Document:

Exhibit 4.2

 

FIRST SUPPLEMENTAL INDENTURE

FIRST SUPPLEMENTAL INDENTURE (the “First Supplemental Indenture”), effective as of November 1, 2007, by and among PETROBRAS INTERNATIONAL FINANCE COMPANY, an exempted company incorporated with limited liability under the laws of the Cayman Islands, having its principal office at 4th Floor, Harbour Place, 103 South Church Street, George Town, Grand Cayman, Cayman Islands (the “Company”), THE BANK OF NEW YORK, a New York banking corporation, as Trustee hereunder (the “Trustee”), and PETRÓLEO BRASILEIRO S.A. – PETROBRAS, a mixed capital company (sociedade de economia mista) organized under the laws of Brazil, having its principal office at Avenida
República do Chile, 65, 20035-900 Rio de Janeiro – RJ, Brazil (“Petrobras”).

W I T N E S S E T H:

WHEREAS, the Company and the Trustee previously have entered into an indenture, dated as of December 15, 2006 (the “Original Indenture”, and as supplemented by this First Supplemental Indenture and any further supplements thereto, the “Indenture”), providing for the issuance from time to time of secured or unsecured debentures, notes or other evidences of indebtedness of the Company to be issued in one or more series as provided in the Indenture;

WHEREAS, Section 9.01 of the Indenture provides that, subsequent to the execution of the Original Indenture and subject to satisfaction of certain conditions, the Company and the Trustee may enter into one or more indentures supplemental to the Original Indenture to add to, change or eliminate any of the provisions of the Indenture in respect of one or more series of Securities (as defined in the Indenture);

WHEREAS, on the date hereof the Company intends to issue pursuant to its Registration Statement on Form F-3 (File No. 333-139459-01) (the “Registration Statement”), dated December 18, 2006, the Prospectus Supplement dated October 29, 2007 and related Base Prospectus dated December 18, 2006 (collectively, the “Offering Document”) and the Indenture, US$1,000,000,000 of its 5.875% Global Notes due 2018, in the form attached as Exhibit A hereto (the “Notes”), having the terms and conditions contemplated in the Offering Document as provided for in the Original Indenture, as supplemented by this First Supplemental Indenture;  

WHEREAS, as contemplated in the Offering Document, Petrobras and the Trustee intend, in connection with the issuance of the Notes, to (i) enter into a Standby Purchase Agreement, dated as of the date hereof in the form attached as Exhibit B hereto (the “Standby Purchase Agreement”), to provide the holders of the Notes (the “Holders”) with assurances that, if the Company shall fail to make all required payments of principal, interest or other amounts due in respect of the Notes and the Indenture, Petrobras will purchase the rights of the Holders to receive such amounts in consideration of the payment by Petrobras of an amount of funds equal to the amounts then owed under the Indenture and the Notes, subject to the provisions thereof and (ii) grant
Holders of the Notes direct rights against Petrobras in respect of the Standby Purchase Agreement by Petrobras being a party to the Indenture as provided herein;

 

	
       
 	
      1
 	
       
 

 

 

 

 

WHEREAS, the Trustee has provided to the Company and Petrobras Statements of Eligibility under the Trust Indenture Act of 1939, as amended, with respect to each of the Companies which have been filed as exhibits to the Registration Statement;

WHEREAS, any and all conditions and requirements necessary to make this First Supplemental Indenture a valid, binding, and legal instrument in accordance with the terms of the Indenture have been performed and fulfilled and the execution and delivery of this First Supplemental Indenture have been in all respects duly authorized;

WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this First Supplemental Indenture; and

WHEREAS, the Company and Petrobras have requested that the Trustee execute and deliver this First Supplemental Indenture; 

NOW, THEREFORE, for and in consideration of the premises and the mutual covenants contained herein and in the Indenture and for other good and valuable consideration, the receipt and sufficiency of which are herein acknowledged, the Company, Petrobras and the Trustee hereby agree, for the equal and ratable benefit of all Holders, as follows:

ARTICLE 1

DEFINITIONS

 

Section 1.01.     Defined Terms.  All capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Indenture, as supplemented and amended hereby.  All definitions in the Original Indenture shall be read in a manner consistent with the terms of this First Supplemental Indenture.

Section 1.02.     Additional Definitions.  (a) For the benefit of the Holders of the Notes, Section 1.01 of the Original Indenture shall be amended by adding the following new definitions:

“Closing Date” means November 1, 2007.

“Comparable Treasury Issue” means the United States Treasury security or securities selected by an Independent Investment Banker as having an actual or interpolated maturity comparable to the remaining term of Notes to be redeemed 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 a comparable maturity to the remaining term of such Notes.

“Comparable Treasury Price” means, with respect to any Redemption Date, (1) the average of the Reference Treasury Dealer Quotations for such Redemption Date, after excluding the highest and lowest such Reference Treasury Dealer Quotation or (2) if the Trustee obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such quotations.

“Default Rate” has the meaning set forth in Section 2.01(g) herein.

 

 

	
             
 	
            2
 	
             
 
						

 

 

 

 

“Denomination Currency” has the meaning set forth in Section 2.03(b) herein.

“Independent Investment Banker” means one of the Reference Treasury Dealers appointed by the Company.

“Interest Period” means the period beginning on an Interest Payment Date and ending on the day before the next Interest Payment Date, except that the first Interest Period shall be the period beginning on the Closing Date and ending on the day before the next Interest Payment Date.

“Judgment Currency” has the meaning set forth in Section 2.03(b) herein.

“Lien” means any mortgage, pledge, lien, hypothecation, security interest or other charge or encumbrance on any property or asset, including, without limitation, any equivalent created or arising under applicable law.

“Make Whole Amount” has the meaning set forth in Section 2.01(k) herein.

“Material Subsidiary” means, as to any Person, any Subsidiary of such Person which, on any given date of determination, accounts for more than 10% of Petrobras’ total consolidated assets, as such total assets are set forth on the most recent consolidated financial statements of Petrobras prepared in accordance with U.S. GAAP (or if Petrobras does not prepare financial statements in U.S. GAAP, consolidated financial statements prepared in accordance with Brazilian generally accepted accounting principles).

“Offering Document” shall have the meaning set forth in the recitals to the First Supplemental Indenture.

“Payment Account” has the meaning set forth in Section 2.01(h) herein.

“Permitted Lien” means a:

(a)  Lien arising by operation of law, such as merchants’, maritime or other similar Liens arising in the Company’s ordinary course of business or that of any Subsidiary or Lien in respect of taxes, assessments or other governmental charges that are not yet delinquent or that are being contested in good faith by appropriate proceedings; 

(b)  Lien arising from the Company’s obligations under performance bonds or surety bonds and appeal bonds or similar obligations incurred in the ordinary course of business and consistent with the Company’s past practice; 

(c)  Lien arising in the ordinary course of business in connection with Indebtedness maturing not more than one year after the date on which such Indebtedness was originally incurred and which is related to the financing of export, import or other trade transactions; 

 

 

	
             
 	
            3
 	
             
 
						

 

 

 

 

(d)  Lien granted upon or with respect to any assets hereafter acquired by the Company or any Subsidiary to secure the acquisition costs of such assets or to secure Indebtedness incurred solely for the purpose of financing the acquisition of such assets, including any Lien existing at the time of the acquisition of such assets as long as the maximum amount so secured shall not exceed the aggregate acquisition costs of all such assets or the aggregate Indebtedness incurred solely for the acquisition of such assets, as the case may be; 

(e)  Lien granted in connection with the Indebtedness of a Wholly-Owned Subsidiary owing to the Company or another Wholly-Owned Subsidiary; 

(f)  Lien existing on any asset or on any stock of any Subsidiary prior to the acquisition thereof by the Company or any Subsidiary as long as such Lien is not created in anticipation of such acquisition; 

(g)  Lien existing as of the date of the Indenture; 

(h)  Lien resulting from the Indenture or the Standby Purchase Agreement; 

(i)  Lien incurred in connection with the issuance of debt or similar securities of a type comparable to those already issued by the Company, on amounts of cash or cash equivalents on deposit in any reserve or similar account to pay interest on such securities for a period of up to 24 months as required by any Rating Agency as a condition to such Rating Agency rating such securities investment grade or as is otherwise consistent with market conditions at such time, as such conditions are satisfactorily demonstrated to the Trustee; 

(j)  Lien granted or incurred to secure any extension, renewal, refinancing, refunding or exchange (or successive extensions, renewals, refinancings, refundings or exchanges), in whole or in part, of or for any Indebtedness secured by Lien referred to in paragraphs (a) through (i) above (but not paragraph (c)), provided that such Lien does not extend to any other property, the principal amount of the Indebtedness secured by such Lien is not increased, and in the case of paragraphs (a), (b), and (c), the obligees meet the requirements of such paragraphs; and 

(k)  Lien in respect of Indebtedness the principal amount of which in the aggregate, together with all Liens not otherwise qualifying as the Company’s Permitted Liens pursuant to clauses (a) through (j) of this definition, does not exceed 15% of the Company’s consolidated total assets (as determined in accordance with U.S. GAAP) at any date as at which the Company’s balance sheet is prepared and published in accordance with applicable Law.

“Reference Treasury Dealer” means each of UBS Securities LLC and Morgan Stanley & Co. Incorporated or their affiliates which are primary United States government securities dealers and two other leading primary United States government securities dealers in New York City reasonably designated by the Company; provided, however, that if any of the foregoing shall cease to be a primary United States government securities dealer in New York 

 

 

	
             
 	
            4
 	
             
 
						

 

 

 

City (a “Primary Treasury Dealer”), the Company shall substitute therefore another Primary Treasury Dealer.

“Reference Treasury Dealer Quotation” means, 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 (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 3:30 pm New York time on the third business day preceding such redemption date.

 “Treasury Rate” means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity or interpolated maturity (on a day count basis) of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date.

ARTICLE 2

TERMS OF THE NOTES

Section 2.01.     General.  In accordance with Section 3.01 of the Original Indenture, the following terms relating to the Notes are hereby established:

(a)          Title:  The Notes shall constitute a series of Securities having the title “5.875% Global Notes due 2018.”

