Document:

exhibit4-7.htm

Exhibit 4.7

BSD MEDICAL CORPORATION

 

 

TO

 

 

[_____________], as Trustee

 

 

 

INDENTURE

 

 

Dated as of ____________, 20__

 

 

SUBORDINATED DEBT SECURITIES

 

 

  

  

  

TABLE OF CONTENTS

 

 

	  	 	  	  
	  	  	  	
Page

	
ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

	
1

	 	 	 	 
	  	
SECTION 101.

	
Definitions

	
1

	  	
SECTION 102.

	
Compliance Certificates and Opinions

	
11

	  	
SECTION 103.

	
Form of Documents Delivered to Trustee

	
12

	  	
SECTION 104.

	
Acts of Holders

	
12

	  	
SECTION 105.

	
Notices, etc., to the Trustee and Company

	
14

	  	
SECTION 106.

	
Notice to Holders; Waiver

	
14

	  	
SECTION 107.

	
Effect of Headings and Table of Contents

	
15

	  	
SECTION 108.

	
Successors and Assigns

	
15

	  	
SECTION 109.

	
Separability Clause

	
16

	  	
SECTION 110.

	
Benefits of Indenture

	
16

	  	
SECTION 111.

	
No Personal Liability

	
16

	  	
SECTION 112.

	
Governing Law

	
16

	  	
SECTION 113.

	
Legal Holidays

	
16

	  	
SECTION 114.

	
Conflict with Trust Indenture Act

	
17

	 	 
	
ARTICLE TWO SECURITIES FORMS

	
17

	 	 	 	 
	  	
SECTION 201.

	
Forms of Securities

	
17

	  	
SECTION 202.

	
Form of Trustee’s Certificate of Authentication

	
18

	  	
SECTION 203.

	
Securities Issuable in Global Form

	
18

	 	 
	
ARTICLE THREE THE SECURITIES

	
19

	 	 	 	 
	  	
SECTION 301.

	
Amount Unlimited; Issuable in Series

	
19

	  	
SECTION 302.

	
Denominations

	
23

	  	
SECTION 303.

	
Execution, Authentication, Delivery and Dating

	
23

	  	
SECTION 304.

	
Temporary Securities

	
25

	  	
SECTION 305.

	
Registration, Registration of Transfer and Exchange

	
27

	  	
SECTION 306.

	
Mutilated, Destroyed, Lost and Stolen Securities

	
30

	  	
SECTION 307.

	
Payment of Interest; Interest Rights Preserved

	
31

	  	
SECTION 308.

	
Persons Deemed Owners

	
34

	  	
SECTION 309.

	
Cancellation

	
34

	  	
SECTION 310.

	
Computation of Interest

	
35

	 	 
	
ARTICLE FOUR SATISFACTION AND DISCHARGE

	
35

	 	 	 	 
	  	
SECTION 401.

	
Satisfaction and Discharge of Indenture

	
35

	  	
SECTION 402.

	
Application of Trust Funds

	
36

	 	 
	
ARTICLE FIVE REMEDIES

	
37

	 	 	 	 
	  	
SECTION 501.

	
Events of Default

	
37

	  	
SECTION 502.

	
Acceleration of Maturity; Rescission and Annulment

	
38

	  	
SECTION 503.

	
Collection of Indebtedness and Suits for Enforcement by Trustee

	
39

	  	
SECTION 504.

	
Trustee May File Proofs of Claim

	
40

	  	
SECTION 505.

	
Trustee May Enforce Claims Without Possession of Securities or Coupons

	
40

	  	
SECTION 506.

	
Application of Money Collected

	
41

	  	
SECTION 507.

	
Limitation on Suits

	
41

	  	
SECTION 508.

	
Unconditional Right of Holders to Receive Principal, Premium or Make-Whole Amount, if any, Interest and Additional Amounts

	
42

	  	
SECTION 509.

	
Restoration of Rights and Remedies

	
42

	  	
SECTION 510.

	
Rights and Remedies Cumulative

	
42

	  	
SECTION 511.

	
Delay or Omission Not Waiver

	
42

	  	
SECTION 512.

	
Control by Holders of Securities

	
43

	  	
SECTION 513.

	
Waiver of Past Defaults

	
43

	  	
SECTION 514.

	
Waiver of Stay or Extension Laws

	
43

	  	
SECTION 515.

	
Undertaking for Costs

	
44

	 	 
	
ARTICLE SIX THE TRUSTEE

	
44

	 	 	 	 
	  	
SECTION 601.

	
Notice of Defaults

	
44

	  	
SECTION 602.

	
Certain Rights of Trustee

	
45

	  	
SECTION 603.

	
Not Responsible for Recitals or Issuance of Securities

	
46

	  	
SECTION 604.

	
May Hold Securities

	
46

	  	
SECTION 605.

	
Money Held in Trust

	
46

	  	
SECTION 606.

	
Compensation, Reimbursement and Indemnification

	
46

	  	
SECTION 607.

	
Corporate Trustee Required; Eligibility

	
47

	  	
SECTION 608.

	
Resignation and Removal; Appointment of Successor

	
47

	  	
SECTION 609.

	
Acceptance of Appointment By Successor

	
49

	  	
SECTION 610.

	
Merger, Conversion, Consolidation or Succession to Business

	
50

	  	
SECTION 611.

	
Appointment of Authenticating Agent

	
50

	  	
SECTION 612.

	
Certain Duties and Responsibilities

	
52

	  	
SECTION 613.

	
Conflicting Interests

	
52

	 	 
	
ARTICLE SEVEN HOLDERS’ LISTS AND REPORTS BY TRUSTEE AND COMPANY

	
52

	 	 	 	 
	  	
SECTION 701.

	
Disclosure of Names and Addresses of Holders

	
52

	  	
SECTION 702.

	
Reports by Trustee

	
53

	  	
SECTION 703.

	
Reports by Company

	
53

	  	
SECTION 704.

	
Company to Furnish Trustee Names and Addresses of Holders

	
53

	 	 
	
ARTICLE EIGHT CONSOLIDATION, MERGER, SALE, LEASE OR CONVEYANCE

	
54

	 	 	 	 
	  	
SECTION 801.

	
Consolidations and Mergers of Company and Sales, Leases and Conveyances Permitted Subject to Certain Conditions

	
54

	  	
SECTION 802.

	
Rights and Duties of Successor Corporation

	
54

	  	
SECTION 803.

	
Officers’ Certificate and Opinion of Counsel

	
55

	 	 
	
ARTICLE NINE SUPPLEMENTAL INDENTURES

	
55

	 	 	 	 
	  	
SECTION 901.

	
Supplemental Indentures Without Consent of Holders

	
55

	  	
SECTION 902.

	
Supplemental Indentures with Consent of Holders

	
57

	  	
SECTION 903.

	
Execution of Supplemental Indentures

	
58

	  	
SECTION 904.

	
Effect of Supplemental Indentures

	
58

	  	
SECTION 905.

	
Conformity with Trust Indenture Act

	
59

	  	
SECTION 906.

	
Reference in Securities to Supplemental Indentures

	
59

	  	
SECTION 907.

	
Notice of Supplemental Indentures

	
59

	  	
SECTION 908.

	
Subordination Unimpaired

	
59

	 	 
	
ARTICLE TEN COVENANTS

	
59

	 	 	 	 
	  	
SECTION 1001.

	
Payment of Principal, Premium or Make-Whole Amount, if any, Interest and Additional Amounts

	
59

	  	
SECTION 1002.

	
Maintenance of Office or Agency

	
60

	  	
SECTION 1003.

	
Money for Securities Payments to Be Held in Trust

	
61

	  	
SECTION 1004.

	
Reserved

	
62

	  	
SECTION 1005.

	
Existence

	
62

	  	
SECTION 1006.

	
Maintenance of Properties

	
63

	  	
SECTION 1007.

	
Insurance

	
63

	  	
SECTION 1008.

	
Payment of Taxes and Other Claims

	
63

	  	
SECTION 1009.

	
Statement as to Compliance

	
63

	  	
SECTION 1010.

	
Additional Amounts

	
64

	  	
SECTION 1011.

	
Waiver of Certain Covenants

	
65

	 	 
	
ARTICLE ELEVEN REDEMPTION OF SECURITIES

	
65

	 	 	 	 
	  	
SECTION 1101.

	
Applicability of Article

	
65

	  	
SECTION 1102.

	
Election to Redeem; Notice to Trustee

	
65

	  	
SECTION 1103.

	
Selection by Trustee of Securities to Be Redeemed

	
65

	  	
SECTION 1104.

	
Notice of Redemption

	
66

	  	
SECTION 1105.

	
Deposit of Redemption Price

	
67

	  	
SECTION 1106.

	
Securities Payable on Redemption Date

	
68

	  	
SECTION 1107.

	
Securities Redeemed in Part

	
69

	 	 
	
ARTICLE TWELVE SINKING FUNDS

	
69

	 	 	 	 
	  	
SECTION 1201.

	
Applicability of Article

	
69

	  	
SECTION 1202.

	
Satisfaction of Sinking Fund Payments with Securities

	
69

	  	
SECTION 1203.

	
Redemption of Securities for Sinking Fund

	
70

	 	 
	
ARTICLE THIRTEEN REPAYMENT AT THE OPTION OF HOLDERS

	
70

	 	 	 	 
	  	
SECTION 1301.

	
Applicability of Article

	
70

	  	
SECTION 1302.

	
Repayment of Securities

	
70

	  	
SECTION 1303.

	
Exercise of Option

	
71

	  	
SECTION 1304.

	
When Securities Presented for Repayment Become Due and Payable

	
71

	  	
SECTION 1305.

	
Securities Repaid in Part

	
72

	 	 
	
ARTICLE FOURTEEN DEFEASANCE AND COVENANT DEFEASANCE

	
72

	 	 	 	 
	  	
SECTION 1401.

	
Applicability of Article; Company’s Option to Effect Defeasance or Covenant Defeasance

	
72

	  	
SECTION 1402.

	
Defeasance and Discharge

	
73

	  	
SECTION 1403.

	
Covenant Defeasance

	
73

	  	
SECTION 1404.

	
Conditions to Defeasance or Covenant Defeasance

	
74

	  	
SECTION 1405.

	
Deposited Money and Government Obligations to Be Held in Trust; Other Miscellaneous Provisions

	
76

	  	
SECTION 1406.

	
Reinstatement

	
77

	 	 
	
ARTICLE FIFTEEN MEETINGS OF HOLDERS OF SECURITIES

	
77

	 	 	 	 
	  	
SECTION 1501.

	
Purposes for Which Meetings May Be Called

	
77

	  	
SECTION 1502.

	
Call, Notice and Place of Meetings

	
77

	  	
SECTION 1503.

	
Persons Entitled to Vote at Meetings

	
78

	  	
SECTION 1504.

	
Quorum; Action

	
78

	  	
SECTION 1505.

	
Determination of Voting Rights; Conduct and Adjournment of Meetings

	
79

	  	
SECTION 1506.

	
Counting Votes and Recording Action of Meetings

	
80

	  	
SECTION 1507.

	
Evidence of Action Taken by Holders

	
80

	  	
SECTION 1508.

	
Proof of Execution of Instruments

	
80

	 	 
	
ARTICLE SIXTEEN CONVERSION OR EXCHANGE OF SECURITIES

	
81

	 	 	 	 
	  	
SECTION 1601.

	
Applicability of Article

	
81

	  	
SECTION 1602.

	
Election to Exchange; Notice to Trustee and Holders

	
81

	  	
SECTION 1603.

	
No Fractional Shares

	
81

	  	
SECTION 1604.

	
Adjustment of Exchange Rate

	
81

	  	
SECTION 1605.

	
Payment of Certain Taxes Upon Exchange

	
82

	  	
SECTION 1606.

	
Shares Free and Clear

	
82

	  	
SECTION 1607.

	
Cancellation of Security

	
82

	  	
SECTION 1608.

	
Duties of Trustee Regarding Exchange

	
82

	  	
SECTION 1609.

	
Repayment of Certain Funds Upon Exchange

	
83

	  	
SECTION 1610.

	
Exercise of Conversion Privilege

	
83

	  	
SECTION 1611.

	
Effect of Consolidation or Merger on Conversion Privilege

	
85

	 	 
	
ARTICLE SEVENTEEN SUBORDINATION

	
86

	 	 	 	 
	  	
SECTION 1701.

	
Agreement to Subordinate

	
86

	  	
SECTION 1702.

	
Liquidation; Dissolution; Bankruptcy

	
86

	  	
SECTION 1703.

	
Default on Senior Debt

	
86

	  	
SECTION 1704.

	
Acceleration of Securities

	
87

	  	
SECTION 1705.

	
Payments

	
87

	  	
SECTION 1706.

	
Notice by Company

	
89

	  	
SECTION 1707.

	
Subrogation

	
89

	  	
SECTION 1708.

	
Relative Rights

	
89

	  	
SECTION 1709.

	
Subordination May Not Be Impaired By Company

	
89

	  	
SECTION 1710.

	
Distribution or Notice to Representative

	
90

	  	
SECTION 1711.

	
Rights of Trustee and Paying Agent

	
90

Note:  This table of contents shall not, for any purpose, be deemed to be a part of the Indenture.

  

  

  

BSD MEDICAL CORPORATION

 

Reconciliation and tie between Trust Indenture Act of 1939, as amended (“TIA”), and Indenture, dated as of ____________ 20__:

 

	
Trust Indenture Act Section

	
Indenture Section

	
Section 310(a)(1)

	
607

	
(a)(2)

	
607

	
(b)

	
608

	
Section 312(c)

	
701

	
Section 314(a)

	
703

	
(a)(4)

	
1009

	
(c) (1)

	
102

	
(c) (2)

	
102

	
(e)

	
102

	
Section 315(a)

	
612

	
(b)

	
601

	
(c)

	
612

	
(d)

	
612

	
(e)

	
515

	
Section 316(a)(last sentence)

	
101 (“Outstanding”)

	
(a)(1)(A)

	
502, 512

	
(a)(1)(B)

	
513

	
(b)

	
508

	
Section 317(a)(1)

	
503

	
(a)(2)

	
504

	
(b)

	
1003

	
Section 318(a)

	
112

	
(c)

	
112

Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture.

 

Attention should also be directed to Section 318(c) of the TIA, which provides that the provisions of Sections 310 to and including 317 of the TIA are a part of and govern every qualified indenture, whether or not physically contained therein.

 

  

  

  

INDENTURE

 

INDENTURE, dated as of ____________ ____, 20___, between BSD MEDICAL CORPORATION, a Delaware corporation (the “Company”), having its principal office at 2188 West 2200 South, Salt Lake City, Utah 84119 and ______________, a ___________ banking corporation, as Trustee hereunder (hereinafter called the “Trustee”), having its Corporate Trust Office at ____________________.

 

RECITALS OF THE COMPANY

 

The Company deems it necessary to issue from time to time for its lawful purposes subordinated debt securities (the “Securities”) evidencing its unsecured and subordinated indebtedness, and has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of the Securities, unlimited as to aggregate principal amount, to bear interest at the rates or formulas, to mature at such times and to have such other provisions as shall be fixed therefor as hereinafter provided.

 

All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done.

 

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

 

For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows:

 

ARTICLE ONE

DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

 

SECTION 101.                                Definitions.

 

For all purposes of this Indenture, except as otherwise expressly provided or the context otherwise requires:

 

(1)           the terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular;

 

(2)           all other terms used herein that are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein, and the terms “cash transaction” and “self-liquidating paper,” as used in Trust Indenture Act Section 311, shall have the meanings assigned to them in the rules of the Commission adopted under the Trust Indenture Act;

 

(3)           all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles; and

 

  

  

  

(4)           the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision.

 

Certain terms, used principally in Article Three, Article Five, Article Six and Article Ten, are defined in those Articles.  In addition, the following terms shall have the indicated respective meanings:

 

“Act” has the meaning specified in Section 104.

 

“Additional Amounts” means any additional amounts that are required by a Security, under circumstances specified therein, to be paid by the Company in respect of certain taxes imposed on certain Holders and that are owing to such Holders.

 

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person.  For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

 

“Authenticating Agent” means any authenticating agent appointed by the Trustee pursuant to Section 611.

 

“Authorized Newspaper” means a newspaper, printed in the English language, customarily published on each Business Day, whether or not published on Saturdays, Sundays or holidays, and of general circulation in each place in connection with which the term is used or in the financial community of each such place.  Whenever successive publications are required to be made in Authorized Newspapers, the successive publications may be made in the same or in different Authorized Newspapers in the same city meeting the foregoing requirements and in each case on any Business Day.

 

“Bankruptcy Law” has the meaning specified in Section 501.

 

“Bearer Security” means a Security that is payable to bearer.

 

“Board of Directors” means either (i) the Board of Directors of the Company, the executive committee or any other committee or director of that board duly authorized to act for it in respect hereof, or (ii) one or more duly authorized officers of the Company to whom the Board of Directors of the Company or a committee thereof has delegated the authority to act with respect to the matters contemplated by this Indenture.

 

“Board Resolution” means (i) a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors or a committee thereof, and to be in full force and effect on the date of such certification, and delivered to the Trustee or (ii) a certificate signed by the authorized officer or officers of the Company to whom the Board of Directors of the Company or a committee thereof has delegated its authority (as described in the definition of Board of Directors), and in each case, delivered to the Trustee.

 

  

2

  

“Business Day,” when used with respect to any Place of Payment or any other particular location referred to in this Indenture or in the Securities, means, unless otherwise specified with respect to any Securities pursuant to Section 301, any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in that Place of Payment or particular location are authorized or required by law, regulation or executive order to close.

 

“Clearstream” means Clearstream Banking S.A., a societe anonyme incorporate in Luxembourg or any successor or survivor entity.

 

“Commission” means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or, if at any time after execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties on such date.

 

“Common Depository” has the meaning specified in Section 304(b).

 

“Company” means the Person named as the “Company” in the first paragraph of this Indenture until a successor corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “Company” shall mean such successor corporation.

 

“Company Request” and “Company Order” mean, respectively, a written request or order signed in the name of the Company by the President or a Vice President of the Company, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of the Company, and delivered to the Trustee.

 

“Conversion Event” means the cessation of use of (i) a Foreign Currency (other than as otherwise provided with respect to a Security pursuant to Section 301) as provided by the government of the country that issued such currency and for the settlement of transactions by a central bank or other public institutions of or within the international banking community, or (ii) the ECU, both within the European Monetary System and for the settlement of transactions by public in situations of or within the European Community, or (iii) any currency unit (or composite currency) for the purposes for which it was established.

 

“Corporate Trust Office” means the office of the Trustee at which, at any particular time, its corporate trust business shall be principally administered, which office at the date hereof is located at________________________________.

 

“corporation” includes corporations, associations, companies and business trusts.

 

“coupon” means any interest coupon appertaining to a Bearer Security.

 

“Custodian” has the meaning set forth in Section 501.

 

“Debt” means the principal, premium, if any, unpaid interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not a claim for post-filing interest is allowed in such proceeding), fees, charges, expenses, reimbursement and indemnification obligations, and all other amounts payable under or in respect of the following indebtedness of the Company for money borrowed, whether any such indebtedness exists as of the date of the Indenture or is created, incurred, assumed or guaranteed after such date:

 

  

3

  

 

(i) any debt (a) for money borrowed, (b) evidenced by a bond, note, debenture, or similar instrument (including purchase money obligations) given in connection with the acquisition of any business, property or assets, whether by purchase, merger, consolidation or otherwise, but shall not include any account payable or other obligation created or assumed in the ordinary course of business in connection with the obtaining of materials or services, or (c) that is a direct or indirect obligation that arises as a result of banker’s acceptances or bank letters of credit issued to secure obligations of the Company, or to secure the payment of revenue bonds issued for the benefit of the Company,
whether contingent or otherwise;

 

(ii) any debt of others described in the preceding clause (i) that the Company has guaranteed or for which it is otherwise liable;

 

(iii) the obligation of the Company, as lessee under any lease of property that is reflected on the Company’s balance sheet as a capitalized lease; and

 

(iv) any deferral, amendment, renewal, extension, supplement or refunding of any liability of the kind described in any of the preceding clauses (i), (ii), and (iii); provided, however, that, in computing indebtedness of the Company, there shall be excluded any particular indebtedness if, upon or prior to the maturity thereof, there shall have been deposited with a depository in trust money (or evidence of indebtedness if permitted by the instrument creating such indebtedness) in the necessary amount to pay, redeem or satisfy such indebtedness as it becomes due, and the amount so deposited shall not be included in any computation of the assets of the Company.

 

“Defaulted Interest” has the meaning specified in Section 307.

 

“Dollar” or “$” means a dollar or other equivalent unit in such coin or currency of the United States of America as at the time shall be legal tender for payment of public and private debts.

 

“DTC” means The Depository Trust Company.

 

“Euroclear” means Euroclear Bank S.A./N.V. a societe anonyme and naamloze venootschap incorporated in Belgium which operates the Euroclear System or any successor or survivor entity.

 

“Event of Default” has the meaning specified in Section 501.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder by the Commission.

 

“Foreign Currency” means any currency, currency unit or composite currency issued by the government of one or more countries other than the United States of America or by any recognized confederation or association of such governments.

 

  

4

  

“GAAP” means generally accepted accounting principles as used in the United States applied on a consistent basis as in effect from time to time; provided that solely for purposes of any calculation required by the financial covenants contained herein, “GAAP” shall mean generally accepted accounting principles as used in the United States on the date hereof, applied on a consistent basis.

 

“Government Obligations” means securities that are (i) direct obligations of the United States of America or the government that issued the Foreign Currency in that the Securities of a particular series are payable, for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America or such government that issued the Foreign Currency in which the Securities of such series are payable, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America or such other government, which, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such Government Obligation or a specific payment of interest on or principal of any such Government Obligation held by such custodian for the account of the holder of a depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Obligation or the specific payment of interest on or principal of the Government Obligation evidenced by such depository receipt.

 

“Holder” means, in the case of a Registered Security, the Person in whose name a Security is registered in the Security Register and, in the case of a Bearer Security, the bearer thereof and, when used with respect to any coupon, shall mean the bearer thereof.

 

“Indenture” means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, and shall include the terms of particular series of Securities established as contemplated by Section 301; provided, however, that, if at any time more than one Person is acting as Trustee under this instrument, “Indenture” shall mean, with respect to any one or more series of Securities for which such Person is Trustee, this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof and shall include the terms of the or those particular series of Securities for which such Person is Trustee established as contemplated by Section 301, exclusive, however, of any provisions or terms that relate solely to other series of Securities for which such Person is not Trustee, regardless of when such terms or provisions were adopted, and exclusive of any provisions or terms adopted by means of one or more indentures supplemental hereto executed and delivered after such Person had become such Trustee but to which such Person, as such Trustee, was not a party.

 

“Indexed Security” means a Security the terms of which provide that the principal amount thereof payable at Stated Maturity may be more or less than the principal face amount thereof at original issuance.

 

  

5

  

“Interest” when used with respect to an Original Issue Discount Security that by its terms bears interest only after Maturity, shall mean interest payable after Maturity, and, when used with respect to a Security that provides for the payment of Additional Amounts pursuant to Section 1010, includes such Additional Amounts.

 

“Interest Payment Date” means, when used with respect to any Security, the Stated Maturity of an installment of interest on such Security.

 

“Make-Whole Amount” means the amount, if any, in addition to principal that is required by a Security, under the terms and conditions specified therein or as otherwise specified as contemplated by Section 301, to be paid by the Company to the Holder thereof in connection with any optional redemption or accelerated payment of such Security.

 

“Maturity” means, when used with respect to any Security, the date on which the principal of such Security or an installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, notice of redemption, notice of option to elect repayment, repurchase or otherwise.

 

“Officers’ Certificate” means a certificate signed by the President or a Vice President and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company, and delivered to the Trustee.

 

“Opinion of Counsel” means a written opinion of counsel, who may be an employee of or counsel for the Company or other counsel satisfactory to the Trustee.

 

“Original Issue Discount Security” means any Security that provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502.

 

“Outstanding,” when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except:

 

(i) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation;

 

(ii) Securities, or portions thereof, for whose payment or redemption or repayment at the option of the Holder money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities and any coupons appertaining thereto; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or other provision therefor satisfactory to the Trustee has been made;

 

(iii) Securities, except solely to the extent provided in Sections 1402 or 1403, as applicable, with respect to which the Company has effected defeasance and/or covenant defeasance as provided in Article Fourteen;

 

  

6

  

(iv) Securities that have been paid pursuant to Section 306 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to the Trustee that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company; and

 

(v) Securities converted or exchanged into other securities or property (including securities of other issuers, provided that such securities are registered under Section 12 of the Exchange Act and such issuer is then eligible to use Form S-3 (or any successor form) for a primary offering of its securities) of the Company pursuant to or in accordance with this Indenture if the terms of such Securities provide for convertibility or exchange pursuant to Section 301; provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder or are present at a
meeting of Holders for quorum purposes, and for the purpose of making the calculations required by Trust Indenture Act Section 313, (i) the principal amount of an Original Issue Discount Security that may be counted in making such determination or calculation and that shall be deemed to be Outstanding for such purpose shall be equal to the amount of principal thereof that would be (or shall have been declared to be) due and payable, at the time of such determination, upon a declaration of acceleration of the maturity thereof pursuant to Section 502, (ii) the principal amount of any Security denominated in a Foreign Currency that may be counted in making such determination or calculation and that shall be deemed Outstanding for such purpose shall be equal to the Dollar equivalent, determined pursuant to Section 301 as of the date such Security is originally issued by the Company, of the
principal amount (or, in the case of an Original Issue Discount Security, the Dollar equivalent as of such date of original issuance of the amount determined as provided in clause (i) above) of such Security, (iii) the principal amount of any Indexed Security that may be counted in making such determination or calculation and that shall be deemed outstanding for such purpose shall be equal to the principal face amount of such Indexed Security at original issuance, unless otherwise provided with respect to such Indexed Security pursuant to Section 301, and (iv) Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in making such calculation or in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities that a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded.  Securities so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor.

 

“Paying Agent” means any Person authorized by the Company to pay the principal of (and premium or Make-Whole Amount, if any) or interest on any Securities, or coupons on behalf of the Company, or if no such Person is authorized, the Company.

 

  

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“Permitted Junior Securities” means debt or equity securities of the Company or any successor corporation issued pursuant to a plan of reorganization or readjustment of the Company that are subordinated to the payment of all then outstanding Senior Debt of the Company at least to the same extent that the Securities are subordinated to the payment of all Senior Debt of the Company on the issue date.

 

“Person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.

 

“Place of Payment” means, when used with respect to the Securities of or within any series, the place or places where the principal of (and premium or Make-Whole Amount, if any) and interest on such Securities are payable as specified as contemplated by Sections 301 and 1002.

 

“Predecessor Security” of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security or a Security to which a mutilated, destroyed, lost or stolen coupon appertains shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security or the Security to which the mutilated, destroyed, lost or stolen coupon appertains.

 

“Redemption Date” means, when used with respect to any security to be redeemed in whole or in part, the date fixed for such redemption by or pursuant to this Indenture.

 

“Redemption Price” means, when used with respect to any Security to be redeemed, the price at which it is to be redeemed pursuant to this Indenture.

 

“Registered Security” means any Security that is registered in the Security Register.

 

“Regular Record Date” for the installment of interest payable on any Interest Payment Date on the Registered Securities of or within any series means the date specified for that purpose as contemplated by Section 301, whether or not a Business Day.

 

“Repayment Date” means, when used with respect to any Security to be repaid or repurchased at the option of the Holder, the date fixed for such repayment or repurchase by or pursuant to this Indenture.

 

“Repayment Price” means, when used with respect to any Security to be repaid or purchased at the option of the Holder, the price at which it is to be repaid or repurchased pursuant to this Indenture.

 

“Representative” means the indenture trustee or other trustee, agent or representative for an issue of Senior Debt.

 

“Responsible Officer” means any vice president, assistant vice president, assistant treasurer, assistant secretary, any financial services officer or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and having direct responsibility for the administration of this Indenture, and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer’s knowledge of and familiarity with the particular subject.

 

  

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“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder by the Commission.

 

“Security” has the meaning stated in the first recital of this Indenture and, more particularly, means any Security or Securities authenticated and delivered under this Indenture; provided, however, that if at any time there is more than one Person acting as Trustee under this Indenture, “Securities” with respect to the Indenture as to which such Person is Trustee shall have the meaning stated in the first recital of this Indenture and shall more particularly mean Securities authenticated and delivered under this Indenture, exclusive, however, of Securities of or within any series as to which such Person is not Trustee.

 

“Security Register” and “Security Registrar” have the respective meanings specified in Section 305.

 

“Senior Debt” means the principal, premium, if any, unpaid interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not a claim for post-filing interest is allowed in such proceeding), fees, charges, expenses, reimbursement and indemnification obligations, and all other amounts payable under or in respect of the following indebtedness of the Company for money borrowed, whether any such indebtedness exists as of the date of the Indenture or is created, incurred, assumed or guaranteed after such date:

 

(i) any debt (a) for money borrowed by the Company, including any debt evidenced by a bond, note, debenture, credit agreement, or similar instrument, or (b) evidenced by a bond, note, debenture, or similar instrument (including purchase money obligations) given in connection with the acquisition of any business, property or assets, whether by purchase, merger, consolidation or otherwise, but shall not include any account payable or other obligation created or assumed in the ordinary course of business in connection with the obtaining of materials or services, or (c) which is a direct or indirect obligation which arises as a result of banker’s acceptances or bank letters of credit issued to
secure obligations of the Company, or to secure the payment of revenue bonds issued for the benefit of the Company whether contingent or otherwise, or (d) which is a direct or indirect obligation which arises as a result of any obligation in connection with a derivative contract or related transaction, including any swap, hedge, collar, floor or other similar transaction, whether related to interest rate protection, commodities or otherwise and whether contingent or otherwise;

 

(ii) any debt of others described in the preceding clause (i) which the Company has guaranteed or for which it is otherwise liable;

 

(iii) the obligation of the Company as lessee under any lease of property which is reflected on the Company’s balance sheet as a capitalized lease; and

 

  

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(iv) any deferral, amendment, renewal, extension, supplement or refunding of any liability of the kind described in any of the preceding clauses (i), (ii) and (iii);

 

provided, that the term Senior Debt shall not include (x) any debt, if the instrument creating or evidencing the same or the assumption or guarantee thereof expressly provides that such debt shall not be senior in right of payment to the Securities or is otherwise expressly subordinate to the debt of the Company, (y) any debt of the Company to a Subsidiary of the Company, or (z) debt to trade creditors and other amounts incurred in connection with obtaining goods, materials or services; provided, further that, that, in computing the indebtedness of the Company, there shall be excluded any particular indebtedness if, upon or prior to the maturity thereof, there shall have been deposited with a
depository in trust money (or evidence of indebtedness if permitted by the instrument creating such indebtedness) in the necessary amount to pay, redeem or satisfy such indebtedness as it becomes due, and the amount so deposited shall not be included in any computation of the assets of the Company provided, further, that in computing the indebtedness of the Company hereunder, there shall be excluded (1) any such indebtedness, obligation or liability referred to in clauses (i) through (iv) above as to which, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such indebtedness, obligation or liability is not superior in right of payment to the Securities, or ranks pari passu with the Securities, (2) any such indebtedness, obligation or liability which is subordinated to indebtedness of the Company to substantially the same
extent as or to a greater extent than the Securities are subordinated, (3) any indebtedness to a subsidiary of the Company and (4) the Securities.  There is no limit on the amount of Senior Debt that the Company may incur.

 

“Significant Subsidiary” means any Subsidiary that is a “significant subsidiary” (within the meaning of Regulation S-X, promulgated under the Securities Act) of the Company.

 

“Special Record Date” for the payment of any Defaulted Interest on the Registered Securities of or within any series means a date fixed by the Trustee pursuant to Section 307.

 

“Stated Maturity” means, when used with respect to any Security or any installment of principal thereof or interest thereon, the date specified in such Security or a coupon representing such installment of interest as the fixed date on which the principal of such Security or such installment of principal or interest is due and payable.

 

“Subsidiary” means, with respect to any Person, any corporation or other entity of which a majority of (i) the voting power of the voting equity securities or (ii) the outstanding equity interests of which are owned, directly or indirectly, by such Person.  For the purposes of this definition, “voting equity securities” means equity securities having voting power for the election of directors, whether at all times or only so long as no senior class of security has such voting power by reason of any contingency.

 

“Trust Indenture Act” or “TIA” means the Trust Indenture Act of 1939, as amended and as in force at the date as of which this Indenture was executed, except as provided in Section 905.

 

  

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“Trustee” means the Person named as the “Trustee” in the first paragraph of this Indenture until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “Trustee” shall mean or include each Person who is then a Trustee hereunder; provided, however, that if at any time there is more than one such Person, “Trustee” as used with respect to the Securities of or within any series shall mean only the Trustee with respect to the Securities of that series.

 

“United States” means, unless otherwise specified with respect to any Securities pursuant to Section 301, the United States of America (including the states and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction.

 

“United States person” means, unless otherwise specified with respect to any Securities pursuant to Section 301, an individual who is a citizen or resident of the United States, a corporation, partnership or other entity created or organized in or under the laws of the United States or any state or the District of Columbia or an estate or trust the income of which is subject to United States federal income taxation regardless of its source.

 

“Yield to Maturity” means the yield to maturity, computed at the time of issuance of a Security (or, if applicable, at the most recent predetermination of interest on such Security) and as set forth in such Security in accordance with generally accepted United States bond yield computation principles.

 

SECTION 102.                                Compliance Certificates and Opinions.

 

Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers’ Certificate stating that all conditions precedent, if any, provided for in this Indenture (including covenants, compliance with which constitute conditions precedent) relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or opinion need be furnished.

 

Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (excluding certificates delivered pursuant to Section 1009) shall include:

 

(1)           a statement that each individual signing such certificate or opinion has read such condition or covenant and the definitions herein relating thereto;

 

(2)           a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

 

  

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(3)           a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such condition or covenant has been complied with; and

 

(4)           a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with.

 

SECTION 103.                                Form of Documents Delivered to Trustee.

 

In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion as to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

 

Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon an Opinion of Counsel, or a certificate or representations by counsel, unless such officer knows, or in the exercise of reasonable care should know, that the opinion, certificate or representations with respect to the matters upon which his certificate or opinion is based are erroneous.  Any such Opinion of Counsel or certificate or representations may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information as to such factual matters is in the possession of
the Company, unless such counsel knows that the certificate or opinion or representations as to such matters are erroneous.

 

Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.

 

SECTION 104.                                Acts of Holders.

 

(a)           Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders of the Outstanding Securities of all series or one or more series, as the case may be, may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agents duly appointed in writing.  If Securities of a series are issuable as Bearer Securities, any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders of Securities of such
series may, alternatively, be embodied in and evidenced by the record of Holders of Securities of such series voting in favor thereof, whether in person or by proxies duly appointed in writing, at any meeting of Holders of Securities of such series duly called and held in accordance with the provisions of Article Fifteen, or a combination of such instruments and any such record.  Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments or record or both are delivered to the Trustee and, where it is hereby expressly required, to the Company.  Such instrument or instruments and any such record (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “Act” of the Holders signing such
instrument or instruments or so voting at any such meeting.  Proof of execution of any such instrument or of a writing appointing any such agent, or of the holding by any Person of a Security, shall be sufficient for any purpose of this Indenture and (subject to Section 612) conclusive in favor of the Trustee and the Company and any agent of the Trustee or the Company, if made in the manner provided in this Section.  The record of any meeting of Holders of Securities shall be proved in the manner provided in Section 1506.

 

  

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(b)           The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof.  Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority.  The fact and date of the execution of any such instrument or writing, or
the authority of the Person executing the same, may also be proved in any other reasonable manner that the Trustee deems sufficient.

 

(c)           The ownership of Registered Securities shall be proved by the Security Register or by a certificate of the Security Registrar.

 

(d)           The ownership of Bearer Securities may be proved by the production of such Bearer Securities or by a certificate executed, as depository, by any trust company, bank, banker or other depository, wherever situated, if such certificate shall be deemed by the Trustee to be satisfactory, showing that at the date therein mentioned such person had on deposit with such depository, or exhibited to it, the Bearer Securities therein described; or such facts may be proved by the certificate or affidavit of the Person holding such Bearer Securities, if such certificate or affidavit is deemed by the Trustee to be satisfactory.  The
Trustee and the Company may assume that such ownership of any Bearer Security continues until (1) another certificate or affidavit bearing a later date issued in respect of the same Bearer Security is produced, or (2) such Bearer Security is produced to the Trustee by some other Person, or (3) such Bearer Security is surrendered in exchange for a Registered Security, or (4) such Bearer Security is no longer Outstanding.  The ownership of Bearer Securities may also be proved in any other manner that the Trustee deems sufficient.

 

(e)           If the Company shall solicit from the Holders of Registered Securities any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, in or pursuant to a Board Resolution, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so.  Notwithstanding TIA Section 316(c), such record date shall be the record date specified in or pursuant to such Board Resolution, which shall be a date not earlier than the date 30
days prior to the first solicitation of Holders generally in connection therewith and not later than the date such solicitation is completed.  If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of Outstanding Securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the Outstanding Securities shall be computed as of such record date; provided that no such authorization, agreement or consent by the Holders on
such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than eleven months after the record date.

 

  

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(f)           Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee, any Security Registrar, any Paying Agent, any Authenticating Agent or the Company in reliance thereon, whether or not notation of such action is made upon such Security.

 

SECTION 105.                                Notices, etc., to the Trustee and Company.

 

Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to or filed with,

 

(1)           the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, Attention:  Corporate Trust Administration, or

 

(2)           the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first class postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this Indenture or at any other address previously furnished in writing to the Trustee by the Company.

 

SECTION 106.                                Notice to Holders; Waiver.

 

Where this Indenture provides for notice of any event to Holders of Registered Securities by the Company or the Trustee, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each such Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice.  In any case where notice to Holders of Registered Securities is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders of Registered Securities or the sufficiency of any notice to Holders of Bearer Securities given as provided herein.  Any notice mailed to a Holder in the manner herein prescribed shall be conclusively deemed to have been received by such Holder, whether or not such Holder actually receives such notice.

 

  

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If by reason of the suspension of or irregularities in regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification to Holders of Registered Securities as shall be made with the approval of the Trustee shall constitute a sufficient notification to such Holders for every purpose hereunder.

 

Except as otherwise expressly provided herein or otherwise specified with respect to any Securities pursuant to Section 301, where this Indenture provides for notice to Holders of Bearer Securities of any event, such notice shall be sufficiently given if published in an Authorized Newspaper in the City of New York, New York, and in such other city or cities as may be specified in such Securities, and if the Securities of such series are listed on any stock exchange outside the United States, in any place at which such Securities are listed on a securities exchange to the extent that such securities exchange so requires, on a Business Day, such publication to be not later than the latest date, and
not earlier than the earliest date, prescribed for the giving of such notice.  Any such notice shall be deemed to have been given on the date of such publication or, if published more than once, on the date of the first such publication.

 

If by reason of the suspension of publication of any Authorized Newspaper or Authorized Newspapers or by reason of any other cause it shall be impracticable to publish any notice to Holders of Bearer Securities as provided above, then such notification to Holders of Bearer Securities as shall be given with the approval of the Trustee shall constitute sufficient notice to such Holders for every purpose hereunder.  Neither the failure to give notice by publication to any particular Holder of Bearer Securities as provided above, nor any defect in any notice so published, shall affect the sufficiency of such notice with respect to other Holders of Bearer Securities or the sufficiency of any
notice to Holders of Registered Securities given as provided herein.

 

Any request, demand, authorization, direction, notice, consent or waiver required or permitted under this Indenture shall be in the English language, except that any published notice may be in an official language of the country of publication.

 

Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice.  Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.

 

SECTION 107.                                Effect of Headings and Table of Contents.

 

The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.

 

  

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SECTION 108.                                Successors and Assigns.

 

All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not.

 

SECTION 109.                                Separability Clause.

 

In case any provision in this Indenture or in any Security or coupon shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

 

SECTION 110.                                Benefits of Indenture.

 

Nothing in this Indenture or in the Securities or coupons appertaining thereto, express or implied, shall give to any Person, other than the parties hereto, any Security Registrar, any Paying Agent, any Authenticating Agent and their successors hereunder and the holders of Senior Debt or the Holders any benefit or any legal or equitable right, remedy or claim under this Indenture.

 

SECTION 111.                                No Personal Liability.

 

No recourse under or upon any obligation, covenant or agreement contained in this Indenture, in any Security or coupon appertaining thereto, or because of any indebtedness evidenced thereby, shall be had against any promoter, as such, or against any past, present or future shareholder, officer or director, as such, of the Company or of any successor, either directly or through the Company or any successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance of the Securities by the Holders thereof and as part of the
consideration for the issue of the Securities.

 

SECTION 112.                                Governing Law.

 

This Indenture and the Securities and coupons shall be governed by and construed in accordance with the laws of the State of New York.  This Indenture is subject to the provisions of the TIA that are required to be part of this Indenture and shall, to the extent applicable, be governed by such provisions.

 

  

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SECTION 113.                                Legal Holidays.

 

In any case where any Interest Payment Date, Redemption Date, Repayment Date, sinking fund payment date, Stated Maturity or Maturity of any Security or the last date on which a Holder has the right to convert or exchange a Security at a particular conversion or exchange price shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or any Security or coupon other than a provision in the Securities of any series that specifically states that such provision shall apply in lieu hereof), payment of interest or any Additional Amounts or principal (and premium or Make-Whole Amount, if any) need not be made at such Place of Payment on such date,
conversion or exchange need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the Interest Payment Date, Redemption Date, Repayment Date or sinking fund payment date, or at the Stated Maturity or Maturity or on such last day for conversion or exchange, provided that no interest shall accrue on the amount so payable for the period from and after such Interest Payment Date, Redemption Date, Repayment Date, sinking fund payment date, Stated Maturity or Maturity or on such last day for conversion or exchange, as the case may be.

 

SECTION 114.                                Conflict with Trust Indenture Act.

 

If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act which is required under such Act to be part of and govern this Indenture, the latter provision shall control.  If any provision of this Indenture modifies or excludes any provision  of the Trust Indenture Act which may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded as the case may be.

 

ARTICLE TWO

SECURITIES FORMS

 

SECTION 201.                                Forms of Securities.

 

The Registered Securities, if any, of each series and the Bearer Securities, if any, and related coupons of each series, shall be in substantially the forms as shall be established in or pursuant to one or more indentures supplemental hereto or Board Resolutions, shall have such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture or any indenture supplemental hereto, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements placed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Indenture, or as may be required to comply with
any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Securities may be listed, or to conform to usage.

 

Unless otherwise specified as contemplated by Section 301, Bearer Securities shall have interest coupons attached.

 

  

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The definitive Securities and coupons shall be printed, lithographed or engraved or produced by any combination of these methods on a steel engraved border or steel engraved borders or may be produced in any other manner, all as determined by the officers of the Company executing such Securities or coupons, as evidenced by their execution of such Securities or coupons.

 

SECTION 202.                                Form of Trustee’s Certificate of Authentication.

 

Subject to Section 611, the Trustee’s certificate of authentication shall be in substantially the following form:

 

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

 

________________, as Trustee

 

 

By:    ________________   

 

Responsible Officer

 

SECTION 203.                                Securities Issuable in Global Form.

 

If Securities of or within a series are issuable in global form, as specified as contemplated by Section 301, then, notwithstanding clause (8) of Section 301 and the provisions of Section 302, any such Security shall represent such of the Outstanding Securities of such series as shall be specified therein and may provide that it shall represent the aggregate amount of Outstanding Securities of such series from time to time endorsed thereon and that the aggregate amount of Outstanding Securities of such series represented thereby may from time to time be increased or decreased to reflect exchanges, maturities or redemptions.  Any endorsement of a Security in global form to reflect the
amount, or any increase or decrease in the amount, of Outstanding Securities represented thereby shall be made by the Trustee in such manner and upon written instruction given by such Person or Persons as shall be specified therein or in the Company Order to be delivered to the Trustee pursuant to Section 303 or 304.  Subject to the provisions of Section 303 and, if applicable, Section 304, the Trustee shall deliver and redeliver any Security in permanent global form in the manner and upon written instructions given by the Person or Persons specified therein or in the applicable Company Order.  If a Company Order pursuant to Section 303 or 304 has been, or simultaneously is, delivered, any instructions by the Company with respect to endorsement or delivery or redelivery of a Security in global form shall be in writing but need not comply with Section 102.

 

The provisions of the last sentence of Section 303 shall apply to any Security represented by a Security in global form if such Security was never issued and sold by the Company and the Company delivers to the Trustee the Security in global form together with written instructions (that need not comply with Section 102 and need not be accompanied by an Opinion of Counsel) with regard to the reduction in the principal amount of Securities represented thereby, together with the written statement contemplated by the last sentence of Section 303.

 

  

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Notwithstanding the provisions of Section 307, unless otherwise specified as contemplated by Section 301, payment of principal of and any premium or Make-Whole Amount and interest on any Security in permanent global form shall be made to the Person or Persons specified therein.

 

Notwithstanding the provisions of Section 308 and except as provided in the preceding paragraph, the Company, the Trustee and any agent of the Company and the Trustee shall treat as the Holder of such principal amount of Outstanding Securities represented by a permanent global Security (i) in the case of a permanent global Security in registered form, the Holder of such permanent global Security in registered form, or (ii) in the case of a permanent global Security in bearer form, Euroclear or Clearstream.

