-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JBi06lALwWShQ8C/V5szJ5mElbSPx9qp5IMLqj45ZcrNCJZq2x+TFnF0WCt53uxt iCB0+OP0DC7qrtJeT/t5Pw== 0000351116-97-000004.txt : 19970815 0000351116-97-000004.hdr.sgml : 19970815 ACCESSION NUMBER: 0000351116-97-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FREEPORT MCMORAN INC CENTRAL INDEX KEY: 0000351116 STANDARD INDUSTRIAL CLASSIFICATION: METAL MINING [1000] IRS NUMBER: 133051048 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08124 FILM NUMBER: 97660891 BUSINESS ADDRESS: STREET 1: 1615 POYDRAS ST CITY: NEW ORLEANS STATE: LA ZIP: 70112 BUSINESS PHONE: 5045824000 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended June 30, 1997 Commission File Number: 1-8124 Freeport-McMoRan Inc. Incorporated in Delaware 13-3051048 (IRS Employer Identification No.) 1615 Poydras Street, New Orleans, Louisiana 70112 Registrant's telephone number, including area code:(504) 582-4000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No On June 30, 1997, there were issued and outstanding 23,339,541 shares of the registrant's Common Stock, par value $0.01 per share. 1 FREEPORT-McMoRan INC. TABLE OF CONTENTS Page Part I. Financial Information Financial Statements: Condensed Balance Sheets 3 Statements of Income 4 Statements of Cash Flow 5 Notes to Financial Statements 6 Remarks 7 Report of Independent Public Accountants 8 Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Part II. Other Information 14 Signature 15 Exhibit Index E-1 2 FREEPORT-McMoRan INC. PART I. FINANCIAL INFORMATION Item 1. Financial Statements. FREEPORT-McMoRan INC. CONDENSED BALANCE SHEETS (Unaudited)
June 30, December 31, 1997 1996 ---------- ---------- (In Thousands) ASSETS Current assets: Cash and cash equivalents $ 5,481 $ 19,977 Accounts receivable 67,137 71,795 Inventories 159,640 141,158 Prepaid expenses and other 4,719 5,065 ---------- ---------- Total current assets 236,977 237,995 Property, plant and equipment, net 945,947 964,787 Other assets 58,247 48,641 ---------- ---------- Total assets $1,241,171 $1,251,423 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable and accrued liabilities $ 168,779 $ 168,557 Long-term debt, less current portion 449,641 441,030 Accrued postretirement benefits and pension costs 184,969 182,832 Reclamation and mine shutdown reserves 108,330 106,374 Other liabilities and deferred credits 90,358 84,247 Minority interest 166,705 174,081 Stockholders' equity 72,389 94,302 ---------- ---------- Total liabilities and stockholders' equity $1,241,171 $1,251,423 ========== ==========
The accompanying notes are an integral part of these financial statements. 3 FREEPORT-McMoRan INC. STATEMENTS OF INCOME (Unaudited) Revenues $ 228,906 $ 242,793 $ 440,778 $ 499,620 Cost of sales: Production and delivery 160,595 172,573 307,193 342,521 Depreciation and amortization 16,410 9,385 25,810 20,807 ---------- ---------- ---------- ---------- Total cost of sales 177,005 181,958 333,003 363,328 Gain on IMC-Agrico investment - - - (11,917) Exploration expenses - - 6,222 - General and administrative expenses 14,097 14,405 27,955 32,040 ---------- ---------- ---------- ---------- Total costs and expenses 191,102 196,363 367,180 383,451 ---------- ---------- ---------- ---------- Operating income 37,804 46,430 73,598 116,169 Interest expense, net (9,451) (8,413) (18,724) (16,438) Other income (expense), net (197) 607 (173) 1,355 ---------- ---------- ---------- ---------- Income before minority interest and income taxes 28,156 38,624 54,701 101,086 Minority interest in net income of consolidated subsidiaries (14,809) (18,639) (38,197) (47,741) Income tax provision (5,016) (6,764) (6,202) (18,899) ---------- ---------- ---------- ---------- Net income 8,331 13,221 10,302 34,446 Preferred dividends (1,095) (1,095) (2,191) (2,191) ---------- ---------- ---------- ---------- Net income applicable to common stock $ 7,236 $ 12,126 $ 8,111 $ 32,255 ========== ========== ========== ========== Net income per primary and fully diluted share $.31 $.45 $.34 $1.18 ==== ==== ==== ===== Average primary and fully diluted common and common equivalent shares outstanding 23,634 27,145 23,863 27,412 ====== ====== ====== ====== Cash dividend per common share $.09 $.09 $.18 $.18 ==== ==== ==== ====
The accompanying notes are an integral part of these financial statements. 4 FREEPORT-McMoRan INC. STATEMENTS OF CASH FLOW (Unaudited)
Six Months Ended June 30, ------------------------- 1997 1996 ---------- ---------- (In Thousands) Cash flow from operating activities: Net income $ 10,302 $ 34,446 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 25,810 20,807 Gain on IMC-Agrico investment - (11,917) Oil and gas exploration expenses 6,222 - Deferred income taxes 4,222 18,798 Minority interest's share of net income 38,197 47,741 Cash distributions from IMC-Agrico in excess of interest in capital 22,816 24,897 Reclamation and mine shutdown expenditures (12,255) (6,476) (Increase) decrease in working capital, net of effect of distribution: Accounts receivable 4,009 22,359 Inventories (18,482) (17,644) Prepaid expenses and other 346 (353) Accounts payable and accrued liabilities 6,104 (40,855) Other 1,922 9,606 ---------- ---------- Net cash provided by operating activities 89,213 101,409 ---------- ---------- Cash flow from investing activities: Capital expenditures: FRP (23,137) (16,649) Other (11,444) (926) Sale of assets - 4,000 ---------- ---------- Net cash used in investing activities (34,581) (13,575) ---------- ---------- Cash flow from financing activities: Purchase of FTX common shares (26,069) (57,672) Purchase of FRP units - (1,305) Distributions paid to FRP public unitholders (45,573) (61,898) Proceeds from debt 134,382 96,091 Repayments of debt (125,728) (219,859) Proceeds from sale of FRP 7% Senior Notes - 147,831 Cash dividends paid: Common stock (4,285) (4,832) Preferred stock (2,191) (2,191) Other 336 (156) ---------- ---------- Net cash used in financing activities (69,128) (103,991) ---------- ---------- Net decrease in cash and cash equivalents (14,496) (16,157) Cash and cash equivalents at beginning of year 19,977 23,496 ---------- ---------- Cash and cash equivalents at end of period $ 5,481 $ 7,339 ========== ==========
