<PAGE>
PROSPECTUS SUPPLEMENT FILED PURSUANT TO RULE 424B2
(TO PROSPECTUS DATED MAY 24, 1996) REGISTRATION STATEMENT NO. 333-02699
$450,000,000
LOGO
[Logo of Freeport McMoRan appears here]
$200,000,000 7.50% SENIOR NOTES DUE 2006
$250,000,000 7.20% SENIOR NOTES DUE 2026
----------------
Interest on the 7.50% Senior Notes due November 15, 2006 (the "2006 Notes")
and the 7.20% Senior Notes due November 15, 2026 (the "2026 Notes," and
together with the 2006 Notes, the "Senior Notes") is payable semiannually on
May 15 and November 15 of each year, commencing May 15, 1997. The holder of
each 2026 Note may elect to have that 2026 Note, or any portion of the
principal amount thereof that is a multiple of $1,000, repaid on November 15,
2003 at 100% of the principal amount thereof, together with accrued interest to
November 15, 2003. Such election, which is irrevocable when made, must be made
within the period commencing on September 15, 2003 and ending at the close of
business (5:00 p.m., New York City time) on October 15, 2003.
The Senior Notes will also be redeemable, in whole or in part, at the option
of Freeport-McMoRan Copper & Gold Inc. ("FCX" or the "Company") at any time at
a redemption price determined separately for each series equal to the greater
of (i) 100% of their principal amount or (ii) the sum of the present values of
the remaining scheduled payments of principal and interest discounted to the
date of redemption on a semi-annual basis (assuming a 360-day year consisting
of twelve 30-day months), at the Treasury Rate (as defined herein) plus 30
basis points, together with, in either case, accrued interest to the date of
redemption.
The Senior Notes will rank senior in priority to any subordinated
indebtedness of the Company and pari passu with any other senior unsecured
indebtedness of the Company. The Senior Notes will be junior in right of
payment to all of the Company's secured obligations (insofar as the assets
securing such obligations are concerned) and will be effectively junior in
right of payment to the indebtedness and other liabilities of the Company's
subsidiaries (insofar as the assets of those subsidiaries are concerned). See
"Capitalization" and "Description of the Senior Notes."
The Senior Notes will be represented by one or more Registered Global
Securities registered in the name of a nominee of The Depository Trust Company,
as depository ("DTC"), or other depository. Beneficial interests in the
Registered Global Securities will be shown on, and transfers thereof will be
effected only through, records maintained by DTC's participants. Except as
provided herein, owners of beneficial interests in the Registered Global
Securities will not be entitled to receive Senior Notes in definitive form and
will not be considered owners or holders thereof. Settlement for the Senior
Notes will be made in immediately available funds. So long as the Senior Notes
are represented by the Registered Global Securities registered in the name of
DTC or its nominee, the Senior Notes will trade in DTC's Same-Day Funds
Settlement System, and secondary market trading activity in the Senior Notes
will therefore settle in immediately available funds. So long as the Senior
Notes are represented by the Registered Global Securities, all payments of
principal and interest thereon will be made in immediately available funds. See
"Description of the Senior Notes."
PROSPECTIVE PURCHASERS OF SENIOR NOTES SHOULD CAREFULLY CONSIDER THE
MATTERS SET FORTH UNDER THE CAPTION "RISK FACTORS"
BEGINNING ON PAGE 5 OF THE ACCOMPANYING
PROSPECTUS.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public(1) Discount(2) Company(1)(3)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per 2006 Note.................... 99.475% .650% 98.825%
- -------------------------------------------------------------------------------
Total............................ $198,950,000 $1,300,000 $197,650,000
- -------------------------------------------------------------------------------
Per 2026 Note.................... 99.893% .625% 99.268%
- -------------------------------------------------------------------------------
Total............................ $249,732,500 $1,562,500 $248,170,000
- -------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from November 18, 1996.
(2) The Company has agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $500,000.
----------------
The Senior Notes are offered by the Underwriters, subject to prior sale,
when, as and if issued to and accepted by the Underwriters and subject to
approval of certain legal matters by counsel for the Underwriters and to
certain other conditions. The Underwriters reserve the right to withdraw,
cancel or modify such offer and to reject orders in whole or in part. See
"Underwriting." It is expected that the Senior Notes will be available for
delivery in book-entry form only through the facilities of DTC in New York, New
York on or about November 18, 1996 against payment therefor in immediately
available funds.
----------------
UBS SECURITIES
CHASE SECURITIES INC.
CS FIRST BOSTON
November 13, 1996
<PAGE>
IN CONNECTION WITH THE OFFERING MADE HEREBY, THE UNDERWRITERS MAY OVER-ALLOT
OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE
SENIOR NOTES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-2
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in this
Prospectus Supplement and in the accompanying Prospectus or incorporated by
reference herein and therein and does not purport to be complete. Reference is
made to, and this Summary is qualified in its entirety by and should be read in
conjunction with, the more detailed information contained elsewhere herein and
in the accompanying Prospectus or incorporated by reference herein or therein.
Unless otherwise defined herein, capitalized terms used in this Summary have
the respective meanings ascribed to them elsewhere in this Prospectus
Supplement, the accompanying Prospectus or in the Indenture (as defined below)
with respect to the Senior Notes.
THE COMPANY
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 credits for
related gold and silver production. FCX's principal operating subsidiary is
P.T. Freeport Indonesia Company ("PT-FI"), which 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 those
metals. FCX owns, directly and indirectly, an 85.87% interest in PT-FI. FCX is
also engaged pursuant to a separate COW in the exploration of additional
acreage in Irian Jaya through P.T. IRJA Eastern Minerals Corporation ("Eastern
Mining"), in which FCX currently owns an indirect 94.9% interest, and in the
smelting and refining of copper concentrates in Spain through its indirect,
wholly owned subsidiary, Atlantic Copper Holding, S.A. ("Atlantic Copper"),
formerly known as Rio Tinto Minera, S.A.
In mid-1995, The RTZ-CRA Group ("RTZ-CRA") purchased from Freeport-McMoRan
Inc. ("FTX"), the former parent of the Company, an aggregate of 23.9 million
shares of the Company's Class A Common Stock (approximately 12% of the then
outstanding common stock of all classes of the Company). In October 1996, the
Company and RTZ-CRA signed definitive documentation pursuant to which RTZ-CRA
will acquire an undivided 40% interest in future production expansions and
certain developmental activities in areas covered by the PT-FI COW. See "Recent
Developments--Relationship with The RTZ-CRA Group."
The Company and RTZ-CRA have established to their satisfaction the economic
justification for, and have commenced engineering activities in connection
with, the further expansion of PT-FI's mining and milling facilities, subject
to the approval of the Indonesian Government. The current throughput rate is
approximately 125,000 metric tons per day ("MTPD") of ore and the optimum rate
following expansion is expected to be at least 190,000 to 200,000 MTPD of ore.
Costs for this expansion are expected to approximate $960 million with
completion anticipated in the second half of 1998. See "Recent Developments--
Relationship with The RTZ-CRA Group."
PT-FI's total estimated proved and probable recoverable reserves as of
December 31, 1995 increased over the December 31, 1994 level, 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-CRA does not participate in year-end 1994 ore reserves,
but with limited exceptions will participate with respect to reserves
discovered thereafter within the PT-FI COW and Eastern Mining COW.
S-3
<PAGE>
PT-FI's largest mine, Grasberg, was discovered in 1988 in the area referred
to as "Block A" covered by the PT-FI COW. 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 PT-FI COW and the Eastern Mining COW
permit extensive exploration, mining and production activities. In addition to
Block A, the PT-FI COW currently covers an approximate 3.25 million acre
exploration area, net of prior relinquishments. See "Business--Contracts of
Work." The PT-FI COW expires in December 2021 with provisions for two 10-year
extensions under certain conditions. The Eastern Mining COW currently covers an
approximate 1.8 million acre exploration area, net of prior relinquishments,
and provides for a seven-year exploratory term that commenced August 15, 1994
and a 30-year term for actual mining operations with provisions for two 10-year
extensions under certain conditions.
The Company's principal executive offices are located at 1615 Poydras Street,
New Orleans, Louisiana, 70112 and its telephone number is (504) 582-4000.
THE OFFERING
Securities Offered...... $200,000,000 aggregate principal amount of 7.50%
Senior Notes due 2006.
$250,000,000 aggregate principal amount of 7.20%
Senior Notes due 2026.
Interest Payment Dates.. May 15 and November 15 of each year, commencing May
15, 1997.
Ranking................. The Senior Notes will be senior unsecured
indebtedness of FCX and will rank senior in priority
to any subordinated indebtedness of FCX and pari
passu with any other senior unsecured indebtedness of
FCX. The Senior Notes will be junior in right of
payment to all secured indebtedness (insofar as the
assets securing such obligations are concerned) of
FCX and effectively junior in right of payment to the
indebtedness and other liabilities of FCX's
subsidiaries (insofar as the assets of those
subsidiaries are concerned). See "Capitalization" and
"Description of the Senior Notes."
Repayment............... The holder of each 2026 Note may elect to have that
2026 Note, or any portion of the principal amount
that is a multiple of $1,000, repaid on November 15,
2003 at 100% of the principal amount thereof,
together with accrued interest to November 15, 2003.
Such election, which is irrevocable when made, must
be made within the period commencing on September 15,
2003 and ending at the close of business (5:00 p.m.,
New York City time) on October 15, 2003. The 2006
Notes are not subject to repayment at the option of
their holders.
Optional Redemption..... The Senior Notes will not be entitled to any sinking
fund. The Senior Notes will be redeemable, in whole
or in part, at the option of FCX at any time, upon
not less than 30 nor more than 60 days notice by mail
at a redemption price determined separately for each
series equal to the greater of (i) 100% of the
principal amount of the Senior Notes to be redeemed
or (ii) the sum of the present values of the
remaining scheduled payments of principal and
interest discounted to the date of redemption on a
semi-annual basis (assuming a 360-day year consisting
of twelve 30-day months) at the Treasury Rate (as
defined herein) plus 30 basis points, together with,
in either case, accrued interest to the date of
redemption.
S-4
<PAGE>
Covenants............... The Indenture will contain covenants that limit FCX's
ability to incur indebtedness secured by certain
liens and to engage in certain sale/leaseback
transactions. These limitations will be subject to
certain qualifications and exceptions. See
"Description of the Senior Notes--Certain Covenants."
Use of Proceeds......... The estimated net proceeds of approximately $445.3
million from the sale of the Senior Notes will be
used to repay amounts outstanding under FCX's $450
million bank credit facility (the "FCX Bank Credit
Facility") and PT-FI's $550 million bank credit
facility (the "PT-FI Bank Credit Facility" and,
together with the FCX Bank Credit Facility, the
"Credit Facilities"). See "Use of Proceeds" and
"Capitalization."
Absence of Market for
the Senior Notes........
The Senior Notes will be new issues of securities for
which there currently is no market. Although the
Underwriters have informed the Company that they each
currently intend to make a market in the Senior
Notes, they are not obligated to do so, and any such
market making may be discontinued at any time without
notice. Accordingly, there can be no assurance as to
the development or liquidity of any market for the
Senior Notes.
For further information regarding the Senior Notes, see "Description of the
Senior Notes."
S-5
<PAGE>
RISK FACTORS
Prospective purchasers of the Senior Notes should consider carefully the risk
factors set forth beginning on page 5 of the accompanying Prospectus, as well
as all other information contained or incorporated by reference in this
Prospectus Supplement or the accompanying Prospectus, in evaluating an
investment in the Senior Notes. To the extent any of the information contained
or incorporated by reference in this Prospectus Supplement or accompanying
Prospectus constitutes a "forward-looking statement," as defined in Section
27A(i)(1) of the Securities Act of 1933, as amended, the information set forth
in the Prospectus under the heading "Risk Factors" and the information included
herein under the headings "Recent Developments--Exploration Activities," "--
Sale of Put Option Contracts," "Business--Republic of Indonesia," "--Ore
Reserves," "--Mining Operations--Location and Mining Risks," "--Exploration,"
"--Marketing," "--Competition," and "--Environmental Matters" constitutes
meaningful cautionary statements identifying important factors that could cause
actual results to differ materially from those in the forward-looking
statement.
RECENT DEVELOPMENTS
RELATIONSHIP WITH THE RTZ-CRA GROUP
In mid-1995, RTZ-CRA purchased from FTX, the former parent of the Company, an
aggregate of 23.9 million shares of the Company's Class A Common Stock
(approximately 12% of the then outstanding common stock of all classes of the
Company). Additionally, the Company and RTZ-CRA agreed, subject to certain
conditions, to establish joint ventures pursuant to which RTZ-CRA would 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 those agreements, RTZ-CRA and the
Company established an exploration committee to approve exploration
expenditures and RTZ-CRA 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 $59.4 million incurred through September 30,
1996). In October 1996, RTZ-CRA funded its full $100 million exploration
commitment. Mutually agreed upon exploration costs in excess of $100 million in
these areas will be borne 60% by the Company and 40% by RTZ-CRA.
The Company and RTZ-CRA have established to their satisfaction the economic
justification for, and have commenced engineering activities in connection
with, the expansion of PT-FI's mining and milling capacity to at least 190,000-
200,000 MTPD. Any such expansion will be subject to the approval of the
Indonesian Government. Costs for the expansion are expected to approximate $960
million, including approximately $300 million for a coal-fired power plant and
related facilities, with completion anticipated in the second half of 1998. In
October 1996, the Company and RTZ-CRA entered into certain definitive
agreements establishing the joint venture pursuant to which, following
commencement of concentrate production from expansions of PT-FI's existing
mining and milling capacity financed by RTZ-CRA, RTZ-CRA will have a 40%
interest in future production exceeding specified annual amounts of copper,
gold and silver concentrates estimated to be produced from the first 118,000
MTPD of ore mined each year through approximately 2021. To finance the
expansion, subsidiaries of RTZ-CRA will provide up to $750 million for defined
costs, of which 40% will be funded directly and 60% will be loaned to PT-FI on
a non-recourse basis. The parties will share incremental cash flow attributable
to such expansion projects on the basis of 60% to PT-FI and 40% to RTZ-CRA. PT-
FI will assign to RTZ-CRA its interest in such incremental cash flow until RTZ-
CRA has received an amount of funds from such assigned interest equal to the
funds lent to PT-FI plus interest based on RTZ-CRA's cost of borrowing. When
the definitive agreements were executed in October 1996, RTZ-CRA funded $84
million of previously incurred expansion costs together with its full $100
million exploration commitment.
SALE OF PUT OPTION CONTRACTS
The significant decline in copper prices during 1996 increased the value of
put option contracts that PT-FI purchased under its price protection program to
provide a floor price of $0.90 per pound for essentially all
S-6
<PAGE>
copper sales through the second quarter of 1997. During the third quarter of
1996, PT-FI sold for $97.2 million all of its put option contracts covering
approximately 1.2 billion pounds of copper. As a result, PT-FI no longer has
any price protection on its copper sales, but PT-FI will report copper revenues
through June 30, 1997 at prices higher than those actually realized under its
copper concentrate sales contracts. Through September 30, 1996, PT-FI
recognized $30.0 million of additional revenues from the sale of its put option
contracts. PT-FI will recognize additional revenues from the sale of its put
option contracts in the following amounts: $21.1 million in the fourth quarter
of 1996, $23.0 million in the first quarter of 1997 and $23.1 million in the
second quarter of 1997.
EXPLORATION ACTIVITIES
In September 1996, the Company announced that drilling activities at the
Kucing Liar prospect had confirmed the continuity of extensive skarn-type
copper and gold mineralization that, based on current information, could
represent as much as a 250 million metric ton geologic resource at an average
grade of greater than two percent copper equivalent. Such high grade
underground mineralization in close proximity to the mill could have a
significant positive impact on the average grade of the ore feed to and the
economics of PT-FI's mill expansion. The Company's continuing exploration of
areas underneath and around the Grasberg complex has also intersected the
fringes of heavy sulfide skarn-type mineralization that the Company believes
may surround the Grasberg complex. The preliminary results of exploration
activities described above remain unproven, and the potential for converting
these prospects into proven reserves is subject to significant uncertainties.
Accordingly, no assurance can be given that any of these new areas contain
commercially exploitable mineral deposits.
GRESIK SMELTER
In July 1996, construction commenced on a copper smelter in Gresik, East
Java, Indonesia having a design capacity of 200,000 metric tons of copper
cathode per year. PT-FI, Mitsubishi Materials Corporation ("Mitsubishi
Materials"), Mitsubishi Corporation ("Mitsubishi") and Nippon Mining & Metals
Co., Ltd. ("Nippon") own 25%, 60.5%, 9.5% and 5% interests, respectively, in
the smelter. The estimated aggregate project cost, before working capital
requirements, is approximately $600 million. The joint venture has received a
commitment from a group of banks for a $300 million non-recourse term loan and
a $110 million working capital facility, both of which are expected to be in
place by the end of the fourth quarter of 1996. The remainder of the required
funding will be supplied by PT-FI, Mitsubishi Materials, Mitsubishi and Nippon
in accordance with their interests. Construction is expected to be completed by
mid-1998, and the smelter is expected to be fully operational during the second
half of 1998. It is anticipated that PT-FI will provide all of the smelter's
copper concentrate requirements at market rates, subject to a floor during the
first 15 years of operations. PT-FI has also agreed to assign, if necessary,
its share of any dividends from the joint venture to support a 13% annual
return to Mitsubishi Materials, Mitsubishi and Nippon for the first 20 years of
commercial operations.
S-7
<PAGE>
USE OF PROCEEDS
The estimated net proceeds of approximately $445.3 million from the sale of
the Senior Notes will be used to repay amounts outstanding under the Credit
Facilities. See "Capitalization." Amounts repaid under the Credit Facilities
can be reborrowed from time to time. The average interest rate on indebtedness
outstanding under the FCX Bank Credit Facility on September 30, 1996 was 6.2%
per annum, and all outstanding indebtedness under the FCX Bank Credit Facility
matures on December 31, 1999. The average interest rate on indebtedness
outstanding under the PT-FI Bank Credit Facility on September 30, 1996 was
6.15% per annum, and all outstanding indebtedness under the PT-FI Bank Credit
Facility matures on December 31, 1999.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges of the
Company and its consolidated subsidiaries for the periods indicated.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------ NINE MONTHS ENDED
1991 1992 1993 1994 1995 SEPTEMBER 30, 1996
---- ---- ---- ---- ---- ------------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to
fixed charges.......... 4.5x 6.5x 3.6x 7.5x 6.0x 3.7x
</TABLE>
For purposes of calculating the ratios, "earnings" consist of income from
continuing operations before income taxes, minority interest and fixed charges
and "fixed charges" consist of interest and that portion of rent which is
deemed representative of interest.
S-8
<PAGE>
CAPITALIZATION
The following table sets forth the Company's unaudited capitalization as of
September 30, 1996, pro forma to give effect to the transactions consummated
with RTZ-CRA in October 1996 and pro forma as adjusted to give effect to the
sale of the Senior Notes and the application of the net proceeds therefrom
(approximately $445.3 million) as described under "Use of Proceeds." This
table should be read in conjunction with the Company's consolidated financial
statements and notes thereto incorporated by reference herein.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
---------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and short-term investments............ $ 49,031 $ 49,031 $ 49,031
========== ========== ==========
Long-term debt, including current portion
and short-term borrowings: (a)
Credit Facilities (b).................... $ 670,000 $ 486,000 $ 40,680
Atlantic Copper project financing........ 283,750 283,750 283,750
Equipment loan........................... 57,750 57,750 57,750
ALatieF loan............................. 51,750 51,750 51,750
Other Atlantic Copper borrowings......... 67,874 67,874 67,874
9 3/4% Senior Guaranteed Notes due 2001.. 120,000 120,000 120,000
RTZ-CRA expansion loan................... -- 50,400 50,400
Senior Notes offered hereby.............. -- -- 450,000
Capital lease obligations and other PT-FI
debt.................................... 350,182 350,182 350,182
---------- ---------- ----------
Total long-term debt, including current
portion and short-term borrowings..... 1,601,306 1,467,706 1,472,386
---------- ---------- ----------
Mandatory redeemable preferred stock:
Gold-denominated preferred stock......... 232,620 232,620 232,620
Gold-denominated preferred stock, Series
II...................................... 167,379 167,379 167,379
Silver-denominated preferred stock....... 100,008 100,008 100,008
---------- ---------- ----------
Total mandatory redeemable preferred
stock................................. 500,007 500,007 500,007
---------- ---------- ----------
Stockholders' equity:
Convertible exchangeable preferred stock. 218,854 218,854 218,854
Step-Up convertible preferred stock...... 349,990 349,990 349,990
Class A Common Stock, 88,250,377 shares
outstanding (c)......................... 8,825 8,825 8,825
Class B Common Stock, 120,857,891 shares
outstanding (d)......................... 12,086 12,086 12,086
Capital in excess of par value of common
stock................................... 419,086 419,086 419,086
Retained earnings........................ 43,902 43,902 43,902
Cumulative foreign translation
adjustment.............................. 10,244 10,244 10,244
Common stock held in treasury-15,860,463
shares, at cost......................... (418,067) (418,067) (418,067)
---------- ---------- ----------
Total stockholders' equity............. 644,920 644,920 644,920
---------- ---------- ----------
Total capitalization....................... $2,746,233 $2,612,633 $2,617,313
========== ========== ==========
</TABLE>
- --------
(a) For additional information with respect to the Company's long-term debt,
see Note 7 to the Company's consolidated financial statements included in
the Company's Annual Report on Form 10-K incorporated by reference herein.