 

ARTICLE THREE

THE SECURITIES

 

SECTION 301.                                Amount Unlimited; Issuable in Series.

 

The aggregate principal amount of Securities that may be authenticated and delivered under this Indenture is unlimited.

 

The Securities may be issued in one or more series.  There shall be established in or pursuant to one or more Board Resolutions and, subject to Section 303, set forth, or determined in the manner provided, in an Officers’ Certificate, or established in one or more or indentures supplemental hereto, prior to the issuance of Securities of any series:

 

(1)           the title of the Securities of or within the series (that shall distinguish the Securities of such series from all other series of Securities);

 

(2)           any limit upon the aggregate principal amount of the Securities of or within the series that may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of or within the series pursuant to Section 304, 305, 306, 906, 1107, or 1305 and except for any Securities which, pursuant to Section 303 are deemed never to been authenticated and delivered hereunder);

 

(3)           the date or dates, or the method by which such date or dates will be determined, on which the principal of the Securities of or within the series shall be payable and the amount of principal payable thereon;

 

(4)           the rate or rates (which may be fixed or variable) at which the Securities of or within the series shall bear interest, if any, or the method by which such rate or rates shall be determined, the date or dates from which such interest shall accrue or the method by which such date or dates shall be determined, the Interest Payment Dates on which such interest will be payable and the Regular Record Date, if any, for the interest payable on any Registered Security on any Interest Payment Date, or the method by which such date shall be determined, and the
basis upon which interest shall be calculated if other than that of a 360-day year consisting of twelve 30-day months;

 

  

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(5)           the place or places where the principal of (and premium or Make-Whole Amount, if any), interest, if any, on, and Additional Amounts, if any, payable in respect of, Securities of or within the series shall be payable, any Registered Securities of or within the series may be surrendered for registration of transfer, exchange or conversion and notices or demands to or upon the Company in respect of the Securities of or within the series and this Indenture may be served;

 

(6)           the period or periods within which, the price or prices (including the premium or Make-Whole Amount, if any) at which, the currency or currencies, currency unit or units or composite currency or currencies in which and other terms and conditions upon which Securities of or within the series may be redeemed in whole or in part, at the option of the Company, if the Company is to have the option, and, if other than by Company Order, the manner in which any election by the Company to redeem the Securities shall be evidenced;

 

(7)           the obligation, if any, of the Company to redeem, repay or purchase Securities of or within the series pursuant to any sinking fund or analogous provision or at the option of a Holder thereof, and the period or periods within which or the date or dates on which, the price or prices at which, the currency or currencies, currency unit or units or composite currency or currencies in which, and other terms and conditions upon which Securities of or within the series shall be redeemed, repaid or purchased, in whole or in part, pursuant to such obligation;

 

(8)           if other than denominations of $1,000 and any integral multiple thereof, the denominations in which any Registered Securities of or within the series shall be issuable and, if other than the denomination of $5,000, the denomination or denominations in which any Bearer Securities of or within the series shall be issuable;

 

(9)           if other than the Trustee, the identity of each Security Registrar and/or Paying Agent;

 

(10)           if other than the principal amount thereof, the portion of the principal amount of Securities of or within the series that shall be payable upon declaration of acceleration of the maturity thereof pursuant to Section 502 or, if applicable, the portion of the principal amount of Securities of or within the series that is convertible in accordance with the provisions of this Indenture, or the method by which such portion shall be determined;

 

(11)           if other than Dollars, the Foreign Currency or Currencies in which payment of the principal of (and premium or Make-Whole Amount, if any) or interest or Additional Amounts, if any, on the Securities of or within the series shall be payable or in which the Securities of or within the series shall be denominated;

 

  

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(12)           whether the amount of payments of principal of (and premium or Make-Whole Amount, if any) or interest, if any, on the Securities of or within the series may be determined with reference to an index, formula or other method (which index, formula or method may be based, without limitation, on one or more currencies, currency units, composite currencies, commodities, equity indices or other indices), and the manner in which such amounts shall be determined;

 

(13)           whether the principal of (and premium or Make Whole Amount, if any) or interest or Additional Amounts, if any, on the Securities of or within the series are to be payable, at the election of the Company or a Holder thereof, in a currency or currencies, currency unit or units or composite currency or currencies other than that in which such Securities are denominated or stated to be payable, the period or periods within which, and the terms and conditions upon which, such election may be made, and the time and manner of, and identity of the exchange rate agent with responsibility for, determining the exchange rate between the
currency or currencies, currency unit or units or composite currency or currencies in which such Securities are denominated or stated to be payable and the currency or currencies, currency unit or units or composite currency or currencies in which such Securities are to be so payable;

 

(14)           provisions, if any, granting special rights to the Holders of Securities of or within the series upon the occurrence of such events as may be specified;

 

(15)           any deletions from, modifications of or additions to the Events of Default or covenants of the Company with respect to Securities of or within the series, whether or not such Events of Default or covenants are consistent with the Events of Default or covenants set forth herein;

 

(16)           whether Securities of or within the series are to be issuable as Registered Securities, Bearer Securities (with or without coupons) or both, any restrictions applicable to the offer, sale or delivery of Bearer Securities and the terms upon which Bearer Securities of or within the series may be exchanged for Registered Securities of or within the series and vice versa (if permitted by applicable laws and regulations), whether any Securities of or within the series are to be issuable initially in temporary global form and whether any Securities of or within the series are to be issuable in permanent global form (with or without
coupons) and, if so, whether beneficial owners of interests in any such permanent global Security may exchange such interests for Securities of such series and of like tenor of any authorized form and denomination and the circumstances under which any such exchanges may occur, if other than in the manner provided in Section 305, and, if Registered Securities of or within the series are to be issuable as a global Security, the identity of the depository for such series;

 

(17)           the date as of which any Bearer Securities of or within the series and any temporary global Security representing Outstanding Securities of or within the series shall be dated if other than the date of original issuance of the first Security of the series to be issued;

 

  

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(18)           the Person to whom any interest on any Registered Security of the series shall be payable, if other than the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, the manner in which, or the Person to whom, any interest on any Bearer Security of the series shall be payable, if otherwise than upon presentation and surrender of the coupons appertaining thereto as they severally mature, and the extent to which, or the manner in which, any interest payable on a temporary global Security on an Interest Payment Date will be paid
if other than in the manner provided in Section 304;

 

(19)           the applicability, if any, of Sections 1402 and/or 1403 to the Securities of or within the series and any provisions in modification of, in addition to or in lieu of any of the provisions of Article Fourteen;

 

(20)           if the Securities of such series are to be issuable in definitive form (whether upon original issue or upon exchange of a temporary Security of such series) only upon receipt of certain certificates or other documents or satisfaction of other conditions, then the form and/or terms of such certificates, documents or conditions;

 

(21)           if the Securities of or within the series are to be issued upon the exercise of debt warrants, the time, manner and place for such Securities to be authenticated and delivered;

 

(22)           whether and under what circumstances the Company will pay Additional Amounts as contemplated by Section 1010 on the Securities of or within the series to any Holder who is not a United States person (including any modification to the definition of such term) in respect of any tax, assessment or governmental charge and, if so, whether the Company will have the option to redeem such Securities rather than pay such Additional Amounts (and the terms of any such option);

 

(23)           the obligation, if any, of the Company to permit the Securities of such series to be converted into or exchanged for Common Stock of the Company or other securities or property of the Company and the terms and conditions upon which such conversion or exchange shall be effected (including, without limitation, the initial conversion price or rate, the conversion or exchange period, any adjustment of the applicable conversion or exchange price or rate and any requirements relative to the reservation of such shares for purposes of conversion or exchange);

 

(24)           if convertible or exchangeable, any applicable limitations on the ownership or transferability of the securities or property into which such Securities are convertible or exchangeable; and

 

(25)           any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture except as permitted by Section 905).

 

All Securities of any one series and the coupons appertaining to any Bearer Securities of such series, if any, shall be substantially identical except, in the case of Registered or Bearer Securities issued in global form, as to denomination and except as may otherwise be provided in or pursuant to the Board Resolution referred to above and (subject to Section 303) set forth, or determined in the manner provided, in the Officers’ Certificate referred to above or in any such indenture supplemental hereto.  All Securities of any one series need not be issued at the same time and, unless otherwise provided, a
series may be reopened, without the consent of the Holders, for issuances of additional Securities of such series.

 

  

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If any of the terms of the Securities of any series are established by action taken pursuant to one or more Board Resolutions, a copy of an appropriate record of such action(s) shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Company Order for authentication and delivery of such Securities.

 

SECTION 302.                                Denominations.

 

Unless otherwise provided in the applicable Officers’ Certificate or supplemental indenture, the Securities of each series shall be issuable in such denominations as shall be specified as contemplated by Section 301.  With respect to Securities of any series denominated in Dollars, in the absence of any such provisions with respect to the Securities of any series, the Registered Securities of such series, other than Registered Securities issued in global form (which may be of any denomination), shall be issuable in denominations of $1,000 and any integral multiple thereof and the Bearer Securities of such series other than Bearer Securities issued in global form (which may be of
any denomination), shall be issuable in denominations of $5,000.

 

SECTION 303.                                Execution, Authentication, Delivery and Dating.

 

The Securities and any coupons appertaining thereto shall be executed on behalf of the Company by its President or a Vice President, under its corporate seal reproduced thereon, and attested by its Secretary or an Assistant Secretary.  The signature of any of these officers on the Securities and coupons may be manual or facsimile signatures of the present or any future such authorized officer and may be imprinted or otherwise reproduced on the Securities.

 

Securities or coupons appertaining thereto bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities or coupons.

 

At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series, together with any coupon appertaining thereto, executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities, and the Trustee in accordance with the Company Order shall authenticate and deliver such Securities; provided, however, that, in connection with its original issuance, no Bearer Security shall be mailed or otherwise delivered to any location in the United States; and provided further that, unless otherwise specified with
respect to any series of Securities pursuant to Section 301 a Bearer Security may be delivered in connection with its original issuance only if the Person entitled to receive such Bearer Security shall have furnished a certificate to Euroclear or Clearstream, as the case may be, in the form set forth in Exhibit A-1 to this Indenture or such other certificate as may be specified with respect to any series of Securities pursuant to Section 301, dated no earlier than 15 days prior to the earlier of the date on which such Bearer Security is delivered and the date on which any temporary Security first becomes exchangeable for such Bearer Security in accordance with the terms of such temporary Security and this Indenture.  Except as permitted by Section 306, the Trustee shall not authenticate and deliver
any Bearer Security unless all appurtenant coupons for interest then matured have been detached and canceled.

 

  

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If all of the Securities of any series are not to be issued at one time and if the Board Resolution, Officers’ Certificate, or supplemental indenture establishing such series shall so permit, such Company Order may set forth procedures acceptable to the Trustee for the issuance of such Securities and determining the terms of particular Securities of such series, such as interest rate or formula, maturity date, date of issuance and date from which interest shall accrue.  In authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and (subject to Section 612 and TIA
Section 315(a) through 315(d)) shall be fully protected in conclusively relying upon:

 

(i)           an Opinion of Counsel complying with Section 102 and stating that:

 

(a)           the form or forms of such Securities and any coupons have been, or will have been upon compliance with such procedures as may be specified therein, established in conformity with the provisions of this Indenture;

 

(b)           the terms of such Securities and any coupons have been, or will have been upon compliance with such procedures as may be specified therein, established in conformity with the provisions of this Indenture; and

 

(c)           such Securities, together with any coupons appertaining thereto, when executed by the Company, authenticated and delivered by the Trustee in accordance with this Indenture and issued and delivered by the Company and paid for, all in the manner and subject to any conditions specified in such Opinion of Counsel, will be duly issued under this Indenture and will constitute, valid and legally binding obligations of the Company, enforceable in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting generally the enforcement of creditors’ rights and to
principles of equity, and to such other matters as may be specified therein.

 

 (ii)           an Officers’ Certificate complying with Section 102 and stating that all conditions precedent provided for in this Indenture relating to the issuance of such Securities have been, or will have been upon compliance with such procedures as may be specified therein, complied with and that, to the best of the knowledge of the signers of such certificate, no Event of Default with respect to such Securities shall have occurred and be continuing.

 

  

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Notwithstanding the provisions of Section 301 and of the preceding paragraph, if all the Securities of any series are not to be issued at one time, it shall not be necessary to deliver a Company Order, an Opinion of Counsel or an Officers’ Certificate otherwise required pursuant to the preceding paragraph at the time of issuance of each Security of such series, but such order, opinion and certificate, with appropriate modifications to cover such future issuances, shall be delivered at or before the time of issuance of the first Security of such series.

 

The Trustee shall not be required to authenticate such Securities if the issue of such Securities pursuant to this Indenture will affect the Trustee’s own rights, duties, obligations or immunities under the Securities and this Indenture or otherwise in a manner that is not reasonably acceptable to the Trustee.

 

Each Registered Security shall be dated the date of its authentication and each Bearer Security shall be dated as of the date specified as contemplated by Section 301.

 

No Security or coupon appertaining thereto shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security or the Security to which such coupon appertains a certificate of authentication substantially in the form provided for herein duly executed by the Trustee by manual signature of an authorized officer, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture.  Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder
but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 309 together with a written statement (which need not comply with Section 102 and need not be accompanied by an Opinion of Counsel) stating that such Security has never been issued or sold by the Company, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture.

 

SECTION 304.                                Temporary Securities.

 

(a)           Pending the preparation of definitive Securities of any series, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities that are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued, in registered form, or, if authorized, in bearer form with one or more coupons or without coupons, and with such appropriate insertions, omissions, substitutions and other variations as the officers of the Company executing such Securities may determine,
as conclusively evidenced by their execution of such Securities.  In the case of Securities of any series, such temporary Securities may be in global form.

 

 

  

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Except in the case of temporary Securities in global form (which shall be exchanged in accordance with Section 304(b) or as otherwise provided in or pursuant to a Company Order), if temporary Securities of any series are issued, the Company will cause definitive Securities of that series to be prepared without unreasonable delay.  After the preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable for definitive Securities of such series upon surrender of the temporary Securities of such series at the office or agency of the Company in a Place of
Payment for that series, without charge to the Holder.  Upon surrender for cancellation of any one or more temporary Securities of any series (accompanied by any non-matured coupons appertaining thereto), the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of the same series of authorized denominations; provided, however, that no definitive Bearer Security shall be delivered in exchange for a temporary Registered Security; and provided further that a definitive Bearer Security shall be delivered in exchange for a temporary Bearer Security only in compliance with the conditions set forth in Section 303.  Until so exchanged, the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of such
series.

 

(b)           Unless otherwise provided as contemplated in Section 301, this Section 304(b) shall govern the exchange of temporary Securities issued in global form other than through the facilities of DTC.  If any such temporary Security is issued in global form, then such temporary global Security shall, unless otherwise provided therein, be delivered to the London, England office of a depository or common depository (the “Common Depository”), for the benefit of Euroclear and Clearstream.

 

Without unnecessary delay but in any event not later than the date specified in, or determined pursuant to the terms of, any such temporary global Security (the “Exchange Date”), the Company shall deliver to the Trustee definitive Securities, in an aggregate principal amount equal to the principal amount of such temporary global Security, executed by the Company.  On or after the Exchange Date, such temporary global Security shall be surrendered by the Common Depository to the Trustee, as the Company’s agent for such purpose, to be exchanged, in whole or from time to time in part, for definitive Securities without charge, and the Trustee shall authenticate and deliver,
in exchange for each portion of such temporary global Security, an equal aggregate principal amount of definitive Securities of or within the same series of authorized denominations and of like tenor as the portion of such temporary global Security to be exchanged.  The definitive Securities to be delivered in exchange for any such temporary global Security shall be in bearer form, registered form, permanent global bearer form or permanent global registered form, or any combination thereof, as specified as contemplated by Section 301, and, if any combination thereof is so specified, as requested by the beneficial owner thereof; provided, however, that, unless otherwise specified in such temporary global Security, upon such presentation by the Common Depository, such temporary global Security is accompanied by a certificate dated the Exchange Date or a subsequent date and
signed by Euroclear as to the portion of such temporary global Security, if any, held for its account then to be exchanged and a certificate dated the Exchange Date or a subsequent date and signed by Euroclear or Clearstream as to the portion of such temporary global Security, if any, held for its account then to be exchanged, each in the form set forth in Exhibit A-2 to this Indenture or in such other form as may be established pursuant to Section 301; and provided further that definitive Bearer Securities shall be delivered in exchange for a portion of a temporary global Security only in compliance with the requirements of Section 303.

 

  

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Unless otherwise specified in such temporary global Security, the interest of a beneficial owner of Securities of a series in a temporary global Security shall be exchanged for definitive Securities of the same series and of like tenor following the Exchange Date when the account holder instructs Euroclear or Clearstream, as the case may be, to request such exchange on his behalf and delivers to Euroclear or Clearstream, as the case may be, a certificate in the form set forth in Exhibit A-1 to this Indenture (or in such other form as may be established pursuant to Section 301), dated no earlier than 15 days prior to the Exchange Date, copies of which certificate shall be available from the offices
of Euroclear or Clearstream, the Trustee, any Authenticating Agent appointed for such series of Securities and each Paying Agent.  Unless otherwise specified in such temporary global Security, any such exchange shall be made free of charge to the beneficial owners of such temporary global Security, except that a Person receiving definitive Securities must bear the cost of insurance, postage, transportation and the like unless such Person takes delivery of such definitive Securities in person at the offices of Euroclear or Clearstream.  Definitive Securities in bearer form to be delivered in exchange for any portion of a temporary global Security shall be delivered only outside the United States.

 

Until exchanged in full as hereinabove provided, the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of the same series and of like tenor authenticated and delivered hereunder, except that, unless otherwise specified as contemplated by Section 301, interest payable on a temporary global Security on an Interest Payment Date for Securities of such series occurring prior to the applicable Exchange Date shall be payable to Euroclear or Clearstream on such Interest Payment Date upon delivery by Euroclear or Clearstream to the Trustee of a certificate or certificates in the form set forth in Exhibit A-2 to this
Indenture (or in such other forms as may be established pursuant to Section 301), for credit without further interest on or after such Interest Payment Date to the respective accounts of Persons who are the beneficial owners of such temporary global Security on such Interest Payment Date and who have each delivered to Euroclear or Clearstream, as the case may be, a certificate dated no earlier than 15 days prior to the Interest Payment Date occurring prior to such Exchange Date in the form set forth as Exhibit A-1 to this Indenture (or in such other forms as may be established pursuant to Section 301).  Notwithstanding anything to the contrary herein contained, the certifications made pursuant to this paragraph shall satisfy the certification requirements of the preceding two paragraphs of this Section 304(b) and of the third paragraph of Section 303 of this Indenture and the
interests of the Persons who are the beneficial owners of the temporary global Security with respect to which such certification was made will be exchanged for definitive Securities of the same series and of like tenor on the Exchange Date or the date of certification if such date occurs after the Exchange Date, without further act or deed by such beneficial owners.  Except as otherwise provided in this paragraph, no payments of principal or interest owing with respect to a beneficial interest in a temporary global Security will be made unless and until such interest in such temporary global Security shall have been exchanged for an interest in a definitive Security.  Any interest so received by Euroclear or Clearstream and not paid as herein provided shall be returned to the Trustee prior to the expiration of two years after such Interest Payment Date in order to be
repaid to the Company.

 

  

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SECTION 305.                                Registration, Registration of Transfer and Exchange.

 

The Company shall cause to be kept at the Corporate Trust Office of the Trustee or in any office or agency of the Company in a Place of Payment a register for each series of Securities (the registers maintained in such office or in any such office or agency of the Company in a Place of Payment being herein sometimes referred to collectively as the “Security Register”) in which, subject to such reasonable regulations as it or the Security Registrar may prescribe, the Company shall provide for the registration of Registered Securities and of transfers of Registered Securities.  The Security Register shall be in written form or any other form capable of being converted into
written form within a reasonable time.  The Trustee, at its Corporate Trust Office, is hereby initially appointed “Security Registrar” for the purpose of registering Registered Securities and transfers of Registered Securities on such Security Register as herein provided.  In the event that the Trustee shall cease to be Security Registrar, it shall have the right to examine the Security Register at all reasonable times and to require that a copy of the Security Register in written form be delivered to it from time to time as reasonably requested.  Subject to the provisions of this Section 305, upon surrender for registration of transfer of any Registered Security of any series at any office or agency of the Company in a Place of Payment for that series, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Registered Securities of the same series, of any authorized denominations and of a like aggregate principal amount, bearing a number not contemporaneously outstanding, and containing identical terms and provisions.

 

Subject to the provisions of this Section 305, at the option of the Holder, Registered Securities of any series may be exchanged for other Registered Securities of the same series, of any authorized denomination or denominations and of a like aggregate principal amount, containing identical terms and provisions, upon surrender of the Registered Securities to be exchanged at any such office or agency.  Whenever any such Registered Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Registered Securities that the Holder making the exchange is entitled to receive.  Unless otherwise specified with respect to any
series of Securities as contemplated by Section 301, Bearer Securities may not be issued in exchange for Registered Securities.

 

If (but only if) permitted as contemplated by Section 301, at the option of the Holder, Bearer Securities of any series may be exchanged for Registered Securities of the same series of any authorized denominations and of a like aggregate principal amount and tenor, upon surrender of the Bearer Securities to be exchanged at any such office or agency, with all unmatured coupons and all matured coupons in default thereto appertaining.  If the Holder of a Bearer Security is unable to produce any such unmatured coupon or coupons or matured coupon or coupons in default, any such permitted exchange may be effected if the Bearer Securities are accompanied by payment in funds acceptable to the
Company in an amount equal to the face amount of such missing coupon or coupons, or the surrender of such missing coupon or coupons may be waived by the Company and the Trustee if there is furnished to them such security or indemnity as they may require to save each of them and any Paying Agent harmless.  If thereafter the Holder of such Security shall surrender to any Paying Agent any such missing coupon in respect of which such a payment shall have been made, such Holder shall be entitled to receive the amount of such payment; provided, however, that, except as otherwise provided in Section 1002, interest represented by coupons shall be payable 

 

  

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only upon presentation and surrender of those coupons at an office or agency located outside the United States.  Notwithstanding the foregoing, in case a Bearer Security of any series is surrendered at any such office or agency in a permitted exchange for a Registered Security of the same series and like tenor after the close of business at such office or agency on (i) any Regular Record Date and before the opening of business at such office or agency on the relevant Interest Payment Date, or (ii) any Special Record Date and before the opening of business at such office or agency on the related proposed date for payment of Defaulted Interest, such Bearer Security shall be surrendered
without the coupon relating to such Interest Payment Date or proposed date for payment, as the case may be, and interest or Defaulted Interest, as the case may be, will not be payable on such Interest Payment Date or proposed date for payment, as the case may be, in respect of the Registered Security issued in exchange for such Bearer Security, but will be payable only to the Holder of such coupon when due in accordance with the provisions of this Indenture.  Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities that the holder making the exchange is entitled to receive.

 

Notwithstanding the foregoing, except as otherwise specified as contemplated by Section 301, any permanent global Security shall be exchangeable only as provided in this paragraph.  If the depository for any permanent global Security is DTC, then, unless the terms of such global Security expressly permit such global Security to be exchanged in whole or in part for definitive Securities, a global Security may be transferred, in whole but not in part, only to a nominee of DTC, or by a nominee of DTC to DTC, or to a successor to DTC for such global Security selected or approved by the Company or to a nominee of such successor to DTC.  If at any time DTC notifies the Company that
it is unwilling or unable to continue as depository for the applicable global Security or Securities or if at any time DTC ceases to be a clearing agency registered under the Exchange Act if so required by applicable law or regulation, the Company shall appoint a successor depository with respect to such global Security or Securities.  If (x) a successor depository for such global Security or Securities is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such unwillingness, inability or ineligibility, (y) an Event of Default has occurred and is continuing and the beneficial owners representing a majority in principal amount of the applicable series of Securities represented by such global Security or Securities advise DTC to cease acting as depository for such global Security or Securities or (z) the Company, in its sole
discretion, determines at any time that all Outstanding Securities (but not less than all) of any series issued or issuable in the form of one or more global Securities shall no longer be represented by such global Security or Securities (provided, however, the Company may not make such determination during the 40-day restricted period provided by Regulation S under the Securities Act or during any other similar period during which the Securities must be held in global form as may be required by the Securities Act), then the Company shall execute, and the Trustee shall authenticate and deliver definitive Securities of like series, rank, tenor and terms in definitive form in an aggregate principal amount equal to the principal amount of such global Security or Securities.  If any beneficial owner of an interest in a permanent global Security is otherwise entitled to exchange
such an interest for Securities of such series and of like tenor and principal amount of another authorized form and denomination, as specified as contemplated by Section 301 and provided that any applicable notice provided in the permanent global Security shall have been given, then without unnecessary delay but in any

 

  

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 event not later than the earliest date on which such interest may be so exchanged, the Company shall execute, and the Trustee shall authenticate and deliver definitive Securities in aggregate principal amount equal to the principal amount of such beneficial owner’s interest in such permanent global Security.  On or after the earliest date on which such interests may be so exchanged, such permanent global Security shall be surrendered for exchange by DTC or such other depository as shall be specified in the Company Order with respect thereto to the Trustee, as the Company’s agent for such purpose; provided, however, that no such exchanges may occur during a period
beginning at the opening of business 15 days before any selection of Securities to be redeemed and ending on the relevant Redemption Date if the Security for which exchange is requested may be among those selected for redemption; and provided further that no Bearer Security delivered in exchange for a portion of a permanent global Security shall be mailed or otherwise delivered to any location in the United States.  If a Registered Security is issued in exchange for any portion of a permanent global Security after the close of business at the office or agency where such exchange occurs on (i) any Regular Record Date and before the opening of business at such office or agency on the relevant Interest Payment Date, or (ii) any Special Record Date and before the opening of business at such office or agency on the related proposed date for payment of Defaulted Interest, interest
or Defaulted Interest, as the case may be, will not be payable on such Interest Payment Date or proposed date for payment, as the case may be, in respect of such Registered Security, but will be payable on such Interest Payment Date or proposed date for payment, as the case may be, only to the Person to whom interest in respect of such portion of such permanent global Security is payable in accordance with the provisions of this Indenture.

 

All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange.

 

Every Registered Security presented or surrendered for registration of transfer or for exchange or redemption shall (if so required by the Company or the Security Registrar) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Security Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing.

 

No service charge shall be made for any registration of transfer or exchange of Securities, but the Company and the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304, 906, 1107 or 1305 not involving any transfer.

 

The Company or the Trustee, as applicable, shall not be required (i) to issue, register the transfer of or exchange any Security if such Security may be among those selected for redemption during a period beginning at the opening of business 15 days before selection of the Securities to be redeemed under Section 1103 and ending at the close of business on (A) if such Securities are issuable only as Registered Securities, the day of the mailing of the relevant notice of redemption and (B) if such Securities are issuable as Bearer Securities, the day of the first publication of the relevant notice of redemption or, if such Securities are also issuable as Registered Securities and there is no
publication, the mailing of the relevant notice of redemption, or (ii) to register the transfer of or exchange any Registered Security so selected for redemption in whole or in part, except, in the case of any Registered Security to be redeemed in part, the portion thereof not to be redeemed, or (iii) to exchange any Bearer Security so selected for redemption except that such a Bearer Security may be exchanged for a Registered Security of that series and like tenor, provided that such Registered Security shall be simultaneously surrendered for redemption, or (iv) to issue or to register the transfer or exchange of any Security which has been surrendered for repayment at the option of the Holder, except the portion, if any, of such Security not to be so repaid.

 

  

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SECTION 306.                                Mutilated, Destroyed, Lost and Stolen Securities.

 

If any mutilated Security or a Security with a mutilated coupon appertaining to it is surrendered to the Trustee or the Company, together with such security or indemnity as may be required by the Company or the Trustee to save each of them or any agent of either of them harmless, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of the same series and principal amount, containing identical terms and provisions and bearing a number not contemporaneously outstanding, with coupons corresponding to the coupons, if any, appertaining to the surrendered Security.

 

If there shall be delivered to the Company and to the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security or coupon, and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of actual notice to the Company or the Trustee that such Security or coupon has been acquired by a bona fide purchaser, the Company shall execute and upon its request the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security or in exchange for the Security to which a destroyed, lost or stolen coupon appertains (with all appurtenant coupons not destroyed,
lost or stolen), a new Security of the same series and principal amount, containing identical terms and provisions and bearing a number not contemporaneously outstanding, with coupons corresponding to the coupons, if any, appertaining to such destroyed, lost or stolen Security or to the Security to which such destroyed, lost or stolen coupon appertains.

 

Notwithstanding the provisions of the previous two paragraphs, in case any such mutilated, destroyed, lost or stolen Security or coupon has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, with coupons corresponding to coupons, if any, appertaining to such destroyed, lost or stolen Security or to the Security to which such destroyed, lost or stolen coupon appertains, pay such Security or coupon; provided, however, that payment of principal of (and premium or Make-Whole Amount, if any), any interest on and any Additional Amounts with respect to Bearer Securities shall, except as otherwise provided in Section 1002, be payable only at
an office or agency located outside the United States and, unless otherwise specified as contemplated by Section 301, any interest on Bearer Securities shall be payable only upon presentation and surrender of the coupons appertaining thereto.

 

  

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Upon the issuance of any new Security under this Section, the Company and the Trustee may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith.

 

Every new Security of any series with its coupons, if any, issued pursuant to this Section in lieu of any destroyed, lost or stolen Security, or in exchange for a Security to which a destroyed, lost or stolen coupon appertains, shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security and its coupons, if any, or the destroyed, lost or stolen coupon shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of that series and their coupons, if any, duly issued hereunder.

 

The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities or coupons.

 

SECTION 307.                                Payment of Interest; Interest Rights Preserved.

 

Except as otherwise specified with respect to a series of Securities in accordance with the provisions of Section 301, interest on any Registered Security that is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest at the office or agency of the Company maintained for such purpose pursuant to Section 1002; provided, however, that each installment of interest on any Registered Security may at the Company’s option be paid by (i) mailing a check for such interest, payable to or upon the
written order of the Person entitled thereto pursuant to Section 308, to the address of such Person as it appears on the Security Register or (ii) transfer to an account maintained by the payee located inside the United States.

 

Unless otherwise provided as contemplated by Section 301 with respect to the Securities of any series, payment of interest may be made, in the case of a Bearer Security, by transfer to an account maintained by the payee with a bank located outside the United States.

 

Unless otherwise provided as contemplated by Section 301, every permanent global Security will provide that interest, if any, payable on any Interest Payment Date will be paid to DTC, Euroclear and/or Clearstream, as the case may be, with respect to that portion of such permanent global Security held for its account by DTC, Euroclear or Clearstream, as the case may be, for the purpose of permitting such party to credit the interest received by it in respect of such permanent global Security to the accounts of the beneficial owners thereof.

 

In case a Bearer Security of any series is surrendered in exchange for a Registered Security of such series after the close of business (at an office or agency in a Place of Payment for such series) on any Regular Record Date and before the opening of business (at such office or agency) on the next succeeding Interest Payment Date, such Bearer Security shall be surrendered without the coupon relating to such Interest Payment Date and interest will not be payable on such Interest Payment Date in respect of the Registered Security issued in exchange for such Bearer Security, but will be payable only to the Holder of such
coupon when due in accordance with the provisions of this Indenture.

 

  

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Except as otherwise specified with respect to a series of Securities in accordance with the provisions of Section 301, any interest on any Registered Security of any series that is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called “Defaulted Interest”) shall forthwith cease to be payable to the registered Holder thereof on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clause (1) or (2) below:

 

(1)           The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Registered Securities of such series (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner.  The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Registered Security of such series and the date of the proposed payment (which shall not be less than 20 days after such notice is received by the Trustee), and at the same time
the Company shall deposit with the Trustee an amount of money in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series) equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit on or prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided.  Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt
by the Trustee of the notice of the proposed payment.  The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Registered Securities of such series at such Holder’s address as it appears in the Security Register not less than 10 days prior to such Special Record Date.  Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names the Registered Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no
longer be payable pursuant to the following clause (2).  In case a Bearer Security of any series is surrendered at the office or agency in a Place of Payment for such series in exchange for a Registered Security of such series after the close of business at such office or agency on any Special Record Date and before the opening of business at such office or agency on the related proposed date for payment of Defaulted Interest, such Bearer Security shall be surrendered without the coupon relating to such proposed date of payment and Defaulted Interest will not be payable on such proposed date of payment in respect of the Registered Security issued in exchange for such Bearer Security, but will be payable only to the Holder of such coupon when due in accordance with the provisions of this
Indenture.

 

  

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(2)           The Company may make payment of any Defaulted Interest on the Registered Securities of any series in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after written notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee.

 

Subject to the foregoing provisions of this Section and Section 305, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security.

 

Subject to the provisions of Section 1402 and except as otherwise specified with respect to a series of Securities in accordance with the provisions of Section 301, in the case of any Security that is converted or exchanged after any Regular Record Date and on or prior to the next succeeding Interest Payment Date (other than any Security, the principal of (or premium, if any, on) which shall become due and payable, whether at a Stated Maturity or by declaration of acceleration, call for redemption, or otherwise, prior to such Interest Payment Date), interest whose Stated Maturity is on such Interest Payment Date shall be payable on such Interest Payment Date notwithstanding such conversion or
exchange, and such interest (whether or not punctually paid or duly provided for) shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on such Regular Record Date.  Except as otherwise expressly provided in the immediately preceding sentence, in the case of any Security which is converted or exchanged, interest whose Stated Maturity is after the date of conversion or exchange of such Security shall not be payable.

 

SECTION 308.                                Persons Deemed Owners.

 

Prior to due presentment of a Registered Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Registered Security is registered as the owner of such Security for the purpose of receiving payment of principal of (and premium or Make-Whole Amount, if any), and (subject to Sections 305 and 307) interest on, such Registered Security and for all other purposes whatsoever, whether or not such Registered Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary.

 

Title to any Bearer Security and any coupons appertaining thereto shall pass by delivery.  The Company, the Trustee and any agent of the Company or the Trustee may treat the Holder of any Bearer Security and the Holder of any coupon as the absolute owner of such Security or coupon for the purpose of receiving payment thereof or on account thereof and for all other purposes whatsoever, whether or not such Security or coupon be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary.

 

  

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None of the Company, the Trustee, any Paying Agent or the Security Registrar will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Security in global form or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

 

Notwithstanding the foregoing, with respect to any global Security, nothing herein shall prevent the Company, the Trustee, or any agent of the Company or the Trustee, from giving effect to any written certification, proxy or other authorization furnished by any depository, as a Holder, with respect to such global Security or impair, as between such depository and owners of beneficial interests in such global Security, the operation of customary practices governing the exercise of the rights of such depository (or its nominee) as Holder of such global Security.

 

SECTION 309.                                Cancellation.

 

All Securities and coupons surrendered for payment, redemption, repayment at the option of the Holder, registration of transfer or exchange or for credit against any sinking fund payment shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee, and any such Securities and coupons and Securities and coupons surrendered directly to the Trustee for any such purpose shall be promptly canceled by it.  The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder that the Company may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to
the Trustee) for cancellation any Securities previously authenticated hereunder that the Company has not issued and sold, and all Securities so delivered shall be promptly canceled by the Trustee.  If the Company shall so acquire any of the Securities, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Securities unless and until the same are surrendered to the Trustee for cancellation.  No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture.  Cancelled Securities and coupons held by the Trustee shall be destroyed by the Trustee and, if required in writing by the Company, the Trustee shall deliver a certificate of such destruction to the Company, unless by a Company Order the
Company directs their return to it.

 

SECTION 310.                                Computation of Interest.

 

Except as otherwise specified as contemplated by Section 301 with respect to Securities of any series, interest on the Securities of each series shall be computed on the basis of a 360-day year consisting of twelve 30-day months.

 

  

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ARTICLE FOUR 

SATISFACTION AND DISCHARGE

 

SECTION 401.                                Satisfaction and Discharge of Indenture.

 

This Indenture shall upon Company Request cease to be of further effect with respect to any series of Securities specified in such Company Request (except as to any surviving rights of registration of transfer or exchange of Securities of such series herein expressly provided for and any right to receive Additional Amounts, as provided in Section 1010), and the Trustee, upon receipt of a Company Order, and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture as to such series when

 

(1)           either

 

(A)           all Securities of such series theretofore authenticated and delivered and all coupons, if any, appertaining thereto (other than (i) coupons appertaining to Bearer Securities surrendered for exchange for Registered Securities and maturing after such exchange, whose surrender is not required or has been waived as provided in Section 305, (ii) Securities and coupons of such series that have been destroyed, lost or stolen and that  have been replaced or paid as provided in Section 306, (iii) coupons appertaining to Securities called for redemption and maturing after the relevant Redemption Date, whose surrender has been
waived as provided in Section 1106, and (iv) Securities and coupons of such series for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or

 

(B)           all Securities of such series and, in the case of (i) or (ii) below, any coupons appertaining thereto not theretofore delivered to the Trustee for cancellation

 

(i)           have become due and payable, or

 

(ii)           will become due and payable at their Stated Maturity within one year, or

 

(iii)           if redeemable at the option of the Company, are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company,

 

and the Company, in the case of (i), (ii) or (iii) above, has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable, sufficient to pay and discharge the entire indebtedness on such Securities and such coupons not theretofore delivered to the Trustee for cancellation, for principal (and premium or Make-Whole Amount, if any) and interest, and any Additional Amounts with respect thereto, to the date of such deposit (in the case
of Securities that have become due and payable) or the Stated Maturity or Redemption Date, as the case may be;

 

  

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(2)           The Company has paid or caused to be paid all or other sums payable hereunder by the Company; and

 

(3)           The Company has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture as to such series have been complied with.

 

Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee and any predecessor Trustee under Section 606, the obligations of the Company to any Authenticating Agent under Section 611 and, if money shall have been deposited with and held by the Trustee pursuant to subclause (B) of clause (1) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003, shall survive.

 

In the event that there are Securities of two or more series outstanding hereunder, the Trustee shall be required to execute an instrument acknowledging satisfaction and discharge of this Indenture only if requested to do so with respect to Securities of a particular series as to which it is Trustee and if the other conditions thereto are met.

 

SECTION 402.                                Application of Trust Funds.

 

Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities, the coupons and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium or Make-Whole Amount, if any), and any interest and Additional Amounts for whose payment such money has been deposited with or received by the Trustee, but such money need not be segregated from other funds except to the extent required by
law.  Money deposited pursuant to this section not in violation of this Indenture shall not be subject to claims of holders of Senior Debt under Article Seventeen.

 

  

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ARTICLE FIVE

REMEDIES

 

SECTION 501.                                Events of Default.

 

Subject to any modifications, additions or deletions relating to any series of Securities as contemplated pursuant to Section 301, “Event of Default,” wherever used herein with respect to any particular series of Securities, means any one of the following events (whatever the reason for such Event of Default and whether or not it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

 

(1)           default in the payment of any interest upon or any Additional Amounts payable in respect of any Security of or within that series or of any coupon appertaining thereto, when such interest, Additional Amounts or coupon becomes due and payable, and continuance of such default for a period of 30 days; or

 

(2)           default in the payment of the principal of (or premium or Make-Whole Amount, if any, on) any Security of that series when it becomes due and payable at its Maturity; or

 

(3)           default in the deposit of any sinking fund payment, when and as due by the terms of any Security of that series; or

 

(4)           default in the performance, or breach, of any covenant or warranty of the Company in this Indenture with respect to any Security of that series (other than (i) a covenant or agreement included in this Indenture solely for the benefit of a series of Securities other than such series or (ii) a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least
25% in principal amount of the Outstanding Securities of that series a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a “Notice of Default” hereunder; or

 

(5)           the Company or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law:

 

(A) commences a voluntary case;

 

(B) consents to the entry of an order for relief against it in an involuntary case;

 

(C) consents to the appointment of a Custodian of it or for all or substantially all of its property; or

 

(D) makes a general assignment for the benefit of its creditors; or

 

  

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(6)           a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

 

(A) is for relief against the Company or any Significant Subsidiary in an involuntary case,

 

(B) appoints a Custodian of the Company or any Significant Subsidiary or for all or substantially all of either of its property, or

 

(C) orders the liquidation of the Company or any Significant Subsidiary, and the order or decree remains unstayed and in effect for 90 days; or

 

(7)           any other Event of Default provided with respect to Securities of that series.

 

As used in this Section 501, the term “Bankruptcy Law” means Title 11, U.S. Code or any similar Federal or state law for the relief of debtors and the term “Custodian” means any receiver, trustee, assignee, liquidator or other similar official under any Bankruptcy Law.

 

SECTION 502.                                Acceleration of Maturity; Rescission and Annulment.

 

If an Event of Default with respect to Securities of any series at the time Outstanding occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in aggregate principal amount of the Outstanding Securities of each such affected series (voting as a single class) may declare the principal (or, if any Securities are Original Issue Discount Securities or Indexed Securities, such portion of the principal as may be specified in the terms thereof) of, and the Make-Whole Amount, if any, on, all the Securities of that series to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by the Holders), and upon any such
declaration such principal or specified portion thereof shall become immediately due and payable.

 

At any time after such a declaration of acceleration with respect to Securities of any series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the Outstanding Securities of that series, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if:

 

(1)           the Company has paid or deposited with the Trustee a sum sufficient to pay in the currency, currency unit or composite currency in which the Securities of such series is payable (except as otherwise specified pursuant to Section 301 for the Securities of such series):

 

  

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(A) all overdue installments of interest on and any Additional Amounts payable in respect of all Outstanding Securities of that series and any related coupons;

 

(B) the principal of (and premium or Make-Whole Amount, if any, on) any Outstanding Securities of that series that have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates borne by or provided for in such Securities;

 

(C) to the extent that payment of such interest is lawful, interest upon overdue installments of interest and any Additional Amounts at the rate or rates borne by or provided for in such Securities; and

 

(D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and

 

(2)           all Events of Default with respect to Securities of that series, other than the nonpayment of the principal of (or premium or Make-Whole Amount, if any) or interest on Securities of that series that have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513.

 

No such rescission shall affect any subsequent default or impair any right consequent thereon.

 

SECTION 503.                                Collection of Indebtedness and Suits for Enforcement by Trustee.

 

The Company covenants that if:

 

(1)           default is made in the payment of any installment of interest or Additional Amounts, if any, on any Security of any series and any related coupon when such interest or Additional Amount becomes due and payable and such default continues for a period of 30 days, or

 

(2)           default is made in the payment of the principal of (or premium or Make-Whole Amount, if any, on) any Security of any series at its Maturity,

 

then the Company will, upon demand of the Trustee, pay to the Trustee, for the benefit of the Holders of such Securities of such series and coupons, the whole amount then due and payable on such Securities and coupons for principal (and premium or Make-Whole Amount, if any) and interest and Additional Amounts, with interest upon any overdue principal (and premium or Make-Whole Amount, if any) and, to the extent that payment of such interest shall be legally enforceable, upon any overdue installments of interest or Additional Amounts, if any, at the rate or rates borne by or provided for in such Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

 

  

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If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Company or any other obligor upon such Securities of such series and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon such Securities of such series, wherever situated.

 

If an Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series and any related coupons by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy.

 

SECTION 504.                                Trustee May File Proofs of Claim.

 

In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities of any series shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal, premium or Make-Whole Amount, if any, or interest) shall be entitled and empowered, by intervention in such
proceeding or otherwise:

 

(i)           to file and prove a claim for the whole amount, or such lesser amount as may be provided for in the Securities of such series, of principal (and premium or Make-Whole Amount, if any) and interest and Additional Amounts, if any, owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and

 

(ii)           to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same;

 

and any custodian, receiver, assignee, trustee, liquidator, sequestrator (or other similar official) in any such judicial proceeding is hereby authorized by each Holder of Securities of such series and coupons to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee and any predecessor Trustee, their agents and counsel, and any other amounts due the Trustee or any predecessor Trustee under Section 606.

 

  

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Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder of a Security or coupon any plan of reorganization, arrangement, adjustment or composition affecting the Securities or coupons or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder of a Security or coupon in any such proceeding.

 

SECTION 505.                                Trustee May Enforce Claims Without Possession of Securities or Coupons.

 

All rights of action and claims under this Indenture or any of the Securities or coupons may be prosecuted and enforced by the Trustee without the possession of any of the Securities or coupons or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities and coupons in respect of which such judgment has been recovered.

 

SECTION 506.                                Application of Money Collected.

 

Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium or Make-Whole Amount, if any) or interest and any Additional Amounts, upon presentation of the Securities or coupons, or both, as the case may be, and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:

 

FIRST:  To the payment of all amounts due the Trustee and any predecessor Trustee under Section 606,

 

SECOND:  To the payment of the amounts then due and unpaid upon the Securities and coupons for principal (and premium or Make-Whole Amount, if any) and interest and any Additional Amounts payable, in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the aggregate amounts due and payable on such Securities and coupons for principal (and premium or Make-Whole Amount, if any), interest and Additional Amounts, respectively, and

 

THIRD:  To the payment of the remainder, if any, to the Company.

 

  

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SECTION 507.                                Limitation on Suits.