The accompanying notes are an integral part of these financial statements. 5 FREEPORT-McMoRan INC. NOTES TO FINANCIAL STATEMENTS 1. FTX AGREEMENT TO MERGE On July 28, 1997, Freeport-McMoRan Inc. (FTX) and IMC Global Inc. (IGL) announced an agreement to merge, with IGL as the surviving entity. The proposed combination, subject to negotiation of a definitive agreement and appropriate approvals, will involve the exchange of FTX common shares for 0.9 common shares of IGL stock plus a three-year warrant to purchase one-third of a share of IGL common stock at a price of $44.50 per share. The merger transaction will also involve the transfer of the Freeport-McMoRan Resource Partners, Limited Partnership's (FRP) sulphur business, including its 58.3 percent interest in the Main Pass 299 sulphur and oil property, together with IGL's 25 percent interest which IGL will relinquish to FRP, to a new entity whose common stock will be distributed to FRP unitholders, including FTX. FTX will distribute the stock to its stockholders. The definitive merger agreement is expected to be completed within approximately 30 days, with completion of the merger transaction by the end of 1997. 2. OIL AND GAS EXPLORATION INVESTMENT In March 1997, FRP entered into an agreement with McMoRan Oil & Gas Co. (MOXY), pursuant to which FRP acquired an interest in seven leases awarded to MOXY at the OCS Lease Sale 166 held in March 1997 for $5.5 million. In July 1997, FRP and MOXY also agreed to a multi-year aggregate $200 million oil and gas exploration program (MOXY/FRP Exploration Program) to explore and develop prospects primarily offshore in the Gulf of Mexico and onshore in the Gulf Coast area. FRP and MOXY will fund 60 percent and 40 percent, respectively, of the exploration costs and all revenues and other costs will be shared equally. Additionally, during August 1997, FRP purchased from MCN Energy Group Inc. (MCN), MCN's 60 percent interest in the MOXY/MCN offshore exploration program (MOXY/MCN program) which includes two producing oil and gas fields, an inventory of eight exploration prospects in the offshore Gulf of Mexico and MOXY's program debt of approximately $12.4 million owed to MCN for a total of $46.4 million, subject to adjustments. Subject to completion of MOXY's recapitalization described below, MOXY will acquire the two producing properties from FRP for $26.0 million, subject to certain adjustments, and repay FRP for MOXY's debt under the MOXY/MCN program. FRP and MOXY will contribute their interests in the MOXY/MCN program exploration properties and their interests in the seven offshore leases discussed above to the MOXY/FRP Exploration Program. To provide capital for these transactions, MOXY intends to undertake a $100 million rights offering pursuant to which MOXY anticipates issuing approximately 28.6 million shares of common stock. FRP has agreed to purchase at the $3.50 per share subscription price all shares that are offered but not purchased by rights holders. Upon closing of the MOXY rights offering, FRP will receive from MOXY a fee of $6 million. Additionally, if FRP does not acquire at least 30 percent of MOXY's outstanding common stock in the rights offering, FRP will have the option to purchase at $3.50 per share up to a 30 percent ownership interest in MOXY. These transactions are subject to approval by MOXY's stockholders. The proposed merger between FTX and IGL, discussed in Note 1, will have no effect on the proposed oil and gas exploration program and other transactions between FRP and MOXY. 6 3. PARENT COMPANY BALANCE SHEET The unaudited, unconsolidated condensed balance sheet of FTX as of June 30, 1997 follows (in thousands): Cash and cash equivalents $ 279 Other current assets 1,586 Property, plant and equipment, net 51,551 Investment in FRP 181,355 Other assets 10,454 ---------- Total assets $ 245,225 ========== Accounts payable and accrued liabilities $ 26,171 Long-term debt 52,700 Other liabilities and deferred credits 93,965 Stockholders' equity 72,389 ---------- Total liabilities and stockholders' equity $ 245,225 ========== 4. SRI LANKA PROJECT In March 1997, FRP was reimbursed $2.9 million for previously incurred expenses as a result of IMC-Agrico's participation in the potential phosphate mine and upgrading project in Sri Lanka. This project would be undertaken through a joint venture involving the Government of Sri Lanka, IMC-Agrico and another party. 5. NORTH BAY JUNOP EXPLORATION CHARGE In April 1997, FRP's 25 percent owned oil and gas exploration joint venture with Phillips Petroleum Company and MOXY completed drilling of its exploratory well on the North Bay Junop prospect, the second of two high-risk, high-potential prospects which have been drilled within the joint venture's project area in south Louisiana. The well reached total depth but did not encounter commercial hydrocarbons in the primary objective zones, resulting in a first-quarter 1997 charge to exploration expense of $6.2 million. 6. NEW ACCOUNTING STANDARDS In February 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share," which simplifies the computation of earnings per share. SFAS 128 is effective for financial statements issued for periods ending after December 15, 1997 and requires restatement for all prior period earnings per share data presented. Adoption of SFAS 128 will not have a material impact on FTX's previously reported earnings per share. In June 1997, the FASB issued SFAS 130, "Reporting Comprehensive Income," and SFAS 131, "Disclosures About Segments of an Enterprise and Related Information." SFAS 130 establishes standards for the reporting and display of comprehensive income in the financial statements. Comprehensive income is the total of net income and all other non-owner changes in equity. SFAS 131 requires that companies disclose segment data based on how management makes decisions about allocating resources to segments and measuring their performance. SFAS 130 and 131 are effective for 1998. Adoption of these standards is expected to result in additional disclosures, but will not have an effect on FTX's financial position or results of operations. ----------------- Remarks The information furnished herein should be read in conjunction with FTX's financial statements contained in its 1996 Annual Report to stockholders included in its Annual Report on Form 10-K. The information furnished herein reflects all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the periods. All such adjustments are, in the opinion of management, of a normal recurring nature. 