to 190,000 MTPD,
expected to be undertaken in a joint venture with RTZ during 1996 and
completed by late 1998.
RTM smelter expansion construction was essentially completed and the
Gresik smelter feasibility study was completed.
RESULTS OF OPERATIONS
1995 1994 1993
---------- ---------- ----------
(In Millions, Except Per Share Amounts)
Revenues $ 1,834.3 $ 1,212.3 $ 925.9
Operating income 594.3a 280.1b 155.3c
Net income applicable
to common stock 199.5a 78.4b 21.9c,d
Net income per common share .98a .38b .11c,d
Operating income (loss)
by subsidiary:
PT-FI $ 679.7 $ 295.4 $ 180.1
Eastern Mining (4.0) (8.8) -
RTM (28.1) - (6.4)
Intercompany eliminations
and other e (53.3) (6.5) (18.4)
---------- ---------- ----------
$ 594.3 $ 280.1 $ 155.3
========== ========== ==========
a. Includes charges totaling $49.6 million ($26.9 million to net
income or $0.13 per share) consisting of $12.5 million for a
materials and supplies inventory reserve adjustment in connection
with the completion of PT-FI's expansion program, $29.8 million
for stock option costs resulting from the rise in common stock
prices (Note 5) and $7.3 million for an early retirement program.
b. Includes a $32.6 million insurance settlement gain ($17.4 million
to net income or $0.08 per share).
c. Includes charges totaling $37.1 million ($20.5 million to net
income or $0.10 per share) for restructuring and other related
costs (Note 1).
d. Includes a $9.9 million cumulative charge ($0.05 per share) for
changes in accounting principle (Note 1).
e. Profit on PT-FI sales to RTM is not reflected in FCX's
consolidated results until completion of the smelting and
refining process and sale by RTM. The increased level of PT-FI
concentrate sales to RTM at the end of 1995 to support the
expanding smelter capacity resulted in additional intercompany
eliminations totaling $40.4 million for 1995.
1995 Compared With 1994. FCX's 1995 revenues and gross profit rose
significantly, reflecting record PT-FI copper and gold sales levels
achieved because of higher mill throughput, recovery rates and copper
realizations (see Selected Financial and Operating Data) combined with
lower unit cash production costs. A reconciliation of revenues from
1994 to 1995 follows (in millions):
Revenues - 1994 $ 1,212.3
Increases (decreases):
PT-FI sales:
Volumes:
Copper 290.5
Gold 212.9
Price realizations:
Copper 196.8
Gold 3.5
Treatment charges, royalties and other (57.5)
RTM revenues, net of eliminations (24.2)
----------
Revenues - 1995 $ 1,834.3
==========
Copper sales volumes rose 41 percent and gold sales volumes
rose 70 percent as a result of a 54 percent increase in mill
throughput and improved recovery rates, although copper ore grades
were lower. Copper prices remained strong throughout 1995 buoyed by
robust demand and a drawdown of inventories held by copper exchanges.
However, during early 1996, copper exchange inventories increased,
causing the spot copper price on the London Metals Exchange (LME) to
weaken from $1.27 per pound at yearend to $1.16 per pound at February
6, 1996. Average gold realizations were virtually unchanged from the
prior year, although they strengthened somewhat by late 1995. Total
treatment charges and royalties increased primarily because of higher
sales volumes and copper prices. However, per pound treatment
charges declined because of reduced rates negotiated in 1994, somewhat
offset by higher price participation payments which vary with the
price of copper. Per pound treatment charges, a portion of which are
negotiated annually with customers, are expected to increase in 1996.
PT-FI Gross Profit Per Pound of Copper(cents)
1995 1994 1993
---------- ---------- ----------
Average realized price a 122.2 102.2 90.4
---------- ---------- ----------
Production costs:
Site production and delivery b 53.5 57.3 49.3
Gold and silver credits (53.8) (43.9) (43.4)
Treatment charges 19.6 23.9 23.7
Royalty on metals 4.3 2.8 1.5
---------- ---------- ----------
Cash production costs 23.6 40.1 31.1
Depreciation and amortization 10.4 7.5 8.7
---------- ---------- ----------
Total production costs 34.0 47.6 39.8
---------- ---------- ----------
Revenue adjustments c (2.1) (0.7) (2.4)
---------- ---------- ----------
86.1 53.9 48.2
========== ========== ==========
a. Amounts were $1.28, $1.15 and $0.82 in 1995, 1994 and 1993,
respectively, before hedging adjustments.
b. Excludes inventory reserve adjustments of $12.5 million (1.3
cents per pound) in 1995 and $10 million (1.5 cents per pound) in
1993.
c. Reflects adjustments for prior year concentrate sales and
amortization of the price protection program cost.
PT-FI completed its expansion during the second quarter of 1995,
nearly seven months ahead of schedule. Mill throughput averaged
126,800 MTPD for the 1995 fourth quarter (111,900 MTPD for the year)
and is expected to be sustained at approximately 125,000 MTPD during
1996. With the expansion completed, PT-FI has focused on maximizing
efficiencies. These efforts, together with the benefits of the
expansion, substantial increases in gold and silver credits and
reduced treatment charges, contributed to reducing average 1995 cash
production costs to 23.6 cents per pound of copper, 41 percent lower
than the 1994 average. Gold and silver credits per pound increased 23
percent because of a rise in comparative gold grades and recovery
rates. Unit royalties rose because of higher copper prices, as PT-
FI's copper royalty rate varies from 1.5 percent to 3.5 percent
depending on the price of copper.
PT-FI's 1995 depreciation rate averaged 10.4 cents per pound of
copper (11 cents per pound during the second half of 1995) as a result
of the additional capital expenditures necessary to support its
expanded operations. For 1996, depreciation is expected to
approximate 13 cents per pound reflecting a full year of depreciation
for the expanded operations, completion of the first phase of an
infrastructure program and increases in ore reserves.
RTM is expected to benefit in 1996 from its smelter expansion and
anticipated higher treatment and refining charge rates, partly offset
by potentially reduced price participation payments if copper prices
are below 1995 levels. In 1995, RTM's smelter was shut down for
approximately seven weeks to tie-in expansion equipment and for a
major maintenance turnaround. Major maintenance turnarounds on the
smelter furnace are scheduled every eight years. The smelter was
later shut down for one week because of the curtailment of cooling
water at RTM's facilities caused by a labor strike at an adjacent
facility. Significantly lower treatment charge rates and the
strengthening of the Spanish peseta in relation to the U.S. dollar
also adversely affected RTM's operating results.
Effective January 1996, RTM changed its functional currency from
the Spanish peseta to the U.S. dollar, reflecting recent changes in
its business. During 1996, a one peseta change in the U.S. dollar and
Spanish peseta exchange rate will result in an approximate $2 million
change in FCX's net income.
CAPITAL RESOURCES AND LIQUIDITY
In the second quarter of 1995, FCX completed its most recent expansion
of mining and milling capacity. This expansion significantly improved
FCX's profitability and operating cash flows. In addition, the joint
ventures with RTZ (Note 2) also significantly enhanced FCX's financial
flexibility by significantly reducing funding required for future
exploration and development expenditures. As a result, FCX's Board of
Directors raised its regular quarterly common stock cash dividend 50
percent to 22.5 cents per share. FCX also announced an open market
share purchase program for up to 20 million shares of its common
stock, representing approximately 10 percent of the shares
outstanding. The timing of purchases is dependent upon many factors,
including the price of common shares, FCX's financial position and
general economic and market conditions.
Net cash provided by operating activities during 1995 rose to
$393.1 million, compared with $336.2 million in 1994, primarily
reflecting higher net income from operations partially offset by
working capital uses related to PT-FI's price protection program.
Cash flow used in investing activities reflects a reduction in PT-FI
capital expenditures ($435.5 million in 1995 compared with $664.7
million in 1994) corresponding with the completion of the expansion,
partially offset by higher RTM expenditures ($151.4 million in 1995
compared with $78.7 million in 1994) because of the smelter expansion,
which was essentially complete at yearend. In September 1995, FCX
purchased Freeport Copper Company (FCC) from FTX for $25 million.
FCC's sole asset is a 50 percent interest in a joint venture with
ASARCO Santa Cruz, Inc. controlling approximately 7,600 contiguous
acres in Arizona. The joint venture is involved in a research project
for an experimental in-situ leaching process to mine copper.
Cash flow from financing activities totaled $207.7 million
compared with $437.7 million in 1994. Net proceeds from FCX equity
securities and debt (including infrastructure financing) were $600.4
million in 1995 and $633.8 million in 1994. During 1995, FCX
purchased 7.7 million shares of its common stock for $177.8 million
(an average of $23.13 per share) under its share purchase program.
Higher dividends reflect the increase in FCX's regular quarterly cash
dividend.
Net cash provided by operating activities during 1994 increased
to $336.2 million, compared with $158.5 million in 1993, primarily
reflecting higher income from operations and an increase in accounts
payable and accrued liabilities related to PT-FI's price protection
program. Cash flow used in investing activities during 1994 reflected
capital expenditures for expansion at PT-FI and RTM. Cash flow
provided by financing activities totaled $437.7 million compared with
a use of $53.1 million in 1993. Net proceeds from FCX equity
securities and debt (including infrastructure financing) totaled
$633.8 million in 1994 compared with $107.6 million in 1993. The sale
of FCX preferred stock was the primary reason for a $35.4 million
increase in dividend payments during 1994.
In July 1995, the credit agreement in which PT-FI participated
was modified to become a separate $550 million facility for PT-FI
($265 million of additional borrowings available at February 6, 1996)
and a new $200 million facility was arranged for FCX and PT-FI ($65
million of additional borrowings available at February 6, 1996). PT-
FI's capital expenditures for 1996 are expected to approximate $200
million primarily for infrastructure assets and mine and mill
sustaining capital. Capital expenditures will be funded by operating
cash flow, the bank credit facility (Note 7) and other financing
sources. Additionally, pursuant to their joint venture arrangements,
FCX and RTZ have agreed to commence immediately a detailed feasibility
study to expand FCX's mine and mill facilities to 190,000 MTPD. The
FCX/RTZ joint venture has initiated engineering activities and plans
to order major long-lead-time component equipment to enable rapid
construction for the expansion. The expansion requires approval from
the Government of Indonesia (GOI), which has previously approved
expansion to 160,000 MTPD. The expansion is expected to be completed
by late 1998. Pursuant to joint venture arrangements, RTZ is expected
to provide funds for the expansion, which is anticipated to involve
expenditures of $700 million to $750 million (Note 2).
RTM has substantially completed its smelter expansion
construction to 270,000 metric tons of metal per year using project
financing, nonrecourse to FCX. With the investment in the expansion
and upon satisfying certain conditions, RTM expects to receive over
$50 million of grants from the Spanish government, including $14.7
million received in 1995. In July 1995, RTM sold its mining
operations, pursuant to which RTM will make cash payments to the
purchasers totaling approximately $14.9 million through July 1997 in
exchange for their assumption of certain RTM liabilities. PT-FI has a
long-term contract to provide RTM with a significant portion of its
copper concentrate requirements at market prices.
In January 1996, PT-FI concluded an agreement for a 200,000
metric tons of metal per year copper smelter/refinery complex in
Gresik, Indonesia, 20 percent owned by PT-FI (Note 10). Financing for
the estimated $570 million aggregate project cost, plus approximately
$100 million of working capital, is expected to be in place by mid-
1996 and construction is expected to be completed by mid-1998. Upon
completion of the Gresik smelter, FCX anticipates that approximately
two-thirds of PT-FI's annual concentrate production at current
throughput rates will be sold to RTM and the Gresik smelter at market
prices.