(b) The PT-FI Bank Credit Facility currently provides $550 million of credit
and matures in December 1999. FCX has guaranteed all of PT-FI's
obligations under the PT-FI Bank Credit Facility. The FCX Bank Credit
Facility currently provides $450 million of credit, all of which is
available to FCX and PT-FI, 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
(Footnotes continued on following page)
S-9
<PAGE>
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. The Company's
borrowings under the FCX Bank Credit Facility and FCX's guarantee of PT-FI's
borrowings under the PT-FI Bank Credit Facility currently are unsecured. FCX
will have the right under the Indenture relating to the Senior Notes offered
hereby, subject to certain limitations, to create liens on its assets and
properties in the future. See "Description of the Senior Notes--Certain
Covenants--Limitations on Liens."
(c) Does not include approximately (i) 11.7 million shares of Class A Common
Stock authorized for issuance upon conversion of the Step-Up Convertible
Preferred Stock and (ii) 8.9 million shares of Class A Common Stock
authorized for issuance upon conversion of the Convertible Exchangeable
Preferred Stock.
(d) Does not include approximately 5.2 million shares of Class B Common Stock
authorized for issuance upon the exercise of employee stock options.
S-10
<PAGE>
BUSINESS
GENERAL
FCX 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 credits for
related gold and silver production.
FCX's principal operating subsidiary is 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 a COW with the Indonesian Government and in the worldwide marketing
of concentrates containing those 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 approximately 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 of any mine in the world.
Through its Eastern Mining subsidiary, FCX holds an additional COW in Irian
Jaya originally consisting of 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, Atlantic Copper. During
1995, PT-FI supplied Atlantic Copper with approximately 182,000 tons of copper
concentrate and for the nine month period ended September 30, 1996, PT-FI
supplied 331,400 tons, providing for approximately 40% and 55%, respectively,
of Atlantic Copper's requirements in those periods. Atlantic Copper completed
the expansion of its smelter production capacity from 150,000 to approximately
270,000 tons of metal per year in June 1996.
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 75, 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
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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. The Indonesian military occasionally has
exercised its right to appropriate transportation and other equipment of PT-FI
to use in its security operations.
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 several
public health programs, agricultural assistance programs, a business incubator
program to encourage the local people to establish their own small scale
businesses, cultural presentation programs, and charitable donations. In March
1996, there were disturbances in the mining town of Tembagapura and the
lowlands town of Timika in which area tribesmen engaged in acts of vandalism
that resulted in approximately $3 million of damage to Company property and a
three day closure of PT-FI's mine and mill as a precautionary measure.
Following these disturbances and as a result of subsequent meetings with
tribal leaders, the Company, in cooperation with the Indonesian Government,
agreed to redistribute and refocus its community development programs by
dedicating 1% of PT-FI's annual revenues over the next ten years to fund these
efforts and, among other things, to increase the number of local Irianese in
the work force. The Indonesian Government agreed as part of its development
efforts in Irian Jaya to create an integrated development plan calling for the
participation of the local indigenous tribes in the creation and
administration of community development projects funded by the Company. While
management believes that its efforts to be responsive to the issues relating
to the impact of its operations on the local indigenous tribes should serve to
avoid further disruptions of mining operations, social and political
instability in the area may, in the future, have an adverse impact on PT-FI's
mining operations.
As described under "--Environmental Matters," the Company has elected to
terminate all political risk insurance.
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 at the end of 1996, unless a one year
extension is granted. In order to determine which acreage to relinquish
pursuant to these requirements, PT-FI has conducted an active exploration
program since 1989 under a preliminary agreement with the Indonesian
Government, focusing on what PT-FI believes to be the most promising
exploration opportunities in Block B.
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In August 1994, Eastern Mining was granted the Eastern Mining COW originally
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 a 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 original approximately 2.5 million acres at the end of each of three
specified periods. The first relinquishment, of approximately 0.7 million
acres, occurred on August 15, 1996.
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 a result PT-FI's total estimated
proved and probable recoverable reserves as of December 31, 1995 increased over
the December 31, 1994 level, 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-CRA does not
participate in year-end 1994 ore reserves, but with limited exceptions will
participate with respect to reserves discovered thereafter within the PT-FI COW
and Eastern Mining COW pursuant to the joint ventures described under "Recent
Developments--Relationship with The RTZ-CRA Group."
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") from the vicinity of the mill
towards the center of the currently delineated Grasberg ore body at the
approximately 2,900 meter elevation level. By the end of the first quarter of
1997, the Amole adit is expected to be in a position to 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 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.
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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 area is located in an area of known
seismic activity, and earth tremors have been experienced from time to time.
None of these factors has caused personal injury to PT-FI employees,
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 0.5 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 at
a prospect called Wabu, which lies within 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.
For information regarding recent exploration activities, see "Recent
Developments--Exploration Activities".
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See "Risk Factors--Reserves" in the accompanying Prospectus.
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.
In the second quarter of 1995 PT-FI completed the latest phase of its
expansion of overall mining and milling capacity and achieved record copper
production of 978.0 million recoverable pounds in 1995, approximately 38% more
than in 1994, and record gold production of 1,310,400 recoverable ounces in
1995, approximately 67% more than in 1994. During the nine months ended
September 30, 1996, copper production totaled 812.2 million recoverable pounds
and gold production totaled 1,181,000 recoverable ounces.
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. During the nine months ended
September 30, 1996, recovery rates averaged 84%, 76% and 65%, respectively.
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 1996, PT-FI completed the first phase of the Enhanced Infrastructure
Program ("EIP"), which includes various residential, community and commercial
facilities. The EIP is 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.
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 London Metals
Exchange ("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 for that month. 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, if any, 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
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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 Atlantic Copper,
for essentially all of its expected fourth-quarter 1996 and 1997 concentrate
sales. Sales for 1996 are estimated to total approximately 1.1 billion pounds
of copper and 1.65 million ounces of gold. Anticipated fourth-quarter 1996
copper and gold sales reflect management's expectation of mining ore with
higher than mine-life average grades.
Approximately 16%, 12% and 27% of PT-FI's total concentrate sales in 1994,
1995 and the nine months ended September 30, 1996, respectively, were to
Atlantic Copper. With Atlantic Copper's recently completed smelter expansion
and upon completion of the Gresik smelter discussed under "Recent
Developments," 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
Atlantic Copper 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. During the third quarter
of 1996, FCX sold all of the put option contracts it had purchased under a
price protection program. See "Recent Developments--Sale of Put Option
Contracts."
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 customary 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 of mining and milling operations 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-CRA have
commenced engineering activities in connection with the further expansion
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to at least 190,000-200,000 MTPD, which will require a separate environmental
impact assessment, environmental management plan and environmental monitoring
plan, as well as Indonesian Governmental approval. Management believes that all
necessary approvals can be obtained although no assurance can be given that
such approvals will be granted on acceptable terms or at all.
Management believes that PT-FI's operations are being conducted pursuant to
all necessary permits and in compliance in all material respects with
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 two years 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 believed
that there was neither a factual nor a legal basis for OPIC's action, and the
matter was submitted to arbitration even though the availability of the
insurance is not financially material to the Company. In April 1996, the
Company and OPIC agreed to terminate the arbitration proceedings. As part of
this settlement, OPIC agreed to reinstate the political risk insurance until
December 31, 1996, and the Company agreed to create a trust fund that it will
manage to finance environmental reclamation initiatives. The Company will make
annual contributions to the trust fund accumulating to a total of $100 million
at the end of mining operations. In September 1996, FCX notified OPIC and
certain other insurers that it elected to terminate all of its political risk
insurance.
In 1995, PT-FI participated in an independent environmental audit of its
Irian Jaya operations under a program monitored by the Indonesian Government.
The environmental audit was released in April 1996 and included a total of 33
recommendations, 22 of which have already been implemented or are in the
process of being implemented by PT-FI and 11 of which are under study. The
audit team identified the disposal of tailings as the most critical
environmental issue facing PT-FI, requiring significant study, engineering and
monitoring over the life of the mine. The audit concluded that PT-FI's Tailing
and River Management Plan represented the most suitable option for tailings
disposal considering the engineering and environmental challenges in Irian
Jaya. The audit also concluded that the tailings from PT-FI's mining operations
are non-toxic, the mining operations do not pose any significant risk to Irian
Jaya's bio-diversity and PT-FI's operations are being conducted in all material
respects in compliance with applicable Indonesian environmental laws, rules and
regulations. PT-FI intends to implement a program of independent external
audits, as well as continuing internal audits through the life of its mining
operations so that PT-FI's environmental management and monitoring programs
remain sound to ensure compliance in all material respects with applicable
Indonesian environmental laws, rules and regulations and to preserve and
protect the environment in its area of operations.
In 1995, PT-FI also began to participate in an independent social/cultural
audit of its Irian Jaya operations under a program monitored by the Indonesian
Government. The audit is being conducted by Labatt Anderson, which is an
internationally recognized consulting firm based in the United States. The
social/cultural audit is continuing, but the interim results were submitted to
the Indonesian Government in the second quarter of 1996. Labatt Anderson made
17 recommendations in its interim report, all of which had previously been
implemented by PT-FI or have been implemented since the interim report was
submitted.
Management believes that Atlantic Copper's facilities and operations are in
compliance in all material respects with applicable Spanish environmental laws,
rules and regulations. Atlantic Copper recently completed modifications to and
expanded its sulfuric acid plants, which has resulted in significant reductions
in air emissions. In addition, Atlantic Copper 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.
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The Company has expended significant resources, both financial and
managerial, to comply with environmental regulations and permitting and
approval requirements, and anticipates that it will continue to do so in the
future. There can be no assurance that additional significant costs and
liabilities will not be incurred to comply with such current and future
regulations or that such regulations will not have a material affect on the
Company's operations.
LEGAL PROCEEDINGS
During the second quarter of 1996, a class action lawsuit was filed against
the Company and FTX, the Company's former parent, in Federal District Court in
New Orleans and a class action lawsuit was filed in Louisiana State Court in
New Orleans. In both actions, the plaintiffs allege substantially identical
environmental, human rights and social and cultural violations in Indonesia.
The plaintiff in the federal court suit seeks $6 billion in monetary damages
and other equitable relief and the plaintiff in the state court suit seeks
unspecified monetary damages and other equitable relief. The Company denies the
allegations, and believes that they have been refuted by a series of
independent examinations of PT-FI's Indonesian mining operations. The Company
believes that the actions are baseless in law and fact with regard to the
allegations and will vigorously defend such actions.
EMPLOYEES OF PT-FI AND RELATIONSHIP WITH FTX
As of July 31, 1996, PT-FI had approximately 5,800 employees (approximately
95% Indonesian). In addition, as of July 31, 1996, PT-FI had approximately
9,000 contract workers, most of whom were Indonesian. Approximately 48% 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 July 31, 1996, Atlantic Copper
had approximately 700 employees, of which approximately 82% are covered by
union contracts. Atlantic Copper experienced limited work stoppages in 1995,
but relations with these unions have 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 Atlantic Copper'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 Atlantic Copper 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.
DESCRIPTION OF THE SENIOR NOTES
The Senior Notes offered hereby are separate series of "Senior Securities" as
defined and described in the accompanying Prospectus dated May 24, 1996 (the
"Prospectus"), and the following description of the terms of the Senior Notes
supplements the description of the general terms and provisions of the Senior
Securities set forth in the Prospectus.
The Senior Notes will be issued pursuant to an Indenture to be dated as of
November 15, 1996 as supplemented by a First Supplemental Indenture dated as of
November 18, 1996 (as so supplemented, the
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"Indenture") among FCX and The Chase Manhattan Bank, as trustee (the
"Trustee"). A copy of the form of Indenture is incorporated by reference as an
exhibit to the Registration Statement of which this Prospectus Supplement is a
part. The following summaries of certain provisions of the Senior Notes and the
Indenture should be read in conjunction with the statements under "Description
of Debt Securities and Guarantees" in the Prospectus. Such information does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the Senior Notes and the Indenture. Wherever particular
provisions or defined terms of the Indenture are referred to, such provisions
or defined terms are incorporated herein by reference. Unless otherwise
indicated, section references herein are to sections in the Indenture.
The 2006 Notes will mature on November 15, 2006 and the 2026 Notes will
mature on November 15, 2026. Each series of the Senior Notes will bear interest
at the respective rates per annum stated on the cover page hereof from November
18, 1996, payable semiannually on May 15 and November 15 of each year,
commencing May 15, 1997, to the person in whose name the Senior Note is
registered at the close of business on the April 30 or October 31 next
preceding such Interest Payment Date. Interest will be computed on the basis of
a 360-day year of twelve 30-day months. Principal and interest will be payable
at the offices of the Trustee, provided that, at the option of the Company, if
the Senior Notes are no longer in the form of Registered Global Securities,
payment of interest can be made by check mailed to the address of the person
entitled thereto as it appears in the register of the Senior Notes (the
"Register") maintained by the Registrar. Subject to the terms of the Indenture
and the limitations applicable to Registered Global Securities, the Senior
Notes will be transferable and exchangeable at the office of the Registrar and
any co-registrar and will be issued in fully registered form, without coupons,
in denominations of $1,000 and any integral multiple thereof. The Company may
require payment of a sum sufficient to cover any transfer tax or other similar
governmental charge payable in connection with certain transfers and exchanges.
RANKING
The Senior Notes will be senior unsecured obligations of the Company, will
rank senior in priority to any subordinated indebtedness of the Company and
will rank pari passu with any other senior unsecured indebtedness of FCX. For
further information on FCX's debt, see "Capitalization." The Senior Notes will
be junior in right of payment to all of FCX's secured indebtedness (insofar as
the assets securing such obligations are concerned) and will be junior in right
of payment to the indebtedness and other liabilities of PT-FI and any of FCX's
other subsidiaries (insofar as the assets of those subsidiaries are concerned).
The Indenture does not contain any covenants or other provisions applicable to
the Senior Notes that limit the amount of indebtedness that may be issued or
incurred by FCX, PT-FI or any of FCX's other Subsidiaries, that restrict PT-
FI's or any of FCX's other Subsidiaries ability to incur secured indebtedness,
that restrict FCX's ability to pay dividends or make other distributions, nor
does it contain provisions that would afford holders of the Senior Notes
protection in the event of a change in control, highly leveraged transaction,
recapitalization or similar transaction involving FCX, any of which could
adversely affect the holders of the Senior Notes.
FCX is a holding company which conducts its business through its various
Subsidiaries, including PT-FI. As a result, FCX's cash flow and consequent
ability to meet its debt obligations primarily depend on the earnings of PT-FI
and its other Subsidiaries, and on dividends and other payments therefrom.
Under certain circumstances, contractual and legal restrictions, as well as the
financial condition and operating requirements of PT-FI and FCX's other
Subsidiaries, could limit FCX's ability to obtain cash from its Subsidiaries
for the purpose of meeting its debt service obligations, including the payment
of principal and interest on the Senior Notes. Any right of FCX to participate
in any distribution of the assets of PT-FI and its other Subsidiaries upon the
liquidation, reorganization or insolvency thereof would, with certain
exceptions, be subject to the claims of creditors (including trade creditors)
and preferred stockholders (if any) of such Subsidiaries.
REPAYMENT AT OPTION OF HOLDER
Any 2026 Note may be repaid on November 15, 2003, at the option of the
registered holder of such 2026 Note, at 100% of its principal amount, together
with accrued interest to November 15, 2003. In order for a holder to exercise
this option, the Company must receive at its office or agency in New York, New
York, during the period beginning on September 15, 2003 and ending at 5:00 p.m.
(New York City
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time) on October 15, 2003 (or, if October 15, 2003 is not a Business Day, the
next succeeding Business Day), the certificate representing the 2026 Notes
subject to repayment with the form "Option to Elect Repayment on November 15,
2003" on such certificate duly completed. Any such notice received by the
Company during the period beginning on September 15, 2003 and ending at 5:00
p.m. (New York City time) on October 15, 2003 shall be irrevocable. See "--
Book-Entry, Delivery and Form." The repayment option may be exercised by the
holder of a 2026 Note for less than the entire principal amount of the 2026
Notes held by such holder, so long as the principal amount that is to be repaid
is equal to $1,000 or an integral multiple of $1,000. No registration of the
transfer or exchange of such 2026 Note (or, in the event that such 2026 Note is
to be repaid in part, the portion of the 2026 Note to be repaid) will be
permitted after exercise of a repayment option as to such 2026 Note. All
questions as to the validity, form, eligibility (including time of receipt) and
acceptance of any 2026 Note for repayment will be determined by the Company,
whose determination will be final and binding.
Failure by the Company to repay any 2026 Note when required as described in
the preceding paragraph will result in an Event of Default under the Indenture.
As long as the 2026 Notes are represented by a Registered Global Security,
DTC or its nominee will be the registered holder of the 2026 Notes and,
therefore, will be the only entity that can exercise the right to repayment
described in this section. See "--Book-Entry, Delivery and Form."
No similar right of repayment is available to holders of the 2006 Notes.
OPTIONAL REDEMPTION
The Senior Notes will be redeemable in whole or in part, at the option of the
Company at any time, upon not less than 30 nor more than 60 days notice by mail
at a redemption price determined separately for each series equal to the
greater of (i) 100% of the principal amount of the Senior Notes to be redeemed
or (ii) the sum of the present values of the remaining scheduled payments of
principal and interest thereon discounted to the date of redemption on a semi-
annual basis (assuming a 360-day year consisting of twelve 30-day months) at
the Treasury Rate (as defined herein) plus 30 basis points, together with, in
either case, accrued interest to the date of redemption.
"Treasury Rate" means, with respect to any series of Senior Notes, with
respect to any redemption date, the rate per annum equal to the semi-annual
equivalent yield to maturity of the Comparable Treasury Issue for such series,
assuming a price for such Comparable Treasury Issue (expressed as a percentage
of its principal amount) equal to the Comparable Treasury Price for such
redemption date.
"Comparable Treasury Issue" means, with respect to any series of Senior
Notes, the United States Treasury security selected by an Independent
Investment Banker as having a maturity comparable to the remaining term of the
Senior Notes of such series that would be utilized, at the time of selection
and in accordance with customary financial practice, in pricing new issues of
corporate debt securities of comparable maturity to the remaining term of such
Senior Notes. "Independent Investment Banker" means one of the Reference
Treasury Dealers appointed by FCX.
"Comparable Treasury Price" means, with respect to any series of Senior
Notes, with respect to any redemption date, (i) the average of the bid and
asked prices for the Comparable Treasury Issue for such series (expressed in
each case as a percentage of its principal amount) on the third business day
preceding such redemption date, as set forth in the daily statistical release
(or any successor release) published by the Federal Reserve Bank of New York
and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities"
or (ii) if such release (or any successor release) is not published or does not
contain such prices on such business day, (A) the average of the Reference
Treasury Dealer Quotations for such redemption date, after excluding the
highest and lowest such Reference Treasury Dealer Quotations, or (B) if the
Trustee obtains fewer than three such Reference Treasury Dealer Quotations, the
average of all such Quotations.
"Reference Treasury Dealer Quotations" means, with respect to any series of
Senior Notes, with respect to each Reference Treasury Dealer and any redemption
date, the average, as determined by the Trustee, of the bid and asked prices
for the Comparable Treasury Issue for such series (expressed in each case as a
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percentage of its principal amount) quoted in writing to the Trustee by such
Reference Treasury Dealer at 5:00 p.m. on the third business day preceding such
redemption date.
"Reference Treasury Dealer" means each of UBS Securities LLC, Chase
Securities Inc. and CS First Boston Corporation and their respective
successors; provided, however, that if any of the foregoing cease to be a
primary U.S. Government securities dealer in New York City (a "Primary Treasury
Dealer"), FCX shall substitute therefor another Primary Treasury Dealer.
Any notice to the holders of such a redemption need not set forth the
redemption price but need only set forth the calculation thereof as described
in the first paragraph of this section entitled "Optional Redemption." The
redemption price, calculated as aforesaid, shall be set forth in an officer's
certificate delivered to the Trustee no later than two business days prior to
the redemption date.
