Document:

ex10-2.htm

Exhibit 10.2

 

Execution Copy (12/30/16)

 

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is made between Nuvectra Corporation, a Delaware corporation (the “Company” or “Nuvectra”) and Walter Z. Berger (“Executive”).

 

In consideration of the below mutual covenants and other good and valuable consideration, the parties agree as follows:

 

1.     Employment Period. The Company shall employ Executive, and Executive hereby accepts employment with the Company, upon the terms and conditions set forth in this Agreement effective as of March 7, 2016 (the “Effective Date”) until the third anniversary of the Effective Date (the “Term”). Thereafter, unless written notification is given at least ninety (90) days before the expiration of the Term or any subsequent renewal term, this Agreement will automatically renew for successive one-year periods (each, a “Renewal Term”). Notwithstanding the foregoing, Executive’s employment hereunder may be earlier terminated in accordance with Section 4.1 below. The period of time between the Effective Date and the termination of Executive’s employment hereunder shall be referred to herein as the “Employment Period.” For the avoidance of doubt, subject to the terms and provisions of this Agreement, including Section 4 below, the Employment Period may be terminated by either the Company or Executive at will.

 

2.     Position and Duties.

 

2.1     During the Employment Period, Executive shall serve as Executive Vice President and the Chief Operating Officer and Chief Financial Officer (“CFO”) of Nuvectra and shall have the normal duties, responsibilities, functions and authority of such position, reporting to the Chief Executive Officer (“CEO”) and as legally required, the Company’s Board of Directors (“Board”), and such other duties as the CEO and Board shall designate and assign from time to time that are not inconsistent with Executive’s position as Executive Vice President and CFO of the Company. Executive shall render such services to the Company and its Subsidiaries, if any, at the offices currently located at 5830 Granite Parkway, Plano, Texas 75024 (“Executive’s Office”).

 

2.2     During the Employment Period, Executive shall devote substantially all of Executive’s business time, efforts, energy and skill (except for Company holidays, permitted vacation periods and reasonable periods of illness or other incapacity) to the business and affairs of the Company and shall comply with the Company’s published policies and procedures in all material respects. Notwithstanding the foregoing, nothing shall prevent Executive from: (i) serving on the board of directors of no more than two (2) for-profit entities with the prior approval of the CEO and Governance Committee of the Board; (ii) serving on the board of directors of charitable, non-profit organizations and, (iii) participating in charitable, civic, educational, professional, community or industry affairs; and (iv) managing Executive’s passive personal investments; provided, however, such permitted activities shall not in any material respect interfere or conflict with the Executive’s duties under this Agreement or create a potential business or fiduciary conflict.

 

 

 

 

 

2.3     For purposes of this Agreement, a “Subsidiary” shall mean any subsidiary corporation of the Company within the meaning of Section 424(f) of the Internal Revenue Code of 1986, as amended (the “Code”).

 

3.     Compensation and Benefits.

 

3.1     During the Employment Period, the Company agrees to pay Executive a base salary at a rate of not less than $375,000.00 per annum, payable by the Company in regular installments in accordance with the Company’s general payroll practices in effect from time to time, but not less frequently than monthly. Executive’s base salary and performance shall be subject to annual review by the CEO and the salary may be increased, but not decreased, by the Board in the first quarter of each year during the Employment Period. The base salary as determined herein from time to time shall constitute “Base Salary” for purposes of this Agreement. During any partial years of employment during the Employment Period, the Base Salary shall be prorated on an annualized basis.

 

3.2     Executive shall be eligible to earn a discretionary performance bonus each fiscal year based upon specific annual objectives that the Board or its Compensation Committee will develop in consultation with the CEO. The bonus will be targeted at not less than 60% of Executive’s Base Salary, with actual payment to range from 0 to 120%, depending on Executive’s and the Company’s actual performance. The general objectives of the bonus plan and its goals will be consistent with the plans provided to other executives of the Company.

 

3.3     On or about April 5, 2016 Executive was granted certain shares (options shares and restricted stock units) under the Plan, as defined below. Executive will be eligible for a grant of equity stock under the 2016 Equity Incentive Plan, as may be amended from time to time (“Plan”). Such grant will be determined by the Compensation Committee of the Board of Directors whose considerations for such grant will include comparable market data for CFO equity grants in companies within Nuvectra’s peer group companies, as determined by the Compensation Committee with input from Management. All such grants shall be subject to approval by the Board and the terms and conditions concerning such grant(s) will be controlled by and subject to the terms of the Plan unless specifically set forth for in this Agreement. 

 

3.4     Executive and Company shall execute the Company’s current form indemnification agreement for officers as such form exists as on file with the Securities and Exchange Commission as of the execution date of this Agreement.

 

3.5     In addition, during the Employment Period, Executive shall be entitled to participate in all of the Company’s employee benefit programs for which executive employees of the Company are generally eligible. Further, Executive will be eligible for not less than four weeks of paid vacation per year and may undergo an annual executive physical which cost will be reimbursed by the Company.

 

 

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3.6     During the Employment Period, the Company shall reimburse Executive for all reasonable business expenses incurred by Executive in the course of performing Executive’s duties and responsibilities under this Agreement which are consistent with the Company’s policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to the Company’s requirements with respect to reporting and documentation of such expenses. 

 

3.7     All amounts payable to Executive hereunder and as may be required by this Agreement in the future shall be subject to all required and customary withholdings by the Company.

 

4.     Termination of Employment.

 

4.1     Executive’s employment and the Employment Period shall terminate on the first of the following to occur:

 

4.1.1     Automatically on the date of Executive’s death.

 

4.1.2     Immediately upon written notice by the Company to Executive for any termination by the Company, including a termination due to Disability (which the Company may, in its sole discretion, make effective on any date later than the notice date).

 

4.1.3     Immediately upon written notice by Executive to the Company of a resignation for any reason.

 

4.1.4     The expiration of the Term or Renewal Term in accordance with Section 1 above.

 

4.2     Upon a termination of Executive’s employment for any reason in Section 4.1 above, Executive shall be entitled to the “Accrued Benefits,” which shall mean: (i) any unpaid Base Salary through the date of termination, payable on the next Company payroll date following termination; (ii) reimbursement for any unreimbursed business expenses incurred through the date of termination, payable on the next Company payroll date following termination and Executive submission of documentation of such expenses; and (iii) all other payments, benefits or fringe benefits earned but unpaid through the date of termination to which Executive may then be entitled under the terms of any applicable compensation arrangement or benefit, equity or fringe benefit plan or program or grant or this Agreement. 

 

4.3     If Executive’s employment is terminated by the Company without Cause or for Good Reason then, in addition to the Accrued Benefits, Executive shall be entitled to receive:

 

4.3.1     Lump sum payment of Executive’s annual Base Salary as in effect on the date of termination and the target bonus for the current year, payable within 15 days of Executive’s execution and non-revocation of the General Release specified in Section 4.5;

 

 

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4.3.2     Lump sum payment for 12 months of COBRA continuation coverage premiums under the Company’s group medical plans as in effect from time to time based on Executive coverage as of the date of termination and provided Executive timely elects COBRA continuation coverage, payable within 15 days of Executive’s execution and non-revocation of the General Release specified in Section 4.5; 

 

4.3.3     Lump sum payment of any unpaid annual bonus for any then completed fiscal year, cash LTIP amounts for completed performance measurement periods, and, if terminated after July 1 of the year and payment of a pro-rata annual bonus based on the Company’s and Executive’s actual performance through the date of termination. Each lump sum payment payable within fifteen (15) days of Executive’s execution and non-revocation of the General Release specified in Section 4.5 or, if later, as soon as reasonably practicable following determination of such LTIP or bonus amounts; and

 

4.3.4     Vesting of all stock held by Executive will continue to vest through the later of: (i) the one year anniversary of the Term, or (ii) the end of the quarter following the date of termination. Further, performance based vesting and awards shall be paid based on the performance of the Company and Executive at and through the time of termination.

 

4.4     If Executive’s employment is terminated (i) by the Company without Cause three (3) months prior or twelve (12) months after a Change of Control (as that term is defined in the 2016 Equity Incentive Plan, as may be amended), (ii) by the Executive for Good Reason within 6 months after a Change of Control; or, (iii) by Executive for any reason in the period beginning six (6) months after and ending twelve (12) months after the effective date of the Change in Control, Executive shall be entitled to receive: 

 

4.4.1     Lump sum payment of two times (i) Executive’s annual Base Salary as in effect on the date of termination and (ii) Executive’s target bonus for the year, payable within fifteen (15) days of Executive’s execution and non-revocation of the General Release specified in Section 4.5;

 

4.4.2     Lump sum payment for eighteen (18) months (or if Executive would qualify for continuation coverage under COBRA in excess of eighteen (18) months, then the number of months in such extended period not to exceed a total of twenty-four (24) months) of COBRA continuation coverage premiums under the Company’s group medical plans as in effect from time to time based on Executive coverage as of the date of termination and provided Executive timely elects COBRA continuation coverage, payable within fifteen (15) days of Executive’s execution and non-revocation of the General Release specified in Section 4.5; 

 

4.4.3     Payment of any unpaid annual bonus for any then completed fiscal year and, payment of a pro-rata annual bonus based on the Company’s and Executive’s actual performance through the date of termination, payable within fifteen (15) days of Executive’s execution and non-revocation of the General Release specified in Section 4.5 or, if later, as soon as reasonably practicable following determination of such LTIP or bonus amounts, and

 

4.4.4     Vesting of all stock held by Executive pursuant to the Plan and vesting of all LTIP.as of the Change in Control, provided that if such termination occurs within ninety (90) days before the Change of Control, Executive will be treated as though he were employed through the date of Change of Control for vesting purposes.

 

 

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4.4.5     Notwithstanding anything set forth herein to the contrary, if any payment or benefit Executive would receive from the Company or any other party whether in connection with the provisions herein or otherwise (the “Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment shall be equal to the Best Results Amount. The “Best Results Amount” shall be either (x) the full amount of such Payment or (y) such lesser amount as would result in no portion of the Payment being subject to the Excise Tax, whichever of the foregoing amounts, taking into account the applicable federal, state and local employment taxes, income taxes and the Excise Tax, results in Executive’s receipt, on an after-tax basis, of the greater amount notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in payments or benefits constituting “parachute payments” is necessary so that the Payment equals the Best Results Amount, reduction shall occur in the following order: reduction of cash payments; cancellation of accelerated vesting of stock awards; reduction of employee benefits. In the event that acceleration of vesting of stock award compensation is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant of Executive’s stock awards unless Executive elects in writing a different order for cancellation. Executive shall be solely responsible for the payment of all personal tax liability that is incurred as a result of the payments and benefits received under this Agreement, and Executive will not be reimbursed by the Company for any such payments. The Company shall select a professional services firm to make all of the determinations required to be made under this Section 4.4.5. The Company shall request that firm provide detailed supporting calculations both to the Company and Executive prior to the date on which the event that triggers the Payment occurs if administratively feasible, or subsequent to such date if events occur that result in parachute payments to Executive at that time. For purposes of making the calculations required under this Section 4.4.5, the firm may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith determinations concerning the application of the Code. The Company and Executive shall furnish to the firm such information and documents as the firm may reasonably request in order to make a determination under this Section 4.4.5. The Company shall bear all costs the firm may reasonably incur in connection with any calculations contemplated by this Section 4.4.5 Any such determination by the firm shall be binding upon the Company and Executive, and the Company shall have no liability to Executive for the determinations of the firm. 

 

4.5     Notwithstanding Sections 4.3 and 4.4 above, Executive shall only be entitled to the payments and benefits described in Section 4.3 or 4.4 if and only if, within twenty-one (21) days following termination of employment or Executive’s receipt of the General Release, whichever is later, Executive: (x) has executed and delivered to the Company the General Release substantially in form and substance as set forth in Exhibit A attached hereto and has not revoked such General Release within seven (7) days of execution; and (y) has not: (i) breached the provisions of the General Release, (ii) materially breached Section 5 or 6 or (iii) breached Section 7. 

 

 

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4.6     If Executive’s employment and the Employment Period is terminated by the Company for Cause, then Executive shall only be entitled to the Accrued Benefits. For purposes of this Agreement, “Cause” shall mean with respect to Executive one or more of the following: (i) Executive’s conviction of, or pleading guilty or no contest or its equivalent, to a felony (other than minor traffic-related offenses) or other crime involving moral turpitude (acts involving dishonesty, fraud, deceit, misrepresentation, deliberate violence, or that reflect adversely on a CFO’s honesty, trustworthiness, or fitness as a CFO); (ii) Executive’s committing fraud, malfeasance, material dishonesty or material theft in connection with the performance of Executive’s duties to the Company; (iii) reporting to work under the influence of alcohol or illegal drugs, provided, that Executive’s consumption of alcoholic beverages at Company-related social events or client- (or potential-client-) related events shall not be deemed as a Cause event; (iv) substantial and repeated failure to perform duties as reasonably and lawfully directed by the Company’s Board, in each case in accordance with Section 2 (other than due to physical or mental incapacity), after notice of such breach and, if curable, an opportunity to cure such breach within 10 days; (v) breach of fiduciary duty, gross negligence or willful misconduct with respect to the business of the Company; (vi) any material breach of the Company’s personnel policies (e.g., sexual harassment) or (vii) any material breach of this Agreement, including, without limitation, a material breach of Sections 5 or 6; or (vii) any breach of Section 7 of this Agreement, after written notice of such breach, and, if curable, an opportunity to cure such breach, if curable, within 10 days.