7 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Stockholders of Freeport-McMoRan Inc.: We have reviewed the accompanying condensed consolidated balance sheet of Freeport-McMoRan Inc. (the Company), a Delaware Corporation, as of June 30, 1997, and the related consolidated statements of operations for the three-month and six-month periods ended June 30, 1997 and 1996 and the statements of cash flow for the six-month periods ended June 30, 1997 and 1996. These financial statements are the responsibility of the Company's management. We did not review the interim financial information of IMC-Agrico Company (the Joint Venture). The Company's share of the Joint Venture constitutes 47 percent of consolidated total assets as of June 30, 1997, and 82 percent of the Company's consolidated total revenues for the periods ended June 30, 1997 and 1996. Those statements were reviewed by other accountants whose report covering their review has been furnished to us. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review and the report of other accountants, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the balance sheet of Freeport-McMoRan Inc. as of December 31, 1996, and the related statements of operations, stockholders' equity and cash flow for the year then ended (not presented herein), and in our report dated January 21, 1997, based on our audit and the report of other auditors, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying condensed balance sheet as of December 31, 1996, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived. ARTHUR ANDERSEN LLP New Orleans, Louisiana, July 22, 1997 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. FTX AGREEMENT TO MERGE On July 28, 1997, Freeport-McMoRan Inc. (FTX) and IMC Global Inc. (IGL) announced an agreement to merge, with IGL as the surviving entity. The proposed combination, subject to negotiation of a definitive agreement and appropriate approvals, will involve the exchange of FTX common shares for 0.9 common shares of IGL stock plus a three-year warrant to purchase one-third of a share of IGL common stock at a price of $44.50 per share. The merger transaction will also involve the transfer of the Freeport-McMoRan Resource Partners, Limited Partnership's (FRP) sulphur business, including its 58.3 percent interest in the Main Pass 299 sulphur and oil property, together with IGL's 25 percent interest which IGL will relinquish to FRP, to a new entity whose common stock will be distributed to FRP unitholders, including FTX. FTX will distribute the stock to its stockholders. The definitive merger agreement is expected to be completed within approximately 30 days, with completion of the merger transaction by the end of 1997. OVERVIEW The business operations of FTX primarily consist of its 51.6 percent ownership in FRP. FRP, through its subsidiaries and joint venture operations, is one of the world's leading integrated phosphate fertilizer producers. FRP is a joint venture partner in IMC-Agrico Company, the world's largest and one of the lowest cost producers, marketers and distributors of phosphate fertilizers. IMC-Agrico's business also includes the mining and sale of phosphate rock and the production, marketing and distribution of animal feed ingredients. FRP's Main Pass sulphur mine, offshore Louisiana in the Gulf of Mexico, and its Culberson mine in Texas also make FRP the largest producer of Frasch sulphur in the world. Main Pass also contains proved oil reserves that FRP produces and sells for the Main Pass joint venture. The combined sulphur, phosphate mining and fertilizer production operations provide FRP with the competitive advantages of vertical integration and operating efficiencies and reduce the sensitivity of FRP's phosphate fertilizer costs to changes in raw material prices. FRP also believes that the strategic location of IMC-Agrico's fertilizer operations, both in Florida and on the Mississippi River, provide it with a competitive advantage over other fertilizer producers. Management has been able to move forward on several growth opportunities during 1997 as follows: * In March 1997, FRP, a significant consumer of natural gas in its sulphur and fertilizer operations, entered into an agreement with McMoRan Oil & Gas Co. (MOXY) pursuant to which FRP acquired an interest in seven leases awarded to MOXY at the OCS Lease Sale 166 held in March 1997 for $5.5 million. In July 1997, FRP and MOXY also agreed to a multi-year aggregate $200 million oil and gas exploration program (MOXY/FRP Exploration Program) to explore and develop prospects primarily offshore in the Gulf of Mexico and onshore in the Gulf Coast area. FRP and MOXY will fund 60 percent and 40 percent, respectively, of the exploration costs and all revenues and other costs will be shared equally. Additionally, during August 1997, FRP purchased from MCN Energy Group Inc. (MCN), MCN's 60 percent interest in the MOXY/MCN offshore exploration program (MOXY/MCN Program) which includes two producing oil and gas fields, an inventory of eight exploration prospects in the offshore Gulf of Mexico and MOXY's program debt of approximately $12.4 million owed to MCN for a total of $46.4 million, subject to adjustments. Subject to completion of MOXY's recapitalization described below, MOXY will acquire the two producing properties from FRP for $26.0 million, subject to certain adjustments, and repay FRP for MOXY's debt under the MOXY/MCN Program. FRP and MOXY will contribute their interests in the MOXY/MCN Program exploration properties and their interests in the seven offshore leases discussed above to the MOXY/FRP Exploration Program. To provide capital for these transactions, MOXY intends to undertake a $100 million rights offering pursuant to which MOXY anticipates issuing approximately 28.6 million shares of common stock. FRP has agreed to purchase at the $3.50 per share subscription price all shares that are offered but not purchased by rights holders. Upon closing of the rights offering, FRP will receive from MOXY a fee of $6 million. Additionally, if FRP does not acquire at least 30 percent of MOXY's outstanding common stock in the rights offering, FRP will have the option to purchase at $3.50 per share up to a 30 percent ownership interest in MOXY. These transactions are subject to approval by MOXY's stockholders. 