PT-FI has had positive relations with the GOI since PT-FI
commenced business activities in Indonesia in 1967. The Contract of
Work (COW) provides that the GOI will not nationalize or expropriate
the mining operations of PT-FI. Disputes under the COW are to be
resolved by international arbitration. The 1967 Foreign Capital
Investment Law, which expresses Indonesia's foreign investment policy,
provides basic guarantees of remittance rights and protection against
nationalization, a framework for incentives and basic rules as to
other rights and obligations of foreign investors.
Exploration Results - Total estimated proved and probable recoverable
reserves at PT-FI have increased since December 31, 1994, net of 1995
production, by 12.3 billion pounds of copper (a 44 percent increase),
12.5 million ounces of gold (a 32 percent increase) and 30.3 million
ounces of silver (a 38 percent increase). PT-FI's total yearend 1995
estimated proved and probable reserves, on a 100 percent basis, are
now 40.3 billion pounds of copper, 52.1 million ounces of gold and
111.1 million ounces of silver. Pursuant to the joint venture
arrangements between FCX and RTZ, RTZ has a conditional right to
participate with respect to a 40 percent interest in reserves added
subsequent to 1994 within the Block A area of FCX's COW (Note 13).
FCX's exploration costs totaled $13.9 million in 1995 (net of
$30.8 million expected to be paid by RTZ), $40.4 million in 1994 and
$33.7 million in 1993. Pursuant to the mid-1995 agreement with RTZ
(Note 2) and subject to certain GOI approvals, RTZ will pay for the
next $100 million of exploration costs including the $30.8 million
incurred in 1995. The 1996 exploration budget totals approximately
$50 million, all of which is expected to be paid by RTZ. FCX and RTZ
are continuing their exploration activities within the original 24,700
acre Block A area, the adjacent approximate 3.25 million acre Block B
area and the approximate 2.5 million acre Eastern Mining area. As
required by the applicable COW, PT-FI has relinquished its rights to
approximately 3.25 million acres at Block B and will relinquish an
additional approximate 1.6 million acres in December 1998. Similarly,
75 percent of the Eastern Mining area must be relinquished in three
installments over the next six years.
Other Financial Results - FCX's general and administrative
expenses were $169.7 million in 1995, $109 million in 1994 and $81.4
million in 1993. General and administrative expenses for 1995 include
$37.1 million of stock option and early retirement charges discussed
earlier. During 1995 and 1994, increased general and administrative
expenses were required because of additional personnel and
administrative efforts necessary to manage the expanded operations.
Included in the 1993 amount were nonrecurring charges totaling $6.3
million primarily related to restructuring efforts (Notes 1 and 9).
FCX's total interest cost (before capitalization) rose to $97.7
million in 1995, compared to $35.1 million in 1994 and $39.8 million
in 1993, because of an overall increase in debt levels associated with
the expansions. Capitalized interest relating to the PT-FI and RTM
expansions totaled $49.8 million in 1995, $35.1 million in 1994 and
$24.5 million in 1993. Interest expense is expected to increase
during 1996 because of higher debt levels and completion of the
expansions. During 1995, RTM entered into $160 million of interest
rate swaps maturing in five years at an average fixed rate of 6.1
percent (Note 11). Preferred stock dividends totaled $54.2 million in
1995, $51.8 million in 1994 and $29 million in 1993, reflecting the
additional preferred stock issued during 1994 and 1993.
FCX's effective tax rate was 43 percent in 1995, 44 percent in
1994 and 52 percent in 1993 (Note 6). PT-FI's COW provides a 35
percent corporate income tax rate for PT-FI and a 15 percent
withholding on dividends paid to FCX by PT-FI and on interest for debt
incurred after the signing of the COW. No income tax benefit has been
recorded for the losses at RTM, which is subject to taxation in Spain,
because it has not generated taxable income in recent years.
MARKETING AND PRICE PROTECTION
PT-FI's copper concentrates, which also contain significant
amounts of gold and silver, are sold primarily under long-term sales
agreements. PT-FI's current markets primarily include Asia, Europe
and the Americas. PT-FI has commitments from various parties to
purchase virtually all of its estimated 1996 production at market
prices. Sales for 1996 are estimated to be approximately 1.1 billion
pounds of copper and 1.65 million ounces of gold. Strong 1996 gold
sales reflect the expectation of producing greater than mine life gold
grades during the year. However, first-quarter 1996 production will
be adversely affected by the anticipated mining of lower grade ore and
sales, expected to approximate 175 million pounds of copper and
225,000 ounces of gold, will be affected by the timing of concentrate
shipments.
During 1994, PT-FI implemented a price protection program at a
cost of $31.7 million to cover anticipated copper sales for 1995 and a
portion of 1996. In late 1994 and early 1995, when spot copper prices
rose significantly, PT-FI closed a portion of its 1995 contracts
receiving $36.2 million cash and $19.9 million cash, respectively,
which it recognized in 1995 revenues. As FCX was completing its major
expansion, it entered into a series of contracts during periods of
copper price uncertainty and volatility to establish fixed prices on a
portion of its copper production and to provide floor prices on a
portion of its copper production. Management's present intention is
to provide a floor price for its future copper sales through put
option contracts, when attainable at an acceptable cost, to protect
operating cash flow from the impact of potentially significant
declines in copper prices while providing for full participation in
potentially higher prices. For 1996 and the first quarter of 1997,
PT-FI has established a minimum price of $0.90 per pound on
approximately 260 million pounds of quarterly copper sales, with full
participation in prices above that amount. As conditions warrant, PT-
FI may modify or extend its existing programs. At December 31, 1995,
the $22.7 million cost of the price protection program is included in
inventory. FCX's revenues include net reductions of $68.6 million in
1995 and $103 million in 1994 and net additions of $36.8 million in
1993 related to PT-FI's price protection program.
As of December 31, 1995, 249 million pounds of PT-FI copper sales
remained to be contractually priced in 1996 and are subject to changes
in world copper prices. These pounds are recorded at an average price
of $1.20 per pound. Adjustments to the pricing on these pounds will
be reflected in 1996 revenues (Note 1).
RTM's purchases of copper concentrate are priced at approximately
the same time as its sales of the refined copper, insulating RTM from
most copper price risk. RTM enters into hedging contracts when a
mismatch occurs. At December 31, 1995, RTM had contracts to sell 36.2
million pounds of copper at an average price of $1.29 per pound.
RESULTS OF OPERATIONS
1994 Compared With 1993. FCX's revenues and operating income improved
primarily as a result of significantly higher copper and gold
realizations and increased copper sales volumes from PT-FI. A
reconciliation of revenues from 1993 to 1994 follows (in millions):
Revenues - 1993 $ 925.9
Increases (decreases):
PT-FI sales:
Price realizations:
Copper 82.7
Gold 15.4
Volumes:
Copper 49.9
Gold 11.5
Treatment charges, royalties and other (13.1)
RTM revenues, net of eliminations 140.0a
----------
Revenues - 1994 $ 1,212.3
==========
a. 1993 included only nine months of RTM revenues.
Revenues increased significantly primarily because of a 13
percent improvement in PT-FI's copper realizations, including the
impact of the price protection program, and a 5 percent increase in
gold realizations. Additionally, copper sales volumes rose 9 percent
resulting from expanded mill throughput, partially offset by lower
grades and recoveries. In June 1993, two of PT-FI's four mill level
ore passes caved resulting in a blockage of a portion of the ore pass
delivery system. The blockage's primary effect was to limit mill
throughput to approximately 40,700 MTPD for eight weeks. The impact
of the blockage was minimized by using an ore stockpile adjacent to
the mill and installing conveyors to alternate ore pass systems. In
December 1994, PT-FI settled the resulting property and business
interruption insurance claims and recognized a $32.6 million gain.
PT-FI's 1994 mill throughput rate rose 16 percent compared with
1993. Unit site production and delivery costs increased 8 cents per
pound because of lower copper grades and recoveries, higher jobsite
administrative expenses, expansion related activities and costs
associated with initial infrastructure efforts. Unit royalty costs
were higher in 1994 because of higher copper prices. As a result of
significant 1994 reserve additions, PT-FI's 1994 depreciation rate
decreased to 7.5 cents per pound compared with 8.3 cents for 1993.
RTM's operations were break-even in 1994 compared with a $6.4
million loss for the 1993 period. Smelter cash margins improved in
1994 because of higher operating rates, cost reduction efforts and
greater price participation payments resulting from higher copper
prices.
ENVIRONMENTAL
FCX, in its commitment to environmental responsibility, conducts
regular environmental surveys as part of its long-term environmental
monitoring program. FCX operates under an Environmental Policy which
commits FCX to compliance with applicable environmental regulations
and requires a comprehensive annual environmental audit of its
operations.
FCX believes its Irian Jaya operations are in compliance with
applicable Indonesian environmental laws, rules and regulations. FCX
has performed an environmental impact assessment for expansion of its
operations and infrastructure up to 160,000 MTPD. The assessment was
conducted and the management and monitoring programs were developed by
a team of independent environmental scientists following a government-
approved protocol. The documents were submitted to the GOI for review
and approval as a part of their formal environmental impact assessment
procedures. The impact assessment was approved in February 1994 and
the environmental management and monitoring programs were approved in
February 1995.
FCX's environmental management programs are designed to manage,
minimize and mitigate the impact of its operations on the environment.
A key management program is called the "Tailings and River Management
Plan," which manages the river transport and deposition of tailings,
the crushed rock that remains after the commercially valuable minerals
have been physically extracted from the mined ore. This program
controls the transport and deposition of tailings within a defined
area called the Ajkwa Deposition Area (ADA). The results of analyses
show that the river with tailings meets Indonesian water quality
standards, as well as U.S. Environmental Protection Agency drinking
water standards for metals. Other programs to revegetate and reclaim
the ADA and other areas are being successfully implemented.
RTM believes that its facilities are in compliance with
applicable environmental standards. In 1995, RTM completed
modifications and expansion of its sulphuric acid plants significantly
reducing air emissions.
FCX makes significant expenditures at its operations to manage
and monitor environmental impacts. An increasing emphasis on
environmental issues could require FCX to incur additional costs which
would be charged against future operations. Based upon an analysis of
its operations related to current and anticipated future environmental
requirements, management does not anticipate that these investments
will have a significant adverse impact on its future operations,
liquidity, capital resources or financial position.
PT-FI has volunteered as one of the first companies in Indonesia
to participate in the GOI's Environmental Audit Program, which
provides for an independent consulting firm to completely review and
evaluate the company's environmental programs. A similar program is
also under way to audit PT-FI's social programs. A summary of the
consultants' reports will be made available to the public in 1996.
________________________
The results of operations reported and summarized above are not
necessarily indicative of future operating results.
REPORT OF MANAGEMENT
Freeport-McMoRan Copper & Gold Inc. (the Company) is responsible for
the financial statements and all other information contained in this Annual
Report. The financial statements have been prepared in conformity with
generally accepted accounting principles and include amounts that are based
on management's informed judgements and estimates.
The Company maintains a system of internal accounting controls designed
to provide reasonable assurance at reasonable costs that assets are
safeguarded against loss or unauthorized use, that transactions are executed
in accordance with management's authorization and that transactions are
recorded and summarized properly. The system is tested and evaluated on a
regular basis by the Company's internal auditors, Price Waterhouse LLP. In
accordance with generally accepted auditing standards, the Company's
independent public accountants, Arthur Andersen LLP, have developed an overall
understanding of our accounting and financial controls and have conducted
tests as they consider necessary to support their opinion on the financial
statements.
The Board of Directors, through its Audit Committee composed solely of
non-employee directors, is responsible for overseeing the integrity and
reliability of the Company's accounting and financial reporting practices and
the effectiveness of its system of internal controls. Arthur Andersen LLP
and Price Waterhouse LLP meet regularly with, and have access to, this
committee, with and without management present, to discuss the results of
their audit work.