 

No Holder of any Security of any series or any related coupon shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless:

 

(1)           such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series;

 

(2)           the Holders of not less than 25% in principal amount of the Outstanding Securities of that series shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder;

 

(3)           such Holder or Holders have offered to the Trustee indemnity satisfactory to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request;

 

(4)           the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and

 

(5)           no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities of that series;

 

it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all such Holders.

 

SECTION 508.                                Unconditional Right of Holders to Receive Principal, Premium or Make-Whole Amount, if any, Interest and Additional Amounts.

 

Notwithstanding any other provision in this Indenture, the Holder of any Security or coupon shall have the right that is absolute and unconditional to receive payment of the principal of (and premium or Make-Whole Amount, if any) and (subject to Sections 305 and 307) interest on, and any Additional Amounts in respect of, such Security or payment of such coupon on the respective due dates expressed in such Security or coupon (or, in the case of redemption, on the Redemption Date), to convert or exchange such Securities in accordance with Article Sixteen and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such
Holder.

 

  

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SECTION 509.                                Restoration of Rights and Remedies.

 

If the Trustee or any Holder of a Security or coupon has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Company, the Trustee and the Holders of Securities and coupons shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding has been instituted.

 

SECTION 510.                                Rights and Remedies Cumulative.

 

Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities or coupons in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders of Securities or coupons is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise.  The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.

 

SECTION 511.                                Delay or Omission Not Waiver.

 

No delay or omission of the Trustee or of any Holder of any Security or coupon to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or any acquiescence therein.  Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders of Securities or coupons, as the case may be.

 

SECTION 512.                                Control by Holders of Securities.

 

The Holders of not less than a majority in principal amount of the Outstanding Securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee with respect to the Securities of such series, provided that

 

(1)           such direction shall not be in conflict with any rule of law or with this Indenture,

 

  

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(2)           the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction, and

 

(3)           the Trustee need not take any action that might involve it in personal liability or be unduly prejudicial to the Holders of Securities of such series not joining therein (but the Trustee shall have no obligation as to the determination of such undue prejudice).

 

SECTION 513.                                Waiver of Past Defaults.

 

The Holders of not less than a majority in principal amount of the Outstanding Securities of any series may on behalf of the Holders of all the Securities of such series and any related coupons consent to the waiver of any past default hereunder with respect to such series and its consequences, except a default

 

(1)           in the payment of the principal of (or premium or Make-Whole Amount, if any) or interest on or Additional Amounts payable in respect of any Security of such series or any related coupons, or

 

(2)           in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected.

 

Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon.

 

SECTION 514.                                Waiver of Stay or Extension Laws.

 

The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

 

  

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SECTION 515.                                Undertaking for Costs.

 

All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in such suit having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of
this Section shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Securities, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium or Make-Whole Amount, if any) or interest on or Additional Amounts payable with respect to any Security on or after the respective Stated Maturities expressed in such Security (or in the case of redemption, on or after the Redemption Date) or to enforce the right to convert or exchange any Security in accordance with Article Sixteen.

 

ARTICLE SIX

THE TRUSTEE

 

SECTION 601.                                Notice of Defaults.

 

Within 90 days after the occurrence of any default hereunder with respect to the Securities of any series, the Trustee shall transmit in the manner and to the extent provided in TIA Section 313(c), notice of such default hereunder actually known to a Responsible Officer of the Trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of (or premium or Make-Whole Amount, if any) or interest on or any Additional Amounts with respect to any Security of such series, or in the payment of any sinking fund installment with respect to the Securities of such series, the Trustee shall be protected in withholding
such notice if and so long as Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interests of the Holders of the Securities and coupons of such series; and provided further that in the case of any default or breach of the character specified in Section 501(4) with respect to the Securities and coupons of such series, no such notice to Holders shall be given until at least 60 days after the occurrence thereof.  For the purpose of this Section, the term “default” means any event that is, or after notice or lapse of time or both would become, an Event of Default with respect to the Securities of such series.

 

  

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SECTION 602.                                Certain Rights of Trustee.

 

Subject to the provisions of TIA Section 315(a) through 315(d):

 

(1)           the Trustee shall perform only such duties as are expressly undertaken by it to perform under this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee;

 

(2)           the Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, coupon or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;

 

(3)           any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order (other than delivery of any Security, together with any coupons appertaining thereto, to the Trustee for authentication and delivery pursuant to Section 303 that shall be sufficiently evidenced as provided therein) and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution;

 

(4)           whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers’ Certificate;

 

(5)           the Trustee may consult with counsel and as a condition to the taking, suffering or omission of any action hereunder may demand an Opinion of Counsel, and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;

 

(6)           the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders of Securities of any series or any related coupons pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity satisfactory to the Trustee against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction;

 

(7)           the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, coupon or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney;

 

  

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(8)           the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, attorneys, custodians or nominees and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent, attorney, custodian or nominee appointed with due care by it hereunder; and

 

(9)           the Trustee shall not be liable for any action taken, suffered or omitted by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture.  The Trustee shall not be required to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or indemnity satisfactory to the Trustee against such risk or liability is not reasonably assured to
it.

 

SECTION 603.                                Not Responsible for Recitals or Issuance of Securities.

 

The recitals contained herein and in the Securities, except the Trustee’s certificate of authentication, and in any coupons shall be taken as the statements of the Company, and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness.  The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities or coupons, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Securities and perform its obligations hereunder.  Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Company
of Securities or the proceeds thereof.

 

SECTION 604.                                May Hold Securities.

 

The Trustee, any Paying Agent, Security Registrar, Authenticating Agent or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and coupons and, subject to Section 613 and TIA Sections 310(b) and 311, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Paying Agent, Security Registrar, Authenticating Agent or such other agent.

 

SECTION 605.                                Money Held in Trust.

 

Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law.  The Trustee shall be under no liability for interest on, or investment of, any money received by it hereunder.

 

  

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SECTION 606.                                Compensation, Reimbursement and Indemnification.

 

The Company agrees:

 

(1)           to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder, including extraordinary services rendered in connection with or during the continuation of a default hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);

 

(2)           to reimburse each of the Trustee and any predecessor Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by it in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except to the extent any such expense, disbursement or advance may be attributable to its gross negligence or bad faith; and

 

(3)           to indemnify each of the Trustee and any predecessor Trustee and each of their respective directors, officers, agents and employees for, and to hold each of them harmless against, any loss, liability, claim, action, suit, cost or expense, arising out of or in connection with the acceptance or administration of the trust or trusts or the performance of its duties hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder except to the extent any such loss, liability or expense may be attributable to its own
gross negligence or bad faith.

 

As security for the performance of the obligations of the Company under this Section, the Trustee shall have a lien prior to the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the payment of principal of (or premium or Make-Whole Amount, if any) or interest on particular Securities or any coupons.

 

When the Trustee incurs expenses or renders services in connection with an Event of Default described in Section 501(6) and (7), such expenses (including the fees and expenses of its counsel) and the compensation for such services are intended to constitute expenses of administration under any Bankruptcy Law.

 

The provisions of this Section shall survive the termination of this Indenture or the resignation or removal of the Trustee.

 

SECTION 607.                                Corporate Trustee Required; Eligibility.

 

There shall at all times be a Trustee hereunder that shall be eligible to act as Trustee under TIA Section 310(a)(1) and shall have a combined capital and surplus of at least $50,000,000 or is a subsidiary of a corporation that shall be a Person that has a combined capital and surplus of at least $50,000,000 and that unconditionally guarantees the obligations of the Trustee hereunder.  If such Trustee or Person publishes reports of condition at least annually, pursuant to law or the requirements of Federal, State, Territorial or District of Columbia supervising or examining authority, then for the purposes of
this Section, the combined capital and surplus of such Trustee or Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.  If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article.

 

  

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SECTION 608.                                Resignation and Removal; Appointment of Successor.

 

(a)           No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 609.

 

(b)           The Trustee may resign at any time with respect to the Securities of one or more series by giving written notice thereof to the Company.  If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee.

 

(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 such series delivered to the Trustee and to the Company.

 

(d)           If at any time:

 

(1)           the Trustee shall fail to comply with the provisions of Section 613 or TIA Section 310(b) after written request therefor by the Company or by any Holder of a Security who has been a bona fide Holder of a Security for at least six months, or

 

(2)           the Trustee shall cease to be eligible under Section 607 and shall fail to resign after written request therefor by the Company or by any Holder of a Security who has been a bona fide Holder of a Security for at least six months, or

 

(3)           the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,

 

then, in any such case, (i) the Company by or pursuant to a Board Resolution may remove the Trustee and appoint a successor Trustee with respect to all Securities, or (ii) subject to TIA Section 315(e), any Holder of a Security who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees.

 

  

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(e)           If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause with respect to the Securities of one or more series, the Company, by or pursuant to a Board Resolution, shall promptly appoint a successor Trustee or Trustees with respect to the Securities of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any particular series).  If, within one year
after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee with respect to the Securities of such series and to that extent supersede the successor Trustee appointed by the Company.  If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Company or the Holders of Securities and accepted appointment in the manner hereinafter provided, any Holder of a Security who has been a bona fide Holder of a Security of such series for at least six months may, on
behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to Securities of such series.

 

(f)           The Company shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series in the manner provided for notices to the Holders of Securities in Section 106.  Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office.

 

SECTION 609.                                Acceptance of Appointment By Successor.

 

(a)           In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an
instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder, subject nevertheless to its claim, if any, provided for in Section 606.

 

  

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(b)           In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto, pursuant to Article Nine hereof, wherein each successor Trustee shall accept such appointment and that (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and
apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates.

 

(c)           Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph (a) or (b) of this Section, as the case may be.

 

(d)           No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article.

 

(e)           All monies due and owing to the Trustee shall be paid before the Successor Trustee takes over.

 

SECTION 610.                                Merger, Conversion, Consolidation or Succession to Business.

 

Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto.  In case any Securities or coupons shall have been
authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities or coupons so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities or coupons.  In case any Securities or coupons shall not have been authenticated by such predecessor Trustee, any such successor Trustee may authenticate and deliver such Securities or coupons, in either its own name or that of its predecessor Trustee, with the full force and effect that this Indenture provides for the certificate of authentication of the Trustee.

 

  

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SECTION 611.                                Appointment of Authenticating Agent.

 

At any time when any of the Securities remain Outstanding, the Trustee may appoint an Authenticating Agent or Agents with respect to one or more series of Securities that shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon exchange, registration of transfer or partial redemption or repayment thereof or pursuant to Section 306, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder.  Any such appointment shall be evidenced by an instrument in writing signed by a Responsible Officer of the Trustee, a copy of which
instrument shall be promptly furnished to the Company.  Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee’s certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent.  Each Authenticating Agent shall be reasonably acceptable to the Company and, except as may otherwise be provided pursuant to Section 301, shall at all times be a bank or trust company or corporation organized and doing business and in good standing under the laws of the United States of America or of any State or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus
of not less than $25,000,000 and subject to supervision or examination by Federal or State authorities.  If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.  In case at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section.

 

Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or further act on the part of the Trustee or the Authenticating Agent.

 

  

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An Authenticating Agent for any series of Securities may at any time resign by giving written notice of resignation to the Trustee for such series and to the Company.  The Trustee for any series of Securities may at any time terminate the agency of an Authenticating Agent by giving written notice of termination to such Authenticating Agent and to the Company.  Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee for such series may appoint a successor Authenticating Agent that shall be acceptable to the Company and shall
give notice of such appointment to all Holders of Securities of or within the series with respect to which such Authenticating Agent will serve in the manner set forth in Section 106.  Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent herein.  No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section.

 

The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation including reimbursement of its reasonable expenses for its services under this Section.

 

If an appointment with respect to one or more series is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to or in lieu of the Trustee’s certificate of authentication, an alternate certificate of authentication substantially in the following form:

 

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

 

_________________, As Trustee

 

 

 

By: ______________________      

 

As Authenticating Agent

 

 

By:  ______________________     

 

Authorized Officer

 

SECTION 612.                                Certain Duties and Responsibilities.

 

No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or indemnity satisfactory to the Trustee against such risk or liability is not reasonably assured to it.  Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the
provisions of this Section.

 

  

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SECTION 613.                                Conflicting Interests.

 

If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture.  To the extent permitted by such Act, the Trustee shall not be deemed to have a conflicting interest by virtue of being a trustee under this Indenture with respect to Securities of more than one series.  In case an Event of Default shall occur and be continuing, the Trustee shall exercise such of its rights and powers under the applicable Indenture and use the same degree of care and skill in
their exercise as a prudent person would exercise or use under the circumstances in the conduct of his own affairs.

 

ARTICLE SEVEN

HOLDERS’ LISTS AND REPORTS BY TRUSTEE AND COMPANY

 

SECTION 701.                                Disclosure of Names and Addresses of Holders.

 

Every Holder of Securities or coupons, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any Authenticating Agent nor any Paying Agent nor any Security Registrar nor any director, officer, agent or employee of any of them shall be held accountable by reason of the disclosure of any information as to the names and addresses of the Holders of Securities or coupons in accordance with TIA Section 312, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under TIA Section 312(b).

 

SECTION 702.                                Reports by Trustee.

 

Within 60 days after March 15 of each year commencing with the first March 15 after the first issuance of Securities pursuant to this Indenture, the Trustee shall transmit by mail to all Holders of Securities as provided in TIA Section 313(c) a brief report dated as of such March 15 if and to the extent required by TIA Section 313(a).

 

  

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SECTION 703.                                Reports by Company.

 

The Company will:

 

(1)           file with the Trustee, within 15 days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the Company is not required to file information, documents or reports pursuant to either of such Sections, then it will file with the Trustee and the Commission, in accordance with rules and
regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports that may be required pursuant to Section 13 of the Exchange Act in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations;

 

(2)           file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and

 

(3)           transmit by mail to the Holders of Securities, within 30 days after the filing thereof with the Trustee, in the manner and to the extent provided in TIA Section 313(c), such summaries of any information, documents and reports required to be filed by the Company pursuant to paragraphs (1) or (2) of this Section as may be required by rules and regulations prescribed from time to time by the Commission.

 

SECTION 704.                                Company to Furnish Trustee Names and Addresses of Holders.

 

The Company will furnish or cause to be furnished to the Trustee:

 

(a)           semi-annually, not later than 15 days after the Regular Record Date for interest for each series of Securities, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders of Registered Securities of such series as of such Regular Record Date, or if there is no Regular Record Date for interest for such series of Securities, semi-annually, upon such dates as are set forth in the Board Resolution or indenture supplemental hereto authorizing such series, and

 

(b)           at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished, provided, however, that, so long as the Trustee is the Security Registrar, no such lists shall be required to be furnished.

 

  

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ARTICLE EIGHT

CONSOLIDATION, MERGER, SALE, LEASE OR CONVEYANCE

 

SECTION 801.                                Consolidations and Mergers of Company and Sales, Leases and Conveyances Permitted Subject to Certain Conditions.

 

The Company may consolidate with, or sell, lease or convey all or substantially all of its assets to, or merge with or into any other Person, provided that in any such case, (i) either the Company shall be the continuing entity, or the successor (if other than the Company) entity shall be a Person organized and existing under the laws of the United States or a State thereof or the District of Columbia and such successor entity shall expressly assume the due and punctual payment of the principal of (and premium or Make-Whole Amount, if any) and any interest (including all Additional Amounts, if any, payable pursuant to Section 1010) on all of the Securities, according to their tenor, the conversion
or exchange rights shall be provided for in accordance with Article Sixteen, if applicable, or as otherwise specified pursuant to Section 301, and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed by the Company by supplemental indenture, complying with Article Nine hereof, in form satisfactory to the Trustee, executed and delivered to the Trustee by such Person and (ii) immediately after giving effect to such transaction and treating any indebtedness that becomes an obligation of the Company or any Subsidiary as a result thereof as having been incurred by the Company or such Subsidiary at the time of such transaction, no Event of Default, and no event that, after notice or the lapse of time, or both, would become an Event of Default, shall have occurred and be continuing.

 

SECTION 802.                                Rights and Duties of Successor Corporation.

 

In case of any such consolidation, merger, sale, lease or conveyance and upon any such assumption by the successor entity, such successor entity shall succeed to and be substituted for the Company, with the same effect as if it had been named herein as the party of the first part, and the predecessor entity, except in the event of a lease, shall be relieved of any further obligation under this Indenture and the Securities.  Such successor entity thereupon may cause to be signed, and may issue either in its own name or in the name of the Company, any or all of the Securities issuable hereunder that theretofore shall not have been signed by the Company and delivered to the Trustee; and,
upon the order of such successor entity, instead of the Company, and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Securities that previously shall have been signed and delivered by the officers of the Company to the Trustee for authentication, and any Securities that such successor entity thereafter shall cause to be signed and delivered to the Trustee for that purpose.  All the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Securities had been issued at the date of the execution hereof.

 

  

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In case of any such consolidation, merger, sale, lease or conveyance, such changes in phraseology and form (but not in substance) may be made in the Securities thereafter to be issued as may be appropriate.

 

SECTION 803.                                Officers’ Certificate and Opinion of Counsel.

 

Any consolidation, merger, sale, lease or conveyance permitted under Section 801 is also subject to the condition that the Trustee receive an Officers’ Certificate and an Opinion of Counsel to the effect that any such consolidation, merger, sale, lease or conveyance, and the assumption by any successor entity, and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, complies with the provisions of this Article and that all conditions precedent herein provided for relating to such transaction have been complied with.

 

ARTICLE NINE

SUPPLEMENTAL INDENTURES

 

SECTION 901.                                Supplemental Indentures Without Consent of Holders.

 

Without the consent of any Holders of Securities or coupons, the Company, when authorized by or pursuant to a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes:

 

(1)           to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities contained; or

 

(2)           to add to the covenants of the Company for the benefit of the Holders of all or any series of Securities (and, if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for the benefit of such series) or to surrender any right or power herein conferred upon the Company; or

 

(3)           to add any additional Events of Default for the benefit of the Holders of all or any series of Securities (and if such Events of Default are to be for the benefit of less than all series of Securities, stating that such Events of Default are expressly being included solely for the benefit of such series); provided, however, that in respect of any such additional Events of Default such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon
such default or may limit the remedies available to the Trustee upon such default or may limit the right of the Holders of a majority in aggregate principal amount of that or those series of Securities to which such additional Events of Default apply to waive such default; or

 

  

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(4)           to add to or change any of the provisions of this Indenture to provide that Bearer Securities may be registrable as to principal, to change or eliminate any restrictions on the payment of principal of or any premium, Make-Whole Amount or Interest on Bearer Securities, to permit Bearer Securities to be issued in exchange for Registered Securities, to permit Bearer Securities to be issued in exchange for Bearer Securities of other authorized denominations or to permit or facilitate the issuance of Securities in uncertificated form, provided that any such action shall not adversely affect the interests of the Holders of Securities
of any series or any related coupons in any material respect; or

 

(5)           to add to, change or eliminate any of the provisions of this Indenture in respect of any series of Securities, provided that any such addition, change or elimination shall (i) neither (A) apply to any Security of any series created prior to the execution of such supplemental indenture and entitled to the benefit of such provision, nor (B) modify the rights of the Holder of any such Security with respect to such provision; or (ii) become effective only when there is no such Security Outstanding; or

 

(6)           to secure the Securities; or

 

(7)           to establish the form or terms of Securities of any series and any related coupons as permitted by Sections 201 and 301, including the provisions and procedures relating to Securities convertible into or exchangeable for other securities or property of the Company; or

 

(8)           to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee; or

 

(9)           to make provision with respect to the conversion or exchange rights of Holders pursuant to the requirements of Article Sixteen, including providing for the conversion or exchange of the Securities into any security or property of the Company; or

 

(10)           to cure any ambiguity, to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture that shall not be inconsistent with the provisions of this Indenture or to make any other changes, provided that in each case, such provisions shall not adversely affect the interests of the Holders of Securities of any series or any related coupons in any material respect; or

 

(11)           to close this Indenture with respect to the authentication and delivery of additional series of Securities or to qualify, or maintain qualification of, this Indenture under the TIA; or

 

  

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(12)           to supplement any of the provisions of this Indenture to such extent as shall be necessary to permit or facilitate the defeasance and discharge of any series of Securities pursuant to Sections 401, 1402 and 1403; provided in each case that any such action shall not adversely affect the interests of the Holders of Securities of such series and any related coupons or any other series of Securities in any material respect.

 

SECTION 902.                                Supplemental Indentures with Consent of Holders.

 

The Company and the Trustee may (i) amend or supplement this Indenture or the Securities without notice to any Securityholder but with the written consent of the Holders of a majority in aggregate principal amount of the Securities of all series then outstanding or (ii) supplement this Indenture with regard to a series of Securities, amend or supplement a Supplemental Indenture relating to a series of Securities, or amend the Securities of a series, without notice to any Securityholder but with the written consent of the Holders of a majority in aggregate principal amount of the Securities of that series then outstanding.  The Holders of a majority in principal amount of the Securities
of all series then outstanding may waive compliance by the Company with any provision of this Indenture or the Securities without notice to any Securityholder.  The Holders of a majority in principal amount of the Securities of any series then outstanding may waive compliance with any provision of this Indenture, any Supplemental Indenture or the Securities of that series with regard to the Securities of that series without notice to any Securityholder.  However, without the consent of the Holder of each Outstanding Security affected thereby, no amendment, supplement or waiver may:

 

(1)           change the Stated Maturity of the principal of (or premium or Make-Whole Amount, if any, on) or any installment of principal of or interest on, any Security; or reduce the principal amount thereof or the rate or amount of interest thereon or any Additional Amounts payable in respect thereof, or any premium or Make-Whole Amount payable upon the redemption thereof, or change any obligation of the Company to pay Additional Amounts pursuant to Section 1010 (except as contemplated by Section 801(i) and permitted by Section 901(1)), or reduce the amount of the principal of an Original Issue Discount Security or Make-Whole Amount, if
any, that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502 or the amount thereof provable in bankruptcy pursuant to Section 504, or adversely affect any right of repayment at the option of the Holder of any Security, or change any Place of Payment where, or the currency or currencies, currency unit or units or composite currency or currencies in which, the principal of any Security or any premium or Make-Whole Amount or any Additional Amounts payable in respect thereof or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption or repayment at the option of the Holder, on or after the Redemption Date or the Repayment Date, as the case may be); or

 

(2)           reduce the percentage in principal amount of the Outstanding Securities of any series, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver with respect to such series (or compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or reduce the requirements of Section 1504 for quorum or voting; or

 

  

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(3)           modify any of the provisions of this Section, Section 513 or Section 1011, except to increase the required percentage to effect such action or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby; or

 

(4)           make any change that adversely affects the right to convert or exchange any Security as provided in Article Sixteen or pursuant to Section 301 (except as permitted by Section 901(9)) or decrease the conversion or exchange rate or increase the conversion or exchange price of any such Security.

 

It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof.

 

A supplemental indenture that changes or eliminates any covenant or other provision of this Indenture that has expressly been included for the benefit of one or more particular series of Securities, or that modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series.

 

SECTION 903.                                Execution of Supplemental Indentures.

 

In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modification thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel and an Officers’ Certificate stating that the execution of such supplemental indenture is authorized or permitted by this Indenture and that all conditions precedent to the execution of such supplemental indenture have been complied with.  The Trustee may, but shall not be obligated to, enter into any such supplemental indenture that affects the Trustee’s own rights, duties or immunities
under this Indenture or otherwise.

 

SECTION 904.                                Effect of Supplemental Indentures.

 

Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder and of any coupon appertaining thereto shall be bound thereby.

 

  

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SECTION 905.                                Conformity with Trust Indenture Act.

 

Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect.

 

SECTION 906.                                Reference in Securities to Supplemental Indentures.

 

Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture.  If the Company shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series.

 

SECTION 907.                                Notice of Supplemental Indentures.

 

Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of Section 902, the Company shall give notice thereof to the Holders of each Outstanding Security affected, in the manner provided for in Section 106, setting forth in general terms the substance of such supplemental indenture.

 

SECTION 908.                                Subordination Unimpaired.

 

No provision in any supplemental indenture that affects the superior position of the holders of Senior Debt shall be effective against holders of Senior Debt.

 

ARTICLE TEN

COVENANTS

 

SECTION 1001.                                Payment of Principal, Premium or Make-Whole Amount, if any, Interest and Additional Amounts.

 

The Company covenants and agrees for the benefit of the Holders of each series of Securities that it will duly and punctually pay the principal of (and premium or Make-Whole Amount, if any) and interest on and any Additional Amounts payable in respect of the Securities of that series in accordance with the terms of such series of Securities, any coupons appertaining thereto and this Indenture.  Unless otherwise specified as contemplated by Section 301 with respect to any series of Securities, any interest due on and any Additional Amounts payable in respect of Bearer Securities on or before Maturity, other than
Additional Amounts, if any, payable as provided in Section 1010 in respect of principal of (or premium or Make-Whole Amount, if any, on) such a Security, shall be payable only upon presentation and surrender of the several coupons for such interest installments as are evidenced thereby as they severally mature.  Unless otherwise specified with respect to Securities of any series pursuant to Section 301, at the option of the Company, all payments of principal may be paid by check to the registered Holder of the Registered Security or other person entitled thereto against surrender of such Security.

 

  

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SECTION 1002.                                Maintenance of Office or Agency.

 

If Securities of a series are issuable only as Registered Securities, the Company shall maintain in each Place of Payment for any series of Securities an office or agency where Securities of that series may be presented or surrendered for payment or conversion, where Securities of that series may be surrendered for registration of transfer or exchange, where Securities of that series may be converted or exchanged in accordance with Article Sixteen, and where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served.  If Securities of a series are issuable as Bearer Securities, the Company will maintain:  (A) in the
City of Salt Lake City, an office or agency where any Registered Securities of that series may be presented or surrendered for payment or conversion, where any Registered Securities of that series may be surrendered for exchange, where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served and where Bearer Securities of that series and related coupons may be presented or surrendered for payment or conversion in the circumstances described in the following paragraph (and not otherwise); (B) subject to any laws or regulations applicable thereto, in a Place of Payment for that series that is located outside the United States, an office or agency where Securities of that series and related coupons may be presented and surrendered for payment (including payment of any Additional Amounts payable on Securities of that series
pursuant to Section 1010) or conversion; provided, however, that if the Securities of that series are listed on the Luxembourg Stock Exchange, The International Stock Exchange or any other stock exchange located outside the United States and such stock exchange shall so require, the Company will maintain a Paying Agent for the Securities of that series in Luxembourg, London, England or any other required city located outside the United States, as the case may be, so long as the Securities of that series are listed on such exchange; and (C) subject to any laws or regulations applicable thereto, in each Place of Payment for that series located outside the United States an office or agency where any Securities of that series may be surrendered for registration of transfer, where Securities of that series may be surrendered for exchange and where notices and demands to or upon the Company
in respect of the Securities of that series and this Indenture may be served.  The Company will give prompt written notice to the Trustee of the location, and any change in the location, of each such office or agency.  If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, except that Bearer Securities of that series and the related coupons may be presented and surrendered for payment (including payment of any Additional Amounts payable on Bearer Securities of that series pursuant to Section 1010) at the offices specified in the Security, in London, England, and the Company hereby
appoints the same as its agent to receive such respective presentations, surrenders, notices and demands, and the Company hereby appoints the Trustee its agent to receive all such presentations, surrenders, notices and demands.

 

  

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Unless otherwise specified with respect to any Securities pursuant to Section 301, no payment of principal, premium, Make-Whole Amount or interest on or Additional Amounts in respect of Bearer Securities shall be made at any office or agency of the Company in the United States or by check mailed to any address in the United States or by transfer to an account maintained with a bank located in the United States; provided, however, that, if the Securities of a series are payable in Dollars, payment of principal of and any premium and interest on any Bearer Security (including any Additional Amounts or Make-Whole Amount payable on Securities of such series pursuant to Section 1010) shall be made at
the office of the Company’s Paying Agent in the City of Salt Lake City, if (but only if) payment in Dollars of the full amount of such principal, premium, interest, Additional Amounts or Make-Whole Amount, as the case may be, at all offices or agencies outside the United States maintained for the purpose by the Company in accordance with this Indenture, is illegal or effectively precluded by exchange controls or other similar restrictions.

 

The Company may from time to time designate one or more other offices or agencies where the Securities of one or more series and related coupons, if any, may be presented or surrendered for any or all of such purposes, and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in accordance with the requirements set forth above for Securities of any series for such purposes.  The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or
agency.

 

Unless otherwise specified with respect to any Securities pursuant to Section 301, if and so long as the Securities of any series (i) are denominated in a Foreign Currency or (ii) may be payable in a Foreign Currency, or so long as it is required under any other provision of the Indenture, then the Company will maintain with respect to each such series of Securities, or as so required, at least one exchange rate agent.

 

SECTION 1003.                                Money for Securities Payments to Be Held in Trust.

 

If the Company shall at any time act as its own Paying Agent with respect to any series of any Securities and any related coupons, it will, on or before each due date of the principal of (and premium or Make-Whole Amount, if any), or interest on or Additional Amounts in respect of, any of the Securities of that series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series) sufficient to pay the principal (and premium or Make-Whole Amount, if
any) or interest or Additional Amounts so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and will promptly notify the Trustee of its action or failure so to act.

 

  

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Whenever the Company shall have one or more Paying Agents for any series of Securities and any related coupons, it will, on or before each due date of the principal of (and premium or Make-Whole Amount, if any), or interest on or Additional Amounts in respect of, any Securities of that series, deposit with a Paying Agent a sum (in the currency or currencies, currency unit or units or composite currency or currencies described in the preceding paragraph) sufficient to pay the principal (and premium or Make-Whole Amount, if any) or interest or Additional Amounts, so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium, Make-Whole Amount or
interest or Additional Amounts and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act.

 

The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will:

 

(1)           hold all sums held by it for the payment of principal of (and premium or Make-Whole Amount, if any) or interest on Securities or Additional Amounts in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided;

 

(2)           give the Trustee written notice of any default by the Company (or any other obligor upon the Securities) in the making of any such payment of principal (and premium or Make-Whole Amount, if any) or interest or Additional Amounts; and

 

(3)           at any time during the continuance of any such default upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent.

 

The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such sums.

 

Except as otherwise provided in the Securities of any series, any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (and premium or Make-Whole Amount, if any) or interest on, or any Additional Amounts in respect of, any Security of any series and remaining unclaimed for two years after such principal (and premium or Make-Whole Amount, if any), interest or Additional Amounts has become due and payable shall be paid to the Company upon Company Request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the
Company for payment of such principal of (and premium or Make-Whole Amount, if any) or interest on, or any Additional Amounts in respect of, any Security, without interest thereon, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in an Authorized Newspaper, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company.

 

  

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SECTION 1004.                                Reserved.

 

SECTION 1005.                                Existence.

 

Subject to Article Eight, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect the existence, rights (charter and statutory) and franchises of the Company and its Subsidiaries; provided, however, that the Company shall not be required to preserve any right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries as a whole and that the loss thereof is not disadvantageous in any material respect to the Holders of Securities of any series.

 

SECTION 1006.                                Maintenance of Properties.

 

The Company will cause all of its material properties used or useful in the conduct of its business or the business of any Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Company or any Subsidiary from (i) discontinuing the operation or maintenance of any such properties if such
discontinuance is, in the judgment of the Company, desirable in the conduct of its business or the business of any Subsidiary and not disadvantageous in any material respect to the Holders of Securities of any series or (ii) selling or otherwise disposing of its properties in the ordinary course of its business.

 

SECTION 1007.                                Insurance.

 

The Company will, and will cause each of its Subsidiaries to, keep all its insurable properties insured against loss or damage with commercially reasonable amounts and types of insurance provided by insurers of recognized responsibility.

 

  

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SECTION 1008.                                Payment of Taxes and Other Claims.

 

The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all taxes, assessments and governmental charges levied or imposed upon it or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary, and (2) all lawful claims for labor, materials and supplies that, if unpaid, might by law become a lien upon the property of the Company or any Subsidiary; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings.

 

SECTION 1009.                                Statement as to Compliance.

 

The Company will deliver to the Trustee within 120 days after the end of each fiscal year, a brief certificate, which need not comply with Section 102, from the principal executive officer, principal financial officer or principal accounting officer of the Company as to his or her knowledge of the Company’s compliance with all conditions and covenants under this Indenture and, in the event of any noncompliance, specifying such noncompliance and the nature and status thereof of which such officers may have knowledge.  For purposes of this Section 1010, such compliance shall be determined without regard to any period of grace or requirement of notice under this Indenture.

 

SECTION 1010.                                Additional Amounts.

 

If any Securities of a series provide for the payment of Additional Amounts, the Company will pay to the Holder of any Security of such series or any coupon appertaining thereto Additional Amounts as may be specified as contemplated by Section 301.  Whenever in this Indenture there is mentioned, in any context except in the case of Section 502(1), the payment of the principal of or any premium, Make-Whole Amount or interest on, or in respect of, any Security of any series or payment of any related coupon or the net proceeds received on the sale or exchange of any Security of any series, such mention shall be deemed to include mention of the payment of Additional Amounts provided by the
terms of such series established pursuant to Section 301 to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof pursuant to such terms and express mention of the payment of Additional Amounts (if applicable) in any provisions hereof shall not be construed as excluding Additional Amounts in those provisions hereof where such express mention is not made.

 

 

  

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Except as otherwise specified as contemplated by Section 301, if the Securities of a series provide for the payment of Additional Amounts, at least 10 days prior to the first Interest Payment Date with respect to that series of Securities (or if the Securities of that series will not bear interest prior to Maturity, the first day on which a payment of principal and any premium is made), and at least 10 days prior to each date of payment of principal and any premium or Make-Whole Amount or interest if there has been any change with respect to the matters set forth in the below-mentioned Officers’ Certificate,
the Company will furnish the Trustee and the Company’s principal Paying Agent or Paying Agents, if other than the Trustee, with an Officers’ Certificate instructing the Trustee and such Paying Agent or Paying Agents whether such payment of principal of and any premium or interest on the Securities of that series shall be made to Holders of Securities of that series or any related coupons who are not United States persons without withholding for or on account of any tax, assessment or other governmental charge described in the Securities of or within the series.  If any such withholding shall be required, then such Officers’ Certificate shall specify by country the amount, if any, required to be withheld on such payments to such Holders of Securities of that series or related coupons and the Company will pay to the Trustee or such Paying Agent the Additional
Amounts, if any, required by the terms of such Securities.  In the event that the Trustee or any Paying Agent, as the case may be, shall not so receive the above mentioned certificate, then the Trustee or such Paying Agent shall be entitled (i) to assume that no such withholding or deduction is required with respect to any payment of principal or interest with respect to any Securities of a series or related coupons until it shall have received a certificate advising otherwise and (ii) to make all payments of principal and interest with respect to the Securities of a series or related coupons without withholding or deductions until otherwise advised.  The Company covenants to indemnify the Trustee and any Paying Agent and their respective officers, directors, employees and agents for, and to hold them harmless against, any loss, liability or expense (including but
not limited to legal fees and expenses) reasonably incurred without gross negligence or bad faith on their part arising out of or in connection with actions taken or omitted by any of them in reliance on any Officers’ Certificate furnished pursuant to this Section or in reliance on the Company’s not furnishing such an Officers’ Certificate.

 

SECTION 1011.                                Waiver of Certain Covenants.

 

The Company may omit in any particular instance to comply with any term, provision or condition set forth in Sections 1005 to 1008, inclusive, and with any other term, provision or condition with respect to the Securities of any series specified in accordance with Section 301 (except any such term, provision or condition that could not be amended without the consent of all Holders of Securities of such series pursuant to Section 902), if before or after the time for such compliance the Holders of at least a majority in principal amount of all outstanding Securities of such series, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such covenant
or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect.

 

  

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ARTICLE ELEVEN

REDEMPTION OF SECURITIES

 

SECTION 1101.                                Applicability of Article.

 

Securities of any series that are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise specified as contemplated by Section 301 for Securities of any series) in accordance with this Article.

 

SECTION 1102.                                Election to Redeem; Notice to Trustee.

 

The election of the Company to redeem any Securities shall be evidenced by or pursuant to a Company Order.  In case of any redemption at the election of the Company of less than all of the Securities of any series, the Company shall, at least 45 days prior to the giving of the notice of redemption in Section 1104 (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee, in writing, of such Redemption Date, of the principal amount of Securities of such series to be redeemed and of the Redemption Price of such Securities and any accrued interest and Additional Amounts payable with respect thereto, if any, on the Redemption Date.  In the case of any
redemption of Securities prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this Indenture, the Company shall furnish the Trustee with an Officers’ Certificate and Opinion of Counsel evidencing compliance with such restriction.

 

SECTION 1103.                                Selection by Trustee of Securities to Be Redeemed.

 

If less than all the Securities of any series issued with the same terms are to be redeemed, the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series issued on such date with the same terms not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and that may provide for the selection for redemption of portions (equal to the minimum authorized denomination for Securities of that series or any integral multiple thereof) of the principal amount of Securities of such series of a denomination larger than the minimum authorized denomination for
Securities of that series.

 

If any Security selected for partial redemption is converted in part before termination of the conversion or exchange right with respect to the portion of the Security so selected, the converted or exchanged portion of such Security shall be deemed (so far as may be) to be the portion selected for redemption.  Securities that have been converted or exchanged during a selection of Securities to be redeemed shall be treated by the Trustee as Outstanding for the purpose of such selection.  In any case where more than one Security is registered in the same name, the Trustee in its discretion may treat the aggregate principal amount so registered as if it were represented by one
Security.

 

  

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The Trustee shall promptly notify the Company and the Security Registrar (if other than itself) in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed.

 

For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security that has been or is to be redeemed.

 

SECTION 1104.                                Notice of Redemption.

 

Notice of redemption shall be given in the manner provided in Section 106, not less than 30 days nor more than 60 days prior to the Redemption Date, unless a shorter period is specified by the terms of such series established pursuant to Section 301, to each Holder of Securities to be redeemed, but failure to give such notice in the manner herein provided to the Holder of any Security designated for redemption as a whole or in part, or any defect in the notice to any such Holder, shall not affect the validity of the proceedings for the redemption of any other such Security or portion thereof.

 

Any notice that is mailed to the Holders of Registered Securities in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the Holder receives the notice.

 

All notices of redemption shall state:

 

(1)           the Redemption Date;

 

(2)           the Redemption Price, accrued interest to the Redemption Date payable as provided in Section 1106, if any, and Additional Amounts, if any;

 

(3)           if less than all Outstanding Securities of any series are to be redeemed, the identification (and, in the case of partial redemption, the principal amount) of the particular Security or Securities to be redeemed;

 

(4)           in case any Security is to be redeemed in part only, that on and after the Redemption Date, upon surrender of such Security, the holder will receive, without a charge, a new Security or Securities of authorized denominations for the principal amount thereof remaining unredeemed;

 

(5)           that on the Redemption Date the Redemption Price and accrued interest to the Redemption Date payable as provided in Section 1106, if any, will become due and payable upon each such Security, or the portion thereof, to be redeemed and, if applicable, that interest thereon shall cease to accrue on and after said date;

 

(6)           the Place or Places of Payment where such Securities, together in the case of Bearer Securities with all coupons appertaining thereto, if any, maturing after the Redemption Date, are to be surrendered for payment of the Redemption Price and accrued interest, if any, or for conversion or exchange;

 

  

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(7)           that the redemption is for a sinking fund, if such is the case;

 

(8)           that, unless otherwise specified in such notice, Bearer Securities of any series, if any, surrendered for redemption must be accompanied by all coupons maturing subsequent to the date fixed for redemption or the amount of any such missing coupon or coupons will be deducted from the Redemption Price, unless security or indemnity satisfactory to the Company, the Trustee for such series and any Paying Agent is furnished;

 

(9)           if Bearer Securities of any series are to be redeemed and any Registered Securities of such series are not to be redeemed, and if such Bearer Securities may be exchanged for Registered Securities not subject to the redemption on this Redemption Date pursuant to Section 305 or otherwise, the last date, as determined by the Company, on which such exchanges may be made;

 

(10)           the CUSIP number of such Security, if any, provided that neither the Company nor the Trustee shall have any responsibility for any such CUSIP number;

 

(11)           if applicable, that a Holder of Securities who desires to convert or exchange Securities to be redeemed must satisfy the requirements for conversion or exchange contained in such Securities, the then existing conversion or exchange price or rate and the date and time when the option to convert or exchange shall expire and the place or places where such Securities may be surrendered for conversion or exchange; and

 

(12)           such other information as the Trustee reasonably deems appropriate.

 

Notice of redemption of Securities to be redeemed shall be given by the Company or, at the Company’s written request, by the Trustee in the name and at the expense of the Company.

 

SECTION 1105.                                Deposit of Redemption Price.

 

On or prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, which it may not do in the case of a sinking fund payment under Article Twelve, segregate and hold in trust as provided in Section 1003) an amount of money in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series) sufficient to pay on the Redemption Date the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all
the Securities or portions thereof which are to be redeemed on that date.

 

  

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SECTION 1106.                                Securities Payable on Redemption Date.

 

Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series) (together with accrued interest and Additional Amounts payable with respect thereto on the Redemption Date), and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest and Additional Amounts, if any) such Securities shall, if the
same were interest-bearing, cease to bear interest and the coupons for such interest appertaining to any Bearer Securities so to be redeemed, except to the extent provided below, shall be void.  Upon surrender of any such Security for redemption in accordance with said notice, together with all coupons, if any, appertaining thereto maturing after the Redemption Date, such Security shall be paid by the Company at the Redemption Price, together with accrued interest and Additional Amounts payable with respect thereto, if any, on the Redemption Date; provided, however, that installments of interest on Bearer Securities whose Stated Maturity is on or prior to the Redemption Date shall be payable only at an office or agency located outside the United States (except as otherwise provided in Section 1002) and, unless otherwise specified as contemplated by Section 301, only upon
presentation and surrender of coupons for such interest; and provided further that except as otherwise provided with respect to Securities convertible or exchangeable into other securities or property (including securities of other issuers, provided that such securities are registered under Section 12 of the Exchange Act and such issuer is then eligible to use Form S-3 (or any successor form) for a primary offering of its securities) of the Company, installments of interest on Registered Securities whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307.

 

If any Bearer Security surrendered for redemption shall not be accompanied by all appurtenant coupons maturing after the Redemption Date, such Security may be paid after deducting from the Redemption Price an amount equal to the face amount of all such missing coupons, or the surrender of such missing coupon or coupons may be waived by the Company and the Trustee if there be furnished to them such security or indemnity as they may require to save each of them and any Paying Agent harmless.  If thereafter the Holder of such Security shall surrender to the Trustee or any Paying Agent any such missing coupon in respect of which a deduction shall have been made from the Redemption Price,
such Holder shall be entitled to receive the amount so deducted; provided, however, that interest represented by coupons shall be payable only at an office or agency located outside the United States (except as otherwise provided in Section 1002) and, unless otherwise specified as contemplated by Section 301, only upon presentation and surrender of those coupons.  If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal, (and premium or Make-Whole Amount, if any) shall, until paid, bear interest from the Redemption Date at the rate borne by the Security.

 

  

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SECTION 1107.                                Securities Redeemed in Part.

 

Any Security that is to be redeemed only in part (pursuant to the provisions of this Article or of Article Twelve) shall be surrendered at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing) and the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security without service charge a new Security or Securities of the same series, of any authorized denomination as requested by such Holder in aggregate principal amount equal to and in exchange for
the unredeemed portion of the principal of the Security so surrendered.

 

ARTICLE TWELVE

SINKING FUNDS

 

SECTION 1201.                                Applicability of Article.

 

The provisions of this Article shall be applicable to any sinking fund for the retirement of Securities of a series except as otherwise specified as contemplated by Section 301 for Securities of such series.

 

The minimum amount of any sinking fund payment provided for by the terms of Securities of any series is herein referred to as a “mandatory sinking fund payment,” and any payment in excess of such minimum amount provided for by the terms of such Securities of any series is herein referred to as an “optional sinking fund payment.” If provided for by the terms of any Securities of any series, the cash amount of any mandatory sinking fund payment may be subject to reduction as provided in Section 1202.  Each sinking fund payment shall be applied to the redemption of Securities of any series as provided for by the terms of Securities of such series.

 

SECTION 1202.                                Satisfaction of Sinking Fund Payments with Securities.

 

The Company may, in satisfaction of all or any part of any mandatory sinking fund payment with respect to the Securities of a series, (1) deliver Outstanding Securities of such series (other than any previously called for redemption) together in the case of any Bearer Securities of such series with all unmatured coupons appertaining thereto and (2) apply as a credit Securities of such series that have been redeemed either at the election of the Company pursuant to the terms of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities, as provided for by the terms of such Securities, or which have otherwise been acquired by the
Company; provided that such Securities so delivered or applied as a credit have not been previously so credited.  Such Securities shall be received and credited for such purpose by the Trustee at the applicable Redemption Price specified in such Securities for redemption through operation of the sinking fund and the amount of such mandatory sinking fund payment shall be reduced accordingly.

 

  

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SECTION 1203.                                Redemption of Securities for Sinking Fund.