9 The merger between FTX and IGL, discussed above, will have no effect on the proposed oil and gas exploration program and other transactions between FRP and MOXY. * In March 1997, FRP was reimbursed $2.9 million for previously incurred expenses as a result of IMC-Agrico's participation in the potential phosphate mine and upgrading project in Sri Lanka. This project would be undertaken through a joint venture involving the Government of Sri Lanka, IMC-Agrico and another party. Because of the strategic location of this project in close proximity to Asian customers, it would have potentially favorable economic competitive advantages. Project evaluation continues. RESULTS OF OPERATIONS Second Quarter Six Months ------------------------ ---------------------- 1997 1996 1997 1996 ---------- ---------- ---------- --------- (In Millions) Revenues $ 228.9 $ 242.8 $ 440.8 $ 499.6 Operating income 37.8 46.4 73.6 116.2 Net income to common stock 7.2 12.1 8.1 32.3 FTX's operating results for the second quarter of 1997 were affected by lower average realizations on its phosphate fertilizer, phosphate rock, sulphur and oil sales, as well as reduced sales volumes for phosphate rock and oil. For the six-month 1997 period, FTX experienced lower average realizations on its phosphate fertilizer, phosphate rock and sulphur sales, combined with reduced production and sales volumes for phosphate fertilizer, phosphate rock and oil. The six-month 1997 period includes a $6.2 million charge for oil and gas exploration costs and a $2.9 million credit for reimbursement of previously incurred expenses as a result of IMC- Agrico's participation in a potential phosphate mine and upgrading project in Sri Lanka. The six-month 1996 period included an $11.9 million gain from the increase in FRP's ownership of IMC-Agrico and charges totaling $3.0 million for asset valuations at IMC-Agrico. Depreciation and amortization for the current quarter increased $7.0 million from the 1996 period amount. This rise is attributable primarily to a $3.2 million increase related to FRP's disproportionate interest in the IMC-Agrico cash distributions and $3.7 million in nonrecurring charges from IMC-Agrico, partially offset by a decline in unit-of-production depreciation of $1.5 million from Main Pass oil operations caused by lower volumes. For the six-month 1997 period, depreciation and amortization rose $5.0 million primarily because of a $3.4 million increase related to FRP's disproportionate interest in the IMC-Agrico cash distributions and $3.7 million in nonrecurring charges from IMC-Agrico, partially offset by a reduction of $3.4 million from Main Pass oil operations. General and administrative expenses for the six-month 1997 period declined $4.1 million from the 1996 period amount. A majority of the decrease related to lower stock appreciation rights costs. Interest expense for the 1997 periods increased from the year-ago amounts because of higher average debt levels. Minority interest represents the FRP public unitholders' pro rata share of FRP earnings, with the six-month 1997 period including an additional charge of $9.2 million (versus a gain of $0.5 million and $1.7 million for the second-quarter and six-month periods of 1996, respectively) because FTX was not paid its proportionate share of FRP distributions in connection with the final quarterly distribution under the public FRP unitholders' preferential distribution priority paid in February 1997. To the extent that cumulative unpaid distributions are reduced in the future, as discussed below, FTX will recognize a disproportionately greater share of FRP's reported earnings. FTX's income tax provision for 1997 decreased from the 1996 period amount, primarily resulting from the decline in pretax, after-minority interest earnings. Agricultural Minerals Operations - FTX's agricultural minerals operations, which include FRP's fertilizer and phosphate rock operations (conducted through IMC-Agrico) and its sulphur business, reported second-quarter 1997 operating income of $42.2 million on revenues of $221.1 million compared with operating income of $50.1 million on revenues of $233.0 million for the 1996 period. Operating income for the first six months of 1997 was $84.7 million on revenues of $424.3 million compared with operating income of $126.3 million on revenues of $480.2 million for the year-ago period. Significant items impacting operating income follow (in millions): 10 Second Six Quarter Months ---------- ---------- Agricultural minerals operating income -1996 $ 50.1 $ 126.3 ---------- ---------- Increases (decreases): Sales volumes .4 (18.4) Realizations (12.6) (37.0) Other .3 (.5) ---------- ---------- Revenue variance (11.9) (55.9) Cost of sales a 3.9 24.9 Gain on IMC-Agrico investment - (11.9) General and administrative .1 1.3 ---------- ---------- (7.9) (41.6) ---------- ---------- Agricultural minerals operating income -1997 $ 42.2 $ 84.7 ========== ========== a. Includes a reduction to depreciation of $5.3 million and $8.5 million for the second quarter of 1997 and 1996, respectively, and $12.4 million and $15.8 million for the six-month period of 1997 and 1996, respectively, caused by FRP's disproportionate interest in IMC- Agrico cash distributions. These adjustments to depreciation will end after the third quarter of 1997, when FRP receives its final disproportionate cash distribution from IMC-Agrico. The six-month 1996 period also includes $3.0 million of asset valuation charges from IMC-Agrico. FRP's second-quarter 1997 phosphate fertilizer sales volumes increased by 3 percent from the year-ago quarter, as North American demand was very strong and export shipments remained brisk with IMC- Agrico shipping significant tonnage to China under its 1997/1998 sales agreement. Average sales prices for phosphate fertilizers for the quarter were slightly lower than the prior-year period and the previous quarter. IMC-Agrico resumed full production at its New Wales, Florida facility in April 1997 in response to strengthened demand associated with the domestic spring season and new sales to the international market. Unit production costs for diammonium phosphate (DAP), IMC-Agrico's principal fertilizer product, declined slightly from the year-ago quarter primarily as a