 

4.7     If Executive’s employment and the Employment Period are terminated due to Executive’s death or Disability as that term is defined for purposes of Section 409A of the Internal Revenue Code (“Section 409A”), then Executive (or Executive’s legal representative or estate, if applicable) shall be entitled to the Accrued Benefits. In the event Executive is terminated due to Executive’s Disability, Executive shall also be paid any prior year’s bonus and a pro-rata bonus for the then current year. Such bonus payment shall be paid to Executive as soon as practicable following the Disability determination and the Company’s calculation of the bonus amount(s). Except as specifically provided for in the Company’s employee benefit plans or as otherwise expressly provided for herein or as required by applicable law, Executive (or Executive’s legal representative or estate, if applicable) shall not be entitled to any other salary, compensation or benefits after termination of Executive’s employment and the Employment Period due to death or Disability. 

 

 

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4.8     For purposes of this Agreement, “Good Reason” shall mean, with respect to Executive, the occurrence of one or more of the following without Executive’s prior written consent: (i) the assignment to Executive of any duties, authority or responsibilities (including reporting responsibilities) or an adverse change in Executive’s title(s) that is materially inconsistent with Executive’s position; (ii) a material reduction by the Company in Executive’s then Base Salary or bonus opportunity unless such reduction is made, with Executive’s input, pursuant to an across-the-board base salary or bonus opportunity reduction applicable to all or substantially all executives of the Company (excluding any executive, including Executive, hired within the 12-month period prior to the effective date of such base salary reduction); (iii) the relocation of Employee’s office by more than thirty-five (35) miles; (iv) a material reduction of Executive’s annual Long Term Incentive Pay opportunity; or (v) a material breach by the Company of this Agreement; provided, that in order for Executive’s resignation for Good Reason to be effective: (x) Executive must deliver to the Company written notice detailing the specific circumstances alleged to constitute Good Reason within 60 days after the first occurrence of any such event, (y) the Company shall have 30 days after receipt of such notice during which the Company may remedy the occurrence giving rise to the claim for “Good Reason” termination, and if the Company cures such occurrence within such 30-day period there shall be no “Good Reason”.

 

4.9     In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement.

 

4.10     In the event Executive dies after termination of employment, but prior to the payment of any amounts due under this Section 4, such amounts shall be paid to Executive’s estate, except that if the Executive provides written notice to the Company’s senior human resources personnel of a designated beneficiary or designated beneficiaries then such amount shall be paid to such designated beneficiary or designated beneficiaries.

 

4.11     Notwithstanding any other provision of this Agreement, if following the termination of Executive’s employment and while Executive is entitled to payments under Section 4.3 or 4.4, but (i) the Company later determines that Cause with respect to Executive exists or existed on or prior to such termination of Executive’s employment or (ii) Executive materially breaches Section 5 or 6 of this Agreement or breaches Section 7, then except for Accrued Benefits that Executive is entitled to receive (x) Executive shall not be entitled to any additional payments pursuant to Section 4.3 or 4.4 or (y) any and all additional payments to be made by the Company to Executive pursuant to Section 4.3 or 4.4 shall be subject to full recourse and recovery by the Company.

 

4.12     Notwithstanding anything to the contrary herein, at all times the Company shall have the right to terminate the Employment Period.

 

5.     Confidential Information.

 

 

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5.1     Executive acknowledges that the information, observations and data (including trade secrets) obtained by Executive while employed by the Company and its predecessors (including those obtained by Executive prior to the date of this Agreement) concerning the business or affairs of the Company, any of its Subsidiaries, joint ventures (“Joint Ventures”) or affiliates (“Confidential Information”), which Confidential Information the Executive shall have access to and shall be provided during the Employment Period, are the property of the Company or such Subsidiary, Joint Venture or affiliate. Therefore, Executive agrees that, other than for the execution of the duties and responsibilities required by this Agreement, Executive shall not disclose to any person or entity or use for Executive’s own benefit or purposes, or the benefit or purposes of any other person or entity, any Confidential Information or any confidential or proprietary information of other persons or entities in the possession of the Company and its Subsidiaries and affiliates (“Third Party Information”), without the prior written consent of the CEO of the Company. Confidential Information or Third Party Information shall not apply to information that (i) was known to the public prior to its disclosure to Executive; (ii) becomes generally known to the public subsequent to disclosure to Executive through no wrongful act of Executive or any representative of the Executive; or (iii) Executive is required to disclose by applicable law, regulation or legal process. Executive shall deliver to the Company at the termination of the Employment Period, or at any other time the Company may request, all memoranda, notes, plans, records, reports, computer files, disks and tapes, printouts and software and other documents and data (and copies thereof) embodying or relating to Third Party Information, Confidential Information, Work Product (as defined below) or the business of the Company or any Subsidiary, joint venture or affiliate which Executive may then possess or have under Executive’s control. Upon Termination, Executive may retain Executive’s cell phone, rolodex and similar address books provided that such items only include contact information; provided further that the Executive shall provide a copy of any Company related business contact information in such rolodex or similar address books to the Company promptly following the termination of the Employment Period.

 

5.2     Executive shall not use or disclose any confidential information or trade secrets of any former employers or any person or entity to whom Executive owes an obligation of confidentiality. If at any time during the Employment Period Executive believes Executive is being asked to engage in work that will, or will be likely to, jeopardize any confidentiality or other obligations Executive may have to former employers or other persons or entities, Executive shall immediately advise the CEO of the Company so that Executive’s duties can be modified appropriately. Executive represents and warrants to the Company that Executive took nothing with Executive which belonged to any former employer when Executive left Executive’s prior employment positions and that Executive has nothing that contains any information which belongs to any former employer, and, if at any time Executive discovers that the foregoing is incorrect, Executive shall promptly return any such materials to Executive’s former employer. The Company refuses access to any such materials, and Executive shall not be permitted to use or refer to any such materials in the performance of Executive’s duties hereunder.

 

 

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6.     Intellectual Property, Inventions and Patents. Executive acknowledges that all discoveries, concepts, ideas, inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports, patent applications, copyrightable work and mask work (whether or not including any Confidential Information) and all registrations or applications related thereto, all other proprietary information and all similar or related information (whether or not patentable) which relate to the Company’s or any of its Subsidiaries’ or affiliates’ actual or anticipated business, research and development or existing or future products or services and which were or are conceived, developed, contributed to or made or reduced to practice by Executive (whether alone or jointly with others) while employed by the Company and any of its predecessors, whether before or after the date of this Agreement (“Work Product”), belong to the Company. Executive shall promptly disclose such Work Product to the CEO and, at the Company’s expense, perform all actions reasonably requested by the CEO of the Company (whether during or after the Employment Period) to establish and confirm such ownership (including assignments, consents, powers of attorney and other instruments). Executive acknowledges that all copyrightable Work Product shall be deemed to constitute “works made for hire” under the U.S. Copyright Act of 1976, as amended, and that the Company or such Company Affiliate shall own all rights therein. To the extent that any such copyrightable work is not a “work made for hire,” Executive hereby assigns and agrees to assign to the Company or such Company Affiliate all right, title and interest, including a copyright, in and to such copyrightable work. The foregoing provisions of this Section 6 shall not apply to any invention that Executive developed entirely on Executive’s own time without using the Company’s equipment, supplies, facilities or trade secret information, except for those inventions that (i) relate to the Company’s business or actual or demonstrably anticipated research or development, or (ii) result from any work performed by Executive for the Company.

 

7.     Non-Compete, Non-Solicitation; Mutual Non-Disparagement.

 

7.1     In consideration for (1) the agreement by Company to commence and continue Executive’s employment for the Employment Period, (2) the compensation to be paid to Executive hereunder, (3) Executive’s access to and receipt of Confidential Information of the Company as described herein; (4) the promise to provide Executive with equity opportunities in the Company; and (5) the Company’s promise to provide Executive with Confidential Information during the Employment Period, Executive agrees to the provisions of this Section 7. It is expressly understood and agreed that the Company and Executive consider the restrictions contained in this Section 7 to be reasonable and necessary for the purposes of preserving and protecting the Confidential Information and other legitimate business interests of the Company.

 

7.2     Executive further acknowledges that during the course of Executive’s employment with the Company, Executive has and shall continue to become familiar with the Company’s trade secrets and with other Confidential Information concerning the Company and that Executive’s services have been and shall continue to be of special, unique and extraordinary value to the Company, and therefore, Executive agrees that, during the Employment Period and during the Non-Compete Period (as defined below), Executive shall not, except as approved in advance by the Company’s Board Chairman, directly or indirectly own any interest in, manage, control, participate in, consult with, render services for, be employed in an executive, managerial or administrative capacity by, or in any manner engage in, any business or entity engaged in (i) any business that is conducted by the Company, on the Effective Date, which provides similar services or products in connection therewith, or (ii) the same or similar business entered into by the Company after the Effective Date during the Employment Period, (each of clauses (i) or (ii) a “Competing Business”) within the United States. Competing Business shall include all neurostimulation indications and other therapy areas that the Company is actively engaged at the time of Executive’s separation from employment, including but not limited to, product design, development and manufacturing, regulatory body clinical studies and submissions, distributions and marketing and partnerships, joint ventures and co-developments. Competing Business shall not include any business that is not the same or similar to the type of business conducted by the Company while Executive is CFO. Nothing herein shall prohibit Executive from being a passive owner of not more than 2% of any class of stock of a corporation engaged in a Competing Business, which class of stock is publicly traded, so long as Executive has no active participation in the business of such corporation. For purposes of this Agreement, the “Non-Compete Period” shall mean a period of time greater of one (1) year following termination of the Employment Period for any reason.

 

 

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7.3     In addition, during the Non-Compete Period, Executive shall not directly or indirectly through another person or entity (i) induce or attempt to induce any employee of the Company to leave the employ of the Company, or in any way interfere with the relationship between the Company and any employee thereof, (ii) hire any person who was an employee of the Company at any time during the six-month period prior to Executive’s termination or (iii) induce or attempt to induce any customer, supplier, licensee, licensor, franchisee or other business relation of the Company to cease doing business with the Company, or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company. Notwithstanding the foregoing, the provisions of this Section 7.3 shall not be violated by (A) general advertising or solicitation not specifically targeted at Company, Subsidiary or Joint Venture related persons or entities, (B) Executive serving as a reference, upon request, for any employee of the Company or any Subsidiary, or (C) actions taken by any person or entity with which Executive is associated if Executive is not personally involved in any manner in the matter and has not identified such Company, Subsidiary or Joint Venture related person or entity for soliciting or hiring

 

7.4     In addition, during the Employment Period and for two years thereafter (the “Non-Disparage Period”), Executive shall not make any negative or disparaging statements or communications regarding the Company, any of their respective products or practices, or any of their respective directors, officers, agents, representatives, direct or indirect equity holders or affiliates, either orally or in writing; provided that Executive may confer in confidence with Executive’s legal counsel and make truthful statements as required by law or legal process. During the Employment Period and the Non-Disparage Period, the Company and its respective directors and officers, while employed by the Company or serving as a director of the Company, as the case may be, shall not make any negative or disparaging statements or communications regarding Executive or Executive’s business or personal reputation. The foregoing shall not be violated by truthful statements in response to legal process, required governmental testimony or filings, or administrative or arbitral proceedings (including, without limitation, depositions in connection with such proceedings) or as otherwise may be protected by legal privilege.

 

 

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8.     Enforcement. If, at the time of enforcement of Sections 5, 6 and 7, a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum period, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum period, scope and area permitted by law. Because Executive’s services are unique and because Executive has access to Confidential Information and Work Product, the parties hereto agree that the Company would suffer irreparable harm from a breach of Sections 5, 6 and 7 by Executive and that money damages would not be an adequate remedy for any such breach of this Agreement. Therefore, in the event a breach or threatened breach of this Agreement, Executive or the Company, in addition to other rights and remedies existing in their favor, shall be entitled to specific performance and/or injunctive or other equitable relief from a court of competent jurisdiction in order to enforce, or prevent any violations of, the provisions hereof. In addition, in the event of a breach or violation by Executive or the Company of Section 7, the Non-Compete Period and/or the Non-Disparage Period shall be automatically extended by the amount of time between the initial occurrence of the breach or violation and when such breach or violation has been resolved. Executive and the Company acknowledge that the restrictions contained in Section 7 are reasonable and that each party has reviewed the provisions of this Agreement with Executive’s or its legal counsel.