 

Not less than 60 days prior to each sinking fund payment date for Securities of any series, the Company will deliver to the Trustee an Officers’ Certificate specifying the amount of the next ensuing mandatory sinking fund payment for that series pursuant to the terms of that series, the portion thereof, if any, which is to be satisfied by payment of cash in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series) and the portion thereof, if any, which is to be satisfied by delivering and crediting Securities of that series
pursuant to Section 1202, and the amount of optional sinking fund payments, if any, to be added in cash to the next ensuing mandatory sinking fund payment, and will also deliver to the Trustee any Securities to be so delivered and credited.  If such Officers’ Certificate shall specify an optional amount to be added in cash to the next ensuing mandatory sinking fund payment, the Company shall thereupon be obligated to pay the amount therein specified.  Not less than 30 days before each such sinking fund payment date the Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 1103 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 1104.  Such notice having been duly given, the redemption of such
Securities shall be made upon the terms and in the manner stated in Section 1106 and 1107.

 

ARTICLE THIRTEEN

REPAYMENT AT THE OPTION OF HOLDERS

 

SECTION 1301.                                Applicability of Article.

 

Repayment of Securities of any series before their Stated Maturity at the option of Holders thereof shall be made in accordance with the terms of such Securities, if any, and (except as otherwise specified by the terms of such series established pursuant to Section 301) in accordance with this Article.

 

SECTION 1302.                                Repayment of Securities.

 

Securities of any series subject to repayment in whole or in part at the option of the Holders thereof will, unless otherwise provided in the terms of such Securities, be repaid at a price equal to the principal amount thereon, together with interest, if any, thereof accrued to the Repayment Date specified in or pursuant to the terms of such Securities and Additional Amounts, if any, payable thereon.  The Company covenants that on or before the Repayment Date it will deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in
Section 1003) an amount of money in the currency or currencies, currency unit or units or composite currency or currencies in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series) sufficient to pay the principal (or, if so provided by the terms of the Securities of any series, a percentage of the principal) of, and (except if the Repayment Date shall be an Interest Payment Date) accrued interest on, all the Securities or portion thereof, as the case may be, to be repaid on such date and Additional Amounts, if any, payable thereon.

 

  

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SECTION 1303.                                Exercise of Option.

 

Securities of any series subject to repayment at the option of the Holders thereof will contain an “Option to Elect Repayment” form on the reverse of such Securities.  In order for any Security to be repaid at the option of the Holder, the Trustee must receive at the Place of Payment therefor specified in the terms of such Security (or at such other place or places of which the Company shall from time to time notify the Holders of such Securities and the Trustee) not earlier than 60 days nor later than 30 days prior to the Repayment Date (1) the Security so providing for such repayment together with the “Option to Elect Repayment” form on the reverse thereof duly
completed by the Holder (or by the Holder’s attorney duly authorized in writing) or (2) a telegram, telex, facsimile transmission or a letter from a member of a national securities exchange, or the Financial Industry Regulatory Authority (“FINRA”), or a commercial bank or trust company in the United States setting forth the name of the Holder of the Security, the principal amount of the Security, the principal amount of the Security to be repaid, the CUSIP number, if any, or a description of the tenor and terms of the Security, a statement that the option to elect repayment is being exercised thereby and a guarantee that the Security to be repaid, together with the duly completed form entitled “Option to Elect Repayment” on the reverse of the Security, will be received by the Trustee not later than the fifth Business Day after the date of such telegram,
telex, facsimile transmission or letter; provided, however, that such telegram, telex, facsimile transmission or letter shall only be effective if such Security and form duly completed are received by the Trustee by such fifth Business Day.  If less than the entire principal amount of such Security is to be repaid in accordance with the terms of such Security, the principal amount of such Security to be repaid, in increments of the minimum denomination for Securities of such series, and the denomination or denominations of the Security or Securities to be issued to the Holder for the portion of the principal amount of such Security surrendered that is not to be repaid, must be specified.  The principal amount of any Security providing for repayment at the option of the Holder thereof may not be repaid in part if, following such repayment, the unpaid principal amount
of such Security would be less than the minimum authorized denomination of Securities of or within the series of which such Security to be repaid is a part.  Except as otherwise may be provided by the terms of any Security providing for repayment at the option of the Holder thereof, exercise of the repayment option by the Holder shall be irrevocable unless waived by the Company.

 

  

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SECTION 1304.                                When Securities Presented for Repayment Become Due and Payable.

 

If Securities of any series providing for repayment at the option of the Holders thereof shall have been surrendered as provided in this Article and as provided by or pursuant to the terms of such Securities, such Securities or the portions thereof, as the case may be, to be repaid shall become due and payable and shall be paid by the Company on the Repayment Date therein specified, and on and after such Repayment Date (unless the Company shall default in the payment of such Securities on such Repayment Date) such Securities shall, if the same were interest bearing, cease to bear interest and the coupons for such interest appertaining to any Bearer Securities so to be repaid, except to the extent
provided below, shall be void.  Upon surrender of any such Security for repayment in accordance with such provisions, together with all coupons, if any, appertaining thereto maturing after the Repayment Date, the principal amount of such security so to be repaid shall be paid by the Company, together with accrued interest, if any, to the Repayment Date; provided, however, that coupons whose Stated Maturity is on or prior to the Repayment Date shall be payable only at an office or agency located outside the United States (except as otherwise provided in Section 1002) and, unless otherwise specified pursuant to Section 301, only upon presentation and surrender of such coupons; and provided further that, in the case of Registered Securities, installments of interest, if any, whose Stated Maturity is on or prior to the Repayment Date shall be payable (but without interest thereon,
unless the Company shall default in the payment thereof) to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307.

 

If any Bearer Security surrendered for repayment shall not be accompanied by all appurtenant coupons maturing after the Repayment Date, such Security may be paid after deducting from the amount payable therefor as provided in Section 1302 an amount equal to the face amount of all such missing coupons, or the surrender of such missing coupon or coupons may be waived by the Company and the Trustee if there be furnished to them such security or indemnity as they may require to save each of them and any Paying Agent harmless.  If thereafter the Holder of such Security shall surrender to the Trustee or any Paying Agent any such missing coupon in respect of which a deduction shall have been
made as provided in the preceding sentence, such Holder shall be entitled to receive the amount so deducted; provided, however, that interest represented by coupons shall be payable only at an office or agency located outside the United States (except as otherwise provided in Section 1002) and, unless otherwise specified as contemplated by Section 301, only upon presentation and surrender of those coupons.  If the principal amount of any Security surrendered for repayment shall not be so repaid upon surrender thereof, such principal amount (together with interest, if any, thereon accrued to such Repayment Date) shall, until paid, bear interest from the Repayment Date at the rate of interest or Yield to Maturity (in the case of Original Issue Discount Securities) set forth in such Security.

 

  

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SECTION 1305.                                Securities Repaid in Part.

 

Upon surrender of any Registered Security that is to be repaid in part only, the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security, without service charge and at the expense of the Company, a new Registered Security or Securities of the same series, of any authorized denomination specified by the Holder, in an aggregate principal amount equal to and in exchange for the portion of the principal of such Security so surrendered which is not to be repaid.

 

ARTICLE FOURTEEN

DEFEASANCE AND COVENANT DEFEASANCE

 

SECTION 1401.                                Applicability of Article; Company’s Option to Effect Defeasance or Covenant Defeasance.

 

If, pursuant to Section 301, provision is made for either or both of (a) defeasance of the Securities of or within a series under Section 1402 or (b) covenant defeasance of the Securities of or within a series under Section 1403 to be applicable to the Securities of any series, then the provisions of such Section or Sections, as the case may be, together with the other provisions of this Article (with such modifications thereto as may be specified pursuant to Section 301 with respect to any Securities), shall be applicable to such Securities and any coupons appertaining thereto, and the Company may at its option by Board Resolution at any time, with respect to such Securities and any coupons
appertaining thereto, elect to defease such Outstanding Securities and any coupons appertaining thereto pursuant to Section 1402 (if applicable) or Section 1403 (if applicable) upon compliance with the conditions set forth below in this Article.

 

SECTION 1402.                                Defeasance and Discharge.

 

Upon the Company’s exercise of the above option applicable to this Section with respect to any Securities of or within a series, the Company shall be deemed to have been discharged from its obligations with respect to such Outstanding Securities and any coupons appertaining thereto on the date the conditions set forth in Section 1404 are satisfied (hereinafter, “defeasance”).  For this purpose, such defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by such Outstanding Securities and any coupons appertaining thereto, which shall thereafter be deemed to be “Outstanding” only for the purposes of
Section 1405 and the other Sections of this Indenture referred to in clauses (A) and (B) below, and to have satisfied all of its other obligations under such Securities and any coupons appertaining thereto and this Indenture insofar as such Securities and any coupons appertaining thereto are concerned (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following that shall survive until otherwise terminated or discharged hereunder:  (A) the rights of Holders of such Outstanding Securities and any coupons appertaining thereto to receive, solely from the trust fund described in Section 1404 and as more fully set forth in such Section, payments in respect of the principal of (and premium or Make-Whole Amount, if any) and interest, if
any, on such Securities and any coupons appertaining thereto when such payments are due, (B) the Company’s obligations with respect to such Securities under Sections 305, 306, 1002 and 1003 and with respect to the payment of Additional Amounts, if any, on such Securities as contemplated by Section 1010, (C) the rights, powers, trusts, duties and immunities of the Trustee hereunder including but not limited to Section 606 hereof and (D) this Article.  Subject to compliance with this Article Fourteen, the Company may exercise its option under this Section notwithstanding the prior exercise of its option under Section 1403 with respect to such Securities and any coupons appertaining thereto.

 

  

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SECTION 1403.                                Covenant Defeasance.

 

Upon the Company’s exercise of the above option applicable to this Section with respect to any Securities of or within a series, the Company shall be released from its obligations under Sections 1005 to 1008, inclusive, and, if specified pursuant to Section 301, its obligations under any other covenant, with respect to such Outstanding Securities and any coupons appertaining thereto on and after the date the conditions set forth in Section 1404 are satisfied (hereinafter, “covenant defeasance”), and such Securities and any coupons appertaining thereto shall thereafter be deemed to be not “Outstanding” for the purposes of any direction, waiver, consent or declaration
or Act of Holders (and the consequences of any thereof) in connection with Sections 1005 to 1008, inclusive, or such other covenant, but shall continue to be deemed “Outstanding” for all other purposes hereunder.  For this purpose, such covenant defeasance means that, with respect to such Outstanding Securities and any coupons appertaining thereto, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such Section or such other covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such Section or such other covenant or by reason of reference in any such Section or such other covenant to any other provision herein or in any other document and such omission to comply shall not constitute a default or an Event of Default under Section 501(4) or 501(7) or
otherwise, as the case may be, but, except as specified above, the remainder of this Indenture and such Securities and any coupons appertaining thereto shall be unaffected thereby.

 

SECTION 1404.                                Conditions to Defeasance or Covenant Defeasance.

 

The following shall be the conditions to application of Section 1402 or Section 1403 to any Outstanding Securities of or within a series and any coupons appertaining thereto:

 

 

  

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(a)           The Company shall irrevocably have deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Securities and any coupons appertaining thereto, (1) an amount in such currency, currencies or currency unit in which such Securities and any coupons appertaining thereto are then specified as payable at Stated Maturity, or (2) Government Obligations applicable to such Securities and coupons
appertaining thereto (determined on the basis of the currency, currencies or currency unit in which such Securities and coupons appertaining thereto are then specified as payable at Stated Maturity) that through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment of principal of (and premium or Make-Whole Amount, if any) and interest and Additional Amounts, if any, on such Securities and any coupons appertaining thereto, money in an amount, or (3) a combination thereof in an amount, sufficient, without consideration of any reinvestment of such principal and interest, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and that shall be applied by the
Trustee to pay and discharge, (i) the principal of (and premium or Make-Whole Amount, if any) and interest, if any, on such Outstanding Securities and any coupons appertaining thereto on the Stated Maturity of such principal or installment of principal or interest and (ii) any mandatory sinking fund payments or analogous payments applicable to such Outstanding Securities and any coupons appertaining thereto on the day on which such payments are due and payable in accordance with the terms of this Indenture and of such Securities and any coupons appertaining thereto; provided, that the Trustee shall have been irrevocably instructed to apply such money or the proceeds of such Government Obligations to said payments with respect to such Securities.  Before such a deposit, the Company may give to the Trustee, in accordance with Section 1102 hereof, a notice of its election to
redeem all or any portion of such Outstanding Securities at a future date in accordance with the terms of the Securities of such series and Article Eleven hereof, which notice shall be irrevocable.  Such irrevocable redemption notice, if given, shall be given effect in applying the foregoing.

 

(b)           Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under, this Indenture or any other material agreement or instrument to which the Company is a party or by which it is bound (and shall not cause the Trustee to have a conflicting interest pursuant to Section 310(b) of the TIA with respect to any Security of the Company).

 

(c)           No Event of Default or event that with notice or lapse of time or both would become an Event of Default with respect to such Securities and any coupons appertaining thereto shall have occurred and be continuing on the date of such deposit or, insofar as Sections 501(5) and 501(6) are concerned, at any time during the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period).

 

(d)           In the case of an election under Section 1402, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the date of execution of this Indenture, there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of such Outstanding Securities and any coupons appertaining thereto will not recognize income, gain or loss for Federal income tax purposes as a result of such defeasance and will
be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred.

 

  

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(e)           In the case of an election under Section 1403, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of such Outstanding Securities and any coupons appertaining thereto will not recognize income, gain or loss for Federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred.

 

(f)           The Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance under Section 1402 or the covenant defeasance under Section 1403 (as the case may be) have been complied with and an Opinion of Counsel to the effect that either (i) as a result of a deposit pursuant to subsection (a) above and the related exercise of the Company’s option under Section 1402 or Section 1403 (as the case may be) registration is not required under the Investment Company Act of 1940, as amended, by the Company, with respect to the trust funds
representing such deposit or by the Trustee for such trust funds or (ii) all necessary registrations under said Act have been effected.

 

(g)           After the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally.

 

(h)           Notwithstanding any other provisions of this Section, such defeasance or covenant defeasance shall be effected in compliance with any additional or substitute terms, conditions or limitations that may be imposed on the Company in connection therewith pursuant to Section 301.

 

SECTION 1405.                                Deposited Money and Government Obligations to Be Held in Trust; Other Miscellaneous Provisions.

 

Subject to the provisions of the last paragraph of Section 1003, all money and Government Obligations (or other property as may be provided pursuant to Section 301) (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 1405, the “Trustee”) pursuant to Section 1404 in respect of any Outstanding Securities of any series and any coupons appertaining thereto shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and any coupons appertaining thereto and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its
own Paying Agent) as the Trustee may determine, to the Holders of such Securities and any coupons appertaining thereto of all sums due and to become due thereon in respect of principal (and premium or Make-Whole Amount, if any) and interest and Additional Amounts, if any, but such money need not be segregated from other funds except to the extent required by law.

 

  

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Unless otherwise specified with respect to any Security pursuant to Section 301, if, after a deposit referred to in Section 1404(a) has been made, (a) the Holder of a Security in respect of which such deposit was made is entitled to, and does, elect pursuant to Section 301 or the terms of such Security to receive payment in a currency or currency unit other than that in which the deposit pursuant to Section 1404(a) has been made in respect of such Security, or (b) a Conversion Event occurs in respect of the currency or currency unit in which the deposit pursuant to Section 1404(a) has been made, the indebtedness represented by such Security and any coupons appertaining thereto shall be deemed to
have been, and will be, fully discharged and satisfied through the payment of the principal of (and premium or Make-Whole Amount, if any), and interest, if any, on such Security as the same becomes due and Additional Amounts, if any, out of the proceeds yielded by converting (from time to time as specified below in the case of any such election) the amount or other property deposited in respect of such Security into the currency or currency unit in which such Security becomes payable as a result of such election or Conversion Event based on the applicable market exchange rate for such currency or currency unit in effect on the second Business Day prior to each payment date, except, with respect to a Conversion Event, for such currency or currency unit in effect (as nearly as feasible) at the time of the Conversion Event.

 

The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the Government Obligations deposited pursuant to Section 1404 or the principal and interest received in respect thereof other than any such tax, fee or other charge that by law is for the account of the Holders of such Outstanding Securities and any coupons appertaining thereto.

 

Anything in this Article to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon Company Request any money or Government Obligations (or other property and any proceeds therefrom) held by it as provided in Section 1404 that, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof that would then be required to be deposited to effect a defeasance or covenant defeasance, as applicable, in accordance with this Article.

 

SECTION 1406.                                Reinstatement.

 

If the Trustee or the Paying Agent is unable to apply any money in accordance with this Article with respect to any Securities by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the obligations under this Indenture and such Securities from which the Company has been discharged or released pursuant to Section 1402 or 1403 shall be revived and reinstated as though no deposit had occurred pursuant to this Article with respect to such Securities, until such time as the Trustee or Paying Agent is permitted to apply all money held in trust pursuant to Section 1405
with respect to such Securities in accordance with this Article; provided, however, that if the Company makes any payment of principal of or any premium or interest on any such Security following such reinstatement of its obligations, the Company shall be subrogated to the rights (if any) of the Holders of such Securities to receive such payment from the money so held in trust.

 

  

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ARTICLE FIFTEEN

MEETINGS OF HOLDERS OF SECURITIES

 

SECTION 1501.                                Purposes for Which Meetings May Be Called.

 

A meeting of Holders of Securities of any series may be called at any time and from time to time pursuant to this Article to make, give or take any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be made, given or taken by Holders of Securities of such series.

 

SECTION 1502.                                Call, Notice and Place of Meetings.

 

(a)           The Trustee may at any time call a meeting of Holders of Securities of any series for any purpose specified in Section 1501, to be held at such time and at such place in the City of Salt Lake City, or in London, England as the Trustee shall determine.  Notice of every meeting of Holders of Securities of any series, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be given, in the manner provided in Section 106, not less than 21 nor more than 180 days prior to the date fixed for the meeting.

 

(b)           In case at any time the Company, pursuant to a Board Resolution, or the Holders of at least 10% in principal amount of the Outstanding Securities of any series shall have requested the Trustee to call a meeting of the Holders of Securities of such series for any purpose specified in Section 1501, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have made the first publication of the notice of such meeting within 21 days after receipt of such request or shall not thereafter proceed to cause the meeting to be held as provided herein, then the Company or
the Holders of Securities of such series in the amount above specified, as the case may be, may determine the time and the place in the City of Salt Lake City, or in London, England for such meeting and may call such meeting for such purposes by giving notice thereof as provided in subsection (a) of this Section.

 

SECTION 1503.                                Persons Entitled to Vote at Meetings.

 

To be entitled to vote at any meeting of Holders of Securities of any series, a Person shall be (1) a Holder of one or more Outstanding Securities of such series, or (2) a Person appointed by an instrument in writing as proxy for a Holder or Holders of one or more Outstanding Securities of such series by such Holder or Holders.  The only Persons who shall be entitled to be present or to speak at any meeting of Holders of Securities of any series shall be the Persons entitled to vote at such meeting and their counsel, any representatives of the Trustee and its counsel and any representatives of the Company and its counsel.

 

  

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SECTION 1504.                                Quorum; Action.

 

The Persons entitled to vote a majority in principal amount of the Outstanding Securities of a series shall constitute a quorum for a meeting of Holders of Securities of such series; provided, however, that if any action is to be taken at such meeting with respect to a consent or waiver that this Indenture expressly provides may be given by the Holders of not less than a specified percentage in principal amount of the Outstanding Securities of a series, the Persons entitled to vote such specified percentage in principal amount of the Outstanding Securities of such series shall constitute a quorum.  In the absence of a quorum within 30 minutes after the time appointed for any such
meeting, the meeting shall, if convened at the request of Holders of Securities of such series, be dissolved.  In any other case the meeting may be adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such meeting.  In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such adjourned meeting.  Notice of the reconvening of any adjourned meeting shall be given as provided in Section 1502(a), except that such notice need be given only once not less than five (5) days prior to the date on which the meeting is scheduled to be reconvened.  Notice of the reconvening of any adjourned meeting shall state expressly the percentage,
as provided above, of the principal amount of the Outstanding Securities of such series that shall constitute a quorum.  Except as limited by the proviso to Section 902, any resolution presented to a meeting or adjourned meeting duly reconvened at which a quorum is present as aforesaid may be adopted by the affirmative vote of the Holders of a majority in principal amount of the Outstanding Securities of that series; provided, however, that, except as limited by the proviso to Section 902, any resolution with respect to any request, demand, authorization, direction, notice, consent, waiver or other action that this Indenture expressly provides may be made, given or taken by the Holders of a specified percentage, which is less than a majority, in principal amount of the Outstanding Securities of a series may be adopted at a meeting or an adjourned meeting duly reconvened and at
which a quorum is present as aforesaid by the affirmative vote of the Holders of such specified percentage in principal amount of the Outstanding Securities of that series.

 

Any resolution passed or decision taken at any meeting of Holders of Securities of any series duly held in accordance with this Section shall be binding on all the Holders of Securities of such series and the related coupons, whether or not present or represented at the meeting.

 

Notwithstanding the foregoing provisions of this Section 1504, if any action is to be taken at a meeting of Holders of Securities of any series with respect to any request, demand, authorization, direction, notice, consent, waiver or other action that this Indenture expressly provides may be made, given or taken by the Holders of a specified percentage in principal amount of all Outstanding Securities affected thereby, or of the Holders of such series and one or more additional series:

 

(i)           there shall be no minimum quorum requirement for such meeting; and

 

  

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(ii)           the principal amount of the Outstanding Securities of such series that vote in favor of such request, demand, authorization, direction, notice, consent, waiver or other action shall be taken into account in determining whether such request, demand, authorization, direction, notice, consent, waiver or other action has been made, given or taken under this Indenture.

 

SECTION 1505.                                Determination of Voting Rights; Conduct and Adjournment of Meetings»

 

.

 

(a)           Notwithstanding any provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Holders of Securities of a series in regard to proof of the holding of Securities of such series and of the appointment of proxies and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate.  Except as otherwise permitted or required by any such regulations, the holding of Securities
shall be proved in the manner specified in Section 104 and the appointment of any proxy shall be proved in the manner specified in Section 104 or by having the signature of the Person executing the proxy witnessed or guaranteed by any trust company, bank or banker authorized by Section 104 to certify to the holding of Bearer Securities.  Such regulations may provide that written instruments appointing proxies, regular on their face, may be presumed valid and genuine without the proof specified in Section 104 or other proof.

 

(b)           The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Holders of Securities as provided in Section 1502(b), in which case the Company or the Holders of Securities of or within the series calling the meeting, as the case may be, shall in like manner appoint a temporary chairman.  A permanent chairman and a permanent secretary of the meeting shall be elected by vote of the Persons entitled to vote a majority in principal amount of the Outstanding Securities of such series represented at the meeting.

 

(c)           At any meeting each Holder of a Security of such series or proxy shall be entitled to one vote for each $1,000 principal amount of the Outstanding Securities of such series held or represented by him; provided, however, that no vote shall be cast or counted at any meeting in respect of any Security challenged as not Outstanding and ruled by the chairman of the meeting to be not Outstanding.  The chairman of the meeting shall have no right to vote, except as a Holder of a Security of such series or proxy.

 

(d)           Any meeting of Holders of Securities of any series duly called pursuant to Section 1502 at which a quorum is present may be adjourned from time to time by Persons entitled to vote a majority in principal amount of the Outstanding Securities of such series represented at the meeting, and the meeting may be held as so adjourned without further notice.

 

  

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SECTION 1506.                                                Counting Votes and Recording Action of Meetings.

 

The vote upon any resolution submitted to any meeting of Holders of Securities of any series shall be by written ballots on which shall be subscribed the signatures of the Holders of Securities of such series or of their representatives by proxy and the principal amounts and serial numbers of the Outstanding Securities of such series held or represented by them.  The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in duplicate of all votes cast at the meeting.  A record, at least in
duplicate, of the proceedings of each meeting of Holders of Securities of any series shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the fact, setting forth a copy of the notice of the meeting and showing that said notice was given as provided in Section 1502 and, if applicable, Section 1504.  Each copy shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one such copy shall be delivered to the Company and another to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting.  Any record so signed and verified shall be conclusive evidence of the matters therein
stated.

 

SECTION 1507.                                Evidence of Action Taken by Holders.

 

Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by a specified percentage in principal amount of the Holders of any or all series may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such specified percentage of Holders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee.  Proof of execution of any instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and
(subject to Article Six) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Article.

 

SECTION 1508.                                Proof of Execution of Instruments.

 

Subject to Article Six, the execution of any instrument by a Holder or his agent or proxy may be proved in accordance with such reasonable rules and regulations as may be prescribed by the Trustee or in such manner as shall be satisfactory to the Trustee.

 

  

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ARTICLE SIXTEEN

CONVERSION OR EXCHANGE OF SECURITIES

 

SECTION 1601.                                Applicability of Article.

 

The provisions of this Article shall be applicable to the Securities of any series that are convertible or exchangeable for other securities or property (including securities of other issuers, provided that such securities are registered under Section 12 of the Exchange Act and such issuer is then eligible to use Form S-3 (or any successor form) for a primary offering of its securities) of the Company, except as otherwise specified as contemplated by Section 301 for the Securities of such series.

 

SECTION 1602.                                Election to Exchange; Notice to Trustee and Holders.

 

The election of the Company to exchange any Securities shall be evidenced by a Board Resolution or in another manner specified as contemplated by Section 301 for such Securities.  On or prior to the seventh Business Day prior to Maturity of the Securities, the Company shall provide written notice to the Holders of record of the Securities and to the Trustee and will publish a notice in a daily newspaper of national circulation stating whether the Company has made such election.

 

SECTION 1603.                                No Fractional Shares.

 

No fractional shares of securities shall be delivered upon exchanges of Securities of any series.  If more than one Security shall be surrendered for exchange at one time by the same Holder, the number of full shares that shall be delivered upon exchange shall be computed on the basis of the aggregate principal amount of the Securities (or specified portions thereof to the extent permitted hereby) so surrendered.  If, except for the provisions of this Section 1603, any Holder of a Security or Securities would be entitled to a fractional share of a security upon the exchange of such Security or Securities, or specified portions thereof, the Company shall pay to such Holder an
amount in cash equal to the current market value of such fractional share computed on the basis of an average Closing Price of such security.  The “Closing Price” of any security on any date of determination means, (i) if such security is listed or admitted to unlisted trading privileges on a national securities exchange, the last reported sale price regular way on such exchange, or (ii) if such security is not at the time so listed or admitted to unlisted trading privileges on a national securities exchange, the average of the bid and asked prices of such security in the over-the-counter market, as reported by the National Quotation Bureau, Incorporated or similar organization if the National Quotation Bureau, Incorporated is no longer reporting such information, or if not so available, the market price as determined by a nationally recognized independent
investment banking firm retained for this purpose by the Company.

 

  

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SECTION 1604.                                Adjustment of Exchange Rate.

 

The exchange rate of Securities of any series that is exchangeable for other securities or property (including securities of other issuers, provided that such securities are registered under Section 12 of the Exchange Act and such issuer is then eligible to use Form S-3 (or any successor form) for a primary offering of its securities) of the Company shall be adjusted for any stock dividends, stock splits, reclassification, combinations or similar transactions or any consolidation, merger or other reorganization event in accordance with the terms of the supplemental indenture or Board Resolution setting forth the terms of the Securities of such series.

 

Whenever the exchange rate is adjusted, the Company shall compute the adjusted exchange rate in accordance with terms of the applicable Board Resolution or supplemental indenture and shall prepare an Officers’ Certificate setting forth the adjusted exchange rate and showing in reasonable detail the facts upon which such adjustment is based, and such certificate shall forthwith be filed at each office or agency maintained for the purpose of exchange of Securities pursuant to Section 1002 and, if different, with the Trustee.  The Company shall forthwith cause a notice setting forth the adjusted exchange rate to be mailed, first class postage prepaid, to each Holder of Securities of
such series at its address appearing on the Security Register and to any exchange agent other than the Trustee.

 

SECTION 1605.                                Payment of Certain Taxes Upon Exchange.

 

The Company will pay any and all taxes that may be payable in respect of the transfer and delivery of shares of other securities or property (including securities of other issuers, provided that such securities are registered under Section 12 of the Exchange Act and such issuer is then eligible to use Form S-3 (or any successor form) for a primary offering of its securities) of the Company on exchange of Securities pursuant hereto.  The Company shall not, however, be required to pay any tax that may be payable in respect of any transfer involved in the delivery of shares of securities in a name other than that of the Holder of the Security or Securities to be exchanged, and no such
transfer or delivery shall be made unless and until the person requesting such transfer has paid to the Company the amount of any such tax, or has established, to the satisfaction of the Company, that such tax has been paid.

 

SECTION 1606.                                Shares Free and Clear.

 

The Company hereby warrants that upon exchange of Securities of any series, the Holder of a Security shall receive all rights held by the Company in such security for which such Security is at such time exchangeable under this Article Sixteen, free and clear of any and all liens, claims, charges and encumbrances other than any liens, claims, charges and encumbrances that may have been placed on any such security by the prior owner thereof, prior to the time such security was acquired by the Company.  Except as provided in Section 1604, the Company will pay all taxes and charges with respect to the delivery of
such security delivered in exchange for Securities hereunder.

 

  

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SECTION 1607.                                Cancellation of Security.

 

Upon receipt by the Trustee of Securities of any series delivered to it for exchange under this Article Sixteen, the Trustee shall cancel and dispose of the same as provided in Section 309.

 

SECTION 1608.                                Duties of Trustee Regarding Exchange.

 

Neither the Trustee nor any exchange agent shall at any time be under any duty or responsibility to any Holder of Securities of any series that is exchangeable into other securities or property (including securities of other issuers, provided that such securities are registered under Section 12 of the Exchange Act and such issuer is then eligible to use Form S-3 (or any successor form) for a primary offering of its securities) of the Company to determine whether any facts exist that may require any adjustment of the exchange rate, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed, whether herein or in any supplemental indenture, any
resolutions of the Board of Directors or written instrument executed by one or more officers of the Company provided to be employed in making the same.  Neither the Trustee nor any exchange agent shall be accountable with respect to the validity or value (or the kind or amount) of any securities or property (including securities of other issuers, provided that such securities are registered under Section 12 of the Exchange Act and such issuer is then eligible to use Form S-3 (or any successor form) for a primary offering of its securities) of the Company, or of any Securities and neither the Trustee nor any exchange agent makes any representation with respect thereto.  Subject to the provisions of Section 612, neither the Trustee nor any exchange agent shall be responsible for any failure of the Company to issue, transfer or deliver any stock certificates or other
securities or property (including securities of other issuers, provided that such securities are registered under Section 12 of the Exchange Act and such issuer is then eligible to use Form S-3 (or any successor form) for a primary offering of its securities) upon the surrender of any Security for the purpose of exchange or to comply with any of the covenants of the Company contained in this Article Sixteen or in the applicable supplemental indenture, resolutions of the Board of Directors or written instrument executed by one or more duly authorized officers of the Company.

 

SECTION 1609.                                Repayment of Certain Funds Upon Exchange.

 

Any funds that at any time shall have been deposited by the Company or on its behalf with the Trustee or any other paying agent for the purpose of paying the principal of, and premium, if any, and interest, if any, on any of the Securities (including funds deposited for the sinking fund referred to in Article Twelve hereof) and that shall not be required for such purposes because of the exchange of such Securities as provided in this Article Sixteen shall after such exchange be repaid to the Company by the Trustee upon the Company’s written request.

 

  

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SECTION 1610.                                Exercise of Conversion Privilege.

 

In order to exercise a conversion or exchange privilege, the Holder of a Security of a series with such a privilege shall surrender such Security to the Company at the office or agency maintained for that purpose pursuant to Section 1002, accompanied by written notice to the Company that the Holder elects to convert or exchange such Security or a specified portion thereof.  Such notice shall also state, if different from the name or names (with address) in which the Securities are registered, the name or names in which the Securities or property (including securities of other issuers, provided that such securities are registered under Section 12 of the Exchange Act and such issuer is
then eligible to use Form S-3 (or any successor form) for a primary offering of its securities) of the Company that shall be issuable on such conversion or exchange shall be issued.  Securities surrendered for conversion or exchange shall (if so required by the Company or the Trustee) be duly endorsed by or accompanied by instruments of transfer in forms satisfactory to the Company and the Trustee duly executed by the registered Holder or its attorney duly authorized in writing; and Securities so surrendered for conversion or exchange during the period from the close of business on any Regular Record Date to the opening of business on the next succeeding Interest Payment Date (excluding Securities or portions thereof called for redemption during such period) shall also be accompanied by payment in funds acceptable to the Company of an amount equal to the interest payable on
such Interest Payment Date on the principal amount of such Security then being converted, and such interest shall be payable to such registered Holder notwithstanding the conversion or exchange of such Security, subject to the provisions of Section 307 relating to the payment of Defaulted Interest by the Company.  As promptly as practicable after the receipt of such notice and of any payment required pursuant to a Board Resolution and, subject to Section 303, set forth, or determined in the manner provided, in an Officers’ Certificate, or established in one or more indentures supplemental hereto setting forth the terms of such series of Security, and the surrender of such Security in accordance with such reasonable regulations as the Company may prescribe, the Company shall issue and shall deliver, at the office or agency at which such Security is surrendered, to such
Holder or on its written order, securities or property (including securities of other issuers, provided that such securities are registered under Section 12 of the Exchange Act and such issuer is then eligible to use Form S-3 (or any successor form) for a primary offering of its securities) of the Company issuable or deliverable upon the conversion or exchange of such Security (or specified portion thereof), in accordance with the provisions of such Board Resolution, Officers’ Certificate or supplemental indenture, and cash as provided therein in respect of any fractional share of such Common Stock otherwise issuable upon such conversion or exchange.  Such conversion or exchange shall be deemed to have been effected immediately prior to the close of business on the date on which such notice and such payment, if required, shall have been received in proper order for
conversion or exchange by the Company and such Security shall have been surrendered as aforesaid (unless such Holder shall have so surrendered such Security and shall have instructed the Company to effect the conversion or exchange on a particular date following such surrender and such Holder shall be entitled to convert or exchange such Security on such date, in which case such conversion or exchange shall be deemed to be effected immediately prior to the close of business on such date) and at such time the rights of the Holder of such Security as such Security Holder shall cease and the person or persons in whose name or names any securities or property (including securities of other issuers, provided that such securities are registered under Section 12 of the Exchange Act and such issuer is then eligible to
use Form S-3 (or any successor form) for a primary offering of its securities) of the Company shall be issuable or deliverable upon such conversion or exchange shall be deemed to have become the Holder or Holders of record of the shares represented thereby.  Except as set forth above and subject to the final paragraph of Section 307, no payment or adjustment shall be made upon any conversion or exchange on account of any interest accrued on the Securities surrendered for conversion or exchange or on account of any interest or dividends on the Securities or property (including securities of other issuers, provided that such securities are registered under Section 12 of the Exchange Act and such issuer is then eligible to use Form S-3 (or any successor form) for a primary offering of its securities) of the Company issued or delivered upon such conversion or
exchange.

 

  

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In the case of any Security that is converted or exchanged in part only, upon such conversion or exchange the Company shall execute and the Trustee shall authenticate and deliver to or on the order of the Holder thereof, at the expense of the Company, a new Security or Securities of the same series, of authorized denominations, in aggregate principal amount equal to the unconverted or unexchanged portion of such Security.

 

SECTION 1611.                                Effect of Consolidation or Merger on Conversion Privilege.

 

In case of any consolidation of the Company with, or merger of the Company into or with any other Person, or in case of any sale of all or substantially all of the assets of the Company, the Company or the Person formed by such consolidation or the Person into which the Company shall have been merged or the Person that shall have acquired such assets, as the case may be, shall execute and deliver to the Trustee a supplemental indenture providing that the Holder of each Security then outstanding of any series that is convertible into Common Stock of the Company shall have the right, which right shall be the exclusive conversion right thereafter available to said Holder (until the expiration of the
conversion right of such Security), to convert such Security into the kind and amount of shares of stock or other securities or property (including cash) receivable upon such consolidation, merger or sale by a holder of the number of shares of Common Stock of the Company into which such Security might have been converted immediately prior to such consolidation, merger or sale, subject to compliance with the other provisions of this Indenture, such Security and such supplemental indenture.  Such supplemental indenture shall provide for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in such Security.  The above provisions of this Section shall similarly apply to successive consolidations, mergers or sales.  It is expressly agreed and understood that anything in this Indenture to the contrary
notwithstanding, if, pursuant to such merger, consolidation or sale, holders of outstanding shares of Common Stock of the Company do not receive shares of common stock of the surviving corporation but receive other securities, cash or other property or any combination thereof, Holders of Securities shall not have the right to thereafter convert their Securities into common stock of the surviving corporation or the corporation that shall have acquired such assets, but rather, shall have the right upon such conversion to receive the other securities, cash or other property receivable by a holder of the number of shares of Common Stock of the Company into which the Securities held by such holder might have been converted immediately prior to such consolidation, merger or sale, all as more fully provided in the
first sentence of this Section 1611.  Anything in this Section 1611 to the contrary notwithstanding, the provisions of this Section 1611 shall not apply to a merger or consolidation of another corporation with or into the Company pursuant to which both of the following conditions are applicable:  (i) the Company is the surviving corporation and (ii) the outstanding shares of Common Stock of the Company are not changed or converted into any other securities or property (including cash) or changed in number or character or reclassified pursuant to the terms of such merger or consolidation.

 

  

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As evidence of the kind and amount of shares of stock or other securities or property (including cash) into which Securities may properly be convertible after any such consolidation, merger or sale, or as to the appropriate adjustments of the conversion prices applicable with respect thereto, the Trustee shall be furnished with and may accept the certificate or opinion of an independent certified public accountant with respect thereto; and, in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely thereon, and shall not be responsible or accountable to any Holder of Securities for any provision in conformity therewith or approved by such independent certified
accountant that may be contained in said supplemental indenture.

 

ARTICLE SEVENTEEN

SUBORDINATION

 

SECTION 1701.                                Agreement to Subordinate.

 

Except as otherwise provided in a supplemental indenture or pursuant to Section 301, the Company agrees, and each Holder by accepting a Security agrees, that the indebtedness evidenced by the Securities is subordinated in right of payment, to the extent and in the manner provided in this Article, to the prior payment in full of all Senior Debt and that the subordination is for the benefit of the holders of Senior Debt and that each holder of Senior Debt whether now outstanding or hereafter created, incurred, assumed or guaranteed shall be deemed to have acquired its Senior Debt in reliance upon the covenants and provisions contained in this Indenture.

 

SECTION 1702.                                Liquidation; Dissolution; Bankruptcy.

 

Upon any distribution to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property:

 

(1)           holders of Senior Debt shall be entitled to receive payment in full in cash of the principal of and interest (including interest accruing after the commencement of any such proceeding) to the date of payment on the Senior Debt before Holders shall be entitled to receive any payment of principal of or interest on Securities;

 

  

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(2)           until the Senior Debt is paid in full in cash, any distribution to which Holders would be entitled but for this Article shall be made to holders of Senior Debt as their interests may appear, except that Holders may receive securities that are subordinated to Senior Debt to at least the same extent as the Securities; and

 

(3)           the Trustee is entitled to conclusively rely upon an order or decree of a court of competent jurisdiction or a certificate of a bankruptcy trustee or other similar official for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of Senior Debt and other Company debt, the amount thereof or payable thereon and all other pertinent facts relating to the Trustee’s obligations under this Article.

 

SECTION 1703.                                Default on Senior Debt.

 

The Company may not pay principal of or interest on the Securities and may not acquire any Securities for cash or property other than capital stock of the Company if:  (i) a default on Senior Debt that would permit the holders of such Senior Debt to accelerate its maturity has occurred and continued beyond any applicable grace period without being waived or (ii) the maturity of any Senior Debt has been accelerated by the holders thereof and such acceleration has not been rescinded or cancelled, and in either case such Senior Debt has not been repaid in full. The Company may resume payments on the Securities and may acquire them
when:

 

(a)           the default is cured or waived, or

 

(b)           180 days pass after the holders of such Senior Debt give the Trustee notice thereof, if the default is not the subject of judicial proceedings, if this Article otherwise permits the payment or acquisition at that time (a “Blockage Period”).

 

Notwithstanding anything herein to the contrary, in no event will a Blockage Period extend beyond 180 days from the date the payment on the Securities was due and only one such Blockage Period may be commenced within any 360 consecutive days. No event of default which existed or was continuing on the date of the commencement of any Blockage Period with respect to the Senior Debt shall be, or be made the basis for the commencement of a second Blockage Period by any holder of Senior Debt whether or not within a period of 360 consecutive days, unless such event of default shall have been cured or waived for a period of not less than 90 consecutive days (it being acknowledged that any subsequent
action, or any breach of any financial covenants for a period commencing after the date of commencement of such Blockage Period that, in either case, would give rise to an event of default pursuant to any provisions under which an event of default previously existed or was continuing shall constitute a new event of default for this purpose).

 

  

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SECTION 1704.                                               Acceleration of Securities.

 

If payment of the Securities is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Debt of the acceleration.  The Company may pay the Securities when 180 days pass after the acceleration occurs if this Article otherwise permits the payment at that time.

 

SECTION 1705.                                Payments.

 

(1)           When Distribution Must Be Paid Over. If a distribution is made to Holders that, because of this Article should not have been made to them, the Holders who receive the distribution shall hold it in trust for holders of Senior Debt and pay it over to them as their interests may appear.

 

(2)           Payment Over of Proceeds upon Dissolution, Etc.

 

(a) Upon any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities (other than a payment in the form of any Permitted Junior Securities), to creditors upon any liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors or marshaling of assets of the Company or in a bankruptcy, reorganization, insolvency, receivership or other similar proceeding relating to the Company or its property, whether voluntary or involuntary, all obligations due or to become due upon all Senior Debt shall first be paid in full in cash or cash equivalents before any payment or
distribution of any kind or character (other than a payment in the form of Permitted Junior Securities) is made on account of any obligations on or with respect to the Securities, or for the acquisition of any of the Securities for cash or property or otherwise. Upon any such dissolution, winding-up, liquidation, reorganization, receivership or similar proceeding, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holders of the Securities or the Trustee under this Indenture would be entitled, except for the provisions hereof, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders or by the Trustee under this Indenture if received by them, directly to the holders of Senior Debt (pro rata to
such holders on the basis of the respective amounts of Senior Debt held by such holders) or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Senior Debt remaining unpaid until all such Senior Debt has been paid in full in cash or cash equivalents after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of Senior Debt.

 

  

93

  

(b) To the extent any payment of Senior Debt (whether by or on behalf of the Company, as proceeds of security or enforcement of any right of setoff or otherwise) is declared to be fraudulent or preferential, set aside or required to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then, if such payment is recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person, the
Senior Debt or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment had not occurred. It is further agreed that any diminution (whether pursuant to court decree or otherwise, including, without limitation, for any of the reasons described in the preceding sentence) of the Company's obligation to make any distribution or payment pursuant to any Senior Debt, except to the extent such diminution occurs by reason of the repayment (which has not been disgorged or returned) of such Senior Debt in cash or cash equivalents, shall have no force or effect for purposes of the subordination provisions contained in this Article, with any turnover of payments as otherwise calculated pursuant to this Article to be made as if no such diminution has occurred.

 

(3)           Payments By the Company Prior to Dissolution. Nothing contained in this Article or elsewhere in this Indenture shall prevent (i) the Company, except under the conditions described in Sections 1702 and 1703, from making payments at any time for the purpose of making payments of principal of and interest on the Securities, or from depositing with the Trustee any moneys for such payments, or (ii) in the absence of actual knowledge by the Trustee that a given payment would be prohibited by Section 1702 or 1703, the application by the Trustee of any moneys deposited
with it for the purpose of making such payments of principal of, and interest on, the Securities to the Holders entitled thereto unless at least one Business Day prior to the date upon which such payment would otherwise become due and payable, the Trustee shall have received the written notice provided for in Section 1703; provided that, notwithstanding the foregoing, the subordination of the Securities to the Senior Debt shall not be affected and the Holders receiving any payments made in contravention of Section 1702 and/or Section 1703 shall otherwise be subject to this Article.

 

SECTION 1706.                                Notice by Company.

 

The Company shall promptly notify the Trustee, in writing, and any Paying Agent of any facts known to the Company that would cause a payment of principal of or interest on Securities to violate this Article.

 

SECTION 1707.                                Subrogation.

 

After all Senior Debt is paid in full and until the Securities are paid in full, Holders shall be subrogated to the rights of holders of Senior Debt to receive distributions applicable to Senior Debt to the extent that distributions otherwise payable to the Holders have been applied to the payment of Senior Debt.  For purposes of this subrogation, a distribution made under this Article to holders of Senior Debt which otherwise would have been made to Holders is not and shall not be deemed, as between the Company, its creditors other than the holders of Senior Debt and Holders, a payment by the Company on Senior
Debt.

 

  

94

  

 

SECTION 1708.                                Relative Rights.

 

This Article defines the relative rights of Holders and holders of Senior Debt.  Nothing in this Indenture shall:

 

(1)           impair, as between the Company and Holders, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Securities in accordance with their terms;

 

(2)           affect the relative rights of Holders and creditors of the Company other than holders of Senior Debt; or

 

(3)           prevent the Trustee or any Holder from exercising its available remedies upon an Event of Default, subject to the rights of holders of Senior Debt to receive distributions otherwise payable to Holders.