result of reduced sulphur, ammonia and processing costs. Near-term unit production costs are expected to benefit as the full effect of a decline in ammonia prices which occurred over the past six months is realized. With very low phosphate fertilizer producer inventories, the near-term market outlook appears favorable. Even with current expectations of good crop yields in North America, world grain stocks should remain at historically low levels. Long-term projected demand growth, especially in the developing countries of Asia and Latin America, is expected to require additional supplies of fertilizer beyond the current production capability of existing facilities. Additionally, FRP believes higher prices and operating margins are required before new major phosphate projects are initiated. However, weather and government policies will continue to cause annual fluctuations in the overall agricultural and fertilizer supply and demand situation. FRP's second-quarter and six-month 1997 phosphate rock sales volumes declined 25 percent and 20 percent, respectively, over year- ago levels, as IMC-Agrico continues to limit-third party sales in order to maximize the long-term value of its reserves through internal use. This strategy is expected to result in lower sales volumes of phosphate rock for 1997. Reduced sales volumes and lower realizations contributed to decreased earnings from phosphate rock operations. FRP's Main Pass and Culberson sulphur mines continue to operate at reduced rates in order to match market requirements. FRP's sulphur realizations for the second quarter of 1997 strengthened, rising 3 percent from the first quarter of 1997, but were 6 percent lower than the year-ago period. Sulphur sales volumes for the second quarter of 1997 rose 11 percent from the 1996 period, primarily caused by increased sales to IMC-Agrico. FRP's future sulphur sales realizations and volumes will continue to depend on the level of demand from the domestic phosphate fertilizer industry and the availability of competing supplies from recovered sources. Since FRP's sulphur consumption approximates its production, a change in the market price of sulphur does not have a significant effect on earnings. FRP continues to evaluate its sulphur business strategy in light of the current sulphur market, including the possibility of reducing its overall production levels. 11 Second Quarter Six Months ------------------------ ---------------------- 1997 1996 1997 1996 ---------- ---------- ---------- ---------- Phosphate fertilizers -primarily DAP Sales (short tons) 833,400 809,900 1,532,900 1,599,900 Average realized price a All phosphate fertilizers $171.77 $174.96 $172.93 $185.88 DAP 175.99 178.37 177.04 192.05 Phosphate rock Sales (short tons) 558,300 740,700 1,191,500 1,492,500 Average realized price a $22.70 $27.27 $23.20 $26.77 Sulphur Sales (long tons) b 738,900 665,700 1,476,900 1,403,800 a. Represents average realization f.o.b. plant/mine. b. Includes internal consumption of 200,600 tons and 169,000 tons for the second quarter of 1997 and 1996, respectively, and 398,300 tons and 355,000 tons for the six-month period of 1997 and 1996, respectively. Oil Operations - Main Pass oil operations achieved the following: Second Quarter Six Months ----------------------- --------------------- 1997 1996 1997 1996 --------- -------- -------- --------- Sales (barrels) 443,700 502,300 867,500 1,044,500 Average realized price $17.52 $19.26 $18.78 $18.32 Operating income (in millions) $1.5 $2.5 $4.2 $4.7 Main Pass operating income for the 1997 period reflects lower average realizations and reduced production levels. Net production for 1997 is expected to decline slightly from 1996 levels, as increased drilling activities at Main Pass are expected to generate production sufficient to partially offset declining reservoir production. In April 1997, FRP's 25 percent owned oil and gas exploration joint venture with Phillips Petroleum Company and MOXY completed drilling of an exploratory well on the North Bay Junop prospect. The well reached total depth but did not encounter commercial hydrocarbons in the primary objective zones, resulting in a $6.2 million charge to first-quarter 1997 exploration expense. The well was completed in a shallower zone with approximately 25 feet of net gas pay. The well was flow tested at a rate of 5.3 Mmcf of gas and 93 barrels of condensate per day. Because of the complexity of the salt dome geology and potentially limited reservoir size, production performance will be required to determine the reserve volumes associated with this completion. Other leads within the project area which have been identified by 3-D seismic survey continue to be evaluated. As noted earlier, FRP intends to significantly expand its oil and gas activities through a multi-year aggregate $200 million exploration program, and potentially significant equity investment, with MOXY. Pending formation of the MOXY/FRP Exploration Program, FRP's exploration activities will take place through its recently purchased interest in the MOXY/MCN Program, which has three prospects scheduled to initiate exploratory drilling activities during the third quarter of 1997. CAPITAL RESOURCES AND LIQUIDITY As discussed earlier, FTX has announced its intent to merge with IGL, with IGL as the surviving entity. As part of the merger, FRP's operations would also be significantly changed. As a result, this merger would fundamentally change both FTX's and FRP's structure, capital resources, etc. FTX's main source of cash flow is distributions from FRP. On July 22, 1997, FRP declared a distribution of 33 cents per unit. This cash distribution represents the second distribution following the end of the public unitholders' preference period in early 1997. FRP's distributable cash is now shared ratably by FRP's public unitholders and FTX, except that FTX will be entitled to receive unpaid cash distributions from previous quarters ($431.3 million unpaid at July 22, 1997) from one-half of the quarterly distributable cash after the payment of 60 cents per unit to all FRP unitholders. FRP's future distributions will depend on the distributions received from IMC-Agrico, on the cash flow generated from FRP's sulphur and Main Pass oil operations, the cash requirements of its expanding 12 oil and gas exploration activities (discussed