CERTAIN COVENANTS
Limitation on Liens. The Indenture will provide that FCX will not issue,
create, incur, assume or suffer to exist any Debt secured by any Lien on (i)
any property or asset, now owned or hereafter acquired by FCX or (ii) any
Capital Stock of PT-FI or a Restricted PT-FI Transferee (as defined below) now
owned or hereafter acquired by FCX or any Subsidiary of FCX without making
effective provision whereby any and all Senior Notes then or thereafter
outstanding will be secured by a Lien equally and ratably with (or, at FCX's
option, prior to) any and all obligations thereby secured for so long as any
such obligations shall be so secured. The foregoing restriction will not,
however, apply with respect to:
(a) Liens on the Capital Stock of any Subsidiary, including any
Restricted PT-FI Transferee, to secure FCX's guarantee of any Debt of such
Subsidiary in an aggregate principal amount for all such Debt of all such
Subsidiaries (including any extension, refinancing, renewal, replacement or
refunding of such Debt) not to exceed the existing committed amount under
the PT-FI Bank Credit Facility on the date of this Prospectus Supplement,
provided that in the case of a Lien on the Capital Stock of PT-FI in no
event shall Capital Stock representing more than a 50.1% ownership interest
in PT-FI on a fully-diluted basis be subject to any such Lien;
(b) Liens to secure any Debt of FCX (including any guarantee by FCX of
any Debt of a Subsidiary of FCX) in an aggregate principal amount
(including any extension, refinancing, renewal, replacement or refunding of
such Debt) not to exceed the principal amount of the Debt (excluding for
this purpose the amount committed or outstanding under the PT-FI Bank
Credit Facility on the date of this Prospectus Supplement and the aggregate
amount of the Debt of FM Properties Inc. and its subsidiaries guaranteed or
committed to be guaranteed by FCX on the date of this Prospectus
Supplement) committed or outstanding on the date of this Prospectus
Supplement;
(c) Liens incurred on real or personal property, including the Capital
Stock of any Subsidiary acquiring or owning such property, for the purpose
of (i) financing all or any part of the purchase price of such property by
FCX or such Subsidiary and incurred prior to, at the time of, or within 180
days after, the acquisition of such property or (ii) financing all or any
part of the cost of construction, improvement, development or expansion of
any such property, provided that in the case of clause (i) or (ii) the
amount of such financing shall not exceed the amount expended in the
acquisition of, or construction, improvement or development of, such
property; provided further, that the Lien permitted by this clause (c)
shall not include any Lien on the Capital Stock of (x) PT-FI or (y) any
other Subsidiary of FCX to which PT-FI has transferred, directly or
indirectly, assets with a value in excess of $10 million and which are
within or constitute a part of COW Area Block A, other than (A) machinery,
equipment, fixtures, infrastructure and real property (excluding any and
all mineral rights appertaining thereto) that is not directly involved in
the mining of COW Area Block A and (B) assets that are transferred by PT-FI
on terms that are no less favorable to PT-FI than those that could have
been obtained by PT-FI in a comparable transaction with an unrelated party
(any such Subsidiary described in clause (y) being referred to as a
"Restricted PT-FI Transferee");
(d) Liens on property or other assets existing at the time of acquisition
thereof by FCX, including acquisition through merger, consolidation or the
purchase of property or other assets; provided that such Liens do not
extend to other property or assets of FCX;
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(e) Liens created in connection with a project financed with, and created
to secure a Non-Recourse Obligation, provided that such Liens are limited
(i) to the property or assets acquired, constructed or improved with the
proceeds of such Non-Recourse Obligation and (ii) to the Capital Stock of a
special purpose Subsidiary of FCX created to issue or incur such Non-
Recourse Obligation;
(f) Liens arising from or in connection with the conveyance of any
production payment or similar obligation or instrument with respect to any
mineral or natural resource that is not in production on the date of this
Prospectus Supplement;
(g) Liens to secure Debt incurred in connection with the construction,
installation or financing of pollution control or abatement facilities or
other forms of industrial revenue or development bond financing, which
Liens extend solely to the property which is the subject thereof;
(h) Liens to secure Debt issued or guaranteed by the United States or any
state or any department, agency or instrumentality of the United States,
incurred in connection with the financing of the construction,
refurbishment or operation of any property or assets of FCX, which Liens
extend solely to the property which is the subject thereof;
(i) Liens arising by reason of deposits necessary to obtain standby
letters of credit and surety bonds in the ordinary course of business;
(j) Liens in favor of governmental bodies to secure progress, advance and
other payments required in connection with the acquisition, possession or
use of any property or assets of FCX;
(k) Liens in favor of customs and revenue authorities or incurred upon
any property or assets in accordance with customary banking practice to
secure any indebtedness incurred in connection with the exporting of goods
to, or between, or the marketing of goods, or the importing of goods from,
foreign countries, which Liens extend only to the property or asset being
so exported or imported;
(l) Liens upon property or assets sold by FCX resulting from the exercise
of any rights or arising out of defaults on receivables to secure Debt
relating to the sale of such property or assets; and
(m) Liens to secure Debt incurred to extend, refinance, renew, replace or
refund (or successive extensions, refinancings, renewals, replacements or
refundings) of any Debt secured by any Lien referred to in the foregoing
clauses (c) through (l) so long as such Lien does not extend to any other
property and the amount of such Debt so secured is not increased above the
amount outstanding immediately prior to such refinancing. Notwithstanding
the foregoing, FCX may create or assume Liens in addition to those
permitted by the preceding sentence of this paragraph and renew, extend or
replace such Liens, provided that at the time of such creation, assumption,
renewal, extension or replacement, and after giving effect thereto, the
Debt so secured by any such Lien plus any Attributable Debt does not exceed
10% of Consolidated Total Assets as shown on the balance sheet of FCX as of
the end of the most recent fiscal quarter prior to the incurrence of the
Debt for which a balance sheet is available.
Limitation on Sale/Leaseback Transactions. The Indenture will provide that
FCX will not enter into any Sale/Leaseback Transaction with any Person unless:
(a) FCX would be entitled to incur Debt, in a principal amount equal to
the Attributable Debt with respect to such Sale/Leaseback Transaction,
secured by a Lien on the property subject to such Sale/Leaseback
Transaction pursuant to the covenant described under "Limitation on Liens"
above without equally and ratably securing the Senior Notes pursuant to
such covenant;
(b) since the date of the original issuance of the Senior Notes and
within a period commencing six months prior to the effective date of such
Sale/Leaseback Transaction and ending six months thereafter, FCX has
expended or will expend for any property (including amounts expended for
the acquisition, and for additions, alterations, improvements and repairs
thereto) an amount equal to all or a portion of the net proceeds received
from such transaction and elects to designate such amount as a credit
against the
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application of the restrictions set forth hereunder and under "Limitation
on Liens" to such transaction (with any such amount not being so designated
to be applied as set forth in (c) below); or
(c) FCX, during or immediately after the expiration of the 12 months
after the effective date of any such Sale/Leaseback Transaction, applies to
the voluntary defeasance or retirement of the Senior Notes or any of FCX's
other Senior Secured Indebtedness an amount equal to the greater of the net
proceeds of the sale or transfer of the property leased in such transaction
or the Attributable Debt as determined by FCX in an officer's certificate
delivered to the Trustee at the time of entering into such transaction (in
either case adjusted to reflect the remaining term of the lease and any
amount utilized by FCX as set forth in (b) above), less an amount equal to
the principal amount of the Senior Notes delivered within 12 months after
the date of such arrangement to the Trustee for retirement and cancellation
and excluding retirements of Senior Notes and any Senior Secured
Indebtedness as a result of conversions or pursuant to mandatory sinking
fund or mandatory prepayment provisions or by payment at maturity.
Limitations on Mergers, Consolidations and Sale of Assets. The Indenture will
provide that FCX will not consolidate with or merge into any Person, or sell,
lease, convey, transfer or otherwise dispose of all or substantially all of its
assets to any Person, and FCX will not permit any Person to consolidate or
merge into FCX or sell, lease, convey, transfer or otherwise dispose of all or
substantially all of its assets to FCX unless: (i) the Person formed by or
surviving such consolidation or merger (if other than FCX), or to which such
sale, lease, conveyance, transfer or other disposition shall be made
(collectively, the "Successor"), is a corporation organized and existing under
the laws of the United States or any State thereof or the District of Columbia
and the Successor assumes by supplemental indenture in a form satisfactory to
the Trustee all of the obligations of FCX under the Indenture and the Senior
Notes and the due and punctual performance of every covenant in the Indenture
on the part of FCX to be performed or observed; (ii) immediately after giving
effect to such transaction and treating any Debt that becomes an obligation of
FCX or any Subsidiary of FCX as a result thereof as having been incurred by FCX
or such Subsidiary at the time of such transaction, no Default or Event of
Default shall have occurred and be continuing; (iii) if, as a result of such
transaction, property or assets of FCX or Capital Stock of PT-FI or a
Restricted PT-FI Transferee would become subject to a Lien prohibited by the
provisions described under "Certain Covenants--Limitation on Liens," FCX or the
Successor shall have secured the Senior Notes as required by that covenant; and
(iv) FCX shall each have delivered to the Trustee an Officer's Certificate and
Opinion of Counsel, each stating that such merger, consolidation, sale, lease,
conveyance, transfer or other disposition and such Supplemental Indenture, if
any, complies with the Indenture.
CERTAIN DEFINITIONS
The following is a summary of certain defined terms to be used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms and for the definitions of other capitalized terms used herein and
not defined below.
"Attributable Debt," when used in connection with a Sale/Leaseback
Transaction means, at the time of determination, the lesser of: (a) the fair
value of the property subject thereto (as determined in good faith by FCX); or
(b) the then present value of the total net amount of rent required to be paid
under the lease in respect of such Sale/Leaseback Transaction during the
remaining term thereof (including any renewal term or period for which such
lease has been extended) or until the earlier date on which the lessee may
terminate such lease upon payment of a penalty or a lump-sum termination
payment (in which case the total net rent shall include such penalty or
termination payment), computed by discounting from the respective due dates to
such dates such total net amount of rent at the actual interest factor included
in such rent or implicit in the terms of the applicable Sale/Leaseback
Transaction, as determined in good faith by FCX. For purposes of the foregoing
definition, rent shall not include amounts required to be paid by the lessee,
whether or not designated as rent or additional rent, on account of or
contingent upon maintenance and repair, insurance, taxes, assessments, water
rates and similar charges.
"Capital Stock" means any and all shares, interests, rights to purchase,
options, participations or other equivalents of or interests in (however
designated) corporate stock or any security issued in exchange therefore or
distributed in respect thereof.
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"Capitalized Lease Obligation" of any Person means any obligation that is
required to be classified and accounted for as a capital lease on a balance
sheet of such Person in accordance with generally accepted accounting
principles.
"Consolidated Total Assets" means at any date the consolidated assets of the
Company and its consolidated Subsidiaries, including all investments by the
Company or its consolidated Subsidiaries in other Persons, all as reflected in
the most recent consolidated balance sheet of the Company and its consolidated
Subsidiaries.
"Debt" means (without duplication), with respect to any Person, (i) all
obligations of such Person for borrowed money (whether or not the recourse of
the lender is to the whole of the assets of such Person or only to a portion
thereof), (ii) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (iii) all obligations of such Person to
pay the deferred and unpaid purchase price of property or services (including
conditional sale obligations and title retention arrangements), except
accounts payable and accrued expenses incurred in the ordinary course of
business, (iv) all Capitalized Lease Obligations of such Person, (v) all
obligations of such Person for the reimbursement of any obligor on any letter
of credit, banker's acceptance or similar credit transaction securing
obligations described in the foregoing clauses (i) through (iv); (vi) any
obligations of such Person with respect to the redemption, repayment or other
purchase of any preferred stock (but excluding any obligation due within the
following six months, the payment of which is secured by a deposit of cash or
U.S. government obligations), (vii) all Debt of others secured by a Lien on
any asset of such Person, whether or not such Debt is assumed by such Person,
and (viii) all Debt of others guaranteed by such Person to the extent of such
guarantee.
"Lien" means, with respect to any property or assets, any mortgage or deed
of trust, pledge, charge, security interest, assignment, encumbrance,
conditional sale or other title retention agreement; provided, however, that
Lien shall not include a trust established for the purpose of defeasing any
Debt pursuant to the terms evidencing or providing for the issuance of such
Debt if the assets of such trust are limited to cash and U.S. government
securities.
"Non-Recourse Obligation" means, at any date, Debt substantially related to
(i) the acquisition of property or assets not owned by FCX or any of its
Subsidiaries as of the date of original issuance of the Senior Notes or (ii)
the financing of a project involving the acquisition or development of any
property or assets of FCX or any of its Subsidiaries, as to which in the case
of clause (i) or (ii) the obligee with respect to such Debt has no recourse to
the general corporate funds or the property or assets, in general, of FCX.
"Sale/Leaseback Transaction" means any arrangement with any Person providing
for the leasing by FCX, for a period of more than three years of any property
or assets, which property or assets have been or are to be sold or transferred
by FCX to such Person in contemplation of such leasing.
"Significant Subsidiary" means any Subsidiary of FCX which constitutes at
least 20% of FCX's Consolidated Total Assets.
"Senior Secured Indebtedness" means Debt of FCX secured by a Lien on any
property or assets of FCX. See "Capitalization."
"Subsidiary" of a Person means any corporation, association, partnership or
other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other interests (including partnership interests)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such Person or any of its Subsidiaries,
and any partnership of which more than 50% of the partnership interests are
owned, directly or indirectly, by such Person or any of its Subsidiaries.
EVENTS OF DEFAULT
An Event of Default will be defined in the Indenture as being: (i) default
by FCX for 30 days in payment of any interest on the Senior Notes; (ii)
default by FCX in any payment of principal of the Senior Notes at
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their respective Stated Maturities, upon redemption or otherwise; (iii) failure
by FCX to repay principal and any accrued interest on any 2026 Note upon
exercise by its holder of the option described under "Repayment at Option of
Holder"); (iv) failure by FCX to comply with the covenant described under
"Certain Covenants--Limitations on Mergers, Consolidations and Sale of
Assets,"; (v) default by FCX in compliance with any of its other covenants or
agreements in, or provisions of, the Senior Notes or the Indenture which shall
not have been remedied within 60 days after written notice by the Trustee or by
the holders of at least 25% in principal amount of any series of the Senior
Notes then outstanding; (vi) the acceleration of the maturity or non-payment
within any applicable grace period after final maturity of any Debt (other than
the Senior Notes or any Non-Recourse Obligation) of FCX or any Significant
Subsidiary having an outstanding principal amount of $40 million or more
individually or in the aggregate if, in the case of an acceleration, such
acceleration has not been rescinded or annulled within 30 days; (vii) one or
more judgments or orders for the payment of money in excess of $40 million (net
of applicable insurance coverage) in the aggregate having been rendered against
FCX or any Significant Subsidiary and such judgment or order shall continue
unsatisfied and unstayed for a period of 60 days; or (viii) certain events
involving bankruptcy, insolvency or reorganization of FCX or any Significant
Subsidiary. The Indenture will provide that the Trustee may withhold notice to
the holders of the Senior Notes of any default (except in payment of principal
of or interest on the Senior Notes) if the Trustee considers it in the interest
of the holders of the Senior Notes to do so.
The Indenture will provide that if an Event of Default occurs and is
continuing with respect to the Indenture, the Trustee or the holders of not
less than 25% in principal amount of the Senior Notes of either series then
outstanding may declare the principal of and accrued but unpaid interest on all
the Senior Notes of such series to be due and payable. Upon such a declaration,
such principal and interest will be due and payable immediately. If an Event of
Default relating to certain events of bankruptcy, insolvency or reorganization
of FCX or any Significant Subsidiary occurs and is continuing, the principal of
and interest on all the Senior Notes will become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
holders of the Senior Notes. The amount due and payable on the acceleration of
any Senior Note will be equal to 100% of the principal amount of such Senior
Note, plus accrued interest to the date of payment. Under certain
circumstances, the holders of a majority in principal amount of the outstanding
Senior Notes may rescind any such acceleration with respect to the Senior Notes
and its consequences.
The Indenture will provide that no holder of a Senior Note may pursue any
remedy under the Indenture unless (i) the Trustee shall have received written
notice of a continuing Event of Default, (ii) the Trustee shall have received a
request from holders of at least 25% in principal amount of the Senior Notes of
either series to pursue such remedy, (iii) the Trustee shall have been offered
indemnity reasonably satisfactory to it, (iv) the Trustee shall have failed to
act for a period of 60 days after receipt of such notice and offer of indemnity
and (v) the Trustee shall not have received directions inconsistent with such
request by the holders of a majority in principal amount of the outstanding
Senior Notes of the affected series; however, such provision does not affect
the right of a holder of a Senior Note to sue for enforcement of any overdue
payment thereon.
The holders of a majority in principal amount of the Senior Notes of either
series then outstanding will have the right to direct the time, method and
place of conducting any proceeding for exercising any remedy available to the
Trustee under the Indenture, subject to certain limitations specified in the
Indenture. The Indenture will require the annual filing by the Company with the
Trustee of a written statement regarding compliance with the covenants
contained in the Indenture.
MODIFICATION AND WAIVER
The Indenture will provide that modifications and amendments to the Indenture
or the Senior Notes may be made by FCX and the Trustee with the consent of the
holders of a majority in principal amount of the Senior Notes of the series to
be affected then outstanding (voting separately as one or more classes);
provided that no such modification or amendment may, without the consent of the
holder of each Senior Note then outstanding affected thereby, (i) change the
Stated Maturity of the principal of, or any installment
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of interest on, any Senior Note, alter the principal amount of a Senior Note or
the rate or method of computation, or extend the time of payment of, interest
thereon, change the place of payment where or the coin or currency in which
amounts due on the Senior Notes are payable, reduce or alter the method of
computation of any amount payable on redemption thereof (or the time at which
any such redemption may be made); (ii) make any reduction in the principal
amount of Senior Notes of such series whose holders must consent to an
amendment or any waiver under the Indenture or modify the Indenture provisions
relating to such amendments or waivers; or (iii) impair or affect the right to
institute suit for the enforcement of any payment with respect to the Senior
Notes
Without the consent of any holder of Senior Notes, FCX and the Trustee may
amend the Indenture to (i) secure the Senior Notes, (ii) cure any ambiguity,
defect or inconsistency, provided that no such amendment will materially and
adversely affect the interests of the holders of the Senior Notes; (iii)
provide for the assumption by a successor to FCX of the obligations of FCX
under the Indenture, (iv) provide for uncertificated Senior Notes in addition
to certificated Senior Notes, so long as such uncertificated Senior Notes are
in registered form for United States federal income tax purposes, (v) make any
change which FCX may deem necessary or desirable that does not adversely affect
the interests of the holders of Senior Notes, (vi) make any change to comply
with any requirement of the Securities and Exchange Commission in connection
with the qualification of the Indenture under the Trust Indenture Act of 1939,
as amended, (vii) add covenants or obligations of FCX or Events of Default
under the Indenture for the protection of holders of the Senior Notes or
surrender any right, power or option conferred by the Indenture on FCX.
The Indenture will provide that the holders of a majority in aggregate
principal amount of the Senior Notes of either series then outstanding may
waive any past default under the Indenture with respect to the Senior Notes of
such series, except a default in the payment of principal or interest.
SATISFACTION, DISCHARGE AND DEFEASANCE OF INDEBTEDNESS
FCX may satisfy and discharge its obligations under the Indenture by
delivering to the Trustee for cancellation all outstanding Senior Notes or by
depositing with the Trustee, after the Senior Notes have become due and
payable, cash sufficient to pay at the Stated Maturity all of the outstanding
Senior Notes and paying all other sums payable under the Indenture by FCX.
Under terms satisfactory to the Trustee, FCX may discharge substantially all
of its obligations under the Indenture to holders of Senior Notes which by
their terms are due and payable within one year (or are scheduled for
redemption within one year) by irrevocably depositing with the Trustee in trust
for the benefit of the holders (i) money in an amount or (ii) U.S. Government
Obligations which through the payment of interest and principal will provide,
not later than one day before the due date of payments in respect of the Senior
Notes, money in an amount, or (iii) a combination thereof, sufficient to pay or
discharge the principal of and interest on, the Senior Notes then outstanding
at and through the maturity or redemption date.
Under terms satisfactory to the Trustee, FCX may also discharge substantially
all of its obligations under the Indenture ("defeasance"). FCX may instead be
released from the obligations imposed by certain provisions of the Indenture
("Defeasable Events"), including the covenants described above limiting liens,
Sale/Leaseback Transactions, consolidations, mergers, and omit to comply with
such provisions without creating an Event of Default ("covenant defeasance").
Defeasance or covenant defeasance may be effected only if, among other things,
FCX irrevocably deposits with the Trustee in trust for the benefit of the
holders, (i) money in an amount or (ii) United States Government Obligations
which through the payment of interest and principal will provide, not later
than one day before the due date of principal of and each installment of
interest in respect of the Senior Notes, money in an amount, or (iii) a
combination thereof, sufficient to pay and discharge the principal of and
interest on the Senior Notes then outstanding at maturity or at the earliest
date at which FCX may redeem such Senior Notes if FCX has made adequate
arrangements with the Trustee to redeem such Senior Notes at such time. Such a
trust may only be established if FCX has delivered to the Trustee an Opinion of
Counsel acceptable to the Trustee (who may be counsel to FCX) to the effect
that the defeasance and discharge will not be deemed, or result in, a taxable
event, with respect to
S-26
<PAGE>
holders of the Senior Notes and that the creation of the trust will not violate
the Investment Company Act of 1940. The Indenture will not be discharged if,
among other things, an Event of Default (other than a Defeasable Event), or an
event which with notice or lapse of time would have become such an Event of
Default, shall have occurred and be continuing on the date of such deposit or
during the period ending on the 91st day after such date. In the event of any
such defeasance and discharge, the holders of the Senior Notes will thereafter
be able to look only to such trust fund for payment of principal and interest
on the Senior Notes.
GOVERNING LAW
The Indenture and the Senior Notes will be governed by and construed in
accordance with the laws of the State of New York, and for all purposes shall
be construed in accordance with the laws of said State.