(b)          Aggregate Amount:  The aggregate principal amount of the Notes that may be initially authenticated and delivered under the First Supplemental Indenture shall be US$1,000,000,000.  As provided in the Original Indenture, the Company may, from time to time, without the consent of the Holders of Notes, issue Add On Notes having identical terms (including CUSIP, ISSN and other relevant identifying characteristics as the Notes), so long as, on the date of issuance of such Add On Notes: (i) no Default or Event of Default shall have occurred and then be continuing, or shall occur as a result of the issuance of such Add On Notes, (ii) such Add On Notes shall rank pari passu with the Notes and shall have identical terms,
conditions and benefits as the Notes and be part of the same series as the Notes, (iii) the Company and the Trustee shall have executed and delivered a further supplemental indenture to the Indenture providing for the issuance of such Add On Notes and reflecting such amendments to the Indenture as may be required to reflect the increase in the aggregate principal amount of the Notes resulting from the issuance of the Add On Notes, (iv) Petrobras and the Trustee shall have executed and delivered an amended Standby Purchase Agreement reflecting the increase in the aggregate principal amount of the Notes resulting from the issuance of the Add On Notes and (v) the Trustee shall have received all such opinions and other documents as it shall have requested, including an Opinion of Counsel stating that such Add On Notes are authorized and permitted by the Indenture and all conditions precedent to the issuance of such Add On Notes have been complied with by the Company and Petrobras.  All
Add On Notes issued hereunder will, when issued, be considered Notes for all purposes hereunder and will be subject to and take the benefit of all of the terms, conditions and provisions of this Indenture.

 

 

	
             
 	
            5
 	
             
 
						

 

 

 

 

(c)          Ranking:  The Notes (including the Add On Notes) shall be general senior unsecured and unsubordinated obligations of the Company and shall at all times rank pari passu among themselves and at least equal in right of payment with all of the Company’s other present and future unsecured and unsubordinated obligations from time to time outstanding that are not, by their terms, expressly subordinated in right of payment to the Notes.

(d)          Maturity:  The entire outstanding principal of the Notes shall be payable in a single installment on March 1, 2018 (the “Stated Maturity”).  No payments in respect of the principal of the Notes shall be paid prior to the Stated Maturity except in the case of the occurrence of an Event of Default and acceleration of the aggregate outstanding principal amount of the Notes, upon redemption prior to the Stated Maturity pursuant to Section 11.08 of the Original Indenture or pursuant to 2.01(l) and (m) hereof.

(e)          Interest:  Interest shall accrue on the Notes at the rate of 5.875% per annum until all required amounts due in respect of the Notes have been paid.  All interest shall be paid by the Company to the Trustee and distributed by the Trustee in accordance with this Indenture semiannually in arrears on March 1 and September 1 of each year (or, as provided in the Original Indenture, if such date is not a Business Day, the next succeeding Business Day following such day) during which any portion of the Notes shall be Outstanding (each, an “Interest Payment Date”), commencing on March 1, 2008, to the Person in whose name a Note is registered at the close of business on the preceding Regular Record Date
(which shall mean, with respect to any payment to be made on an Interest Payment Date, the Business Day that is ten Business Days prior to such Interest Payment Date.)  As provided in the Original Indenture, (i) interest shall be calculated based on a 360-day year of twelve 30-day months, (ii) payment of principal and interest and other amounts on the Notes will be made at the Corporate Trust Office of the Trustee in New York City, or such other paying agent office in the United States as the Company appoints, in the form provided for in Section 10.08 of the Original Indenture, (iii) all such payments to the Trustee shall be made by the Company by depositing immediately available funds in U.S. dollars one Business Day prior to the relevant Interest Payment Date to the Payment Account and (iv) so long as any of the Notes remain Outstanding, the Company shall maintain a paying agent in New York City.

(f)           Default Rate:  Upon the occurrence and during the continuation of an Event of Default, (i) interest on the outstanding principal amount of the Notes shall accrue on the Notes at a rate equal to 1.0% per annum above the interest rate on the Notes at that time (the “Default Rate”) and (ii) to the fullest extent permitted by law, interest shall accrue on the amount of any interest, fee, Additional Amounts, or other amount payable under the Indenture and the Notes that is not paid when due, from the date such amount was due until such amount shall be paid in full, excluding the date of such payment, at the Default Rate.

(h)          Payment Account:  On the Closing Date, the Trustee shall establish (and shall promptly notify the Company of the establishment of such account, including the relevant account numbers and other relevant identifying details) and, until the Notes and all accounts due in respect thereof have been paid in full, maintain a special purpose non-interest bearing trust account (the “Payment Account”) into which all payments required to be made by the Company under or with respect to the Notes shall be deposited.  The Company agrees that the Payment 

 

 

	
             
 	
            6
 	
             
 
						

 

 

 

Account shall be maintained in the name of the Trustee and under its sole dominion and control (acting on behalf of the Holders of the Notes) and used solely to make payments of principal, interest and other amounts from time to time due and owing on, or with respect to, the Notes.  No funds contained in the Payment Account shall be used for any other purpose or in any manner not expressly provided for herein nor shall the Company or any other Person have an interest therein or amounts on deposit therein.  All amounts on deposit in the Payment Account on any Interest Payment Date after the Trustee has paid all amounts due and owing to the holders of the Notes as of such Interest Payment Date shall be retained in the Payment Account and used by the Trustee to pay any amounts due and owing to the Holders of the Notes on the next succeeding Interest Payment Date.

(i)           Form and Denomination:  The Notes shall be issuable in whole in the registered form of one or more Global Notes (without coupons), in minimum denominations of US$2,000 and integral multiples of US$1,000 in excess thereof, and shall be transferable in integral multiples of US$2,000 and integral multiples of US$1,000 in excess thereof and the Depository for such Global Notes shall be The Depository Trust Company, New York, New York. 

(j)           Standby Purchase Agreement:  The Notes shall have the benefit of the Standby Purchase Agreement in the manner provided in Article 3 of this First Supplemental Indenture.

(k)          Rating:  The Notes can be issued without the requirement that they have any rating from a nationally recognized statistical rating organization.

(l)           Optional Early Redemption.  The Notes are subject to redemption at the Company’s option before the Stated Maturity in whole or in part, upon not less than 30 but no more than 60 days’ notice, at a Redemption Price equal to the greater of (A) 100% of the principal amount of such Notes and (B) the sum of the present values of the remaining scheduled payments of principal and interest thereon (exclusive of interest accrued to the date of redemption) discounted to the Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at, in each case, the Treasury Rate plus 25 basis points (the “Make Whole Amount”), plus in each case, accrued interest on the principal amount of such Notes to (but not
including) the date of redemption.

(m)         Early Redemption Solely for Tax Reasons.  Pursuant to Section 11.08 of the Original Indenture, the Notes may be redeemed at the option of the Company, in whole but not in part, at any time at a Redemption Price equal to the principal amount thereof plus accrued interest to the date fixed for redemption if as a result of any change in or amendment to the laws or regulations or ruling promulgated thereunder of the jurisdiction in which the Company is incorporated (or, in the case of a successor Person to the Company, of the jurisdiction in which such successor Person is organized or any political subdivision or taxing authority thereof or therein) or any change in the official application or interpretation of such laws, regulations or rulings, or any change in the
official application of or interpretation of, or any execution of or amendment to, any treaty or treaties affecting taxation to which such jurisdiction or such political subdivision or taxing authority (or such other jurisdiction or political subdivision or taxing 

 

 

	
             
 	
            7
 	
             
 
						

 

 

 

authority) is a party, which change, execution or amendment becomes effective on or after the date hereof (or in the case of a successor Person to the Company, the date on which such successor Person became such pursuant to Section 8.01 and 8.02 of the Original Indenture), the Company would be required to pay Additional Amounts pursuant to Section 10.10 of the Original Indenture.  For purposes of Section 11.08 of the Original Indenture, the reincorporation of the Company shall be treated as the adoption of a successor entity, provided, however, that redemption under Section 11.08 of the Original Indenture shall not be available if the reincorporation was performed in anticipation of a change in, execution of or amendment to any laws or treaties or the official application or interpretation of any laws or treaties of such new jurisdiction of incorporation that would result in an obligation to pay Additional Amounts.

(n)          Conversion:  The Notes will not be convertible into, or exchangeable for, any other securities.

Section 2.02.     Amendments to Article Five Relating to Events of Default.  (a) Restated Events of Default:  As it applies to the Notes, Section 5.01 of the Original Indenture shall be amended to read in its entirety as follows:

"Section 5.01  Events of Default

“Event of Default,” wherever used herein with respect to the Notes, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

1.            The Company shall fail to make any payment in respect of principal on any of the Notes whether on the Stated Maturity, upon redemption or prior to the Maturity or otherwise in accordance with the terms of the Notes and this Indenture, non-payment of which shall continue for a period of three calendar days and the Trustee shall not have otherwise received such amounts from Petrobras under the Standby Purchase Agreement, or otherwise by the end of such three calendar day period;

2.            The Company shall fail to make any payment in respect of any interest or other amounts due on or with respect to the Notes (including Additional Amounts, if any) in accordance with the terms of the Notes and this Indenture, non-payment of which shall continue for a period of 30 calendar days and the Trustee shall not have otherwise received such amounts from Petrobras under the Standby Purchase Agreement, or otherwise by the end of such 30 calendar day period;

3.            The Company or Petrobras shall fail to perform, or breach, any term, covenant, agreement or obligation contained in this Indenture or the Standby Purchase Agreement and such failure (other than any failure to make any payment under the Standby Purchase Agreement, for which there is no cure) is either incapable of remedy or continues for a period of 60 calendar days (inclusive of any time frame contained in any such term, covenant, agreement or obligation for compliance thereunder) after there has been received by the Company or Petrobras from the Trustee or the Holders of at least 

 

 

	
             
 	
            8
 	
             
 
						

 

 

 

25% in principal amount of the Outstanding Securities of that series a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a “Notice of Default” hereunder;

4.            The maturity of any Indebtedness of the Company, Petrobras or any Material Subsidiary in a total aggregate principal amount of US$100,000,000 or more is accelerated in accordance with the terms of that Indebtedness, it being understood that prepayment or redemption by the Company, Petrobras or the relevant Material Subsidiary of any Indebtedness is not acceleration for this purpose;

5.            One or more final and non-appealable judgments or final decrees is entered against the Company, Petrobras or any Material Subsidiary thereof involving in the aggregate a liability (not theretofore paid or covered by insurance) of US$100,000,000 (or its equivalent in another currency) or more, and all such judgments or final decrees shall not have been vacated, discharged or stayed within 120 calendar days after the rendering thereof;

6.            The Company, Petrobras or any Material Subsidiary thereof stops payment of, or is generally unable to pay, its debts as and when they become due except (i) as is otherwise expressly provided under this Indenture or the Standby Purchase Agreement, or (ii) in the case of a winding-up, dissolution or liquidation for the purpose of and followed by a consolidation, merger, conveyance or transfer, the terms of which shall have been approved by a resolution of a meeting of the Holders;