earlier), and on the level of and methods of financing its capital expenditure needs, including reclamation and growth projects. FRP's distributable cash in July 1997 included $43.7 million from IMC-Agrico. Future distributions from IMC-Agrico will depend primarily on the phosphate fertilizer market, discussed earlier, and FRP's share of IMC-Agrico cash distributions (Current Interest). Effective July 1, 1997, FRP's Current Interest in IMC-Agrico declined from 54.35 percent to 41.45 percent, where FRP's Current Interest is scheduled to remain. FTX currently has a quarterly cash dividend of 9 cents per common share. This dividend level allows FTX to use additional available funds to purchase FTX stock, purchase FRP units and/or invest in potential new growth opportunities. The timing of FTX stock and FRP unit purchases is dependent upon many factors, including their price, FTX's financial condition and general economic and market factors. FTX anticipates that its cash distributions from FRP and amounts available to it under its credit facility ($258.0 million of additional borrowings available to FRP at July 25, 1997, $51.0 million of which is available to FTX) will be sufficient to meet its obligations. Net cash provided by operating activities during the first six months of 1997 totaled $89.2 million, compared with $101.4 million for the 1996 period, primarily reflecting lower earnings. Capital expenditures for the 1997 period were up from the year-ago level, and are currently estimated to approximate $80 million for 1997. During the first six months of 1997, FTX purchased 898,800 shares of its common stock for an aggregate $26.1 million. CAUTIONARY STATEMENT Management's discussion and analysis contains forward-looking statements including, without limitation, statements regarding sales and production volumes, capital expenditures and product markets. Important factors that might cause future results to differ from these projections include, without limitation, economic and business conditions, product market conditions, agricultural conditions and other factors, many of which are beyond the control of the Company. Further information regarding these and other factors are described in more detail under the heading "Cautionary Statement" in FTX's Form 10- K for the year ended December 31, 1996. -------------------------------- The results of operations reported and summarized above are not necessarily indicative of future operating results. 13 FREEPORT-McMoRan INC. PART II. Other Information Item 4. Submission of Matters to a Vote of Security Holders. (a) The Annual Meeting of Stockholders of the Company was held on April 29, 1997 (the "Annual Meeting"). Proxies were solicited pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. (b) At the Annual Meeting, William B. Harrison, Jr., Henry A. Kissinger, Rene L. Latiolais and J. Taylor Wharton were elected to serve until the 2000 annual meeting of stockholders. In addition to the directors elected at the Annual Meeting, the terms of the following directors continued after the Annual Meeting: Richard C. Adkerson, Robert W. Bruce III, Robert A. Day, Bobby Lee Lackey, Gabrielle K. McDonald, James R. Moffett, George Putnam and B. M. Rankin, Jr. (c) At the Annual Meeting, holders of shares of the Company's Common Stock elected four directors with the number of votes cast for or withheld from each nominee as follows: Name For Withheld ---- --- -------- William B. Harrison, Jr. 21,711,380 212,258 Henry A. Kissinger 21,669,155 254,483 Rene L. Latiolais 21,826,890 96,748 J. Taylor Wharton 21,825,742 97,896 With respect to the election of directors, there were no abstentions or broker non-votes. At the Annual Meeting, the stockholders also voted on and approved a proposal to ratify the appointment of Arthur Andersen LLP to act as the independent auditors to audit the financial statements of the Company and its subsidiaries for the year 1997. Holders of 21,838,860 shares voted for, holders of 37,476 shares voted against and holders of 47,302 shares abstained from voting on, such proposal. There were no broker non-votes with respect to such proposal. Item 6. Exhibits and Reports on Form 8-K. (a) The exhibits to this report are listed on the Exhibit Index appearing on page E-1 hereof. (b) No reports on Form 8-K were filed by the registrant during the quarter for which this report is filed. 14 FREEPORT-McMoRan INC. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FREEPORT-McMoRan INC. By: /s/ C. Donald Whitmire, Jr. --------------------------- C. Donald Whitmire, Jr. Controller - Financial Reporting (authorized signatory and Principal Accounting Officer) Date: August 14, 1997 15 FREEPORT-McMoRan INC. EXHIBIT INDEX Number Description Sequentially Numbered Page - ------ ---------- -------------------------- 3.1 Composite copy of Certificate of Incorporation of FTX, as amended. Incorporated by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q of FTX for the quarter ended June 30, 1992 (the "FTX 1992 Second Quarter Form 10-Q"). 3.2 By-Laws of FTX, as amended. Incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-K for the fiscal year ended December 31, 1996 (the "FTX 1996 Form 10-K"). 4.1 Certificate of Designations of the $4.375 Convertible Exchangeable Preferred Stock of FTX. Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of FTX dated March 23, 1992. 4.2 Amended and Restated Agreement of Limited Partnership of FRP dated as of May 29, 1987 (the "FRP Partnership Agreement") among FTX, Freeport Phosphate Rock Company and Geysers Geothermal Company, as general partners, and Freeport Minerals Company ("FMC"), as general partner and attorney-in-fact for the limited partners, of FRP. Incorporated by reference to Exhibit B to the Prospectus dated May 29, 1987 included in FRP's Registration Statement on Form S-1, as amended, as filed with the Commission on May 29, 1987 (Registration No. 33-13513). 4.3 Amendment to the FRP Partnership Agreement dated as of December 16, 1988 effected by FMC, as Administrative Managing General Partner, and FTX, as General Partner, of FRP. Incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-K of FRP for the fiscal year ended December 31, 1994. 