THE TRUSTEE
The Chase Manhattan Bank will initially be the trustee (the "Trustee") under
the Indenture. The Company has also appointed the Trustee as the initial
Registrar and as initial Paying Agent under the Indenture. The Indenture and
provisions of the Trust Indenture Act incorporated by reference therein contain
limitations on the right of the Trustee, should it become a creditor of FCX to
obtain payment of claims in certain cases or to realize on certain property
received by it in respect of any such claim as security or otherwise. The
Trustee does banking business on a regular basis with FCX, is one of the
lenders and is the co-agent for the lenders under the FCX Bank Credit Facility
and PT-FI Bank Credit Facility and is the trustee under the Indenture related
to the 9 3/4% Senior Notes due 2001 guaranteed by the Company and the indenture
related to the Company's subordinated Debt securities. Chase Securities Inc.,
an affiliate of the Trustee, is an underwriter of the offering of the Senior
Notes. See "Underwriting."
BOOK-ENTRY, DELIVERY AND FORM
The Senior Notes will be issued in the form of one or more Registered Global
Securities that will be deposited with, or on behalf of, The Depository Trust
Company, New York, New York ("DTC"). Unless and until it is exchanged in whole
or in part for Securities in definitive form, a Registered Global Security may
not be transferred except as a whole to a nominee of DTC for such Registered
Global Security, or by a nominee of DTC to DTC or another nominee of DTC, or by
DTC or any such nominee to a successor Depository or a nominee of such
successor Depository. Initially, the Senior Notes will be registered in the
name of Cede & Co., the nominee of DTC.
Ownership of beneficial interests in a Registered Global Security will be
limited to persons who have accounts with DTC or its nominee ("participants")
or persons who hold interests through participants. Ownership of beneficial
interests in the Registered Global Security will be shown on, and the transfer
of these ownership interests will be effected only through, records maintained
by DTC or its nominee (with respect to interests of participants) and the
records of participants (with respect to interests of persons held by such
participants on their behalf).
So long as DTC, or its nominee, is the registered owner or holder of a
Registered Global Security, DTC or such nominee, as the case may be, will be
considered the sole owner or holder of the Senior Notes represented by such
Registered Global Security for all purposes under the Indenture and the Senior
Notes. In addition, no beneficial owner of an interest in a Registered Global
Security will be able to transfer that interest except in accordance with the
applicable procedures of DTC.
Payments on a Registered Global Security will be made to DTC or its nominee,
as the registered owner thereof. None of FCX, the Trustee or any paying agent
will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in a
Registered Global Security or for maintaining, supervising or reviewing any
records related to such beneficial ownership interests.
S-27
<PAGE>
FCX has been advised by DTC that upon receipt of any payment in respect of a
Registered Global Security representing any Senior Notes held by it or its
nominee, DTC will immediately credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Registered Global Security for such Senior Notes as shown on the
records of DTC or its nominee. FCX also expects that payments by participants
will be governed by standing instructions and customary practices, as is now
the case with securities held for the accounts of customers registered in the
names of nominees for such customers. Such payment will be the responsibility
of such participants. None of the Company, the Trustee or any agent of the
Company, or the Trustee shall have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
interests in a Registered Global Security, or for maintaining, supervising or
reviewing any records relating to such beneficial interests.
Transfers between participants in DTC will be effected in the ordinary way in
accordance with DTC rules. The laws of some states require that certain Persons
take physical delivery of securities in definitive form. Consequently, the
ability to transfer beneficial interests in a Registered Global Security to
such Persons may be limited. Because DTC can only act on behalf of
participants, who in turn act on behalf of indirect participants (as defined
below) and certain banks, the ability of a Person having a beneficial interest
in a Registered Global Security to pledge such interest to Persons that do no
participate in the DTC system, or otherwise take actions in respect of such
interest, may be affected by the lack of a physical certificate of such
interest.
DTC has advised the Company as follows: DTC is a limited-purpose trust
company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code and a "clearing agency" registered pursuant to the provisions
of Section 17A of the Exchange Act. DTC holds securities that its participants
deposit with DTC and facilitates the settlement among participants of
securities transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
Direct participants include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. Access to the
DTC system is also available to others such as securities brokers and dealers,
banks and trust companies that clear through or maintain a custodial
relationship with a direct participant, either directly or indirectly
("indirect participants"). The rules applicable to DTC and its participants are
on file with the Commission.
Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in a Registered Global Security among
participants of DTC, it is under no obligation to perform or continue to
perform such procedures, and such procedures may be discontinued at any time.
None of FCX or the Trustee will have any responsibility for the performance by
DTC or the participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
So long as the 2026 Notes are represented by a Registered Global Security,
DTC or DTC's nominee will be the only entity that can exercise a right to
repayment pursuant to the holder's option to elect repayment of its 2026 Notes.
Notice by participants or by owners of beneficial interests in a Registered
Global Security held through such participants of the exercise of the option to
elect repayment of beneficial interests in 2026 Notes represented by a
Registered Global Security must be transmitted to DTC in accordance with its
procedures on a form required by DTC and provided to its participants. In order
to ensure that DTC or DTC's nominee will timely exercise the right to repayment
with respect to a particular 2026 Note, the beneficial owner of such 2026 Note
must instruct the broker or other participant through which it holds an
interest in such 2026 Note to notify DTC of its desire to exercise a right to
repayment. Different firms have different cut-off times for accepting
instructions from their customers and, accordingly, each beneficial owner
should consult the broker or other participant through which it holds an
interest in a 2026 Note in
S-28
<PAGE>
order to ascertain the cut-off time by which such an instruction must be given
in order for timely notice to be delivered to DTC. The Company will repay only
that principal amount of and accrued interest on 2026 Notes for which it has
received timely notice from DTC, and will not be liable for any delay in
delivery of such notice to DTC.
Senior Notes represented by a Registered Global Security will be exchangeable
for Senior Notes in definitive form of like tenor as such Registered Global
Security in denominations of $1,000 and in any greater amount that is an
integral multiple if DTC notifies FCX that it is unwilling or unable to
continue as Depository for such Registered Global Security or if at any time
DTC ceases to be a clearing agency registered under applicable law and a
successor depositary is not appointed by FCX within 90 days or FCX in its
discretion at any time determines not to require all of the Senior Notes to be
represented by a Registered Global Security and notifies the Trustee thereof.
Any Senior Notes that are exchangeable pursuant to the preceding sentence are
exchangeable for Senior Notes issuable in authorized denominations and
registered in such names as DTC shall direct. Subject to the foregoing, a
Registered Global Security is not exchangeable, except for a Registered Global
Security or Registered Global Securities of the same aggregate denominations to
be registered in the name of DTC or its nominee.
Neither FCX nor the Trustee will be liable for any delay by the related
Global Registered Security Holder or DTC in identifying the beneficial owners
of the related Senior Notes, and each such Person may conclusively rely on, and
will be protected in relying on, instructions from such Global Registered
Security Holder or of DTC for all purposes (including with respect to the
registration and delivery, and the respective principal amounts, of the Senior
Notes to be issued).
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Senior Notes will be made by the Underwriters in
immediately available funds. So long as the Senior Notes are represented by
Registered Global Securities, all payments of principal and interest will be
made by the Company in immediately available funds.
Secondary trading in notes and debentures of corporate issuers is generally
settled in clearinghouse or next-day funds. In contrast, so long as the Senior
Notes are represented by Registered Global Securities registered in the name of
DTC or its nominee, the Senior Notes will trade in DTC's Same-Day Funds
Settlement System, and secondary market trading activity in the Senior Notes
will therefore be required by DTC to settle in immediately available funds. No
assurance can be given as to the effect, if any, of settlement in immediately
available funds on trading activity in the Senior Notes.
S-29
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") among FCX and UBS Securities LLC, Chase
Securities Inc. and CS First Boston Corporation (collectively, the
"Underwriters"), FCX has agreed to sell to the Underwriters, and the
Underwriters have agreed, severally and not jointly, to purchase from FCX, the
respective principal amount of Senior Notes set forth below opposite their
respective names.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
-------------------------
UNDERWRITERS 2006 NOTES 2026 NOTES
------------ ------------ ------------
<S> <C> <C>
UBS Securities LLC............................. $ 66,666,668 $ 83,333,334
Chase Securities Inc........................... 66,666,666 83,333,333
CS First Boston Corporation.................... 66,666,666 83,333,333
------------ ------------
Total........................................ $200,000,000 $250,000,000
============ ============
</TABLE>
The Underwriters propose to offer each series of the Senior Notes in part
directly to the public at the respective initial public offering price set
forth on the cover page of this Prospectus Supplement and in part to certain
securities dealers at such prices less a concession not to exceed 0.40% of the
principal amount of the 2006 Notes and not to exceed 0.35% of the principal
amount of the 2026 Notes. The Underwriters may allow, and such dealers may
reallow, a concession not to exceed 0.25% of the principal amount of the 2006
Notes, not to exceed 0.20% of the principal amount of the 2026 Notes to certain
brokers and dealers. After the Senior Notes are released for sale to the
public, the offering prices and other selling terms may from time to time be
varied by the Underwriters.
The Underwriting Agreement provides that the obligation of the Underwriters
to pay for and accept delivery of the Senior Notes is subject to certain
conditions, including delivery of certain legal opinions by counsel for the
Underwriters.
The Underwriting Agreement provides that FCX will indemnify the Underwriters
against certain liabilities under the Securities Act and will contribute to
payments the Underwriters may be required to make in respect thereof.
The Senior Notes will be new issues of securities for which there is
currently no market. Although the Underwriters have informed FCX that they
currently intend to make a market in the Senior Notes they are not obligated to
do so, and any such market making may be discontinued at any time without
notice. Accordingly, there can be no assurance as to the development or
liquidity of any market for the Senior Notes.
In the ordinary course of their respective businesses, each of the
Underwriters, or affiliates thereof, have from time to time provided, and may
in the future provide, investment banking and/or commercial banking services to
FCX in connection with various transactions and proposed transactions.
The Chase Manhattan Bank ("Chase"), a wholly owned subsidiary of The Chase
Manhattan Corporation and an affiliate of Chase Securities Inc., one of the
Underwriters, is the agent and a lender under the Credit Facilities and the
Trustee under the Indenture for the Senior Notes. It is expected that debt
outstanding under the Credit Facilities will be repaid from the net proceeds of
the issuance of the Senior Notes offered and that Chase will receive its
proportionate share of such repayment. See "Use of Proceeds." More than 10% of
the net proceeds from the offering of the Senior Notes is expected to be used
to repay amounts outstanding under the Credit Facilities. In addition, Mr.
William B. Harrison, Jr., Vice Chairman of The Chase Manhattan Corporation, is
a member of the Board of Directors of the Company. Accordingly, the offerings
are being made in accordance with Section 2710(c)(8) of Article III of the
Conduct Rules of the National Association of Securities Dealers, Inc. Chase
Securities Inc. is participating in the offerings on the same terms as the
other Underwriters and will not receive any benefit in connection with the
offerings other than customary management, underwriting and selling fees.
S-30
<PAGE>
LEGAL MATTERS
The validity of the Senior Notes will be passed upon for the Company by
Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P. The validity of
the Senior Notes will be passed upon for the Underwriters by Sullivan &
Cromwell.
S-31
<PAGE>
PROSPECTUS
$750,000,000
FREEPORT-MCMORAN COPPER & GOLD INC.
DEBT SECURITIES
GUARANTEES
PREFERRED STOCK
WARRANTS
FCX FINANCE COMPANY B.V.
GUARANTEED DEBT SECURITIES
---------------
Freeport-McMoRan Copper & Gold Inc. (the "Company" or "FCX") may offer and
issue from time to time, together or separately, in one or more series (i)
Debt Securities, which may be either senior debt securities ("Senior
Securities"), senior subordinated debt securities ("Senior Subordinated
Securities") or subordinated debt securities ("Subordinated Securities"),
consisting of debentures, notes, bonds and/or other unsecured evidences of
indebtedness, (ii) unconditional and irrevocable guarantees ("Guarantees") of
Debt Securities issued by FCX Finance Company B.V. ("FCX Finance"), a wholly-
owned subsidiary of FCX, (iii) shares of the Company's Preferred Stock, par
value $0.10 per share ("Preferred Stock"), and (iv) Warrants ("Warrants") to
purchase Debt Securities or Preferred Stock. FCX Finance may offer and issue
from time to time Senior Securities, Senior Subordinated Securities and
Subordinated Securities guaranteed, in each case, as to principal, interest,
premium, if any, and additional amounts, if any, by FCX, consisting of
debentures, notes, bonds and/or other unsecured evidences of indebtedness in
one or more series (the "Guaranteed Debt Securities" and together with the
Debt Securities that may be issued by FCX, the "Debt Securities"). The
foregoing securities are collectively referred to as the "Securities." The
Securities will be offered at an aggregate initial offering price not to
exceed U.S. $750,000,000 (or its equivalent (based on the applicable exchange
rate at the time of sale) in one or more foreign currencies, currency units or
composite currencies as shall be designated by FCX or FCX Finance, as the case
may be) at prices and on terms to be determined at the time of sale.
The accompanying Prospectus Supplement sets forth with regard to the
particular Securities in respect of which this Prospectus is being delivered:
(i) in the case of Debt Securities, the title, aggregate principal amount,
denominations (which may be in United States dollars or in any other currency,
currencies or currency unit, including the European Currency Unit), maturity,
interest rate, if any (which may be fixed or variable), or method of
calculation thereof, and time of payment of any interest, premium and
additional amounts, if any, any terms for redemption at the option of the
Company (or, in the case of Guaranteed Debt Securities issued by FCX Finance,
at the option of FCX Finance) or the holder, any terms for sinking fund
payments, any conversion or exchange rights, any listing on a securities
exchange and the initial public offering price and any other terms in
connection with the offering and sale of such Debt Securities; (ii) in the
case of Preferred Stock, the designation, stated value and liquidation
preference per share, initial public offering price, dividend rate (or method
of calculation), dates on which dividends shall be payable and dates from
which dividends shall accrue, any redemption or sinking fund provisions,
conversion or exchange rights, whether the Company has elected to offer the
Preferred Stock in the form of depositary shares, any listing of the Preferred
Stock on a securities exchange and any other terms in connection with the
offering and sale of such Preferred Stock; and (iii) in the case of Warrants,
the number and terms thereof, the designation and the number of Securities
issuable upon their exercise, the exercise price, any listing of the Warrants
or the underlying Securities on a securities exchange and any other terms in
connection with the offering, sale and exercise of the Warrants. The
Prospectus Supplement will also contain information, as applicable, about
certain United States federal income tax considerations relating to the
Securities in respect of which this Prospectus is being delivered.
The Senior Securities of FCX and FCX Finance will rank equally with all
other unsubordinated and unsecured indebtedness of the Company. The Senior
Subordinated Securities of FCX and FCX Finance will be subordinated to all
existing and future Senior Indebtedness (as defined) of the Company, and
senior to all existing and future Subordinated Indebtedness (as defined) of
the Company. The Subordinated Securities of FCX and FCX Finance will be
subordinated to all existing and future Senior Indebtedness and Senior
Subordinated Indebtedness of the Company. All or a portion of any Debt
Securities may be issued in permanent global form.
FCX and FCX Finance may sell Securities to or through one or more
underwriters, dealers or agents or to other purchasers. The accompanying
Prospectus Supplement sets forth the names of any underwriters, dealers or
agents involved in the sale of the Securities in respect of which this
Prospectus is being delivered, the principal amounts, if any, to be purchased
by any underwriters, dealers or sold through any agents and the compensation,
if any, of such underwriters or agents. See "Plan of Distribution."
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
PROSPECTIVE PURCHASERS OF SECURITIES SHOULD CAREFULLY CONSIDER THE MATTERS
SET FORTH UNDER THE CAPTION "RISK FACTORS" BEGINNING ON PAGE 5.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
May 24, 1996
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR IN THE PROSPECTUS SUPPLEMENT, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY FCX, FCX FINANCE OR ANY UNDERWRITER, AGENT OR DEALER. THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN
THE SECURITIES TO WHICH THEY RELATE OR AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER TO OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR THE
ACCOMPANYING PROSPECTUS SUPPLEMENT, NOR ANY SALE MADE THEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE THE IMPLICATION THAT THE INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE HEREIN OR THEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THEIR RESPECTIVE DATES.
IN CONNECTION WITH THE OFFERING OF CERTAIN SECURITIES, THE UNDERWRITERS MAY
OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES
OF SUCH OFFERED SECURITIES OR OTHER SECURITIES OF FCX OR FCX FINANCE AT LEVELS
ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed with the Commission by the Company can
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C., 20549, and at the regional offices of the Commission located at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois, 60661 and at
Seven World Trade Center, 13th Floor, New York, New York, 10048. Copies of such
material can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C., 20549, at prescribed rates. Such
reports, proxy statements and other information concerning the Company can also
be inspected at the offices of the New York Stock Exchange ("NYSE") at 20 Broad
Street, New York, New York, 10005.
FCX Finance is a wholly-owned subsidiary of the Company. It currently is not
independently subject to the information requirements of the Exchange Act. FCX
Finance has applied for a conditional exemption pursuant to Section 12(h) of
the Exchange Act from the informational requirements of the Exchange Act and
anticipates that no independent reports concerning FCX Finance will be sent to
holders of Guaranteed Debt Securities issued by FCX Finance.
The Company and FCX Finance have filed a joint registration statement on Form
S-3 (herein, together with all amendments and exhibits referred to as the
"Registration Statement") with the Commission under the Securities Act of 1933,
as amended (the "Securities Act"), pertaining to the Securities covered by this
Prospectus. This Prospectus, filed as a part of the Registration Statement,
does not contain all the information set forth in the Registration Statement or
the exhibits and schedules thereto, certain parts of which are omitted in
accordance with the rules and regulations of the Commission, and to which
reference is hereby made. Statements made in this Prospectus as to the contents
of any contract, agreement or other document filed as an exhibit to the
Registration Statement are summaries of the terms of such contracts, agreements
or documents. Reference is made to each such exhibit for a more complete
description of the matters involved, and such statements shall be deemed
qualified in their entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's (i) Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 (File No 1-9916) and (ii) Quarterly Report on Form 10-Q for
the quarter ended March 31, 1996, which have been filed by the Company with the
Commission pursuant to the Exchange Act, are by this reference incorporated in
and made a part of this Prospectus.
All reports and other documents subsequently filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering of the Securities shall
be deemed to be incorporated by reference herein and to be part of this
Prospectus from their respective dates of filing. Any statement contained in a
document incorporated or deemed to be
2
<PAGE>
incorporated by reference herein shall be deemed to be modified or superseded
to the extent that a statement contained herein or in any other document
subsequently filed which also is or is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom this Prospectus is delivered, upon a written or oral request, a copy of
any or all of the documents that are incorporated herein by reference (other
than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such documents). Requests should be directed to
Freeport-McMoRan Copper & Gold Inc., Attention: Secretary, 1615 Poydras Street,
New Orleans, Louisiana, 70112 (Telephone: (504) 582-4000).
ENFORCEMENT OF CIVIL LIABILITIES
FCX Finance is a private company with limited liability incorporated in The
Kingdom of the Netherlands. Substantially all of its assets are located outside
the United States. FCX Finance has been advised by its legal counsel in the
Netherlands, Wouters Advocaten, that there is no treaty between the United
States and the Netherlands for the mutual recognition and enforcement of
judgments (other than arbitration awards) in civil and commercial matters.
Therefore, final judgments for the payment of money rendered by any federal or
state court in the United States based on civil liability, whether or not
predicated solely upon the federal securities laws, would not be directly
enforceable in the Netherlands. In order to enforce in the Netherlands any
United States judgment obtained against FCX Finance, proceedings must be
initiated before a court of competent jurisdiction in the Netherlands. A
Netherlands court will, under current practice, normally issue a judgment based
upon the judgment rendered by the United States court if it finds that (i) the
United States court had jurisdiction over the original proceedings, (ii) the
judgment was obtained in compliance with principles of due process, (iii) the
judgment is final and conclusive such that all appeals have been exhausted and
(iv) the judgment does not contravene the public policy or public order of the
Netherlands. Based on the foregoing, there can be no assurance that the United
States investors will be able to enforce against FCX Finance, certain members
of the Board of Directors of FCX Finance or certain experts named herein who
are residents of the Netherlands or countries other than the United States any
judgment in civil and commercial matters, including judgments under the federal
securities laws. FCX Finance has been advised by such counsel that, under
certain circumstances, a Netherlands court might impose civil liability on FCX
Finance or on members of the Board of Directors of FCX Finance in an original
action predicated solely upon the federal securities laws of the United States
brought in a court of competent jurisdiction in the Netherlands against the
Issuer or such members.
FCX, the guarantor of any Guaranteed Debt Securities, is a Delaware
corporation with its principal executive offices in the United States.
Accordingly, process may be served and judgments enforced against FCX in the
United States, including judgments predicated upon the civil liabilities
provisions of the federal securities laws of the United States.
3
<PAGE>
THE COMPANY
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 credits for
related gold and silver production.
FCX's principal operating subsidiary is P.T. Freeport Indonesia Company, a
limited liability company organized under the laws of the Republic of Indonesia
and domesticated in Delaware ("PT-FI"). PT-FI engages in the exploration for
and development, mining and processing of copper, gold and silver in Irian
Jaya, Indonesia pursuant to an agreement (a "COW" or "Contract of Work") with
the Government of the Republic of Indonesia (the "Indonesian Government") and
in the worldwide marketing of concentrates containing such metals. PT-FI's
largest mine, Grasberg, was discovered 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. Eastern Mining was formed in 1994 for the
purpose of acquiring, holding and developing the Eastern Mining COW.
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.
The Company's principal executive offices are located at 1615 Poydras Street,
New Orleans, Louisiana, 70112 and its telephone number is (504) 582-4000.