 

9.     Additional Acknowledgments. In addition, Executive acknowledges that the provisions of Sections 5, 6 and 7 are in consideration of employment with the Company and additional good and valuable consideration as set forth in this Agreement. Executive also acknowledges that (i) the restrictions contained in Sections 5, 6 and 7 do not preclude Executive from earning a livelihood, nor do they unreasonably impose limitations on Executive’s ability to earn a living, (ii) the business of the Company and its Subsidiaries and affiliates will be national in scope and (iii) notwithstanding the state of formation or principal office of the Company or residence of any of its executives or employees (including Executive), it is expected that the Company and its Subsidiaries and affiliates will have business activities and have valuable business relationships within its industry throughout the United States of America. Executive agrees and acknowledges that the potential harm to the Company and its Subsidiaries and affiliates of the non-enforcement of Sections 5, 6 and 7 outweighs any potential harm to Executive of its enforcement by injunction or otherwise. Executive acknowledges that Executive has carefully read this Agreement and consulted with legal counsel of Executive’s choosing regarding its contents, has given careful consideration to the restraints imposed upon Executive by this Agreement and is in full accord as to their necessity for the reasonable and proper protection of confidential and proprietary information of the Company and its Subsidiaries and affiliates now existing or to be developed in the future. Executive and the Company expressly agree and acknowledge that each and every restraint imposed by this Agreement is reasonable with respect to subject matter, time period and geographical area.

 

 

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10.     Executive’s Cooperation. During the Employment Period and thereafter, Executive shall reasonably cooperate with the Company and its Subsidiaries in any internal investigation, any administrative, regulatory or judicial investigation or proceeding or any dispute with a third party as reasonably requested by the Company to the extent that such investigation, proceeding or dispute may relate to matters in which Executive has knowledge as a result of Executive’s employment with the Company or its Subsidiaries (including Executive being available to the Company upon reasonable notice for interviews and factual investigations, appearing at the Company’s request to give testimony without requiring service of a subpoena or other legal process, volunteering to the Company all pertinent information and turning over to the Company all relevant documents which are or may come into Executive’s possession, all at times and on schedules that are reasonably consistent with Executive’s other permitted activities and commitments). Without limiting the generality of the foregoing, to the extent that the Company seeks such assistance, the Company shall use reasonable business efforts, whenever possible, to provide Executive with reasonable advance notice of its need for Executive’s assistance and will attempt to coordinate with Executive the time and place at which Executive’s assistance will be provided with the goal of minimizing the impact of such assistance on any other material pre-scheduled business commitment that Executive may have. In the event the Company requires Executive’s reasonable assistance or cooperation in accordance with this Section 10, the Company shall reimburse Executive for reasonable travel expenses (including lodging and meals) upon submission of receipts and the fees and expenses of counsel for Executive. If the cooperation needed by the Company is not for attendance at a legal proceeding, the Parties shall mutually agree on compensation to be paid to Executive for his time and expenses associated with his assistance on the particular matter.

 

11.     Executive’s Representations. Executive hereby represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by Executive do not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Executive is a party or by which Executive is bound, (ii) Executive is not a party to or bound by any employment agreement, non-compete agreement or confidentiality agreement with any other person or entity and (iii) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of Executive, enforceable in accordance with its terms. Executive hereby acknowledges and represents that Executive has consulted with independent legal counsel regarding Executive’s rights and obligations under this Agreement and that Executive fully understands the terms and conditions contained herein.

 

12.     Corporate Opportunity. Executive shall submit to the CEO of the Company all material business, commercial and investment opportunities, or offers presented to Executive or of which Executive becomes aware at any time during the Employment Period which relate to the business of the Company (“Corporate Opportunities”). Unless approved by the CEO of the Company, Executive shall not accept or pursue, directly or indirectly, any Corporate Opportunities on Executive’s own behalf.

 

13.     Insurance for Company’s Own Behalf. The Company may, at its discretion, apply for and procure in its own name and for its own benefit life and/or disability insurance on Executive in any amount or amounts considered advisable. Further to applicable law restricting disclosure of protected health and genetic information, Executive agrees to cooperate in any medical or other examination, supply any information and execute and deliver any applications or other instruments in writing as may be reasonably necessary to obtain and constitute such insurance.

 

 

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14.     Indemnification and Reimbursement of Payments on Behalf of Executive. The Company and its Subsidiaries shall be entitled to deduct or withhold from any amounts owing from the Company or any of its Subsidiaries to Executive any federal, state, local or foreign withholding taxes, excise tax, or employment taxes (“Taxes”) imposed with respect to Executive’s compensation or other payments from the Company or any of its Subsidiaries or Executive’s ownership interest in the Company (including wages, bonuses, dividends, the receipt or exercise of equity options and/or the receipt or vesting of restricted equity). In the event the Company or any of its Subsidiaries does not make such deductions or withholdings, Executive shall indemnify the Company and its Subsidiaries for any amounts paid with respect to any such Taxes, together with any interest, penalties and related expenses thereto. The Company and Executive shall discuss in good faith and agree to a mutually acceptable and reasonable payment schedule with respect to any amounts due to the Company from Executive pursuant to the immediately preceding sentence.

 

15.     Survival. The rights and obligations of the parties under this Agreement shall survive as provided herein or if necessary or desirable to accomplish the purposes of other surviving provisions following the termination of Executive’s employment with the Company or any Subsidiary, regardless of the manner of or reasons for such termination.

 

16.     Notices. All notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally against written receipt or by facsimile transmission against facsimile confirmation or mailed by prepaid first class certified mail, return receipt requested, or mailed by overnight courier prepaid, to the Parties at the following addresses or facsimile numbers:

 

Notices to Executive:

Walter Z. Berger

3505 Turtle Creek Blvd., 18D

Dallas, TX 75219

 

Notices to the Company:

Nuvectra Corporation
Chief Executive Officer 
5830 Granite Parkway, 11th Floor
Plano, TX 75024

 

 

 

13

 

 

All such notices, requests and other communications will (a) if delivered personally to the address as provided in this Section 16 or by facsimile transmission to the facsimile number as provided for in this Section 16, be deemed given on the day so delivered, or, if delivered after 5:00 p.m. local time or on a day other than a Saturday, Sunday or any day on which banks located in the State of Texas are authorized or obligated to close (a “Business Day”), then on the next proceeding Business Day, (b) if delivered by mail in the manner described above to the address as provided in this Section 16, be deemed given on the earlier of the third Business Day following mailing or upon receipt and (c) if delivered by overnight courier to the address as provided for in this Section 16, be deemed given on the earlier of the first Business Day following the date sent by such overnight courier or upon receipt, in each case regardless of whether such notice, request or other communication is received by any other Person to whom a copy of such notice is to be delivered pursuant to this Section 16. Any party hereto from time to time may change its address, facsimile number or other information for the purpose of notices to that party by giving notice specifying such change to the other party hereto.

 

17.     Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or any action in any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

 

18.     Complete Agreement. Unless otherwise specifically stated herein, this Agreement embodies the complete agreement and understanding among the parties and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof or thereof in any way.

 

19.     No Strict Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any party.

 

20.     Counterparts. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.

 

21.     Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive, the Company and their respective heirs, successors and assigns, except that Executive may not assign Executive’s rights or delegate Executive’s duties or obligations hereunder without the prior written consent of the Company. The Company may only assign this Agreement to a successor to all or substantially all of the business and/or assets of the Company. As used in this Agreement, “Company” shall mean the Company and any successor to its business and/or assets, which assumes and agrees to perform the duties and obligations of the Company under this Agreement by operation of law or otherwise. This Agreement and the Company’s rights hereunder may be enforced by Parent.

 

 

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22.     Choice of Law. All issues and questions concerning the construction, validity, enforcement and interpretation of this Agreement and the exhibits and schedules hereto shall be governed by, and construed in accordance with, the laws of the State of Texas, without giving effect to any choice-of-law or conflict-of-law rules or provisions (whether of the State of Texas or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Texas.

 

23.     Amendment and Waiver. The provisions of this Agreement may be amended or waived only with the prior written consent of the Company (as approved by the Chairman of the Board) and Executive, and no course of conduct or course of dealing or failure or delay by any party hereto in enforcing or exercising any of the provisions of this Agreement (including the Company’s right to terminate the Employment Period for Cause) shall affect the validity, binding effect or enforceability of this Agreement or be deemed to be an implied waiver of any provision of this Agreement.

 

24.     Consent to Jurisdiction. EACH OF THE PARTIES IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN THE STATE OF TEXAS, COUNTY OF COLLIN, FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF THIS AGREEMENT, ANY RELATED AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY. EACH OF THE PARTIES HERETO FURTHER AGREES THAT SERVICE OF ANY PROCESS, SUMMONS, NOTICE OR DOCUMENT BY U.S. REGISTERED MAIL TO SUCH PARTY’S RESPECTIVE ADDRESS SET FORTH ABOVE SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY ACTION, SUIT OR PROCEEDING IN THE STATE OF TEXAS WITH RESPECT TO ANY MATTERS TO WHICH IT HAS SUBMITTED TO JURISDICTION IN THIS SECTION 24. EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF THIS AGREEMENT, ANY RELATED DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY IN THE STATE AND FEDERAL COURTS LOCATED IN THE STATE OF TEXAS, COUNTY OF COLLIN, AND HEREBY AND THEREBY FURTHER IRREVOCABLY AND UNCONDITIONALLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION, SUIT OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

 

25.     Waiver of Jury Trial. AS A SPECIFICALLY BARGAINED-FOR INDUCEMENT FOR EACH OF THE PARTIES HERETO TO ENTER INTO THIS AGREEMENT (AFTER HAVING THE OPPORTUNITY TO CONSULT WITH COUNSEL), EACH PARTY HERETO EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING RELATING TO OR ARISING IN ANY WAY FROM THIS AGREEMENT OR THE MATTERS CONTEMPLATED HEREBY.

 

 

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26.     Arbitration. 

 

26.1     Except with respect to disputes and claims under Sections 5, 6 and 7 (which the parties hereto may pursue in any court of competent jurisdiction and which may be pursued in any court of competent jurisdiction as specified herein and with respect to which each party shall bear the cost of its own attorneys’ fees and expenses, except to the extent otherwise required by applicable law), each party hereto agrees that arbitration, pursuant to the procedures set forth in the National Rules for the Resolution of Employment Disputes of the American Arbitration Association (as adopted and effective as of June 1, 1997 or such later version as may then be in effect) (the “AAA Rules”), shall be the sole and exclusive method for resolving any claim or dispute (“Claim”) arising out of or relating to the rights and obligations of the parties under this Agreement and the employment of Executive by the Company (including any Claim regarding employment discrimination, sexual harassment, termination and discharge), whether such Claim arose or the facts on which such Claim is based occurred prior to or after the execution and delivery of this Agreement.

 

26.2     The parties hereto agree that (i) one arbitrator shall be appointed pursuant to the AAA Rules to conduct any such arbitration, (ii) all meetings of the parties and all hearings with respect to any such arbitration shall take place in Plano, Texas and (iii) each party to the arbitration shall bear its own costs and expenses (including all attorneys’ fees and expenses, except to the extent otherwise required by applicable law) and all costs and expenses of the arbitration proceeding (such as filing fees, the arbitrator’s fees, hearing expenses, etc.) shall be borne equally by the parties hereto.

 

26.3     In addition, the parties hereto agree that (i) the arbitrator shall have no authority to make any decision, judgment, ruling, finding, award or other determination that does not conform to the terms and conditions of this Agreement (as executed and delivered by the parties hereto), (ii) the arbitrator shall have no greater authority to award any relief than a court having proper jurisdiction pursuant to Section 24 and (iii) the arbitrator shall have no authority to commit an Error of Law (as defined below) in its decision, judgment, ruling, finding, award or other determination, and on appeal from or motion to vacate or confirm such decision, judgment, ruling, finding, award or other determination, a court having proper jurisdiction pursuant to Section 24 may vacate any such decision, judgment, ruling, finding, award or other determination to the extent containing an Error of Law. For purposes of this Agreement, an “Error of Law” means any decision, judgment, ruling, finding, award or other determination that is inconsistent with the laws governing this Agreement pursuant to Section 22. Any decision, judgment, ruling, finding, award or other determination of the arbitrator and any information disclosed in the course of any arbitration hereunder (collectively, the “Arbitration Information”) shall be kept confidential by the parties subject to Section 26.4, and any appeal from or motion to vacate or confirm such decision, judgment, ruling, finding, award or other determination shall be filed under seal.

 

 

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26.4     In the event that any party or such party’s affiliates, associates or representatives is requested or required (by oral question or request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand, or similar process) to disclose any Arbitration Information (the “Disclosing Party”), such Disclosing Party shall notify the other party promptly of the request or requirement so that the other party may seek an appropriate protective order or waive compliance with the provisions of this Section 26. If, in the absence of a protective order or the receipt of a waiver hereunder, the Disclosing Party or any of its affiliates, associates or representatives believes in good faith, upon the advice of legal counsel, that it is compelled to disclose any such Arbitration Information, such Disclosing Party may disclose such portion of the Arbitration Information as it believes in good faith, upon the advice of legal counsel, it is required to disclose; provided that the Disclosing Party shall use reasonable efforts to obtain, at the request and expense of the other party, an order or other assurance that confidential treatment shall be accorded to such portion of the Arbitration Information required to be disclosed as the other party shall designate. Notwithstanding anything in this Section 26 to the contrary, the parties shall have no obligation to keep confidential any Arbitration Information that becomes generally known to and available for use by the public other than as a result of the disclosing party’s acts or omissions or the acts or omissions of such party’s affiliates, associates or representatives. The parties agree that, subject to the right of any party to appeal or move to vacate or confirm any decision, judgment, ruling, finding, award or other determination of an arbitration as provided in this Section 26, the decision, judgment, ruling, finding, award or other determination of any arbitration under the AAA Rules shall be final, conclusive and binding on all of the parties hereto; provided, however, nothing in this Section 26 shall prohibit any party hereto from instituting litigation to enforce any final decision, judgment, ruling, finding, award or other determination of the arbitration.