4.4 Amendment to the FRP Partnership Agreement dated as of March 29, 1990 effected by FMC, as Administrative Managing General Partner, and FTX, as Managing General Partner, of FRP. Incorporated by reference to Exhibit 19.2 to the Quarterly Report on Form 10-Q of FRP for the quarter ended March 31, 1990 (the "FRP 1990 First Quarter Form 10-Q"). 4.5 Amendment to the FRP Partnership Agreement dated as of April 6, 1990 effected by FTX, as Administrative Managing General Partner of FRP. Incorporated by reference to Exhibit 19.3 to the FRP 1990 First Quarter Form 10-Q. 4.6 Amendment to the FRP Partnership Agreement dated as of January 27, 1992 between FTX, as Administrative Managing General Partner, and FMRP Inc., as Managing General Partner of FRP. Incorporated by reference to Exhibit 3.3 to the Annual Report on Form 10-K of FRP for the fiscal year ended December 31, 1991 (the "FRP 1991 Form 10-K"). 4.7 Amendment to the FRP Partnership Agreement dated as of October 14, 1992 between FTX, as Administrative Managing General Partner, and FMRP Inc., as Managing General Partner of FRP. Incorporated by reference to Exhibit 3.4 to the Annual Report on Form 10-K of FRP for the fiscal year ended December 31, 1992 (the "FRP 1992 Form 10-K"). 4.8 Deposit Agreement dated as of June 27, 1986 (the "Deposit Agreement") among FRP, The Chase Manhattan Bank, N.A. ("Chase") and Freeport Minerals Company, as attorney-in-fact of those limited partners and assignees holding depositary receipts for units of limited partnership interests in FRP ("Depositary Receipts"). Incorporated by reference to Exhibit 28.4 to the Current Report on Form 8-K of FTX dated July 11, 1986. 16 4.9 Resignation dated December 26, 1991 of Chase as Depositary under the Deposit Agreement and appointment dated December 27, 1991 of Mellon Bank, N.A. ("Mellon") as successor Depositary, effective January 1, 1992. Incorporated by reference to Exhibit 4.5 to the FRP 1991 Form 10-K. 4.10 Service Agreement dated as of January 1, 1992 between FRP and Mellon pursuant to which Mellon will serve as Depositary under the Deposit Agreement and Custodian under the Custodial Agreement. Incorporated by reference to Exhibit 4.6 to the FRP 1991 Form 10-K. 4.11 Amendment to the Deposit Agreement dated as of November 18, 1992 between FRP and Mellon. Incorporated by reference to Exhibit 4.4 to the FRP 1992 Form 10-K. 4.12 Form of Depositary Receipt. Incorporated by reference to Exhibit 4.5 to the FRP 1992 Form 10-K. 4.13 Custodial Agreement regarding the FRP Depositary Unit Reinvestment Plan among FTX, FRP and Chase, effective as of April 1, 1987 (the "Custodial Agreement"). Incorporated by reference to Exhibit 19.1 to the Quarterly Report on Form 10-Q of FRP for the quarter ended June 30, 1987. 4.14 FRP Depositary Unit Reinvestment Plan. Incorporated by reference to Exhibit 4.4 to the FRP 1991 Form 10-K. 4.15 Second Amended and Restated Credit Agreement dated as of November 14, 1996 (the "FTX/FRP Credit Agreement") among FTX, FRP, the various financial institutions that are parties thereto (the "Banks"), The Chase Manhattan Bank (successor by merger to Chemical Bank) and The Chase Manhattan Bank (National Association), as Administrative Agent, FRP Collateral Agent, FTX Collateral Agent and Documentary Agent. Incorporated by reference to Exhibit 4.15 to the FTX 1996 Form 10-K. 4.16 Subordinated Indenture as of October 26, 1990 (the "Subordinated Indenture") between FRP and Manufacturers Hanover Trust Company ("MHTC") as Trustee. Incorporated by reference to Exhibit 4.11 to the Annual Report on Form 10-K of FRP for the fiscal year ended December 31, 1993. 4.17 First Supplemental Indenture dated as of February 15, 1994 between FRP and Chemical Bank, as Successor to MHTC, as Trustee, to the Subordinated Indenture providing for the issuance of $150,000,000 of aggregate principal amount of 8 3/4% Senior Subordinated Notes due 2004. Incorporated by reference to Exhibit 4.12 to the FRP 1993 Form 10-K. 4.18 Form of Senior Indenture (the "Senior Indenture") from FRP to Chemical Bank, as Trustee. Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of FRP dated February 13, 1996. 4.19 Form of Supplemental Indenture dated February 14, 1996 from FRP to Chemical Bank, as Trustee, to the Senior Indenture providing for the issuance of $150,000,000 aggregate principal amount of 7% Senior Notes due 2008. Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K dated February 16, 1996 of FRP. 10.1 1982 Stock Option Plan of FTX, as amended. 10.2 FTX 1992 Stock Option Plan, as amended. 10.3 FTX 1996 Stock Option Plan, as amended. 11.1 Freeport-McMoRan Inc. Computation of Net Income per Common and Common Equivalent Share 15.1 Letter dated July 22, 1997 from Arthur Andersen LLP regarding unaudited interim financial statements. 27.1 Freeport-McMoRan Inc. Financial Data Schedule EX-10 2 1982 STOCK OPTION PLAN ARTICLE I PURPOSE OF THE PLAN This 1982 Stock Option Plan (this "Plan") is intended to provide a method whereby Employees (as hereinafter defined) of Freeport-McMoRan Inc. (the "Company") and its Subsidiaries (as hereinafter defined) who are largely responsible for their management and growth, and who are making and continue to make substantial contributions to their success, may be encouraged to acquire a proprietary interest in the Company and whereby needed new Employees may be persuaded to accept employment by the Company and its Subsidiaries, and to provide both present and new Employees with greater incentive, encourage their entrance or continuance in the Company's service and promote the interests of the Company and all its stockholders. Accordingly, the Company may from time to time on or before April 18, 1992, in its discretion, grant to such persons as may be selected in the manner hereinafter provided options to purchase shares of Common Stock of the Company ("Common Stock"), and Stock Appreciation Rights or SARs (as hereinafter defined), on the terms and subject to the conditions hereinafter set forth. ARTICLE II ADMINISTRATION OF THE PLAN SECTION 1. Subject to the authority as described herein of the Board of Directors of the Company (the "Board"), this Plan shall be administered by a committee (the "Committee") designated by the Board, which shall be composed of not fewer than two directors, each of whom, to the extent necessary to comply with Rule 16b-3 (as hereinafter defined) only, is a "non-employee director" within the meaning of Rule 16b-3 and, to the extent necessary to comply with