FCX FINANCE
FCX Finance Company B.V. ("FCX Finance") is a wholly-owned subsidiary of FCX
organized as a private company with limited liability under the laws of the
Netherlands on March 4, 1996. FCX Finance was established for the purpose of
issuing the Guaranteed Debt Securities and other debt securities guaranteed by
FCX and lending the net proceeds thereof to FCX and its other subsidiaries. FCX
Finance will be restricted from issuing any capital stock to any person other
than FCX and its wholly-owned subsidiaries. FCX Finance will not lease or own
any material facilities or other property or engage in any other material
operations. FCX Finance's principal office is c/o ABN AMRO Trust Company
(Nederland) B.V. Coolsingel 139,3000 DG, Rotterdam, The Netherlands, and its
telephone number of 011-31-10-402-4323.
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RISK FACTORS
An investment in any Securities involves certain risks. Accordingly,
prospective investors should consider carefully the following factors, in
addition to the other information concerning the Company and its business
contained or incorporated by reference in this Prospectus, and any accompanying
Prospectus Supplement, before purchasing any of the Securities offered hereby.
To the extent any of the information contained in this Prospectus and any
accompanying Prospectus Supplement constitutes a "forward-looking statement" as
defined in Section 27A(i)(1) of the Securities Act, the risk factors set forth
below are meaningful cautionary statements identifying important factors that
could cause actual results to differ materially from those in the forward-
looking statement.
PRICES OF MINERALS
Because FCX's revenues are derived primarily from the sale of concentrates
containing copper and gold, FCX's earnings are directly related to market
prices for copper and gold. Prices for such minerals historically have
fluctuated widely and are affected by numerous factors beyond FCX's control.
LOCATION AND INDUSTRY RISKS
PT-FI's mining operations are located in steeply mountainous terrain in a
very remote area of Indonesia, which makes the conduct of its operations
difficult and has required PT-FI to overcome special engineering difficulties
and develop extensive infrastructure facilities. 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.
POLITICAL FACTORS
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. The Indonesian military occasionally has
exercised its right to appropriate transportation and other equipment of PT-FI.
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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.
Following civil disturbances in the mining town of Tembagapura and the
lowlands town of Timika in early 1996 and as a result of subsequent meetings
with tribal leaders, the Company, in cooperation with the Indonesian
Government, agreed to redistribute and refocus its community development
programs by dedicating 1% of PT-FI's revenues over the next ten years to fund
these efforts and, among other things, to increase the number of local Irianese
in its work force. The Indonesian Government agreed as part of its development
efforts in Irian Jaya to create an integrated development plan calling for the
participation of the local indigenous tribes in creating and developing the
community development projects funded by the Company. While management believes
that its efforts to be responsive to the issues relating to the impact of its
operations on the local indigenous tribes should ensure that mining operations
will not be disrupted, social and political instability in the area may, in the
future, have an adverse impact on PT-FI's mining operations.
RESERVES
FCX reserve amounts, which are determined in accordance with established
mining industry practices and standards, are estimates only. PT-FI's mines in
production or development 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, gold and, to a lesser extent, silver, and
changes in operating and capital costs may render certain ore reserves
uneconomic to develop. No assurance can be given that FCX's exploration
programs will result in the discovery of commercially exploitable mineral
deposits.
ENVIRONMENTAL AND GOVERNMENT REGULATION
The Company's exploration and mining activities in Irian Jaya involve
significant engineering and environmental challenges that relate primarily to
the location of the mine in remote, rugged highlands and the disposition of
tailings through discharge into a river that deposits them in a controlled
deposition area near the sea. The Company has sought to preserve and protect
the environment in its area of operations.
The Company has expended significant resources, both financial and
managerial, to comply with environmental regulations and permitting and
approval requirements and anticipates that it will continue to do so in the
future. There can be no assurance that additional significant costs and
liabilities will not be incurred to comply with such current and future
regulations.
HOLDING COMPANY STRUCTURE
Because FCX is primarily a holding company, conducting business through its
subsidiaries, its ability to meet its obligations under the Debt Securities,
the Guarantees and its other indebtedness and to pay dividends on its Preferred
Stock and Common Stock will depend on the earnings and cash flow of its
subsidiaries and the ability of its subsidiaries to pay dividends and to
advance funds to the Company. Under certain circumstances, contractual and
legal restrictions, as well as the financial condition and operating
requirements of PT-FI and the Company's other subsidiaries, could limit the
Company's ability to obtain cash from its subsidiaries for the purpose of
meeting its debt service obligations, including the payment of principal and
interest on any Debt Securities. Any right of the Company to participate in any
distribution of the assets of PT-FI and its other subsidiaries upon the
liquidation, reorganization or insolvency thereof would, with certain
exceptions, be subject to the claims of creditors (including trade creditors)
and preferred stockholders (if any) of such subsidiaries.
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USE OF PROCEEDS
Unless otherwise set forth in the applicable Prospectus Supplement, the net
proceeds from the sale of the Securities will be used for general corporate
purposes, including the repayment of existing indebtedness, capital
expenditures and additions to working capital. The Company anticipates that it
and its subsidiaries will raise additional funds from time to time through
equity or debt financings, including borrowings under its revolving credit
facilities, to finance their businesses.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges and the
ratio of earnings to fixed charges, preferred stock dividends and minimum
distributions of the Company and its consolidated subsidiaries for the periods
indicated.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------ THREE MONTHS ENDED
1991 1992 1993 1994 1995 MARCH 31, 1996
---- ---- ---- ---- ---- ------------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges. 4.5x 6.5x 3.6x 7.5x 6.0x 3.2x
Ratio of earnings to fixed charges,
preferred stock dividends and
minimum distributions (unaudited). 3.3x 3.5x 1.2x 2.1x 3.0x 1.8x
</TABLE>
For purposes of calculating the ratios, "earnings" consist of income from
continuing operations before income taxes, minority interest and fixed charges
and "fixed charges" consist of interest and that portion of rent which is
deemed representative of interest. For purposes of calculating the ratio of
earnings to fixed charges, preferred stock dividends and minimum distributions,
the preferred stock dividend requirements were assumed to be equal to the
pretax earnings which would be required to cover such dividend requirements.
The amount of such pretax earnings required to cover preferred stock dividends
was computed using tax rates for the applicable year. "Minimum distributions"
for purposes of calculating this ratio consist of required minimum
distributions for the Company's Class A Common Stock that expired May 1, 1993.
DESCRIPTION OF DEBT SECURITIES AND GUARANTEES
Debt Securities may be issued from time to time in one or more series by FCX
or by FCX Finance. In the event that any series of Guaranteed Debt Securities
is issued by FCX Finance, such Guaranteed Debt Securities will be offered
together with unconditional and irrevocable guarantees issued by FCX (the
"Guarantees"). In the following description, references to the Issuer refer to
FCX, in the case of a series of Debt Securities issued by FCX, and to FCX and
FCX Finance, in the case of a series of Debt Securities issued by FCX Finance.
The Debt Securities will constitute either indebtedness designated as Senior
Indebtedness ("Senior Securities"), indebtedness designated as Senior
Subordinated Indebtedness ("Senior Subordinated Securities") or indebtedness
designated as Subordinated Indebtedness ("Subordinated Securities"). The
particular terms of each series of Securities offered by a particular
Prospectus Supplement and, if such Debt Securities are offered by FCX Finance,
the particular terms of the Guarantees offered in connection therewith, will be
described in such Prospectus Supplement or Prospectus Supplements relating to
such series. Senior Securities, Senior Subordinated Securities and Subordinated
Securities will each be issued under separate indentures (individually an
"Indenture" and collectively the "Indentures") to be entered into prior to the
issuance of such Debt Securities, forms of which Indentures are filed as
exhibits to this Registration Statement. The Indentures will be substantially
identical, except for provisions relating to subordination and the Guarantees.
Information regarding the Trustee under an Indenture will be included in any
Prospectus Supplement relating to the Debt Securities issued thereunder. The
following discussion includes a summary description of all
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material terms of the Indentures, other than terms which are specific to a
particular series of Debt Securities and which will be described in the
Prospectus Supplement relating to such series. The following summaries do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all of the provisions of the Indentures, including the
definitions therein of certain terms capitalized in this Prospectus. Wherever
particular Sections or Articles or defined terms of the Indentures are referred
to herein or in a Prospectus Supplement, such Sections or defined terms are
incorporated herein or therein by reference.
Other than to the extent applicable to the Debt Securities of a particular
series, as indicated in the applicable Prospectus Supplement, there are no
provisions of the Indentures that limit the amount of indebtedness that may be
issued or incurred by the Issuer or any subsidiary, that restrict the Issuer's
or any subsidiary's ability to incur secured indebtedness, that restrict FCX's
ability to pay dividends or make other distributions, nor do the Indentures
contain provisions that would afford holders of the Debt Securities protection
in the event of a change in control, highly leveraged transaction,
recapitalization or similar transaction involving FCX, any of which could
adversely affect the holders of the Debt Securities.
GENERAL
The Indentures do not limit the aggregate amount of Debt Securities which may
be issued thereunder, and Debt Securities may be issued thereunder from time to
time in separate series up to the aggregate amount from time to time authorized
by the Issuer for each series. Debt Securities of a series may be issued in
registered form without coupons ("Registered Debt Securities"), in bearer form
with or without coupons attached ("Bearer Debt Securities") or in the form of
one or more Global Securities in registered or bearer form (each, a "Global
Security"). Bearer Debt Securities, if any, will be offered only to non-United
States persons and to offices located outside the United States of certain
United States financial institutions. The Senior Securities will be unsecured
and unsubordinated obligations of the Issuer and will rank equally and ratably
with all other unsecured and unsubordinated indebtedness of the Issuer. The
Senior Subordinated Securities and the Subordinated Securities will be
subordinated in right of payment to the prior payment in full of the Senior
Indebtedness (as defined) of the Issuer, as described below under
"Subordination of Senior Subordinated Securities, Subordinated Securities and
Guarantees" and in a Prospectus Supplement applicable to an offering of Senior
Subordinated Securities or Subordinated Securities.
Any Debt Security issued by FCX Finance will be unconditionally and
irrevocably guaranteed by FCX as to payment of principal, premium and
additional amounts, if any, and interest.
The applicable Prospectus Supplement or Prospectus Supplements will describe
the following terms of the series of Debt Securities in respect of which this
Prospectus is being delivered: (a) the Issuer (which may be either the Company
or FCX Finance) and title of such Debt Securities; (b) any limit on the
aggregate principal amount of such Debt Securities; (c) whether such Debt
Securities will be issued as Registered Debt Securities, Bearer Debt Securities
or any combination thereof, and any limitation on issuance of such Bearer Debt
Securities and any provisions regarding the transfer or exchange of such Bearer
Debt Securities, including exchange for Registered Debt Securities of the same
series; (d) whether any of such Debt Securities are to be issuable as a Global
Security, whether such Global Securities are to be issued in temporary global
form or permanent global form, and, if so, the terms and conditions, if any,
upon which interests in such Securities in global form may be exchanged, in
whole or in part, for the individual Debt Securities represented thereby; (e)
the person to whom any interest on any Debt Security of the series shall be
payable if other than the person in whose name the Debt Security is registered
on the record date; (f) the date or dates on which such Debt Securities will
mature; (g) the rate or rates of interest, if any, or the method of calculation
thereof, which such Debt Securities will bear; (h) the date or dates from which
any such interest will accrue, the interest payment dates on which any such
interest on such Debt Securities will be payable and the record date for any
interest payable on any interest payment date; (i) the place or places where
the principal of, interest, premium and additional amounts (if any) on such
Debt Securities will be payable; (j) the period or periods within which, the
events upon the occurrence of which, and the price or prices at which, such
Debt
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Securities may, pursuant to any optional or mandatory provisions, be redeemed
or purchased, in whole or in part, by the Issuer and any terms and conditions
relevant thereto; (k) the power or obligation of the Issuer, if any, to redeem
or repurchase such Debt Securities; (l) the denominations in which any such
Debt Securities will be issuable, if other than denominations of $1,000 and any
integral multiple thereof; (m) the currency, currencies or currency unit or
units of payment of principal of and any premium, additional amounts (if any)
and interest on such Debt Securities if other than U.S. dollars; (n) any index
or formula used to determine the amount of payments of principal of and any
premium, additional amounts (if any) and interest on such Debt Securities; (o)
if the principal of or any premium, additional amounts (if any) or interest on
such Debt Securities is to be payable, at the election of the Issuer or a
Holder thereof, in one or more currencies or currency units other than that or
those in which such Debt Securities are stated to be payable, the currency,
currencies or currency units in which payment of the principal of and any
premium additional amounts (if any) and interest on Debt Securities of such
series as to which such election is made shall be payable, and the periods
within which and the terms and conditions upon which such election is to be
made; (p) if other than the principal amount thereof, the portion of the
principal amount of such Debt Securities of the series which will be payable
upon declaration of the acceleration of the maturity thereof; (q) the
applicability of any provisions described under "Certain Covenants of the
Issuer" and any additional restrictive covenants (including any defined terms
relating thereto) included for the benefit of the holders of such Debt
Securities; (r) the applicability of, deletions from, modifications of or
additions to any provisions described under "Events of Default" (including any
defined terms relating thereto) and any additional Events of Default with
respect to the Debt Securities; (s) the applicability of any provisions
described under "Defeasance"; and (t) any other terms of such Debt Securities
not inconsistent with the provisions of the respective Indentures.
Debt Securities may be issued at a discount from their principal amount. Any
United States federal income tax considerations and other special
considerations applicable to any such Original Issue Discount Securities will
be described in the applicable Prospectus Supplement.
If the purchase price of any of the Debt Securities is denominated in a
foreign currency or currencies or a foreign currency unit or units or if the
principal of and any premium and interest on any series of Debt Securities is
payable in a foreign currency or currencies or a foreign currency unit or
units, the restrictions, elections, general tax considerations, specific terms
and other information with respect to such issue of Debt Securities and such
foreign currency or currencies or foreign currency unit or units will be set
forth in the applicable Prospectus Supplement.
Debt Securities may be presented for exchange and registered Debt Securities
may be presented for transfer in the manner, at the places and subject to the
restrictions set forth in the Debt Securities and the applicable Indenture.
Such services will be provided without charge, other than any tax or other
governmental charge payable in connection therewith, but subject to the
limitations provided in the applicable Indenture. Bearer Debt Securities and
the coupons, if any, appertaining thereto will be transferable by delivery.
Unless otherwise set forth in the applicable Prospectus Supplement, Debt
Securities may bear interest at a fixed rate or a floating rate. Debt
Securities bearing no interest or interest at a rate that at the time of
issuance is below the prevailing market rate may be sold at a discount below
their stated principal amount. Special United States federal income tax
considerations applicable to any such discounted Debt Securities or to certain
Debt Securities issued at par which are treated as having been issued at a
discount for United States federal income tax purposes will be described in the
relevant Prospectus Supplement.
Debt Securities may be issued from time to time with payment terms which are
calculated by reference to the value, rate or price of one or more commodities,
currencies or indices. Holders of such Debt Securities may receive a principal
amount (including premium, if any) on any principal payment date,or a payment
of additional amounts (if any), interest on any interest payment date, that is
greater than or less than the amount of principal (including premium, if any)
or interest otherwise payable on such dates, depending upon the value, rate or
price on the applicable dates of the applicable currency, commodity or index.
Information as to the methods for determining the amount of principal, premium
(if any) or interest payable on any date, the
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currencies, commodities or indices to which the amount payable on such date is
linked and certain additional tax considerations will be set forth in the
applicable Prospectus Supplement.
GUARANTEES
The Company will unconditionally and irrevocably guarantee, on a senior,
senior subordinated or subordinated basis, the due and punctual payment of
principal of, premium and additional amounts, if any, and interest on any Debt
Securities that are issued by FCX Finance, and the due and punctual payment of
any sinking fund payments thereon, when and as the same shall become due and
payable, whether at the maturity date, by declaration of acceleration, call for
redemption or otherwise. See "Subordination of Senior Subordinated Securities,
Subordinated Securities and Guarantees."
SENIOR DEBT
The Senior Securities will rank pari passu with all other unsecured and
unsubordinated debt of the Issuer and senior to any Subordinated Debt
Securities and Subordinated Securities.
SUBORDINATION OF SENIOR SUBORDINATED SECURITIES, SUBORDINATED SECURITIES AND
GUARANTEES
The indebtedness evidenced by the Senior Subordinated Securities and the
Subordinated Securities will be subordinated and junior in right of payment to
the extent set forth in the respective Indenture to the prior payment in full
of amounts then due on all Senior Indebtedness (as defined below). No payment
shall be made by the Issuer on account of principal of (or premium or
additional amounts, if any) or interest on the Senior Subordinated Securities
or the Subordinated Securities or on account of the purchase or other
acquisition of Senior Subordinated Securities or the Subordinated Securities,
if the maturity of any of the Senior Subordinated Securities or the
Subordinated Securities shall have been accelerated, until all amounts due have
been paid on all outstanding Senior Indebtedness, or if there shall have
occurred and be continuing (a) a default in the payment of principal (or
premium or additional amounts, if any) or interest on any Senior Indebtedness
beyond any applicable grace period with respect thereto, or any event of
default with respect to any Senior Indebtedness resulting in the acceleration
of the maturity of such Senior Indebtedness, unless and until such default or
event of default shall have been cured or waived or shall have ceased to exist
and such acceleration shall have been rescinded or annulled or (b) any such
default in payment or event of default shall be the subject of a judicial
proceeding. By reason of these provisions in the event of default of any Senior
Indebtedness, whether now outstanding or hereafter issued, payments of
principal of (and premium, if any) and interest on the Senior Subordinated
Securities or the Subordinated Securities may not be permitted to be made until
such default is cured or such Senior Indebtedness is paid in full.
Upon any distribution of assets of the Issuer upon any receivership,
dissolution, winding-up, liquidation, reorganization or similar proceedings of
the Issuer, whether voluntary or involuntary, or in bankruptcy or insolvency,
all principal of (and premium and additional amounts, if any) and interest due
upon all Senior Indebtedness must be paid in full before the Holders of the
Senior Subordinated Securities and the Subordinated Securities or the Trustee
is entitled to receive or retain any assets so distributed in respect of the
Senior Subordinated Securities or the Subordinated Securities. By reason of
this provision, in the event of insolvency, Holders of the Senior Subordinated
Securities and the Subordinated Securities may recover less, ratably, than
other creditors of the Issuer, including holders of Senior Indebtedness.
"Senior Indebtedness" means, when used with respect to any series of Senior
Subordinated Securities or Subordinated Securities, the principal of (and
premium, if any) and interest on (a) all indebtedness of the Issuer (including
indebtedness of others guaranteed by the Issuer) other than the Subordinated
Securities which is (i) for money borrowed or (ii) evidenced by a note or
similar instrument given in connection with the acquisition of any businesses,
properties or assets of any kind, (b) obligations of the Issuer as lessee under
leases required to be capitalized on the balance sheet of the lessee under
generally accepted accounting
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principles, and (c) amendments, renewals, extensions, modifications and
refunding of any such indebtedness or obligation, in any such case whether
outstanding on the date of the Senior Subordinated Indenture or the
Subordinated Indenture or thereafter created, incurred or assumed, except that,
with respect to the Senior Subordinated Securities, any particular
indebtedness, obligation, liability, guaranty, assumption, deferral, renewal,
extension or refunding shall not constitute "Senior Indebtedness" if it is
expressly stated in the governing terms, or in the assumption or guarantee,
thereof that the indebtedness involved is not senior in right of payment to the
Senior Subordinated Securities or that such indebtedness is pari passu with or
junior to the Senior Subordinated Securities and, with respect to Subordinated
Securities, any particular indebtedness, obligation, liability, guaranty,
assumption, deferral, renewal, extension or refunding shall not constitute
"Senior Indebtedness" if it is expressly stated in the governing terms, or in
the assumption or guarantee, thereof that the indebtedness involved is not
senior in right of payment to the Subordinated Securities or that such
indebtedness is pari passu with or junior to the Subordinated Securities. As of
March 31, 1996, the amount of Senior Indebtedness of the Company was
approximately $1.1 billion. FCX Finance has no indebtedness at the date of this
Prospectus.
If this Prospectus is being delivered in connection with a series of Senior
Subordinated Securities or Subordinated Securities, the accompanying Prospectus
Supplement or the information incorporated herein by reference will set forth
the approximate amount of Senior Indebtedness outstanding as of the end of the
Issuer's most recent fiscal quarter.
In the event that Senior Subordinated Securities or Subordinated Securities
are issued by FCX Finance, the related Guarantees issued by the Company will be
subordinate and junior in right of payment to Senior Indebtedness of the
Company on substantially the same terms and conditions as the obligations of
FCX Finance under the Senior Subordinated Securities or the Subordinated
Securities, as the case may be, will be subordinate and junior in right of
payment to Senior Indebtedness. Accordingly, in the event of insolvency of the
Company, holders of Senior Securities of FCX Finance and the related Guarantees
may recover less, ratably, than other creditors of the Company, including
holders of Senior Securities of FCX and the Guarantees related thereto.
FORM, EXCHANGE, REGISTRATION, CONVERSION, TRANSFER AND PAYMENT
Debt Securities are issuable in definitive form as Registered Debt
Securities, as Bearer Debt Securities or both. Unless otherwise indicated in an
applicable Prospectus Supplement, Bearer Debt Securities will have interest
coupons attached. Debt Securities are also issuable in temporary or permanent
global form.