 

If the Company fails because of this Article to pay principal of or interest on a Security on the due date, the failure is still a default.

 

SECTION 1709.                                Subordination May Not Be Impaired By Company.

 

No right of any holder of Senior Debt to enforce the subordination of the indebtedness evidenced by the Securities shall be impaired by any act or failure to act by the Company or by its failure to comply with this Indenture.  Without limiting the foregoing, the holders of any Senior Debt may, at any time and from time to time, without notice to or consent of the Trustee or the Holders, renew, extend, amend, supplement or otherwise modify the terms of such Senior Debt; sell, exchange, release or otherwise deal with any property security such Senior Debt; release the Company or any other Person obligated upon such Senior Debt from such obligations; or exercise or refrain from exercising
any rights or remedies against the Company or any other Person with respect to such Senior Debt.

 

SECTION 1710.                                Distribution or Notice to Representative.

 

Whenever a distribution is to be made or a notice given to holders of Senior Debt, the distribution may be made and the notice given to their Representative.

 

  

95

  

SECTION 1711.                                Rights of Trustee and Paying Agent.

 

Each Holder, by such Holder’s acceptance of the Securities, authorizes the Trustee to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article 17 and appoints the Trustee as such Holder’s agent for such purpose.

 

The Trustee or any Paying Agent may continue to make payments on the Securities until a responsible officer receives written notice of facts that would cause a payment of principal of or interest on the Securities to violate this Article.  Only the Company, a Representative or a holder of an issue of Senior Debt that has no Representative may give the written notice.

 

The Trustee has no duty to the holders of Senior Debt other than as created under this Indenture.  The Trustee in its individual or any other capacity may hold Senior Debt with the same rights it would have if it were not Trustee.

 

The Company’s obligation to pay, and the Company’s payment of, the amounts required by Section 606 are excluded from the operation of this Article Seventeen.

 

  

96

  

This Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Indenture.

 

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

 

 

	 	 	 BSD MEDICAL CORPORATION
	 	 	 
	 	 	 
	 	 By:	 ________________________
	 	 Name:	 
	 	 Title:	 
	 	 	 
	 	 	 
	 	 	 ________________________, As Trustee
	 	 By:	 
	 	 Name:	 
	 	 Title:	 

  

97

  

EXHIBIT A

 

 

FORM OF CERTIFICATION

 

EXHIBIT A-1

 

 

FORM OF CERTIFICATE TO BE GIVEN BY PERSON ENTITLED

 

TO RECEIVE BEARER SECURITY OR TO OBTAIN INTEREST

 

PAYABLE PRIOR TO THE EXCHANGE DATE

 

CERTIFICATE

 

[Insert title or sufficient description of Securities to be delivered]

 

This is to certify that, as of the date hereof, and except as set forth below, the above-captioned Securities held by you for our account (i) are owned by person(s) that are not citizens or residents of the United States, domestic partnerships, domestic corporations or any estate or trust the income of which is subject to United States federal income taxation regardless of its source (“United States person(s)”), (ii) are owned by United States person(s) that are (a) foreign branches of United States financial institutions (financial institutions, as defined in United States Treasury Regulations Section 1.165-12(c)(1)(v) are herein referred to as “financial institutions”)
purchasing for their own account or for resale, or (b) United States person(s) who acquired the Securities through foreign branches of United States financial institutions and who hold the Securities through such United States financial institutions on the date hereof (and in either case (a) or (b), each such United States financial institution hereby agrees, on its own behalf or through its agent, that you may advise  _______________ or its agent that such financial institution will provide a certificate within a reasonable time stating that it agrees to comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the United States Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) are owned by a financial institution for purposes of resale during the restricted period (as defined in United States Treasury Regulations Section
1.1635(c)(2)(i)(D)(7)), and, such financial institution described in clause (iii) above (whether or not also described in clause (i) or (ii)), certifies that it has not acquired the Securities for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions.

 

As used herein, “United States” means the United States of America (including the States and the District of Columbia); and its “possessions” include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands.

 

We undertake to advise you promptly by tested telex on or prior to the date on which you intend to submit your certification relating to the above-captioned Securities held by you for our account in accordance with your Operating Procedures if any applicable statement herein is not correct on such date, and in the absence of any such notification it may be assumed that this certification applies as of such date.  This certificate excepts and does not relate to [U.S.$] of such interest in the above-captioned Securities in respect of which we are not able to certify and as to which we understand an exchange for an interest in a permanent global Security or an exchange for and delivery of
definitive Securities (or, if relevant, collection of any interest) cannot be made until we do so certify.

 

  

A-1-1

  

We understand that this certificate may be required in connection with certain tax legislation in the United States.  If administrative or legal proceedings are commenced or threatened in connection with which this certificate is or would be relevant, we irrevocably authorize you to produce this certificate or a copy thereof to any interested party in such proceedings.

 

Dated:  _____________________, _______ [To be dated no earlier than the 15th day prior to the earlier of (i) the Exchange Date or (ii) the relevant Interest Payment Date occurring prior to the Exchange Date, as applicable]

 

[Name of Person Making

Certification]

(Authorized Signator)

Name:

Title:

 

  

A-1-2

  

EXHIBIT A-2

 

 

FORM OF CERTIFICATE TO BE GIVEN BY EUROCLEAR AND CLEARSTREAM S.A. IN CONNECTION WITH THE EXCHANGE OF

 

A PORTION OF A TEMPORARY GLOBAL SECURITY OR TO

 

OBTAIN INTEREST PAYABLE PRIOR TO THE EXCHANGE DATE

 

CERTIFICATE

 

[Insert title or sufficient description of Securities to be delivered]

 

This is to certify that, based solely on written certifications that we have received in writing, by tested telex or by electronic transmission from each of the persons appearing in our records as persons entitled to a portion of the principal amount set forth below (our “Member Organizations”) substantially in the form attached hereto, as of the date hereof, (U.S.$) principal amount of the above-captioned Securities (i) is owned by person(s) that are not citizens or residents of the United States, domestic partnerships, domestic corporations or any estate or trust the income of which is subject to United States Federal income taxation regardless of its source (“United States
person(s)”), (ii) is owned by United States person(s) that are (a) foreign branches of United States financial institutions (financial institutions, as defined in United States Treasury Regulations Section 1.165-12(c)(1)(v) are herein referred to as “financial institutions”) purchasing for their own account or for resale, or (b) United States person(s) who acquired the Securities through foreign branches of United States financial institutions and who hold the Securities through such United States financial institutions on the date hereof (and in either case (a) or (b), each such financial institution has agreed, on its own behalf or through its agent, that we may advise _______________________ or its agent that such financial institution will provide a certificate within a reasonable time stating that it agrees to comply with the requirements of Section 165(j)(3)(A),
(B), or (C) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) is owned by a financial institution for purposes of resale during the restricted period (as defined in United States Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and that such financial institutions described in clause (iii) above (whether or not also described in clause (i) or (ii)) have certified that they have not acquired the Securities for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions.

 

As used herein, “United States” means the United States of America (including the States and the District of Columbia); and its “possessions” include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands.

 

We further certify that (i) we are not making available herewith for exchange (or, if relevant, collection of any interest) any portion of the temporary global Security representing the above-captioned Securities excepted in the above-referenced certificates of Member Organizations and (ii) as of the date hereof we have not received any notification from any of our Member Organizations to the effect that the statements made by such Member Organizations with respect to any portion of the part submitted herewith for exchange (or, if relevant, collection of any interest) are no longer true and cannot be relied upon as of the date hereof.

 

  

A-2-1

  

We understand that this certification is required in connection with certain tax legislation in the United States.  If administrative or legal proceedings are commenced or threatened in connection with which this certificate is or would be relevant, we irrevocably authorize you to produce this certificate or a copy thereof to any interested party in such proceedings.

 

Dated:  ________________, ____________

 

[To be dated no earlier than the earlier of the Exchange Date or the relevant Interest Payment Date occurring prior to the Exchange Date, as applicable]

 

,

 

as

 

By:

 

 ________________________

 

 

A-2-2Exhibit 4.1

 

Inmet Mining Corporation

 

Annual Information Form

 

 

March 28, 2012

 

 

 

 

Annual information form

This AIF contains important information that can help you make an informed decision about Inmet Mining Corporation. It describes our business, our mineral reserves and resources, our operations and prospects, risks and other factors that affect us.

 

Inmet Mining Corporation

March 28, 2012

 

	
WHAT’S INSIDE
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
CORPORATE STRUCTURE
    	
 
    	
3
    
	
 
    	
 
    	
 
    
	
GENERAL DEVELOPMENT OF THE BUSINESS
    	
 
    	
5
    
	
 
    	
 
    	
 
    
	
DESCRIPTION OF THE BUSINESS
    	
 
    	
8
    
	
 
    	
 
    	
 
    
	
OPERATIONS
    	
 
    	
11
    
	
 
    	
 
    	
 
    
	
Çayeli Bakir Isletmeleri A.S. (Çayeli)
    	
 
    	
11
    
	
 
    	
 
    	
 
    
	
Cobre Las Cruces S.A. (Las Cruces)
    	
 
    	
15
    
	
 
    	
 
    	
 
    
	
Pyhäsalmi Mine Oy (Pyhäsalmi)
    	
 
    	
21
    
	
 
    	
 
    	
 
    
	
Minera Panama S.A. (Cobre Panama)
    	
 
    	
24
    
	
 
    	
 
    	
 
    
	
Exploration
    	
 
    	
33
    
	
 
    	
 
    	
 
    
	
MINERAL RESERVES AND RESOURCES
    	
 
    	
34
    
	
 
    	
 
    	
 
    
	
RISK FACTORS
    	
 
    	
39
    
	
 
    	
 
    	
 
    
	
DESCRIPTION OF CAPITAL STRUCTURE
    	
 
    	
48
    
	
 
    	
 
    	
 
    
	
RATINGS
    	
 
    	
49
    
	
 
    	
 
    	
 
    
	
MARKET FOR SECURITIES
    	
 
    	
49
    
	
 
    	
 
    	
 
    
	
MATERIAL CONTRACTS
    	
 
    	
49
    
	
 
    	
 
    	
 
    
	
GOVERNANCE
    	
 
    	
51
    
	
 
    	
 
    	
 
    
	
Board of Directors
    	
 
    	
51
    
	
 
    	
 
    	
 
    
	
About the Audit Committee
    	
 
    	
56
    
	
 
    	
 
    	
 
    
	
Officers
    	
 
    	
58
    
	
 
    	
 
    	
 
    
	
TRANSFER AGENT AND REGISTRAR
    	
 
    	
60
    
	
 
    	
 
    	
 
    
	
USE OF EXPERTS
    	
 
    	
60
    
	
 
    	
 
    	
 
    
	
SHARE OWNERSHIP
    	
 
    	
61
    
	
 
    	
 
    	
 
    
	
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL   TRANSACTIONS
    	
 
    	
61
    
	
 
    	
 
    	
 
    
	
ADDITIONAL INFORMATION
    	
 
    	
62
    
	
 
    	
 
    	
 
    
	
Schedule 1 – Inmet Mining Audit Committee   Charter
    	
 
    	
63
    

 

 

About this document

Unless otherwise indicated, the information in this annual information form (“AIF”) is given as of December 31, 2011. All currency amounts in this AIF are expressed in Canadian dollars, unless otherwise indicated. References to “US $” are to United States dollars and “€” are to Euros, where and if applicable. “SEDAR” means the System for Electronic Document Analysis and Retrieval, the publicly accessible database used for the filing of public securities information as required by securities regulatory agencies in Canada.  Throughout this AIF, the terms we, us, our and Inmet mean Inmet Mining Corporation and its subsidiaries and joint ventures. Inmet Mining means Inmet Mining Corporation only.

 

Caution with respect to forward-looking statements and information

Securities regulators encourage companies to disclose forward-looking information to help investors understand a company’s future prospects. This AIF contains statements about our business, results of operations and future financial condition.

 

These statements are “forward-looking” because we have used what we know and expect today to make a statement about the future. Forward-looking statements usually include words like may, expect, anticipate, believe or other similar words. We believe the expectations reflected in these forward-looking statements are reasonable. Actual events and results could be substantially different, however, because of the risks and uncertainties associated with our business or events that happen after the date of this AIF. For resource and reserve figures appearing herein, varying cut-off grades have been used depending on the mine, method of extraction and type of ore contained in the ore body.

 

You should not place undue reliance on forward-looking statements. As a general policy, we do not update forward-looking statements except if there is an offering document or where securities legislation requires us to do so.

 

All forward-looking statements and information herein are qualified by this cautionary statement.

 

Presentation of mineral reserve and resource estimates

This AIF uses the terms “Mineral”, “Measured”, “Indicated” and “Inferred” in connection with its resource presentations, as defined in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”) under guidelines set out in the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) Standards on Mineral Resources and Mineral Reserves adopted by the CIM Council. While the terms “Mineral”, “Measured”, “Indicated” and “Inferred” are recognized and required by Canadian regulations, they are not defined terms under standards of the SEC. As such, certain information contained in this AIF concerning descriptions of mineralization and resources under Canadian standards is not comparable to similar information made public by U.S. companies subject to the reporting requirements of the SEC. “Inferred” resources have a great amount of uncertainty as to their existence and as to their economic and legal feasibility. It cannot be assumed that all or any part of an “Inferred” resource will ever be upgraded to a higher category. Under Canadian rules, estimates of “Inferred” resources may not form the basis of feasibility or other economic studies. Mineral resources that are not mineral reserves do not have demonstrated economic viability. United States shareholders are cautioned not to assume that all or any part of “Measured” or “Indicated” resources will ever be converted into “Mineral Reserves”. United States shareholders are also cautioned not to assume that all or part of an “Inferred” resource exists, or is economically or legally mineable. In addition, the definitions of “Proven” and “Probable” reserves under CIM standards differ in certain respects from the Securities and Exchange Commission (“SEC”) standards.

 

2

 

CORPORATE STRUCTURE

 

Inmet Mining exists under the Canada Business Corporations Act. Our registered and head office is at 330 Bay Street, Suite 1000, Toronto, Ontario Canada, M5H 2S8. We have approximately 1,280 employees worldwide.

 

Inmet Mining’s corporate history

 

	
1987
    	
 
    	
June   1
    	
 
    	
Metall   Mining Corporation/Corporation Minière Metall continued under the laws of   Canada by certificate and articles of continuance
    
	
1988
    	
 
    	
January   1
    	
 
    	
Amalgamation   with two wholly-owned subsidiaries by certificate and articles of   amalgamation
    
	
1990
    	
 
    	
December   31
    	
 
    	
Amalgamation   with a wholly-owned subsidiary by certificate and articles of amalgamation
    
	
1995
    	
 
    	
May   4
    	
 
    	
Name   changed to Inmet Mining Corporation/Corporation Minière Inmet
    
	
1999
    	
 
    	
January   1
    	
 
    	
Amalgamation   with a wholly-owned subsidiary by certificate and articles of amalgamation
    
	
2011
    	
 
    	
February   14
    	
 
    	
Amalgamation   with a wholly-owned subsidiary by certificates and articles of amalgamation
    

 

Principal Subsidiaries and Properties

 

Our principal subsidiaries as at December 31, 2011 were:

 

	
 
    	
 
    	
Jurisdiction
    	
 
    	
Ownership (%)
    	
 
    
	
Çayeli Bakir   Isletmeleri A.S. (Çayeli)
    	
 
    	
Turkey
    	
 
    	
100
    	
 
    
	
Cobre Las Cruces   S.A. (Las Cruces)
    	
 
    	
Spain
    	
 
    	
100
    	
 
    
	
Pyhäsalmi Mine Oy   (Pyhäsalmi)
    	
 
    	
Finland
    	
 
    	
100
    	
 
    
	
Minera Panama S.A.   (Cobre Panama)
    	
 
    	
Panama
    	
 
    	
100
    	
(1)
    

 

3

 

Our principal operations and development properties as at December 31, 2011 were:

 

	
 
    	
 
    	
Çayeli
    	
 
    	
Las
   Cruces
    	
 
    	
Pyhäsalmi
    	
 
    	
Cobre Panama(2)
    
	
Location
    	
 
    	
Turkey
    	
 
    	
Spain
    	
 
    	
Finland
    	
 
    	
Panama
    
	
Ownership
    	
 
    	
100%
    	
 
    	
100%
    	
 
    	
100%
    	
 
    	
100%(1)
    
	
Primary metal
    	
 
    	
copper
    	
 
    	
copper
    	
 
    	
copper
    	
 
    	
copper
    
	
Secondary metal
    	
 
    	
zinc
    	
 
    	
—
    	
 
    	
zinc
    	
 
    	
gold
    
	
Mine type
    	
 
    	
underground
    	
 
    	
open pit
    	
 
    	
underground
    	
 
    	
open pit
    
	
Mine life
    	
 
    	
2019
    	
 
    	
2022
    	
 
    	
2018
    	
 
    	
30 years (est.)
    

 

(1) As at December 31, 2011, Inmet’s ownership is subject to an option granted to Korea Panama Mining Corporation to acquire a 20 percent equity interest in Minera Panama, S.A., the Inmet subsidiary holding Cobre Panama. On January 10, 2012 Inmet received notice that Korea Panama Mining Corporation elected to exercise this option. As of the date of this document, closing of this option exercise is expected to occur in April, 2012.

 

(2) Cobre Panama is a development property and is not currently an operating mine.

 

4

 

GENERAL DEVELOPMENT OF THE BUSINESS

 

The following is a summary of key developments over the past three years:

 

2009

 

Las Cruces Commissioning

Construction of the process plant was completed in February 2009, following construction of the mine in 2008.  In June 2009 Las Cruces produced its first copper cathode and we commenced the 1st phase of commissioning, focusing on correcting equipment deficiencies and materials selection for the process plant.  In 2009 Las Cruces produced 3,900 tonnes of cathode.

 

Troilus Site Closure and Decommissioning

In April 2009 Inmet ceased mining operations at Troilus, a gold-copper mine located in Quebec, Canada. Inmet continued to process low-grade ore stockpiled at the site after it ceased mining operations.  In late 2009 Inmet submitted a final detailed version of the site closure plan and cost estimate to the Quebec regulatory authorities.

 

Equity offering and Las Cruces debt restructuring

On June 25, 2009, we completed a public offering of 7.825 million common shares of Inmet Mining on a “bought deal” basis, at a price of $44.50 per share for gross proceeds of $348 million. We used part of the proceeds to repay the remaining $232 million outstanding under a Las Cruces project credit facility with third party lenders and cash collateralized $32 million in letters of credit that had been secured under that facility. This eliminated the facility and its restrictive covenants, and significantly reduced long-term debt on our consolidated balance sheet.

 

KPMC Granted Option for 20 percent of Cobre Panama

In October 2009, we entered into an agreement with Korea Panama Mining Corporation (KPMC) that gave it the option to acquire a 20 percent equity interest in Minera Panama S.A. (Minera Panama).  The initial agreement provided KPMC with 60 days to exercise its option following a public announcement by Inmet with respect to the construction and development of Cobre Panama.  Subsequently, in July 2011 Inmet and KPMC agreed to amend the initial agreement to provide KPMC with the right to exercise its option up to the date that is the later of 60 days following Inmet’s announcement, and the seventh day following receipt of approval of the project environmental and social impact assessment (ESIA) by the Autoridad Nacional del Ambiente (ANAM), the Panamanian environmental regulatory authority (provided that the option could not be exercised after June 30, 2013).  Upon closing of the option, KPMC will be required to invest in Minera Panama its proportionate share of our investment to that time, and to fund its share of future development costs.  KPMC has the right also to enter into an off-take purchase agreement, on terms to be negotiated, under which it will be entitled to purchase a pro-rata share of Cobre Panama’s production of copper concentrates, subject to KPMC providing financing to the project in proportion to its interest.

 

2010

 

Cobre Panama final FEED Study and ESIA Submission

On March 31, 2010 we announced the results of a final Front-end Engineering and Design (FEED) study that included updated capital cost and operating cost estimates, and other information about the project. On September 2010, Minera Panama submitted the project ESIA to ANAM.

 

Troilus Site Closure and Decommissioning

In June 2010 all remaining surface ore stockpiles were depleted and Inmet ceased milling operations.  Following cessation of operations, a small group of workers remained onsite to oversee closure activities.

 

5

 

Las Cruces Commissioning

Effective July 1, 2010, we ceased capitalizing Las Cruces’ pre-operating costs net of sales and began to recognize these results in operating earnings and operating cash flow in our consolidated financial statements.  At this time we entered a 2nd Phase of commissioning, focusing on bottlenecks in the plant design, increasing throughput and balancing plant runtime with the process chemistry.  In September, 2010 we entered a 3rd Phase dedicated to metallurgical optimization.  In 2010 Las Cruces produced 28,500 tonnes of cathode.

 

Acquisition of Remainder of Cobre Las Cruces

On December 15, 2010, we completed the acquisition of a 30 percent indirect equity interest and subordinated sponsor loans in the Las Cruces from Leucadia National Corporation and an affiliate of it (Leucadia).  Inmet paid US $150 million in cash and issued Leucadia 5,442,413 common shares.  Leucadia was also released from its guarantee on US $72 million debt owed by Cobre Las Cruces, S.A. to an affiliate of Inmet.  As a result of the share issuance, the number of Inmet’s issued and outstanding common shares increased to 61,549,172 common shares and Leucadia’s beneficial ownership increased at that time to 11,042,413 Inmet shares, or 17.94 percent of Inmet’s issued and outstanding common shares.

 

Amended Subscription Agreement with Temasek subsidiary

On March 31, 2010 we announced that Inmet and Ellington Investments Pte. Ltd. (Ellington), an indirect wholly-owned subsidiary of Temasek Holdings (Private) Limited (Temasek) entered into a subscription agreement pursuant to which Ellington agreed to purchase 9,258,419 subscription receipts at a price of $54.0049 for total proceeds of $500 million.  Each subscription receipt was exchangeable for an Inmet common share upon satisfaction of certain conditions.

 

On December 23, 2010 Inmet and Ellington announced that they had amended the subscription agreement to provide that the subscription receipts previously issued to Ellington would be exchanged for Inmet common shares.  Under the amended subscription agreement, each subscription receipt was exchangeable for 0.840283 Inmet common share, representing a subscription price per Inmet common share of $64.2699, or a 15 percent discount to the five day volume-weighted average price of Inmet common shares on the Toronto Stock Exchange as at December 22, 2010.  The subscription receipts were to be automatically exchanged no later than 150 days after the coming into effect of legislation to amend Panama’s Mineral Resources Code (Code) to permit entities in which foreign governmental bodies or authorities have an interest to hold direct or indirect interests in mining concessions in Panama.

 

2011

 

Terminated Arrangement with Lundin Mining Corporation

On January 12, 2011, Inmet Mining and Lundin Mining Corporation (“Lundin”) entered into an arrangement agreement under which they agreed, subject to certain conditions, to amalgamate the two companies by way of a Plan of Arrangement under the Canada Business Corporations Act.

 

The proposed amalgamation was to feature a common share exchange through which common shareholders of the parties would have received common shares of the merged company in exchange for common shares held in the predecessor companies. The exchange ratios represented no premium to either party based on the respective 30 day volume weighted average prices (VWAP) on the TSX to January 11, 2011.

 

Completion of the proposed merger was conditional on approval of Inmet and Lundin shareholders, and satisfaction of other customary approvals including regulatory, stock exchange, and court approvals.

 

The arrangement agreement also included customary reciprocal deal protections, including covenants to not solicit any alternative transaction, subject to the exercise of the board of directors of each company of its fiduciaries duties in respect of any unsolicited “Superior Proposal”, as defined under the arrangement agreement.  Each company also agreed to pay the other a break fee of C$120 million in certain circumstances.  In addition, each company granted the other a right to match any competing offer.

 

6

 

On February 28, 2011, Equinox Minerals Limited (Equinox) announced that it would make an unsolicited offer to acquire Lundin, followed by a formal bid made on March 7, 2011. On March 20, 2011, Lundin announced that its board of directors unanimously recommended that Lundin shareholders reject the Equinox offer.

 

On March 29, 2011, Inmet and Lundin agreed to terminate the arrangement agreement in accordance with its terms. While no break fee was payable by either party upon such termination, Inmet retained the right to receive the break fee in the event that Equinox’s unsolicited offer to acquire Lundin was successful.  As Equinox’s bid to acquire Lundin was ultimately not successful, no break fee was paid by either party.

 

Disposition of Interest in Ok Tedi

On January 28, 2011 we disposed of our 18 percent equity interest in Ok Tedi Mining Limited (OTML) for gross proceeds of US $335 million, which resulted in net proceeds received by Inmet of approximately US $307 million after deduction of withholding taxes paid in Papua New Guinea.

 

Temasek Subsidiary Exchanges Subscription Receipts for Common Shares

On May 17, 2011 a Temasek subsidiary exchanged $500 million previously issued subscription receipts for 7,779,692 common shares.  As a result of the share issuance, the number of Inmet’s issued and outstanding common shares increased to 69,328,864 common shares and Temasek’s beneficial ownership represented approximately 11 percent of Inmet’s issued and outstanding common shares.

 

Cobre Panama ESIA Approval

On December 28, 2011 the Government of Panama, through ANAM, approved the ESIA required for development of the Cobre Panama copper project, including the mining operations and related infrastructure, a port facility, and a coal-fired power plant.  With the announcement of the approval by ANAM of the project ESIA, KPMC had until January 10, 2012 to notify Inmet as to its election to acquire a 20 percent interest in the project.

 

Las Cruces Production

Las Cruces continued to work towards achieving design capacity of 72,000 tonnes per annum. In 2011 Las Cruces produced 42,100 tonnes of cathode, and in the final month of 2011 Las Cruces produced over 5,000 tonnes of cathode.

 

Recent Developments

 

KPMC Exercises Option for 20 percent of Cobre Panama

On January 10, 2012, KPMC elected to exercise its option to acquire a 20 percent interest in the Cobre Panama development project. As of the date of this document it is expected that KPMC will complete its purchase of this interest in April, 2012.

 

7

 

DESCRIPTION OF THE BUSINESS

 

Inmet is a Canadian-based global mining company that focuses on producing copper and zinc. We have three wholly-owned mining operations: Çayeli (Turkey), Las Cruces (Spain) and Pyhäsalmi (Finland). As at March 28, 2012, we also have a 100 percent interest in Cobre Panama, a development property in Panama.  On January 10, 2012 KPMC exercised an option to acquire a 20 percent interest in Cobre Panama, closing of which is expected to occur in April, 2012.

 

The following table provides a summary of our copper and zinc production by operating mine for each of our last two financial years:

 

	
 
    	
 
    	
2011
    	
 
    	
2010
    	
 
    
	
 
    	
 
    	
COPPER
   PRODUCTION 
   (TONNES)(2)
    	
 
    	
ZINC
   PRODUCTION 
   (TONNES)
    	
 
    	
COPPER
   PRODUCTION 
   (TONNES) (2)
    	
 
    	
ZINC
   PRODUCTION 
   (TONNES)
    	
 
    
	
Çayeli
    	
 
    	
28,700
    	
 
    	
48,100
    	
 
    	
28,200
    	
 
    	
51,300
    	
 
    
	
Las Cruces
    	
 
    	
42,100
    	
 
    	
—
    	
 
    	
20,600
    	
 
    	
—
    	
 
    
	
Pyhäsalmi 
    	
 
    	
14,000
    	
 
    	
32,300
    	
 
    	
14,700
    	
 
    	
30,100
    	
 
    
	
Other(1)
    	
 
    	
—
    	
 
    	
—
    	
 
    	
2,000
    	
 
    	
—
    	
 
    
	
Total 
    	
 
    	
84,800
    	
 
    	
80,400
    	
 
    	
65,500
    	
 
    	
81,400
    	
 
    

 

(1)          Consists of production from Troilus (production ceased in June, 2010).

 

(2)          Excludes volumes from Ok Tedi (Inmet’s interest disposed of in January, 2011)

 

The following table sets out our revenue by product for each of our last two financial years:

 

	
 
    	
 
    	
2011
    	
 
    	
2010
    	
 
    
	
 
    	
 
    	
($, millions)
    	
 
    	
(%)
    	
 
    	
($, millions)
    	
 
    	
(%)
    	
 
    
	
Copper
    	
 
    	
696
    	
 
    	
71.1
    	
 
    	
470
    	
 
    	
60.3
    	
 
    
	
Zinc
    	
 
    	
177
    	
 
    	
18.1
    	
 
    	
176
    	
 
    	
22.6
    	
 
    
	
Other
    	
 
    	
106
    	
 
    	
10.8
    	
 
    	
133
    	
 
    	
17.1
    	
 
    
	
Total
    	
 
    	
979
    	
 
    	
100.0
    	
 
    	
779
    	
 
    	
100.0
    	
 
    

 

Product Summary

Inmet is primarily a producer of copper and zinc and also produces gold, silver and pyrites as by-products.  We produce both copper cathodes and copper concentrates, as well as zinc concentrates.  We also produce a pyrite concentrate for customers who require sulphur units.

 

Global Economy Review

At the beginning of 2011 consensus expectations were for global gross domestic product (GDP) growth of around 4.0 – 4.5 percent, primarily driven by robust emerging market economies. Current estimates are that global GDP growth in 2011 will have been only 2.5 percent, with significant underperformance in the industrial countries with growth of around 0.7 percent. Emerging economies, on the other hand appear to have performed much better, with growth at around 6.0 percent, not far short of the original expectations.

 

8

 

2011 turned out to be a year of tremendous uncertainty and many surprises, all of which unleashed a wave of volatility across most markets. The earthquake and tsunami in Japan affected production in many industries in the early part of the year; the Arab spring in North Africa and the Middle East has initiated the process of political change in those regions; elevated global debt levels have heightened tensions in the US budget process and more substantially throughout the Eurozone. China in contrast, spent most of the year attempting to slow its overheating economy.

 

Copper

Refined copper is used primarily in electrical and electronic applications.  Prices and premiums are largely dependent on the demand for electrical wire in construction, communications, automotive applications and in consumer durables. Copper is traded on the London Metal Exchange (LME), the New York Commodity Exchange (COMEX) and the Shanghai Futures Exchange (SHFE).

 

Our business model focuses on base metals, primarily copper, which we continue to believe will be an attractive business over the long-term. As populations and industries grow, so does the demand for copper. The pace of industrialization, especially in China and India, has kept global demand for copper high over the last decade and it is expected to remain high over the long-term. Per capita copper consumption in developing countries is still only a fraction of that of developed nations. Copper supply has been constrained by declining production at existing operations, declining ore grades, production disruptions for environmental, economic and community reasons, a limited number of viable new projects and restricted access to financing.  New copper projects are increasingly more difficult to develop because of their locations, their social contexts, and increasingly stringent environmental regulations and requirements. We believe that this bodes very well for the price of copper in the future and that copper has the best performance profile in the industry and we will continue to focus on copper in the future.

 

2011 was originally projected to be a strong year for base metal prices, particularly for copper, as forecasts at the beginning of the year were pointing towards a copper market deficit ranging from 300 kt to 500 kt and the prospect of destocking in China was expected to help keep prices at high levels. While much of this view indeed materialized, Europe’s fall into recession during the fourth quarter has significantly changed the landscape for commodities demand. However, copper market fundamentals still remain strong as reported stocks are falling and mine supply growth continues to be challenged by declining ore grades from aging mines, labor and community disruptions and difficulty in bringing greenfield mines to production.

 

Copper prices began 2011 at US $4.42 per pound and rose to record levels of US $4.60 per pound early in the year.  However as for other base metals and commodities, the price of copper declined toward the end of August and fell sharply during the last quarter of 2011 closing the year at US $3.43 per pound. The average copper price for 2011 was US$4.00 per pound, 17 percent higher than the 2010 average and the highest annual average price in history.

 

While copper prices were sharply down during the last quarter, total exchange stocks (LME, Comex, Shanghai) ended the year with very little change, starting the year at 576,000 tonnes and ending at 553,000 tonnes, a decline of 4 percent. We believe that this was due to increasing Chinese imports of low price copper for restocking during the last quarter.

 

Zinc

Zinc is used primarily for galvinizing steel, and prices and premiums are dependent on the demand for steel products.  The main consuming sectors are infrastructure, auto production and construction. Zinc is traded on the London Metal Exchange and on the Shanghai Futures Exchange.

 

In recent years zinc mine supply has grown strongly keeping the zinc market in surplus as evidenced by significantly accumulated exchange stocks since 2008.  As a result, zinc prices have not been as strong as copper prices in recent years.  In 2012 we believe that high levels of visible refined zinc stocks and the continued global economic uncertainty will limit the upside potential of zinc prices. As a result, we forecast zinc prices to remain close to the levels experienced at the beginning of 2011 for much of the first half of 2012. During the second half of the year we expect that positive progress on the Eurozone crisis and

 

9

 

increasing demand from China will boost market sentiment and zinc prices.

 

Zinc prices started 2011 at US $1.12 per pound.  Zinc prices fell sharply in the last quarter to close the year at $0.83 per pound, losing 26 percent of its value in 2011.

 

10

 

OPERATIONS

 

Çayeli

 

	
Location
    	
 
    	
Turkey
    
	
Ownership
    	
 
    	
100%
    
	
Type of mine
    	
 
    	
underground
    
	
Primary metal
    	
 
    	
copper
    
	
Secondary metal
    	
 
    	
zinc
    
	
End product
    	
 
    	
copper and zinc concentrates
    
	
Expected mine life
    	
 
    	
2019
    
	
Average reserve grades
    	
 
    	
copper – 3.1%
    
	
 
    	
 
    	
zinc – 3.7%
    
	
Infrastructure
    	
 
    	
close to roads and 18 kilometres from the port   at Rize
    
	
Employees
    	
 
    	
475
    
	
Contractors
    	
 
    	
84
    

 

Business structure

Çayeli Bakir Isletmeleri A.S. is a wholly-owned subsidiary of Inmet Mining and is incorporated under the laws of the Republic of Turkey. Its main asset is the Çayeli copper and zinc mine.

 

Eti Holding A.S., which is wholly-owned by the Government of Turkey, holds the operating license for the property and has leased it to Çayeli. The lease expires on July 29, 2044. Eti is entitled to a royalty based on 7 percent of Çayeli’s net income.

 

About the property

The Çayeli mine is located in the province of Rize near the Black Sea coast of northeastern Turkey:

·                  the plant site is at about 100 metres above sea level, on the western flood plain of the Büyükdere River

·                  it sits directly across from the town of Madenli, about seven kilometres from the Black Sea coast

·                  the town of Çayeli is located where the Büyükdere River enters the Black Sea, about 18 kilometres east of the city of Rize

·                  the surface projection of the ore body covers an area of approximately 203 hectares

·                  the mine accesses electrical power from the national grid and draws the water it uses for processing from a series of ground water wells and the adjacent Büyükdere River

·                  copper and zinc concentrates are shipped from the site in covered trucks to the Black Sea port at Rize, a distance of 18 kilometres.

 

Physical characteristics of the deposit

Çayeli is a Cretaceous-age volcanogenic massive sulphide deposit that:

·                  has a known strike length of over 600 metres

·                  extends to a depth of at least 600 metres

·                  varies in thickness from a few metres to 80 metres, averaging about 20 metres.

 

The average dip is 65 degrees to the north northwest.

 

The deposit is at the contact between altered footwall felsic volcanic flows and pyroclastic and hangingwall mafic volcanic rocks. It consists of massive and stockwork sulphides. The mineralization includes pyrite, chalcopyrite and sphalerite and smaller amounts of galena and tetrahedrite.

 

11

 

Geology

The massive sulphide ore is classified into:

·                  yellow ore, which is copper-rich and zinc-poor

·                  black ore, which is zinc-rich and copper-poor

·                  clastic ore, which contains copper, zinc and precious metals. In this ore, the sphalerite contains intergrowths and inclusions of chalcopyrite and requires batch processing through the mill.

 

Stockwork ore, containing pyrite and chalcopyrite in veins, occurs stratigraphically below the massive sulphide ores.

 

Environmental and Social Context

The Çayeli surface footprint is small, consisting of mine infrastructure, processing facilities, administrative offices, warehouse facilities and yards. There are three small rock storage facilities that store waste rock from the underground mine.

 

In 2011, Çayeli received its Integrated Environmental Permit from the Turkish regulators which governs the environmental requirements at the site. There is no tailings management facility at Çayeli. Process plant tailings are disposed at a depth of 275 metres in the Black Sea (Deep Sea Tailings Placement, or DSTP) in compliance with applicable Turkish regulations and accepted practice.  At this depth in the Black Sea, the water is naturally rich in hydrogen sulphide and low in dissolved oxygen, which is an environment that does not support marine life.  As a result, DSTP is the preferred tailings disposal method. Turkey is currently developing Mine Waste Regulations to align with European Union standards. Given the long-standing acceptance of DSTP, our strong long-term environmental performance, and Çayeli’s robust monitoring program which demonstrates no change in water quality, we expect that these new regulations will provide for our continued use of DSTP.

 

Çayeli pumps ground water from a local aquifer. The aquifer has historically shown signs of drawdown, caused by a number of local and regional factors, and this has periodically affected our ability to pump sufficient water to satisfy our operational needs. Çayeli has secured other surface water rights to help offset future ground water limitations.

 

When the mine is closed, Çayeli’s infrastructure will be dismantled and any remaining waste rock will be placed underground in the mine. Waste rock from the Çayeli underground workings is stored in one of three surface storage facilities. Plans call for this material to be placed back underground when the facility is decommissioned in 2018. If such material is left on surface post-closure there is a risk that it could generate acid drainage which could increase closure and post-closure costs.

 

Any contaminated materials will be disposed of in accordance with Turkish law and we will re-vegetate the site. The underground mine workings will be allowed to flood once the facility is decommissioned in 2018. There is a risk that ground water traveling through the Çayeli underground workings could become contaminated with metals and other constituents over time which could necessitate treatment of ground water, increasing post-closure costs.

 

Çayeli operates under Turkish environmental laws and regulations, many of which have been modified over the past several years to incorporate aspects of European Union directives. The current estimated, undiscounted closure cost is $17 million.

 

Some houses in the vicinity of our mine have suffered damage due to settling.  Some members of the local community have attributed this settling to our mining activities.  While it has not been possible to establish a conclusive causal link between our mining activities and the housing damage, we have decided to resolve this issue as a community relations initiative, rather than through a strictly technical or legal process.  We have performed detailed surveys of homes in the area, identified a zone of impact (in conjunction with local residents), completed inventories and prioritized homes based on the severity of the damage.  We have initiated a multi-year process of coming to agreement with owners of the most severely damaged homes to purchase them for fair market value and ensure that the residents have replacement 

 

12

 

housing that is better than the damaged homes they had been living in.  In-kind and/or cash settlements are offered, depending on the particular circumstances of the residents.

 

We expect the relocation process to last for several years.  Our offers are and will be based on fair market value and we have already been successful in reaching agreement with several of the residents. This process has been conducted under evolving international best practice and in compliance with Turkish law.  As a result of this process we believe we have continued to foster an atmosphere of open dialogue and trust with our local communities, avoiding conflict and maintaining our privilege to operate.

 

Mining method and metallurgical process

Çayeli’s mine design is based on underground bulk mining methods with the use of delayed backfill to extract ore in a sequential manner. The primary mining method is retreat transverse and longitudinal long hole stoping with paste fill and loose or consolidated waste rock backfill. The stopes are mined in primary, secondary and tertiary sequencing.

 

Ore processing includes three stages of crushing, primary and secondary ball mill grinding, conventional flotation using either standard or column cells, and water removal by thickening and pressure filtering to produce copper and zinc concentrates.

 

Çayeli key operating data

 

	
 
    	
 
    	
 
    	
 
    	
2011
    	
 
    	
2011
    	
 
    	
2010
    	
 
    	
Change
    	
 
    	
Change
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
results
    	
 
    	
target
    	
 
    	
results
    	
 
    	
(target to 2011)
    	
 
    	
(2010 to 2011)
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Tonnes of ore milled (thousands)
    	
 
    	
 
    	
 
    	
1,195
    	
 
    	
1,200
    	
 
    	
1,147
    	
 
    	
—
    	
 
    	
+4
    	
%
    
	
Tonnes of ore milled per day
    	
 
    	
 
    	
 
    	
3,300
    	
 
    	
3,300
    	
 
    	
3,150
    	
 
    	
—
    	
 
    	
+4
    	
%
    
	
Grades (percent)
    	
 
    	
copper
    	
 
    	
3.2
    	
 
    	
3.2
    	
 
    	
3.2
    	
 
    	
—
    	
 
    	
—
    	
 
    
	
 
    	
 
    	
zinc
    	
 
    	
6.0
    	
 
    	
5.6
    	
 
    	
6.3
    	
 
    	
+7
    	
%
    	
-5
    	
%
    
	
Mill recoveries (percent)
    	
 
    	
copper
    	
 
    	
75
    	
 
    	
80
    	
 
    	
76
    	
 
    	
-6
    	
%
    	
-1
    	
%
    
	
 
    	
 
    	
zinc
    	
 
    	
68
    	
 
    	
73
    	
 
    	
71
    	
 
    	
-7
    	
%
    	
-4
    	
%
    
	
Metal production (tonnes)
    	
 
    	
copper
    	
 
    	
28,700
    	
 
    	
30,900
    	
 
    	
28,200
    	
 
    	
-7
    	
%
    	
+2
    	
%
    
	
 
    	
 
    	
zinc
    	
 
    	
48,000
    	
 
    	
48,600
    	
 
    	
51,300
    	
 
    	
-1
    	
%
    	
-6
    	
%
    
	
Capital expenditures (C$ millions)
    	
 
    	
 
    	
 
    	
$
    	
13
    	
 
    	
$
    	
19
    	
 
    	
$
    	
15
    	
 
    	
-32
    	
%
    	
-13
    	
%
    
																	

 

Operations review

Çayeli’s mine production reached a record 1.2 million tonnes this year and set new records for weekly tonnage of 30,160 tonnes and monthly tonnage of 108,100 tonnes. This increase in performance is the result of improved mine planning processes, the implementation of a mine control system, and additional rehabilitation resources. Çayeli’s ground conditions require constant monitory and reinforcement, including the need to minimize any underground void area. The underground void volume was reduced to an all-time low during the year.

 

Mill production this year also reached a record 1.2 million tonnes despite difficult metallurgy from milling five different ore types with some ore types containing bornite minerals. Bornite activates zinc leading to its inclusion in Çayeli’s copper concentrate rather than reporting to the zinc concentrate. This reduced the overall metallurgical recoveries for both copper and zinc this year. Copper grades this year were in line with our target and with last year. Copper production was therefore slightly below our expectations. Zinc production was essentially on target because higher grades offset the impact of lower recoveries.

 

We spent $13 million this year to engineer a pair of new ore pass upgrades, add to the underground mobile equipment fleet, install copper concentrate column flotation cells, install a conveyor dust collection system in the mill, add surface storm water runoff capacity, and to continue our mine development. In 2010, we spent $15 million to upgrade underground mobile equipment, remediate the head frame, and install a new double deck screen for the crusher and mine development.

 

13

 

Legal Matters

A wholly-owned subsidiary of Inmet Mining has been named as a defendant in a claim for the equivalent of $5 million, filed before the Ankara (Turkey) 10th Commercial Court. Inmet Mining held an indirect interest in the Cerattepe exploration property in eastern Turkey, but ultimately the mining license with respect to the project was cancelled by a Turkish court.  Inmet was unsuccessful in its efforts to overturn this judgment. The claimant holds a royalty interest in the cancelled Cerattepe license. Inmet and other third parties have been named as defendants based on an alleged failure to comply with the terms of the royalty agreement.  Inmet is evaluating the claim but at this time it believes that the claim is without merit.

 

Outlook for 2012

In 2012, production levels should remain at approximately 1.2 million tonnes. As the ore pass project progresses, the mine will rely on two rather than three ore passes for much of 2012, reducing flexibility and increasing ore mixing. This will be mitigated by the introduction of a new mining block in 2012 in close proximity to one of the functioning ore passes.

 

Both copper and zinc recoveries should remain near 2011 levels in 2012, reflecting the ongoing metallurgical challenges presented by the higher percentages of bornite containing ores and the decreasing zinc grade.

 

We expect to produce between 27,000 tonnes and 30,000 tonnes of copper and between 36,000 and 39,800 tonnes of zinc. Zinc production at Çayeli from 2008 to 2011 benefitted from grades well above the average reserve grade of 4.3 percent. In 2012, lower zinc grades expected account for the anticipated decline in zinc production.

 

We expect operating earnings and cash flows to decrease in line with lower expected zinc sales volumes.

 

We expect operating costs in 2012 to be consistent with 2011 levels. The current three-year labour agreement will expire in May 2012. We expect the negotiation of a new labour agreement will require most of 2012 and we will make a strong effort to manage labour cost escalations to remain a low-cost mine.

 

We expect to spend $20 million on capital in 2012, including $7 million to upgrade our ore pass system to addresses deterioration that has accumulated over time, and to extend the shotcrete slickline and replace certain mobile equipment.

 

Planning for the future

Underground infrastructure additions and improvements such as the concrete delivery line extension, an additional internal exhaust raise, and the ore pass rehabilitation should enhance Çayeli’s ability to sustain production at a level of 1.2 million tonnes per year in the coming years.