7.            Proceedings are initiated against the Company, Petrobras or any Material Subsidiary thereof under any applicable bankruptcy, reorganization, insolvency, moratorium or intervention law or law with similar effect, or under any other law for the relief of, or relating to, debtors, and any such proceeding is not dismissed or stayed within 90 days after the entering of such proceeding, or an administrator, receiver, trustee, manager, fiduciary, statutory manager, intervener or assignee for the benefit of creditors (or other similar official) is appointed to take possession or control of, or a distress, execution, attachment or sequestration or other process is levied, enforced upon, sued out or put in force against,
all or any material part of the undertaking, property, assets or revenues of the Company, Petrobras or any Material Subsidiary thereof and is not discharged or removed within 90 days;

8.            The Company, Petrobras or any Material Subsidiary thereof commences voluntarily or consents to judicial, administrative or other proceedings relating to it under any applicable bankruptcy, reorganization, insolvency, moratorium or intervention law or law with similar effect, or under any other law for the relief of, or relating to, debtors, or makes or enters into any composition, concordata or other similar arrangement with its creditors, or appoints or applies for the appointment of an administrator, receiver, trustee, manager, fiduciary, statutory manager, intervener or assignee for the benefit of creditors (or other similar official) to take possession or control of the whole or any material part of its
undertaking, property, assets or revenues, or takes any judicial, administrative or 

 

 

	
             
 	
            9
 	
             
 
						

 

 

 

other similar proceeding under any law for a readjustment or deferment of its Indebtedness or any part of it;

9.            An effective resolution is passed for, or any authorized action is taken by any court of competent jurisdiction, directing the winding-up, dissolution or liquidation of the Company, Petrobras or any Material Subsidiary thereof  (other than in any of the circumstances referred to as exceptions in paragraph (6) above);

10.          Any event occurs that under the laws of any relevant jurisdiction has substantially the same effect as any of the events referred to in any of paragraphs (6), (7), (8) or (9) of this Section 5.01; 

11.          This Indenture, the Notes, the Standby Purchase Agreement or any part thereof shall cease to be in full force and effect or binding and enforceable against the Company or Petrobras, it becomes unlawful for the Company or Petrobras to perform any material obligation under this Indenture, the Notes or the Standby Purchase Agreement, or the Company or Petrobras shall contest the enforceability of this Indenture, the Notes or the Standby Purchase Agreement or deny that it has liability under this Indenture, the Notes or the Standby Purchase Agreement; 

12.          Petrobras fails to retain at least 51% direct or indirect ownership of the outstanding voting and economic interests (equity or otherwise) of and in the Company.”

	
       
	
    Section 2.03.
	
    Amendments to Article 10 Relating to Covenants. 

(a)          Statement of Officers as to Default and Notices of Events of Default:  As it applies to the Notes, Section 10.05 of the Original Indenture shall be amended by deleting the second sentence in its entirety and replacing it with the following:

“Within 10 calendar days (or promptly with respect to Events of Default pursuant to Sections 5.01(4), 5.01(5), 5.01(6), 5.01(7), 5.01(8), 5.01(9) and 5.01(10) hereunder and in any event no later than 10 calendar days) after the Company becomes aware or should reasonably become aware of the occurrence of an Event of Default pursuant to Section 5.01 hereunder, the Company shall provide notice to the Trustee of such occurrence, accompanied by an Officer’s Certificate of the Company setting forth the details thereof.”

(b)          Additional Covenants Applicable to the Notes:  As it applies to the Notes, Article 10 of the Original Indenture shall be amended to include the following:

"Section 10.11     Use of Proceeds.

The Company will use the proceeds from the offer and sale of the Notes after the deduction of any commissions principally for general corporate purposes, including the financing of the purchase of oil product imports and the repayment of existing trade-related debt and intercompany loans.  The Company may also lend the proceeds from the offer and sale of the Notes to Petrobras for use for its general corporate purposes.

 

 

	
       
	
      10
	
       

						

 

 

Section 10.12      Negative Pledge

So long as any Note remains Outstanding, the Company will not create or permit any Lien, other than a Permitted Lien, on any of the Company’s assets to secure (a) any of the Company’s Indebtedness or (b) the Indebtedness of any other Person, unless the Company contemporaneously creates or permits such Lien to secure equally and ratably the Company’s obligations under the Notes and this Indenture or the Company provides such other security for the Notes as is duly approved by a resolution of the Holders of the Notes in accordance with this Indenture.  In addition, the Company will not allow any of the Company’s Subsidiaries to create or permit any Lien, other than a Permitted Lien, on any of its assets to secure (a) any of the Company’s Indebtedness, (b) any of its own Indebtedness or (c) the Indebtedness of any other Person, unless it
  contemporaneously creates or permits the Lien to secure equally and ratably the Company’s obligations under the Notes and this Indenture or the Company provides such other security for the Notes as is duly approved by a resolution of the Holders of the Notes in accordance with the Indenture.

Section 10.13    Currency Rate Indemnity.  (a)  The Company shall (to the extent lawful) indemnify the Trustee and the Holders of the Notes and keep them indemnified against:

 (i)      in the case of nonpayment by the Company of any amount due to the Trustee, on behalf of the Holders of the Notes, under the Indenture any loss or damage incurred by any of them arising by reason of any variation between the rates of exchange used for the purposes of calculating the amount due under a judgment or order in respect thereof and those prevailing at the date of actual payment by the Company; and 

 (ii)       any deficiency arising or resulting from any variation in rates of exchange between (i) the date as of which the local currency equivalent of the amounts due or contingently due under the Indenture or in respect of the Notes is calculated for the purposes of any bankruptcy, insolvency or liquidation of the Company, and (ii) the final date for ascertaining the amount of claims in such bankruptcy, insolvency or liquidation.  The amount of such deficiency shall be deemed not to be increased or reduced by any variation in rates of exchange occurring between the said final date and the date of any bankruptcy, insolvency or liquidation or any distribution of assets in connection therewith. 

(b)          The Company agrees that, if a judgment or order given or made by any court for the payment of any amount in respect of its obligations hereunder is expressed in a currency (the “Judgment Currency”) other than U.S. dollars (the “Denomination Currency”), it will indemnify the relevant Holder and the Trustee against any deficiency arising or resulting from any variation in rates of exchange between the date at which the amount in the Denomination Currency is notionally converted into the amount in the Judgment Currency for the purposes of such judgment or order and the date of actual payment thereof.  

 

 

	
       
	
      11
	
       

						

 

 

  

(c)          The above indemnities shall constitute separate and independent obligations of the Company from its obligations under the Indenture, will give rise to separate and independent causes of action, will apply irrespective of any indulgence granted from time to time and will continue in full force and effect notwithstanding any judgment or the filing of any proof or proofs in any bankruptcy, insolvency or liquidation of the Company for a liquidated sum or sums in respect of amounts due under the Indenture or the Notes.”

Section 2.04.   Application of the Article of the Indenture Regarding Defeasance and Covenant Defeasance.  The provisions of Sections 14.01, 14.02 and 14.03 of the Original Indenture shall apply to the Notes.

 

ARTICLE 3

STANDBY PURCHASE AGREEMENT

Section 3.01.     Execution.  The Trustee is hereby authorized and directed to execute and deliver the Standby Purchase Agreement and to perform all of its duties and obligations thereunder.  

Section 3.02.     Enforcement.  The Trustee shall enforce the provisions of the Standby Purchase Agreement against Petrobras in accordance with the terms thereof and the terms of the Indenture and Petrobras, by execution of this First Supplemental Indenture, and by so agreeing to become a party to the Indenture, agrees that each Holder of the Notes shall have direct rights under the Standby Purchase Agreement as if it were a party thereto

.Section 3.03.     Petrobras hereby (i) acknowledges and agrees to be bound by the provisions of Sections 1.08 and 3.14 of the Original Indenture and (ii) confirms that (A) its obligations under the Standby Purchase Agreement shall be issued pursuant to the Indenture and (B) it intends for the Holders of the Notes, in addition to those rights under the Standby Purchase Agreement as provided therein, to be entitled to the benefits of the Indenture with respect to their rights against Petrobras under the Standby Purchase Agreement.

Section 3.04.     Definition of the Term “Securities.” For all purposes relating to the Notes, the term “Securities” in Section 1.01 of the Original Indenture shall be amended by inserting the following at the end thereof:  “All references herein to any Securities shall be deemed to include the rights of the Holder thereof under any standby purchase agreement or guarantee arrangement entered into by Petrobras with the Trustee in connection with the issuance of such Securities pursuant to Section 3.14 hereof, which are an integral part of such Securities.”

ARTICLE 4

MISCELLANEOUS

Section 4.01.   Effect of the First Supplemental Indenture.  This First Supplemental Indenture supplements the Indenture and shall be a part, and subject to all the terms, thereof.  The Original Indenture, as supplemented and amended by this First Supplemental Indenture, is in 

 

 

	
       
	
      12
	
       

						

 

 

 

all respects ratified and confirmed, and the Original Indenture and this First Supplemental Indenture shall be read, taken and construed as one and the same instrument.  All provisions included in this First Supplemental Indenture supersede any conflicting provisions included in the Original Indenture unless not permitted by law.  The provisions of this First Supplemental Indenture are intended to apply solely to the Notes and the Holders thereof and shall not apply to any future issuance of securities by the Company (other than any Add On Notes as provided herein) and all references to provisions of the Original Indenture herein amended and restated or otherwise modified shall have effect solely with respect to the Notes contemplated in this First Supplemental Indenture.  The Trustee accepts the trusts created by the Original Indenture, as supplemented by this First Supplemental Indenture, and agrees to
perform the same upon the terms and conditions of the Original Indenture, as supplemented by this First Supplemental Indenture.

Section 4.02.   Governing Law.  This First Supplemental Indenture shall be governed by, and construed in accordance with, the laws of the State of New York.

Section 4.03.   Trustee Makes No Representation.  The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this First Supplemental Indenture or for or in respect of the recitals contained herein, all of which are made solely by the Company and Petrobras.

Section 4.04.   Effect of Headings.  The section headings herein are for convenience only and shall not affect the construction of this First Supplemental Indenture. 

Section 4.05.   Counterparts.  The parties may sign any number of copies of this First Supplemental Indenture.  Each signed copy shall be an original, but all of them shall represent the same agreement.

[SIGNATURE PAGE TO FOLLOW IMMEDIATELY]

 

	
       
	
      13
	
       

						

 

 

  

IN WITNESS WHEREOF, the parties have caused this First Supplemental Indenture to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written.