 

27.     Deferred Compensation Provisions. Notwithstanding any other provision herein:

 

27.1     The parties hereto intend that payments and benefits under this Agreement comply with or be exempt from Section 409A and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith or exempt therefrom. In no event whatsoever shall the Company be liable for any additional tax, interest or penalty that may be imposed on Executive by Section 409A or damages for failing to comply with Section 409A.

 

27.2     A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits that are considered nonqualified deferred compensation under Section 409A upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Section 409A and the payment thereof prior to a “separation from service” would violate Section 409A. For all purposes of this Agreement, references herein to “termination,” “termination of the Employment Period,” “resignation” or other terms of similar import shall in each case mean a “separation from service” within the meaning of Section 409A.

 

 

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27.3     For purposes of Section 409A, Executive’s right to receive any installment payment pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a discrete length of time (e.g., “within 15 days”), the actual date of payment within the specified period shall be within the sole discretion of the Company.

 

27.4     In no event shall any payment under this Agreement that constitutes nonqualified deferred compensation subject to Section 409A be subject to offset unless otherwise permitted by Section 409A.

 

27.5     To the extent that reimbursements or other in-kind benefits under this Agreement constitute “nonqualified deferred compensation” for purposes of Section 409A, (i) all expenses or other reimbursements hereunder shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by Executive, (ii) any right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (iii) no such reimbursement, expenses eligible for reimbursement, or in-kind benefits provided in any taxable year shall in any way affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year.

 

27.6     To the extent that Executive is a “specified employee,” as defined in Section 409A(a)(2)(B)(i) of the Code and Treasury Regulations and other Internal Revenue Service guidance promulgated thereunder and any elections made by the Company in accordance therewith, notwithstanding the timing of payments provided in any other Section of this Agreement, no payment, distribution or benefit under this Agreement that constitutes a payment of nonqualified deferred compensation (within the meaning of Treasury Regulation Section 1.409A-1(b)) upon separation from service (within the meaning of Treasury Regulation Section 1.409A-1(h)), after taking into account all available exemptions that would otherwise be payable, distributable or settled during the six-month period after separation from service, shall not be made during such six-month period, and any such payment, distribution or benefit instead shall be paid, distributed or settled on the first business day after such six-month period; provided that if Executive dies following the date of separation from service and prior to the payment, distribution, settlement or provision of any payments, distributions or benefits delayed on account of Section 409A of the Code, such payments, distributions or benefits shall be paid or provided to the personal representative of the Executive’s estate within thirty (30) days after the date of the Executive’s death.

 

* * * * *

 

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date indicated below.

 

	
 
	
 NUVECTRA CORPORATION
	
 

	 	 	 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 

	
 
	
By: 
	
/s/ Scott F. Drees

	
 
	
 
	
Scott F. Drees 
	
 

	
 
	
 
	
Chief Executive Officer
	
 

 

 

 

 

	 	/s/ Walter Z. Berger	 
	 	Walter Z. Berger	 

 

 

 

	 	1/13/2017	 
	 	Date	 

 

 

19Exhibit 4.1

 

DATED JANUARY 17, 2017

 

FIBRIA OVERSEAS FINANCE LTD.
 AS ISSUER

 

AND

 

FIBRIA CELULOSE S.A.
 AS GUARANTOR

 

AND

 

DEUTSCHE BANK TRUST COMPANY AMERICAS
 AS TRUSTEE

 

 

SECOND SUPPLEMENTAL INDENTURE

 

U.S.$700,000,000

 

5.500% NOTES DUE 2027

 

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
1.
    	
DEFINITIONS
    	
1
    
	
 
    	
 
    	
 
    
	
2.
    	
GENERAL TERMS AND   CONDITIONS OF THE NOTES
    	
2
    
	
 
    	
 
    	
 
    
	
3.
    	
AMENDMENTS TO THE BASE   INDENTURE
    	
3
    
	
 
    	
 
    	
 
    
	
4.
    	
MISCELLANEOUS PROVISIONS
    	
16
    
	
 
    	
 
    	
 
    
	
5.
    	
THE TRUSTEE AND AGENTS
    	
17
    

 

 

Second Supplemental Indenture, dated as of January 17, 2017, among FIBRIA OVERSEAS FINANCE LTD., a Cayman Islands exempted company incorporated with limited liability (herein called the “Company”), having its registered office at the offices of Intertrust Corporate Services (Cayman) Limited, 190 Elgin Avenue, George Town, Grand Cayman KY1-9005, Cayman Islands and its principal executive office is located at Rua Fidêncio Ramos, 302, 3rd Floor, Torre B, Edifício Vila Olímpia Corporate, Vila Olímpia, São Paulo, SP, 04551-010, Brazil, FIBRIA CELULOSE S.A., a company duly organized under the laws of the Federative Republic of Brazil (the “Guarantor” or “Fibria”), having its executive office at Rua Fidêncio Ramos, 302, 3rd Floor, Torre B, Edifício Vila Olímpia Corporate, Vila Olímpia, São Paulo, SP, 04551-010, Brazil, and DEUTSCHE BANK TRUST COMPANY AMERICAS, a New York banking corporation, as Trustee (in such capacity, the “Trustee”), to the indenture dated as of May 12, 2014 among the Company, the Guarantor and the Trustee (the “Base Indenture”).

 

W I T N E S S E T H :

 

Whereas, the Base Indenture provides for the issuance from time to time thereunder, in series, of Securities of the Company carrying the Guarantee of the Guarantor, and Section 3.01 of the Base Indenture provides for the establishment of the form or terms of Securities issued thereunder through one or more supplemental indentures;

 

Whereas, the Company and the Guarantor desire by this Second Supplemental Indenture to create a new series of Securities to be issuable under the Base Indenture, as supplemented by this Second Supplemental Indenture, and to be known as the Company’s 5.500% Notes due 2027 (the “Notes”) the terms and provisions of which are to be as specified in this Second Supplemental Indenture;

 

Whereas, the Company and the Guarantor have duly authorized the execution and delivery of this Second Supplemental Indenture to establish the Notes as a series of Securities under the Base Indenture and to provide for, among other things, the issuance of and the form and terms of the Notes and additional covenants for the benefit of the Holders thereof and the Trustee; and

 

Whereas, all things necessary to make this Second Supplemental Indenture a valid and binding legal obligation of the Company and the Guarantor according to its terms have been done.

 

Now, therefore, for and in consideration of the premises and the purchase and acceptance of the Notes by the Holders thereof and for the purpose of setting forth, as provided in the Base Indenture, the form of the Notes and the terms, provisions and conditions thereof, the Company and the Guarantor covenant and agree with the Trustee and the Paying Agent:

 

DEFINITIONS

 

1.1                               Provisions of the Base Indenture

 

Except insofar as herein otherwise expressly provided, all the definitions, provisions, terms and conditions of the Base Indenture shall remain in full force and effect. The Base

 

 

Indenture, as amended and supplemented by this Second Supplemental Indenture, is in all respects ratified and confirmed, and the Base Indenture and this Second Supplemental Indenture shall be read, taken and considered as one and the same instrument for all purposes.

 

1.2                               Definitions

 

For all purposes of this Second Supplemental Indenture and the Notes, except as otherwise expressly provided or unless the subject matter or context otherwise requires:

 

1.2.1                     any reference to a “Section” refers to a Section of this Second Supplemental Indenture;

 

1.2.2                     the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Second Supplemental Indenture as a whole and not to any particular Section or other subdivision;

 

1.2.3                     all terms used in this Second Supplemental Indenture that are defined in the Base Indenture have the meanings assigned to them in the Base Indenture, except as otherwise provided in this Second Supplemental Indenture;

 

1.2.4                     the term “Securities” as defined in the Base Indenture and as used in any definition therein, shall be deemed to include or refer to, as applicable, the Notes; and

 

1.2.5                     the following terms have the meanings given to them in this Section 1.2.5.

 

“Applicable Procedures” means with respect to any transfer or transaction involving a Global Note or beneficial interest therein, the rules and procedures of the Depositary, Euroclear and Clearstream, Luxembourg for such Global Note, in each case to the extent applicable to such transaction and as in effect from time to time.

 

“Depositary” means The Depository Trust Company, its nominees and their respective assigns or such other depositary institution herein after appointed by the Company.

 

“Global Note” means a Note that evidences all or part of the Notes and is authenticated and delivered to, and registered in the name of, the Depositary for such Notes or a nominee thereof.

 

“Interest Payment Date” has the meaning set forth in Section 2.1 hereof.

 

“Notes” has the meaning specified in the recitals hereof.

 

“Stated Maturity” has the meaning specified in Section 2.1 hereof.

 

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GENERAL TERMS AND CONDITIONS OF THE NOTES

 

2.1                               Designation, Principal Amount and Redemption.

 

There is hereby authorized and established a new series of Securities designated the “5.500% Notes due 2027”. The Notes will initially be issued in an aggregate principal amount of U.S.$700,000,000 (which amount does not include Notes authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Notes pursuant to Sections 3.04, 3.05, 9.06 or 11.07 of the Base Indenture).

 

The principal of the Notes shall be due and payable at the Stated Maturity. The stated maturity of the Notes shall be on January 17, 2027 (the “Stated Maturity”). The Notes shall (subject to Section 10.09 of the Base Indenture) be unsecured and shall bear interest at the rate of 5.500% per annum, from January 17, 2017 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, as the case may be, payable semi-annually on January 17 and July 17 of each year, commencing on July 17, 2017 (each, an “Interest Payment Date”), until the principal thereof is paid or made available for payment. Interest on the Securities shall be computed on the basis of a 360-day year consisting of twelve 30-day months.

 

The Company may from time to time, without the consent of the Holders, create and issue additional Notes having the same terms and conditions as the Notes in all respects, except for issue date, issue price and the first payment of interest thereon. Additional Notes issued in this manner shall increase the aggregate principal amount of, and shall form a single series with and vote together with the previously outstanding Notes.

 

2.2                               Forms Generally

 

The Notes shall be in substantially the form set forth in Annex A, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Second Supplemental Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the Officers executing such Notes, as evidenced by their execution thereof.

 

2.3                               Payments

 

Principal of, premium, if any, interest and any Additional Amounts on the Notes will be payable at the office of the Trustee and at the offices of the Paying Agent, and the transfer of the Notes will be registrable at the office of the Trustee.

 

AMENDMENTS TO THE BASE INDENTURE

 

(a)                                 With respect to the Notes only (and, for the avoidance of doubt, not with respect to any other series of notes issued pursuant to the Base Indenture on or prior to the date hereof) Section 1.01 of the Base Indenture is hereby amended by adding new defined terms as follows (without any effect on the other defined terms contained therein):

 

“Change of Control” means:

 

(1)                                 the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of

 

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related transactions, of all or substantially all of the assets of the Guarantor and its subsidiaries, taken as a whole, to any Person (including any “person” (as that term is used in Section 13(d)(3) of the Exchange Act)) other than to one or more of the Permitted Holders; or

 

(2)                                 the consummation of any transaction (including without limitation, any merger or consolidation) the result of which is that any Person (including any “person” (as that term is used in Section 13(d)(3) of the Exchange Act) but excluding any of the Permitted Holders) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) of more than 50% of the outstanding Voting Stock of the Guarantor, measured by voting power rather than number of shares.

 

“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 the 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 comparable maturity to the remaining term of such Notes.

 

“Comparable Treasury Price” means (A) the arithmetic average of the Reference Treasury Dealer Quotations for such Redemption Date after excluding the highest and lowest Reference Treasury Dealer Quotations, or (B) if the Company obtains fewer than four Reference Treasury Dealer Quotations, the arithmetic average of all Reference Treasury Dealer Quotations for such Redemption Date.

 

“Designated Affiliate” means, at any time, one or more Persons designated by the Guarantor to be the purchaser of Notes under an Offer to Purchase.

 

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

 

“Investment Grade” means BBB-or higher by Standard & Poor’s, Baa3 or higher by Moody’s or BBB-or higher by Fitch, or the equivalent of such global ratings by Standard & Poor’s, Moody’s or Fitch.

 

“Permitted Holder” means each of (1) Votorantim Participações S.A. or any affiliate thereof and (2) BNDES Participações S.A. or any affiliate thereof.

 

“Person” means any corporation, partnership, joint venture, trust, limited liability company or unincorporated organization.

 

“Rating Agency” means each of (1) Standard & Poor’s, (2) Moody’s and (3) Fitch, or their respective successors; provided that if any of Standard & Poor’s, Moody’s or Fitch ceases to rate the notes or fails to make a rating on the notes publicly available, the Guarantor will appoint a replacement for such Rating

 

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Agency that is a “nationally recognized statistical rating organization” within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act.