James R. Moffett Richard C. Adkerson
Chairman of the Board and Executive Vice President and
Chief Executive Officer Chief Financial Officer
FREEPORT-McMoRan COPPER & GOLD INC.
BALANCE SHEETS
December 31,
---------------------------
1995 1994
---------- ----------
ASSETS (In Thousands)
Current assets:
Cash and short-term investments $ 26,883 $ 44,252
Accounts receivable:
Customers 139,808 153,585
Other 116,313 80,639
Inventories:
Products 158,673 121,247
Materials and supplies 196,055 192,775
Prepaid expenses and other 15,542 10,896
---------- ----------
Total current assets 653,274 603,394
---------- ----------
Property, plant and equipment 3,566,808 2,958,644
Less accumulated depreciation
and amortization 721,183 598,155
---------- ----------
Net property, plant and equipment 2,845,625 2,360,489
---------- ----------
Other assets 82,847 76,314
---------- ----------
Total assets $3,581,746 $3,040,197
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $ 351,485 $ 401,821
Current portion of long-term debt
and short-term borrowings 86,943 24,098
Accrued income taxes 88,357 5,657
---------- ----------
Total current liabilities 526,785 431,576
Long-term debt, less current portion 1,080,289 525,612
Accrued postretirement benefits
and other liabilities 186,342 213,043
Deferred income taxes 305,490 292,580
Minority interests 101,159 82,404
Mandatory redeemable preferred stock 500,007 500,007
Stockholders' equity:
Convertible exchangeable
preferred stock 223,900 223,900
Step-Up convertible preferred stock 350,000 350,000
Class A common stock, par value
$0.10, 88,044,008 shares and
65,972,568 shares outstanding 8,804 6,597
Class B common stock, par value
$0.10, 118,619,885 shares and
139,980,763 shares outstanding 11,862 13,998
Capital in excess of par value
of common stock 376,054 362,557
Retained earnings 78,565 41,663
Cumulative foreign currency
translation adjustment 10,244 (3,740)
Common stock held in treasury
- 7,685,100 shares, at cost (177,755) -
---------- ----------
881,674 994,975
---------- ----------
Total liabilities and
stockholders' equity $3,581,746 $3,040,197
========== ==========
The accompanying notes are an integral part of these financial
statements.
FREEPORT-McMoRan COPPER & GOLD INC.
STATEMENTS OF INCOME
Years Ended December 31,
----------------------------------------
1995 1994 1993
---------- ---------- ---------
(In Thousands,Except Per Share Amounts)
Revenues $1,834,335 $1,212,284 $ 925,932
Cost of sales:
Production and delivery 932,438 740,261 566,765
Depreciation and
amortization 124,055 75,100 67,906
---------- ---------- ----------
Total cost of sales 1,056,493 815,361 634,671
Exploration expenses 13,888 40,380 33,748
Provision for
restructuring charges - - 20,795
Gain on insurance settlement - (32,602) -
General and
administrative expenses 169,702 109,011 81,399
---------- ---------- ----------
Total costs and expenses 1,240,083 932,150 770,613
---------- ---------- ----------
Operating income 594,252 280,134 155,319
Interest expense, net (47,900) - (15,327)
Other expense, net (1,590) (1,042) (2,599)
---------- ---------- ----------
Income before income taxes
and minority interests 544,762 279,092 137,393
Provision for income taxes (234,044) (123,412) (67,589)
Minority interests in net
income of consolidated
subsidiaries (57,100) (25,439) (9,134)
---------- ---------- ----------
Income before changes
in accounting principle 253,618 130,241 60,670
Cumulative effect of
changes in
accounting principle, net - - (9,854)
---------- ---------- ----------
Net income 253,618 130,241 50,816
Preferred dividends (54,153) (51,838) (28,954)
---------- ---------- ----------
Net income applicable
to common stock $ 199,465 $ 78,403 $ 21,862
========== ========== ==========
Net income per primary and fully diluted share of common stock:
Before changes in
accounting principle $.98 $.38 $.16
Cumulative effect of changes
in accounting principle - - (.05)
------ ------ ----
$.98 $.38 $.11
==== ==== ====
Average common
shares outstanding 204,406 205,755 197,929
======= ======= =======
Dividends paid per
common share $.675 $.60 $.60
===== ==== ====
The accompanying notes are an integral part of these financial
statements.
FREEPORT-McMoRan COPPER & GOLD INC.
STATEMENTS OF CASH FLOW
Years Ended December 31,
----------------------------------------
1995 1994 1993
---------- ---------- ---------
(In Thousands)
Cash flow from operating activities:
Net income $ 253,618 $ 130,241 $ 50,816
Adjustments to reconcile net
income to net cash provided by
operating activities:
Cumulative effect of changes
in accounting principle - - 9,854
Depreciation and
amortization 124,055 75,100 67,906
Deferred income taxes 22,735 77,507 8,512
(Recognition) deferral of
unearned income (36,207) 36,207 -
Amortization of discount
on zero coupon
exchangeable notes - - 10,844
Minority interests' share
of net income 57,100 25,439 9,134
(Increase) decrease in
working capital, net
of effect of acquisition:
Accounts receivable 2,095 (45,543) (16,904)
Inventories (47,308) (97,050) (36,669)
Prepaid expenses
and other (4,593) 2,912 (10,503)
Accounts payable and
accrued liabilities (86,747) 145,197 32,792
Accrued income taxes 72,876 (1,688) 19,736
Other 35,492 (12,115) 13,027
---------- ---------- ----------
Net cash provided by
operating activities 393,116 336,207 158,545
---------- ---------- ----------
Cash flow from investing activities:
Capital expenditures:
PT-FI (435,475) (664,735) (450,854)
RTM (151,398) (78,735) (12,658)
Investment in Freeport
Copper Company (25,000) - -
Other (6,269) - -
---------- ---------- ----------
Net cash used in
investing activities (618,142) (743,470) (463,512)
---------- ---------- ----------
Cash flow from financing activities:
Proceeds from sale of:
Preferred stock - 252,985 561,090
9 3/4% senior notes - 116,276 -
Proceeds from debt 617,535 526,561 367,971
Repayment of debt (259,885) (372,807) (841,439)
Net proceeds from
infrastructure financing 242,775 110,825 20,000
Purchase of FCX
common shares (177,755) - -
Cash dividends paid:
Common stock (137,563) (123,503) (118,575)
Preferred stock (50,591) (46,822) (22,981)
Minority interests (38,897) (25,798) (19,143)
Other 12,038 - -
---------- ---------- ----------
Net cash provided by
(used in)
financing activities 207,657 437,717 (53,077)
---------- ---------- ----------
Net increase (decrease)
in cash and short-term
investments (17,369) 30,454 (358,044)
Cash and short-term
investments at
beginning of year 44,252 13,798 371,842
---------- ---------- ----------
Cash and short-term
investments at
end of year $ 26,883 $ 44,252 $ 13,798
========== ========== ==========
Interest paid $ 91,291 $ 26,332 $ 29,122
========== ========== ==========
Income taxes paid $ 138,433 $ 47,593 $ 39,314
========== ========== ==========
The accompanying notes, which include information in notes 1, 3 and 11
regarding noncash transactions, are an integral part of these
financial statements.
FREEPORT-McMoRan COPPER & GOLD INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31,
----------------------------------------
1995 1994 1993
---------- ---------- ----------
(In Thousands)
Convertible Exchangeable
Preferred Stock:
Balance at beginning of year $ 223,900 $ 224,400 $ 224,400
Conversions to Class A
common stock - (500) -
---------- ---------- ----------
Balance at end of year 223,900 223,900 224,400
---------- ---------- ----------
Step-Up Convertible Preferred Stock:
Balance at beginning of year 350,000 350,000 -
Sale of shares to the public - - 350,000
---------- ---------- ----------
Balance at end of year 350,000 350,000 350,000
---------- ---------- ----------
Class A common stock:
Balance at beginning of year 6,597 5,802 5,318
Conversions of convertible
exchangeable preferred stock,
Class B common stock and
zero coupon
exchangeable notes 2,207 795 484
---------- ---------- ----------
Balance at end of year 8,804 6,597 5,802
---------- ---------- ----------
Class B common stock:
Balance at beginning of year 13,998 14,213 14,213
Conversions to Class A
common stock (2,207) (215) -
Exercised stock options 71 - -
---------- ---------- ----------
Balance at end of year 11,862 13,998 14,213
---------- ---------- ----------
Capital in excess of par value of common stock:
Balance at beginning of year 362,557 334,166 353,697
Issuance cost of
preferred stock - (14,401) (21,530)
Conversion of convertible
exchangeable preferred stock
and zero coupon
exchangeable notes - 100,197 79,241
Cash dividends on
common stock - (57,405) (65,587)
Dividends on
preferred stock - - (11,655)
Exercised stock options 13,497 - -
---------- ---------- ----------
Balance at end of year 376,054 362,557 334,166
---------- ---------- ----------
Retained earnings:
Balance at beginning of year 41,663 29,358 48,829
Net income 253,618 130,241 50,816
Cash dividends on
common stock (137,563) (66,098) (52,988)
Dividends on preferred stock (54,153) (51,838) (17,299)
Purchase of Freeport
Copper Company (25,000) - -
---------- ---------- ----------
Balance at end of year 78,565 41,663 29,358
---------- ---------- ----------
Cumulative foreign currency translation adjustment:
Balance at beginning of year (3,740) (10,012) -
Adjustment 13,984 6,272 (10,012)
---------- ---------- ----------
Balance at end of year 10,244 (3,740) (10,012)
---------- ---------- ----------
Common stock held in treasury:
Purchase of
7,685,100 shares (177,755) - -
---------- ---------- ----------
Balance at end of year (177,755) - -
---------- ---------- ----------
Total stockholders' equity $ 881,674 $ 994,975 $ 947,927
========== ========== ==========
The accompanying notes are an integral part of these financial
statements.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation. The consolidated financial statements of
Freeport-McMoRan Copper & Gold Inc. (FCX) include its majority-owned
subsidiaries, P.T. Freeport Indonesia Company (PT-FI), Rio Tinto
Minera, S.A. (RTM), P.T. IRJA Eastern Minerals Corporation (Eastern
Mining) and certain joint ventures involving PT-FI (Note 10). All
significant intercompany transactions have been eliminated. Certain
prior year amounts have been reclassified to conform to the 1995
presentation.
Use of Estimates. The financial statements have been prepared in
conformity with generally accepted accounting principles and include
amounts that are based on management's informed judgments and
estimates.
Cash and Short-Term Investments. Highly liquid investments purchased
with a maturity of three months or less are considered cash
equivalents. Cash and short-term investments at PT-FI are not
available to FCX until a distribution is paid to all owners of PT-FI
equity securities.
Inventories. Inventories are generally stated at the lower of cost or
market. PT-FI uses the average cost method and RTM uses the first-in,
first-out (FIFO) cost method.
Property, Plant and Equipment. Property, plant and equipment are
carried at cost. Mineral exploration costs are expensed as incurred,
except in the year the property is deemed to contain a viable mineral
deposit, in which case they are capitalized. Development costs,
including interest incurred during the construction and development
period, are capitalized. Expenditures for replacements and
improvements are capitalized. Depreciation for mining and milling
operations is determined using the unit-of-production method based on
estimated recoverable reserves. Other assets, including RTM's
smelter, are depreciated on a straight-line basis over estimated
useful lives of 15 to 20 years for buildings and 3 to 25 years for
machinery and equipment.