 

	 	PETROBRAS INTERNATIONAL FINANCE COMPANY
	 	By: /s/ Theodore M. Helms       
	 	 	Name: Theodore M. Helms 

  Title:   Attorney-in-Fact 
	 	 
	 	PETRÓLEO BRASILEIRO S.A. – PETROBRAS
	 	By: /s/ Theodore M. Helms       
	 	 	Name: Theodore M. Helms 

    Title:    Executive Manager 
	 	 	 
	 	WITNESSES:
	 	1. /s/  David Flechner               
	 	 	Name: David Flechner 
	 	2. /s/ Iris H. Castellano             
	 	 	Name:  Iris H. Castellano 

 

 

  

 

	
              
 	
            1
 	
             
 

 

 

  

	
      STATE OF NEW YORK
	
      )
	
       

	
       
	
      )
	
      ss:

	
      COUNTY OF NEW YORK
	
      )
	
       

	

On this 1st day of November, 2007, before me personally cameTheodore Helms, to me known, who, being by me duly sworn, did depose and say that he is the Attorney-in-Fact of Petrobras International Finance Company - PIFCo, a corporation described in and which executed the foregoing instrument and acknowledge that said instrument to be the free act and deed of said entity.

On this 1st day of November, 2007, before me personally came Theodore Helms, to me known, who, being by me duly sworn, did depose and say that he is the Attorney-in-Fact of Petróleo Brasileiro S.A. - Petrobras, a corporation described in and which executed the foregoing instrument and acknowledge that said instrument to be the free act and deed of said entity.

On this 1st day of November, 2007, before me personally came David Flechner and Iris Castellano to me personally known, who being by me sworn, did depose and say that they signed their names to the foregoing instrument as witnesses.

 

	[Notarial Seal]	/s/ Risa Laurie Chubinsky  

        Notary Public

        COMMISSION EXPIRES 

	 	Risa Laurie Chubinsky

      Notary Public, State of New York 

      No. 01CH6172040

      Qualified in Kings County 

      Certificate Filed in New York County

      Commission Expires Aug. 6, 2011 

                

 

 

 

  

 

	
        
	
      2
	
       

 

 

 

  

	 	THE BANK OF NEW YORK, as Trustee 
	 	By: /s/ John T. Needham, Jr.     
	 	 	Name: John T. Needham, Jr.

      Title:   Vice President 
	 	 
	 	WITNESSES:
	 	1. /s/ Kevin F. Binnie                
	 	 	Name: Kevin F. Binnie 

      Title:   Vice President  
	 	2. /s/ Lucia Jaklitsch                  
	 	 	Name: Lucia Jaklitsch

      Title:   Vice President  

 

  

 

 

 

 

 

	
              
 	
            3
 	
             
 

 

 

  

	
      STATE OF NEW YORK
	
      )
	
       

	
       
	
      )
	
      ss:

	
      COUNTY OF NEW YORK
	
      )
	
       

	

On this 1st day of November, 2007 before me, a notary public within and for said county, personally appeared Kevin F. Binnie, to me personally known who being duly sworn, did say that John T. Meedham, Jr. is a Vice President of The Bank of New York, one of the persons described in and which executed the foregoing instrument, and acknowledge said instrument to be the free act and deed of said corporation.

On this 1st day of November, 2007, before me personally came Kevin F. Binnie and Lucia Jaklitsch to me personally known, who being by me sworn, did depose and say that they signed their names to the foregoing instrument as witnesses.

 

	 	/s/ Emily Fayan                                                 

        Notary Public

	 	Emily Fayan 

      Notary Public, State of New York 

      No. 01FA4737006

      Qualified in Kings County 

      Certificate Filed in New York County

      Commission Expires Dec. 31, 2009 

 

 

	
              
 	
            4
 	
             
 

 

 

  

Exhibit A

Form of 5.875% Global Note due 2018 

GLOBAL NOTE

 

THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE THEREOF.  THIS NOTE MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A NOTE REGISTERED, AND NO TRANSFER OF THIS NOTE IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.

 

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT AND SUCH CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE IS REGISTERED IN THE NAME OF CEDE & CO., OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL, SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 

 

	
              
 	
            5
 	
             
 

 

 

  

PETROBRAS INTERNATIONAL FINANCE COMPANY

 

5.875% GLOBAL NOTES DUE 2018

No. 1

CUSIP No.: 71645WAM3

ISIN No.: US71645WAM38

Common Code: 032961614

Principal Amount:  US$500,000,000

Initial Issuance Date:  November 1, 2007

This Note is one of a duly authorized issue of notes of PETROBRAS INTERNATIONAL FINANCE COMPANY, an exempted company with limited liability organized under the laws of the Cayman Islands (the “Issuer”), designated as its 5.875% Global Notes Due 2018 (the “Notes”), issued in an initial aggregate principal amount of US$1,000,000,000 under the First Supplemental Indenture (the “First Supplemental Indenture”), effective as of November 1, 2007, by and among the Issuer, The Bank of New York, a New York banking corporation, as Trustee (the “Trustee”), and Petróleo Brasileiro S.A. - PETROBRAS, a mixed capital company (sociedade de economia
mista) organized under the laws of Brazil (“Petrobras”), to the Indenture, dated as of December 15, 2006 (the “Original Indenture”, and as supplemented by the First Supplemental Indenture and any further supplements thereto with respect to the Notes, the “Indenture”), by and among the Issuer and the Trustee. Reference is hereby made to the Indenture for a statement of the respective rights, limitations of interests, benefits, obligations and duties thereunder of the Issuer, the Trustee and the Holders, and of the terms upon which the Notes are, and are to be, authenticated and delivered.  All capitalized terms used in this Note which are defined in the Indenture and not otherwise defined herein shall have the meanings assigned to them in the Indenture.

The Issuer, for value received, hereby promises to pay to Cede & Co. or its registered assigns, as nominee of The Depository Trust Company (“DTC”) and the Holder of record of this Note, the principal amount specified above in U.S. dollars on March 1, 2018 (or earlier as provided for in the Indenture) upon presentation and surrender hereof, at the office or agency of the Trustee referred to below.

As provided for in the Indenture, the Issuer promises to pay interest on the outstanding principal amount hereof, from the Closing Date, semi-annually on March 1 and September 1 of each year (or if such date is not a Business Day, the next succeeding Business Day following such day), commencing March 1, 2008 (each such date, an “Interest Payment Date”), at a rate equal to 5.875% per annum.  Interest payable, and punctually paid or duly provided for, on this Note on any Interest Payment Date will, as provided in the Indenture, be paid in U.S. dollars to the Person in whose name this Note (or one or more predecessor Notes) is registered at the close of business on the relevant Regular Record Date for such interest payment.

Payment of the principal of and interest on this Note will be payable by wire transfer to a U.S. dollar account maintained by the Holder of this Note as reflected in the Security Register of the Trustee.  In the event the date for any payment of the principal of or interest on any Note is not a Business Day, then payment will be made on the next Business Day 

 

 

	
              
 	
            6
 	
             
 

 

 

 

with the same force and effect as if made on the nominal date of any such date for such payment and no additional interest will accrue on such payment as a result of such payment being made on the next succeeding Business Day.  Interest accrued with respect to this Note shall be calculated based on a 360-day year of twelve 30-day months.

The Notes are subject to redemption by the Issuer on the terms and conditions specified in the Indenture.

This Note does not purport to summarize the Indenture, and reference is made to the Indenture for information with respect to the respective rights, limitations of interests, benefits, obligations and duties thereunder of the Issuer, the Trustee and the Holders.

If an Event of Default shall occur and be continuing, the outstanding principal amount of all the Notes may become or may be declared due and payable in the manner and with the effect provided in the Indenture.

Modifications of the Indenture may be made by the Issuer and the Trustee only to the extent and in the circumstances permitted by the Indenture.

The Notes shall be issued only in fully registered form, without coupons.  Notes shall be issued in the form of beneficial interests in one or more global securities in denominations of US$2,000 and integral multiples of US$1,000 in excess thereof.

Prior to and at the time of due presentment of this Note for registration of transfer, the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the Person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note is overdue, and neither the Issuer, the Trustee nor any agent thereof shall be affected by notice to the contrary.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

	
              
 	
            7
 	
             
 

 

 

  

Unless the certificate of authentication hereon has been duly executed by the Trustee by manual signature, this Note shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose.

THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK.

IN WITNESS WHEREOF, the Issuer has caused this Note to be duly executed.

 

	 	PETROBRAS INTERNATIONAL 

FINANCE COMPANY
	 	By:                                            
	 	 	Name:

      Title: 
	 	 
	 	WITNESSES:
	 	1.                                                
	 	 	Name:
	 	2.                                                
	 	 	Name:

 

 

 

	
              
 	
            8
 	
             
 

 

 

  

PETROBRAS INTERNATIONAL FINANCE COMPANY

 

5.875% GLOBAL NOTES DUE 2018

No. 2

CUSIP No.: 71645WAM3ISIN

No.: US71645WAM38

Common Code: 032961614

Principal Amount:  US$500,000,000

Initial Issuance Date:  November 1, 2007

This Note is one of a duly authorized issue of notes of PETROBRAS INTERNATIONAL FINANCE COMPANY, an exempted company with limited liability organized under the laws of the Cayman Islands (the “Issuer”), designated as its 5.875% Global Notes Due 2018 (the “Notes”), issued in an initial aggregate principal amount of US$1,000,000,000 under the First Supplemental Indenture (the “First Supplemental Indenture”), effective as of November 1, 2007, by and among the Issuer, The Bank of New York, a New York banking corporation, as Trustee (the “Trustee”), and Petróleo Brasileiro S.A. - PETROBRAS, a mixed capital company (sociedade de economia
mista) organized under the laws of Brazil (“Petrobras”), to the Indenture, dated as of December 15, 2006 (the “Original Indenture”, and as supplemented by the First Supplemental Indenture and any further supplements thereto with respect to the Notes, the “Indenture”), by and among the Issuer and the Trustee. Reference is hereby made to the Indenture for a statement of the respective rights, limitations of interests, benefits, obligations and duties thereunder of the Issuer, the Trustee and the Holders, and of the terms upon which the Notes are, and are to be, authenticated and delivered.  All capitalized terms used in this Note which are defined in the Indenture and not otherwise defined herein shall have the meanings assigned to them in the Indenture.

The Issuer, for value received, hereby promises to pay to Cede & Co. or its registered assigns, as nominee of The Depository Trust Company (“DTC”) and the Holder of record of this Note, the principal amount specified above in U.S. dollars on March 1, 2018 (or earlier as provided for in the Indenture) upon presentation and surrender hereof, at the office or agency of the Trustee referred to below.