 

“Ratings Decline” means that at any time within 90 days after the earlier of the date of public notice of a Change of Control and the date on which the Guarantor or any other Person publicly declares its intention to effect a Change of Control, (1) in the event the Notes are assigned an Investment Grade rating by at least two of the Rating Agencies prior to such public notice or declaration, the rating assigned to the Notes by at least two of the Rating Agencies is below an Investment Grade rating; or (2) in the event the ratings assigned to the Notes by at least two of the Rating Agencies prior to such public notice or declaration are below an Investment Grade rating, the rating assigned to the Notes by at least two of the Rating Agencies is decreased by one or more categories (i.e., notches); provided that, in each case, any such Ratings Decline is expressly stated by the applicable Rating Agencies to have been the result of the Change of Control.

 

“Reference Treasury Dealers” means at least four primary U.S. government securities dealers in New York City, New York designated by the Company or the Guarantor not later than the third Business Day preceding such Redemption Date.

 

“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any Redemption Date, the arithmetic average, as determined by the Company or the Guarantor, 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 Company or the Guarantor, as applicable, by such Reference Treasury Dealer at approximately 3:30 p.m. (New York City time) on the third Business Day preceding such Redemption Date.

 

“Remaining Scheduled Payment” means the remaining scheduled payments of the principal and interest that would be due after the applicable redemption date but for such redemption.

 

“Treasury Rate” means, with respect to any Redemption Date, the rate per annum equal to the semi-annual equivalent yield to maturity or interpolated yield to maturity of the Comparable Treasury Issue. In determining the Treasury Rate, the price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) will be assumed to be equal to the Comparable Treasury Price for such Redemption Date.

 

“Voting Stock” means, with respect to the Guarantor as of any date, the Capital Stock of the Guarantor that is at the time entitled to vote generally in the election of the Board of Directors of the Guarantor and in respect of other matters presented at shareholders’ meetings of the Guarantor.

 

(b)                                 With respect to the Notes only (and, for the avoidance of doubt, not with respect to any other series of notes issued pursuant to the Base Indenture on or prior to the date hereof) paragraph (xv) of the definition of “Permitted Liens” in Section 1.01

 

5

 

of the Base Indenture is hereby deleted and amended and restated in its entirety as follows:

 

“in addition to the foregoing Liens set forth in Clauses (i) through (xiv) above or otherwise permitted by Section 10.09, Liens securing Debt of Fibria or any Subsidiary (including, without limitation, guarantees of Fibria or any Subsidiary) that does not in aggregate principal amount, at any time of determination, exceed 15.0% of Consolidated Total Assets.”

 

(c)                                  With respect to the Notes only (and, for the avoidance of doubt, not with respect to any other series of notes issued pursuant to the Base Indenture on or prior to the date hereof), the following new Section 1.19 shall be inserted into the Base Indenture:

 

“Section 1.19 Currency Indemnity. U.S. Dollars are the sole currency of account and payment for all sums payable by the Company or the Guarantor under or in connection with the Notes, including damages. Any amount received or recovered in a currency other than U.S. Dollars (whether as a result of, or of the enforcement of, a judgment or order of a court of any jurisdiction, in the winding-up or dissolution of the Guarantor, the Company or otherwise) by any Holder in respect of any sum expressed to be due to it from the Company or the Guarantor shall only constitute a discharge of the Company or the Guarantor, as the case may be, to the extent of the U.S. Dollar amount which the recipient is able to purchase with the amount so received or recovered in that other currency on the date of that receipt or recovery (or, if it is not practicable to make that purchase on that date, on the first date on which it is practicable to do so). If that U.S. Dollar amount is less than the U.S. Dollar amount expressed to be due to the recipient under any Notes, the Company or the Guarantor, as the case may be, shall indemnify such Holder against any loss sustained by it as a result; and if the amount of U.S. Dollars so purchased is greater than the sum originally due  to such Holder, such Holder shall, by accepting the Notes, be deemed to have agreed to repay such excess. In any event, the Company or the Guarantor, as the case may be, shall indemnify the recipient against the cost of making any such purchase. For the purposes of this Section 1.19, it shall be sufficient for the Holder to certify in a satisfactory manner (indicating the sources of information used) that it would have suffered a loss had an actual purchase of U.S. Dollars been made with the amount so received in that other currency on the date of receipt or recovery (or, if a purchase of U.S. Dollars on such date had not been practicable, on the first date on which it would have been practicable, it being required that the need for a change of date be certified in the manner mentioned above). These indemnities constitute a separate and independent obligation from the other obligations of the Company and the Guarantor, shall give rise to a separate and independent cause of action, shall apply irrespective of any indulgence granted by any Holder and shall continue in full force and effect despite any other judgment, order, claim or proof for a liquidated amount in respect of any sum due under any Notes.”

 

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(d)                                 With respect to the Notes only (and, for the avoidance of doubt, not with respect to any other series of notes issued pursuant to the Base Indenture on or prior to the date hereof) Section 5.01 of the Base Indenture is hereby deleted in its entirety and amended and restated 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:

 

a)                                     The Company or the Guarantor default in any payment of interest on any Notes when the same becomes due and payable, and such Default continues for a period of 30 days;

 

b)                                     The Company or the Guarantor default in the payment of the principal (including premium, if any) of any Notes when the same becomes due and payable upon its Stated Maturity, redemption or otherwise;

 

c)                                      The Company or the Guarantor fails to comply with any of its other covenants or agreements in the Notes or this Indenture (other than those referred to in Sections 5.01(a) and 5.01(b)) and such failure continues for 60 days after the Company or the Guarantor, as the case may be, receives a notice of Default from the Trustee or the Holders of at least 25% in principal amount of the outstanding Notes;

 

d)                                     The Guarantor or any Significant Subsidiary defaults under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Debt for money borrowed by the Guarantor or any such Significant Subsidiary (or the payment of which is guaranteed by the Guarantor or any such Significant Subsidiary) whether such Debt or guarantee now exists, or is created after the date of this Indenture, which default (1) is caused by failure to pay principal of (and premium, if any, on) or interest on such Debt after giving effect to any grace period provided in such Debt on the date of such default (“Payment Default”) or (2) results in the acceleration of such Debt prior to its express maturity and, in each case, the principal amount of any such Debt or guarantee, as applicable, together with the principal amount of any other such Debt or guarantee under which there has been a Payment Default or the maturity of which has been so accelerated, totals U.S.$100,000,000 (or the equivalent thereof at the time of determination) or more in the aggregate;

 

e)                                      One or more final judgments or decrees for the payment of money in excess of U.S.$100,000,000 (or the equivalent in another currency at the time of determination, if applicable) in the aggregate are rendered against the Guarantor or any Significant Subsidiary and are not paid (whether in full or in installments in accordance with the terms of the judgment) or otherwise discharged (and otherwise not covered by an insurance policy or policies issued by reputable and creditworthy insurance companies) and,

 

7

 

in the case of each such judgment or decree, either (a) an enforcement proceeding has been commenced by any creditor upon such judgment or decree and is not dismissed within 60 days following commencement of such enforcement proceedings or (b) there is a period of 60 days following such judgment during which such judgment or decree is not discharged, waived or the execution thereof stayed;”

 

f)                                       The Guarantor or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law:

 

a.                                      commences a voluntary case or files a request or petition for a writ of execution to initiate bankruptcy proceedings or have itself adjudicated as bankrupt;

 

b.                                      applies for or consents to the entry of an order for relief against it in an involuntary case;

 

c.                                       applies for or consents to the appointment of a Custodian of it or for any substantial part of its property;

 

d.                                      makes a general assignment for the benefit of its creditors;

 

e.                                       proposes or agrees to an accord or composition in bankruptcy between itself and its creditors; or

 

f.                                        files for a reorganization of its debts (judicial or extrajudicial recovery);

 

g)                                      A court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

 

a.                                      is for relief against the Guarantor or any Significant Subsidiary in an involuntary case;

 

b.                                      appoints a Custodian of the Guarantor or any Significant Subsidiary or for any substantial part of the property of the Guarantor or any Significant Subsidiary;

 

c.                                       orders the winding up or liquidation of the Guarantor or any Significant Subsidiary;

 

d.                                      adjudicates the Guarantor or any Significant Subsidiary as bankrupt or insolvent;

 

e.                                       ratifies an accord or composition in bankruptcy between the Guarantor or any Significant Subsidiary and the respective creditors thereof; or

 

8

 

f.                                        grants a judicial or extrajudicial recovery to the Guarantor or any Significant Subsidiary,

 

and, in the case of any of Subsection (g)(a) through (g)(f), the order or decree remains unstayed and in effect for 60 days.

 

h)                                     All or substantially all of the undertaking, assets and revenues of the Guarantor or any of its Significant Subsidiaries is condemned, seized or otherwise appropriated by any Person acting under the authority of any national, regional or local government or the Guarantor or any of its Significant Subsidiaries is prevented by any such Person for a period of 60 consecutive days or longer from exercising normal control over all or substantially all of its undertaking, assets and revenues; or

 

i)                                         Any guarantee by the Guarantor of the Notes shall cease to be or is claimed by the Guarantor not to be in full force and effect.

 

If a Responsible Officer of the Trustee receives written notice of an Event of Default with respect to the Notes, the Trustee shall give the Holders notice of such Event of Default as and to the extent provided in this Indenture; provided, however, that in the case of any default of the character specified in clause (d) above, no such notice to such Holders shall be given until at least 30 days after the occurrence thereof.”

 

(e)                                  With respect to the Notes only (and, for the avoidance of doubt, not with respect to any other series of notes issued pursuant to the Base Indenture on or prior to the date hereof) the first paragraph of Section 6.01 of the Base Indenture is hereby deleted and amended and restated in its entirety as follows:

 

“Section 6.01                       Certain Duties and Responsibilities. The duties, responsibilities, rights, benefits and protections of the Trustee shall be as specifically set forth in this Indenture and the Trust Indenture Act and no implied covenants or obligations shall be read into this Indenture against the Trustee.”

 

(f)                                   With respect to the Notes only (and, for the avoidance of doubt, not with respect to any other series of notes issued pursuant to the Base Indenture on or prior to the date hereof) the first paragraph of Section 10.08 of the Base Indenture is hereby deleted and amended and restated in its entirety as follows:

 

“Section 10.08                Additional Amounts. All payments by the Company and Fibria in respect of the Securities or the Guarantee, as the case may be, shall be made without withholding or deduction for or on account of any present or future taxes, duties, assessments, or other governmental charges of whatever nature imposed or levied by or on behalf of any Relevant Taxing Jurisdiction, unless the Company or Fibria, as applicable, is compelled by law to deduct or withhold such taxes, duties, assessments or governmental charges. In such event, the Company or Fibria, as the case may be, shall pay to each Holder such additional amounts (“Additional Amounts”) as may be necessary in order that every net payment

 

9

 

made by the Company or Fibria, as the case may be, on each Security or the Guarantee after such withholding or deduction shall not be less than the amount then due and payable on such Security or the Guarantee. Notwithstanding the foregoing, the obligation to pay Additional Amounts shall not apply to or in respect of:”

 

(g)                                  With respect to the Notes only (and, for the avoidance of doubt, not with respect to any other series of notes issued pursuant to the Base Indenture on or prior to the date hereof), the following new Section 10.10 shall be inserted into the Base Indenture:

 

“Section 10.10 Additional Limitations on the Company.

 

(a)                                 For so long as any of the Notes is outstanding:

 

(i)           the Company shall not engage in any business, or conduct any operations, other than to finance the operations of the Guarantor and its Subsidiaries, activities that are reasonably ancillary thereto (including, without limitation, on-lending of funds, repurchases of Debt not prohibited by the Base Indenture or this Supplemental Indenture and entering into transactions involving Hedging Obligations not for speculative purposes relating to such Debt) and cash management measures and short term Investments;

 

(ii)          the Company shall not incur any Debt other than (1) the Notes and (2) any other indebtedness which (i) ranks equally with the Notes or (ii) is subordinated to the Notes;

 

(iii)        the Company shall not consolidate with or merge with or into, or convey, transfer or lease all or substantially all of its assets to any person, except (i) to the extent that it complies with the conditions set forth in Section 8.01 (substituting “the Company” for “the Guarantor” therein) or (ii) with an affiliate of the Company solely for the purpose of reincorporating the Company in another jurisdiction (so long as reincorporation does not materially adversely affect the rights of the holders of the notes);

 

(iv)         the Company shall not redeem any shares of its Capital Stock; and

 

(v)          the Company shall not incur any Liens on any of its assets, except for any Liens imposed by operation of law.

 

(b)                                 In addition, the Guarantor will continue to own, directly or indirectly, a majority of the Voting Stock of the Company. In connection with a substitution of the Company as issuer, upon the

 

10

 

execution of the applicable Issuer Substitution Documents, neither the Company nor the Substituted Issuer will be subject to the covenants set forth in this Section 10.10.

 

(h)                                 With respect to the Notes only (and, for the avoidance of doubt, not with respect to any other series of notes issued pursuant to the Base Indenture on or prior to the date hereof) Section 11.01 of the Base Indenture is hereby deleted in its entirety and amended and restated in their entirety as follows:

 

“Section 11.01 Right of Redemption.

 

(a)                                 Except as described in this Section 11.01, Sections 11.07, 11.08 and 11.09 and Paragraphs 2, 3 and 4 of the Notes, the Notes may not be redeemed prior to their Stated Maturity.