In March 1995, the Financial Accounting Standards Board issued
Statement No. 121 (FAS 121) which requires a reduction of the carrying
amount of long-lived assets to fair value when events indicate that their
carrying amount may not be recoverable. FCX adopted FAS 121 effective
January 1, 1995, the effect of which was not material.
Financial Contracts. Financial contracts have been used by FCX to
manage certain market risks resulting from fluctuations in commodity
prices (primarily copper and gold), foreign exchange rates and
interest rates by creating offsetting market exposures. Costs or
premiums and gains or losses on the contracts, including closed
contracts, are recognized with the hedged transaction. Also, gains or
losses are recognized if the hedged transaction is no longer expected
to occur. FCX monitors its credit risk on an ongoing basis and
considers this risk to be minimal because its contracts are with a
diversified group of financially strong counterparties.
Redeemable preferred stock indexed to commodities is treated as a
hedge of future production and is carried at its original issue value.
As principal payments occur, differences between the carrying value
and the payment will be recorded as an adjustment to revenues.
Concentrate Sales. Revenues from PT-FI's concentrate sales are
recorded net of royalties, treatment costs and the impact of the price
protection program (Note 11). PT-FI's concentrate sales agreements,
including its sales to RTM, provide for provisional billings based on
world metals prices, primarily using prices on the London Metal
Exchange (LME), with actual settlement on the copper portion generally
based on the average LME price for a specified month (quotational
period). Copper revenues are recorded initially using provisional
pricing and the impact of the price protection program. Copper
revenues which are not fixed through the price protection program are
adjusted based on current prices. At December 31, 1995, copper sales
totaling 249 million pounds remained to be contractually priced in
1996 and are subject to changes in world copper prices. These pounds
are recorded at an average price of $1.20 per pound. Gold sales are
priced according to individual contract terms, generally the average
London Bullion Market Association price for the month of shipment,
except those sales hedged with forward contracts (Note 11).
In December 1991, PT-FI and the Government of Indonesia (the GOI)
signed a contract of work (the COW) with a 30-year term and two 10-
year extensions permitted. Under the COW, PT-FI pays the GOI a
royalty of 1.5 percent to 3.5 percent on the value of copper sold, net
of delivery costs and treatment and refining charges, and a 1 percent
royalty on gold and silver sales. The royalties totaled $42 million
in 1995, $19.4 million in 1994 and $9.5 million in 1993.
Foreign Currency Translation Adjustment. Effective January 1, 1996,
RTM changed its functional currency from the Spanish peseta to the
U.S. dollar. This change results from the significant changes in
RTM's operations related to its expansion and the sale of its mining
operations in Spain. Previously, RTM's assets and liabilities
denominated in pesetas were translated to U.S. dollars using the
exchange rate in effect at the balance sheet date, with translation
adjustments recorded as a component of stockholders' equity.
Translation gains and losses associated with peseta-denominated
monetary assets and liabilities will now be included in net income.
Net Income Per Share. Primary net income per share is computed by
dividing net income applicable to common stock by the average common
and common equivalent shares outstanding. Fully diluted net income
per share is computed assuming all convertible securities, if
dilutive, were converted at the beginning of the period or date of
issuance, whichever is later.
Changes in Accounting Principle. During 1993, FCX adopted the
following changes in accounting principle:
Periodic Scheduled Maintenance - These costs are expensed when
incurred. Previously, costs were capitalized when incurred and
amortized.
Deferred Charges - Costs that directly relate to the acquisition,
construction and development of assets and to the issuance of debt and
related instruments are deferred. Previously, certain other costs
that benefited future periods were deferred.
Management Information Systems (MIS) - MIS equipment and software that
have a material impact on net income are capitalized. Other MIS
costs, including equipment and purchased software, that involve
immaterial amounts (currently individual expenditures of less than
$0.5 million) and short estimated productive lives (currently less
than three years) are charged to expense when incurred. Previously,
most expenditures for MIS equipment and purchased software were
capitalized.
These changes were adopted to improve the measurement of
operating results by recognizing cash expenditures as expense when
incurred unless they directly relate to long-lived asset additions.
The change in accounting for MIS costs also recognizes the rapid rate
of technology change in MIS which results in a need for continuing
investments. These changes did not have a material impact on
operating income.
Restructuring Charges. During 1993, FCX recognized restructuring
expenses totaling $20.8 million, including $10.7 million allocated
from Freeport-McMoRan Inc. (FTX), the parent company of FCX prior to
the distribution discussed in Note 2. The charges consisted of $8.3
million for personnel related costs, $3.2 million for excess office
space and furniture and fixtures resulting from staff reductions, $6.1
million for downsizing its MIS structure and $3.2 million of deferred
charges relating to PT-FI's credit facility which was substantially
revised.
In connection with the restructuring project, FCX changed its
accounting systems and undertook a detailed review of its accounting
records. As a result of this process, FCX recorded a $10 million
charge to production and delivery costs comprised of $5 million for
materials and supplies inventory obsolescence, $2.5 million for
revised estimates of value added taxes and import duties related to
prior years and $2.5 million for adjustments in converting accounting
systems.
2. OWNERSHIP OF FCX COMMON STOCK
In July 1995, FTX completed its restructuring by distributing all the
shares of FCX Class B common stock which it owned to FTX common
stockholders. As a result of this distribution, FTX no longer owns
any interest in FCX.
Prior to the distribution, The RTZ Corporation PLC (RTZ)
purchased 23.9 million shares of FCX Class A common stock
(approximately 12 percent of the then outstanding common stock of FCX)
from FTX. Additionally, FCX and RTZ have agreed to establish joint
ventures whereby RTZ has the right to become a 40 percent joint
venture partner in FCX's future production expansions and exploration
and development activities in Indonesia. Under these contractual
arrangements, RTZ has agreed to pay the next $100 million of
exploration expenses with expenditures beyond $100 million shared 60
percent by FCX and 40 percent by RTZ. As of December 31, 1995, FCX
had recorded a $30.8 million receivable from RTZ for exploration costs
incurred since May 1995. In PT-FI's Block A, RTZ has agreed to fund
up to $750 million of the costs of future approved expansion projects.
RTZ will receive 100 percent of incremental cash flow related to the
funded projects until RTZ recoups PT-FI's 60 percent share of costs
with interest, after which incremental cash flow would be shared 60
percent by PT-FI and 40 percent by RTZ. Incremental cash flow
consists of amounts generated from production in excess of specified
annual amounts based on the December 31, 1994 reserves and mine plan.
The incremental production from the expansion, as well as production
from PT-FI's existing operations, will share proportionately in
operating and administrative costs. FCX will continue to receive 100
percent of cash flow from its existing production facilities as
specified by the contractual arrangements.
3. OWNERSHIP IN PT-FI AND RTM
PT-FI issued 8,321 shares of its stock to FCX in December 1993
and 6,169 shares in January 1994 in exchange for the conversion of
certain intercompany notes. FCX's direct ownership in PT-FI totaled
81.3 percent at December 31, 1995 and 1994. FCX also owns 49 percent
of P.T. Indocopper Investama Corporation, a 9.4 percent owner of PT-
FI, bringing FCX's total ownership in PT-FI to 85.9 percent at
December 31, 1995 and 1994. At December 31, 1995, PT-FI's net assets
totaled $420 million, including $216.4 million of retained earnings.
FCX has several intercompany loans to PT-FI totaling $1.2 billion at
December 31, 1995.
In March 1993, FCX acquired a 65 percent interest in RTM and in
December 1993, RTM redeemed the remaining 35 percent ownership
interest. RTM is engaged in the smelting and refining of copper
concentrates in Spain. The purchase price allocation follows (in
thousands):
Current assets $ 101,454
Current liabilities (158,445)
Property, plant and equipment 277,170
Other assets 5,358
Long-term debt (38,941)
Accrued postretirement
benefits and other liabilities (176,206)
----------
Net cash investment $ 10,390
==========
Since its acquisition, RTM's smelter has been expanded and by mid-1996
is expected to produce at an annual rate of 270,000 metric tons of
metal. This expansion was financed on a project basis, essentially
nonrecourse to FCX (Note 7). At December 31, 1995, RTM's net assets
totaled $67.9 million. RTM is not expected to pay dividends in the
near future.
4. REDEEMABLE PREFERRED STOCK
In August 1993, FCX sold publicly 6 million depositary shares
representing 300,000 shares of its Gold-Denominated Preferred Stock
for net proceeds of $220.4 million. Each depositary share has a
cumulative quarterly cash dividend equal to the value of 0.000875
ounce of gold and will be redeemed in August 2003 for the cash value
of 0.1 ounce of gold.
In January 1994, FCX sold publicly 4.3 million depositary shares
representing 215,279 shares of its Gold-Denominated Preferred Stock,
Series II for net proceeds of $158.5 million. Each depositary share
has a cumulative quarterly cash dividend equal to the value of
0.0008125 ounce of gold and will be redeemed in February 2006 for the
cash value of 0.1 ounce of gold.
In July 1994, FCX sold publicly 4.8 million depositary shares
representing 119,000 shares of its Silver-Denominated Preferred Stock
for net proceeds of $94.5 million. Each depositary share has a
cumulative quarterly cash dividend equal to the value of 0.04125 ounce
of silver. Beginning in August 1999, FCX will redeem the underlying
Silver-Denominated Preferred Stock in eight equal annual installments.
The redeemable preferred stocks are being reported as a hedge of
future gold and silver sales for accounting purposes (Note 1).
5. STOCKHOLDERS' EQUITY
Common Stock. FCX has 473.6 million authorized shares of capital
stock consisting of 423.6 million shares of common stock and 50
million shares of preferred stock. FCX has two classes of common
stock which differ only as to their voting rights for the directors of
FCX. Holders of Class B common stock elect 80 percent of the FCX
directors while holders of Class A common stock and preferred stock
elect 20 percent.
Preferred Stock. FCX has outstanding 9 million depositary shares
representing 447,800 shares of its 7% Convertible Exchangeable
Preferred Stock. Each depositary share has a cumulative annual cash
dividend of $1.75 (payable quarterly) and a $25 liquidation
preference, and is convertible at the option of the holder into 1.021
shares of FCX Class A common stock. FCX may redeem these depositary
shares for cash at $26.225 per share (declining ratably to $25 per
share in March 2002) plus accrued and unpaid dividends.
In July 1993, FCX sold publicly 14 million depositary shares
representing 700,000 shares of its Step-Up Convertible Preferred Stock
for net proceeds of $340.7 million. Each depositary share has a
cumulative annual cash dividend (payable quarterly) of $1.25 through
August 1996 and $1.75 thereafter and a $25 liquidation preference, and
is convertible at the option of the holder into 0.835 shares of FCX
Class A common stock. From August 1996 through August 1999, FCX may
redeem these depositary shares for 0.835 shares of FCX Class A common
stock per depositary share if the market price of FCX Class A common
stock exceeds certain specified levels. Thereafter, FCX may redeem
these depositary shares at $25 per share (payable in FCX Class A
common stock, cash or a combination of both, at FCX's option) plus
accrued and unpaid dividends.
Stock Options. In 1995, FCX's shareholders adopted the Adjusted Stock
Award Plan to provide for the issuance of certain stock awards to
employees, officers and directors of FTX in connection with FTX's
distribution of FCX shares. Under this plan, FCX made a one time
grant of awards to purchase up to 10.7 million Class B common shares,
including stock appreciation rights (SARs), at prices equivalent to
the original FTX price at date of grant as adjusted for the
proportionate market value of FCX shares at the time of the
distribution. All options granted under this plan expire 10 years
from the original FTX date of grant.