As provided for in the Indenture, the Issuer promises to pay interest on the outstanding principal amount hereof, from the Closing Date, semi-annually on March 1 and September 1 of each year (or if such date is not a Business Day, the next succeeding Business Day following such day), commencing March 1, 2008 (each such date, an “Interest Payment Date”), at a rate equal to 5.875% per annum.  Interest payable, and punctually paid or duly provided for, on this Note on any Interest Payment Date will, as provided in the Indenture, be paid in U.S. dollars to the Person in whose name this Note (or one or more predecessor Notes) is registered at the close of business on the relevant Regular Record Date for such interest payment.

Payment of the principal of and interest on this Note will be payable by wire transfer to a U.S. dollar account maintained by the Holder of this Note as reflected in the Security Register of the Trustee.  In the event the date for any payment of the principal of or interest on any Note is not a Business Day, then payment will be made on the next Business Day 

 

 

	
              
 	
            9
 	
             
 

 

 

 

with the same force and effect as if made on the nominal date of any such date for such payment and no additional interest will accrue on such payment as a result of such payment being made on the next succeeding Business Day.  Interest accrued with respect to this Note shall be calculated based on a 360-day year of twelve 30-day months.

The Notes are subject to redemption by the Issuer on the terms and conditions specified in the Indenture.

This Note does not purport to summarize the Indenture, and reference is made to the Indenture for information with respect to the respective rights, limitations of interests, benefits, obligations and duties thereunder of the Issuer, the Trustee and the Holders.

If an Event of Default shall occur and be continuing, the outstanding principal amount of all the Notes may become or may be declared due and payable in the manner and with the effect provided in the Indenture.

Modifications of the Indenture may be made by the Issuer and the Trustee only to the extent and in the circumstances permitted by the Indenture.

The Notes shall be issued only in fully registered form, without coupons.  Notes shall be issued in the form of beneficial interests in one or more global securities in denominations of US$2,000 and integral multiples of US$1,000 in excess thereof.

Prior to and at the time of due presentment of this Note for registration of transfer, the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the Person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note is overdue, and neither the Issuer, the Trustee nor any agent thereof shall be affected by notice to the contrary.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

	
              
 	
            10
 	
             
 

 

 

  

 

	 	
      STATE OF NEW YORK
	
      )
	
       

	 	
       
	
      )
	
                ss:

	 	
      COUNTY OF NEW YORK
	
      )
	
       

		

On this 1st day of November, 2007, before me personally came __________, to me known, who, being by me duly sworn, did depose and say that he is the _______________ of Petrobras International Finance Company, a corporation described in and which executed the foregoing instrument and acknowledges that said instrument to be the free act and deed of said entity.

On this 1st day of November, 2007, before me personally came _____________ and ______________ to me personally known, who being by me sworn, did depose and say that they signed their names to the foregoing instrument as witnesses.

[Notarial Seal]

______________________

Notary Public

COMMISSION EXPIRES

 

 

	
              
 	
            11
 	
             
 

 

 

 

  

CERTIFICATE OF AUTHENTICATION

This is one of the Securities of the series designated therein referred to in the within mentioned Indenture.

Dated:  November 1, 2007

The Bank of New York

As Trustee

By:  ____________________

       Name: 

       Title: Authorized Officer

  

 

	
              
 	
            12
 	
             
 

 

 

  

ASSIGNMENT FORM

For value received

hereby sells, assigns and transfers unto

(Please insert social security or

other identifying number of assignee)

 

(Please print or type name and address,including zip code, of assignee:)

the within Note and does hereby irrevocably constitute and appoint Attorney to transfer the Note on the books of the Note Registrar with full power of substitution in the premises.

 

	
            Date:
 	
            Your Signature:
 

(Sign exactly as your name

appears on the face of this Note)

 

 

 

	
              
 	
            13
 	
             
 

 

 

 

  

Exhibit B

Form of Standby Purchase Agreement 

 

 

  [SEE EXHIBIT 4.1 TO THIS FORM 6-K] 

 

	
              
 	
            14(English translation)

 

AGREEMENT CONCERNING

ALLOCATION OF THE STOCK ACQUISITION RIGHTS 

OF SONY CORPORATION

FOR THE FISCAL YEAR 2007

 

SONY CORPORATION (hereinafter referred to as the “Corporation”) and ___________________ (hereinafter referred to as the “Qualified Person”) enter into this Agreement as follows in connection with the allocation of the stock acquisition rights (hereinafter referred to as the “Stock Acquisition Rights”) to be issued by the Corporation pursuant to the provisions of the terms and conditions of the Stock Acquisition Rights (hereinafter referred to as the “Terms and Conditions”) set forth in Exhibit 1 attached hereto and pursuant to the special resolution adopted at the 90th Ordinary General Meeting of Shareholders held on June 21, 2007 and the resolution adopted at the meeting of the Board of Directors held on October 25, 2007:

 

	
      Article 1
 	
  (Purpose)
 

The primary purpose of allocating the Stock Acquisition Rights to the Qualified Person is to give the Qualified Person an incentive to contribute towards the improvement of the Sony Group’s business performance and thereby improve such business performance by making the economic interest, which the Qualified Person will receive, correspond to the business performance of the Corporation.

 

	
      Article 2
 	
  (Restrictions under the Terms and Conditions and this Agreement)
 

The Stock Acquisition Rights shall be subject to the Terms and Conditions and, further, exercise or disposition of the Stock Acquisition Rights shall be subject to certain conditions and restrictions provided for in this Agreement (including the exhibits).

 

	
      Article 3
 	
  (Subscription for and Allocation of the Stock Acquisition Rights)
 

The Qualified Person hereby applies for the subscription for      Stock Acquisition Rights issued in accordance with the Terms and Conditions, and pursuant to this Agreement, the Corporation allocates such number of the Stock Acquisition Rights to the Qualified Person in accordance with the following terms on November 14, 2007 (hereinafter referred to as the “Allotment Date”).

 

	
       
	
      (2)
	Class and number of shares to be issued or transferred upon exercise of each Stock Acquisition Right:
	 	 	100 shares of common stock of the Corporation
	 	 	In the event that the Corporation conducts a stock split (including free distribution of shares (musho-wariate)) or a consolidation of the shares of common stock of the Corporation, the number of shares to be issued or transferred upon exercise of each Stock Acquisition Right (hereinafter referred to as the “Number of Granted Shares”) shall be adjusted in accordance with the following formula:

	
            Number

of Granted Shares after adjustment
 	
            =
 	
            Number of 
 Granted Shares
 before Adjustment
 	
            x
 	
            Ratio of split or

consolidation
 

  	 	 	Provided, however, that such adjustment shall be made only with respect to the Number of Granted Shares for the Stock Acquisition Rights which have not been exercised at the time of the adjustment. Any fraction less than one (1) share resulting from the adjustment shall be disregarded. 
	
       
 	
      (3)
 	
  Payment in exchange for Stock Acquisition Rights:
 
	 	 	The Stock Acquisition Rights are issued without payment of any consideration to the Corporation.
	 	(4)	Amount to be paid in per share to be issued or transferred upon exercise of the Stock Acquisition Rights (hereinafter referred to as the “Exercise Price”) is initially:
	 	 	5,514 yen
	 	 	Provided, however, that if the closing price of shares of common stock of the Corporation in the regular trading thereof on the Tokyo Stock Exchange (hereinafter referred to as the “Closing Price”) on the Allotment Date (if there is no Closing Price on such date, the Closing Price on the immediately preceding trading day) is higher than 5,514 yen, then the amount equal to the Closing Price on the Allotment Date shall be the initial Exercise Price. In this case, the Corporation shall notify such initial Exercise Price to the Qualified Person. The Exercise Price may be adjusted pursuant to the provisions of the Terms and Conditions.
	 	(5)	Period during which the Stock Acquisition Rights may be exercised:
	 	 	As provided for in Exhibit 2 attached hereto
	Article 4 	 (Corporation and its Shares)
	 	(1)	Trade name of the Corporation:
	 	 	SONY CORPORATION

 

 

 

 

- 2 -

 

	
       
 	
      (2)
 	
  Total number of shares authorized to be issued by the Corporation:
 
	 	 	3,600,000,000 shares
	 	
        (3)
	
        Number of shares constituting one (1) unit of shares:

	 	 	100 shares
	 	
        (4)
	
        Transfer Agent

	 	 	Mitsubishi UFJ Trust and Banking Corporation
	 	 	4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo
	 	 	(Business office)	Mitsubishi UFJ Trust and Banking Corporation
	 	 	 	Corporate Agency Division
	 	 	 	10-11, Higashisuna 7-chome, Koutou-ku, Tokyo

 

	
      Article 5
 	
  (Restrictions on and Conditions for Exercise of the Stock Acquisition Rights and Prohibition of Disposition)
 

1.          Notwithstanding Item (5) of Article 3 above, one-third of the aggregate number of the Stock Acquisition Rights allocated to the Qualified Person (any fraction less than one (1) Stock Acquisition Right shall be disregarded) (hereinafter referred to as the “First Exercisable Portion”) is exercisable as from and including the commencement date of the period provided for in Item (5) of Article 3 (hereinafter referred to as the “Commencement Date of Exercisable Period”), half of the number of the Stock Acquisition Rights after deduction of the First Exercisable Portion from the aggregate number of the Stock Acquisition Rights allocated to such Qualified Person (any fraction less than one (1) Stock Acquisition Right shall be disregarded) (hereinafter referred to as the “Second Exercisable
Portion”) is exercisable as from and including November 14, 2009 and the balance of the Stock Acquisition Rights after deduction of the First Exercisable Portion and the Second Exercisable Portion from the aggregate number of the Stock Acquisition Rights allocated to such Qualified Person is exercisable as from and including November 14, 2010.

2.          In case that the Qualified Person forfeits either status as a director, corporate executive officer or employee of the Corporation or of group companies of the Corporation (subsidiaries and affiliates of the Corporation as defined in the “Rules Concerning Terminology, Form and Method of Preparation of Financial Statements, etc. under the Japanese Financial Products Trading Law”, hereinafter collectively referred to as the “Sony Group Companies”) by falling under any of the following items, the exercise of the Stock Acquisition Rights shall be subject to the restrictions provided for in such following item; provided, however, that in no case any Stock Acquisition Rights may be exercised after the period provided for in Item (5) of Article 3.