 

(b)                                 The Notes shall be redeemable, at the option of the Company or the Guarantor, in whole or in part, at any time and from time to time, upon giving not less than five Business Days’ nor more than 60 Business Days’ notice to the Holders with a copy to the Trustee, at the Redemption Price and on the terms and conditions, described in Paragraph 3 of the Notes.

 

(c)                                  The Company or the Guarantor may enter into an arrangement under which the Guarantor or a subsidiary of the Guarantor may, in lieu of redemption by the Company or the Guarantor, purchase for a purchase price equal to the full Redemption Price any Note to be redeemed pursuant to this Section 11.01, Sections 11.08 and 11.09 or Paragraphs 2, 3 and 4 of the Notes.”

 

(i)                                     With respect to the Notes only (and, for the avoidance of doubt, not with respect to any other series of notes issued pursuant to the Base Indenture on or prior to the date hereof) Section 11.08 of the Base Indenture is hereby deleted in its entirety and amended and restated in their entirety as follows:

 

“Section 11.08                Optional Redemption Due to Changes in Tax Treatment. The Securities may be redeemed at the option of the Company, Fibria or any successor, in whole but not in part, at any time upon giving not less than five Business Days’ but no more than 60 Business Days’ notice to the Holders (which notice shall be irrevocable) at a Redemption Price, as calculated by the Company, equal to 100% of the principal amount thereof, plus accrued and unpaid interest thereon, to, but excluding, the Redemption Date, only if, as a result of a change in, or amendment to, any laws, rules or regulations of a Relevant Taxing Jurisdiction, or any amendment to or change in an official interpretation, administration or application of such laws, rules or regulations (including a holding by a court of competent jurisdiction), which change or amendment becomes effective or is announced on or after the later of the issue date of the Securities or the date a Relevant Taxing Jurisdiction becomes a Relevant Taxing

 

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Jurisdiction (i) Fibria or any successor has or will become obligated to pay Additional Amounts with respect to the Securities or the Guarantee in excess of the Additional Amounts Fibria or any such successor would be obligated to pay if payments were subject to withholding or deduction at a rate of 15% or at a rate of 25% in case the holder of the notes is resident in a tax haven jurisdiction for Brazilian tax purposes (i.e., countries which do not impose any income tax or which impose it at a maximum rate lower than 17% or where the laws impose restrictions on the disclosure of ownership composition or securities ownership) or (ii) the Company or any successor has or will become obligated to pay any Additional Amounts in excess of the Additional Amounts the Company or any such successor would be obligated to pay if payments were subject to withholding or deduction at a rate of 0%, and in the case of each of (i) and (ii), such obligation cannot be avoided by the Company, Fibria or their respective successors, as applicable, after taking reasonable measures to avoid it; provided, however, that for this purpose reasonable measures shall not include any change in the Company’s, Fibria’s or any successor’s jurisdiction of incorporation or organization or location of its principal executive office or registered office, as applicable.

 

Prior to the publication or mailing of any notice of redemption pursuant to the preceding paragraph, the Company, Fibria or any successor shall deliver to the Trustee an Officer’s Certificate to the effect that the obligation of the Company, Fibria or any successor, as the case may be, to pay Additional Amounts cannot be avoided by the Company, Fibria or any successor taking reasonable measures available to it. The Company, Fibria or any successor, as the case may be, shall also deliver to the Trustee an Opinion of Counsel stating that the Company, Fibria or any successor, as the case may be, would be obligated to pay Additional Amounts due to the changes in tax laws or regulations. The Trustee shall accept such Officer’s Certificate and Opinion of Counsel as sufficient evidence of the satisfaction of the conditions precedent set forth in Clauses (i) and (ii) of the preceding paragraph of this Section 11.08, in which event it shall be conclusive and binding on the Holders.

 

The Company or Fibria may enter into an arrangement under which Fibria or a subsidiary of Fibria may, in lieu of redemption by the Company or Fibria, purchase for a purchase price equal to the full Redemption Price any Security to be redeemed pursuant to this Section 11.08.”

 

(j)                                    With respect to the Notes only (and, for the avoidance of doubt, not with respect to any other series of notes issued pursuant to the Base Indenture on or prior to the date hereof), the following new Section 11.09 shall be inserted into the Base Indenture:

 

“Section 11.09 Change of Control.

 

(a)                                 If a Change of Control that results in a Ratings Decline occurs, not later than 30 days following such an occurrence, the Guarantor,

 

12

 

acting on behalf of the Company, shall make, directly or through a Designated Affiliate, an offer to purchase all of the Notes pursuant to the offer described below (the “Offer to Purchase”) at a price in cash (the “Offer to Purchase Payment”) equal to 101% of the principal amount thereof plus accrued and unpaid interest thereon and Additional Amounts, if any, to, but excluding, the Offer to Purchase Payment Date. Not later than 30 days after the occurrence of a Change of Control that results in a Ratings Decline, the Guarantor or a Designated Affiliate shall send written notice of such Offer to Purchase, together with a letter of transmittal, by first class mail, with a copy to the Trustee, to each Holder at the address of such Holder appearing in the Register or otherwise in accordance with the procedures of the Depositary with the following information:

 

(i)           that an Offer to Purchase is being made pursuant to this Section 11.09 and that all Notes properly tendered pursuant to such Offer to Purchase will be accepted for payment;

 

(ii)         that a Holder may tender all or any portion of its Notes pursuant to such Offer to Purchase, subject to the requirement if a Holder tenders only a portion of its Notes, the remaining Notes must be no less than U.S.$2,000 in principal amount and integral multiples of U.S.$1,000 in excess thereof;

 

(iii)        the purchase price, the expiration date (the “Expiration Date”) of the Offer to Purchase, which will be no less than 30 days nor more than 60 days after the date such notice is mailed, and the purchase date, which will be no more than five Business Days after the Expiration Date (the “Offer to Purchase Payment Date”);

 

(iv)        any Note not properly tendered will remain outstanding and continue to accrue interest;

 

(v)          unless the Guarantor or its Designated Affiliate defaults in the payment of the Offer to Purchase Payment, all Notes accepted for payment pursuant to the Offer to Purchase will cease to accrue interest on the Offer to Purchase Payment Date;

 

(vi)         Holders electing to have any Notes purchased pursuant to an Offer to Purchase will be required to surrender the Notes, together with a duly executed letter of transmittal properly completed in accordance with the instructions thereto, to the Paying Agent specified in such notice at the

 

13

 

address specified in such notice prior to the close of business on the Expiration Date;

 

(vii)       Holders shall be entitled to withdraw their tendered Notes and their election to require the Guarantor or a Designated Affiliate to purchase such Notes; provided that such Paying Agent receives, not later than the close of business on the Expiration Date, a facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes tendered for purchase, and a statement that such Holder is withdrawing its tendered Notes and its election to have such Notes purchased; and

 

(viii)      that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered; provided that each such new Note will be in a principal amount of U.S.$2,000 or an integral multiple of U.S.$1,000 in excess thereof.

 

If (a) notice is mailed in a manner provided in this Section 11.09 and (b) any Holder fails to receive such notice or a Holder receives such notice but it is defective, such Holder’s failure to receive such notice or such defect shall not affect the validity of the Offer to Purchase as to all other Holders that properly received such notice without defect.

 

(b)                                 On or before the Offer to Purchase Payment Date, the Guarantor or a Designated Affiliate shall, to the extent lawful:

 

(i)           accept for payment for all Notes properly tendered and not withdrawn pursuant to the Offer to Purchase;

 

(ii)         deposit with such Paying Agent an amount equal to the aggregate Offer to Purchase Payment in respect of all Notes or portions thereof so tendered; and

 

(iii)        deliver, or cause to be delivered, to the Trustee for cancellation the Notes so accepted together with an Officer’s Certificate stating that such Notes or portions thereof have been tendered to and purchased by the Guarantor or a Designated Affiliate.

 

(c)                                  The Paying Agent shall promptly mail to each Holder the Offer to Purchase Payment for its Notes that have been accepted for payment in the Offer to Purchase, and the Trustee shall promptly authenticate and deliver (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that

 

14

 

each such new Note will be in a principal amount of U.S.$2,000 or an integral multiple of U.S.$1,000 in excess thereof.

 

(d)                                 Notwithstanding Section 11.09(a) or Paragraph 4 of the Notes, the Guarantor shall not be required to make an Offer to Purchase upon a Change of Control that results in a Ratings Decline if (i) a third party makes an offer to purchase in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 11.09 applicable to an Offer to Purchase made by the Guarantor and such third party purchases all Notes properly tendered and not withdrawn under such offer, or (ii) a notice of redemption for all Outstanding Notes has been given pursuant to Sections 11.01, 11.08 or 11.09 or Paragraphs 2, 3 or 4 of the Notes, unless and until there is a default in payment of the applicable Redemption Price. Notwithstanding anything to the contrary contained herein or in the Notes, an Offer to Purchase may be made in advance of a Change of Control, conditioned upon the consummation of such Change of Control, if a definitive agreement is in place for the Change of Control at the time the Offer to Purchase is made.

 

(e)                                  the Guarantor shall not purchase any of the Notes if there has occurred and is continuing on the Offer to Purchase Payment Date an Event of Default, other than an Event of Default resulting from the failure to make a Offer to Purchase Payment when due.

 

(f)                                   the Guarantor and any Designated Affiliate will comply with Rule 14e-1 under the Exchange Act (to the extent applicable) and all other applicable laws in making any Offer to Purchase. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Indenture, the provisions of this Indenture and Paragraph 4 of the Notes shall be deemed to be modified to the extent necessary to permit such compliance. If the provisions of such securities laws or regulations cannot be complied with as a result of such deemed modifications, the Guarantor shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 11.09 or Paragraph 4 of the Notes by virtue thereof.

 

(g)                                  In the event that the Holders of not less than 90% of the aggregate principal amount of the outstanding Notes accept an Offer to Purchase and the Guarantor or a third party purchases all the notes held by such Holders, the Company and the Guarantor will have the right, on not less than 30 nor more than 60 days’ prior notice to each Holder (with a copy to the Trustee), given not more than 30 days following the purchase pursuant to the Offer to Purchase

 

15

 

described above, to redeem all of the Notes that remain outstanding following such purchase at the purchase price equal to that in the Offer to Purchase plus, to the extent not included in the Offer to Purchase payment, accrued and unpaid interest and Additional Amounts, if any, on the Notes that remain outstanding, to, but excluding, the date of redemption.”

 

(k)                                 With respect to the Notes only (and, for the avoidance of doubt, not with respect to any other series of notes issued pursuant to the Base Indenture on or prior to the date hereof), the first paragraph of Section 14.01(a) of the Base Indenture is hereby deleted in its entirety and amended and restated in its entirety as follows:

 

“(a)         Subject to Sections 4.01, 14.02 and 14.06, the Company and Fibria at any time may terminate (i) all their respective obligations under this Indenture and the Guarantee with respect to Securities of any series and the Securities of that series (“legal defeasance option”) or (ii) their respective obligations under Sections 8.01(b), 10.03, 10.04, 10.05, 10.09, 10.10 and 11.09 and the operation of Sections 5.01 (c), (d), (e), (f) (solely with respect to the Guarantor’s Significant Subsidiaries), (g) (solely with respect to the Guarantor’s Significant Subsidiaries) and Sections 5.01(h) and (i), with respect to Securities of any series (“covenant defeasance option”). The legal defeasance option with respect to Securities of any series may be exercised notwithstanding any prior exercise of the covenant defeasance option with respect to Securities of that series.”

 

(l)                                     With respect to the Notes only (and, for the avoidance of doubt, not with respect to any other series of notes issued pursuant to the Base Indenture on or prior to the date hereof) Section 6.10(c) of the Base Indenture is hereby deleted in its entirety and amended and restated in their entirety as follows:

 

“(c)         The Trustee may be removed at any time with respect to the Securities of any series by Act of the Holders of a majority in principal amount of the Outstanding Securities of that series, delivered to the Trustee and to the Company. The Trustee so removed may, at the expense of the Company, petition any court of competent jurisdiction for the appointment of a successor Trustee if no successor Trustee has been appointed within 30 days of such removal. So long as no Event of Default has occurred and is continuing, the Company may remove the Trustee and appoint a new Trustee, provided that such Trustee meets the eligibility requirements of Section 6.09.”

 

MISCELLANEOUS PROVISIONS

 

4.1          Separability of Invalid Provisions

 

In case any one or more of the provisions contained in this Second Supplemental Indenture should be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions contained in this Second Supplemental Indenture, and to the extent and only to the extent that any such provision is invalid, illegal or

 

16

 

unenforceable, this Second Supplemental Indenture shall be construed as if such provision had never been contained herein.

 

4.2          Execution in Counterparts

 

This Second Supplemental Indenture may be simultaneously executed and delivered in any number of counterparts, each of which when so executed and delivered shall be deemed to be an original, and such counterparts shall together constitute one and the same instrument.

 

THE TRUSTEE AND AGENTS

 

(a)                                 The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Second Supplemental Indenture or for or in respect of the recitals contained herein, all of which are made solely by the Company and the Guarantor, as applicable.

 

(b)                                 The rights, protections, indemnities and immunities of the Trustee and Agents as enumerated under the Base Indenture are incorporated by reference into this Second Supplemental Indenture.

 

17

 

In witness whereof, each of the parties hereto has caused this Second Supplemental Indenture to be duly executed on its behalf, all as of the day and year first written above.