FCX's shareholders also adopted the 1995 Stock Option Plan (the
1995 Plan) to provide for the issuance of stock options and other
stock-based awards (including SARs) at no less than market value at
the time of grant. Under this plan, FCX can grant options to
employees to purchase up to 10 million Class B common shares. Options
granted expire 10 years after the date of grant. FCX's shareholders
also adopted the 1995 Stock Option Plan for Non-Employee Directors
(the Director Plan) authorizing FCX to grant options to purchase up to
2 million shares. Options are exerciseable in 25 percent annual
increments beginning one year from the date of grant and expire 10
years after the date of grant. Under certain options, FCX will pay
cash to the optionee equal to an amount based on the maximum
individual federal income tax rate in effect at the time of exercise.
A summary of stock options outstanding, including 2.2 million SARs,
follows:
Number Average
of Option
Options Price
---------- ----------
Balance at January 1, 1995 - $ -
Granted upon FTX restructuring 10,715,351 18.53
Granted 170,000 26.69
Exercised (1,075,868) 19.11
Expired (39,443) 22.49
----------
Balance at December 31, 1995 9,770,040 18.59
==========
At December 31, 1995, stock options representing 7.5 million
shares were exerciseable at an average option price of $18.08 per
share. Options for 10 million shares under the 1995 Plan and 1.8
million shares under the Director Plan were available for new grants
as of December 31, 1995.
During 1995, FCX recorded charges totaling $29.8 million for the
cost of stock options and other stock-based awards. In October 1995
the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123 (FAS 123) "Accounting for Stock-Based
Compensation," effective for FCX at December 31, 1996. Under FAS 123,
companies can either record expense based on the fair value of stock-
based compensation upon issuance or elect to remain under the current
APB Opinion No. 25 method whereby no compensation cost is recognized
upon grant. Entities electing to remain with the accounting in APB
Opinion No. 25 must make disclosures as if FAS 123 had been applied.
FCX anticipates it will continue to account for its stock-based
compensation plans under APB Opinion No. 25.
6. INCOME TAXES
Income taxes are recorded pursuant to Statement of Financial
Accounting Standards No. 109. Substantially all temporary differences
relate to property, plant and equipment. FCX has provided a valuation
allowance equal to its tax credit carryforwards ($71.5 million) as
these would only be used should FCX be required to pay regular U.S.
tax, which is now considered unlikely. The Indonesian tax authorities
are currently reviewing PT-FI's Indonesian income tax returns for
1989-1994.
RTM is subject to taxation in Spain. FCX has provided a
valuation allowance equal to the future tax benefits resulting from
$220.8 million of net operating losses which expire through the year
2002, because RTM has not generated taxable income in recent years.
The provision for income taxes consists of the following:
1995 1994 1993
----------- ----------- ----------
(In Thousands)
Current income taxes:
Indonesian $ 197,409 $ 40,349 $ 51,082
United States 13,900 5,556 4,083
---------- ---------- ----------
211,309 45,905 55,165
Deferred Indonesian
income taxes 22,735 77,507 8,512
---------- ---------- ----------
$ 234,044 $ 123,412 $ 63,677
========== ========== ==========
Reconciliations of the differences between income taxes computed
at the contractual Indonesian tax rate and income taxes recorded
follow:
1995 1994 1993
------------------- ------------------ ------------------
Amount Percent Amounts Percent Amounts Percent
---------- ------- ---------- ------- ---------- -------
(Dollars In Thousands)
Income taxes computed
at the contractual
Indonesian
tax rate $ 190,667 35% $ 97,682 35% $ 42,656 35%
Indonesian tax
withheld on:
Dividend
payments 24,025 4 22,090 8 19,765 16
Interest
payments 8,256 1 9,161 3 4,170 3
Increase (decrease)
attributable to:
Intercompany
interest
expense (23,780) (4) (25,536) (9) (18,645) (15)
RTM net loss 13,225 2 2,208 1 5,500 5
U.S. alternative
minimum tax 13,900 3 5,556 2 4,083 3
Other, net 7,751 2 12,251 4 6,148 5
---------- ----- ---------- ----- ---------- -----
Provision for
income taxes $ 234,044 43% $ 123,412 44% $ 63,677 52%
========== ===== ========== ===== ========== =====
7. LONG-TERM DEBT
December 31,
--------------------------
1995 1994
---------- -----------
(In Thousands)
Notes payable:
FCX and PT-FI credit agreement,
average rate 7% in 1995
and 6.5% in 1994 $ 265,000 $ 55,000
RTM project financing,
average rate 8.1% in 1995
and 8.3% in 1994 246,100 110,000
Equipment loan, average
rate 8.4% in 1995 63,000 70,000
ALatieF loan, average rate 8.7%
in 1995 and 6.7% in 1994 54,000 57,000
Other RTM borrowings 68,003 37,710
9 3/4% Senior Notes due 2001 120,000 120,000
Capital lease obligations,
net of $351.8 million and
$244 million, respectively,
in future interest (Note 10) 351,129 100,000
---------- ----------
1,167,232 549,710
Less current portion and
short-term borrowings 86,943 24,098
---------- ----------
$1,080,289 $ 525,612
========== ==========
Notes Payable. In July 1995, the FTX credit agreement in which PT-FI
participated was modified to become a separate $550 million facility
for PT-FI ($420 million of additional borrowings available at December
31, 1995) and a new $200 million facility was arranged for FCX and PT-
FI ($65 million of additional borrowings available at December 31,
1995). The new variable rate revolving facilities mature in December
1999, provide for minimum working capital requirements, specified cash
flow to interest coverage and restrictions on other borrowings. PT-FI
assigned its existing and future sales contracts and pledged its
rights under the COW and certain other assets as security for its
borrowings. FCX has pledged 50.1 percent of the shares in PT-FI as
security for up to $960 million of borrowings and commitments under
the revolving facilities and other indebtedness of which $461.3
million was outstanding at December 31, 1995.
In 1994, RTM obtained variable rate project financing (the RTM
Facility) consisting of a $225 million term loan facility and a $65
million working capital facility, both nonrecourse to FCX. The term
loan facility matures in thirty-six equal quarterly payments starting
September 30, 1996. The working capital facility matures June 2005.
The RTM Facility requires certain hedging arrangements, restricts
other borrowings and specifies certain minimum coverage ratios. Prior
to meeting the bank's completion test for the expansion, the RTM
Facility is secured by RTM's capital stock and thereafter by 51
percent of the capital stock. FCX guarantees $20 million of RTM's
other bank debt.
In December 1994, FCX entered into a $70 million variable rate
equipment loan secured by certain PT-FI assets. In 1995, FCX fixed
the interest rate on the loan at 8.1 percent. Principal payments
total $7 million annually with a final payment in December 2001.
The ALatieF bank loan, entered into as part of the PT-FI
infrastructure sales (Note 10), has a variable interest rate and is
guaranteed by PT-FI. Principal payments total $3 million annually
with a final payment in December 1998.
Minimum Principal Payments. Payments scheduled for each of the five
succeeding years based on the amounts and terms outstanding at
December 31, 1995 are $86.9 million, $82.9 million, $102.5 million,
$320.4 million and $58.2 million.
Capitalized Interest. Capitalized interest totaled $49.8 million in
1995, $35.1 million in 1994 and $24.5 million in 1993.
8. MAJOR CUSTOMERS
FCX markets its products worldwide primarily pursuant to the
terms of long-term contracts. The following table details the
percentage of revenues attributable to various contracts:
1995 1994 1993
---- ---- ----
Long-term contracts:
Japanese companies 16% 19% 33%
German firm 14 8 5
Swiss firm 11 10 10
Other 47 49 44
Spot sales 12 14 8
The contracts with a group of Japanese companies, the German firm
and the Swiss firm extend through 2000, 1997 and 2003, respectively.
There are several other long-term agreements in place, each
representing less than ten percent of sales. Certain terms of these
long-term contracts are negotiated annually. Approximately 12
percent, 16 percent and 9 percent of PT-FI's total concentrate sales
in 1995, 1994 and 1993, respectively, were made to RTM.
9. TRANSACTIONS WITH FTX AND EMPLOYEE BENEFITS
Management Services Agreement. Through December 31, 1995, FTX
furnished certain management and administrative services to FCX under
a management services agreement. These costs, which include related
overhead, totaled $55.5 million in 1995, $54.3 million in 1994 and $49
million in 1993 (excluding restructuring costs). As of January 1,
1996, FM Services Company (FMS), a newly formed entity owned 50
percent each by FCX and FTX, will provide certain administrative,
financial and other services that were previously provided by FTX on a
similar cost-reimbursement basis. Through December 31, 1995, all
U.S.-based employees as well as expatriate employees overseas were
employed by FTX. As of January 1, 1996, all U.S. and expatriate
employees performing direct services for FCX or its affiliates other
than those employed by FMS became FCX employees.
Pension Plans. Substantially all United States employees were covered
by FTX's defined benefit plan. Additionally, for those employees in
the qualified defined benefit plan whose benefits are limited under
federal income tax laws, FTX sponsored an unfunded, nonqualified plan.
The accumulated benefits and plan assets were not separately
determined. Amounts allocated to FCX under these plans have not been
material. FCX and FMS will establish their own plans which will
assume liabilities equal to the accumulated benefit obligation for the
transferred employees and FTX will transfer assets equal to the
liabilities assumed, while providing essentially the same benefits to
employees.
During 1995, PT-FI adopted a new a defined benefit plan covering
substantially all of its Indonesian national employees which, along
with the old plan, has been funded through cash payments to retirees
at the date of retirement. In accordance with new Indonesian pension
laws, PT-FI will begin funding its plan in 1996. The actuarial
present value of the accumulated benefit obligation, determined by the
projected credit method, was $9.2 million at December 31, 1995. The
projected benefit obligation at December 31, 1995, was $17 million
based on a discount rate of 11 percent and a 9 percent annual increase
in future compensation levels.
RTM has an unfunded contractual obligation to supplement amounts
paid to retired employees. The accrued liability totaled $88.6
million at December 31, 1995. RTM expensed $7.1 million in 1995, $6.8
million in 1994 and $5.2 million since its acquisition in 1993 for
interest on this obligation. Cash payments were $8.9 million in 1995,
$7.8 million in 1994 and $8 million in 1993. Under recently
promulgated Spanish law, RTM is required to fund this obligation by
1998. The actuarial valuation of this obligation was $94.5 million at
December 31, 1995, based on a discount rate of 8 percent.
Other Benefits. FTX provided certain health care and life insurance
benefits for retired employees, the cost of which was not material to
the financial statements. These benefits will be provided by FMS and
FCX beginning in 1996. Summary information of the plan follows:
December 31,
-------------------------
1995 1994
---------- ----------
(In Thousands)
Actuarial present value of
accumulated postretirement obligation:
Retirees $ 12,241 $ 11,721
Fully eligible active
plan participants 1,239 944
Other active plan participants 1,870 494
---------- ----------
Total accumulated
postretirement obligation 15,350 13,159
Unrecognized net gain (loss) (826) 433
---------- ----------
Accrued postretirement benefit cost $ 14,524 $ 13,592
========== ==========
The initial health care cost trend rate used was 11.5 percent for
1993, decreasing 0.5 percent per year until reaching 6 percent. A one
percent increase in the trend rate would increase the amounts by
approximately 10 percent. The discount rate used was 7 percent in
1995 and 8.25 percent in 1994. FCX has the right to modify or
terminate these benefits.
Prior to the FTX restructuring, FTX allocated costs to FCX under
FTX's employee benefits plans. In connection with the restructuring,
FCX adopted other employee benefits plans, certain of which are
related to its performance, which costs are recognized currently in
general and administrative expense.