	
             
 	
            (1)
 	
            In case that the Qualified Person is subject to punitive dismissal or resignation under instruction pursuant to the rules of employment of the Corporation or of the Sony Group Companies or removed from office:
 
	 	 	The Qualified Person may not exercise the Stock Acquisition Rights on and after the day on which he/she forfeits the status as a director, corporate executive 

 

 

- 3 -

 

 

	 	 	officer or employee of the Corporation or of the Sony Group Companies (hereinafter referred to as the “Status Forfeit Date”);
	
       
 	
      (2)
 	
  In case that the Qualified Person ceases to be a director, corporate executive officer or employee of the Corporation or of the Sony Group Companies due to his/her own death:
 
	 	 	Subject to the provision of Article 7, the heir of the Qualified Person may exercise the Stock Acquisition Rights which are exercisable pursuant to Paragraph 1 of this Article as of the Status Forfeit Date (hereinafter referred to as the “Exercisable Stock Acquisition Rights”) until and including the day on which one (1) year after the Status Forfeit Date elapses, but may not exercise the Stock Acquisition Rights which are not exercisable pursuant to Paragraph 1 of this Article as of the Status Forfeit Date (hereinafter referred to as the “Unexercisable Stock Acquisition Rights”) on and after the Status Forfeit Date; provided, however, that if the Corporation allows the heir of the Qualified Person to exercise the Unexercisable Stock Acquisition Rights, all of the Unexercisable Stock Acquisition Rights shall become exercisable on the Status Forfeit Date (or the Commencement Date of Exercisable Period, if the Status Forfeit Date falls on a day before the Commencement Date of Exercisable Period) and the heir of the Qualified Person may exercise the Unexercisable Stock Acquisition Rights until and including the day on which one (1) year after the Status Forfeit Date elapses subject to the provision of Article 7; and
	 	
        (3)
	
        In case that the Qualified Person forfeits the status as a director, corporate executive officer or employee of the Corporation or of the Sony Group Companies due to any other events:

	 	 	The Qualified Person may exercise the Exercisable Stock Acquisition Rights until and including the day on which one (1) year after the Status Forfeit Date elapses, but may not exercise the Unexercisable Stock Acquisition Rights on and after the Status Forfeit Date; provided, however, that if the Corporation allows the Qualified Person to exercise the Unexercisable Stock Acquisition Rights, all of the Unexercisable Stock Acquisition Rights shall become exercisable on the Status Forfeit Date (or the Commencement Date of Exercisable Period, if the Status Forfeit Date falls on a day before the Commencement Date of Exercisable Period) and the Qualified Person may exercise the Unexercisable Stock Acquisition Rights until and including the day on which one (1) year after the Status Forfeit Date elapses.
	3.          The Qualified Person may not exercise the Stock Acquisition Rights in any of the following cases:
	 	
        (1)
	
        In case that the Qualified Person works for a competitor of the Corporation or of the Sony Group Companies as such competitor’s officer, employee or consultant, and any of the designated Representative Corporate Executive Officer(s) of the Corporation determines not to permit the exercise by such Qualified Person of the Stock Acquisition Rights allocated to such Qualified Person.

 

 

- 4 -

 

	
       
 	
      (2)
 	
  In case that the Qualified Person is regarded by the Corporation to have performed any act of disloyalty against the Corporation or the Sony Group Companies.
 
	 	
        (3)
	
        In case that the Qualified Person violates any provision of this Agreement.

4.          The Qualified Person may not be authorized to transfer, pledge or otherwise dispose of all or part of the Stock Acquisition Rights.

5.          In no circumstances shall any Qualified Person request the Corporation to purchase the Stock Acquisition Rights held by him/her.

 

	
      Article 6
 	
  (Procedures for Exercising the Stock Acquisition Rights)
 

Procedures for exercising the Stock Acquisition Rights shall be provided for in the Terms and Conditions and Exhibit 2 attached hereto, and in addition, detailed matters concerning such procedures shall be provided for in a “Guide to the Sony Stock Option Program” separately provided and delivered by the Corporation to the Qualified Person no later than the Commencement Date of Exercisable Period.

 

	
      Article 7
 	
  (Inheritance of the Stock Acquisition Rights)
 

1.          In case that the Qualified Person dies, the heir of such Qualified Person may, pursuant to this Article, other provisions of this Agreement and conditions to be provided separately by the Corporation, succeed to and exercise the outstanding Stock Acquisition Rights; provided, however, that the heir of such Qualified Person may not exercise the Stock Acquisition Rights if such Qualified Person has given a prior written notice to the Corporation in the form prescribed by the Corporation to the effect that such Qualified Person does not allow the heir to exercise the Stock Acquisition Rights.  In case that the Qualified Person dies after he/she forfeits the status as a director, corporate executive officer or employee of the Corporation or of the Sony Group Companies due to any events provided for in each Item
of Article 5, Paragraph 2 (excluding Item (2)), the heir of such Qualified Person may exercise the Stock Acquisition Rights during the period from and including such Qualified Person’s Status Forfeit Date to and including the day on which the exercisable period provided for in the said each Item elapses, to the extent that such Qualified Person may exercise as provided for in the said each Item; provided, however, that in no case any Stock Acquisition Rights may be exercised after the period provided for in Item (5) of Article 3.

2.          In case that there are more than one heir of the Qualified Person, the heirs must designate one heir to succeed to the Stock Acquisition Rights (hereinafter referred to as the “Successor”).

3.          In case that the Successor dies, any heir of the Successor may not exercise the Stock Acquisition Rights.

4.          Heirs of the Qualified Person must, in cooperation, file with or submit to the Corporation the following matters and documents immediately after the commencement of the inheritance:

 

- 5 -

 

	 	(1)	Certified copy of family register, etc. (Those issued within three (3) months or less are required);
	
             
 	
            (2)
 	
      Seal registration certificate of the heirs (Those issued within three (3) months or less are required);
 
	
         
	
        (3)
	
        Legacy division agreement or any other similar document necessary to certify the division of the legacy;

	
         
	
        (4)
	
        Document to verify the name and address of the Successor or in case that the Successor resides outside Japan, his/her contact address in Japan; and

	
         
	
        (5)
	
        Any other matters or documents designated by the Corporation.

5.          In case that no agreement in respect of the division of the legacy is reached between or among the heirs of the Qualified Person, heirs of the Qualified Person shall forthwith designate their representative and notify the Corporation to such effect.  In such case, the representative of the heirs shall file with or submit to the Corporation the matters and documents mentioned in the preceding Paragraph as soon as an agreement is reached.

6.          Each provision, excluding this Article, of this Agreement shall be applicable to the Successor to the extent of their meaning.

 

	
      Article 8
 	
  (Taxes and Expenses)
 

The Qualified Person shall pay all taxes or other governmental charges, which may be imposed in connection with the exercise of the Stock Acquisition Rights, at such Qualified Person’s own expense and responsibility.  This shall apply to all costs and expenses that may arise in connection with the exercise of the Stock Acquisition Rights.

 

	
      Article 9
 	
  (Compliance with Financial Products Trading Law, Etc.)
 

1.          The Qualified Person shall, in selling the shares of common stock of the Corporation, which such Qualified Person has acquired upon exercise of the Stock Acquisition Rights, comply with the Financial Products Trading Law of Japan, any other applicable laws and regulations including the matters agreed upon in Article 10, and the Rules for Prevention of Insider Trading established by the Corporation.

2.          The Qualified Person shall, in selling the shares of common stock of the Corporation, which such Qualified Person has acquired upon exercise of the Stock Acquisition Rights, confirm in advance with the Law & Compliance Division of the Corporation (or any other department of the Corporation in charge of such matters at the time), whether or not such sale will contravene Articles 166 and/or 167 (provisions relating to insider trading) of the Financial Products Trading Law of Japan.

 

	
      Article 10
 	
  (Restrictions under the U.S. Securities Act)
 

The Qualified Person hereby understands and agrees to the following representations, and warrants and covenants for the benefit of the Corporation:

 

- 6 -

 

	
       
 	
      (1)
 	
  Absence of Registration in the United States of America
 
	 	 	Neither the Stock Acquisition Rights nor the shares of common stock of the Corporation issuable or transferable upon exercise of the Stock Acquisition Rights have been registered pursuant to the U.S. Securities Act of 1933 (hereinafter referred to as the “Securities Act”), nor shall such registration be made in the future; no such securities shall be offered or sold in the U.S.A. or to, or for, or for the benefit of U.S. persons except pursuant to an exemption from registration under the Securities Act.
	 	
        (2)
	
        Limitation on Sale of Shares of Common Stock of the Corporation

	 	 	The shares of common stock of the Corporation issued or transferred upon exercise of the Stock Acquisition Rights may not be offered, sold, encumbered or otherwise disposed (including those by depositing the same with any depositary), except (i) on the Tokyo Stock Exchange, Inc., where no sales commission other than ordinary brokerage commission is paid and neither the selling person nor any of his or her agent engages in a directed selling effort in the U.S.A.; (ii) in compliance with the exemption from registration under the Securities Act in accordance with Rule 144 (if applicable); (iii) in the case of mortgage, if such mortgage is given to a Japanese financial institution in Japan and such institution sells the shares of common stock of the Corporation which are subject to such mortgage outside the U.S.A.; or (iv) pursuant to any other applicable exemption from registration under the Securities Act with the consent of the Corporation.

	
      Article 11
 	
  (Treatment in Events of Corporate Transaction)
 

1.          In the event of any corporate transaction excluding (a) a consolidation, amalgamation or merger in which the Corporation is not the continuing corporation, or (b) share exchange (kabushiki-kokan) or share transfer (kabushiki-iten) pursuant to which the Corporation is to become a wholly-owned subsidiary of another corporation involving the Corporation, including a dissolution or liquidation of the Corporation, a sale of all or substantially all of the Corporation’s assets, a corporate split, or any other similar transaction, the Corporation may (x) cause the entity resulting from such transaction to execute an agreement providing that a holder of the Stock Acquisition Rights shall have the right during the term
to exercise the Stock Acquisition Rights and upon such exercise of the Stock Acquisition Rights to receive the class and amount of shares and other securities and property receivable upon such transaction by a holder of the number of shares in respect of which the Stock Acquisition Rights could have been exercised immediately prior to such transaction or (y) prevent from being exercised, effective immediately upon the occurrence of such transaction, each Stock Acquisition Right outstanding immediately prior to such transaction (whether or not then exercisable).

2.          In the event that the Corporation enters into a definitive agreement or makes a decision by board resolution or approval of shareholders’ meeting to effectuate one or more of the transactions or events described in the immediately preceding paragraph, the Corporation may provide not less than twenty days advance notice to the Qualified Person from the consummation of such transaction or event and give the Qualified Person the opportunity to 

 

- 7 -

 

exercise their Stock Acquisition Rights (whether or not such Stock Acquisition Rights are then vested or exercisable), immediately prior to, and subject to, the consummation of such transaction or event.

 

	
      Article 12
 	
  (Condition Subsequent)
 

This Agreement shall terminate, automatically, without any procedures being taken, in the event that the Qualified Person is not in the position of director, corporate executive officer, or employee of the Corporation or of the Sony Group Companies on the Allotment Date.