Registered Debt Securities of any series will be exchangeable for other
Registered Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations. In addition, with
respect to any series of Bearer Debt Securities, at the option of the holder,
subject to the terms of the Indenture, such Bearer Debt Securities (with all
unmatured coupons, except as provided below, and all matured coupons in
default) will be exchangeable into Registered Debt Securities of the same
series of any authorized denominations and of a like aggregate principal amount
and tenor. Bearer Debt Securities surrendered in exchange for Registered Debt
Securities between a record date and the relevant date for payment of interest
shall be surrendered without the coupon relating to such date for payment of
interest, and interest accrued as of such date will not be payable in respect
of the Registered Debt Security issued in exchange for such Bearer Debt
Security, but will be payable only to the holder of such coupon when due in
accordance with the terms of the Indenture.
Debt Securities may be presented for exchange as provided above, and
Registered Debt Securities may be presented for registration of transfer (with
the form of transfer endorsed thereon duly executed), at the office or agency
of the Issuer maintained for such purposes and at any other office or agency
maintained for such purpose with respect to any series of Debt Securities and
referred to in the applicable Prospectus Supplement, without a service charge
and upon payment of any taxes and other governmental charges as
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described in the Indenture. Such transfer or exchange will be effected upon the
Issuer or its agent, as the case may be, being satisfied with the documents of
title and identity of the person making the request. Bearer Debt Securities may
only be presented for exchange at an office or agency of the Issuer (or any
other office or agency maintained for such purpose) located outside the United
States and referred to in the applicable Prospectus Supplement.
In the event of any redemption in part, the Issuer shall not be required to
(a) issue, register the transfer of or exchange Debt Securities of any series
during a period beginning at the opening of business 15 days prior to the
selection of Debt Securities of that series for redemption and ending on the
close of business on (i) if Debt Securities of the series are issued only as
Registered Debt Securities, the day of mailing of the relevant notice of
redemption and (ii) if Debt Securities of the series are issued as Bearer Debt
Securities, the day of the first publication of the relevant notice of
redemption except that, if Securities of the series are also issued as
Registered Debt Securities and there is no publication, the day of mailing of
the relevant notice of redemption; (b) register the transfer of or exchange any
Registered Debt Security, or portion thereof, called for redemption, except the
unredeemed portion of any Registered Debt Security being redeemed in part; or
(c) exchange any Bearer Debt Security called for redemption, except to exchange
such Bearer Debt Security for a Registered Debt Security of that series and
like tenor which is simultaneously surrendered for redemption.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of (and any premium) and interest on Bearer Debt Securities will
be payable, subject to any applicable laws and regulations, in the designated
currency or currency unit, at the offices of such Paying Agents ("Paying
Agents") outside the United States as the Issuer may designate from time to
time, at the option of the holder, by check or by transfer to an account
maintained by the payee with a bank located outside the United States;
provided, however, that the written certification described above under "Form,
Exchange, Registration and Transfer" has been delivered prior to the first
actual payment of interest. Unless otherwise indicated in the applicable
Prospectus Supplement, payment of interest on Bearer Debt Securities on any
interest payment date will be made only against surrender to the Paying Agent
of the coupon relating to such interest payment date. No payment with respect
to any Bearer Debt Security will be made at any office or agency of the Issuer
in the United States or by check mailed to any address in the United States or
by transfer to any account maintained with a bank located in the United States,
nor shall any payments be made in respect of Bearer Debt Securities upon
presentation to the Issuer or its designated Paying Agents within the United
States. Notwithstanding the foregoing, payments of principal of (and any
premium) and interest on Bearer Debt Securities denominated and payable in U.S.
dollars will be made at the office of the Issuer's Paying Agent in the United
States, if (but only if) payment of the full amount thereof in U.S. dollars at
all offices or agencies outside the United States is illegal or effectively
precluded by exchange controls or other similar restrictions.
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of (and any premium) additional amounts (if any) and interest on
Registered Debt Securities will be made in the designated currency or currency
unit at the office of such Paying Agent or Paying Agents as the Issuer may
designate from time to time, except that at the option of the Issuer payment of
any interest may be made by check mailed to the address of the person entitled
thereto as such address shall appear on records of the Security Registrar.
Unless otherwise indicated in an applicable Prospectus Supplement, payment of
any installment of interest on Registered Debt Securities will be made to the
person in whose name such Registered Debt Security is registered at the close
of business on the record date for such interest.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Corporate Trust Office of the Trustee will be designated as a Paying Agent for
the Trustee for payments with respect to Debt Securities which are issuable
solely as Registered Debt Securities, and the Issuer will maintain a Paying
Agent outside the United States for payments with respect to Debt Securities
(subject to limitations described above in the
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case of Bearer Debt Securities) which are issued solely as Bearer Debt
Securities, or as both Registered Debt Securities and Bearer Debt Securities.
Any Paying Agents outside the United States and any other Paying Agents in the
United States initially designated by the Issuer for the Debt Securities will
be named in an applicable Prospectus Supplement. The Issuer may at any time
designate additional Paying Agents or rescind the designation of any Paying
Agent or approve a change in the office through which any Paying Agent acts,
except that, if Debt Securities of a series are issued solely as Registered
Debt Securities, the Issuer will be required to maintain a Paying Agent in each
place of payment for such series and, if Debt Securities of a series are issued
as Bearer Securities, the Issuer will be required to maintain (a) a Paying
Agent in the United States for principal payments with respect to any
Registered Debt Securities of the series (and for payments with respect to
Bearer Debt Securities of the series in the circumstances described above, but
not otherwise), and (b) a Paying Agent in a place of payment located outside
the United States where Securities of such series and any coupons appertaining
thereto may be presented and surrendered for payment.
All monies paid by the Issuer to a Paying Agent for the payment of principal
of and any premium additional amounts (if any) or interest on any Debt Security
which remain unclaimed at the end of two years after such principal, premium or
interest shall have become due and payable will (subject to applicable escheat
laws) be repaid to the Issuer and the holder of such Debt Security or any
coupon will thereafter look only to the Issuer for payment thereof.
TEMPORARY GLOBAL SECURITIES
If so specified in the applicable Prospectus Supplement, all or any portion
of the Debt Securities of a series which are issuable as Bearer Debt Securities
will initially be represented by one or more temporary global Debt Securities,
without interest coupons, to be deposited with a common depository in London
for the Euroclear System ("Euroclear") and CEDEL S.A. ("CEDEL") for credit to
the designated accounts. On and after the date determined as provided in any
such temporary global Debt Security and described in the applicable Prospectus
Supplement, each such temporary global Debt Security will be exchangeable for
definitive Bearer Debt Securities, definitive Registered Debt Securities or all
or a portion of a permanent global security, or any combination thereof, as
specified in the applicable Prospectus Supplement, but, unless otherwise
specified in the applicable Prospectus Supplement, only upon written
certification in the form and to the effect described under "Form, Exchange,
Registration and Transfer." No Bearer Debt Security delivered in exchange for a
portion of a temporary global Debt Security will be mailed or otherwise
delivered to any location in the United States in connection with such
exchange.
Unless otherwise specified in the applicable Prospectus Supplement, interest
in respect of any portion of a temporary global Debt Security payable in
respect of an payment date occurring prior to the issuance of definitive Debt
Securities or a permanent global Subordinated Debt Security will be paid to
each of Euroclear and CEDEL with respect to the portion of the temporary global
Debt Security held for its account. Each of Euroclear and CEDEL will undertake
in such circumstances to credit such interest received by it in respect of a
temporary global Debt Security to the respective accounts for which it holds
such temporary global Debt Security only upon receipt in each case of written
certification in the form and to the effect described above under "Form,
Exchange, Registration and Transfer" as of the relevant payment date regarding
the portion of such temporary global Debt Security on which interest is to be
so credited.
PERMANENT GLOBAL SECURITIES
If any Debt Securities of a series are issuable in permanent global form, the
applicable Prospectus Supplement will describe the circumstances, if any, under
which beneficial owners of interests in any such permanent global Debt
Securities may exchange such interests for Debt Securities of such series and
of like tenor and principal amount in any authorized form and denomination. No
Bearer Debt Security delivered in exchange for a portion of a permanent global
Debt Security shall be mailed or otherwise delivered to any location in the
United States in connection with such exchange. Notwithstanding the foregoing,
unless
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otherwise specified in an applicable Prospectus Supplement, interests in a
permanent global Bearer Debt Security may be exchanged in whole (but not in
part) at the expense of the Issuer, for definitive Bearer Debt Securities, at
the request of any owner of a beneficial interest in such permanent global
Bearer Debt Security.
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the form
of one or more Global Securities that will be deposited with, or on behalf of,
a Depositary ("Depositary") or its nominee identified in the applicable
Prospectus Supplement. In such a case, one or more Global Securities will be
issued in a denomination or aggregate denominations equal to the portion of the
aggregate principal amount of Outstanding Debt Securities of the series to be
represented by such Global Security or Securities. Unless and until it is
exchanged in whole or in part for Debt Securities in registered form, a Global
Security may not be registered for transfer or exchange except as a whole by
the Depositary for such Global Security to a nominee of such Depositary or by a
nominee of such Depositary to such Depositary or another nominee of such
Depositary or by such Depositary or any nominee to a successor Depositary or a
nominee of such successor Depositary and except in the circumstances described
in the applicable Prospectus Supplement.
The specific terms of the depositary arrangement with respect to any portion
of a series of Debt Securities to be represented by a Global Security will be
described in the applicable Prospectus Supplement. The Issuer expects that the
following provisions will apply to depositary arrangements.
Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities which are to be represented by a Global Security to be deposited
with or on behalf of a Depositary will be represented by a Global Security
registered in the name of such Depositary or its nominee. Upon the issuance of
such Global Security, and the deposit of such Global Security with or on behalf
of the Depositary for such Global Security, the Depositary will credit, on its
book-entry registration and transfer system, the respective principal amounts
of the Debt Securities represented by such Global Security to the accounts of
institutions that have accounts with such Depositary or its nominee
("participants"). The accounts to be credited will be designated by the
underwriters or agents of such Debt Securities or by the Issuer, if such Debt
Securities are offered and sold directly by the Issuer. Ownership of beneficial
interest in such Global Security will be limited to participants or Persons
that may hold interests through participants. Ownership of beneficial interests
by participants in such Global Security will be shown on, and the transfer of
that ownership interest will be effected only through, records maintained by
the Depositary or its nominee for such Global Security. Ownership of beneficial
interests in such Global Security by Persons that hold through participants
will be shown on, and the transfer of that ownership interest within such
participant will be effected only through, records maintained by such
participant. The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in certificated form. The
foregoing limitations and such laws may impair the ability to transfer
beneficial interests in such Global Securities.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or Holder of the Securities
represented by such Global Security for all purposes under the applicable
Indenture. Unless otherwise specified in the applicable Prospectus Supplement,
owners of beneficial interests in such Global Security will not be entitled to
have Debt Securities of the series represented by such Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of Debt Securities of such series in certificated form and will not be
considered the Holders thereof for any purposes under the applicable Indenture.
Accordingly, each Person owning a beneficial interest in such Global Security
must rely on the procedures of the Depositary and, if such Person is not a
participant, on the procedures of the participant through which such Person
owns its interest, to exercise any rights of a Holder under the applicable
Indenture. The Issuer understands that under existing industry practices, if
the Issuer requests any action of Holders or an owner of a beneficial interest
in such Global Security desires to give any notice or take any action a Holder
is entitled to give or take under an Indenture, the Depositary would authorize
the participants
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to give such notice or take such action, and participants would authorize
beneficial owners owning through such participants to give such notice or take
such action or would otherwise act upon the instructions of beneficial owners
owning through them.
Principal of and any premium and interest on a Global Security will be
payable in the manner described in the applicable Prospectus Supplement.
LIMITATIONS ON ISSUANCE OF BEARER DEBT SECURITIES
In compliance with United States Federal tax laws and regulations, Bearer
Debt Securities (including securities in permanent global form that are either
Bearer Debt Securities or exchangeable for Bearer Debt Securities) will not be
offered or sold during the restricted period (as defined in United States
Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)) (generally, the first 40
days after the closing date, and, with respect to unsold allotments, until
sold) within the United States or to United States persons (each as defined
below) other than to an office located outside the United States of a United
States financial institution (as defined in Section 1.165-12(c)(1)(v) of the
United States Treasury Regulations), purchasing for its own account or for
resale or for the account of certain customers, that provides a certificate
stating that it agrees to comply with the requirements of Section 165(j)(3)(A),
(B) or (C) of the Code and the United States Treasury Regulations thereunder,
or to certain other persons described in Section 1.163-5(c)(2)(i)(D)(1)(iii)(B)
of the United States Treasury Regulations. Moreover, such Bearer Debt
Securities will not be delivered in connection with their sale during the
restricted period within the United States. Any underwriters and dealers
participating in the offering of Bearer Debt Securities must covenant that they
will not offer or sell during the restricted period any Bearer Debt Securities
within the United States or to United States persons (other than the persons
described above) or deliver in connection with the sale of Bearer Debt
Securities during the restricted period any Bearer Debt Securities within the
United States and that they have in effect procedures reasonably designed to
ensure that their employees and agents who are directly engaged in selling the
Bearer Debt Securities are aware of the restrictions described above. No Bearer
Debt Security (other than a temporary global Bearer Debt Security) will be
delivered in connection with its original issuance nor will interest be paid on
any Bearer Debt Security until receipt by the Issuer of the written
certification described above under "Form, Exchange, Registration and
Transfer." Each Bearer Debt Security, other than a temporary global Bearer Debt
Security, will bear a legend to the following effect: "Any United States person
who holds this obligation will be subject to limitations under the United
States Federal income tax laws, including the limitations provided in Sections
165(j) and 1287(a) of the Internal Revenue Code."
As used herein, "United States person" means any citizen or resident of the
United States, any corporation, partnership or other entity created or
organized in or under the laws of the United States and any estate or trust the
income of which is subject to United States Federal income taxation regardless
of its source, and "United States" means the United States of America
(including the states and the District of Columbia) and its possessions.
CERTAIN COVENANTS OF THE ISSUER
Unless otherwise specified in the applicable Prospectus Supplement, the
Indentures will provide that the Issuer will not consolidate with or merge into
any Person, or sell, lease, convey, transfer or otherwise dispose of all or
substantially all of its assets to any Person, and the Issuer will not permit
any Person to consolidate or merge into the Issuer or sell, lease, convey,
transfer or otherwise dispose of all or substantially all of its assets to the
Issuer unless: (a) the Person formed by or surviving such consolidation or
merger (if other than the Issuer), or to which such sale, lease, conveyance,
transfer or other disposition shall be made (collectively, the "Successor"), is
a corporation organized and existing under the laws of the United States or any
State thereof or the District of Columbia (or, alternatively, in the case of
FCX Finance, organized under the laws of the Netherlands), and the Successor
assumes by supplemental indenture in a form satisfactory to the Trustee all of
the obligations of the Issuer, under the Indenture; (b) immediately after
giving effect to such
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transaction and treating any Debt that becomes an obligation of the Issuer or
any subsidiary as a result thereof as having been incurred by the Issuer or
such subsidiary at the time of such transaction, no Default or Event of Default
shall have occurred and be continuing; and (c) the Issuer shall have delivered
to the Trustee an Officer's Certificate and Opinion of Counsel, each stating
that such merger, consolidation, sale or conveyance and such supplemental
indenture, if any, complies with the Indenture.
EVENTS OF DEFAULT
Unless otherwise specified in the applicable Prospectus Supplement, an Event
of Default is defined under each Indenture with respect to Debt Securities of
any series issued under such Indenture as being: (a) default for 30 days in
payment of any interest or additional amounts, if any, on the Debt Securities
of such series; (b) default in payment of any principal on the Debt Securities
of such series upon maturity or otherwise; provided that, if such default is a
result of the voluntary redemption by the holders of such Debt Securities, the
amount thereof shall be in excess of $50,000,000 or the equivalent thereof in
any other currency or composite currency; (c) default for 60 days after written
notice in the observance or performance of any other covenant or agreement in
the Debt Securities of such series or the Indenture other than a covenant or
agreement included in the Indenture which is not applicable to the Debt
Securities of such series; (d) in the case of Guaranteed Debt Securities, the
Guarantees having ceased for any reason to be in full force or effect or FCX
having asserted that the Guarantees are not in full force an effect and (e)
certain events of bankruptcy, insolvency or reorganization; or (f) failure to
pay at maturity, or other default which results in the acceleration of any Debt
in an amount in excess of $50,000,000 or the equivalent thereof in any other
currency or composite currency without such Debt having been discharged or such
acceleration having been cured, waived, rescinded or annulled for a period of
30 days after written notice thereof ("Debt" being defined to mean obligations
(other than non-recourse obligations or the Debt Securities of such series or
the Guarantees relating thereto), of, or guaranteed or assumed by, the Issuer
for borrowed money or evidenced by bonds, debentures, notes or other similar
instruments).
Unless otherwise specified in the applicable Prospectus Supplement, each
Indenture provides that (a) if an Event of Default due to the default in
payment of principal, premium or additional amounts, if any, or interest on,
any series of Debt Securities issued under such Indenture or due to the Default
in the performance of any other covenant or agreement applicable to the Debt
Securities of such series but not applicable to Debt Securities of any other
series issued under such Indenture shall have occurred and be continuing,
either the Trustee or the holders of not less than 25% in principal amount of
the outstanding Debt Securities of such series may declare the principal (or
such portion thereof as may be specified in the terms thereof) of all Debt
Securities of such series and interest accrued thereof to be due and payable
immediately; and (b) if an Event of Default due to a default in the performance
of any covenants or agreements applicable to outstanding Debt Securities of
more than one series issued under such indenture or an Event of Default
described in clause (e) above shall have occurred and be continuing, either the
Trustee or the holders of not less than 25% in principal amount of the
outstanding Debt Securities of all such affected series (treated as one class)
may declare the principal (or such portion thereof as may be specified in the
terms thereof) of all such Debt Securities and interest accrued thereon to be
due and payable immediately. If an Event of Default due to certain events of
bankruptcy, insolvency or reorganization shall occur, the principal (or such
portion hereof as may be specified in the terms thereof) of and interest
accrued on all Debt Securities then outstanding shall become due and payable
immediately, without action by the Trustee or the holders of any such Debt
Securities. Upon certain conditions such declarations may be annulled and past
defaults may be waived (except a continuing default in payment of principal of
(or premium, if any) or interest on, or in respect of the conversion of, such
Debt Securities) by the holders of a majority in principal amount of the
outstanding Debt Securities of all such affected series (treated as one class).
Each Indenture provides that the Trustee, subject to the duty of the Trustee
during a default to act with the required standard of care, has no obligation
to exercise any right or power granted it under such Indenture at the request
of holders of Debt Securities unless the Trustee is indemnified by such
holders. Subject to such provisions in each Indenture for the indemnification
of the Trustee and certain other limitations, the holders
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of a majority in principal amount of the outstanding Debt Securities of all
affected series issued under such Indenture (treated as one class) may direct
the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee with respect to such series.
Each indenture provides that no holder of Debt Securities of any series
issued under such Indenture may institute any action against the Issuer under
such Indenture (except actions for payment of overdue principal, premium and
additional amounts, (if any) or interest or to enforce conversion rights (if
any)) unless (a) such holder previously shall have given to the Trustee written
notice of default and continuance thereof, (b) the holders of not less than 25%
in principal amount of the Debt Securities of all affected series issued under
such Indenture (treated as one class) shall have made a written request upon
the Trustee to institute such action and shall have offered the Trustee
reasonable indemnity, (c) the Trustee shall not have instituted such action
within 60 days of such request and (d) the Trustee shall not have received
directions inconsistent with such written request by the holders of a majority
in principal amount of the outstanding Debt Securities of all affected series
issued under such indenture (treated as one class).
Each Indenture contains a covenant that the Issuer will file annually with
the Trustee a certificate of no default or a certificate specifying any default
that exists.
DEFEASANCE
Each Indenture provides that the Issuer may defease and be discharged from
any and all obligations (except as otherwise described in (a) below) with
respect to the Debt Securities of any series which have not already been
delivered to the Trustee for cancellation and which have either become due and
payable or are by their terms due and payable within one year (or scheduled for
redemption within one year) by irrevocably depositing with the Trustee, as
trust funds, money or, in the case of Debt Securities payable only in U.S.
dollars, U.S. Government Obligations (as defined) which through the payment of
principal and interest in accordance with their terms will provide money, in an
amount certified to be sufficient to pay at maturity (or upon redemption) the
principal of (and premium, and additional amounts if any) and interest on such
Debt Securities.
In addition, each Indenture provides that with respect to each series of Debt
Securities issued under such Indenture, the Issuer may elect either (a) to
defease and be discharged from any and all obligations with respect to the Debt
Securities of such series (except for the obligations to register the transfer
or exchange or convert the Debt Securities of such series, to replace temporary
or mutilated, destroyed, lost or stolen Debt Securities of such series, to
maintain an office or agency in respect of the Debt Securities of such series
and to hold moneys for payment in trust) or (b) to be released from the
restrictions described under "Certain Covenants of the Issuer" and, to the
extent specified in connection with the issuance of such series of Debt
Securities, other covenants applicable to such series of Debt Securities, upon
the deposit with the Trustee (or other qualifying trustee), as trust funds, or
money or, in the case of Debt Securities payable only in U.S. dollars, U.S.