10. COMMITMENTS AND CONTINGENCIES
Environmental. FCX believes it is in compliance with applicable
environmental laws, rules and regulations. Based on current
environmental regulations, the effect of eventual mine closure and
reclamation and the future expenditures to restore properties and
related facilities to a state required to comply with environmental
and other regulations are not material. However, an increasing
emphasis on environmental issues could require FCX to incur additional
costs which would be charged against future operations.
Long-Term Contracts and Operating Leases. At December 31, 1995, RTM
had a remaining obligation of $11 million under its 1994 turnkey
contract to expand its smelter capacity to 270,000 metric tons of
metal per year. In addition, RTM has commitments from parties other
than PT-FI to purchase concentrate totaling 415,000 metric tons in
1996, 430,000 metric tons in 1997, 381,000 metric tons in 1998,
360,000 metric tons in 1999, 320,000 metric tons in 2000 and a total
of 560,000 metric tons thereafter, at market prices.
FCX's minimum annual contractual charges under noncancelable
long-term contracts and operating leases which extend to 1998 total
$7.3 million, with $3.8 million in 1996, $2.6 million in 1997 and $0.9
million in 1998. Total rental expense under long-term contracts and
operating leases amounted to $7.2 million in 1995, $11.7 million in
1994 and $15.4 million in 1993.
Gresik Smelter. PT-FI has entered into an agreement to develop a
200,000 metric tons of metal per year copper smelter in Gresik,
Indonesia with two other parties; one owning 70 percent and a second
owning 10 percent. Financing for the estimated project cost ($570
million) and for estimated working capital ($100 million) is expected
to be in place by mid-1996. It is contemplated that PT-FI would
provide all of the smelter's concentrate requirements at market rates;
however, for the first fifteen years of operations the treatment and
refining charges would not fall below a certain minimum rate. PT-FI
has also agreed to assign its earnings in the joint venture to support
a 13 percent annual return to the 70 percent partner, if necessary,
for the first twenty years of commercial operations. Additionally,
the 10 percent partner has an option, exercisable on the third
anniversary of commercial operations, to require PT-FI to purchase its
interest at a 10 percent annual return.
Infrastructure Asset Sales. PT-FI entered into joint ventures owned
one-third by PT-FI and two-thirds by P.T. ALatieF Nusakarya
Corporation (ALatieF), an Indonesian investor, to purchase and manage
certain PT-FI infrastructure assets for $270 million. The management
agreements, which are terminable by either party upon six months
written notice after debt repayment, provide ALatieF with a guaranteed
minimum rate of return on its investment and result in the joint
ventures being consolidated for financial reporting purposes. Sales
totaling $194.9 million were made through 1995 and the joint ventures
are expected to complete the final purchase of infrastructure in 1996.
Funding for the purchases will consist of $90 million in equity
contributions by the joint venture partners, the ALatieF bank loan
(Note 7) and the 9 3/4% Senior Notes.
In December 1994, PT-FI entered into a joint venture, 30 percent
owned by PT-FI, to purchase and manage its power-related assets for an
estimated $215 million. A $100 million sale occurred in December 1994
and the remaining sales took place in 1995. PT-FI guaranteed the
joint venture a minimum rate of return and is obligated to make
minimum payments sufficient to allow the joint venture to meet its
debt service. PT-FI's obligation is reflected as a capital lease and
PT-FI accounts for its investment in the joint venture using the
equity method.
In March 1995, PT-FI sold certain of its port, marine, logistics
and construction equipment and facilities for $100 million. In June
1995, PT-FI sold $48 million of its aviation assets to a joint
venture, 25 percent owned by PT-FI. PT-FI is leasing these assets
under capital lease arrangements.
FM Properties Inc. (FMPO). In 1992, FTX transferred
substantially all of its domestic oil and gas properties and real
estate held for development by it and certain of its subsidiaries to a
partnership which is currently 99.8 percent owned by FMPO (FTX owns a
0.2 percent interest in the partnership and serves as its managing
general partner). FTX subsequently distributed the FMPO common stock
to the FTX common stockholders, with FTX guaranteeing FMPO's debt. As
part of FTX's restructuring (Note 2), FCX assumed a guarantee of $90
million of FMPO debt previously guaranteed by FTX and is receiving an
annual three percent fee from FTX on the amount guaranteed. During
1995, FMPO was able to extend its debt maturities until 1997 and is
managing its assets with an objective of reducing its debt. Selected
financial information of FMPO follows:
1995 1994
---------- ----------
(In Thousands)
Statements of Operations:
Revenues $ 48,170 $ 40,435
Operating loss (4,104) (123,739)a
Net income (loss) 153 (86,290)
Cash Flow:
Operating activities 47,655 11,968
Investing activities (35,242) 29,019
Financing activities (11,331) (42,270)
Balance Sheets at December 31:
Current assets 9,591 6,857
Current liabilities 8,100 22,146
Investment in Texas real estate 180,040 198,453
Total assets 194,803 214,365
Long-term debt 121,294 132,075
Stockholders' equity 59,523 59,370
a. Includes a $115 million pretax, noncash write-down.
11. FINANCIAL INSTRUMENTS
Summarized below are the financial instruments whose carrying
amount is not equal to its fair value at December 31. Fair values are
based on quoted market prices and other available market information.
1995 1994
----------------------- -----------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- ----------
(In Thousands)
Price protection program:
Open contracts in
asset position $ 22,721 $ 13,901 $ 25,165 $ 84,602
Open contracts in
liability
position (11,570) (11,570) (98,900) (234,134)
Debt:
Long-term debt
(Note 7) (1,167,232) (1,168,882) (549,710) (552,250)
Foreign exchange
contracts:
$U.S./Deutsche
marks - 1,594 - 2,750
$U.S./Spanish
pesetas - - - 2,459
Interest rate
swaps - (6,249) - (462)
Redeemable preferred
stock (Note 4) (500,007) (429,337) (500,007) (437,999)
Price Protection Program. PT-FI has forward and option contracts to
hedge the market risk associated with fluctuations in the price of
commodities its sells. At December 31, 1995, PT-FI had sold forward
137.2 million pounds of copper at an average price of $1.16 per pound
through March 1996 and 800,000 ounces of gold at an average price of
$392.28 per ounce through July 1996. PT-FI also had put option
contracts on 1.3 billion pounds of copper through the first quarter of
1997 at $0.90 per pound. Deferred gains on closed contracts at
December 31, 1994 totaled $36.2 million. FCX's revenues include net
reductions totaling $68.6 million in 1995 and $103 million in 1994
compared with net additions totaling $36.8 million in 1993 related to
PT-FI's copper price protection program.
At December 31, 1995, RTM had sold forward 36.2 million pounds of
copper at an average price of $1.29 per pound to eliminate the copper
price risk of its concentrate inventory.
Debt. In order to eliminate capital cost exposure because of
fluctuations in foreign exchange rates, RTM has entered into foreign
exchange contracts which mature through March 1996, totaling $24.9
million on 38.1 million Deutsche marks at December 31, 1995. During
1995, certain of RTM's Deutsche mark contracts matured resulting in
gains of $6.4 million which were recorded as reductions of property,
plant and equipment. RTM also closed all of its Spanish peseta
contracts during 1995 recording an $8.1 million gain to other income.
PT-FI entered into an interest rate swap in 1991 and RTM entered
into interest rate swaps in 1995 to manage exposure to interest rate
changes on a portion of its variable rate debt. PT-FI pays 8.3
percent on $57.2 million of financing at December 31, 1995, reducing
annually through 1999. RTM pays an average of 6.1 percent on $160
million of financing at December 31, 1995, maturing in 2000. Interest
on comparable floating rate debt averaged 6.1 percent in 1995, 4.3
percent in 1994 and 3.4 percent in 1993, resulting in additional
interest costs of $1.5 million, $3.3 million and $4.8 million,
respectively.
RTM is a party to letters of credit totaling $43.3 million at
December 31, 1995, certain of which are guaranteed by FCX. The
letters of credit primarily guarantee the satisfaction of certain
grant conditions for the receipt of the Spanish government grants.
Fair value of these letters of credit is not material at December 31,
1995.
12. OTHER FINANCIAL INFORMATION
Presented below is information on FCX's copper and gold mining
operations and exploration activities of PT-FI and Eastern Mining in
Indonesia and RTM's smelting and refining operations in Spain.
Mining Smelting Intercompany
and and Eliminations
Exploration Refining and Other Total
---------- ---------- ----------- ----------
(In Thousands)
1995
Revenues $1,477,919 $ 541,291 $ (184,875) $1,834,335
Production and delivery 543,267 532,826 (143,655) 932,438
Depreciation and
amortization 102,664 17,572 3,819 124,055
Exploration expenses 10,828 2,248 812 13,888
General and
administrative expenses 145,463 16,705 7,534 169,702
---------- ---------- ---------- ----------
Operating income (loss) $ 675,697 $ (28,060) $ (53,385) $ 594,252
========== ========== ========== ==========
Capital expenditures $ 435,475 $ 141,742 $ 6,269 $ 583,486
========== ========== ========== ==========
Total assets $2,896,496 $ 775,151 $ (89,901) $3,581,746
========== ========== ========== ==========
1994
Revenues $ 831,635 $ 536,704 $ (156,055) $1,212,284
Production and delivery 403,842 496,925 (160,506) 740,261
Depreciation and
amortization 52,561 18,829 3,710 75,100
Exploration expenses 35,979 4,058 343 40,380
Gain on insurance settlement (32,602) - - (32,602)
General and administrative
expenses 85,168 16,930 6,913 109,011
---------- ---------- ---------- ----------
Operating income (loss) $ 286,687 $ (38) $ (6,515) $ 280,134
========== ========== ========== ==========
Capital expenditures $ 664,735 $ 72,979 $ - $ 737,714
========== ========== ========== ==========
Total assets $2,497,441 $ 536,582 $ 6,174 $3,040,197
========== ========== ========== ==========
1993 a
Revenues $ 685,238 $ 288,371 $ (47,677) $ 925,932
Production and delivery 327,895 275,751 (36,881) 566,765
Depreciation and
amortization 53,590 11,919 2,397 67,906
Exploration expenses 31,650 2,098 - 33,748
Provision for
restructuring charges 20,795 - - 20,795
General and administrative
expenses 71,204 5,013 5,182 81,399
---------- ---------- ---------- ----------
Operating income (loss) $ 180,104 $ (6,410) $ (18,375) $ 155,319
========== ========== ========== ==========
Capital expenditures $ 450,854 $ 2,268 $ - $ 453,122
========== ========== ========== ==========
Total assets $1,738,343 $ 352,016 $ 26,294 $2,116,653
========== ========== ========== ==========
a. RTM was acquired in March 1993.
13. SUPPLEMENTARY MINERAL RESERVE INFORMATION (UNAUDITED)
PT-FI's estimated proved and probable mineral reserves follow:
Average Ore Grade Per Ton
-----------------------------------------
Year-End Ore Copper Gold Silver
- -------- ------------ ------ ------------- --------------
(Metric Tons) (%) (Grams) (Oz.) (Grams) (Ozs.)
1991 768,045,000 1.45 1.66 .053 3.86 .124
1992 733,173,000 1.47 1.72 .055 3.87 .124
1993 1,074,100,000 1.31 1.47 .047 4.04 .130
1994 1,125,640,000 1.30 1.42 .046 4.06 .131
1995 a 1,899,244,000 1.17 1.18 .038 3.78 .121
Recoverable Reserves
--------------------------------------
Year-End Copper Gold Silver
- -------- --------- --------- ---------
(Billions (Millions (Millions
of Lbs.) of Ozs.) of Ozs.)