 

	
      Article 13
 	
  (Compliance with Foreign Laws and Regulations) 
 

1.          If it is necessary for the reason that the Qualified Person is deemed a resident of any country other than Japan or for any other reason so that, pursuant to any laws or regulations (including those of any country other than Japan) applicable to such Qualified Person, such Qualified Person or the Corporation shall be required to perform or comply with certain procedures for allocating, holding or exercising the Stock Acquisition Rights thereunder, such Qualified Person shall notify the Corporation in advance of the necessity to perform or comply with such procedures and the contents thereof, and perform or comply with such procedures that are required to be performed or complied with by such Qualified Person himself or herself, and request the Corporation to perform or comply with the procedures that are
required to be performed or complied with by the Corporation (hereinafter referred to as the “Corporation’s Procedures”).  In case that the request shall be made by the Qualified Person for the Corporation to perform or comply with the Corporation’s Procedures, the Corporation shall independently consider the necessity for the performance or compliance, and, if the Corporation shall come to the conclusion that it is necessary to do so, it shall perform or comply with the Corporation’s Procedures.

2.          The Qualified Person shall pay for all expenses, which may arise in connection with the procedures provided for in the immediately preceding paragraph, and shall keep the Corporation fully indemnified against all such costs, expenses and damages, which may arise or which the Corporation may incur in connection with such procedures.

 

	
      Article 14
 	
  (Amendment to this Agreement and Treatment of Matters Not Provided for in this Agreement)
 

1.          If it is found out that this Agreement is not in compliance with the Company Law, the Financial Products Trading Law, the Income Tax Law, the Corporation Tax Law or any other related laws or regulations of Japan, or if this Agreement becomes not in compliance therewith as a result of amendments thereto which become effective after the conclusion of this Agreement, the Corporation may, with notice to the Qualified Person, adequately establish, amend or eliminate the subject provisions.

2.          With respect to matters not provided for in this Agreement or the “Guide to the Sony Stock Option Program”, such matters shall be determined by consultation in good faith between the Corporation and the Qualified Person.  In the event that the Qualified Person rejects such consultation, or in the event that such consultation fails to bring an agreement, such matters shall be decided by the Corporation.

 

- 8 -

 

 

	
      Article 15
 	
  (Manner of Notice)
 

Notices by the Corporation to the Qualified Person under the Terms and Conditions and this Agreement shall be made in any of the following manners: 

	
       
 	
      (1)
 	
  delivering (including mailing) a written notice to the address of the Qualified Person set forth in the register of the Stock Acquisition Rights;
 
	
         
	
        (2)
	
        sending documents to the Qualified Person at his/her department in the Corporation (including any Sony Group Company) or sending electronic data to the e-mail address of the Qualified Person at the Corporation (including any Sony Group Company); or

	
         
	
        (3)
	
        giving notice on the web site of the Corporation (including any Sony Group Company).

 

	
      Article 16
 	
  (Governing Law and Jurisdiction)
 

This Agreement shall be governed by and construed in accordance with the laws of Japan.  The Tokyo District Court shall have the exclusive jurisdiction for settling any and all disputes that arises under or in connection with this Agreement.

 

IN WITNESS WHEREOF, two (2) originals of this Agreement have been prepared and executed by seal impressions or signatures by the Corporation and the Qualified Person, each party retaining one (1) original.

 

November 13, 2007

 

	
             
 	
  SONY CORPORATION

    7-1, Konan 1-chome, Minato-ku, Tokyo  
 
	 	 
	 	By:   _________________________________
	 	 	Howard Stringer

      Chairman and Chief Executive Officer, 

      Representative Corporate Executive Officer
	 	 	 
	 	QUALIFIED PERSON
	 	 
	 	By:   _________________________________
	 	 	Name:

      Address:
	 	 
	 	 

 

 

 

- 9 -

 

 

 

(English translation)

 

Exhibit 1

 

TERMS AND CONDITIONS OF THE FOURTEENTH SERIES OF 

STOCK ACQUISITION RIGHTS

FOR SHARES OF COMMON STOCK OF SONY CORPORATION

 

These terms and conditions of the stock acquisition rights shall apply to the Fourteenth Series of Stock Acquisition Rights for Shares of Common Stock (hereinafter referred to as the “Stock Acquisition Rights”) of Sony Corporation (hereinafter referred to as the “Corporation”) issued on November 14, 2007 by the Corporation in accordance with the special resolution adopted at the 90th Ordinary General Meeting of Shareholders held on June 21, 2007 and the resolution adopted at the meeting of the Board of Directors held on October 25, 2007:

 

 

  	
        1. Aggregate Number of Stock Acquisition Rights

         
	
        7,962

	
        2. Class and Number of Shares to be Issued or Transferred upon Exercise of Stock Acquisition Rights

         
	
        The class of shares to be issued or transferred upon exercise of the Stock Acquisition Rights shall be shares of common stock, and the number of shares to be issued or transferred upon exercise of each Stock Acquisition Right (hereinafter referred to as the “Number of Granted Shares”) shall be 100 shares.

         

        The aggregate number of shares to be issued or transferred upon exercise of the Stock Acquisition Rights shall be 796,200 shares of common stock of the Corporation (hereinafter referred to as the “Common Stock”). However, in the event that the Number of Granted Shares is adjusted pursuant to Condition 3 below, the aggregate number of shares to be issued or transferred upon exercise of the Stock Acquisition Rights shall be adjusted to the number obtained by multiplying the Number of Granted Shares after adjustment by the aggregate number of the Stock Acquisition Rights as prescribed in Condition 1 above.

         

	3. Adjustment of Number of Granted Shares	(1) In the event that the Corporation conducts a stock split (including free distribution of shares (musho-wariate)) or consolidation of the Common Stock, the Number of Granted Shares shall be adjusted in accordance with the following formula:

  

  	
         
	
        Number of

            Granted Shares after adjustment
	
        =
	
        Number of

            Granted Shares

            before adjustment
	
        x
	
        Ratio of split or

        consolidation
	
         

  

  	
         

         
	
        (2) An adjustment to the Number of Granted Shares under the immediately preceding item shall be made only with respect to the Number of Granted Shares for the Stock Acquisition Rights which have not been exercised at the time of the adjustment.  Any fraction less than one (1) share resulting from the adjustment shall be disregarded.

	 	(3) The effective date of the Number of Granted Shares after adjustment shall be the same day as the date on which the Exercise Price after adjustment becomes effective as provided for in item (2) of Condition 7 with regard to the adjustment of the Exercise Price pursuant to Condition 7 for the same reason as the adjustment of the Number of Granted Shares.

 

 

  	 	(4) When the Number of Granted Shares is adjusted, the Corporation shall give notice of necessary matters to each holder of the Stock Acquisition Rights registered in the register of Stock Acquisition Rights, no later than the day immediately preceding the effective date of the Number of Granted Shares after adjustment; provided, however, that if the Corporation is unable to give such notice no later than the day immediately preceding such effective date, the Corporation shall promptly give such notice on or after such effective date.

           

	
        4. Payment in exchange for Stock Acquisition Rights

         
	
        The Stock Acquisition Rights are issued without payment of any consideration to the Corporation.

	
        5. Allotment Date of Stock Acquisition Rights

         
	
        November 14, 2007 (hereinafter referred to as the “Allotment Date”)

	
        6. Amount of Assets to be Contributed upon Exercise of Stock Acquisition Rights

         
	
        The amount of the assets to be contributed upon exercise of the Stock Acquisition Rights shall be the amount obtained by multiplying the amount to be paid in per share to be issued or transferred upon exercise of the Stock Acquisition Rights (hereinafter referred to as the “Exercise Price”) by the Number of Granted Shares. The Exercise Price is initially 5,514 yen.

         

        Provided, however, that if the closing price of the Common Stock in the regular trading thereof on the Tokyo Stock Exchange (hereinafter referred to as the “Closing Price”) on the Allotment Date (if there is no Closing Price on such date, the Closing Price on the immediately preceding trading day) is higher than 5,514 yen, then the amount equal to the Closing Price on the Allotment Date shall be the initial Exercise Price.

         

	
        7. Adjustment of Exercise Price

         
	
        (1) In the event that the Corporation conducts a stock split (including free distribution of shares (musho-wariate)) or consolidation of the Common Stock after the Allotment Date of the Stock Acquisition Rights, the Exercise Price shall be adjusted in accordance with the following formula, and any fraction less than one (1) yen resulting from the adjustment shall be rounded up to the nearest one (1) yen:

         

	
         
	
        Exercise 

            Price after 

            adjustment
	
        =
	
        Exercise 

            Price before 

            adjustment
	
        ×
	
        1
	
         

	
        Ratio of split or consolidation

	
         

        (2) In the case that the Exercise Price is adjusted pursuant to the immediately preceding item, the effective date of the Exercise Price after adjustment shall be as set forth below:

         

        The Exercise Price after adjustment shall become effective, in the case of a stock split, on and after the day immediately following the record date for such stock split, and in the case of a stock consolidation, on and after the effective date thereof.

         

        (3) In addition to the cases in item (1) of this Condition where the Exercise Price is required to be adjusted, the Exercise Price shall be adjusted in a manner deemed to be appropriate by the Corporation in the following cases.

         

        (i)  When the Exercise Price is required to be adjusted due to a merger, corporate split (split by new incorporation or by absorption) or reduction of the amount of capital of the Corporation.

         

        (ii)  In addition to item (i) above, when the Exercise Price is required to be adjusted due to the occurrence of an event that cause or may cause a change in the total number of the issued Common Stock.

         

														

 

 

 

  	
         
	
         

        (4) When the Exercise Price is adjusted, the Corporation shall give notice of necessary matters to each holder of the Stock Acquisition Rights registered in the register of Stock Acquisition Rights, no later than the day immediately preceding the effective date of the Exercise Price after adjustment; provided, however, that if the Corporation is unable to give such notice no later than the day immediately preceding such effective date, the Corporation shall promptly give such notice on or after such effective date.

         

	
        8. Period during which Stock Acquisition Rights May be Exercised

         
	
        From and including November 14, 2007, up to and including November 13, 2017. If the last day of such period falls on a holiday of the Corporation, the immediately preceding business day shall be the last day of such period.

	
        9. Conditions for Exercise of Stock Acquisition Rights

         
	
        (1) No Stock Acquisition Right may be exercised in part.