 

Initial bulk emulsion explosives trials are underway. This technological improvement, coupled with the introduction of pastefill barricade pressure monitoring to allow continuous pastefill placement, should speed up the stope cycle time, and allow us to sustain high productivity as the percentage of secondary stopes increases.

 

The installation of the Pitram mine control system, complete with a manned surface control center, has greatly assisted with underground resource allocation and optimization. The purchase of modules to enhance grade control and shift planning functions should add further efficiencies. As the mine planners become more proficient with the new mine scheduling program, better short and long-term planning scenarios will be developed.

 

We expect bornite to continue to be present in different ore types for the remainder of the mine life. With better mine modeling and reconciliation, we have made advances in our ability to optimize the blending of challenging ore types with types that are more straightforward to process. We will continue our efforts to maximize recovery conditions at the mill through ongoing studies and initiatives.

 

14

 

Las Cruces

 

	
Location
    	
Spain
    
	
Ownership
    	
100%
    
	
Type of mine
    	
open pit
    
	
Primary metal
    	
copper
    
	
End product
    	
copper cathode
    
	
Expected mine life
    	
2022
    
	
Average reserve grades
    	
copper – 5.5%
    
	
Infrastructure
    	
well maintained all-weather paved roads   provide excellent access to the site
    
	
Employees
    	
258
    
	
Contractors
    	
629
    

 

Business structure

On August 22, 2005, Inmet acquired a 70 percent indirect interest in Cobre Las Cruces, S.A. (CLC), the owner and operator of the Las Cruces mine, from MK Resources Company (MK Resources). Leucadia National Corporation, through MK Resources, retained the other 30 percent interest in CLC until December 15, 2010 when it was purchased by Inmet to bring its ownership to a 100 percent indirect interest.

 

History

The Las Cruces deposit was originally discovered by a subsidiary of Rio Tinto plc in 1994. It carried on exploration activity until 1999 and sold the project in that year to MK Resources, which established CLC as its local Spanish subsidiary. CLC completed two feasibility studies and carried out environmental studies and permitting work prior to becoming an affiliate of Inmet. CLC subsequently completed a revised feasibility study and basic engineering and commenced construction of the project in 2006. Construction of the mine was completed in 2008 and the process plant was completed in February, 2009.

 

About the property

Las Cruces is located in southern Spain, about 20 kilometres northwest of the city of Seville in the autonomous region known as Andalucia. The regional climate is characterized as Mediterranean and the topography is one of gently rolling hills.

 

CLC has been granted mining rights for subsurface minerals through Mining Concession No. 7532, granted by the Regional Ministry for Employment and Technological Development of the Province of Andalucia. The Mining Concession was granted in August 2003, after a positive Declaration of Environmental Impact was issued by the Andalucian Regional Ministry of the Environment in May 2002.

 

The project has all permits and approvals necessary to operate.

 

The excellent location of the property provides access to all necessary infrastructure:

·      well maintained, paved roads

·      rail service in Seville

·      international airport in Seville with connections throughout Europe

·      port facilities in Huelva, approximately 80 kilometres to the southwest.

 

Power for Las Cruces is provided by the Spanish national grid, water for plant operations comes from both contact water extracted from the pit and from the San Jeronimo municipal water treatment facility.

 

The project is subject to a royalty of 1.5 percent of the copper price greater than or equal to US $0.80 per pound.

 

Physical characteristics of the deposit

The massive sulphide on the property is hosted by late Devonian to early Carboniferous Period volcanic and sedimentary rocks:

 

15

 

·      deposited in a submarine setting within a narrow and relatively shallow intra-continental sea

·      characterized by bimodal volcanism and sedimentation.

 

Post depositional secondary copper enrichment occurred in the upper part of the massive sulphide deposit, forming the mineralization of interest. The deposit was subsequently buried under 100 to 150 metres of sandstone and calcareous mudstone, called marl.

 

Geology

The Las Cruces deposit occurs near the eastern end of the Iberian Pyrite Belt, a 250 kilometre long and 40 kilometre wide geologic belt that extends eastward from southern Portugal into southern Spain. The belt is host to more than 100 mineral deposits, some of which were exploited for metals as long ago as pre-Roman times. Mineralization consists of syngenetic massive sulphides containing polymetallic mineralization, similar to most other Iberian Pyrite Belt deposits.

 

Las Cruces is a blind deposit with no outcroppings because of the 100 to 150 metres of marl on top of the deposit. No other deposits have been found in the immediate area but exploration is difficult because of the thickness of the overburden.

 

The nearest deposits are Aznalcollar and Los Frailes, both approximately 10 kilometres to the west in the area where the host rock assemblage outcrops at the surface. The Aznalcollar and Los Frailes deposits consist of lead and zinc massive sulphides that were in production over the last 10 to 20 years.

 

Environmental Context

Our main environmental focus in 2011 was compliance with the considerable number of commitments contained in our various licenses.  Water management and water purification are two areas of intense focus and activity. The Las Cruces ore body lies below the regional Niebla-Posadas aquifer. We treat all the water that comes into contact with mine materials and much of this water is then recycled for dust suppression around the mine area or reused in the hydrometallurgical process.  Las Cruces uses a dewatering and reinjection system (DRS) to remove ground water from the vicinity of the pit, transport it in a system of closed pipelines around the pit and re-inject the water back into the aquifer so that the ground water quantity and quality are preserved.  The ground water contains low concentrations of naturally-occurring metals and other constituents.  We have committed to removing these constituents, as necessary, so that the extracted ground water meets Spanish human health-based drinking water quality standards. See “Permits” below.

 

The region of southern Spain where Las Cruces is located is subject to intense, short duration rainfall events that can result in pit flooding and accidental release of water from surface storage facilities. There is a risk that such events could lead to a temporary cessation of operations that could impact Las Cruces’ ability to meet its copper production targets.

 

The tailings storage facility (TSF) and waste rock storage facility are engineered structures constructed from compacted marl and synthetic liner. These facilities receive dewatered leach residue from the operation for permanent storage. In July, 2008 an unanticipated ground movement impacted the TSF. After a thorough investigation, we changed the design of all structures on the property that have been constructed from marl to mitigate the potential for the occurrence of a similar event.

 

Based on the current closure plan, reclamation costs are estimated at $112 million, of which $34 million has been secured with bonds posted to the relevant authorities by CLC.

 

Community Context

Las Cruces has built and continues to build broad-based support and privilege to operate.

 

Permits and Regulatory Context

Mining activities in Spain are subject to Spanish national, regional and local environmental laws and regulations, which regulate, among other things, air emissions, water discharges, soil contamination, waste management, management of hazardous substances, protection of natural resources, antiquities and endangered species and reclamation.  Spain has harmonized European Union Directives pertaining to

 

16

 

environmental matters into its domestic legislation.  These rules impose strict environmental conditions on the management of, among other things, water, wastes and air emissions.

 

Las Cruces is a complex operation, and as is typical, requires a large number of permits.  The key permits for Las Cruces are:

·                  Declaration of Environmental Impact (DEI).  The DEI is the formal statement from the Seville Provincial Delegation of the Regional Ministry for the Environment that determines the environmental suitability of a project. The DEI also outlines the environmental conditions for the development and operation of the mine regarding protective measures, mitigation and monitoring. The DEI is binding and is incorporated into the conditions of the mining concession;

·                  Integrated Pollution Prevention and Control permit (IPPC) which provides for an integrated system of environmental permitting for all media and for the different relevant environmental regimes, reflecting the harmonization of Spanish environmental legislation with EU Directive 96/61 on Integrated Pollution Prevention and Control.  Las Cruces’ IPPC has very low water discharge emission limit values and these are much lower than the receiving water quality in the nearby Guadalquivir River; and

·                  The DRS Authorization, issued by the Agencia Andaluza del Agua, which regulates the extraction and re-injection of ground water surrounding the Las Cruces open pit.  The DRS authorization was amended as part of the “Global Plan” authorization in July, 2009 and by a further resolution in May, 2010.  These documents contain, among other things, the limit values that pertain to re-injected ground water.

 

In May, 2008, the authority responsible for the DRS suspended CLC’s authorization to operate other than to ensure preservation of the mine pit walls. The suspension was lifted in May, 2009 and in July 2009 approval for CLC’s “Global Plan” was received.  The Global Plan is designed to address the concerns that led to the suspension and address water management at the operation. The Global Plan includes two primary actions:

 

(1)          Purifying water extracted from the aquifer on a short-term and permanent basis through an engineered membrane (a form of reverse osmosis) purification process prior to reinjection into the aquifer; and

 

(2)          Relocating certain DRS extraction wells from above the mineralized zone to locations outside of the mineralized zones and adding additional wells to increase dewatering capacity.

 

In 2011, we obtained the necessary permits and built an engineered membrane system to purify extracted water prior to re-injecting it back into the ground.  The addition of new dewatering wells has further reduced pit inflows over the course of the year and at year end, pit and pond water levels were well controlled. The purification system is working well and the water we are re-injecting is drinking water quality and cleaner than background levels contained in ground water in the area.  The purification system is consistently able to meet the emission limit values for the Spanish human health-based drinking water quality constituents.  Our license, however, contains constituents for which the purification system was not designed and which are not included in the Spanish human health-based drinking water quality regulation.  Moreover, the license also has emission limit values for some constituents that are more stringent than the drinking water quality limits.  This combination of factors means that we do not currently comply with all aspects of our license and we have been subject to a number of administrative proceedings relating to exceeding the emissions limit values for boron, chlorine and fluorine.  We are working with the regulatory agencies to modify our license so that it addresses the constituents for which the purification system was designed to address.  The non-compliance is strictly administrative in nature and since we are improving the overall quality of the ground water through the re-injection of drinking water, there is no adverse environmental impact.  CLC has taken and will continue to take all necessary actions to comply with applicable requirements.  It is likely that water management will remain an operational challenge at Las Cruces for the foreseeable future.

 

Legal Matters

A local non-governmental organization has initiated several legal proceedings against regulatory

 

17

 

authorities asserting that several approvals for the project relating to the lifting of the suspension on mining, approval of the Global Plan, and a municipal approval from the Town of La Algaba for a license for pipelines and a town planning agreement were not properly authorized. We believe these proceedings are without merit. CLC has joined in the proceedings and is active in vigorously defending against them.  While subject to customary legal uncertainties, we believe that all of these proceedings will be resolved without a material impact on CLC.

 

Certain employees of CLC are the subject of a criminal investigation arising from a complaint made by a local non-governmental organization to the local public prosecutor.  The complaint concerns the placement of certain wells in the open pit immediately prior to the suspension of the DRS permit that were intended to facilitate water management.  The complaint alleges that the operation of the wells in question resulted in environmental damage, which allegation we unequivocally deny.  CLC and its employees are fully cooperating with the investigating judge, who has broad investigative and remedial powers.  The outcome of such investigation cannot be determined at this time.

 

On May 25, 2010, the failure of a pipeline beneath one of the reactors in the process plant exposed two contractor employees and one CLC employee to hot, acidic pulp.  One of the contractor employees subsequently succumbed to his injuries. Certain of CLC’s employees are the subject of a criminal investigation in connection with the fatality, which we have been advised is a customary procedure in Spain in such circumstances. CLC and its employees are fully cooperating with the investigation, whose outcome cannot be determined at this time.

 

Mining method and metallurgical process

Las Cruces uses conventional open pit mining methods, based upon hydraulic shovels and trucks, with drilling and blasting in the lower marls and ore zones. The project has a relatively high stripping ratio supported by the high grade ore. Las Cruces uses contract miners for all mine production.

 

Ore at Las Cruces is mined from an open pit excavated into marl. Overall pit slopes are shallow (28 degrees) but there is a risk that pit slope instability could develop and this could have a material impact on Las Cruces’ ability to access the bottom of the pit to mine ore.

 

The metallurgical plant relies on an atmospheric leaching process to recover copper from the rich Las Cruces chalcocite ore. A unique feature of the plant is the use of eight OKTOP agitated reactors to dissolve the copper under conditions of high temperature and high acidity. Oxygen is also added into the reactors to complete the reaction. The feed to the leaching reactors is mine ore that has passed through three stages of crushing and a single stage of grinding.

 

Once leached, the liquid is separated from the ground solids to become PLS, the feed for the solvent extraction (SX) area. In the SX area the copper is passed to an organic solution and then to the electrolyte that feeds the electrowinning cells. The electrowinning cells produce LME grade copper cathodes weighing approximately 50 kilograms each. An automated crane and stripping machine then harvests and packages the cathodes for shipment.

 

18

 

Las Cruces key operating data

 

	
 
    	
 
    	
2011
    	
 
    	
2011
    	
 
    	
2010
    	
 
    	
Change
    	
 
    	
Change
    	
 
    
	
 
    	
 
    	
results
    	
 
    	
target
    	
 
    	
results
    	
 
    	
(target to 2011)
    	
 
    	
(2010 to 2011)
    	
 
    
	
Tonnes of ore   processed (thousands)
    	
 
    	
776
    	
 
    	
750
    	
 
    	
495
    	
 
    	
+3
    	
%
    	
+57
    	
%
    
	
Copper grades   (percent) cathode
    	
 
    	
6.5
    	
 
    	
7.5
    	
 
    	
7.0
    	
 
    	
-13
    	
%
    	
-7
    	
%
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Plant recoveries   (percent)
    	
 
    	
84
    	
 
    	
89
    	
 
    	
83
    	
 
    	
-6
    	
%
    	
+1
    	
%
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Copper production   (tonnes) cathode
    	
 
    	
42,100
    	
 
    	
50,200
    	
 
    	
28,500
    	
 
    	
-16
    	
%
    	
+48
    	
%
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cost per pound of   cathode produced (C$)
    	
 
    	
$
    	
1.59
    	
 
    	
1.14
    	
 
    	
1.74
    	
(i)
    	
+39
    	
%
    	
-9
    	
%
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Capital expenditures   (C$ millions)
    	
 
    	
$
    	
54
    	
 
    	
$
    	
52
    	
 
    	
$
    	
24
    	
 
    	
+4
    	
%
    	
+125
    	
%
    
															

 

(1)          Subsequent to July 1, 2010

 

Mining

We mined a total of 1.1 million tonnes of ore this year. More than 750,000 tonnes remained in the run of mine stockpile at the end of the year. The large stockpile allows blending flexibility for the plant feed and provides a secure ore source if mining is interrupted during the rainy season.

 

Production

Las Cruces production in 2011 was significantly higher than 2010 production, increasing to 42,100 tonnes of copper cathode from 28,500 tonnes. In the fourth quarter of 2011, Las Cruces produced 14,100 tonnes, and finished the year with monthly production above 5,000 tonnes. In the last two weeks of 2011, we sustained recoveries above 88 percent at increased throughput levels and cathode production approaching design capacity.

 

Although we have not yet achieved production at the design capacity rate of 72,000 tonnes of copper per year, significant progress has been made to date with the production process since first cathode was produced. Initially, our efforts were directed at correcting equipment deficiencies and materials selection for the process plant. During this “1st Phase” of commissioning, which commenced in mid 2009, constant breakdowns prevented the ramp up and stable operation of the plant until April 2010. Plant reliability has since greatly improved and no substantial mechanical downtime was experienced in second half of 2010. In a “2nd Phase”, we addressed bottlenecks in the plant design and our main focus shifted to increasing throughput while working to balance plant runtime with the process chemistry. As a result, in July and August 2010, throughput rose to 50 percent of design capacity.

 

In September 2010, we entered the “3rd Phase” dedicated to metallurgical optimization. We made a strategic decision to lower plant throughput in order to implement measures to reach and maintain our design recovery rates (above 90 percent). This was a necessary step to achieve the proper leaching conditions before further increasing the copper feed and potentially sacrificing copper recoveries. In the fourth quarter 2010 we reached recovery levels of over 86 percent and we continued to raise throughput in step with maintaining recovery levels.

 

Throughout 2011 plant reliability and process stability continued to improve while copper recoveries increased. In the area of process stability, the largest gains were from improvements to the grinding thickener and oxygen distribution within the leach reactors. Plant reliability has been enhanced from the addition of surge capacity with the leach feed tank and the leach residue tank ahead of the leach filters. Better control of the precipitated solids and redundant pipelines has greatly reduced the downtime experienced previously to clean key components. Rebuilding of the grinding thickener in June was successful in allowing us to reach the designed density for feeding the leach circuit and controlling the leach chemistry. During the year we progressively improved oxygen distributors in the leach reactors and now have a design that allows effective use of the oxygen in the reaction. We completed our program to change all 8 leach reactor agitators to fully stainless steel components and agitator wear has been well controlled.

 

19

 

Capital update

 

	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Objective
    	
 
    
	
(100 percent and millions of Canadian dollars)
    	
 
    	
2011
    	
 
    	
2010
    	
 
    	
change
    	
 
    	
2012
    	
 
    
	
Capital
    	
 
    	
$
    	
54
    	
 
    	
$
    	
80
    	
 
    	
-33
    	
%
    	
$
    	
48
    	
 
    
	
Pre-operating costs capitalized, net of sales, working capital and   other
    	
 
    	
—
    	
 
    	
(56
    	
)
    	
-100
    	
%
    	
—
    	
 
    
	
Capital   spending
    	
 
    	
$
    	
54
    	
 
    	
$
    	
24
    	
 
    	
+125
    	
%
    	
$
    	
48
    	
 
    

 

Outlook for 2012

For 2012, we expect throughput and recoveries to stabilize at the levels we achieved towards the end of 2011. We have set our production objective as a range of 61,700 to 68,600 tonnes copper cathode, or approximately 90 percent of design capacity. No major construction projects are planned for the year. Routine maintenance is planned for mill relining, solids management and thickener inspection. Additional strengthening of the grinding thickener will take place during our planned shutdown activities to add security to this critical equipment. In total, we expect a minimum of 90 percent operating time throughout 2012.

 

We expect to spend $48 million on capital projects in 2012. The largest expenditures will come in the areas of mine development, tailings facility expansion and land purchase.

 

Las Cruces’ unit operating costs should continue to decrease as production volumes increase.

 

20

 

Pyhäsalmi

 

	
Location
    	
Finland
    
	
Ownership
    	
100%
    
	
Type of mine
    	
underground
    
	
Primary metal
    	
copper
    
	
Secondary metal
    	
zinc
    
	
End product
    	
copper and zinc concentrates
    
	
Expected mine life
    	
2018
    
	
Average reserve grades
    	
copper – 1.1%
    
	
 
    	
zinc – 2.0%
    
	
Infrastructure
    	
close to roads and rail connection at property
    
	
Employees
    	
230
    
	
Contractors
    	
75
    

 

Business structure

Pyhäsalmi Mine Oy is a wholly-owned subsidiary of Inmet Mining incorporated under the laws of Finland. Its main asset is the Pyhäsalmi copper and zinc mine.

 

Pyhäsalmi’s mining concession consists of two leases:

·      a mining lease of 59.2 hectares, covering all the surface expression of the ore body and the mine itself

·      an auxiliary lease of 352.4 hectares, covering all other areas used for mining purposes.

 

Pyhäsalmi holds both mining concession leases and holds over 3,000 hectares of other exploration claims throughout Finland.

 

About the property

The Pyhäsalmi mine is in central Finland, four kilometres southeast of the town of Pyhäjärvi, on Lake Pyhäjärvi:

·     it is within a two-hour drive from the cities of Oulu, Jyväskylä and Kuopio and their airports

·      a rail spur joins the mine to the national network

·      the rail spur also joins the mine to the port of Kokkola, 170 kilometres to the west on the Gulf of Bothnia.

·      the mine accesses electrical power through two 110 kV national grid lines and draws its fresh water requirements from Lake Pyhäjärvi.

 

Physical characteristics of the deposit

The Pyhäsalmi deposit is a copper-zinc volcanogenic massive sulphide deposit of Proterozoic age:

·      the mineralization is hosted by altered felsic and mafic volcanic rocks

·      the enveloping alteration zone is at least four kilometres long and one kilometre wide at its widest point. Alteration of the felsic volcanic rocks includes sericite and cordierite dominated mineralogies. Cordierite, anthophyllite and garnet dominate in the altered mafic volcanic rocks

·      the metamorphic grade is upper amphibolite facies.

 

Geologyical Setting

 

The upper part of the Pyhäsalmi deposit was mined between 1962 and 2001 and is now depleted. Deep drilling in 1996 by Outokumpu Oyj (the previous owner) led to the discovery of an extension to the deposit below the +1050 metre level.

 

21

 

The newer deep deposit is located between the +1050 metre level (from surface) and the +1416 metre level:

·      maximum dimensions are 420 metres long and 200 metres wide

·      the inner part of the lens consists of massive pyrite with low copper and zinc values. This core is surrounded by massive chalcopyrite-pyrite and the outer rim consists of massive sphalerite-pyrite

 

The main sulphide minerals are:

·      pyrite (65 percent)

·      chalcopyrite (three percent)

·      sphalerite (four percent)

·      pyrrhotite (three percent).

 

The ore is very coarse grained.

 

Environmental Context

Pyhäsalmi continues to have an excellent environmental operating record, and our standards have evolved to adhere to increasingly stringent regulatory requirements in Finland, and globally.  Much of the environmental focus at the mine revolves around the quality of our water discharge and the quantity of fresh water we use in our processing.  Pyhäsalmi draws water from Lake Pyhäjärvi and has developed a water recycling and conservation plan to reduce its reliance on fresh water from the lake. Pyhäsalmi has reduced its annual water consumption by approximately 250,000 m3 since 2009.  Pyhäsalmi continued to focus on water conservation efforts by completing a water management study to identify ways to further reduce fresh water requirements and to increase water recycling. Several opportunities to conserve water resources were identified and are scheduled to be implemented in 2012.

 

Pyhäsalmi discharges treated water into Lake Pyhäjärvi.  The water contains elevated concentrations of dissolved solids which creates some stratification in the lake.  At certain times of the year thermal instability within the lake results in mixing of the layers and there have been rare impacts to fish populations during such events.  We mitigate this impact by only discharging when flow in the lake is from a certain direction and by monitoring.  The southern part of Lake Pyhäjärvi is protected by the Natura 2000 European Union conservation network.  Although Pyhäsalmi’s discharge enters the lake well north of the protected area and the lake does not contain any endangered species, we are supporting the town and the local fishing association by working with them to protect and improve fish habitat in the lake.  Pyhäsalmi actively monitors metal concentrations in its effluent and in the lake.

 

The Pyhäsalmi site consists of mine infrastructure, processing facilities, administrative offices and warehouses, yards, concentrate storage facilities, an abandoned open pit, quarry and tailings storage facilities. Pyrite concentrate is stored outdoors and as a result emission of fugitive pyrite dust has occurred onto adjacent properties. Pyhäsalmi has taken steps to limit these emissions.

 

Pyhäsalmi received its environmental permit in the fourth quarter of 2007. This permit reflects the European Union Integrated Pollution Prevention and Control environmental regulatory framework that has been incorporated into Finnish environmental legislation.

 

When the mine is closed, the main activity will be rehabilitating the surface area. This includes covering and re-vegetating the tailings impoundments. Acid drainage has developed in a decommissioned portion of the tailings management facility and this is managed effectively during operations. The need for long-term water treatment will be evaluated as the mine approaches closure. The current closure plan and cost estimate were updated during 2010; the current estimate of closure costs is $41 million.

 

Mining method and metallurgical process

Pyhäsalmi uses non-entry, bulk open-stope mining methods in a primary-secondary sequence. On average, stope size varies from 50,000 tonnes for narrow primary stopes to over 100,000 tonnes for wider secondary stopes.

 

22

 

Milling includes crushing, 3-stage grinding, conventional flotation using three separate circuits, and water removal to produce copper, zinc and pyrite concentrates.

 

Pyhäsalmi key operating data

 

	
 
    	
 
    	
2011
    	
 
    	
2011
    	
 
    	
2010
    	
 
    	
Change
    	
 
    	
Change
    	
 
    
	
 
    	
 
    	
results
    	
 
    	
target
    	
 
    	
results
    	
 
    	
(target to 2011)
    	
 
    	
(2010 to 2011)
    	
 
    
	
Tonnes of ore milled   (thousands)
    	
 
    	
1,386
    	
 
    	
1,370
    	
 
    	
1,401
    	
 
    	
+1
    	
%
    	
-1
    	
%
    
	
Tonnes of ore milled   per day
    	
 
    	
3,800
    	
 
    	
3,750
    	
 
    	
3,800
    	
 
    	
+1
    	
%
    	
-1
    	
%
    
	
Grades (percent)
    	
copper
    	
 
    	
1.1
    	
 
    	
1.0
    	
 
    	
1.1
    	
 
    	
+10
    	
%
    	
—
    	
 
    
	
 
    	
zinc
    	
 
    	
2.6
    	
 
    	
2.6
    	
 
    	
2.4
    	
 
    	
—
    	
 
    	
+8
    	
%
    
	
 
    	
sulphur
    	
 
    	
42
    	
 
    	
43
    	
 
    	
43
    	
 
    	
-2
    	
%
    	
-2
    	
%
    
	
Mill recoveries   (percent)
    	
copper
    	
 
    	
96
    	
 
    	
95
    	
 
    	
96
    	
 
    	
+1
    	
%
    	
—
    	
 
    
	
 
    	
zinc
    	
 
    	
91
    	
 
    	
90
    	
 
    	
90
    	
 
    	
+1
    	
%
    	
+1
    	
%
    
	
Metal production   (tonnes)
    	
copper
    	
 
    	
14,000
    	
 
    	
13,300
    	
 
    	
14,700
    	
 
    	
+5
    	
%
    	
-5
    	
%
    
	
 
    	
zinc
    	
 
    	
32,300
    	
 
    	
31,900
    	
 
    	
30,100
    	
 
    	
+1
    	
%
    	
+7
    	
%
    
	
 
    	
pyrite
    	
 
    	
804,900
    	
 
    	
600,000
    	
 
    	
584,100
    	
 
    	
+34
    	
%
    	
+38
    	
%
    
	
Capital expenditures   (C$ millions)
    	
 
    	
$
    	
7
    	
 
    	
$
    	
8
    	
 
    	
$
    	
4
    	
 
    	
-13
    	
%
    	
+75
    	
%
    
																

 

Operations Review

Pyhäsalmi maintained its strong performance in 2011, processing 1.4 million tonnes of ore through the mill and achieved copper recoveries of 96 percent and zinc recoveries of 91 percent. Backfill supply was reliable and the underground open void volume was maintained at planned levels.

 

Copper production in 2011 was higher than target and lower than 2010 because of variations in copper grades. Zinc grades were significantly higher than last year, pushing zinc production higher. A record 805,000 tonnes of pyrite concentrate was produced this year to meet higher customer demand.

 

Outlook for 2012

Pyhäsalmi expects to mine 1.4 million tonnes of approximately 1 percent copper and 2 percent zinc in 2012, and produce between 11,300 tonnes and 12,600 tonnes of copper and between 22,800 and 25,200 tonnes of zinc. Copper and zinc production should be lower than 2011 as fewer higher grade stopes are available in the short-term mining sequence. Both copper and zinc grades should recover beyond 2012.

 

Pyhäsalmi expects to produce and sell 800,000 tonnes of pyrite in 2012.

 

Capital spending of $10 million in 2012 will primarily be to replace underground mobile equipment, improve the tailings impoundment area, and upgrade the satellite ore grinding circuit and zinc cleaner cells.

 

Planning for the future

Pyhäsalmi will continue its successful ground support rehabilitation program in critical areas of the mine in light of increased seismic activity and subsidence as the mine matures. Pyhäsalmi sees new technology as an excellent way to meet the challenge of being a low grade operation. In 2012 and beyond the mine will continue to refine its automated and tele-remote mining capabilities and evaluate automated longhole drilling equipment.  A tailings pond expansion completed in 2011, and the installation of a new pressure filter in the pyrite concentrate circuit in early 2012, will ensure we have the capacity to meet the ongoing demand for pyrite.

 

23

 

Cobre Panama Development Project

 

	
Location
    	
Panama
    
	
Ownership
    	
100%
    
	
Type of mine
    	
open pit
    
	
Primary metal
    	
copper
    
	
Secondary metal
    	
gold and molybdenum
    
	
End product
    	
copper and molybdenum concentrates
    
	
Expected mine life
    	
30 years
    
	
Average reserve grades
    	
copper – 0.4%
    
	
Infrastructure
    	
20 kilometres from tide water
    
	
Employees
    	
86
    
	
Contractors
    	
947
    

 

Business structure

We currently have a 100 percent equity interest in Minera Panama S.A. (Minera Panama), the Panamanian corporation that holds the concession for the Cobre Panama property. Minera Panama was incorporated in January 1997 under the laws of the Republic of Panama. On January 10, 2012, KPMC elected to exercise its option to acquire a 20 percent interest in Minera Panama. As at the date of this Annual Information Form, closing of the option exercise is expected to occur in April, 2012.

 

History

2005

In 2005 Inmet, Petaquilla Minerals Ltd. and Teck Cominco Limited (the shareholders of Minera Panama at that time) entered into an agreement to develop a copper project on the concession for the Cobre Panama property in phases, subject to approval by the Government of Panama.

 

In the first phase, Petaquilla Minerals assumed full risk to develop the Molejon gold deposit, which is situated in (but was later severed from) the concession, as a stand-alone gold mine.

 

Under the agreement Petaquilla Minerals was granted the right to explore and develop gold deposits (as defined under the agreement) on the concession, and Minera Panama was granted the right to explore for and develop copper deposits (as defined under the agreement) on the Molejon concession.

 

In November, the Panamanian Minister of Commerce and Industry (MICI) issued a resolution declaring that for the purposes of Contract-Law No. 9 of February 26, 1997 (or Law 9), promulgated by the Government of Panama and under which Minera Panama was granted the mining concession for the property, the start of development of the Molejon gold deposit would constitute the start of development of the copper project and related infrastructure and would also constitute compliance with Minera Panama’s obligations under Law 9 to begin construction of the larger copper project.

 

2006

In 2006 Petaquilla Minerals transferred all of its interest in Minera Panama to Petaquilla Copper Ltd. via a plan of arrangement.

 

2008

At the beginning of 2008, we owned 48 percent of Minera Panama.

 

In March, 2008 we entered into an agreement with Teck to proceed with the development of Cobre Panama. We agreed to work closely with Teck in project development, acting as operator of the project on its behalf. We also agreed to fund our and Teck’s share of project expenditures until we had contributed US $50 million in development costs, or until September 30, 2009, whichever was earlier. As a result, Teck received a 26 percent interest in Minera Panama and Petaquilla Copper’s interest in Minera Panama was fixed at 26 percent.

 

24

 

In July, 2008 we made an offer to acquire all of the outstanding shares of Petaquilla Copper Ltd. at a price of $2.00 per share, and completed the transaction in November at a price of $2.20 per share. In December, 2008 the common shares of Petaquilla Copper Ltd. were delisted from the Toronto Stock Exchange.

 

On November 20, 2008 Teck notified us of its intention to not continue to participate in Cobre Panama. We acquired its 26 percent interest in the project for the US $26 million we had already invested in the project on Teck’s behalf, plus accrued interest and US $3 million, pursuant to the March 2008 agreement. The transaction closed in December, 2008.

 

As at December 31, 2008 we owned 100 percent of Minera Panama.

 

2009

In October, 2009, we entered into an agreement with KPMC that gave them the option to acquire a 20 percent interest in Minera Panama.  Under the terms of the option agreement, we and KPMC were required to fund our respective proportionate shares of Minera Panama’s development costs up to US $150 million, except that we were required to fund 100 percent of development costs that exceed US $150 million prior to the exercise of the option.

 

The initial agreement provided KPMC with 60 days following an announcement by Inmet with respect to the construction and development of the project to exercise its option. Subsequently, in July, 2011 Inmet and KPMC agreed to amend the initial agreement to provide KPMC with the right to exercise its option up to the date that is the later of 60 days following Inmet’s announcement, and the seventh day following receipt of approval of the project environmental and social impact assessment (ESIA) by the Autoridad Nacional del Ambiente (ANAM), the Panamanian environmental regulatory authority (provided that the option could not be exercised after June 30, 2013).  Upon exercise of the option, KPMC was required to invest in Minera Panama its proportionate share of our investment to that time, and fund its share of future development costs.  KPMC also had the right also to enter into an off-take purchase agreement, on terms to be negotiated, under which it would be entitled to purchase a pro-rata share of Cobre Panama’s production of copper concentrates, subject to KPMC arranging for financing in proportion to its interest.

 

On January 10, 2012, KPMC elected to exercise its option to acquire a 20 percent interest in the Cobre Panama development project.  As at the date of this Annual Information Form, closing of the option to exercise is expected to occur in April, 2012.

 

Legal proceedings

Two proceedings have been brought in the Supreme Court of Panama against governmental authorities claiming that Law 9 violates the Constitution of Panama. In one of the proceedings, the claimant alleges that Law 9 did not fulfil mandatory legal requirements at the time of its enactment in 1997 and would also cause harm to the environment and the health of citizens of Panama. In 2011 the Procurer, the Panamanian equivalent of a District Attorney General, issued her formal opinion that Law 9 was constitutional.  The Panamanian Supreme Court is expected to hear the case in 2012.  In the other proceeding, the claimant alleges that Law 9 is unconstitutional because it violates the economic national interest and would cause harm to the environment. We believe that the claims are without merit and Minera Panama has intervened in both proceedings.

 

Several individuals have brought proceedings in the Supreme Court of Panama challenging the validity of the November 2005 resolution of MICI regarding Minera Panama’s compliance with Law 9 at that time. The proceedings sought a nullification of the MICI resolution on the basis that the time period established by Law 9 for approval by MICI of the plan for the multi-phase development of the concession area had expired. A ruling from the Third Chamber of the Supreme Court of Justice, dated January 31, 2011, brought the case to an end. The ruling declared the validity and legality of the November 2005 MICI resolution.

 

25

 

About the property

Minera Panama was granted the mineral concession to explore and exploit the property under Law 9. Law 9 has an initial twenty-year term ending in 2017 and provisions for two consecutive twenty-year extensions.

 

Under Law 9, Minera Panama has the rights to explore for, extract, exploit, beneficiate, process, refine, transport, sell and market the gold, copper and other mining deposits on the concession. It must pay a 2 percent royalty on all mineral product revenues to the Government of Panama. Law 9 also grants to Minera Panama rights of way on state owned lands and easements to use surface lands on concessions adjacent to the Law 9 concession, and the right to build, maintain and use on such lands and easements for use to build, install, maintain and use facilities and installations that Minera Panama deems convenient for the development of the Cobre Panama project.

 

The legal regime established by Law 9 for the development of the Cobre Panama concession is supplemented by the Mineral Resources Code of Panama (Code).  In February 2011, amendments to modify the Code, including clarifications regarding the ability of foreign state-owned entities to own interests in mineral concessions were enacted.  However, such modifications were subsequently repealed by the National Assembly of Panama and given legal effect on March 18, 2011. The repeal recognized concerns from indigenous communities over mining within areas known as Comarcas that are recognized under Panamanian law as administratively autonomous regions whose largely indigenous populations possess exclusive land rights to them. The Cobre Panama project is neither situated on nor adjacent to any Comarcas.  As part of the repeal, the Government of Panama appointed a special commission to consider and recommend to the National Assembly of Panama future modifications to the Code in consultation with affected parties.  This consultation process is currently ongoing.

 

Law 9 was not affected by the repeal of the modified Code and we do not expect that our ability to continue with development of the Cobre Panama project under Law 9 will be adversely affected as a result. In addition, under operation of Panamanian law, the repeal of the modified Code did not reinstate certain provisions of the Code that contained impediments to the ability of foreign state-owned entities from owning interests in mining concessions.  Accordingly, as of the date hereof, we are of the belief that foreign state-owned entities are permitted to own interests in mining concessions in Panama, and that such interests remain a viable option for the Cobre Panama project.

 

The Cobre Panama concession is 120 kilometres west of Panama City and 20 kilometres from the Caribbean Sea coast, in the District of Donoso, Colon Province, in the Republic of Panama. It includes four zones and 13,600 hectares. There is no industrial development in the area of the concession and the region is sparsely populated. The primary occupation of the local residents is subsistence farming. The nearest community, the village of Coclecito (population 900), is 12 kilometres southeast of the proposed plant site. The city of Penonomé, which has a population of 25,000, is 49 kilometres southeast of Coclecito.

 

Access to the south end of the concession area is via the Pan-American Highway system that runs parallel to the Pacific coast from Panama City to Penonomé, surfaced all-weather roads to La Pintada, and gravel roads via the town of Coclecito into the concession. From that point, the rest of the Cobre Panama property is currently accessible only by helicopter.

 

The topography in the concession area is rugged with considerable local relief covered by dense forest. The area to the north is a lowland with minimal relief extending to the Caribbean coast. Climatic conditions are tropical with high precipitation levels, high humidity and relatively high temperatures year-round of 25 to 30 degrees Celsius.

 

The project has two main development areas: a mine and plant site within the concession boundaries, and a port and power station site at Punta Rincon, about 25 kilometres north of the plant site on the Caribbean coast.

 

26

 

Physical characteristics and geology of the deposit

Mineralization at Cobre Panama consists of several disseminated copper — gold — molybdenum deposits. Known geologically as porphyry copper deposits, these are typical of the Western Cordillera of the Americas and other regions around the Pacific Ocean basin.

 

During a regional survey in 1968, a United Nations Development Program team discovered copper, gold and molybdenum porphyry mineralization in the Petaquilla River region of north-central Panama.

 

A total of 1,275 diamond drill holes resulting in 230,555 metres of drilling have been completed. Exploration has outlined the several porphyry deposits, which developed around granodioritic stocks within and peripheral to the Oligocene Petaquilla batholith. Epithermal gold mineralization has also been identified in a more distal setting to the batholith.

 

The porphyry deposits occur at the southern margin of a large granodioritic batholith of mid-Oligocene age.  The three main deposits are Botija, Colina and Valle Grande. There are also a number of smaller zones; the most significant being Brazo and Botija Abajo.

 

All of the porphyry style mineralization on the property is hosted in granodiorite, feldspar-quartz-hornblende porphyry and adjacent andesitic volcanic rocks. At Botija, a number of north dipping feldspar-quartz-hornblende dikes cut the granodiorite. Two roof pendants of andesitic volcanic rock occur in the central and eastern parts of the deposit. At Colina, mineralization is associated with an east-southeasterly trending, shallow north dipping, 2.5 kilometre by 1 kilometre feldspar-quartz-hornblende porphyry sill and dike complex that intrudes granodiorite and andesitic volcanic rocks. The Valle Grande zone is associated with a southeast trending feldspar-quartz-hornblende porphyry lopolith that is bounded to the north and south by andesitic volcanics and minor granodioritic dikes. At Brazo and Botija Abajo the host rock is dominantly feldspar-quartz or feldspar-quartz-hornblende porphyry.

 

Hydrothermal alteration along the Cobre mineral trend is primarily silica-chlorite which is interpreted to be a form of propylitic alteration. Potassic alteration, consisting of salmon coloured potassium feldspar and secondary biotite is seen in the central parts of Botija. Argillic and phyllic alteration is patchy in the three main deposits with the latter variety being most prevalent near the tops of the deposits. At Brazo, pervasive sericite, clay and pyrite is associated with well-developed quartz stockworks.

 

Hypogene sulphides occur as disseminations, micro-veinlets, fracture fillings, and quartz-sulphide stockworks. Chalcopyrite is the dominant copper mineral with lesser bornite. Traces of molybdenite are commonly found in quartz veinlets. There is no significant zone of supergene enrichment at Botija, Colina and Valle Grande. At Brazo, supergene mineralization consisting of chalcocite-coated pyrite and rare native copper occurs to a depth of at least 150 metres.

 

Environmental and Social Context

The project is located in a dense tropical rainforest, which is part of the Mesoamerican Biological Corridor (MBC), a linear zone of high biodiversity value that extends from southern Mexico through to Colombia. The MBC is a sustainable development model for Mesoamerica that unites the goals of conservation with sustainable development initiatives of local peoples throughout the region from southern Mexico to Panama. Unsustainable slash and burn agricultural practices have damaged and are currently impacting the MBC ecosystem.  It is estimated that between 10,000 and 40,000 h.a. of primary forest is impacted annually in Panama by these practices.

 

The Panamanian government established the nearby Donoso Multiple Use Area (DMUA) in 2009 as a mixed use protected area that explicitly recognizes the presence of the Cobre Panama mining concession.  MPSA and other affected parties were not consulted prior to creation of the DMUA and Minera Panama contested its establishment on the basis that required consultative administrative procedures were not followed by the relevant authority.  The establishment of the DMUA is suspended pending resolution of this case.  Minera Panama contested the DMUA to protect its constitutional right to due process and not because it objects to the objectives behind the establishment of the DMUA.  On December 27, 2011 the Panamanian Supreme Court of Justice issued a decision which maintained the DMUA but established that

 

27

 

the DMUA does not affect the existing mining rights of Minera Panama.  However, Minera Panama submitted a Request of Clarification in January 6, 2012 to prevent the ruling from becoming effective and extending the suspension period of the DMUA until the Panamanian Supreme Court responds such Request of Clarification.  Minera Panama is working with the Autoridad Nacional del Ambiente (ANAM), the Panamanian National Environmental Authority, and other stakeholders to create management plans, biodiversity offsets and conservation areas in the region to protect biodiversity in the context of the Cobre Panama project.

 

We have committed to meeting or exceeding the requirements of the International Finance Corporation Performance Standards (IFC PS) on social and environmental sustainability, and we have incorporated these into the social and environmental impact assessment (ESIA) for the project.  We submitted the ESIA to ANAM in September 2010, which ANAM approved on December 28, 2011.  The ESIA describes the environmental and social context of the project, the expected impact from project development and the steps we will take to mitigate them and deliver a net benefit collectively to the local communities, to the environment and to Panama as a whole.

 

Our detailed flora and fauna baseline work confirmed the presence of several threatened and endangered species and also identified more than sixty species of plants new to science. Our project will have a large footprint in the MBC and we have made commitments to conserve and enhance the biodiversity of the MBC through offsets and by contributing to the management of existing protected areas.

 

The project area has up to five metres of rainfall annually, so responsible water management is imperative to ensure that there are no adverse impacts from mine waste materials and other project-related activities.

 

There are twenty-two communities in the region of the project that we consider to be “project-affected”.  All of these are relatively small villages and many are situated along the access road leading north from La Pintada.  There are several small communities of indigenous Ngobe-Bugle people who have migrated into the project area over the past decade from the comarca.  The project will directly impact approximately 65 local families of latino and indigenous people; the indigenous people are dominantly located in two small settlements.  We are applying international best practice in the resettlement of these people.

 

Artisanal mining activities are conducted along the western boundary of the concession, mainly by indigenous people exploiting placer gold deposits along the Petaquilla River.  Mining is generally performed with pumps and sluices; hydraulic mining is used locally. We do not have any evidence of mercury use to produce amalgam.

 

The Project

On March 31, 2010, we announced the results of the final front-end engineering and design (FEED) study for the Cobre Panama project carried out by AMEC Americas Limited. The FEED study outlines a mine with a mine life of a minimum of 30 years and established Cobre Panama as one of the largest undeveloped copper porphyry deposits in the world. The FEED study will be superseded by Basic Engineering report which we intend to release in the second quarter of 2012.

 

Mining will be by open pit method, followed by crushing, grinding and standard flotation, with copper and molybdenum concentrates being produced. The copper concentrates will be pumped as slurry through a pipeline to a new port site on the Caribbean coast for filtration, storage and loading onto ocean-going vessels for shipment to market destinations.  Molybdenum concentrates will be dewatered at the mine site and bagged for truck delivery to the port site. Tailings from the flotation process will be stored under water in a storage facility to be constructed.

 

Both the mine and plant site and port site operations will be supported by equipment maintenance shops, warehouses, container storage areas, administration and security facilities, potable water supply, sewage treatment plants and concrete batch plants for use during both construction and operations. A new access road will be constructed between the mine and plant site and the port. Three pipelines will be buried next

 

28

 

to the road, one for pumping the copper concentrate to the port site, one for diesel fuel delivery to the mine, and the third for returning filtrate water from the dewatered concentrate back to the tailings management facility at the mine/plant site. New access roads and improvements to the existing access roads from Penonome through La Pintada and Coclesito to the site will be constructed to permit safe access to the mine and plant site from the Pan-American Highway via the existing road from Penomone. A permanent camp will be established at the mine and plant site for personnel working in both operating areas. All facilities would operate continuously 24 hours per day, 365 days a year.

 

In September 2010, Minera Panama submitted the project environmental and social impact assessment (ESIA) to the Autoridad Nacional del Ambiente (ANAM), the Panamanian environmental regulatory authority. During 2011, we have advanced several construction projects that were permitted independent of the project main ESIA. These projects include:

 

·                  Upgrade of the access road from Llano Grande to Molejon

·                  Molejon by pass

·                  Pioneer road inside of the concession

·                  New Bridges over San Juan and Molejon rivers

·                  Microwave telecommunication systems

 

These early projects are intended to enhance access to the project and ensure a smooth mobilization upon start of major construction following a final notice to proceed. On December 28, 2011 ANAM approved the ESIA, including the mining operations and related infrastructure, a port facility, and a coal-fired power plant. Following the ESIA approval construction permits that allow us to start site capture and major construction have been obtained.  Site capture and major construction is expected to commence in the second quarter of 2012, subject to the approval of Inmet Mining’s Board of Directors, completion of Basic Engineering, and the Board’s satisfaction regarding our ability to finance development of the project.