1991 21.8 32.4 50.0
1992 20.9 32.1 44.7
1993 26.8 39.1 76.7
1994 28.0 39.6 80.8
1995 a 40.3 52.1 111.1
a. In PT-FI's Block A, RTZ has agreed to fund up to $750 million of
the costs of future approved expansion projects. RTZ will receive 100
percent of incremental cash flow related to the funded projects until
RTZ recoups PT-FI's 60 percent share of costs with interest, after
which incremental cash flow would be shared 60 percent by PT-FI and 40
percent by RTZ. Incremental cash flow consists of amounts generated
from production in excess of specified annual amounts based on the
December 31, 1994 reserves and mine plan. The incremental production
from the expansion, as well as production from PT-FI's existing
operations, will share proportionately in operating and administrative
costs. FCX will continue to receive 100 percent of cash flow from its
existing production facilities as specified by the contractual
arrangements.
14. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Net Income Net
Operating Applicable to Income
Revenues Income Common Stock Per Share
----------- ---------- ------------- ---------
(In Thousands, Except Per Share Amounts)
1995
1st Quarter $ 408,806 $ 121,901 $ 43,993 $.21
2nd Quarter a 421,469 130,716 40,625 .20
3rd Quarter b 469,812 170,496 60,533 .30
4th Quarter b 534,248 171,139 54,314 .27
---------- ---------- ----------
$1,834,335 $ 594,252 $ 199,465 .98
========== ========== ==========
1994
1st Quarter $ 266,153 $ 53,489 $ 13,559 $.07
2nd Quarter 281,452 52,513 9,718 .05
3rd Quarter 313,384 63,361 13,463 .07
4th Quarter c 351,295 110,771 41,663 .20
---------- ---------- ----------
$1,212,284 $ 280,134 $ 78,403 .38
========== ========== ==========
a. Includes a $12.5 million noncash charge ($6.8 million to net
income or $0.03 per share) for a materials and supplies inventory
adjustment in connection with the completion of PT-FI's expansion
program.
b. Includes a third quarter charge totaling $21.4 million ($11.9
million to net income or $0.06 per share) and a fourth quarter
charge totaling $7.9 million ($4.3 million to net income or $0.02
per share) for stock option costs resulting from the rise in
FCX's common stock price during the quarter. The fourth quarter
also includes a $7.3 million charge ($4 million to net income or
$0.02 per share) for an early retirement program.
c. In December 1994, PT-FI settled its property and business
interruption insurance claims for the June 1993 ore pass cave-in,
recording a $32.6 million gain ($17.4 million to net income or
$0.08 per share).
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF FREEPORT-McMoRan COPPER
& GOLD INC.:
We have audited the accompanying balance sheets of Freeport-
McMoRan Copper & Gold Inc. (the Company), a Delaware Corporation, as
of December 31, 1995 and 1994, and the related statements of income,
cash flow and stockholders' equity for each of the three years in the
period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of
the Company as of December 31, 1995 and 1994 and the results of its
operations and its cash flow for each of the three years in the period
ended December 31, 1995 in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the financial statements, effective
January 1, 1993, the Company changed its method of accounting for
periodic scheduled maintenance costs, deferred charges and costs of
management information systems.
New Orleans, Louisiana, Arthur Andersen LLP
January 23, 1996
SHAREHOLDER INFORMATION
FCX CLASS A COMMON SHARES. Our Class A common shares trade on the New York
Stock Exchange (NYSE) and on the Australian Stock Exchange under the symbol
"FCX.A." The FCX.A share price is reported daily in the financial press
under "FMCGA" in most listings of NYSE securities. At yearend 1995 the
number of holders of record of our Class A common shares was 12,855.
NYSE composite tape Class A common share price ranges during 1995 and
1994:
1995 1994
----------------- -----------------
High Low High Low
------ ------ ------ ------
First Quarter $22.63 $20.13 $27.50 $23.00
Second Quarter 22.13 19.88 25.63 21.13
Third Quarter 26.75 20.38 25.50 20.63
Fourth Quarter 30.50 22.50 25.00 19.63
FCX CLASS B COMMON SHARES. Our Class B common shares, which trade under
the symbol "FCX," began trading in July 1995 on the NYSE and on the
Australian Stock Exchange. The FCX share price is reported daily in the
financial press under "FMCG" in most listings of NYSE securities. At yearend
1995 the number of holders of record of our Class B common shares was 18,640.
NYSE composite tape Class B common share price ranges during 1995:
High Low
------ ------
Third Quarter $27.38 $22.63
Fourth Quarter 30.75 22.63
COMMON SHARE DIVIDENDS. FCX has a policy of distributing to its shareholders
all dividends the company receives as the majority shareholder in PT-FI, less
tax obligations, certain administrative costs, investment opportunities and
debt repayments. PT-FI also has a policy of maximizing its dividend payments
after considering its operational, developmental and exploratory needs as
well as debt repayments.
Class A common share cash dividends declared and paid for the quarterly
periods of 1995 and 1994 were:
1995
----------------------------------------
Amount Record Payment
Per Share Date Date
--------- ------------- -----------
First Quarter $.15 Apr. 17, 1995 May 1, 1995
Second Quarter .15 Jul. 14, 1995 Aug.1, 1995
Third Quarter .225 Oct. 16, 1995 Nov.1, 1995
Fourth Quarter .225 Jan. 16, 1996 Feb.1, 1996
1994
---------------------------------------
Amount Record Payment
Per Share Date Date
--------- ------------- -----------
First Quarter $.15 Apr. 15, 1994 May 1, 1994
Second Quarter .15 Jul. 15, 1994 Aug.1, 1994
Third Quarter .15 Oct. 17, 1994 Nov.1, 1994
Fourth Quarter .15 Jan. 17, 1995 Feb.1, 1995
Since public trading began, Class B common share cash dividends declared
and paid for the quarterly periods of 1995 were:
Amount Record Payment
Per Share Date Date
--------- ------------- ------------
Third Quarter $.225 Oct. 16, 1995 Nov. 1, 1995
Fourth Quarter .225 Jan. 16, 1995 Feb. 1, 1996
Exhibit 21.1
List of Subsidiaries of
FREEPORT-McMoRan COPPER & GOLD INC.
Name Under Which
It Does
Entity Organized Business
----------------------------------- --------- ----------------
P.T. Freeport Indonesia Company Indonesia Same
and
Delaware
Rio Tinto Metal, S.A. Spain Same
FM Services Company Delaware Same
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference of our reports included herein or
incorporated by reference in this Form 10-K, into Freeport-McMoRan
Copper & Gold Inc.'s previously filed Registration Statements on Form
S-3 (File Nos. 33-45787, 33-63376, 33-66098 and 33-52503) and on Form
S-8 (File Nos. 33-63267, 33-63269 and 33-63271).
/s/ Arthur Andersen LLP
------------------------
Arthur Andersen LLP
New Orleans, Louisiana,
March 26, 1996
Exhibit 23.2
CONSENT OF INDEPENDENT MINING CONSULTANTS, INC.
We consent to the incorporation by reference of our reports
included herein or incorporated by reference in this Form 10-K,
into Freeport-McMoRan Copper & Gold Inc.'s previously filed
Registration Statements on Form S-3 (File Nos. 33-45787, 33-
63376, 33-66098 and 33-52503) and on Form S-8 (File Nos. 33-
63267, 33-63269 and 33-63271).
/s/ John M. Marek
-----------------
John M. Marek
President
Tucson, Arizona,
March 26, 1996
Exhibit 24.1
FREEPORT-McMoRan COPPER & GOLD INC.
Certificate of Secretary
--------------------------
I, Michael C. Kilanowski, Jr., Secretary of Freeport-McMoRan
Copper & Gold Inc. (the "Corporation"), a Delaware corporation, do
hereby certify that the following resolution was duly adopted by
the Board of Directors of the Corporation at a meeting held on
December 13, 1988, and that such resolution has not been amended,
modified or rescinded and is in full force and effect:
RESOLVED, That any report, registration statement or
other form filed on behalf of this corporation pursuant
to the Securities Exchange Act of 1934, or any amendment
to any such report, registration statement or other form,
may be signed on behalf of any director or officer of
this corporation pursuant to a power of attorney executed
by such director or officer.
IN WITNESS WHEREOF, I have hereunto set my name and the seal
of the Corporation this 25th day of March, 1996.
(Seal) /s/ Michael C. Kilanowski, Jr.
------------------------------
Michael C. Kilanowski, Jr.
Secretary
EXHIBIT 24.2
POWER OF ATTORNEY
-----------------
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors
of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R.
MOFFETT and RENE L. LATIOLAIS, and each of them acting
individually, his true and lawful attorney-in-fact with power to
act without the others and with full power of substitution, to
execute, deliver and file, for and on behalf of him, in his name
and in his capacity or capacities as aforesaid, an Annual Report of
the Company on Form 10-K for the year ended December 31, 1995, and
any amendment or amendments thereto and any other document in
support thereof or supplemental thereto, and the undersigned hereby
grants to said attorneys, and each of them, full power and
authority to do and perform each and every act and thing whatsoever
that said attorney or attorneys may deem necessary or advisable to
carry out fully the intent of the foregoing as the undersigned
might or could do personally or in the capacity or capacities as
aforesaid, hereby ratifying and confirming all acts and things
which said attorney or attorneys may do or cause to be done by
virtue of this Power of Attorney.
EXECUTED this 6th day of February, 1996.
/s/ Richard C. Adkerson
------------------------
Richard C. Adkerson
POWER OF ATTORNEY
-----------------
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors
of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R.
MOFFETT, RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of
them acting individually, his true and lawful attorney-in-fact with
power to act without the others and with full power of
substitution, to execute, deliver and file, for and on behalf of
him, in his name and in his capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year ended
December 31, 1995, and any amendment or amendments thereto and any
other document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of them, full
power and authority to do and perform each and every act and thing
whatsoever that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the foregoing as the
undersigned might or could do personally or in the capacity or
capacities as aforesaid, hereby ratifying and confirming all acts
and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 29th day of February, 1996.
/s/ John T. Eads
----------------
John T. Eads
POWER OF ATTORNEY
-----------------
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors
of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R.
MOFFETT, RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of
them acting individually, his true and lawful attorney-in-fact with
power to act without the others and with full power of
substitution, to execute, deliver and file, for and on behalf of
him, in his name and in his capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year ended
December 31, 1995, and any amendment or amendments thereto and any
other document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of them, full
power and authority to do and perform each and every act and thing
whatsoever that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the foregoing as the
undersigned might or could do personally or in the capacity or
capacities as aforesaid, hereby ratifying and confirming all acts
and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 6th day of February, 1996.
/s/ Robert W. Bruce III
-----------------------
Robert W. Bruce III
POWER OF ATTORNEY
-----------------
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors
of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R.
MOFFETT, RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of
them acting individually, his true and lawful attorney-in-fact with
power to act without the others and with full power of
substitution, to execute, deliver and file, for and on behalf of
him, in his name and in his capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year ended
December 31, 1995, and any amendment or amendments thereto and any
other document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of them, full
power and authority to do and perform each and every act and thing
whatsoever that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the foregoing as the
undersigned might or could do personally or in the capacity or
capacities as aforesaid, hereby ratifying and confirming all acts
and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 6th day of February, 1996.
/s/ R. Leigh Clifford
---------------------
R. Leigh Clifford
POWER OF ATTORNEY
-----------------
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors
of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R.
MOFFETT, RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of
them acting individually, his true and lawful attorney-in-fact with
power to act without the others and with full power of
substitution, to execute, deliver and file, for and on behalf of
him, in his name and in his capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year ended
December 31, 1995, and any amendment or amendments thereto and any
other document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of them, full
power and authority to do and perform each and every act and thing
whatsoever that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the foregoing as the
undersigned might or could do personally or in the capacity or
capacities as aforesaid, hereby ratifying and confirming all acts
and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 6th day of February, 1996.