 

	
 
    	
FIBRIA   OVERSEAS FINANCE LTD.
    
	
 
    	
as   Company
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Marcelo Strufaldi   Castelli
    
	
 
    	
Name: Marcelo Strufaldi Castelli
    
	
 
    	
Title:   Director
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Guilherme Perboyre Cavalcanti
    
	
 
    	
Name:   Guilherme Perboyre Cavalcanti
    
	
 
    	
Title:Director
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
FIBRIA   CELULOSE S.A.
    
	
 
    	
as   Guarantor
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Marcelo Strufaldi   Castelli
    
	
 
    	
Name:   Marcelo Strufaldi Castelli
    
	
 
    	
Title:   Chief Executive Officer
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Guilherme Perboyre Cavalcanti
    
	
 
    	
Name: Guilherme Perboyre Cavalcanti
    
	
 
    	
Title:   Chief Financial Officer
    

 

18

 

	
 
    	
DEUTSCHE BANK TRUST COMPANY
   AMERICAS, as Trustee
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
Deutsche   Bank National Trust Company
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Jeffrey Schoenfeld
    
	
 
    	
Name: Jeffrey Schoenfeld
    
	
 
    	
Title: Vice President
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/Irina   Golovashchuk
    
	
 
    	
Name: Irina Golovashchuk
    
	
 
    	
Title: Vice President
    

 

 

	
STATE OF NEW JERSEY
    	
)
    
	
 
    	
)
    
	
COUNTY OF HUDSON
    	
)
    

 

On the         day of January, in the year 2017 before me, the undersigned, a Notary Public in and for said State, personally appeared Jeffrey Schoenfeld and Irina Golovashchuk, Authorized Signatories for Deutsche Bank National Trust Company on behalf of Deutsche Bank Trust Company Americas, personally known to me or proved to me on the basis of satisfactory evidence to be the individuals whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their capacities, and that by their signatures on the instrument, the individuals, or the persons or entities upon behalf of which the individual acted, executed the instrument.

 

[Notarial Seal]

 

	
 
    	
/s/ Michele H.Y. Voon
    
	
 
    	
Notary Public
    
	
 
    	
COMMISSION EXPIRES
    

 

 

Annex A

 

[Form of Face of Note]

 

THIS IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO, AND IS REGISTERED IN THE NAME OF THE DEPOSITARY OR A NOMINEE OF THE DEPOSITARY, WHICH MAY BE TREATED BY FIBRIA OVERSEAS FINANCE LTD., FIBRIA CELULOSE S.A. AND THE TRUSTEE AND ANY AGENT THEREOF AS OWNER AND HOLDER OF THIS NOTE FOR ALL PURPOSES.

 

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR REGISTERED NOTES IN DEFINITIVE REGISTERED FORM IN THE LIMITED CIRCUMSTANCES REFERRED TO IN SECTION 3.04 OF THE INDENTURE, THIS GLOBAL NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.

 

UNLESS THIS GLOBAL NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”) TO FIBRIA OVERSEAS FINANCE LTD. OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON OTHER THAN DTC OR A NOMINEE THEREOF IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 

 

FIBRIA OVERSEAS FINANCE LTD.

 

5.500% NOTES DUE 2027

 

GUARANTEED BY FIBRIA CELULOSE S.A.

 

	
 
    	
CUSIP: 31572UAF3
    
	
 
    	
ISIN: US31572UAF30
    
	
 
    	
 
    
	
 
    	
U.S.$
    

 

FIBRIA OVERSEAS FINANCE LTD., a company organized and existing under the laws of the Cayman Islands (herein called the “Company”, which term includes any successor Person under the Indenture dated as of May 12, 2014 (the “Base Indenture”), and as supplemented by the Second Supplemental Indenture and any further supplemental indentures entered into with respect to the 5.500% Notes due 2027 from time to time (together with the Base Indenture, the “Indenture”) hereinafter referred to), for value received, hereby promises to pay to Cede & Co., or registered assigns, the principal sum of U.S.$                   on January 17, 2027, and to pay interest thereon from January 17, 2017 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on January 17 and July 17 in each year, commencing July 17, 2017, and at the Maturity thereof, at the rate of 5.500% per annum, until the principal hereof is paid or made available for payment. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on the Regular Record Date for such interest, which shall be the January 15 or July 15 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest so payable, but not punctually paid or duly provided for on any Interest Payment Date will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice of which shall be given to Holders of Notes of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture.

 

If any payment is due on the Notes on a day that is not a Business Day, payment will be made on the day that is the next Business Day. Payments postponed to the next Business Day in this situation will be treated as if they were made on the original payment date. Postponement of this kind will not result in a default under the Notes or the Indenture, and no interest will accrue on the postponed amount from the original payment date to the next day that is a Business Day.

 

Payment of the principal of (and premium, if any, on) and any such interest on this Note will be made by wire transfer of same-day funds to the Holder and paid to beneficial holders of this Note pursuant to the Applicable Procedures of the Depositary as permitted in the Indenture.

 

2

 

Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

 

All terms used in this Note that are not defined herein but are defined in the Indenture shall have the meanings assigned to them in the Indenture.

 

Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof, directly or through an Authenticating Agent, by manual, facsimile or electronic signature of an authorized signatory, this Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

 

3

 

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed manually, in facsimile or electronically.

 

	
Dated:
    	
 
    
	
 
    	
 
    
	
 
    	
FIBRIA OVERSEAS FINANCE LTD.
    
	
 
    	
as Company
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    

 

4

 

TRUSTEE’S CERTIFICATE OF

 

AUTHENTICATION

 

This is the Notes referred to in the within mentioned Indenture.

 

DEUTSCHE BANK TRUST COMPANY AMERICAS,

as Trustee

By: Deutsche Bank National Trust Company

 

 

	
 
    	
By:
    	
 
    
	
 
    	
Name:   Jeffrey Schoenfeld
    
	
 
    	
Title:   Vice President
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:   Irina Golovashchuk
    
	
 
    	
Title:   Vice President
    

 

[Form of Reverse of Note]

 

1.                                      This Note is one of a duly authorized issue of notes of the Company (herein called the “Notes”), issued and to be issued in one or more tranches of one or more series under an Indenture, dated as of May 12, 2014 (the “Base Indenture”) as supplemented by a Second Supplemental Indenture, dated as of January 17, 2017 (collectively with the Base Indenture, the “Indenture”), among the Company, Fibria Celulose S.A., as Guarantor (herein called the “Guarantor” or “Fibria”) and Deutsche Bank Trust Company Americas, as Trustee, registrar, paying agent and transfer agent (herein called the “Trustee”, which term includes any successor trustee under the Indenture), and reference is hereby made to the Indenture for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Guarantor, the Trustee and the Holders and of the terms upon which the Notes are, and are to be, authenticated and delivered. The full and punctual payment of the principal of (and premium, if any, on) and interest on, Additional Amounts, if any, and all other amounts payable under, this Note is unconditionally guaranteed, on a senior unsecured basis, by the Guarantor and such Guarantee shall rank:

 

a.              equal in right of payment to all other existing and future senior unsecured debt of the Guarantor subject to certain statutory preferences under applicable law, including labor and tax claims;

 

b.              senior in right of payment to the Guarantor’s subordinated debt; and

 

 

c.               effectively subordinated to the debt and other liabilities (including subordinated debt and trade payables) of the Guarantor’s Subsidiaries (other than the Company) and jointly controlled companies and to secured debt of the Guarantor to the extent of the value of the assets securing such debt.

 

This Note is one of the series designated on the face hereof.

 

The Company may from time to time, without the consent of the Holders, create and issue unlimited principal amount of additional Notes having the same terms and conditions as the Notes in all respects, except for issue date, issue price and the first payment of interest thereon may differ; provided, however, that unless such additional Notes are issued under a separate CUSIP, such additional Notes will be fungible with the initial Notes for U.S. federal income tax purposes or, if such additional Notes are not fungible with the initial Notes for U.S. federal income tax purposes, neither the initial Notes nor the additional Notes are issued with more than a de minimis amount of original issue discount for U.S. federal income tax purposes. Additional Notes issued in this manner shall increase the aggregate principal amount of, and shall form a single series with and vote together with the previously outstanding Notes.

 

2.                                      The Notes shall be redeemable, at the option of the Company, the Guarantor or any successor, in whole, but not in part, upon giving not less than five Business Days nor more than 60 days’ notice to the Holders with a copy to the Trustee (which notice shall be irrevocable), at 100% of the principal amount thereof, plus accrued and unpaid interest thereon and Additional Amounts, if any, to, but excluding, the Redemption Date, only if, as a result of a change in, or amendment to, any laws, rules or regulations of a Relevant Taxing Jurisdiction, or any amendment to or change in an official interpretation, administration or application of such laws, rules or regulations (including a holding by a court of competent jurisdiction), which change or amendment becomes effective or is announced on or after the later of the issue date of the Securities or the date a Relevant Taxing Jurisdiction becomes a Relevant Taxing Jurisdiction (i) the Guarantor or any successor has or will become obligated to pay Additional Amounts with respect to the Securities or the Guarantee in excess of the Additional Amounts the Guarantor or any such successor would be obligated to pay if payments were subject to withholding or deduction at a rate of 15% or at a rate of 25% in case the holder of the notes is resident in a tax haven jurisdiction for Brazilian tax purposes (i.e., countries which do not impose any income tax or which impose it at a maximum rate lower than 17% or where the laws impose restrictions on the disclosure of ownership composition or securities ownership) or (ii) the Company or any successor has or will become obligated to pay any Additional Amounts in excess of the Additional Amounts the Company or any such successor would be obligated to pay if payments were subject to withholding or deduction at a rate of 0%, and in the case of each of (i) and (ii), such obligation cannot be avoided by the Company, the Guarantor or their respective successors, as applicable, after taking reasonable measures to avoid it; provided, however, that for this purpose reasonable measures shall not include any change in the Company’s, the Guarantor’s or any successor’s jurisdiction of incorporation or organization or location of its principal executive office or registered office, as applicable. No such notice of redemption shall be given earlier than 60 days prior to the earliest date on which the Company, the Guarantor or any successor, as the

 

2

 

case may be, would be obligated to pay such Additional Amounts if a payment in respect of such Notes or the Guarantees were then due.

 

Prior to the publication or mailing of any notice of redemption pursuant to the preceding paragraph, the Company, the Guarantor or any successor shall deliver to the Trustee an Officer’s Certificate to the effect that the obligation of the Company, the Guarantor or any successor, as the case may be, to pay Additional Amounts cannot be avoided by the Company, the Guarantor or any successor taking reasonable measures available to it. The Company, the Guarantor or any successor, as the case may be, shall also deliver to the Trustee an Opinion of Counsel stating that the Company, the Guarantor or any successor, as the case may be, would be obligated to pay Additional Amounts due to the changes in tax laws or regulations. The Trustee shall accept such certificate and opinion as sufficient evidence of the satisfaction of the conditions precedent set forth in clauses (i) and (ii) of the preceding paragraph of this paragraph, in which event it shall be conclusive and binding on the Holders.

 

3.                                      The Notes shall be redeemable, at the option of the Company or the Guarantor, in whole or in part, at any time, upon giving not less than five Business Days’ nor more than 60 Business Days’ notice to the Holders with a copy to the Trustee (which notice shall be irrevocable), at a Redemption Price equal to the greater of the following amounts, plus accrued and unpaid interest and Additional Amounts, if any, to, but excluding, the Redemption Date:

 

a.              100% of the principal amount of the Notes be redeemed; and

 

b.              the sum of the present values of each Remaining Scheduled Payment of principal and interest thereon (excluding interest accrued to the date of redemption) discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) using a discount rate equal to the treasury rate plus 0.50%, plus accrued and unpaid interest on the principal amount of the Notes to the date of redemption.

 

For the purpose of the previous paragraph, the following terms have the indicated meanings:

 

“Treasury Rate” means, with respect to any Redemption Date, the rate per annum equal to the semi-annual equivalent yield to maturity or interpolated yield to maturity of the Comparable Treasury Issue. In determining the Treasury Rate, the price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) will be assumed to be equal to the Comparable Treasury Price for such Redemption Date.

 

“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 the 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 comparable maturity to the remaining term of such Notes.

 

3

 

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

 

“Reference Treasury Dealers” means at least four primary U.S. government securities dealers in New York City, New York designated by the Company not later than the third Business Day preceding such Redemption Date.

 

“Comparable Treasury Price” means (A) the arithmetic average of the Reference Treasury Dealer Quotations for such Redemption Date after excluding the highest and lowest Reference Treasury Dealer Quotations, or (B) if the Company obtains fewer than four Reference Treasury Dealer Quotations, the arithmetic average of all Reference Treasury Dealer Quotations for such Redemption Date.

 

“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any Redemption Date, the arithmetic average, as determined by the Company or the Guarantor, 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 Company or the Guarantor, as applicable by such Reference Treasury Dealer at approximately 3:30 p.m. (New York City time) on the third Business Day preceding such Redemption Date.

 

“Remaining Scheduled Payment” means the remaining scheduled payments of the principal and interest that would be due after the applicable redemption date but for such redemption.

 

In the event of redemption of this Note in part only, a new Note or Notes of this series for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof.