Government Obligations which through the payment of principal and interest in
accordance with their terms will provide money, in an amount certified to be
sufficient to pay at maturity (or upon redemption) the principal of (and
premium and additional amounts, if any) and interest on the Debt Securities of
such series. Such a trust may only be established if, among other things, the
Issuer has delivered to the Trustee an opinion of counsel (as specified in the
Indenture) to the effect that the holders of the Debt Securities of such series
will not recognize income, gain or loss for Federal income tax purposes as a
result of such defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such defeasance had not occurred. Such opinion, in the case of a defeasance
under clause (a) above, must refer to and be based upon a ruling of the
Internal Revenue Service or a change in applicable Federal income tax law
occurring after the date of such Indenture.
In the event of any "legal" defeasance of any series of Subordinated Debt
Securities issued thereunder, the Subordinated Debt Indenture provides that
holders of all outstanding Senior Indebtedness will receive written notice of
such defeasance.
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The foregoing provisions relating to defeasance may be modified in connection
with the issuance of any series of Debt Securities, and any such modification
will be described in the accompanying Prospectus Supplement.
MODIFICATION OF THE INDENTURE
Unless otherwise specified in the applicable Prospectus Supplement, each
Indenture provides that the Issuer and the Trustee may enter into supplemental
indentures without the consent of the holders of Debt Securities to: (a) secure
such Debt Securities, (b) evidence the assumption by a successor entity of the
obligations of the Issuer, (c) add covenants or Events of Default for the
protection of the holders of any Debt Securities, (d) establish the form or
terms of such Debt Securities of any series, (e) evidence the acceptance of
appointment by a successor trustee or (f) cure any ambiguity or correct any
inconsistency in the Indenture, amend the Indenture in any other manner which
the Issuer may deem necessary or desirable, if such action will not adversely
affect the interests of the holders of Debt Securities issued thereunder.
Unless otherwise specified in the applicable Prospectus Supplement, each
Indenture also contains provisions permitting the Issuer and the Trustee, with
the consent of the holders of not less than a majority in principal amount of
Debt Securities of all series issued under such Indenture then outstanding and
affected (voting as a single class), to add any provisions to, or change in any
manner or eliminate any of the provisions of, such Indenture or modify in any
manner the rights of the holders of the Debt Securities of each such series;
provided that the Issuer and the Trustee may not, without the consent of the
holder of each outstanding Debt Security affected thereby, (a) extend the final
maturity of any Debt Security, or reduce the principal amount thereof, or
reduce or alter the method of computation of any amount payable in respect of
interest thereon or extend the time for payment thereof, or reduce or alter the
method of computation of any amount payable on redemption thereof or extend the
time for payment thereof, or change the currency in which the principal
thereof, premium or additional amounts if any, or interest thereon is payable,
or reduce the amount payable upon acceleration or alter certain provisions of
the Indenture relating to the Debt Securities issued thereunder not denominated
in U.S. dollars, or impair the right to institute suit for the enforcement of
any conversion or any payment on any Debt Security when due or materially and
adversely affect any conversion rights or (b) reduce the aforesaid percentage
in principal amount of Debt Securities of any series issued under such
Indenture, the consent of the holders of which is required for any such
modification.
The Subordinated Debt Indenture may not be amended to alter the subordination
of any outstanding Subordinated Debt Securities without the consent of each
holder of Senior Indebtedness then outstanding that would be adversely affected
thereby.
THE TRUSTEE
Information regarding the Trustee under an Indenture will be included in any
Prospectus Supplement relating to the Debt Securities issued thereunder. The
Indentures will provide that in case an Event of Default shall occur (and be
continuing), the Trustee will be required to use the degree of care and skill
of a prudent man in the conduct of his own affairs. The Trustee will be under
no obligation to exercise any of its powers under the Indentures at the request
of any of the holders of the Debt Securities, unless such holders shall have
offered the Trustee reasonable indemnity against the costs, expenses and
liabilities which might be incurred by the Trustee. The Indentures and
provisions of the Trust Indenture Act incorporated by reference therein contain
limitations on the right of a Trustee, should it become a creditor of the
Issuer to obtain payment of claims in certain cases or to realize on certain
property received by it in respect of any such claim as security or otherwise.
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DESCRIPTION OF PREFERRED STOCK
The following is a description of certain general terms and provisions of the
Preferred Stock. The particular terms of any series of Preferred Stock will be
described in the applicable Prospectus Supplement. If so indicated in a
Prospectus Supplement, the terms of any such series may differ from the terms
set forth below. The summary of terms of the Company's Preferred Stock
contained in this Prospectus and the applicable Prospectus Supplement does not
purport to be complete and is subject to, and qualified in its entirety by, the
provisions of the Company's Certificate of Incorporation and the certificate of
designations relating to the applicable series of the Preferred Stock (the
"Certificate of Designations"), which will be filed as an exhibit to or
incorporated by reference in the Registration Statement of which this
Prospectus is a part at the time of issuance of such series of the Preferred
Stock.
The Company's Certificate of Incorporation authorizes the issuance of
50,000,000 shares of Preferred Stock, par value of $0.10 per share. As of March
31, 1996, there were outstanding 8,955,700 depositary shares, each representing
0.05 shares of the Company's 7% Convertible Exchangeable Preferred Stock,
13,999,800 depositary shares, each representing 0.05 shares of the Company's
Step-Up Convertible Preferred Stock, 6,000,000 depositary shares, each
representing 0.05 shares of the Company's Gold-Denominated Preferred Stock,
4,305,580 depositary shares, each representing 0.05 shares of Gold-Denominated
Preferred Stock, Series II, and 4,760,000 depositary shares, each representing
0.025 shares of the Company's Silver-Denominated Preferred Stock. See
"Outstanding Preferred Stock." The Company's Preferred Stock may be issued from
time to time by the Board of Directors in one or more series, without
stockholder approval. The Board of Directors is authorized to determine the
voting powers (if any), designation, preferences and relative, participating,
options or other special rights, and qualifications, limitations or
restrictions thereof, for each series of Preferred Stock that may be issued,
and to fix the number of shares of each such series. Thus, the Board of
Directors, without stockholder approval, could authorize the issuance of
Preferred Stock with voting, conversion and other rights that could adversely
affect the voting power and other rights of holders of Class A Common Stock and
Class B Common Stock or other series of Preferred Stock or that could have the
effect of delaying, deferring or preventing a change in control of the Company.
GENERAL
Reference is made to the Prospectus Supplement for the following terms of and
information relating to the Preferred Stock of any series (to the extent such
terms are applicable to such Preferred Stock): (a) the specific designation,
number of shares, seniority and purchase price; (b) any liquidation preference
per share; (c) any date of maturity; (d) any redemption, payment or sinking
fund provisions; (e) any dividend rate or rates and the dates on which any such
dividends will be payable (or the method by which such rates or dates will be
determined); (f) any voting rights; (g) the currency or units based on or
relating to currencies in which such Preferred Stock are denominated and/or in
which payments will or may be payable; (h) the methods by which amounts payable
in respect of such Preferred Stock may be calculated and any commodities,
currencies or indices, or value, rate or price relevant to such calculation;
(i) whether the Preferred Stock is convertible or exchangeable and, if so, the
Preferred Stock or Debt Securities into which such Preferred Stock is
convertible or exchangeable, the terms and conditions upon which such
conversions or exchanges will be effected including the initial conversion or
exchange prices or rates, the conversion or exchange period and any other
related provisions; (j) the place or places where dividends and other payments
on the Preferred Stock will be payable; and (k) and any additional voting,
dividend, liquidation, redemption, sinking fund and other rights, preferences,
privileges, limitations and restrictions.
The Preferred Stock offered hereby will be issued in one or more series. The
holders of Preferred Stock will have no preemptive rights. Preferred Stock,
upon issuance against full payment of the purchase price therefor, will be
fully paid and nonassessable. Neither the par value nor the liquidation
preference is indicative of the price at which the Preferred Stock will
actually trade on or after the date of issuance. All shares of Preferred Stock
shall be of equal rank with each other, regardless of series. The applicable
Prospectus
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Supplement will contain a description of certain United States federal income
tax consequences relating to the purchase and ownership of the series of
Preferred Stock offered by such Prospectus Supplement.
As described under "Description of Depositary Shares," the Company may, at
its option, elect to offer depositary shares ("Depositary Shares") evidenced by
depositary receipts ("Depositary Receipts"), each representing an interest (to
be specified in the Prospectus Supplement relating to the particular series of
the Preferred Stock) in a share of the particular series of the Preferred Stock
issued and deposited with a Depositary (as defined below).
DIVIDENDS
Holders of shares of Preferred Stock of each series shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds of the
Company legally available for payment, cash dividends, payable at such dates
and at such rates per share per annum as set forth in the applicable Prospectus
Supplement. Such rate may be fixed or variable or both. Each declared dividend
shall be payable to holders of record as they appear on the stock books of the
Company on such record dates determined by the Board of Directors or a duly
authorized committee thereof.
Dividends on any series of the Preferred Stock may be cumulative or
noncumulative, as provided in the applicable Prospectus Supplement. If
dividends on a series of Preferred Stock are noncumulative and if the Board of
Directors fails to declare a dividend in respect of a dividend period with
respect to such series, then holders of such Preferred Stock will have no right
to receive a dividend in respect of such dividend period, and the Company will
have no obligation to pay the dividend for such period, whether or not
dividends are declared payable on any future dividend payment dates.
Unless full cumulative dividends for all past dividend periods on all
outstanding shares of cumulative Preferred Stock and any other series of
capital stock of the Company ranking on a parity with the Preferred Stock have
been paid, or declared and set apart for payment, the Company may not (a)
declare, pay or set apart any amounts for dividends on, or make any other
distribution in cash or other property in respect of, the Class A or Class B
Common Stock or any other stock of the Company ranking junior to the Preferred
Stock as to dividends or distribution of assets upon liquidation, dissolution
or winding up of the affairs of the Company (the Class A or Class B Common
Stock and such other stock being referred to herein as "Junior Stock") other
than a dividend payable solely in Junior Stock, (b) purchase, redeem or
otherwise acquire for value any shares of Junior Stock, directly or indirectly,
other than as a result of a reclassification of Junior Stock, or the exchange
or conversion of one Junior Stock for or into another Junior Stock, or other
than through the use of proceeds of a substantially contemporaneous sale of
other Junior Stock, or (c) make any payment on account of, or set aside money
for, a sinking or other like fund for the purchase, redemption or other
acquisition for value of any shares of Junior Stock. If the funds available for
the payment of dividends are insufficient to pay in full the dividends payable
on all outstanding shares of cumulative Preferred Stock and any other series of
capital stock of the Company ranking on a parity with the Preferred Stock, the
total available funds to be paid in partial dividends on such Preferred Stock
and such other series shall be divided among the Preferred Stock and such other
series in proportion to the aggregate amount of dividends accrued and unpaid
with respect to such Preferred Stock and such other series. Accruals of
dividends will not bear interest.
CONVERTIBILITY AND EXCHANGEABILITY
The terms, if any, on which shares of Preferred Stock of any series may be
exchanged for or converted (mandatorily or otherwise) into shares of Preferred
Stock or Debt Securities (including any rights to receive payments in cash or
Preferred Stock or Debt Securities based on the value, rate or price of one or
more specified commodities, currencies or indices) will be set forth in the
Prospectus Supplement relating thereto. The Preferred Stock will not be
convertible into or exchangeable for Class A or Class B Common Stock of the
Company.
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REDEMPTION
The terms, if any, on which shares of Preferred Stock of any series may be
redeemed will be set forth in the related Prospectus Supplement.
If fewer than all of the outstanding shares of any series of Preferred Stock
are to be redeemed, the number of shares of such series and the method of
effecting such redemption, whether by lot or pro rata, will be as determined by
the Company (with adjustment to avoid redemption of fractional shares).
LIQUIDATION
Unless otherwise specified in the applicable Prospectus Supplement, in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Company, after payment or provision for payment of the debts and other
liabilities of the Company, the holders of shares of any series of the
Preferred Stock, together with any other Preferred Stock and any other series
of capital stock of the Company ranking on a parity with such series of the
Preferred Stock, will be entitled to receive out of the remaining net assets of
the Company an amount per share as set forth in the related Prospectus
Supplement plus accrued and unpaid dividends before any distribution is made or
set apart for the holders of Junior Stock. If the amounts payable with respect
to such Preferred Stock are not paid in full, the holders of such Preferred
Stock and any stock of the Company on a parity with such Preferred Stock as to
distribution of assets upon the liquidation, dissolution or winding up of the
Company will have the right to share ratably in any distribution of the
remaining assets of the Company in proportion to the full respective
preferential amounts to which they are entitled. After payment of the full
amount of the liquidating distribution to which they are entitled, the holders
of such series of Preferred Stock will not be entitled to any further
participation in any distribution of the remaining assets by the Company. A
consolidation or merger of the Company with one or more corporations or the
sale of all or substantially all of the assets of the Company will not be
deemed to be a liquidation, dissolution or winding up of the Company.
VOTING
The Preferred Stock of a series will not be entitled to vote, except as
provided below or in the applicable Prospectus Supplement and as required by
applicable law. Unless otherwise indicated in the Prospectus Supplement
relating to a series of Preferred Stock, each share of such series will not be
entitled to vote on matters which holders of such series are entitled to vote.
Unless otherwise specified in the related Prospectus Supplement, at any time
dividends in an amount equal to six quarterly dividend payments on the
Preferred Stock of such series shall have accrued and be unpaid, holders of
such Preferred Stock shall have the right to a separate class vote together
with the holders of shares of other series of stock of the Company ranking on a
parity with such series of Preferred Stock either as to dividends or the
distribution of assets upon liquidating, dissolution or winding up and upon
which like voting rights have been conferred and are exercisable (such other
series of stock being herein referred to as "Other Voting Stock") to elect two
members to the Board of Directors until dividends on such Preferred Stock have
been paid in full or declared and set apart in trust for payment. In such case,
the Board of Directors will be increased by two directors, and the holders of
Preferred Stock of such series (either alone or with the holders of Other
Voting Stock) will have the exclusive right as members of such class, as
outlined above, to elect two directors at the next annual meeting of
stockholders. Additionally, without the affirmative vote of the holders of a
majority of the shares of Preferred Stock of such series then outstanding,
voting as a separate class, the Company may not (i) create, authorize or issue
any series or class of stock ranking prior to the shares of Preferred Stock of
such series with respect to dividends or distributions of assets upon
liquidation, dissolution or winding up or (ii) change the rights, powers or
preferences or qualifications, limitations or restrictions thereof with respect
to the Preferred Stock of such series if such action would materially adversely
affect such holders.
As more fully described under "Description of Depositary Shares" below, if
the Company elects to issue Depositary Shares, each representing a fraction of
a share of a series of the Preferred Stock, each such Depositary Share will, in
effect, be entitled to such fraction of a vote per Depositary Share.
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NO OTHER RIGHTS
The share of a series of Preferred Stock will not have any preferences,
voting powers or relative, participating, optional or other special rights
except as set forth above or in the related Prospectus supplement, the
Certificate of Incorporation or the Applicable certificate of designations or
as otherwise required by law.
TRANSFER AGENT AND REGISTRAR
The transfer agent for each series of Preferred Stock will be described in
the related Prospectus Supplement.
OUTSTANDING PREFERRED STOCK
All of the Company's outstanding Preferred Stock, and any other series of
Preferred Stock upon which the right to vote for directors has been granted in
accordance with the Certificate, have the right to vote with the holders of the
Class A Common Stock, voting together as a single class, to elect that number
of directors that constitutes 20% of the authorized number of members of the
Board of Directors (or if 20% is not a whole number, then the nearest whole
number of directors that is closest to 20% of such membership). Set forth below
is a summary of certain general terms and provisions of the series of Preferred
Stock outstanding as of the date of this Prospectus.
7% Convertible Preferred Stock. As of March 31, 1996, the Company had
outstanding 447,785 shares of 7% Convertible Exchangeable Preferred Stock par
value $0.10 per share (the "7% Convertible Preferred Stock"). The 7%
Convertible Preferred Stock is represented by depositary shares, each of which
represents .05 shares of 7% Convertible Preferred Stock and which trade on the
NYSE. The 7% Convertible Preferred Stock ranks, as to payments of dividends and
distributions upon liquidation, pari passu with the Company's Step-Up
Convertible Preferred Stock (as defined below), Gold-Denominated Preferred
Stock (as defined below) and the Silver-Denominated Preferred Stock (as defined
below) and senior to the Company's Class A Common Stock and Class B Common
Stock.
The 7% Convertible Preferred Stock has a liquidation preference equivalent to
$25.00 per depositary share and is convertible at the option of the holder at
any time, unless previously redeemed, into shares of Class A Common Stock at a
rate of 1.0208 shares per depositary share (equivalent to a conversion price of
$24.41 per share of Class A Common Stock), subject to adjustment in certain
circumstances. The depositary shares are exchangeable in whole at the option of
the Company on any quarterly dividend payment date for the Company's 7%
Convertible Subordinated Debentures due 2007 (the "Debentures") at a rate of
$25.00 principal amount of Debentures for each depositary share. The
Debentures, if issued, will be convertible at the option of the holder at any
time, unless previously redeemed, into Class A Common Stock at the conversion
price for depositary shares for which the Debentures have previously been
exchanged, subject to adjustment in certain circumstances.
Dividends on the 7% Convertible Preferred Stock are cumulative and are
payable quarterly in an amount equivalent to $1.75 per annum per depositary
share.
The 7% Convertible Preferred Stock is redeemable at the option of the
Company, in whole or in part, at a redemption price which is reduced on each
August 1 until August 1, 2002, by $0.175 per depositary share. After August 1,
2002 the redemption price will be fixed at $25.00 per depositary share.
The 7% Convertible Preferred Stock has limited voting rights with respect to
the election of directors upon the failure of the Company to pay dividends in
an amount equal to six full quarterly dividends and the right to vote as a
class on any proposal to amend the Certificate so as to adversely affect the
rights of holders of 7% Convertible Preferred Stock. The 7% Convertible
Preferred Stock does not have voting rights with
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respect to any amendment to the Certificate to authorize other series of stock
of the Company, whether ranking senior to, or a parity with or junior to the 7%
Convertible Preferred Stock as to dividends or distribution of assets upon the
liquidation, dissolution or winding up of the Company.
Step-Up Convertible Preferred Stock. As of March 31, 1996, the Company had
outstanding 699,990 shares of Step-Up Convertible Preferred Stock, par value
$0.10 per share (the "Step-Up Convertible Preferred Stock"). The Step-Up
Convertible Preferred Stock is represented by depositary shares, each of which
represents 0.05 shares of such stock and which trade on the NYSE. The Step-Up
Convertible Preferred Stock ranks, as to payment of dividends and distribution
upon liquidation, pari passu with the Company's 7% Convertible Preferred Stock,
the Gold-Denominated Preferred Stock (as defined below) and the Silver-
Denominated Preferred Stock (as defined below) and senior to the Company's
Class A Common Stock and Class B Common Stock.
The Step-Up Convertible Preferred Stock has a liquidation preference
equivalent to $25.00 per depositary share and is convertible at the option of
the holder at any time, unless previously redeemed. Dividends on the Step-Up
Convertible Preferred Stock are cumulative and are payable quarterly in an
amount equivalent to $1.25 per annum per depositary share through August 1,
1996 and thereafter in an amount equivalent to $1.75 per annum per depositary
share until redemption or conversion.
The Step-Up Convertible Preferred Stock is not redeemable prior to August 1,
1996. Thereafter and prior to August 1, 1999, the Step-Up Convertible Preferred
Stock is redeemable at the option of the Company, in whole or in part, for such
number of shares of Class A Common Stock as are issuable at the conversion
rate. The Company may exercise this option only if, for 20 trading days within
any period of 30 consecutive trading days, including the last trading day of
such period, the trading prices of the Class A Common Stock has exceeded 125%
of the conversion price in effect on the last trading day and the Company has
satisfied certain other conditions as set forth in the certificates of
designations. After August 1, 1999, the Step-Up Convertible Preferred Stock is
fully redeemable at the option of the Company at a redemption price equivalent
to $25.00 per depositary share, plus accrued and unpaid dividends, which
redemption price, subject to certain exceptions, the Company may pay, at it's
option, in cash, Class A Common Stock or any combination thereof.
The Step-Up Convertible Preferred Stock has limited additional voting rights
with respect to the election of directors upon the failure of the Company to
pay dividends in an amount equal to six full quarterly dividends and the right
to vote as a separate class on any proposal to amend the Certificate so as to
adversely affect the rights of holders of Step-Up Convertible Preferred Stock
or create, authorize or issue any series or class of stock ranking senior to
the shares of Step-Up Convertible Preferred Stock with respect to dividends or
the distribution of assets upon liquidation, dissolution or winding up of the
Company. The Step-Up Convertible Preferred Stock does not have voting rights
with respect to any amendment to the Certificate to authorize other series of
stock of the Company ranking on a parity with or junior to the Step-Up
Convertible Preferred Stock as to dividends or distributions upon liquidation,
dissolution or winding up.