 

During 2011 we also progressed basic engineering and expect to announce updated capital and operating cost estimates in the Basic Engineering report which we intend to release in the second quarter of 2012.  On July 25, 2011, the Board of Directors of Inmet Mining conditionally approved the development of Cobre Panama as described in the final FEED study of March 2010 after completing a comprehensive review and risk assessment. The Board’s approval is conditional on the completion of basic engineering and related update of capital and operating project cost estimates and the Board’s satisfaction regarding our ability to finance development of the project.

 

Power Plant

In July 2011 we engaged SK Engineering and Constructors (SK) for the power plant under an engineering, procurement and construction lump sum turnkey contract. SK was instructed to proceed with engineering and pre-procurement activities under a limited notice to proceed.

 

Updated capital investment, sustaining capital and operating cost estimates for the power plant are expected to be included in the Basic Engineering report which we intend to release in the second quarter of 2012.

 

Environmental and community affairs

The Cobre Panama project presents a complex interplay of challenges as a result of its socio-environmental context.  The Cobre Panama environmental and social impact assessment (ESIA), submitted to the Panamanian regulatory agency in September, 2010, describes the existing socio-environmental conditions in the project area and the likely impacts that will result from development, operation and closure of the project. The most significant environmental impacts are changes to local stream flows, possible water quality impacts, deforestation, impacts to air quality, possible impacts to the biodiversity of the area and an increase in greenhouse gas emissions.  Inmet has made significant

 

29

 

commitments to address these concerns to develop the project responsibly and sustainably.  The Cobre Panama ESIA was approved by the Autoridad Nacional del Ambiente (ANAM), the Panamanian environmental regulator, on December 28, 2011.

 

The ESIA describes the existing socio-environmental conditions in the project area, the likely impacts and benefits that will result from the project and the commitments that Minera Panama will undertake to deliver net positive impact through minimizing the impacts and enhance the benefits. It is one of the most intensive studies ever undertaken of the socio-environmental context of the Atlantic slope of Panama. More than 40,000 person-hours of field time were recorded and more than 100 Panamanian and international experts were involved in preparing the document, and three rounds of public consultation were held in local communities.

 

The ESIA document consists of approximately 15,000 pages in 40 volumes. We worked closely with the Panamanian authorities to facilitate the review process. ANAM hired external experts to assist in their review. In addition to the Panamanian authorities’ review of the ESIA, the project has also been reviewed by external financing agencies for compliance with the International Finance Corporation’s Performance Standards and the Equator Principles.

 

Building our privilege to operate in an underdeveloped region of Panama continues to be one of our highest priorities, and we are confident that our activities will result in local and regional support for the project and the benefits that it will deliver.

 

The project area is a remote and undeveloped part of north-central Panama characterized by rich biodiversity and the presence of small and isolated latino and indigenous communities.  The lack of economic prospects has relegated the local residents to a largely subsistence existence, often characterized by slash and burn agricultural practices.  Such practices, coupled with the continued in-migration of people to the area, are having a detrimental effect on the local biodiversity as more land is cleared.  Local residents are facing a cycle of poverty and environmental degradation, lack of infrastructure, and basic health and educational services.

 

The Cobre Panama project will be a regional economic engine to contribute to Panama’s growth, help alleviate poverty in the local project area, catalyze the development of sustainable communities and help ensure protection of the rich biodiversity of the Mesoamerican Biological Corridor. We are committed to delivering net positive impact to biodiversity through a landscape-scale conservation approach that will maximize the survival of species.

 

There are several Latino and indigenous communities near the project; one of the small indigenous communities is located in close proximity to planned project infrastructure and we are in discussions with members of this community about resettlement.  We also expect that there will be direct resettlement of some homesteads that are within the project footprint as well as some indirect (economic) dislocation of individuals. We are committed to following international best practice in resettlement and are in advanced resettlement negotiations with potentially affected residents.  None of the land required for the project facilities is recognized as a Comarca. In 2011, all six Resettlement Negotiation Committees, representing all of the 65 households to be resettled, signed the Resettlement Action Plan.  The Resettlement Action Plan describes the actions that we will take to protect the rights of the people, to compensate them for their housing and household goods and to provide replacement livelihoods.

 

We have established a local, dedicated team of Panamanian community relations and community development professionals. We continue to consult extensively with affected communities, and conducted community meetings to describe the impact of the project and mitigations.

 

We also started several community development projects to demonstrate our commitment to being a catalyst to help alleviate poverty and build sustainable communities in the region. These programs include agricultural improvement programs, local employment-building initiatives, provision of meals to 6,000 school students daily, a scholarship program and efforts to work with governments to improve local access

 

30

 

to healthcare, education and clean drinking water.

 

Our environmental activities this past year revolved around two primary components: work to further define our actions stemming from ESIA commitments, and support for our field activities. Our primary field-related concerns as we support drilling activities are management of solid and hazardous waste, petroleum product management and making sure the environment is not affected by the discharge from our drilling activities. We have worked cooperatively with the Panamanian environmental regulators to define the permit requirements for our planned field activities and with our evolving knowledge of the Panamanian legal framework, we will continue to ensure that we meet all requirements.

 

Engineering

In October, 2010 Minera Panama awarded a contract for engineering, procurement and construction management (EP+CM) procurement process to Joint Venture Panama Inc. (JVP), a joint venture led by SNC-Lavalin Group Inc. (70 percent) with partners GyM S.A. (a member of Grana y Montero Group) (15 percent) and Techint International Construction Corp. (15 percent). Basic engineering progressed throughout 2011 and we expect to conclude and report on basic engineering in the second quarter of 2012.

 

Following basic engineering, and subject to a final investment decision by MPSA to proceed with construction of the project, the contract will be extended to authorize JVP to proceed with full detailed engineering, procurement and construction management for all facilities except the process plant.  A separate competitive procurement process will be undertaken to award an engineering, procurement and construction contract for the process plant.

 

JVP was engaged through 2011 in construction management activities for the early projects and mobilized into the site.

 

Engineering and pre-procurement activities progressed on the power plant throughout 2011 under the engineering, procurement and construction contract with SK.

 

We made progress with several early works projects in the year in preparation for a final production decision, including the start of construction on a pioneer road and other road by-passes, preparation for bridge construction, and initiation of several permits required for additional work.

 

2012 outlook for development

We plan to:

 

·                  continue our dialogue with stakeholders at the community, regional and national levels, to increase their understanding of the project and its benefits to Panama, and our understanding of their potential concerns

·                  complete additional drilling to improve our understanding of mineralization potential not currently included in the project base case

·                  subject to Board approvals proceed with detail engineering, major procurement and initiate site capture and full construction

·                  issue a Request for Proposal for the Process Plant and award the contract for the detail engineering, procurement and construction under an EPC agreement

·                  consider a range of financing options including a project level limited recourse facility, capital market alternatives and potential new partners

·                  implement, with the assistance of our EP+CM contractors, project specific Health & Safety and Environmental and Social mitigation plans that are consistent with the ESIA and Inmet’s corporate responsibility standards

 

After we have received the appropriate approvals, we expect that site capture, preparation and construction of the project should take approximately 44 months.

 

31

 

Partnership process

In 2011 we recommenced a process to engage potential new partners in Cobre Panama. Interested parties are engaged at various stages of due diligence on the project under confidentiality agreements.

 

32

 

 

Exploration

 

Our exploration strategy focuses on three components which we believe offer the greatest potential for realizing growth.  Those components are:

 

·        exploring worldwide under our generative program for copper deposits that are consistent with our growth objectives;

·        exploring on the Cobre Panama property to find additional resources that will materially impact the economics of the project; and

·        exploring within our operational areas to take advantage of the existing infrastructure and to potentially extend the life of our mines and/or increase mill output.

 

Our objective is to build a pipeline of future growth opportunities through our generative effort, which is focused on exploring for world-class copper deposits which will deliver annual production of at least 100,000 tonnes of copper and have a mine life of at least 25 years. We believe that copper-gold and copper-molybdenum porphyries, sedimentary-hosted copper, skarns and iron oxide copper-gold deposits are those deposit types most likely to meet our growth objectives.

 

We have directed our activities into those geographic areas where we believe the probability of achieving success is highest. Our country selection is based upon:

 

·        geological favourability;

·        quality of geodatabase;

·        political risk;

·        infrastructure; and

·        level of competition.

 

Our exploration is now focused on Chile, Peru, Mexico, Finland, Canada, the United States and Australia.

 

We have increased our exploration budget for 2012 to $31 million of which about 64 percent is allocated towards world class copper opportunities, 13 percent towards our operational areas, 21 percent towards Cobre Panama and 2 percent towards regional office support.

 

33

 

MINERAL RESERVES AND RESOURCES

 

Mineral reserves and resources table

 

The table below shows our operating property mineral reserves and resources estimated at December 31, 2011, except for Cobre Panama resources which are as of March 5, 2012.

 

Operating properties

 

	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Contained Metal (x 1000)
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
Tonnes
    	
 
    	
Cu
    	
 
    	
Zn
    	
 
    	
Pb
    	
 
    	
Au
    	
 
    	
Ag
    	
 
    	
S
    	
 
    	
Mo
    	
 
    	
Cu
    	
 
    	
Zn
    	
 
    	
Pb
    	
 
    	
Au
    	
 
    	
Ag
    	
 
    	
Mo
    	
 
    	
Inmet’s
    	
 
    
	
 
    	
 
    	
Category
    	
 
    	
(x 1000)
    	
 
    	
%
    	
 
    	
%
    	
 
    	
%
    	
 
    	
g/t
    	
 
    	
g/t
    	
 
    	
%
    	
 
    	
%
    	
 
    	
tonnes
    	
 
    	
tonnes
    	
 
    	
tonnes
    	
 
    	
ounces
    	
 
    	
ounces
    	
 
    	
tonnes
    	
 
    	
Interest
    	
 
    
	
Mineral reserves
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Las   Cruces
    	
 
    	
Proven
    	
 
    	
9,777
    	
 
    	
5.8
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
564
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
100
    	
%
    
	
 
    	
 
    	
Probable
    	
 
    	
4,881
    	
 
    	
4.9
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
238
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
100
    	
%
    
	
 
    	
 
    	
Total
    	
 
    	
14,658
    	
 
    	
5.5
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
802
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
100
    	
%
    
	
Çayeli
    	
 
    	
Proven
    	
 
    	
5,007
    	
 
    	
3.0
    	
 
    	
3.4
    	
 
    	
—
    	
 
    	
0.3
    	
 
    	
28
    	
 
    	
—
    	
 
    	
—
    	
 
    	
152
    	
 
    	
170
    	
 
    	
—
    	
 
    	
55
    	
 
    	
4,507
    	
 
    	
—
    	
 
    	
100
    	
%
    
	
 
    	
 
    	
Probable
    	
 
    	
2,946
    	
 
    	
3.3
    	
 
    	
4.3
    	
 
    	
—
    	
 
    	
0.4
    	
 
    	
40
    	
 
    	
—
    	
 
    	
—
    	
 
    	
98
    	
 
    	
126
    	
 
    	
—
    	
 
    	
42
    	
 
    	
3,789
    	
 
    	
—
    	
 
    	
100
    	
%
    
	
 
    	
 
    	
Total
    	
 
    	
7,953
    	
 
    	
3.1
    	
 
    	
3.7
    	
 
    	
—
    	
 
    	
0.4
    	
 
    	
32
    	
 
    	
—
    	
 
    	
—
    	
 
    	
250
    	
 
    	
296
    	
 
    	
—
    	
 
    	
96
    	
 
    	
8,296
    	
 
    	
—
    	
 
    	
100
    	
%
    
	
Pyhäsalmi
    	
 
    	
Proven
    	
 
    	
9,137
    	
 
    	
1.1
    	
 
    	
2.0
    	
 
    	
—
    	
 
    	
0.4
    	
 
    	
14
    	
 
    	
41
    	
 
    	
—
    	
 
    	
99
    	
 
    	
183
    	
 
    	
—
    	
 
    	
118
    	
 
    	
4,113
    	
 
    	
—
    	
 
    	
100
    	
%
    
	
 
    	
 
    	
Probable
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
100
    	
%
    
	
 
    	
 
    	
Total
    	
 
    	
9,137
    	
 
    	
1.1
    	
 
    	
2.0
    	
 
    	
—
    	
 
    	
0.4
    	
 
    	
14
    	
 
    	
41
    	
 
    	
—
    	
 
    	
99
    	
 
    	
183
    	
 
    	
—
    	
 
    	
118
    	
 
    	
4,113
    	
 
    	
—
    	
 
    	
100
    	
%
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Inmet’s   share
    	
 
    	
1,151
    	
 
    	
478
    	
 
    	
 
    	
 
    	
214
    	
 
    	
12,409
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Mineral resources (exclusive of mineral reserves)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Las   Cruces
    	
 
    	
Measured
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
100
    	
%
    
	
 
    	
 
    	
Indicated
    	
 
    	
194
    	
 
    	
4.2
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
8
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
100
    	
%
    
	
 
    	
 
    	
Indicated
    	
 
    	
958
    	
 
    	
—
    	
 
    	
—
    	
 
    	
5.8
    	
 
    	
3.9
    	
 
    	
109
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
56
    	
 
    	
119
    	
 
    	
3,357
    	
 
    	
—
    	
 
    	
100
    	
%
    
	
 
    	
 
    	
(Gossan)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Inferred
    	
 
    	
1,767
    	
 
    	
—
    	
 
    	
—
    	
 
    	
1.6
    	
 
    	
2.5
    	
 
    	
48
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
29
    	
 
    	
140
    	
 
    	
2,744
    	
 
    	
—
    	
 
    	
100
    	
%
    
	
 
    	
 
    	
(Gossan)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Çayeli
    	
 
    	
Measured
    	
 
    	
3,016
    	
 
    	
3.0
    	
 
    	
1.7
    	
 
    	
—
    	
 
    	
0.3
    	
 
    	
11
    	
 
    	
—
    	
 
    	
—
    	
 
    	
89
    	
 
    	
50
    	
 
    	
—
    	
 
    	
33
    	
 
    	
1,067
    	
 
    	
—
    	
 
    	
100
    	
%
    
	
 
    	
 
    	
Indicated
    	
 
    	
2,089
    	
 
    	
3.1
    	
 
    	
3.3
    	
 
    	
—
    	
 
    	
0.6
    	
 
    	
27
    	
 
    	
—
    	
 
    	
—
    	
 
    	
65
    	
 
    	
70
    	
 
    	
—
    	
 
    	
43
    	
 
    	
1,813
    	
 
    	
—
    	
 
    	
100
    	
%
    
	
 
    	
 
    	
Inferred
    	
 
    	
479
    	
 
    	
3.2
    	
 
    	
10.6
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
16
    	
 
    	
51
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
100
    	
%
    
	
Pyhäsalmi
    	
 
    	
Measured
    	
 
    	
7,168
    	
 
    	
0.6
    	
 
    	
0.5
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
44
    	
 
    	
—
    	
 
    	
45
    	
 
    	
37
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
100
    	
%
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Inmet’s   share
    	
 
    	
207
    	
 
    	
157
    	
 
    	
56
    	
 
    	
195
    	
 
    	
6,237
    	
 
    	
—
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
(not including   inferred resources)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

Development property

 

	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Contained Metal (x 1000)
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
Tonnes
    	
 
    	
Cu
    	
 
    	
Zn
    	
 
    	
Pb
    	
 
    	
Au
    	
 
    	
Ag
    	
 
    	
S
    	
 
    	
Mo
    	
 
    	
Cu
    	
 
    	
Zn
    	
 
    	
Pb
    	
 
    	
Au
    	
 
    	
Ag
    	
 
    	
Mo
    	
 
    	
Inmet’s
    	
 
    
	
 
    	
 
    	
Category
    	
 
    	
(x 1000)
    	
 
    	
%
    	
 
    	
%
    	
 
    	
%
    	
 
    	
g/t
    	
 
    	
g/t
    	
 
    	
%
    	
 
    	
%
    	
 
    	
tonnes
    	
 
    	
tonnes
    	
 
    	
tonnes
    	
 
    	
ounces
    	
 
    	
ounces
    	
 
    	
tonnes
    	
 
    	
Interest
    	
 
    
	
Mineral reserves
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cobre   Panama
    	
 
    	
Proven
    	
 
    	
258,000
    	
 
    	
0.57
    	
 
    	
—
    	
 
    	
—
    	
 
    	
0.14
    	
 
    	
1.6
    	
 
    	
—
    	
 
    	
0.010
    	
 
    	
1478
    	
 
    	
—
    	
 
    	
—
    	
 
    	
1126
    	
 
    	
13,020
    	
 
    	
25
    	
 
    	
100
    	
%
    
	
 
    	
 
    	
Probable
    	
 
    	
2,061,000
    	
 
    	
0.38
    	
 
    	
—
    	
 
    	
—
    	
 
    	
0.06
    	
 
    	
1.4
    	
 
    	
—
    	
 
    	
0.007
    	
 
    	
7781
    	
 
    	
—
    	
 
    	
—
    	
 
    	
4041
    	
 
    	
91,008
    	
 
    	
145
    	
 
    	
100
    	
%
    
	
 
    	
 
    	
Total
    	
 
    	
2,319,000
    	
 
    	
0.40
    	
 
    	
—
    	
 
    	
—
    	
 
    	
0.07
    	
 
    	
1.4
    	
 
    	
—
    	
 
    	
0.007
    	
 
    	
9258
    	
 
    	
—
    	
 
    	
—
    	
 
    	
5167 
    	
 
    	
104,028
    	
 
    	
169
    	
 
    	
100
    	
%
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Inmet’s   share
    	
 
    	
9,258
    	
 
    	
—
    	
 
    	
—
    	
 
    	
5,167   
    	
 
    	
104,028
    	
 
    	
169
    	
 
    	
 
    	
 
    
	
Mineral resources (inclusive of mineral reserves)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Cobre   Panama
    	
 
    	
Measured
    	
 
    	
262,000
    	
 
    	
0.56
    	
 
    	
—
    	
 
    	
—
    	
 
    	
0.13
    	
 
    	
1.5
    	
 
    	
—
    	
 
    	
0.009
    	
 
    	
1,476
    	
 
    	
—
    	
 
    	
—
    	
 
    	
1,118
    	
 
    	
12,979
    	
 
    	
24
    	
 
    	
100
    	
%
    
	
 
    	
 
    	
Indicated
    	
 
    	
3,905,000
    	
 
    	
0.34
    	
 
    	
—
    	
 
    	
—
    	
 
    	
0.06
    	
 
    	
1.2
    	
 
    	
—
    	
 
    	
0.005
    	
 
    	
13,237
    	
 
    	
—
    	
 
    	
—
    	
 
    	
7,845 
    	
 
    	
155,392
    	
 
    	
214
    	
 
    	
100
    	
%
    
	
 
    	
 
    	
Total
    	
 
    	
4,167,000
    	
 
    	
0.35
    	
 
    	
—
    	
 
    	
—
    	
 
    	
0.07
    	
 
    	
1.3
    	
 
    	
—
    	
 
    	
0.006
    	
 
    	
14,715
    	
 
    	
—
    	
 
    	
—
    	
 
    	
8,963 
    	
 
    	
168,454
    	
 
    	
238
    	
 
    	
100
    	
%
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Inmet’s   share
    	
 
    	
14,715
    	
 
    	
—
    	
 
    	
—
    	
 
    	
8,963   
    	
 
    	
168,454
    	
 
    	
238
    	
 
    	
 
    	
 
    
	
Cobre   Panama
    	
 
    	
Inferred
    	
 
    	
3,749,000
    	
 
    	
0.23
    	
 
    	
—
    	
 
    	
—
    	
 
    	
0.04
    	
 
    	
1.0
    	
 
    	
—
    	
 
    	
0.004
    	
 
    	
8,660
    	
 
    	
—
    	
 
    	
—
    	
 
    	
4,805 
    	
 
    	
120,534
    	
 
    	
156
    	
 
    	
100
    	
%
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Inmet’s   share
    	
 
    	
8,660
    	
 
    	
—
    	
 
    	
—
    	
 
    	
4,805   
    	
 
    	
120,534
    	
 
    	
156
    	
 
    	
 
    	
 
    

 

Mineral reserves and resources — 2011 Overview

 

Aggregate proven and probable reserves of 10.4 million tonnes of contained copper reported above compare to 10.2 million tonnes reported in the 2010 Annual Information Form, each as reported on a 100% basis for the three operating mines and the Cobre Panama development project. Zinc reserves of 478,000 tonnes of contained zinc reported above compare to 596,000 tonnes reported in 2010. Contained gold has increased to 5.4 million ounces, contained silver has risen to 116 million ounces and contained molybdenum has increased to 169,000 tonnes.

 

Reserves and resources at our Cobre Panama project have increased since the end of 2010.  Based on contained metal, reserves have increased by 367,000 tonnes of copper (4.1%), 211,000 ounces of gold (4.3%), 5.3 million ounces of silver (5.4%) and 5,000 tonnes of molybdenum (3.2%). Measured and indicated resources (inclusive of reserves) have increased by 3.0 million tonnes of contained copper

 

34

 

(25.9%), 2.4 million ounces of contained gold (37.2%), 35.2 million ounces of contained silver (26.4%) and 23,000 tonnes of contained molybdenum (10.7%).  Inferred resources have increased by 1.2 million tonnes of copper (15.3%), 800,000 ounces of gold (20.0%), 17.4 million ounces of silver (16.9%) and 8,000 tonnes of molybdenum (5.7%).

 

Las Cruces’ reserves net of 2011 mining declined by 108,000 tonnes of contained copper due to a reduction in the reserve grade to 5.5 percent from 6.2 percent. Grade reconciliation after mining the first 15 percent of the ore body has shown that the areas previously thought to carry the highest grades have been less extensive than originally estimated. While the decline in Las Cruces’ reserves is disappointing, we expect that we can maintain our design capacity of 72,000 tonnes cathode per year by processing higher tonnage from 2014 onward and as of the date of this Annual Information Form our guidance for this year remains unchanged at 61,700 — 68,600 tonnes at cash costs between US$ 1.08 — 1.26 per pound Cu.  An amended mine plan is in progress, expected to be completed by the end of 2012.

 

Further details regarding changes to reserves and resources at each of our properties are provided below.

 

Çayeli

 

With infill drilling at Çayeli, 500,000 tonnes of footwall stock work mineralization containing 13,000 tonnes of copper was moved from resources to proven and probable reserves.  These tonnes are readily accessible from existing infrastructure.

 

Resources have increased by 1.6 million tonnes, in part by adding 1.3 million tonnes, grading 3.0% copper and 2.2% zinc, and containing 43,000 tonnes of copper and 32,000 tonnes of zinc.

 

An evaluation of all remaining resources will be carried out in 2012, potentially adding additional operating years to the estimated mine life.  We now expect mine production to extend beyond 2019.

 

Pyhäsalmi

 

Reserves at Pyhäsalmi remain largely unchanged at year end 2011, and we continue to expect the mine life to end in 2018.  Minor adjustments are attributed to changes in the expected long term exchange rates, metal prices and operating cost.

 

Cobre Las Cruces

 

Based on findings from our independent Qualified Person, Alan C. Noble, P.E. and the initial results of an 8,500 metre drill program we started in 2011, we have reduced our reserve grade and now estimate 14,658,000 tonnes at 5.5%, or 802,000 contained tonnes copper.  This reduction in the estimated average reserve grade is primarily the result of the following modifications to the reserve assumptions:

 

1.               Reductions to the size of the high grade zones consistent with the results obtained during mining the first 15 percent of the ore zone, corroborated by fault mapping and additional drilling; and

2.               Increasing dilution estimates from 2.4 percent to 6.6 percent with a corresponding decrease in the expected feed grade, in line with operational experience.

 

While the decline in Las Cruces reserves is a disappointment, we expect that we can maintain our design capacity of 72,000 tonnes cathode per year by processing higher tonnage from 2014 onward, when the process plant will need to treat 15 percent additional feed tonnage annually to maintain plant designed cathode output.  The plant has been designed with this factor in mind and many areas of the plant have been tested at the higher levels.  We now expect the Las Cruces mine life to end in 2022.

 

Essentially all of the 2010 copper resources have been upgraded to reserves at Las Cruces. Newly included in the 2011 resource estimate is a quantity of lead gossan containing high amounts of gold and silver.  This material has until now been excluded from the resource statement, but is being included this year following preliminary metallurgical testwork showing that  the gossan is capable of generating a lead

 

35

 

concentrate high in silver and gold with precious metal recovery of approximately 50 percent.  Currently the gossan is removed and stockpiled while accessing the copper zone and no additional cost is incurred in its extraction.  In 2012 we will advance the work with additional testing and discussions with nearby process plants and compatible smelters.  More than 900,000 tonnes, at grades of 5.8 percent Pb, 3.9 g/t Au and 109 g/t silver, of the highest grade gossan is currently stockpiled on surface at Las Cruces and is shown as an Indicated resource in our statement.

 

Cobre Panama

 

For 2012, the Cobre Panama reserves have been revised based on increased metal prices, revised operating cost forecasts and metal recoveries, as detailed in the footnotes to the reserves and resources table.  Pit designs for Botija, Colina and Valle Grande remain the same.  Based on contained metal, the revised reserves have increased by 367,000 tonnes of copper (4.1%), 211,000 ounces of gold (4.3%), 5.3 million ounces of silver (5.4%) and 5,000 tonnes of molybdenum (3.2%).

 

Cobre Panama resources (inclusive of reserves) have been recalculated and now incorporate 59,049 metres of drilling and some 171 holes completed since the 2010 FEED study resource calculation, most of which focused on the 2011 Balboa discovery.  Overall resources in the measured and indicated categories (contained metal) have increased by 3.0 million tonnes  of copper (25.9%), 2.43 million ounces of gold (37.2%), 35.2 million ounces of silver (26.4%) and 23,000 tonnes of molybdenum (10.7%). These increases reflect moving inferred resources into the indicated category on the Brazo deposit and the addition of the Balboa resource. Resources in the inferred category have increased by 1.2 million tonnes of copper (15.3%), 800,000 ounces of gold (20.0%), 17.4 million ounces of silver (16.9%) and 8,000 tonnes of molybdenum (5.7%).  The bulk of the increases in the inferred category came from Balboa’s addition to the resource statement.

 

Notes to mineral reserves and resources table

 

Mineral reserves and resources are shown on a 100 percent basis for each property. Except as stated, mineral resources are exclusive of mineral reserves.

 

The mineral reserve and resource estimates are prepared in accordance with the CIM Definition Standards On Mineral Resources and Mineral Reserves, adopted by CIM Council on November 14, 2004, and the CIM Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines, adopted by CIM Council on November 23, 2003, using geostatistical and/or classical methods, plus economic and mining parameters appropriate to each project. You will find the definitions and guidelines at www.cim.org.

 

Estimates for all operations are prepared by or under the supervision of a qualified person as defined in National Instrument 43-101 (usually an engineer or geologist).

 

There are no known environmental, permitting, legal, taxation, political or other relevant issues that would materially affect the estimates of the mineral reserves.

 

Mineral resources which do not form part of the mineral reserves do not have demonstrated economic viability.

 

36

 

Las Cruces

 

Resource and reserve estimates as at December 31, 2011 prepared by independent consultant Alan C. Noble, P.E. of ORE Reserves Engineering.

 

Reserve estimates are based on the following assumptions:

 

·        copper price: US $2.25 per pound

 

·        exchange rate: €1.00 = US $1.30

 

·        open pit cut-off: 1 percent copper (95 percent of copper in reserve)

 

·        underground cut-off: 3 percent copper (5 percent of copper in reserve)

 

·        resource estimates for the gossan material are based on a cut-off of 1 gram per tonne gold

 

Çayeli

 

Mineral resources as at December 31, 2011, were estimated by Robert Sim, P. Geo., of SIM Geological Inc.  Reserve estimates as at December 31, 2011 were prepared under the supervision of Joseph Boaro, P. Eng. (Director, Mining, Inmet Mining).

 

Reserve estimates are based on the following assumptions:

 

·        copper price: US $2.25 per pound

 

·        zinc price: US $0.85 per pound

 

·        net smelter return cut-off: US $65 per tonne.

 

Resource estimates include only material in addition to those used to generate reserves and are based on the same metal prices and a lower net smelter return cut-off: US $59 per tonne.

 

Pyhäsalmi

 

Reserve and resource estimates as at December 31, 2011 prepared under the supervision of Timo Maki, EurGeol., European Federation of Geologists (Chief Geologist, Pyhäsalmi).

 

Reserve estimates are based on the following assumptions:

 

·        copper price: US $2.25 per pound

 

·        zinc price: US $0.85 per pound

 

·        exchange rate: €1.00 = US $1.30

 

·        net smelter return cut-off: €31.73 per tonne.

 

Resource estimates are based on the geological limits of the massive sulphides.

 

Cobre Panama

 

Mineral resources as at March 5, 2012, were estimated by Robert Sim, P. Geo., of SIM Geological Inc. Mineral reserves as at December 31, 2011 were estimated by William Rose, P.E., of WLR Consulting, Inc., a qualified person under National Instrument 43-101.

 

Reserve estimates are based on the following assumptions:

 

·        copper price: US $2.25 per pound

 

·        gold price: US $1,000 per ounce

 

37

 

·        silver price: US $16 per ounce

 

·        molybdenum price: US $13.50 per pound

 

·        Mining costs : US $ 1.66 per tonne of ore mined, US $ 1.96 per tonne of waste mined and

 

·        Milling and general and administration cost: US $ 5.27 per tonne of ore milled, average life of mine metallurgical recoveries: 89 percent for copper, 52 percent for gold, 46 percent for silver and 53 percent for molybdenum.

 

Mineral resources include mineral reserves.

 

Resource grades are estimated using ordinary kriging with a nominal block size of 25 metres by 25 metres by 15 metres. Resources are limited inside a pit shell defined by a copper price of US $2.60 per pound, $1.75 per tonne mining cost and $7.02 per tonne total site operating cost, and are tabulated at a cut-off grade of 0.15 percent copper.

 

38

 

RISK FACTORS

 

There are risks in every business and the mining industry has its own inherent risks. The following is a description of some of the material risks and uncertainties to which Inmet is subject.

 

Current Global Economic and Financial Conditions May Adversely Affect Our Growth and Profitability

 

The events in global financial markets since 2007 have had a significant impact on the global economy. Many industries, including the copper mining industry, have been impacted by these market conditions.  Current global financial conditions have been characterized by increased volatility and uncertainty.   Several financial institutions have either gone into bankruptcy or have had to be rescued by governmental authorities and a number of sovereign borrowers have experienced difficulties refinancing existing sovereign debt and issuing additional sovereign debt. Although there have been some indications of recovery, there is no certainty that the disruptions and their effects have ended and will not continue to affect the markets.

 

A continued or worsened slowdown in the financial markets or other economic conditions, including but not limited to, consumer spending, employment rates, business conditions, inflation, fuel and energy costs, consumer debt levels, lack of available credit, the state of the financial markets, interest rates, and tax rates may adversely affect our growth and profitability. Specifically:

 

·                  the global credit/liquidity crisis could impact the cost and availability of debt or equity financing and Inmet’s  overall liquidity and, further, the availability of financing on terms favourable to Inmet;

·                  as China consumes a significant proportion of global copper output, the overall state of the Chinese economy, including credit/lending levels, fluctuations in inflation and interest rates and fiscal policy could have an impact on global demand for copper, thereby potentially affecting copper prices realized by Inmet;

·                  the volatility of metal prices could impact Inmet’s revenues, profits, losses and cash flow;

·                  volatile energy prices, commodity and consumables prices, other input costs and currency exchange rates could impact Inmet’s production and development costs; and

·                  any or all of these economic factors, as well as other related factors, may cause decreases in asset values that are deemed to be other than temporary, which may result in impairment losses.

 

These factors could have a material adverse effect on Inmet’s financial condition, results of operations and share price.

 

Fluctuations in Metal Prices May Adversely Affect Us

 

The value and price of Inmet’s common shares, Inmet’s financial results, and Inmet’s exploration, development and mining activities are significantly affected by the price of copper, zinc and other metals in the world market. Our earnings are derived from the sale of metals and fluctuate with changes to the market prices for refined metals. We typically do not hedge the prices of the base metals we produce. Copper, zinc and other metal prices fluctuate widely and are affected by numerous factors beyond Inmet’s control, such as:

 

·                  global supply and demand;

·                  regional supply and demand;

·                  the political and economic conditions of copper-producing and copper-consuming countries throughout the world;

·                  exchange rates relative to the US dollar;

·                  interest rates and interest rate expectations;

·                  inflation or deflation and expectations with respect to inflation or deflation; and

·                  speculative activities.

 

39

 

Future metal price declines could materially adversely affect the value and amount of our reserves, our business, financial condition, liquidity and results of operations, and could cause continued development of and commercial production from Inmet’s properties to be uneconomic. Depending on the price of copper and other metals, cash flow from mining operations may not be sufficient and Inmet could be forced to discontinue production and may lose its interest in, or may be forced to sell, some or all of its properties. Reserve calculations and mine plans using significantly lower copper and other metal prices could result in significant reductions in mineral reserve estimates, which in turn could result in material write-downs of Inmet’s investment in mining properties and increased amortization, reclamation and closure charges. In addition to adversely affecting Inmet’s reserve estimates and its financial condition, declining metal prices can impact operations by requiring a reassessment of the feasibility of a particular project. Such a reassessment may be the result of a management decision or may be required under financing arrangements related to a particular project. Even if a project is ultimately determined to be economically viable, the need to conduct such a reassessment may cause substantial delays or may interrupt operations until the reassessment can be completed.

 

Inmet’s Share Price May be Volatile and May Decline

 

Securities markets throughout the world are cyclical and, over time, tend to undergo high levels of price and volume volatility, and the market price of securities of many companies, particularly those in the resource sector, can experience wide fluctuations which are not necessarily related to the operating performance, underlying asset values or prospects of such companies. There can be no assurance that such fluctuations will not affect the price of Inmet’s securities, and Inmet’s share price may decrease.

 

Inmet May be Adversely Affected by the Availability and Cost of Key Inputs

 

Our competitive position depends on our ability to control operating costs. The cost structure of each operation is based on the location, grade and nature of the ore body, and the management skills at each site as well as the costs of key inputs such as fuel, tires for mining equipment, and other supplies. If such supplies become unavailable or their cost increases significantly, the profitability of Inmet’s mines would be impacted and operations at Inmet’s mines could be interrupted or halted resulting in a significant adverse impact on Inmet’s financial condition. Management of Inmet prepares its cost and production guidance and other forecasts based on its review of current and estimated future costs, and management assumes that the materials and supplies required for operations will be available for purchase. Lack of supply or increased costs for any of these inputs would decrease productivity, reduce the profitability of Inmet’s mines, and potentially result in Inmet suspending operations at its mines.

 

Many of our costs are driven by supply and market demand. For example, the cost of local materials, like cement, explosives and electricity will vary based on demand. Wages can be affected by inflation and currency exchange rates and by the shortage of experienced human resources. The costs of fuel and steel are driven by global market supply and demand. We do not enter into long-term contracts for any consumable products. Our main cost drivers include the cost of labour plus consumables such as electricity, fuel and steel.  In recent years, the mining industry has been impacted by increased worldwide demand for critical resources such as input commodities, drilling equipment, tires and skilled labour, and these shortages may cause unanticipated cost increases and delays in delivery times, thereby impacting operating costs, capital expenditures and production schedules.

 

Concentrate treatment charges, transportation costs, and energy costs are also a significant component of operating costs. Concentrate treatment and refining charges have been volatile in recent years.  We are dependent on third parties for rail, truck and maritime services to transport our products, and contract disputes, demurrage charges, rail and port capacity issues, availability of vessels, weather and climate and other factors can have a material adverse impact on our ability to transport our products according to schedules and contractual commitments.  Our operations, by their nature, use large amounts of power and energy. Even a temporary interruption of power could adversely affect an operation. An increase in power and energy prices could negatively affect our business, financial condition, liquidity and results of 

 

40

 

operations.  Increases in these costs would have an adverse impact on Inmet’s results of operations and could have a material adverse effect on Inmet’s financial condition, results of operations and share price.

 

Labour Shortages or Labour Disruptions May Adversely Affect Us

 

From time to time the mining industry experiences a shortage of skilled or experienced personnel, especially trades people, on a global, regional or local basis. While we have a comprehensive strategy in place to attract and retain people of the highest caliber, there is no assurance that Inmet will be able to retain current personnel and attract and retain new personnel.

 

Certain of our employees are employed under collective bargaining agreements. Inmet cannot predict at this time whether it will be able to reach an agreement with its unionized workforces without a work stoppage.  Further, relations with employees may be affected by changes in the scheme of labour relations that may be introduced by the relevant governmental authorities in the jurisdictions in which Inmet operates.  Changes in such legislation or otherwise in Inmet’s relationship with its employees may result in labour unrest or disruptions such as strikes, lockouts or other work stoppages, could have a material adverse effect on our business as a whole, financial condition, results of operations or share price.

 

We are Subject to Various Risks Related to Environmental and Health and Safety Laws and Regulations

 

Our activities by their very nature impact the environment so our operations and investments are subject to extensive and stringent laws and regulations concerning the environment, employee health and safety, waste disposal, mine development, mine operation and mine closure and reclamation. We require permits and approvals from a variety of regulatory authorities for many aspects of mine development, operation, closure and reclamation. In addition to meeting the requirements necessary to obtain such permits and approvals, they may be invalidated if the applicable regulatory authority is challenged legally that it did not lawfully issue such permits and approvals.

 

Our ability to obtain and maintain permits and approvals and to successfully develop and operate mines may be adversely affected by real or perceived impacts associated with our activities that affect the environment and human health and safety at our development projects and operations and in the surrounding communities. The real or perceived impacts of the activities of other mining companies may also adversely affect our ability to obtain and maintain permits and approvals.

 

Compliance with applicable environmental and health and safety laws and regulations may require significant expenditures and may cause delays. Failure to comply may lead to fines and penalties, temporary or permanent suspension of development and operational activities, clean-up costs, damages and the loss of key permits or approvals. We are exposed to these potential liabilities through our current development projects and operations as well as operations that have been closed or sold. Although we take great care to ensure we maintain full compliance with our legal obligations, there can be no assurance that we have been or will be in full compliance with all of these laws and regulations, or with all permits and approvals that we are required to have.

 

Environmental and health and safety laws and regulations continue to evolve and this can create significant uncertainty around the environmental and reclamation costs we incur. If new legislation and regulations are introduced in the future, they could lead to additional costs, capital expenditures, restrictions and delays at existing operations or development properties, and the extent of any of these possible changes cannot be predicted in a meaningful way, and therefore there cannot be any assurance that such future changes will not adversely affect Inmet’s operations.

 

Environmental and regulatory review has also become a long, complex and uncertain process that can delay the opening of a new mine, expansion at an operating mine, or extend decommissioning activities at a closed mine.

 

41

 

In some jurisdictions, forms of financial assurance are required as security for reclamation activities. The cost of our reclamation activities may materially exceed our provisions for them, or regulatory developments or changes in the assessment of conditions at closed operations may cause these costs to vary substantially, positively or negatively, from prior estimates of reclamation liabilities.

 

Our ability to foster and maintain the support of local communities and governments for our development projects and operations by engaging in dialogue and consulting with them about our activities and generating social and economic benefits from them is critical to the conduct and growth of our business. Even with extensive dialogue and consultation with local communities and governments, as well as the generation of social and economic benefits from a project or operation to them, there can be no assurance that this support can be fostered or maintained. Failing to foster or maintain this support would adversely affect our ability to develop a new mine or operate any of our current mines.

 

Our Reserve and Production Estimates Are Inherently Uncertain and May be Revised

 

The mineral reserves we have reported as of December 31, 2011 are estimated quantities of proven and probable mineral reserves that can be mined legally and economically, and processed by extracting their mineral content under current conditions and conditions anticipated in the future. We determine the amount of our mineral reserves according to the regulatory requirements that apply, and following established mining standards.

 

The volume and grade of reserves we actually recover, and rates of production from our current mineral reserves, may be less than geological measurements of the reserves. Fluctuations in the market price of copper, zinc and other metals, changing exchange rates and operating and capital costs may make it uneconomical to mine certain mineral reserves in the future.

 

Short-term operating factors relating to mineral reserves, such as the need for orderly development of ore bodies or the processing of different ore grades, may also prompt us to modify mineral reserves estimates or make one of our operations unprofitable in a particular fiscal period. There is no assurance that the indicated amount of ore will be recovered or that it will be recovered at prices we have assumed in determining the mineral reserves.

 

Mineral reserve estimates can be uncertain because they are based on limited sampling and not the entire ore body. As we gain more knowledge and understanding of an ore body through on-going exploration and mining activity, the reserve estimate may change significantly, either positively or negatively.

 

We prepare estimates of future production that are based on, among other things, reserve estimates, assumptions about ground conditions and physical characteristics of ores, such as hardness and presence or absence of particular metallurgical characteristics, and estimated rates and costs for mining and processing.

 

Our actual production could be different for a variety of reasons, including:

 

·      actual ore mined varying from estimates of grade;

·      tonnage;

·      dilution;

·      metallurgical and other characteristics;

·      short-term operating factors relating to the mineral reserves, such as the need for sequential development of ore bodies and the processing of new or different ore grades;

·      risks and hazards associated with mining, including geotechnical issues such as pit slope stability at open pit operations and structural issues at underground mines;

·      natural phenomena, such as inclement weather conditions, floods and earthquakes; and

·      unexpected labour shortages or strikes.

 

42

 

There is no assurance that we will achieve our production estimates.  In particular, we continue our efforts to ramp up production at Las Cruces to achieve design capacity. Production estimates at new operations such as Las Cruces are particularly uncertain and subject to revision.  There are no assurances that production at Las Cruces will achieve design capacity in the time periods that we currently expect, or at all. Failing to achieve production estimates at any of our operations or in aggregate could have a material adverse effect on our future cash flows, earnings, financial condition, results of operations or share price.

 

Exploration and Development of New and Existing Mines May be Unsuccessful

 

Because the life of a mine is limited by its mineral reserves, we continually look for opportunities to replace and expand our reserves by exploring existing properties and by looking for potential acquisitions of new properties or companies that own new properties.

 

Exploration and development of mineral properties involves significant financial and operational risk. There is no assurance that we will be successful in our efforts. Very few properties that are explored are later developed into an operating mine. Developing a property involves many risks and unknowns, such as establishing mineral reserves by drilling, completion of feasibility studies, obtaining and maintaining various permits and approvals from governmental authorities, constructing mining and processing facilities, securing required surface or other land rights, finding or generating suitable sources of power and water, confirming the availability and suitability of appropriate local area infrastructure and developing it if needed, and obtaining adequate financing. Substantial spending may be made on properties that are later abandoned due to a failure to satisfy any of such factors.

 

The capital expenditures and timeline needed to develop a new mine are considerable and the economics of a project can be affected by changes to them. Actual costs may increase significantly and economic returns may differ materially from our estimates. We may be unable to satisfactorily resolve fiscal and tax issues, or fail to obtain permits and approvals necessary to operate a project so that the project may not proceed, either on the original timeline, or at all. New mining operations may experience unexpected problems during start-up, which can cause delays and require more capital than anticipated.  Failure to achieve any of these factors could result in Inmet being unsuccessful in developing new mines and consequently may have a negative impact on Inmet’s mineral reserves and resources, production, financial condition, results of operations and share price.

 

We may experience strong competition from other mining companies as we look for acquisition or development opportunities. Much of this competition is from larger, better established mining companies with greater financial resources, operational experience and technical capabilities than Inmet. As a result of this competition, Inmet may be unable to maintain or acquire rights to explore additional attractive mining properties on terms it considers acceptable. Accordingly, there can be no assurance that Inmet will acquire any interest in additional operations that would yield reserves or result in commercial mining operations. If Inmet is not able to acquire such interests, this could have an adverse impact on future cash flows, earnings, financial condition, results of operations and share price.

 

Our International Operations are Subject to Political and Country Risk

 

We conduct exploration, development and production activity in a number of countries. These operations are potentially subject to a number of political, economic and other risks. We are not able to determine the impact of political, economic or other risks on our future financial position, including:

 

·                  emerging resource nationalism;

·                  cancellation or renegotiation of contracts;

·                  changes in foreign laws or regulations, including tax laws and royalty regimes;

·                  retroactive tax or royalty claims;

·                  expropriation or nationalization of property;

·                  inflation of costs that is not compensated by a currency devaluation;

·                  restrictions on the remittance of dividend and interest payments offshore;

 

43

 

·                  environmental controls and permitting;

·                  risks of loss due to civil strife, acts of war, guerrilla activities, insurrection and terrorism; and

·                  other risks arising out of foreign sovereignty issues.

 

Such risks could potentially arise in any country in which Inmet operates. Furthermore, in the event of a dispute arising from such activities, Inmet may be subject to the exclusive jurisdiction of courts outside North America or may not be successful in subjecting persons to the jurisdiction of the courts in North America, which could adversely affect the outcome of a dispute.

 

Our operations and investments outside Canada could be adversely affected by war, civil disturbances and activities of foreign governments that limit or disrupt markets, restrict the movement of funds or supplies, or restrict contractual rights or take property without fair compensation. In addition, we may be subject to the exclusive jurisdiction of courts outside of Canada, which could affect the outcome of any dispute.