 

4.                                      If a Change of Control that results in a Ratings Decline occurs, not later than 30 days following such an occurrence, the Guarantor, acting on behalf of the Company, shall make, directly or through a Designated Affiliate, an offer to purchase all of the Notes pursuant to an Offer to Purchase described in Section 11.09 of the Indenture at a price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest thereon and Additional Amounts, if any, to, but excluding, the Offer to Purchase Payment Date. Not later than 30 days after the occurrence of a Change of Control that results in a Ratings Decline, the Guarantor or a Designated Affiliate shall send notice of such Offer to Purchase, together with a letter of transmittal, by first class mail, with a copy to the Trustee, to each Holder at the address of such Holder appearing in the Register or otherwise in accordance with the procedures of the Depositary and containing the information specified in Section 11.09(a) of the Indenture.

 

a.              On or before the Offer to Purchase Payment Date, the Guarantor or a Designated Affiliate shall, to the extent lawful: (i) accept for payment for all Notes properly tendered and not withdrawn pursuant to the Offer to Purchase; (ii) deposit with a Paying Agent an amount equal to the aggregate Offer to Purchase Payment in respect of all Notes or portions thereof so tendered and (iii) deliver, or cause to be

 

4

 

delivered, to the Trustee for cancellation the Notes so accepted together with an Officer’s Certificate stating that such Notes or portions thereof have been tendered to and purchased by the Guarantor or a Designated Affiliate.

 

b.              Notwithstanding Section 11.09(a) of the Indenture or this Paragraph 4, the Guarantor shall not be required to make an Offer to Purchase upon a Change of Control that results in a Ratings Decline if (i) a third party makes an offer to purchase in the manner, at the times and otherwise in compliance with the requirements set forth in Section 11.09 of the Indenture applicable to an Offer to Purchase made by the Guarantor and such third party purchases all Notes properly tendered and not withdrawn under such offer, or (ii) a notice of redemption for all Outstanding Notes has been given pursuant to Section 11.01 of the Indenture and this Paragraph 4, unless and until there is a default in payment of the applicable Redemption Price. Notwithstanding anything to the contrary contained herein or in the Indenture, an Offer to Purchase may be made in advance of a Change of Control, conditioned upon the consummation of such Change of Control, if a definitive agreement is in place for the Change of Control at the time the Offer to Purchase is made.

 

c.               The Guarantor shall not purchase any of the Notes if there has occurred and is continuing on the Offer to Purchase Payment Date an Event of Default, other than an Event of Default resulting from the failure to make a Offer to Purchase Payment when due.

 

d.              The Guarantor and any Designated Affiliate will comply with Rule 14e-1 under the Exchange Act (to the extent applicable) and all other applicable laws in making any Offer to Purchase. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the Indenture, the provisions of the Indenture and this Paragraph 4 shall be deemed to be modified to the extent necessary to permit such compliance. If the provisions of such securities laws or regulations cannot be complied with as a result of such deemed modifications, the Guarantor shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under Section 11.09 of the Indenture or this Paragraph 4 by virtue thereof.

 

e.               In the event that the Holders of not less than 90% of the aggregate principal amount of the outstanding notes accept an Offer to Purchase and the Guarantor or a third party purchases all the notes held by such Holders, the Company and the Guarantor will have the right, on not less than 30 nor more than 60 days’ prior notice (with a copy to the Trustee), given not more than 30 days following the purchase pursuant to the Offer to Purchase described above, to redeem all of the Notes that remain outstanding following such purchase at the purchase price equal to that in the Offer to Purchase plus, to the extent not included in the Offer to Purchase payment, accrued and unpaid interest and Additional Amounts, if any, on the Notes that remain outstanding, to the date of redemption.

 

5

 

5.                                      The Indenture contains provisions for defeasance at any time of the entire indebtedness of this Note or certain restrictive covenants and Events of Default with respect to this Note, in each case upon compliance with certain conditions set forth in the Indenture.

 

6.                                      If an Event of Default with respect to Notes of this series shall occur and be continuing, the principal of the Notes of this series may be declared due and payable in the manner and with the effect provided in the Indenture.

 

7.                                      The Company, the Guarantor or its or their affiliates may at any time purchase Notes from investors who are willing to sell from time to time, either in the open market at prevailing prices or in private transactions at negotiated prices. Notes so purchased by the Company or Guarantor may, in their discretion, be held, resold or canceled, but will only be resold in compliance with applicable requirements or exemptions under the relevant securities laws.

 

8.                                      All payments by the Company and the Guarantor in respect of the Notes or the Guarantee, as the case may be, shall be made without withholding or deduction for or on account of any present or future taxes, duties, assessments, or other governmental charges of whatever nature imposed or levied by or on behalf of any Relevant Taxing Jurisdiction, unless the Company or the Guarantor, as applicable, is compelled by law to deduct or withhold such taxes, duties, assessments or governmental charges. In such event, the Company or the Guarantor, as the case may be, shall pay to each Holder such Additional Amounts as may be necessary in order that every net payment made by the Company or the Guarantor, as the case may be, on each Security or the Guarantee after such withholding or deduction shall not be less than the amount then due and payable on such Note or the Guarantee.

 

9.                                      The foregoing obligation to pay Additional Amounts shall not apply to or in respect of:

 

(a)                                 any tax, assessment or other governmental charge which would not have been imposed but for the existence of any present or former connection between a Holder (or between a fiduciary, settlor, beneficiary, member or shareholder of such Holder, if such Holder is an estate, a trust, a partnership or a corporation), on the one hand, and Brazil or the Cayman Islands, on the other hand (including, without limitation, such Holder (or such fiduciary, settlor, beneficiary, member or shareholder) being or having been a citizen or resident thereof or having been engaged in a trade or business or present therein or having, or having had, a permanent establishment therein), other than the mere receipt of such payment or the ownership or holding of a Note or Guarantee;

 

(b)                                 any tax, assessment or other governmental charge which would not have been so imposed but for the presentation by a Holder for payment on a date more than 30 days after the date on which such payment became due and payable or the date on which payment thereof is duly provided for, whichever occurs later;

 

(c)                                  any tax, duty, assessment or other governmental charge to the extent that such tax, duty, assessment or other governmental charge would not have been imposed but

 

6

 

for the failure of a Holder or beneficial owner to comply with any certification, identification or other reporting requirements concerning the nationality, residence, identity or connection with Brazil or the Cayman Islands of such Holder if (A) such compliance is required or imposed by law as a precondition to exemption from all or a part of such tax, duty, assessment or other governmental charge and (B) at least 30 days prior to the date on which the Company or the Guarantor, as the case may be, shall apply this Clause (iii), the Company or the Guarantor, as the case may be, shall have notified all Holders of Notes that some or all of the Holders of Notes shall be required to comply with such requirement;

 

(d)                                 any estate, inheritance, gift, sales, transfer, excise or personal property or similar tax, assessment or governmental charge;

 

(e)                                  any withholding or deduction imposed on a payment to an individual and that is required to be made pursuant to any law implementing or complying with, or introduced in order to conform to, any European Union Directive on the taxation of savings;

 

(f)                                   any tax, assessment or other governmental charge which would have been avoided by such Holder presenting the relevant Note (if presentation is required) or requesting that such payment be made to another Paying Agent in a member state of the European Union;

 

(g)                                  any tax, assessment or other governmental charge which is payable other than by deduction or withholding from payments of principal of (and premium, if any, on) and interest on a Note; or

 

(h)                                 any combination of the above.

 

10.                               Notwithstanding anything to the contrary in the preceding paragraph, the Company, the Guarantor and any Paying Agent, the Trustee or any other Person shall be entitled to make any deduction or withholding without any liability, and shall not be required to pay any additional amounts with respect to any such deduction or withholding, imposed on or in respect of any Note pursuant to Section 1471 through Section 1474 of the Code (“FATCA”), any treaty, law, regulation or other official guidance enacted by any jurisdiction in which the Company or the Guarantor is organized, or in which payments on the Notes are made (each such jurisdiction, a “Taxing Jurisdiction”), implementing FATCA, or any agreement between the Company, the Guarantor, the Trustee or a Paying Agent and the United States, a Taxing Jurisdiction or any authority of any of the foregoing implementing FATCA.

 

11.                               The Company hereby covenants with the Trustee that it will promptly inform the Trustee if it determines in its reasonable discretion that any payment made by it is a payment which could be subject to FATCA withholding if a recipient of such payment had not complied with obligations imposed pursuant to Sections 1471 through 1474 of the Code and any regulations, or agreements thereunder or official interpretations thereof or any intergovernmental agreement between the United States and another jurisdiction

 

7

 

facilitating the implementation thereof or any law implementing such an intergovernmental agreement (including obligations to deliver proper documentation establishing the recipient’s status) at the time such payment was made.

 

12.                               The Company or the Guarantor, as the case may be, shall pay any present or future stamp, court or documentary taxes or any other excise or property taxes, charges or similar levies which arise in any jurisdiction from the execution, delivery, registration or the making of payments in respect of the Notes and the Guarantee, excluding any such taxes, charges or similar levies imposed by any jurisdiction outside of Brazil or the Cayman Islands other than those resulting from, or required to be paid in connection with, the enforcement of the Notes and the Guarantee following the occurrence of any Default or Event of Default.

 

13.                               No Additional Amounts shall be paid with respect to a payment on any Note or the Guarantee to a Holder that is a fiduciary or partnership or other than the sole beneficial owner of such payment to the extent a beneficiary or settlor with respect to such fiduciary or a member of such partnership or beneficial owner would not have been entitled to receive payment of the Additional Amounts had the beneficiary, settlor, member or beneficial owner been the Holder or the Guarantee.

 

14.                               The Company or the Guarantor, as applicable, shall provide the Trustee with the official acknowledgment of the Relevant Taxing Authority (or, if such acknowledgment is not available, other reasonable documentation) evidencing any payment of any taxes, duties, assessments, or other governmental charges of whatever nature imposed or levied by or on behalf of any Relevant Taxing Jurisdiction in respect of which the Company or the Guarantor has paid any Additional Amounts. Copies of such documentation shall be made available to the Holders or the Paying Agents, as applicable, upon request therefor.

 

15.                               The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in principal amount of the Notes at the time Outstanding of each series to be affected. The Indenture also contains provisions (i) permitting the Holders of a majority in principal amount of the Notes at the time Outstanding of any series to be affected under the Indenture, on behalf of the Holders of all Notes of such series, to waive compliance by the Company with certain provisions of the Indenture and (ii) permitting the Holders of a majority in principal amount of the Notes at the time Outstanding of any series to be affected under the Indenture, on behalf of the Holders of all Notes of such series, to waive certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note.

 

16.                               As set forth in, and subject to, the provisions of the Indenture, no Holder of any Note of this series will have any right to institute any proceeding with respect to the Indenture,

 

8

 

this Note or for any remedy thereunder, unless such Holder shall have previously given to the Trustee written notice of a continuing Event of Default with respect to the Notes of this series, the Holders of not less than 25% in principal amount of the Outstanding Notes of this series shall have made written request, and offered indemnity and/or security satisfactory to the Trustee to institute such proceeding as trustee, and the Trustee shall not have received from the Holders of a majority in principal of the Outstanding Notes of this series a direction inconsistent with such request and shall have failed to institute such proceeding within 60 days; provided, however, that such limitations do not apply to a suit instituted by the Holder hereof for the enforcement of payment of the principal (and premium, if any) or interest on this Note on or after the respective due dates expressed herein.

 

17.                               No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any, on) and interest on this Note at the times, Place of Payment and rate, and in the coin or currency, herein prescribed or to convert or exchange this Note as provided in the Indenture.

 

18.                               The Notes of this series are issuable only in registered form without coupons in denominations of U.S.$2,000 and any integral multiples of U.S.$1,000 thereof. As provided in the Indenture and subject to certain limitations therein set forth, Notes of this series are exchangeable for a like aggregate principal amount of Notes of this series of a different authorized denomination, as requested by the Holder surrendering the same. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Note is registrable in the Note Register, upon surrender of this Note for registration of transfer at the office or agency of the Company at any Place of Payment, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Note Registrar duly executed by, the Holder hereof or his or her attorney duly authorized in writing, and thereupon one or more new Notes of this series, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.

 

19.                               No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

 

20.                               Prior to due presentment of this Note for registration of transfer, the Company, the Guarantor, the Trustee and any agent of the Company, the Guarantor 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 be overdue, and neither the Company, the Guarantor or the Trustee nor any such agent shall be affected by notice to the contrary.

 

21.                               The Indenture and the Notes shall be governed by and construed in accordance with the laws of the State of New York.

 

22.                               All terms used in this Note which are defined in the Indenture shall have the meanings assigned to them in the Indenture.

 

9

 

Schedule A

 

SCHEDULE OF PRINCIPAL AMOUNT

 

The initial principal amount of this Note shall be U.S.$700,000,000. The following decreases/increases in the principal amount of this Note have been made:

 

	
Date of
   Decrease/Increase
    	
 
    	
Decrease in
   Principal
   Amount
    	
 
    	
Increase in
   Principal
   Amount
    	
 
    	
Total Principal
   Amount
   Following Such
   Decrease/Increase
    	
 
    	
Notation Made
   by or on Behalf
   of Trustee

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