         

        (2) In the event of a resolution being passed at a general meeting of shareholders of the Corporation for an agreement for any consolidation, amalgamation or merger (other than a consolidation, amalgamation or merger in which the Corporation is the continuing corporation), or in the event of a resolution being passed at a general meeting of shareholders of the Corporation (or, where a resolution of a general meeting of shareholders is not necessary, at a meeting of the Board of Directors of the Corporation) for any agreement for share exchange (kabushiki-kokan) or any plan for share transfer (kabushiki-iten) pursuant to which the Corporation is to become a wholly-owned subsidiary of another corporation, the Stock Acquisition Rights may not be exercised on and after the date on which a resolution for such consolidation, amalgamation, merger, share exchange (kabushiki-kokan) or share transfer (kabushiki-iten) was passed.

         

	
        10. Restrictions under the U.S. Securities Act and Other Matters
	
        Neither the Stock Acquisition Rights nor the Common Stock issuable or transferable upon exercise of the Stock Acquisition Rights have been registered pursuant to the U.S. Securities Act of 1933 (hereinafter referred to as the “Securities Act”), nor shall such registration be made in the future; no such securities shall be offered or sold in the U.S.A. or to, or for, or for the benefit of U.S. persons except pursuant to an exemption from registration under the Securities Act.

        The Common Stock issued or transferred upon exercise of the Stock Acquisition Rights may not be offered, sold, encumbered or otherwise disposed (including those by depositing the same with any depositary), except (i) on the Tokyo Stock Exchange, where no sales commission other than ordinary brokerage commission is paid and neither the selling person nor any of his or her agent engages in a directed selling effort in the U.S.A.; (ii) in compliance with the exemption from registration under the Securities Act in accordance with Rule 144 (if applicable); (iii) in the case of mortgage, if such mortgage is given to a Japanese financial institution in Japan and such institution sells the Common Stock which are subject to such mortgage outside the U.S.A.; or (iv) pursuant to any other applicable exemption from registration under the Securities Act with the consent of the Corporation.

         

	
        11. Mandatory Repurchase of Stock Acquisition Rights

         
	
        Not applicable.

	
        12. Restrictions on Acquisition of Stock Acquisition Rights through Transfer

         
	
        The Stock Acquisition Rights cannot be acquired through transfer, unless such acquisition is expressly approved by the Board of Directors of the Corporation.

	13. Application for Exercise of Stock Acquisition Rights and Manner of Payment	(1) In the case of exercise of the Stock Acquisition Rights, the holder of the Stock Acquisition Rights shall fill in necessary matters on the “Application Form for Exercise of the Stock Acquisition Rights” in the form designated by the Corporation, and shall submit such application form (including application for exercise of the Stock Acquisition Rights in an electromagnetic manner) to the place where applications for exercise of the Stock Acquisition Rights are made as provided for in Condition 14, after affixing his or her name and seal or signature (including electronic signature) thereon. The Application Form for Exercise of the Stock Acquisition Rights shall be accepted at the place where applications for exercise of the Stock Acquisition Rights are made only on a business day at such place.

 

 

 

  	
         
	
        (2) With submission of the Application Form for Exercise of the Stock Acquisition Rights as provided in (1) above, the entire amount of the Exercise Price to be paid in upon exercise of the Stock Acquisition Rights (hereinafter referred to as the “Amount of Payment”) shall be paid in cash to an account designated by the Corporation (hereinafter referred to as the “Designated Account”) at the payment handling place provided for in Condition 15 at or before the date and time designated by the Corporation.

         

        (3) Any holder of the Stock Acquisition Rights who has submitted the documents required for exercise of the Stock Acquisition Rights to the place where applications for exercise of the Stock Acquisition Rights are made, may not cancel such exercise thereafter.

         

	
        14. Place where Applications for Exercise of Stock Acquisition Rights are Made

         
	
        Corporate Human Resources (or any division in charge of the relevant service from time to time) of Sony Corporation.

         

	
        15. Payment Handling Place on Exercise of Stock Acquisition Rights

         
	
        Sumitomo Mitsui Banking Corporation, Head Office (or any successor bank of such bank from time to time and/or any successor office of such office).

         

	
        16. Effective Date and Time of Exercise of Stock Acquisition Rights 
	
        (1) The exercise of the Stock Acquisition Rights shall become effective when an Application Form for Exercise of the Stock Acquisition Rights referred to in item (1) of Condition 13 which is accepted at the place where applications for exercise of the Stock Acquisition Rights are made are delivered to the payment handling place provided for in Condition 15 and the Amount of Payment is duly paid to the Designated Account.

         

        (2) The Corporation shall deliver the share certificates without delay after the procedure for exercise of the Stock Acquisition Rights is completed; provided, however, that the Corporation shall not deliver share certificates for shares constituting less than one (1) full unit of shares.

         

	
        17. Matters concerning Amount of Capital and Additional Paid-in Capital Increased by Issuance of Shares upon Exercise of Stock Acquisition Rights
	
        (1) The amount of capital increased by the issue of the shares upon exercise of the Stock Acquisition Rights shall be the amount obtained by multiplying the maximum limit of capital increase, as calculated in accordance with the provisions of Paragraph 1, Article 40 of the Company Accounting Regulations, by 0.5, and any fraction less than one (1) yen arising as a result of such calculation shall be rounded up to the nearest one (1) yen.

         

        (2) The amount of additional paid-in capital increased by the issue of the shares upon exercise of the Stock Acquisition Rights shall be the amount obtained by deducting the capital to be increased, as provided in (1) above, from the maximum limit of capital increase, as also provided in (1) above.

         

	
        18. Handling of Matters Relating to Abolition of Unit Share System
	
        In the case that the Corporation abolishes the unit share system after the Allotment Date of the Stock Acquisition Rights, the Corporation may take necessary measures for handling the related matters thereto in a manner deemed as appropriate by the Corporation in accordance with the provisions of the Company Law of Japan and consistent with these terms and conditions.

         

	
        19. Handling of Matters Relating to Amendments to Company Law, and other Laws and Regulations
	
        In the case that provisions of the Company Law of Japan and/or other Japanese laws and regulations relating to the issuance of share certificates or the stock acquisition rights are amended after the Allotment Date of the Stock Acquisition Rights, the Corporation may take necessary measures for handling the matters relating thereto in a manner deemed as appropriate by the Corporation in accordance with the provisions of the Company Law of Japan and/or other Japanese laws and regulations then in effect and consistent with these terms and conditions.

 

 

 

 

 

 

(English translation)

 

Exhibit 2 (Tax Ineligible)

 

Set forth below are the provisions concerning the conditions and restrictions of exercise or disposition of the Stock Acquisition Rights provided for in Article 2 of the Agreement Concerning Allocation of the Stock Acquisition Rights of Sony Corporation for the fiscal year 2007 (hereinafter referred to as the “Agreement”) and the period during which the Stock Acquisition Rights may be exercised, which is provided for in Item (5) of Article 3 of the Agreement. Unless otherwise provided for, the terms used in this Exhibit 2 shall have the same meaning as used in the Agreement.

 

  	
         
	
        1.
	
        (Period during which the Stock Acquisition Rights may be exercised)

 

The Qualified Person may exercise the Stock Acquisition Rights during the period from and including November 14, 2008 to and including November 13, 2017 (if the last day of such period falls on a holiday of the Corporation, the immediately preceding business day shall be the last day of such period, subject to the restriction of exercise provided for in Paragraph 1 of Article 5 of the Agreement.).

 

  	
         
	
        2.
	
        (Method of delivery of share certificates)

 

The shares that the Qualified Person acquires upon exercise of the Stock Acquisition Rights shall be delivered through the account which the Qualified Person opens in his/her name at a sales office or a business office of a financial products trader, etc. for writing or record in a transfer account book or custody of the shares with respect to the stock option pursuant to the arrangements for writing or record in a transfer account book or delegation of custody of the shares entered into between the Corporation and such financial products trader, etc. Information on such financial products trader, etc. is described in the “Guide to the Sony Stock Option Program” provided for in Article 6 of the Agreement.

 

 

(English translation)

 

Exhibit 2 (Tax Eligible)

 

Set forth below are the provisions concerning the conditions and restrictions of exercise or disposition of the Stock Acquisition Rights provided for in Article 2 of the Agreement Concerning Allocation of the Stock Acquisition Rights of Sony Corporation for the fiscal year 2007 (hereinafter referred to as the “Agreement”) and the period during which the Stock Acquisition Rights may be exercised provided for in Item (5) of Article 3 of the Agreement. Unless otherwise provided for, the terms used in this Exhibit 2 shall have the same meaning as used in the Agreement.

 

1.                 (Period during which the Stock Acquisition Rights may be exercised)

 

The Qualified Person may exercise the Stock Acquisition Rights during the period from and including October 26, 2009 to and including October 25, 2017 (if the last day of such period falls on a holiday of the Corporation, the immediately preceding business day shall be the last day of such period, subject to the restriction of exercise provided for in Paragraph 1 of Article 5 of the Agreement.).

  2.                  (Method of exercise of the Stock Acquisition Rights)

  	
         
	
        (1)
	
        In order to be entitled to the special taxation measure (hereinafter referred to as the “Special Taxation Measure”) provided for in Article 29-2 of the Special Taxation Measures Law, the Qualified Person shall be subject to the following provisions, as for the exercise of the Stock Acquisition Rights, as well as the conditions provided for in the Terms and Conditions and the Agreement.

	 	 	 
	 	 	(i) Total amount of exercise price with respect to the exercise of the Stock Acquisition Rights for one (1) calendar year (from and including January 1 to and including December 31) shall not exceed \12,000,000.
	 	 	 
	 	 	(ii) The shares that the Qualified Person acquires upon exercise of the Stock Acquisition Rights shall be delivered through the account which the Qualified Person opens in his/her name at a sales office or a business office of a financial products trader, etc. for writing or record in a transfer account book or custody of the shares with respect to the stock option pursuant to the arrangements for writing or record in a transfer account book or delegation of custody of the shares entered into between the Corporation and such financial products trader, etc. in accordance with Article 29-2, Paragraph 1, Item 6 of the Special Taxation Measures Law. Information on such financial products trader, etc. is described in the “Guide to the Sony Stock Option Program” provided for in Article 6 of the Agreement.
	 	 	 
	 	 	(iii) The Qualified Person shall comply with the procedures set forth in the “Guide to the Sony Stock Option Program” as specified procedures required by the relevant law to be entitled to the Special Taxation Measure.

 

 

  	
         
	
        (2)
	
        In the case where the Qualified Person is a major shareholder or a person involved with a major shareholder, which is specified in the Special Taxation Measures Law or may not be entitled to the above Special Taxation Measure pursuant to such Law, items (i) and (iii) of the immediately preceding paragraph shall not apply to such Qualified Person.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00132-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00132-of-00352.parquet"}]]