/s/ Thomas B. Coleman
---------------------
Thomas B. Coleman
POWER OF ATTORNEY
-----------------
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors
of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R.
MOFFETT, RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of
them acting individually, his true and lawful attorney-in-fact with
power to act without the others and with full power of
substitution, to execute, deliver and file, for and on behalf of
him, in his name and in his capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year ended
December 31, 1995, and any amendment or amendments thereto and any
other document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of them, full
power and authority to do and perform each and every act and thing
whatsoever that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the foregoing as the
undersigned might or could do personally or in the capacity or
capacities as aforesaid, hereby ratifying and confirming all acts
and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 8th day of March, 1996.
/s/ Bobby E. Cooper
-------------------
Bobby E. Cooper
POWER OF ATTORNEY
-----------------
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors
of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R.
MOFFETT, RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of
them acting individually, his true and lawful attorney-in-fact with
power to act without the others and with full power of
substitution, to execute, deliver and file, for and on behalf of
him, in his name and in his capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year ended
December 31, 1995, and any amendment or amendments thereto and any
other document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of them, full
power and authority to do and perform each and every act and thing
whatsoever that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the foregoing as the
undersigned might or could do personally or in the capacity or
capacities as aforesaid, hereby ratifying and confirming all acts
and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 6th day of February, 1996.
/s/ Robert A. Day
-----------------
Robert A. Day
POWER OF ATTORNEY
-----------------
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors
of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R.
MOFFETT, RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of
them acting individually, his true and lawful attorney-in-fact with
power to act without the others and with full power of
substitution, to execute, deliver and file, for and on behalf of
him, in his name and in his capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year ended
December 31, 1995, and any amendment or amendments thereto and any
other document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of them, full
power and authority to do and perform each and every act and thing
whatsoever that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the foregoing as the
undersigned might or could do personally or in the capacity or
capacities as aforesaid, hereby ratifying and confirming all acts
and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 6th day of February, 1996.
/s/ Leland O. Erdahl
--------------------
Leland O. Erdahl
POWER OF ATTORNEY
-----------------
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors
of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R.
MOFFETT, RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of
them acting individually, his true and lawful attorney-in-fact with
power to act without the others and with full power of
substitution, to execute, deliver and file, for and on behalf of
him, in his name and in his capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year ended
December 31, 1995, and any amendment or amendments thereto and any
other document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of them, full
power and authority to do and perform each and every act and thing
whatsoever that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the foregoing as the
undersigned might or could do personally or in the capacity or
capacities as aforesaid, hereby ratifying and confirming all acts
and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 6th day of February, 1996.
/s/ William B. Harrison, Jr.
----------------------------
William B. Harrison, Jr.
POWER OF ATTORNEY
-----------------
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors
of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R.
MOFFETT, RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of
them acting individually, his true and lawful attorney-in-fact with
power to act without the others and with full power of
substitution, to execute, deliver and file, for and on behalf of
him, in his name and in his capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year ended
December 31, 1995, and any amendment or amendments thereto and any
other document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of them, full
power and authority to do and perform each and every act and thing
whatsoever that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the foregoing as the
undersigned might or could do personally or in the capacity or
capacities as aforesaid, hereby ratifying and confirming all acts
and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 6th day of February, 1996.
/s/ Henry A. Kissinger
----------------------
Henry A. Kissinger
POWER OF ATTORNEY
-----------------
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors
of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R.
MOFFETT, RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of
them acting individually, his true and lawful attorney-in-fact with
power to act without the others and with full power of
substitution, to execute, deliver and file, for and on behalf of
him, in his name and in his capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year ended
December 31, 1995, and any amendment or amendments thereto and any
other document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of them, full
power and authority to do and perform each and every act and thing
whatsoever that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the foregoing as the
undersigned might or could do personally or in the capacity or
capacities as aforesaid, hereby ratifying and confirming all acts
and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 6th day of February, 1996.
/s/ Bobby Lee Lackey
--------------------
Bobby Lee Lackey
POWER OF ATTORNEY
-----------------
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors
of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R.
MOFFETT and RICHARD C. ADKERSON, and each of them acting
individually, his true and lawful attorney-in-fact with power to
act without the others and with full power of substitution, to
execute, deliver and file, for and on behalf of him, in his name
and in his capacity or capacities as aforesaid, an Annual Report of
the Company on Form 10-K for the year ended December 31, 1995, and
any amendment or amendments thereto and any other document in
support thereof or supplemental thereto, and the undersigned hereby
grants to said attorneys, and each of them, full power and
authority to do and perform each and every act and thing whatsoever
that said attorney or attorneys may deem necessary or advisable to
carry out fully the intent of the foregoing as the undersigned
might or could do personally or in the capacity or capacities as
aforesaid, hereby ratifying and confirming all acts and things
which said attorney or attorneys may do or cause to be done by
virtue of this Power of Attorney.
EXECUTED this 6th day of February, 1996.
/s/ Rene L. Latiolais
---------------------
Rene L. Latiolais
POWER OF ATTORNEY
-----------------
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors
of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R.
MOFFETT, RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of
them acting individually, his true and lawful attorney-in-fact with
power to act without the others and with full power of
substitution, to execute, deliver and file, for and on behalf of
him, in his name and in his capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year ended
December 31, 1995, and any amendment or amendments thereto and any
other document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of them, full
power and authority to do and perform each and every act and thing
whatsoever that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the foregoing as the
undersigned might or could do personally or in the capacity or
capacities as aforesaid, hereby ratifying and confirming all acts
and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 6th day of February, 1996.
/s/ Gabrielle K. McDonald
-------------------------
Gabrielle K. McDonald
POWER OF ATTORNEY
-----------------
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors
of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R.
MOFFETT, RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of
them acting individually, his true and lawful attorney-in-fact with
power to act without the others and with full power of
substitution, to execute, deliver and file, for and on behalf of
him, in his name and in his capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year ended
December 31, 1995, and any amendment or amendments thereto and any
other document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of them, full
power and authority to do and perform each and every act and thing
whatsoever that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the foregoing as the
undersigned might or could do personally or in the capacity or
capacities as aforesaid, hereby ratifying and confirming all acts
and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 12th day of February, 1996.
/s/ George A. Mealey
--------------------
George A. Mealey
POWER OF ATTORNEY
-----------------
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors
of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R.
MOFFETT, RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of
them acting individually, his true and lawful attorney-in-fact with
power to act without the others and with full power of
substitution, to execute, deliver and file, for and on behalf of
him, in his name and in his capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year ended
December 31, 1995, and any amendment or amendments thereto and any
other document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of them, full
power and authority to do and perform each and every act and thing
whatsoever that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the foregoing as the
undersigned might or could do personally or in the capacity or
capacities as aforesaid, hereby ratifying and confirming all acts
and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 6th day of February, 1996.
/s/ George Putnam
------------------
George Putnam
POWER OF ATTORNEY
-----------------
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors
of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R.
MOFFETT, RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of
them acting individually, his true and lawful attorney-in-fact with
power to act without the others and with full power of
substitution, to execute, deliver and file, for and on behalf of
him, in his name and in his capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year ended
December 31, 1995, and any amendment or amendments thereto and any
other document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of them, full
power and authority to do and perform each and every act and thing
whatsoever that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the foregoing as the
undersigned might or could do personally or in the capacity or
capacities as aforesaid, hereby ratifying and confirming all acts
and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 6th day of February, 1996.
/s/ B.M. Rankin, Jr.
--------------------
B.M. Rankin, Jr.
POWER OF ATTORNEY
-----------------
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors
of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R.
MOFFETT, RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of
them acting individually, his true and lawful attorney-in-fact with
power to act without the others and with full power of
substitution, to execute, deliver and file, for and on behalf of
him, in his name and in his capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year ended
December 31, 1995, and any amendment or amendments thereto and any
other document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of them, full
power and authority to do and perform each and every act and thing
whatsoever that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the foregoing as the
undersigned might or could do personally or in the capacity or
capacities as aforesaid, hereby ratifying and confirming all acts
and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 6th day of February, 1996.
/s/ Wolfgang F. Siegel
----------------------
Wolfgang F. Siegel
POWER OF ATTORNEY
-----------------
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors
of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R.
MOFFETT, RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of
them acting individually, his true and lawful attorney-in-fact with
power to act without the others and with full power of
substitution, to execute, deliver and file, for and on behalf of
him, in his name and in his capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year ended
December 31, 1995, and any amendment or amendments thereto and any
other document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of them, full
power and authority to do and perform each and every act and thing
whatsoever that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the foregoing as the
undersigned might or could do personally or in the capacity or
capacities as aforesaid, hereby ratifying and confirming all acts
and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 6th day of February, 1996.
/s/ Eiji Umene
--------------
Eiji Umene
POWER OF ATTORNEY
-----------------
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors
of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R.
MOFFETT, RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of
them acting individually, his true and lawful attorney-in-fact with
power to act without the others and with full power of
substitution, to execute, deliver and file, for and on behalf of
him, in his name and in his capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year ended
December 31, 1995, and any amendment or amendments thereto and any
other document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of them, full
power and authority to do and perform each and every act and thing
whatsoever that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the foregoing as the
undersigned might or could do personally or in the capacity or
capacities as aforesaid, hereby ratifying and confirming all acts
and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 6th day of February, 1996.
/s/ J. Taylor Wharton
---------------------
J. Taylor Wharton
POWER OF ATTORNEY
-----------------
BE IT KNOWN: That the undersigned, in his capacity or
capacities as an officer and/or a member of the Board of Directors
of Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), does hereby make, constitute and appoint JAMES R.
MOFFETT, RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of
them acting individually, his true and lawful attorney-in-fact with
power to act without the others and with full power of
substitution, to execute, deliver and file, for and on behalf of
him, in his name and in his capacity or capacities as aforesaid, an
Annual Report of the Company on Form 10-K for the year ended
December 31, 1995, and any amendment or amendments thereto and any
other document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of them, full
power and authority to do and perform each and every act and thing
whatsoever that said attorney or attorneys may deem necessary or
advisable to carry out fully the intent of the foregoing as the
undersigned might or could do personally or in the capacity or
capacities as aforesaid, hereby ratifying and confirming all acts
and things which said attorney or attorneys may do or cause to be
done by virtue of this Power of Attorney.
EXECUTED this 12th day of February, 1996.
/s/ Ward W. Woods, Jr.
----------------------
Ward W. Woods, Jr.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from Freeport-McMoRan Copper & Gold Inc. financial statements
at December 31, 1995 and for the 12 months then ended, and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000831259
<NAME> FREEPORT-MCMORAN COPPER & GOLD INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 26,883
<SECURITIES> 0
<RECEIVABLES> 139,808
<ALLOWANCES> 0
<INVENTORY> 354,728
<CURRENT-ASSETS> 653,274
<PP&E> 3,566,808
<DEPRECIATION> 721,183
<TOTAL-ASSETS> 3,581,746
<CURRENT-LIABILITIES> 526,785
<BONDS> 1,080,289
<COMMON> 20,666
500,007
573,900
<OTHER-SE> 287,108
<TOTAL-LIABILITY-AND-EQUITY> 3,581,746
<SALES> 1,834,335
<TOTAL-REVENUES> 1,834,335
<CGS> 1,056,493
<TOTAL-COSTS> 1,056,493
<OTHER-EXPENSES> 13,888
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47,900
<INCOME-PRETAX> 544,762
<INCOME-TAX> 234,044
<INCOME-CONTINUING> 253,618
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 253,618
<EPS-PRIMARY> .98
<EPS-DILUTED> .98
</TABLE>