Gold-Denominated Preferred Stock. As of March 31, 1996, the Company had
outstanding 300,000 shares of Gold-Denominated Preferred Stock ("Series I") and
215,279 shares of Gold-Denominated Preferred Stock, Series II ("Series II" and,
together with Series I, the "Gold-Denominated Preferred Stock"). The Gold-
Denominated Preferred Stock is represented by depositary shares, each of which
represents 0.05 shares of such stock and which are traded on the NYSE. The
Gold-Denominated Preferred Stock ranks, as to the payment of dividends and
distribution upon liquidation, pari passu with the 7% Convertible Exchangeable
Preferred Stock, the Step-Up Convertible Preferred Stock and the Silver-
Denominated Preferred Stock and senior to the Company's Class A Common Stock
and Class B Common Stock.
The Gold-Denominated Preferred Stock has a liquidation preference equivalent
to the dollar equivalent value of 0.10 ounces of gold per depositary share plus
accrued and unpaid dividends. Dividends on the Gold-Denominated Preferred Stock
are cumulative and are payable quarterly, in the case of Series I, in an amount
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equivalent to the dollar value of 0.000875 ounces of gold per depositary share
and, in the case of Series II, in an amount equivalent to the dollar equivalent
value of 0.0008125 ounces of gold per depositary share.
Each of Series I and Series II is subject to mandatory redemption, out of
funds legally available therefor, on August 1, 2003 and on February 1, 2006,
respectively, at an amount equivalent to the dollar equivalent value of 0.10
ounce of gold per depositary share plus accrued and unpaid dividends. The Gold-
Denominated Preferred Stock is not subject to redemption at the option of the
Company, except in limited circumstances. The Company does not have the right
to make any mandatory or optional redemption of any Gold-Denominated Preferred
Stock unless full cumulative dividends for all past dividend periods shall have
been paid or declared and set aside for payment upon all depositary shares and
all other outstanding shares of stock of the Company ranking, as to dividends,
on a parity with the Gold-Denominated Preferred Stock. For purposes of this
discussion, the "dollar equivalent value" of a specified number of ounces of
gold means that number of ounces multiplied by a reference price determined by
taking the average of the London P.M. gold fixing price for an ounce of gold on
a specified number of days prior to the date of determination.
The Gold-Denominated Preferred Stock has limited additional voting rights
with respect to the election of directors upon the failure of the Company to
pay dividends in an amount equal to six full quarterly dividends and the right
to vote as a separate class on any proposal to amend the Certificate so as to
adversely affect the rights of holders of Gold-Denominated Preferred Stock or
create, authorize or issue any series or class of stock ranking senior to the
shares of Gold-Denominated Preferred Stock with respect to dividends or the
distribution of assets upon liquidation, dissolution or winding upon of the
Company. The Gold-Denominated Preferred Stock does not have voting rights with
respect to any amendment to the Certificate to authorize other series of stock
of the Company ranking on a parity with or junior to the Gold-Denominated
Preferred Stock as to dividends or distributions upon liquidation, dissolution
or winding up.
Silver-Denominated Preferred Stock. As of March 31, 1996, the Company had
outstanding 119,000 shares of Silver-Denominated Preferred Stock (the "Silver-
Denominated Preferred Stock"). The Silver-Denominated Preferred Stock is
represented by depositary shares, each of which represents 0.025 shares of such
stock and which are traded on the NYSE. The Silver-Denominated Preferred Stock
ranks, as to the payment of dividends and distribution upon liquidation, pari
passu with the 7% Convertible Exchangeable Preferred Stock, the Step-Up
Convertible Stock and the Gold-Denominated Preferred Stock and senior to the
Company's Class A Common Stock and Class B Common Stock.
The depositary shares have a liquidation preference equivalent to the dollar
equivalent value of 4.0 ounces of silver per depositary share, plus accrued and
unpaid dividends. Dividends on the Silver-Denominated Preferred Stock are
cumulative and payable quarterly, in an amount equivalent to the dollar value
of 0.04125 ounces of silver per depositary share.
The Company will redeem annually on August 1 beginning in 1999, out of funds
legally available therefor, a number of Silver-Denominated Preferred Stock
shares equal to one-eighth of the shares originally issued, at an amount
equivalent to the dollar equivalent value of 4.0 ounces of silver per
depositary share plus accrued and unpaid dividends. Silver-Denominated
Preferred Stock will not subject to redemption at the option of the Company,
except that, if at any time the total number of shares of Silver-Denominated
Preferred Stock outstanding shall be less than 15% of the total number of
shares of Silver-Denominated Preferred Stock originally issued, the Company
will have the right to redeem the shares of Silver-Denominated Preferred Stock,
in whole but not in part, on any subsequent quarterly dividend date at a
redemption price equivalent to the dollar equivalent value of the liquidation
preference described above plus a pro rata portion of the accrued and unpaid
dividends on the shares of Silver-Denominated Preferred Stock to the date fixed
for redemption. The Company will not have the right to make a mandatory or
optional redemption of any shares of Silver-Denominated Preferred Stock unless
full cumulative dividends for all past dividend periods shall have been paid or
declared and set aside for payment upon all shares of Silver-Denominated
Preferred Stock and all other outstanding shares of stock of the Company
ranking, as to dividends pari passu with the Silver-Denominated Preferred
Stock. For purposes of this discussion, the "dollar
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equivalent value" of a specified number of ounces of silver means that number
of ounces multiplied by a reference price determined by taking the average of
the London silver fixing price for an ounce of silver on a specified number of
days prior to the date of determination.
The Silver-Denominated Preferred Stock has limited additional voting rights
with respect to the election of directors upon the failure of the Company to
pay dividends in an amount equal to six full quarterly dividends and the right
to vote as a separate class on any proposal to amend the Certificate so as to
adversely affect the rights of holders of Silver-Denominated Preferred Stock or
create, authorize or issue any series or class of stock ranking senior to the
shares of Silver-Denominated Preferred Stock with respect to dividends or the
distribution of assets upon liquidation, dissolution or winding up of the
Company. The Silver-Denominated Preferred Stock does not have voting rights
with respect to any amendment to the Certificate to authorize other series of
stock of the Company ranking on a parity with or junior to the Silver-
Denominated Preferred as to dividends or distributions upon liquidation,
dissolution or winding up.
DESCRIPTION OF DEPOSITARY SHARES
The description set forth below and in any Prospectus Supplement of certain
provisions of the Deposit Agreement (as defined below) and of the Depositary
Shares and Depositary Receipts does not purport to be complete and is subject
to, and qualified in its entirety by reference to, the form of Deposit
Agreement and form of Depositary Receipts relating to each series of the
Preferred Stock which will be filed with the Commission as an exhibit to the
Registration Statement of which this Prospectus is a part.
GENERAL
The Company may, at its option, elect to have shares of Preferred Stock
represented by Depositary Shares. The shares of any series of the Preferred
Stock underlying the Depositary Shares will be deposited under a separate
deposit agreement (the "Deposit Agreement") between the Company and a bank or
trust company selected by the Company (the "Depositary"). The Prospectus
Supplement relating to a series of Depositary Shares will set forth the name
and address of the Depositary. Subject to the terms of the Deposit Agreement,
each owner of a Depositary Share will be entitled, in proportion to the
applicable interest in the number of shares of Preferred Stock underlying such
Depositary Share, to all the rights and preferences of the Preferred Stock
underlying such Depositary Share (including dividend, voting, redemption,
conversion, exchange and liquidation rights).
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the Deposit Agreement, each of which will represent the applicable
interest in a number of shares of a particular series of the Preferred Stock
described in the applicable Prospectus Supplement.
Upon surrender of Depositary Shares at the office of the Depositary and upon
payment of the charges provided in the Deposit Agreement and subject to the
terms thereof, a holder of Depositary Shares will be entitled to have the
Depositary deliver to such holder the number of whole shares of Preferred Stock
evidenced by the surrendered Depositary Shares.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends or other cash distributions
received in respect of the Preferred Stock to the record holders of Depositary
Shares representing such Preferred Stock in proportion to the numbers of such
Depositary Shares owned by such holders on the relevant record date.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto or the Depositary may, with the approval of the Company, sell
such property and distribute the net proceeds from such sale to such holders.
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The Deposit Agreement also contains provisions relating to the manner in
which any subscription or similar rights offered by the Company to holders of
Preferred Stock shall be made available to holders of Depositary Shares.
CONVERSION AND EXCHANGE
If any Preferred Stock underlying the Depositary Shares is subject to
provisions relating to its conversion or exchange as set forth in the
Prospectus Supplement relating thereto, each record holder of Depositary Shares
will have the right or obligation to convert or exchange such Depositary Shares
into Preferred Stock or other Debt Securities (including rights to receive
payments in cash or securities based on the value, rate or price of one or more
specified commodities, currencies or indices) pursuant to the terms thereof.
REDEMPTION OF DEPOSITARY SHARES
If Preferred Stock underlying the Depositary Shares is subject to redemption,
the Depositary Shares will be redeemed from the proceeds received by the
Depositary resulting from the redemption, in whole or in part, of the Preferred
Stock held by the Depositary. The redemption price per Depositary Share will be
equal to the aggregate redemption price payable with respect to the number of
shares of Preferred Stock underlying the Depositary Shares. Whenever the
Company redeems Preferred Stock from the Depositary, the Depositary will redeem
as of the same redemption date a proportionate number of Depositary Shares
representing the shares of Preferred Stock that were redeemed. If less than all
the Depositary Shares are to be redeemed, the Depositary Shares to be redeemed
will be selected by lot or pro rata as may be determined by the Company.
After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the Depositary Shares will cease, except the right to receive the
redemption price payable upon such redemption. Any funds deposited by the
Company with the Depositary for any Depositary Shares which the holders thereof
fail to redeem shall be returned to the Company after a period of two years
from the date such funds are so deposited.
VOTING
Upon receipt of notice of any meeting or action in lieu of any meeting at
which the holders of any shares of Preferred Stock underlying the Depositary
Shares are entitled to vote, the Depositary will mail the information contained
in such notice to the record holders of the Depositary Shares relating to such
Preferred Stock. Each record holder of such Depositary Shares on the record
date (which will be the same date as the record date for the Preferred Stock)
will be entitled to instruct the Depositary as to the exercise of the voting
rights pertaining to the number of shares of Preferred Stock underlying such
holder's Depositary Shares. The Depositary will endeavor, insofar as
practicable, to vote the number of shares of Preferred Stock underlying such
Depositary Shares in accordance with such instructions, and the Company will
agree to take all action which may be deemed necessary by the Depositary in
order to enable the Depositary to do so.
AMENDMENT OF THE DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between the Company and the Depositary, provided, however, that any amendment
which materially and adversely alters the rights of the existing holders of
Depositary Shares will not be effective unless such amendment has been approved
by the record holders of at least a majority of the Depositary Shares then
outstanding.
CHARGES OF DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
that arise solely from the existence of the depositary arrangements. The
Company will pay charges of the Depositary in connection
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with the initial deposit of the Preferred Stock and any exchange or redemption
of the Preferred Stock. Holders of Depositary Shares will pay all other
transfer and other taxes and governmental charges, and, in addition, such other
charges as are expressly provided in the Deposit Agreement to be for their
accounts.
MISCELLANEOUS
The Company, or at the option of the Company, the Depositary, will forward to
the holders of Depositary Shares all reports and communications from the
Company which the Company is required to furnish to the holders of Preferred
Stock.
Neither the Depositary nor the Company will be liable if it is prevented or
delayed by law or any circumstance beyond its control in performing its
obligations under the Deposit Agreement. The obligations of the Company and the
Depositary under the Deposit Agreement will be limited to performance in good
faith of their duties thereunder and they will not be obligated to prosecute or
defend any legal proceeding in respect of any Depositary Share or Preferred
Stock unless satisfactory indemnity has been furnished. The Company and the
Depositary may rely upon written advice of counsel or accountants, or
information provided by persons presenting Preferred Stock for deposit, holders
of Depositary Shares or other persons believed to be competent and on documents
believed to be genuine.
RESIGNATION AND REMOVAL OF DEPOSITARY; TERMINATION OF THE DEPOSIT AGREEMENT
The Depositary may resign at any time by delivering to the Company notice of
its election to do so, and the Company may at any time remove the Depositary,
any such resignation or removal to take effect upon the appointment of a
successor Depositary and its acceptance of such appointment. Such successor
Depositary will be appointed by the Company within 60 days after delivery of
the notice of resignation or removal. The Deposit Agreement may be terminated
at the direction of the Company or by the Depositary if a period of 90 days
shall have expired after the Depositary has delivered to the Company written
notice of its election to resign and a successor depositary shall not have been
appointed. Upon termination of the Deposit Agreement, the Depositary will
discontinue the transfer of Depositary Receipts, will suspend the distribution
of dividends to the holders thereof, and will not give any further notices
(other than notice of such termination) or perform any further acts under the
Deposit Agreement except that the Depositary will continue to deliver Preferred
Stock certificates, together with such dividends and distributions and the net
proceeds of any sales of rights, preferences, privileges or other property in
exchange for Depositary Receipts surrendered. Upon request of the Company, the
Depositary shall deliver all books, records, certificates evidencing Preferred
Stock, Depositary Receipts and other documents relating to the subject matter
of the Deposit Agreement to the Company.
DESCRIPTION OF WARRANTS
GENERAL
The Company may issue Warrants, including Warrants to purchase Debt
Securities ("Debt Warrants"), as well as other types of Warrants. Warrants may
be issued independently or together with any Debt Securities or Preferred Stock
and may be attached to or separate from such Debt Securities or Preferred
Stock. Each series of Warrants will be issued under a separate warrant
agreement (each a "Warrant Agreement") to be entered into between the Company
and a warrant agent ("Warrant Agent"). The following sets forth certain general
terms and provisions of the Warrants offered hereby. Further terms of the
Warrants and the applicable Warrant Agreement are set forth in the applicable
Prospectus Supplement.
DEBT WARRANTS
The applicable Prospectus Supplement will describe the following terms of the
Debt Warrants in respect of which this Prospectus is being delivered: (a) the
title of such Debt Warrants; (b) the aggregate number of
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such Debt Warrants; (c) the price or prices at which such Debt Warrants will be
issued; (d) the currency or currencies, including composite currencies, in
which the price of such Debt Warrants may be payable; (e) the designation,
aggregate principal amount and terms of the Debt Securities purchasable upon
exercise of such Debt Warrants; (f) the price at which and currency or
currencies, including composite currencies, in which the Debt Securities
purchasable upon exercise of such Debt Warrants may be purchased; (g) the date
on which the right to exercise such Debt Warrants shall commence and the date
on which such right shall expire; (h) if applicable, the minimum or maximum
amount of such Debt Warrants which may be exercised at any one time; (i) if
applicable, the designation and terms of the Debt Securities or Preferred Stock
with which such Debt Warrants are issued and the number of such Debt Warrants
issued with each such Debt Security or Preferred Stock; (j) if applicable, the
date on and after which such Debt Warrants and the related Debt Securities or
Preferred Stock will be separately transferable; (k) information with respect
to book-entry procedures, if any; (l) if applicable, a discussion of certain
United States Federal income tax considerations; and (m) any other terms of
such Debt Warrants, including terms, procedures and limitations relating to the
exchange and exercise of such Debt Warrants.
OTHER WARRANTS
The Company may issue other Warrants. The applicable Prospectus Supplement
will describe the following terms of any such other Warrants in respect of
which this Prospectus is being delivered: (a) the title of such Warrants; (b)
the aggregate number of such Warrants; (c) the price or prices at which such
Warrants will be issued; (d) the currency or currencies, including composite
currencies, in which the price of such Warrants may be payable; (e) the
designation and terms of the Preferred Stock (including rights to receive
payments in cash or securities based on the value, rate or price of one or more
specified commodities, currencies or indices), purchasable upon exercise of
such Warrants; (f) the price at which and the currency or currencies, including
composite currencies, in which the securities purchasable upon exercise of such
Warrants may be purchased; (g) the date on which the right to exercise such
Warrants shall commence and the date on which such right shall expire; (h) if
applicable, the minimum or maximum amount of such Warrants which may be
exercised at any one time; (i) of applicable, the designation and terms of the
Debt Securities or Preferred Stock with which such Warrants are issued and the
number of such Warrants issued with each such Debt Security or share of
Preferred Stock; (j) if applicable, the date on and after which such Warrants
and the related Debt Securities or Preferred Stock will be separately
transferable; (k) information with respect to book-entry procedures, if any;
(l) if applicable, a discussion of certain United States Federal income tax
considerations; and (m) any other terms of such Warrants, including terms,
procedures and limitations relating to the exchange and exercise of such
Warrants.
PLAN OF DISTRIBUTION
The Company may offer Securities to or through underwriters, through agents
or dealers or directly to other purchasers.
The distribution of Securities may be effected from time to time in one or
more transactions at a fixed price or prices, which may be changed, at market
prices prevailing at the time of sale, at prices related to such market prices
or at negotiated prices.
In connection with the sale of Securities, underwriters, dealers or agents
may receive compensation from FCX, FCX Finance or from purchasers in the form
of discounts, concessions or commissions. Underwriters, dealers and agents
participating in the distribution of the Securities may be deemed to be
underwriters within the meaning of the Securities Act.
Pursuant to agreements which may be entered into between the Company and any
underwriters or agents named in the Prospectus Supplement, such underwriters or
agents may be entitled to indemnification by the Company against certain
liabilities, including liabilities under the Securities Act.
28
<PAGE>
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters or other persons acting as agents for the Company to solicit
offers by certain institutional investors to purchase Debt Securities or
Preferred Stock from the Company pursuant to contracts providing for payment
and delivery on a future date. Institutions with which such contracts may be
made include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions and others, but
shall in all cases be subject to the approval of the Company. The obligations
of the purchaser under any such contract will not be subject to any conditions
except (a) the investment in the Debt Securities or Preferred Stock by the
institution shall not at the time of delivery be prohibited by the laws of any
jurisdiction in the United States to which such institution is subject, and (b)
if a portion of the Debt Securities or Preferred Stock is being sold to
underwriters, FCX and/or FCX Finance shall have sold to such underwriters the
Debt Securities or Preferred Stock not sold for delayed delivery. Underwriters
and such other persons will not have any responsibility in respect of the
validity or performance of such contracts.
All Debt Securities, Preferred Stock and Warrants offered will be a new issue
of securities with no established trading market. Any underwriters to whom such
Debt Securities, Preferred Stock and Warrants are sold by the Company for
public offering and sale may make a market in such Debt Securities, Preferred
Stock and Warrants, but such underwriters will not be obligated to do so and
may discontinue any market making at any time without notice. No assurance can
be given as to the liquidity of or the trading markets for any Debt Securities,
Preferred Stock or Warrants.
Certain of the underwriters or agents and their associates may be customers
of, engage in transactions with and perform services for the Company in the
ordinary course of business.
The specific terms and manner of sale of the Securities in respect of which
this Prospectus is being delivered are set forth or summarized in the
Prospectus Supplement.
LEGAL MATTERS
The validity of the Securities offered will be passed upon for FCX and FCX
Finance by Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P.
Counsel to any underwriters, dealers or agents with respect to any distribution
or Securities will be named in the applicable Prospectus Supplement.
EXPERTS
The audited financial statements and schedules of the Company incorporated in
this Prospectus by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995 have been audited by Arthur Andersen LLP,
independent public accountants as indicated in their report with respect
thereto, and are incorporated herein by reference in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
report. Future audited financial statements and schedules of the Company and
the reports thereon of the Company's independent public accountants also will
be incorporated by reference in this Prospectus in reliance upon the authority
of those accountants as experts in giving those reports to the extent said firm
has audited those financial statements and consented to the use of their
reports thereon.
The Company's reserves as of December 31, 1994 and 1995 incorporated in this
Prospectus by reference to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995 have been verified by Independent Mining
Consultants, Inc., and such reserve information has been incorporated by
reference in this Prospectus in reliance upon the authority of said firm as
experts in mining, geology and reserve determination.
29
<PAGE>
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NO PERSON IS AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN AS CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY FCX, THE UNDERWRITERS OR ANY OF THEIR
RESPECTIVE AFFILIATES. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO
BUY, THE SENIOR NOTES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS SUPPLEMENT OR THE
ACCOMPANYING PROSPECTUS OR IN THE AFFAIRS OF FCX SINCE THE DATE HEREOF.
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TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary.................................................................... S-3
Risk Factors............................................................... S-6
Recent Developments........................................................ S-6
Use of Proceeds............................................................ S-8
Ratio of Earnings to Fixed Charges......................................... S-8
Capitalization............................................................. S-9
Business................................................................... S-11
Description of the Senior Notes............................................ S-18
Underwriting............................................................... S-30
Legal Matters.............................................................. S-31
Prospectus
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
Enforcement of Civil Liabilities........................................... 3
The Company................................................................ 4
FCX Finance................................................................ 4
Risk Factors............................................................... 5
Use of Proceeds............................................................ 7
Ratio of Earnings to Fixed Charges......................................... 7
Description of Debt Securities and Guarantees.............................. 7
Description of Preferred Stock............................................. 19
Description of Depositary Shares........................................... 25
Description of Warrants.................................................... 27
Plan of Distribution....................................................... 28
Legal Matters.............................................................. 29
Experts.................................................................... 29
</TABLE>
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$450,000,000
[LOGO OF FREEPORT-MCMORAN COPPER & GOLD APPEARS HERE]
$200,000,000 7.50% SENIOR NOTES
DUE 2006
$250,000,000 7.20% SENIOR NOTES
DUE 2026
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PROSPECTUS SUPPLEMENT
----------------------
UBS SECURITIES
CHASE SECURITIES INC.
CS FIRST BOSTON
NOVEMBER 13, 1996
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