 

These operations and investments could also be negatively affected by changes in Canadian laws and regulations relating to foreign trade, investment and taxation. We do not currently have political risk insurance.

 

We May be Adversely Affected by Loss of Access to Capital

 

Mining is an extremely capital intensive business. Mining companies need significant amounts of on-going capital to maintain and improve existing operations, invest in large scale capital projects with long lead times, and manage uncertain development and permitting timelines and the volatility associated with fluctuating metals and input prices. Financial markets — banking, debt and equity - can also be extremely volatile and can prevent us from gaining access to the capital required to maintain and grow our business. Failure to obtain, or difficulty or delay in obtaining, requisite financing could result in delay of certain projects or postponement of further exploration, assessment or development of certain properties or projects. Financing through the issuance of equity will result in dilution of existing shareholders.

 

We hold Substantial Funds in Cash and Cash Equivalents and there is a Risk that Financial Market Turmoil or Other Extraordinary Events Could Prevent Us From Obtaining Timely Access to Such Funds or Result in the Loss of Such Funds

 

We currently hold substantial investments in cash and cash equivalents, including treasury bills, money market funds and bank deposits. Management has adopted a conservative investment philosophy with respect to such funds, as we may require that these funds be used on short notice to support our business objectives. Nevertheless, there is a risk that an extraordinary event in financial markets generally or with respect to an obligor under an investment individually will occur that prevents us from accessing our cash and cash equivalent investments. Such an event could, in the case of delayed liquidity, have a negative impact on implementation of time sensitive business objectives that require access to such funds or such an event could, in extreme circumstances, result in the loss of some or all of such funds.

 

Titles or Boundaries at Our Properties Could be Challenged

 

Title to Inmet’s properties may be challenged or impugned, and title insurance is generally not available. Inmet’s mineral properties may be subject to prior unregistered agreements, transfers or claims, and title may be affected by, among other things, undetected defects. In addition, Inmet may be unable to operate its properties as permitted or to enforce its rights with respect to its properties.

 

Our Insurance Coverage Does Not Cover All Potential Risks

 

The business of mining and mineral exploration is generally subject to a number of risks and hazards including: adverse environmental conditions; industrial accidents; work force health issues; contaminations; labour disputes; unusual or unexpected geological conditions; ground or slope failures; cave-ins; changes in the regulatory environment; and natural phenomena such as inclement weather conditions, floods and earthquakes. Such occurrences could result in damage to, or destruction of, mineral properties or production facilities, personal injury or death, environmental damage to Inmet’s properties or the properties of others, delays in mining, monetary losses and possible legal liability.

 

44

 

Although Inmet maintains insurance against certain risks that are typical in the mining industry and in amounts that Inmet believes to be reasonable, its insurance will not cover all of the potential risks associated with its operations.  Specifically, Inmet may be unable to maintain insurance to cover these risks at economically feasible premiums. Insurance coverage may not continue to be available or may not be adequate to cover any resulting liability. Moreover, insurance against risks such as environmental pollution or other hazards as a result of exploration and production is not generally available to Inmet or to other companies in the mining industry on acceptable terms. Inmet might also become subject to liability for pollution or other hazards which may not be insured against or which Inmet may elect not to insure against because of premium costs or other reasons. Losses from these events may cause Inmet to incur significant costs that could have a material adverse effect upon its financial condition, results of operations and share price.

 

Inmet is Dependent on a Relatively Small Number of Key Personnel

 

Inmet is dependent on a relatively small number of key employees, the loss of any of whom could have an adverse effect on Inmet. Inmet currently does not have key person insurance on these individuals.

 

We are Subject to Litigation, the Outcome of Which may Affect our Business

 

Inmet is subject from time to time to litigation and may be involved in disputes with other parties in the future, which may result in litigation. We cannot predict the outcome of any litigation. If we cannot resolve these disputes favourably, our activities, financial condition, results of operations, future prospects and share price may be materially adversely affected.

 

We are Subject to Taxation Risk

 

Inmet has operations and conducts business in a number of jurisdictions and is subject to the taxation laws of these jurisdictions. These taxation laws are complicated and subject to changes and are subject to review and assessment in the ordinary course. Any such changes in taxation law or reviews and assessments could result in higher taxes being payable by Inmet which could adversely affect Inmet’s profitability.

 

Inmet’s Directors May have Conflicts of Interest

 

Certain of the directors of Inmet also serve as directors and/or officers of other companies involved in natural resource exploration and development and consequently there exists the possibility for such directors to be in a position of conflict.   In all cases where directors have an interest in another resource company, such other companies may also compete with Inmet for the acquisition of mineral property rights. In the event that any such conflict of interest arises, a director who has such a conflict will disclose the conflict to a meeting of the directors of Inmet and will abstain from voting for or against the approval of such participation or such terms. In appropriate cases, Inmet will establish a special committee of independent directors to review a matter in which several directors, or management, may have a conflict.

 

Our Costs of Reclamation are Uncertain

 

The actual costs of reclamation are uncertain and planned expenditures may differ from the actual expenditures required. It is not possible to determine the exact amount that will be required to complete reclamation activities, and the amount that Inmet is required to spend could be materially different than current estimates. Reclamation bonds or other forms of financial assurance represent only a portion of the total amount of money that will be spent on reclamation over the life of a mine’s operation. Although Inmet includes estimated reclamation costs in its mining plans, it may be necessary to revise the planned expenditures and the operating plans for our operations in order to fund required reclamation activities. Any additional amounts required to be spent on reclamation may have a material adverse effect on Inmet’s financial condition, results of operations and share price.

 

Asset Carrying Values are Evaluated Annually and May be Subject to Write-downs

 

Inmet annually undertakes an evaluation of Inmet’s portfolio of development projects, exploration and other assets. The recoverability of Inmet’s carrying values of its properties are assessed by comparing carrying values to estimated future net cash flows from each property.

 

Factors which may affect carrying values include, but are not limited to, copper, zinc, iron pyrite and gold

 

45

 

prices, capital cost estimates, mining, processing and other operating costs, grade and metallurgical characteristics of ore, mine design and timing of production. In the event of a prolonged period of depressed copper prices or in the event of other factors reducing estimated future net cash flows from exploration and development properties, Inmet may be required to take additional material write-downs of its exploration and development properties.

 

Our Use of Derivative Contracts Exposes Us to Risk of Opportunity Loss, Mark to Market Accounting Adjustments and Exposure to Counterparty Credit Risk

 

From time to time, Inmet may enter into price risk management contracts to protect against fluctuations in the price of gold and other precious metals, exchange rate movements, and changes in the price of fuel and other input costs. These contracts could include forward sales or purchase contracts, futures contracts, purchased put and call options, and other contracts. Any such use of forward or futures contracts can expose Inmet to risk of an opportunity loss. The use of derivative contracts may also result in significant mark to market accounting adjustments, which may have a material adverse impact on Inmet’s reported financial results.   Inmet is exposed to credit risk with contract counter-parties, including, but not limited to, sales contracts and derivative contracts. In the event of non-performance by a customer in connection with a contract, Inmet could be exposed to a loss of value for that contract.

 

Fluctuations in Exchange Rates May Adversely Affect Our Operating and Capital Costs

 

While our financial results are reported in Canadian dollars, almost all of the revenue we earn is in US dollars and our costs are in several different currencies.  Therefore our revenues, operating costs and capital costs are affected by fluctuations in the exchange rates between the Canadian dollar and the US dollar, the euro, the Turkish lira and the Panamanian dollar.

 

While we may use option contracts to hedge against changes in the US dollar, not all of our exposure to the US dollar will be hedged, any such hedges may not be effective, and therefore there is still the potential for changes in currency exchange rates to have an adverse effect on us.

 

The Actual Cost to Develop Cobre Panama May Differ Materially from Our Current Estimates and Involve Unexpected Problems or Delays

 

The estimates incorporated by reference in this AIF regarding the development and operation of Cobre Panama are based on the revised capital cost estimate to first production of US $4.3 billion. The current estimate of the amount of capital expenditures that will be required to be incurred to complete the first phase of Cobre Panama represent estimates only and are based on certain assumptions and analyses made by Inmet’s management in light of their experience and perception of historical trends, current conditions and expected future developments, as well as other factors management believes are appropriate in the circumstances. These estimates, however, and the assumptions upon which they are based, are subject to a variety of risks and uncertainties and other factors that could cause actual expenditures to differ materially from those estimated. If these estimates prove incorrect, the total capital expenditures required to complete the first phase of Cobre Panama may increase, which may have a material adverse impact on Inmet’s financial condition and share price.

 

There are also a number of uncertainties inherent in the development and construction of any new mine, including Cobre Panama. These uncertainties include:

 

·                  earning and maintaining the privilege to operate from host communities;

·                  the need to obtain necessary environmental and other governmental approvals and permits, and the timing of those approvals and permits; the timing and cost of the construction of mining and processing facilities; the timing and cost of the construction of power facilities;

·                  potential increases in construction and operating costs due to changes in the cost of fuel, power, materials and supplies and foreign exchange rates;

·                  the availability of funds to finance construction and development activities;

·                  the need to obtain all mineral and surface rights necessary to optimally exploit the deposit;

·                  challenges to mineral rights;

 

46

 

·                  the availability and cost of water, power, skilled labour and mining equipment;

·                  the need to obtain necessary environmental and other government permits, and the timing of those permits;

·                  potential opposition from non-governmental organizations, environmental groups or local groups which may delay or prevent development activities; and

·                  the availability of appropriate off-take arrangements for copper.

 

It is common in new mining operations to experience unexpected problems and delays during development, construction and mine start-up. In addition, delays in the commencement of mineral production often occur. Accordingly, there is no assurance that future development activities will result in profitable mining operations or that Inmet will successfully establish an operation at Cobre Panama. In addition, whether operations at Cobre Panama can be economically feasible depends upon future copper prices.

 

We May Need an Additional Partner to Develop Cobre Panama and May Not be Able to Find a Suitable Such Partner

 

Cobre Panama is a significant project and we will require a significant amount of additional financing in order to bring it into production. On January 10, 2012 KPMC elected to exercise its option to acquire an indirect 20 percent interest in Cobre Panama, which option exercise is expected to close in April, 2012. There may be risks associated with KPMC, including its financial condition, of which Inmet is not aware. There is a risk for non-payment by KPMC of its share of project expenditures which could adversely affect Inmet’s financial position and financial results, and adversely affect our ability to complete the development of Cobre Panama within budgeted costs and timelines.

 

In addition to KPMC, we have been in the process of trying to identify another suitable partner with the financial resources to jointly develop Cobre Panama. There can be no assurance that Inmet will identify such a suitable partner. If a suitable partner is identified, there can be no assurance that Inmet will be able to reach agreement on terms acceptable to Inmet for the development of Cobre Panama with such partner. Furthermore, if a suitable partner is identified, Inmet may still need to arrange for financing for a significant portion of the development costs. There can be no guarantee that such financing will be available at all, or on terms acceptable to Inmet and any party that Inmet may have identified.

 

47

 

DESCRIPTION OF CAPITAL STRUCTURE

 

Inmet Mining’s articles of amalgamation provide for three classes of shares:

 

·      common shares

·      preferred shares

·      subordinate voting participating shares.

 

Each class has an unlimited number of shares.

 

At December 31, 2011 there were 69,328,864 common shares issued and outstanding. We have not issued any preferred shares or subordinate voting participating shares.

 

Common shares

 

Each common share gives the holder the right to:

 

·      receive notice of and attend all meetings of shareholders, with each common share entitling the holder to five votes at a meeting of shareholders

·      participate equally with the holders of subordinate voting participating shares in any:

·      dividends declared by the directors

·      distribution of assets if the company is liquidated, dissolved or wound up, after payments are made to holders of preferred shares.

 

Common shares cannot be subdivided, consolidated or otherwise changed unless all of the common shares and subordinate voting participating shares are also subdivided, consolidated or otherwise changed at the same time, in the same proportion and in the same manner.

 

Preferred shares

 

Preferred shares can be issued in series. The directors can fix the number, designation, rights, privileges, restrictions and conditions of the preferred shares of each series before the shares are issued.

 

Holders of preferred shares do not have the right to receive notices of any meetings of shareholders, or to attend them or to vote at them, unless the conditions when the preferred shares are issued state otherwise. Preferred shares can carry other rights that have been specified when the shares are issued. The holders of preferred shares can also be entitled by law to vote as a class on certain matters.

 

Preferred shares rank ahead of subordinate voting participating shares and common shares when:

 

·      dividends are paid

·      assets are distributed if the company is liquidated, dissolved or wound up.

 

Subordinate voting participating shares

 

Each subordinate voting participating share gives the holder the right to:

 

·      receive notice of and attend all meetings of shareholders

·      one vote at a meeting of shareholders

·      participate equally with the holders of common shares in any dividends declared by the directors, and any distribution of assets if the company is liquidated, dissolved or wound up, after payments are made to holders of preferred shares.

 

Subordinate voting participating shares cannot be subdivided, consolidated or otherwise changed unless all of the subordinate voting participating shares are changed in the same way, at the same time and in the same proportion.

 

Dividends

 

Inmet Mining’s board of directors can declare dividends at its discretion and has approved a dividend policy for dividends each year of $0.20 per common share. Since November 2005 of each year, we have paid semi-annual dividends of $0.10 per common share on June 15 and December 15 to our common 

 

48

 

shareholders.  The amount and timing of any dividends is within the discretion of Inmet Mining’s Board of Directors. The Board of Directors reviews the dividend policy from time to time based on the cash requirements of Inmet Mining’s operating assets, exploration and development activities, as well as potential acquisitions, combined with the current and projected financial position of Inmet Mining.  The Board of Directors currently believes that Inmet Mining can maintain its current level of dividend as copper prices fluctuate.

 

RATINGS

 

Credit ratings assess the ability of a company to meet its financial commitment on an obligation.

 

None of our securities have been rated by a rating agency. If, however, they receive a rating in the future, there is no guarantee that the rating will remain in effect for an extended period. A rating can also be revised or withdrawn by the rating agency.

 

MARKET FOR SECURITIES

 

Trading price and volume

 

Inmet’s common shares trade on the Toronto Stock Exchange (TSX) under the symbol IMN. The table below shows the range in share price and volume traded in each month of 2011.

 

	
Month
    	
 
    	
High
    	
 
    	
Low
    	
 
    	
Volume traded
    	
 
    
	
January
    	
 
    	
$
    	
82.14
    	
 
    	
$
    	
72.73
    	
 
    	
8,201,721
    	
 
    
	
February
    	
 
    	
$
    	
80.25
    	
 
    	
$
    	
65.31
    	
 
    	
8,354,024
    	
 
    
	
March
    	
 
    	
$
    	
69.50
    	
 
    	
$
    	
58.95
    	
 
    	
9,635,760
    	
 
    
	
April
    	
 
    	
$
    	
73.86
    	
 
    	
$
    	
64.68
    	
 
    	
5,244,714
    	
 
    
	
May
    	
 
    	
$
    	
69.89
    	
 
    	
$
    	
61.00
    	
 
    	
5,158,569
    	
 
    
	
June
    	
 
    	
$
    	
72.86
    	
 
    	
$
    	
63.56
    	
 
    	
4,284,571
    	
 
    
	
July
    	
 
    	
$
    	
74.95
    	
 
    	
$
    	
64.10
    	
 
    	
4,906,508
    	
 
    
	
August
    	
 
    	
$
    	
66.21
    	
 
    	
$
    	
53.92
    	
 
    	
10,691,555
    	
 
    
	
September
    	
 
    	
$
    	
65.07
    	
 
    	
$
    	
43.89
    	
 
    	
6,436,930
    	
 
    
	
October
    	
 
    	
$
    	
62.50
    	
 
    	
$
    	
39.88
    	
 
    	
6,802,221
    	
 
    
	
November
    	
 
    	
$
    	
62.73
    	
 
    	
$
    	
49.80
    	
 
    	
4,946,529
    	
 
    
	
December
    	
 
    	
$
    	
66.34
    	
 
    	
$
    	
58.58
    	
 
    	
6,179,643
    	
 
    

 

Source: TSX Historical Access Database

 

MATERIAL CONTRACTS

 

The following are the only contracts entered into by Inmet in 2011 which are material and still in effect, other than contracts entered into in the ordinary course of Inmet’s business.

 

Leucadia registration rights agreement

 

Inmet, MK Resources and Leucadia have entered into a registration rights agreement dated as of August 22, 2005, that was amended in connection with Inmet’s acquisition on December 15, 2010 of the 30 percent interest in the Las Cruces mine that it did not already own. Under the amended agreement, Leucadia is entitled to nominate an individual for election to the Inmet board of directors as long as it maintains a minimum shareholder ownership level in Inmet as prescribed under the agreement. Leucadia and MK Resources are also entitled to request registrations of Inmet common shares they hold to enable them to publicly offer such shares for sale. Leucadia and MK Resources may request up to three such registrations; each registration must be for not less than 1 million common shares. Inmet may postpone (not more than once in any period of 12 consecutive months) a requested registration for up to 90 days if in good faith it believes the registration would be materially detrimental to it or would materially adversely

 

49

 

affects its ability to consummate a material transaction. Leucadia and MK Resources are also entitled to request incidental registrations of Inmet common shares held by them where Inmet proposes to register its common shares for sale to the public.

 

Temasek registration rights agreement

 

On May 17, 2011 an investor rights agreement dated April 23, 2010 and as amended December 23, 2010 between Inmet and Ellington Investments Pte. Ltd., an indirect wholly-owned subsidiary of Temasek Holdings (Private) Limited, became effective. Pursuant to this investor rights agreement Ellington is entitled to request registrations of Inmet common shares it holds to enable it to publicly offer such shares for sale. Ellington may request up to five such registrations; subject to certain exceptions, each registration must be for not less than 1.55 million  common shares.  Subject to certain conditions, Inmet may postpone a requested registration for a reasonable period of time (not to exceed 90 days) if it believes, after advice from counsel, that the registration would have a material adverse effect on Inmet or its shareholders because registration would either materially interfere with a material transaction involving Inmet or require premature disclosure of material non-public information that Inmet has a bona fide business purpose for preserving as confidential. Subject to certain conditions, Inmet may also postpone (not more than once in any period of 12 consecutive months) a requested registration for a reasonable period of time (not to exceed 180 days) if it believes that the registration would materially interfere with certain offerings as described in the investor rights agreement. Ellington is also entitled to request incidental registrations of Inmet common shares held by it where Inmet proposes to register its common shares for sale to the public.

 

Under the investor rights agreement, as long as Ellington maintains a minimum shareholder ownership level in Inmet five percent, Ellington is entitled to nominate an individual for election to the Inmet board of directors and Ellington has, subject to certain customary exceptions, participation rights allowing it to maintain its percentage interest in the outstanding common shares.  In addition, Ellington has agreed to certain customary standstill provisions.

 

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GOVERNANCE

 

Board of directors

 

Our board of directors is responsible for the stewardship of our business and affairs. Its main role is to oversee corporate performance and to make sure that management has the talent, professionalism and integrity necessary to successfully carry out our strategic plan and achieve our corporate objectives.

 

Each of our directors holds office until our next annual meeting of shareholders, or until a successor is appointed.  Information regarding each of our directors as at March 28, 2012 is set out below.

 

Dr. Yilmaz Argüden, Ph.D.
 54 
 Istanbul, Turkey
  Independent — Director since 2005

 

Member of:

 

·      Audit committee

·      Corporate governance and nominating committee

·      Corporate responsibility committee

 

Owns no common shares
 Holds 10,034 deferred share units

 

Dr. Argüden is Chairman of ARGE Consulting A.S., a management consulting firm based in Istanbul, Turkey. He is the Chairman of Rothschild investment bank in Turkey. He is also an Adjunct Professor of Business Strategy at the Bosphorus University, an author of numerous books and a columnist.

 

He is the former Chairman of Erdemir, the largest Turkish steel company, and was also a board member of various Anadolu, Borusan, Koç, Vestel and state-owned companies in Turkey. He was selected as a “Global Leader of Tomorrow” by the World Economic Forum in 1999. Dr. Argüden is also Chairman of the Turkish Canadian Business Council, the National Representative of the United Nations Global Compact, and a member of the Private Sector Advisory Group of the Global Corporate Governance Forum.

 

Dr. Argüden is also a director of Anadolu Efes, Coca-Cola Içecek, Vestel Electronics Corp., Vestel White Goods Trade and Industry A.S. and Yazicilar Holding A.S.

 

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David R. Beatty, O.B.E.
 70 
 Toronto, Ontario
  Independent - Chairman — Director since 2003

 

Member of:

 

·      Corporate governance and nominating committee

·      Human resources and compensation committee

 

Owns 10,000 common shares
 Holds 15,135 deferred share units

 

Mr. Beatty is Inmet’s non-executive Chairman. He is Professor of Strategic Management and director of the Clarkson Centre for Business Ethics and Board Effectiveness at the University of Toronto’s Rotman School of Management. He is the past Managing Director of the Canadian Coalition for Good Governance.

 

Mr. Beatty has gained extensive business, international and mining experience during a professional career that spans more than 30 years. He is also Honorary Consul to Canada for the Government of Papua New Guinea and in 1993 was awarded the O.B.E.

 

Mr. Beatty is also a director of FirstService Corporation and Walter Energy, Inc.

 

John H. Clappison  
 65 
 Toronto, Ontario
  Independent — Director since 2010

 

Member of:

 

·      Audit committee (chair)

 

Owns 500 common shares
 Holds 2,010 deferred share units

 

Mr. Clappison is the former managing partner of the Greater Toronto Area office of PricewaterhouseCoopers LLP. He is a Chartered Accountant, a Fellow of the Institute of Chartered Accountants of Ontario and worked with PricewaterhouseCoopers (or its predecessor firm) for 37 years.

 

Mr. Clappison is also a director of Cameco Corporation, Rogers Communications Inc. and Sun Life Financial Inc.

 

52

 

John C. Eby
 60 
 Toronto, Ontario
  Independent — Director since 2005

 

Member of:

 

·      Audit committee

·      Corporate governance and nominating committee (chair)

·      Corporate responsibility committee

 

Owns 3,200 common shares
 Holds 5,399 deferred share units

 

Mr. Eby is a corporate director and former Vice-Chairman, Scotia Capital Inc., where he was responsible for overseeing the firm’s mining practice.

 

He has over 29 years of experience with Scotiabank and its affiliates, covering corporate banking, capital markets and investment banking in a variety of sectors.

 

Mr. Eby is also a director of Crombie Real Estate Investment Trust and Wajax Corporation.

 

Paul E. Gagné
 65 
 Senneville, Quebec
  Independent — Director since 1996

 

Member of:

 

·      Audit committee

·      Corporate responsibility committee (chair)

·      Human resources and compensation committee

 

Owns 5,300 common shares
 Holds 32,918 deferred share units

 

Mr. Gagné is Chairman of Wajax Corporation and a corporate director. From 1998 to 2002, he was a consultant to Kruger Inc. and prior to that, he was Chief Executive Officer of Avenor Inc., a pulp, paper and wood products company.

 

He has extensive experience in the resources sector and is a Canadian chartered accountant.

 

Mr. Gagné is also a director of Ainsworth Lumber Co. Ltd., CAE Inc., Textron Inc. and Wajax Corporation.

 

53

 

Oyvind Hushovd
 62 
 Kristiansand, Norway
 Independent — Director since 2002

 

Member of:

 

·            Human resources and compensation committee

·            Corporate governance and nominating committee

·            Corporate responsibility committee

 

Owns no common shares
 Holds 11,434 deferred share units

 

Mr. Hushovd is a corporate director with considerable experience in the mining and resource sectors. Prior to February 2006, he was the non-executive Chairman, and prior to July 2005, the Chief Executive Officer, of Gabriel Resources Ltd.

 

From 1996 to 2002, he was President and Chief Executive Officer of Falconbridge Limited and prior to that, held senior positions within that company.

 

Mr. Hushovd is also a director of Cameco Corporation, Ivanplats Limited and Nyrstar NV.

 

Thomas E. Mara
 66
 New York, USA
 Independent — Director since 2005

 

Member of:

 

·            Audit committee

 

Owns no common shares
 Holds 7,259 deferred share units

 

Mr. Mara is Executive Vice-President and Treasurer of Leucadia National Corporation.

 

He has broad U.S. and international financial experience.

 

Jochen Tilk
 48
 Toronto, Ontario
 Non-Independent — Director since 2010

 

Owns 36,040 common shares

 

Mr. Tilk is Inmet’s President and Chief Executive Officer. He is a mining engineer and holds a Master’s degree in engineering from the University of Aachen, Germany.

 

54

 

Douglas Whitehead
 65
 North Vancouver, British Columbia
 Independent — Director since 2007

 

Member of:

 

·      Corporate responsibility committee

·      Human resources and compensation committee (chair)

 

Owns 3,000 common shares
 Holds 3,624 deferred share units

 

Mr. Whitehead is Chairman of the Board of Finning International Inc.

 

Prior to May 2008, he was President and Chief Executive Officer of Finning International Inc.

 

Mr. Whitehead is also a director of Ballard Power Systems Inc., Belkorp Industries Inc., Finning International Inc. and International Forest Products Limited.

 

Corporate Cease Trade Orders and Bankruptcies

 

Except as set out below, and to the best of the knowledge of Inmet, no current director or executive officer of Inmet is at the date of the AIF, or within the ten years prior to the date of the AIF has been, a director or chief executive officer chief financial officer of any issuer that was the subject of a cease trade or similar order or an order that denied the issuer access to any exemption under securities legislation that was in effect for a period of more than 30 consecutive days that was issued while that person was acting in that capacity or was issued after that person ceased to act in that capacity and resulted from an event that occurred while such person was acting in that capacity.

 

Except as set out below, and to the best of the knowledge of Inmet, no current director, executive officer or shareholder holding a sufficient number of securities to materially affect control of Inmet is at the date of the AIF, or within the ten years prior to the date of the AIF has been, a director or executive officer of any issuer that, while that person was acting in that capacity or within a year of that person ceasing to act in that capacity become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement, or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold the assets of that person.

 

Except as set out below, to the best of the knowledge of the Company, no current director, executive officer or shareholder holding a sufficient number of securities to materially affect control of the Company had been subject to any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority, or has been subject to any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in making an investment decision.

 

·      Mr. Gagné was a director of Fraser Papers Inc. (Fraser) from April 2004 until February 2011.  In June 2009, Fraser initiated a court-supervised restructuring under the Companies’ Creditors Arrangement Act (CCAA) and also filed for protection pursuant to Chapter 15 of the U.S.  Bankruptcy Code.  As part of its restructuring, Fraser sold all of its productive assets and distributed the proceeds from the sale of those assets pursuant to a Consolidated Plan of Compromise and Arrangement which was approved by the courts in February, 2011.

 

55

 

·      Fraser’s common shares were suspended from trading on the Toronto Stock Exchange (TSX) on June 23, 2009 and delisted on July 22, 2009.  On March 10, 2011, the Ontario Securities Commission issued a cease trade order against Fraser.

 

·      Mr. Beatty was a director of Thistle Mining Inc. on December 21, 2004 when it announced its plans to restructure under the Companies’ Creditors Arrangement Act (CCAA). Thistle completed its restructuring on June 30, 2005. Its common shares have been suspended from trading on the Toronto Stock Exchange since December 31, 2004 due to the restructuring. Mr. Beatty is no longer a director of Thistle.

 

About the audit committee

 

The audit committee consists of five directors:

 

·      John Clappison (chair) 
 Mr. Clappison is a Canadian chartered accountant and is the former managing partner of the Greater Toronto Area office of PricewaterhouseCoopers LLP.  He is a Fellow of the Institute of Chartered Accountants of Ontario and worked with PricewaterhouseCoopers LLP (or its predecessor firm) for 37 years.

·      Paul E. Gagné 
 Mr. Gagné is a Canadian chartered accountant and is a former Chief Executive Officer of Avenor Inc., a pulp, paper and wood products company.

·      Dr. Yilmaz Argüden  
 Dr. Argüden is Chairman of ARGE Consulting A.S., a management consulting firm based in Istanbul, Turkey. He is the Chairman of Rothschild investment bank in Turkey. He was selected as a “Global Leader of Tomorrow” by the World Economic Forum in 1999. He received his Ph.D. in policy analysis from the RAND Graduate Institute. Dr. Argüden is also Chairman of the Turkish Canadian Business Council.

·      John C. Eby  
 Mr. Eby is a corporate director. He is a former Vice-Chairman, Scotia Capital Inc. where he was in charge of the firm’s mining practice.

·      Thomas E. Mara  
 Mr. Mara is Executive Vice-President and Treasurer of Leucadia National Corporation.  He has broad U.S. and international financial experience.

 

Each member is independent and financially literate according to the terms of Multilateral Instrument 52-110, Audit committees.

 

The committee’s main function is to assist the board by overseeing:

 

·      the quality, integrity and appropriateness of our financial reporting

·      the quality, integrity and performance of our systems of internal control for finance, accounting and ethics

·      the quality, performance and independence of our external auditors

·      our compliance with legal and regulatory requirements.

·      the audit committee receives regular reports on the following in order to fulfil its mandate:

·      significant accounting transactions and financial matters that required professional judgment in arriving at the financial statements

·      financial risk management

·      exploration and capital spending in relation to approved budgets

·      our system of internal controls.

 

56

 

The audit committee and the corporate governance and nominating committee review this committee’s charter once a year to make sure it meets regulatory requirements and reflects best practices.

 

Financial reporting

 

The audit committee is also responsible for reviewing:

 

·      our financial reporting procedures, internal controls and risk management practices as they relate to financial reporting

·      the terms of engagement and performance of the external auditors

·      our interim and annual financial statements, management’s discussion and analysis of financial condition and results, and the annual report before they are reviewed and approved by the board.

 

The audit committee meets regularly with our external auditors without management present. It also has direct access to management in order to review specific issues.

 

External auditors

 

KPMG LLP (KPMG) is our current auditor. From time to time, KPMG and/or its affiliates also provide us and some of our subsidiaries with advisory and other non-audit services.

 

These professional services break down into different types of fees:

 

·      audit fees for services for reading annual and interim financial statements and notes and for conducting the annual audit of Inmet Mining and its subsidiaries

·      audit-related fees for services relating to KPMG’s role as auditor. The fees for 
 fiscal 2011 and 2010 relate to our transition to International Financial Reporting Standards (IFRS), French translation services, and due diligence.

·      tax fees for services relating to tax compliance, tax advice and tax planning

·      All other services and fees.

 

The table below shows the fees that were paid to KPMG for the fiscal years ended December 31, 2011 and 2010.

 

	
Fee (thousands)
    	
 
    	
2011
    	
 
    	
2010
    	
 
    
	
Audit fees
    	
 
    	
$
    	
879
    	
 
    	
$
    	
868
    	
 
    
	
Audit-related fees
    	
 
    	
272
    	
 
    	
323
    	
 
    
	
Tax fees
    	
 
    	
1,556
    	
 
    	
824
    	
 
    
	
All other services and   fees
    	
 
    	
229
    	
 
    	
26
    	
 
    
	
Total
    	
 
    	
$
    	
2,936
    	
 
    	
$
    	
2,041
    	
 
    

 

Auditor independence

 

The audit committee has reviewed this list of services and determined KPMG maintained auditor independence.

 

The audit committee has the authority to conduct any investigation it believes is necessary to help it fulfil its responsibilities, and has direct access to the external auditors, our financial management, our officers and employees and all of our books and records. Any member of the committee can ask to retain the help of accounting, legal or other consultants or experts to carry out its duties, and these expenses would be paid by Inmet.

 

Approving services

 

The audit committee has a policy that requires any services to be performed by the external auditors to be pre-approved, including:

 

·      audit and non-audit services provided by external auditors, and the annual range of fees for each type of service

·      services that are not part of the annual process

·      fees that go higher than the range of fees that was pre-approved.

 

57

 

Management must submit a report to the audit committee each year describing in detail all services it expects the external auditors to provide the following fiscal year. The report must also include a range of fees for each type of service.

 

The audit committee takes into account the ratio of fees for audit and audit-related services to non-audit services when pre-approving services and fees. It has also delegated limited authority to the committee chair to pre-approve services and fees. Any approvals the committee chair makes must be reported to and ratified by the audit committee at its next meeting.

 

Inmet has a policy of not engaging external auditors to provide services relating to internal audit, and the design and implementation of financial information systems.

 

The committee met 6 times in 2011.

 

A copy of the committee charter is attached as an appendix to this AIF. It is available on SEDAR (www.sedar.com).

 

Officers

 

Certain information regarding each of the officers of Inmet Mining as at March 28, 2012 is set out below.

 

Jochen Tilk
  Toronto, Ontario

 

President and Chief Executive Officer
 Years with Inmet: 24
  Owns 36,040 common shares

Prior to November, 2009, President and Chief Operating Officer, Inmet

 

Steven Astritis
  Toronto, Ontario

 

Vice-President, Legal and Corporate Affairs
 Years with Inmet: 11
  Owns 19,000 common shares

Prior to April 2011, Vice-President, General Counsel and Secretary, Inmet

 

D. James Slattery
  Oakville Ontario

 

Vice-President and Chief Financial Officer
 Years with Inmet: 6
  Owns 16,370 common shares

 

Frank Balint
  Toronto, Ontario

 

Vice-President, Corporate Development
 Years with Inmet: 34
  Owns 12,267 common shares

 

58

 

Lynda Beesley
  Toronto, Ontario

 

Corporate Secretary
 Years with Inmet: 5
  Owns no common shares

Prior to April 2011, Assistant Corporate Secretary, Inmet

Prior to September 2006, Assistant Corporate Secretary, Falconbridge Limited and Noranda Inc.

 

Craig Ford
  Oakville, Ontario

 

Vice-President, Corporate Responsibility
 Years with Inmet: 12
  Owns 9,501 common shares

Prior to November 2010, Vice-President, People & Environment, Inmet

Prior to July 2008, Vice-President, Safety, Environmental and Community Affairs, Inmet

 

Scott Herr
  Oakville, Ontario

 

Vice-President, Mining
 Years with Inmet: 6
  Owns 6,375 common shares

Prior to January 2007, Director, Mining

 

Wendy Kaufman
  Oakville, Ontario

 

Vice-President, Finance and Treasury
 Years with Inmet: 18
  Owns 9,979 common shares

Prior to October 2011, Vice-President, Finance, Inmet

 

Jean-Claude Lalumiere

Oakville, Ontario

 

Vice-President, Human Resources
 Years with Inmet: 1
  Owns no common shares

Prior to November 2010, Vice-President, Human Resources and Facilities, World Wildlife Fund

Prior to March 2007, Director Global Human Resources Management Systems, LaFarge S.A.

 

Fernando Martinez-Caro
  Oakville, Ontario

 

Vice-President, Engineering and Infrastructure

Years with Inmet: 4
  Owns 1,808 common shares

Prior to January 2010, Director, Projects, Inmet

Prior to August 2008, Managing Director, Ferrovial Agroman (North America)

 

59

 

Ernest Mast

Panama City, Republic of Panama

 

President, Minera Panama, S.A.

Years with Inmet: 4
  Owns 1,400 common shares

Prior to May, 2009, President and General Manager of Xstrata Nickel’s Falcondo project in the Dominican Republic.

 

Jan (Jon) Wojnicki
  Toronto, Ontario

 

Vice-President, Strategic Development

Years with Inmet: Less than 1
  Owns no common shares

Prior to January 2012, Principal, McKinsey & Company, Inc.

 

TRANSFER AGENT AND REGISTRAR

 

CIBC Mellon Trust Company is our transfer agent and registrar, and maintains the register of transfers of our common shares at its main office in Toronto, Ontario.

 

USE OF EXPERTS

 

We rely on experts to audit our financial statements and prepare our mineral reserve and resource estimates.

 

·            Our consolidated financial statements for the year ended December 31, 2011 have been audited by KPMG LLP. The auditors have confirmed they are independent according to the Rules of Professional Conduct of the Institute of Chartered Accountants of Ontario.

·            Notes to mineral reserves and resources table, starting on page 36, lists qualified persons, as defined by National Instrument 43-101 — Standards of Disclosure for Mineral Projects, and competent persons, as defined by the Australasian Code for Reporting of Identified Mineral and Ore Reserves (the Australasian Code) who have prepared or supervised the preparation of our mineral reserve and mineral resource estimates.

 

None of these people or organizations beneficially owns (directly or indirectly), or exercises control or direction over, more than one percent of our issued and outstanding common shares.

 

SHARE OWNERSHIP

 

Our directors and senior management as a group beneficially own (directly or indirectly), or exercise control or direction over, less than 1 percent of our issued and outstanding common shares. Mr. Mara is an officer of Leucadia which, through its wholly-owned subsidiary, MK Resources, owns approximately 15.9 percent of Inmet’s issued and outstanding common shares.

 

60

 

INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

 

Other than as disclosed below or elsewhere in this AIF, no director or executive officer of Inmet or person that beneficially owns or controls, directly or indirectly, 10 percent or more of the issued and outstanding common shares or associate or affiliate of any such director or executive officer or 10 percent shareholder has any material interest, direct or indirect, in any transaction within Inmet’s three most recently completed financial years or within the current financial year that has materially affected or would materially affect Inmet.

 

Leucadia, through its wholly-owned subsidiary, MK Resources, is Inmet’s largest shareholder, holding 15.9 percent of Inmet’s issued and outstanding common shares. Within Inmet’s three most recently completed financial years, and within the current financial year, Leucadia has been party to a transactions that have materially affected, or could materially affect, Inmet. See “THREE YEAR HISTORY — Acquisition of Remainder of Cobre Las Cruces ”.

 

61

 

ADDITIONAL INFORMATION

 

Additional information about Inmet may be found on SEDAR at www.sedar.com.

 

Further information, including particulars of directors’ and officers’ remuneration and indebtedness, principal holders of Inmet’s securities, and securities authorized for issuance under equity compensation plans is contained in the Inmet’s management information circular for its most recent annual meeting of holders of the Inmet’s common shares. Additional financial information is provided in the Inmet’s most current consolidated financial statements and MD&A, copies of which have been filed with the securities commissions in each Canadian province in which Inmet Mining is a reporting issuer and which is available on SEDAR at www.sedar.com.

 

To request a copy of any of these documents, write to:

 

Director of Investor Relations
 Inmet Mining Corporation
 330 Bay Street, Suite 1000
 Toronto, Ontario 
 Canada M5H 2S8

 

You can also call us at +1.416.361.6400 or send a fax to +1.416.368.4692.

 

62

 

SCHEDULE 1

 

Inmet Mining Audit Committee Charter

 

I. Purpose

 

The function of the Audit Committee is to assist the Board of Directors in its oversight of the quality of the Corporation’s financial reporting and public disclosure of financial information, the performance and integrity of the related systems of internal and disclosure controls, compliance with legal and regulatory reporting requirements applicable to financial reporting and public disclosure of financial information and the performance and independence of the external auditors.

 

The Audit Committee may conduct any investigation appropriate to fulfilling its function and have direct access to the independent auditors, any officer or employee of the Corporation and all books and records of the Corporation. At the request of any Audit Committee member, the Audit Committee may retain, at the Corporation’s expense, accounting, legal or other advisors or experts it deems necessary to perform its duties.

 

II. Composition

 

The Audit Committee shall have a minimum of three members. All of its members shall be “independent” as determined under the Board’s annual assessment of the independence of its members and “financially literate”, in each case as defined under any requirements of the Canadian Securities Administrators or other securities regulatory authorities to which the Corporation is subject. Unless a Chair is elected by the Board, the members of the Committee may designate a Chair by majority vote of the full Committee membership.

 

III. Meetings

 

The Committee shall meet at least five times annually, or more frequently as circumstances dictate.

 

The Audit Committee Chair will approve an agenda in advance of each meeting and will cause minutes of meetings to be maintained. The Chair will regularly report to the Board of Directors on the results of the Committee’s deliberations.

 

IV. Responsibilities and Duties

 

To fulfil its responsibilities and duties, the Audit Committee shall:

 

Financial reporting

 

1.               Review the principal risks affecting the Corporation’s financial reporting and oversee appropriate systems to identify, evaluate and manage such risks.

2.               Review the Corporation’s public disclosure of financial information, including annual and interim financial statements, management’s discussion and analysis (MD&A) and annual and interim earnings releases, prior to filing with regulatory authorities or public dissemination and make recommendations to the Board for approval of same.

 

Such review shall address:

 

(a)          Appropriate application of IFRS as well as the underlying estimates, judgments and consideration of alternative treatment and presentation.

(b)         Clarity, accuracy and completeness of public disclosure.

(c)          Application of the Disclosure Committee process.

 

3.               Verify that the Corporation has appropriate procedures and policies in the areas of financial reporting, disclosure and internal controls, including for the review of the Corporation’s public disclosure of 

 

63

 

financial information derived from the Corporation’s financial statements and periodically assess the adequacy of such procedures and policies.

4.               Review the annual audited financial statements of the Corporation’s employee pension plans prior to filing with regulatory authorities and make recommendations to the Board for approval of same.

 

Independent auditors

 

5.               The Audit Committee is directly responsible for overseeing the work of the external auditors engaged for the purpose of preparing or issuing an auditor’s report or performing other audit, review or attest services for the Corporation, including the resolution of disagreements between management and the external auditors regarding financial reporting.

6.               The Audit Committee shall review the independence and performance of the auditors and annually recommend to the Board of Directors the appointment of the independent auditors and their compensation or approve any discharge of auditors where circumstances warrant.

7.               Review and approve the independent auditors’ audit plan and engagement letter. Discuss and approve audit scope, staffing, locations, reliance upon management and general audit approach. Ensure the auditor’s assessment of risks associated with financial reporting is consistent with that prepared by management.

8.               Review the results of the audit with the auditors.

9.               Review quarterly earnings reports with the auditor prior to public release.

10.         Approve the audit fees and other significant compensation to be paid to the independent auditors.

11.         At each Audit Committee meeting, consult with the independent auditors in the absence of management on internal controls and the fullness, appropriateness and accuracy of the Corporation’s annual financial statements including any disagreements.

12.         The Audit Committee shall pre-approve all non-audit services to be provided to the Corporation or its subsidiaries by the external auditors. In this regard, the Chairman is authorized to pre-approve non-audit services provided such pre-approval is presented to the Audit Committee at its first scheduled meeting thereafter.

 

Internal controls and compliance

 

13.         Review and assess reports prepared or caused to be prepared by management regarding internal controls, financial risk management and insurance programs.

14.         On at least a quarterly basis, review with the Corporation’s counsel any legal matters, the Corporation’s compliance with applicable laws and regulations, and inquiries received from regulators or governmental agencies that could have a significant impact on the Corporation’s annual financial statements.

15.         Establish procedures for:

 

(a)          the receipt, retention and treatment of complaints received by the Corporation regarding accounting, internal accounting or auditing matters; and

(b)         the confidential, anonymous submission by employees of the Corporation or its subsidiaries of concerns regarding questionable accounting or auditing matters.

 

16.         Review management’s reports on related party transactions.

17.         Review annually the framework of internal controls, how these align with the objective of preventing and detecting fraud as well as management’s assessment of the continued effectiveness and application of those internal controls.

18.         Review at least annually management’s report on executive travel and other expenses.

19.         Review at least annually management’s report on the Corporation’s source deductions and other remittances required under applicable tax legislation.

 

Other responsibilities

 

20.         Periodically review and discuss with management and the independent auditors the significance of emerging regulatory and accounting standards and initiatives for the financial reporting of the Corporation.

 

64

 

21.         Review and reassess the adequacy of this Charter at least annually and make recommendations to the Corporate Governance and Nominating Committee as well as to the Board of Directors for approval.

22.         Annually assess the effectiveness of the Committee against its Charter and report the results of the assessment to the Corporate Governance and Nominating Committee as well as to the Board.

23.         Review disclosure of a summary of this Charter to shareholders.

24.         Perform any other activities consistent with this Charter, the Corporation’s by-laws, and governing law, as the Committee or the Board deems necessary or appropriate.

25.         At each Audit Committee meeting, meet with management in the absence of the independent auditors.

26.         Periodically review financial and accounting personnel succession planning within the Corporation and its major subsidiaries.

27.         Review and approve the Corporation’s hiring policies regarding partners, employees and former partners and employees of the present and any former external auditors of the Corporation.

 

The Committee’s role, as described in this Charter, is an important part of monitoring the quality and integrity of the Corporation’s financial reporting. This role does not replace the responsibility of the Corporation’s management for the preparation and presentation of financial statements in accordance with generally accepted accounting principles, for significant accounting estimates and judgments, or for ensuring compliance by the Corporation with applicable laws relating to financial reporting. Nor does the role of the Committee detract from the responsibility of the auditors to plan and conduct an audit in accordance with Canadian generally accepted auditing standards or from the fact that the independent auditors are ultimately accountable to the Board of Directors and the Committee, as representatives of the shareholders of the Corporation.

 

This Charter establishes guidelines, rather than inflexible rules, and the Committee will adopt such additional procedures and standards from time to time as it deems appropriate to help fulfil its responsibilities. Nothing in this Charter is intended to expand applicable standards of liability under statutory or regulatory requirements for directors of the Corporation.

 

This Charter has been adopted by the Audit Committee of the Corporation, and approved by the Board, with effect as of December 1, 2009.

 

65

 

	

    	
 

Inmet Mining   Corporation

330 Bay Street,   Suite 1000,

Toronto, Ontario,   Canada M5H 2S8

www.inmetmining.com

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