Section 162(m) (as hereinafter defined) only, is an "outside director" under Section 162(m). Until otherwise determined by the Board, the Corporate Personnel Committee designated by the Board shall be the Committee under this Plan. The Committee is authorized to interpret this Plan and may from time to time adopt such rules and regulations for carrying out this Plan as it may deem best. All determinations by the Committee shall be made by the affirmative vote of a majority of its members, but any determination reduced to writing and signed by a majority of its members shall be fully as effective as if it had been made by a majority vote at a meeting duly called and held. Subject to any applicable provisions of the Company's By-Laws or of this Plan, all determinations by the Committee or by the Board pursuant to the provisions of this Plan, and all related orders or resolutions of the Committee or the Board, shall be final, conclusive and binding on all persons, including the Company and its stockholders, Employees and optionees. SECTION 2. All authority delegated to the Committee pursuant to this Plan, including that referred to in Section 1 of this Article II, may also be exercised by the Board. In the event of any conflict or inconsistency between determinations, orders, resolutions or other actions of the Committee and the Board taken in connection with this Plan, the actions of the Board shall control. ARTICLE III STOCK SUBJECT TO THE PLAN SECTION 1. The shares to be issued or delivered upon exercise of options or rights granted under this Plan shall be made available, at the discretion of the Board, either from the authorized but unissued shares of Common Stock of the Company or from shares of Common Stock reacquired by the Company, including shares purchased by the Company in the open market or otherwise obtained; provided, however, that the Company, at the discretion of the Committee or the Board, may, upon exercise of options or rights granted under this Plan, cause a Subsidiary to deliver shares of Common Stock held by such Subsidiary. Any Subsidiary Equity Securities (as hereinafter defined) distributed pursuant to Section 7 of Article VI of this Plan shall be made available, at the discretion of the Board or the Committee, either directly from the issuer thereof or from the Company's holdings of such Subsidiary Equity Securities purchased by the Company or a Subsidiary in the open market or otherwise obtained. SECTION 2. Subject to the provisions of Section 3 of this Article III, the aggregate number of shares of Common Stock which may be subject to options or SARs granted at any time under this Plan shall not exceed 7,500,000. If any option or SAR or portion thereof lapses or terminates without the issuance of shares of Common Stock or other consideration in lieu of such shares, the shares of Common Stock subject to such option or SAR shall again be available for grant under the Plan, to the extent of such lapse or termination. SECTION 3. In the event of the payment of any dividends payable in Common Stock or in the event of any subdivision or combination of the Common Stock, the number of shares which may be subject to options and SARs under this Plan shall be increased or decreased proportionately, as the case may be, and the number of shares or other amount deliverable upon the exercise thereafter of any option or SAR theretofore granted (whether or not then exercisable) shall be increased or decreased proportionately, as the case may be, without change in the aggregate purchase or exercise price. In the event of any other recapitalization or reorganization affecting the Common Stock or in the event of any significant distribution in kind (including, without limitation, a distribution of units representing beneficial interests in any royalty trust with respect to oil and gas or other mineral properties and distributions of equity securities representing interests in Subsidiaries or affiliates of the Company), the number of shares which may be subject to options and SARs under this Plan, and, with the consent of the holder thereof, the terms of any option or SAR theretofore granted hereunder (whether or not then exercisable), including without limitation the number of shares or other equity securities or any other amounts deliverable upon the exercise of such option or SAR or of any right attached thereto or provided for therein and the exercise price therefor, shall be subject to such adjustment as the Committee or the Board may deem appropriate. In the event the Company is merged or consolidated into or with another corporation, or substantially all of its assets are sold to another corporation, appropriate provisions shall be made for the protection and continuation of any outstanding options and SARs by the substitution, on an equitable basis, of such stock, other securities, cash or combination thereof as shall be appropriate. In the event of (i) a dividend or distribution (other than cash dividends or distributions) with respect to any Subsidiary Equity Securities distributable or payable in the form of cash pursuant to Section 7 of Article VI hereof, (ii) a subdivision or combination of any such Subsidiary Equity Securities, (iii) any recapitalization, reorganization, merger, consolidation, liquidation, or other extraordinary event affecting any such Subsidiary Equity Securities, or (iv) the disposition by the Company and its Subsidiaries of all or substantially all of their holdings of any such Subsidiary Equity Securities, the terms of any option or SAR theretofore granted hereunder (whether or not then exercisable) shall be subject to such adjustment as the Committee or the Board may deem appropriate, including, without limitation, a proportional adjustment in the number of such Subsidiary Equity Securities deliverable upon the exercise of such option or SAR or of any right attached thereto or provided for therein or the substitution, on an equitable basis, of Common Stock, other Subsidiary Equity Securities, or cash or a combination thereof for such Subsidiary Equity Securities. ARTICLE IV PURCHASE PRICE OF OPTIONED SHARES Unless the Committee or the Board shall fix a greater purchase price, the purchase price per share of Common Stock under each option, and the exercise price of any Stock Appreciation Right, shall be 100% of the Fair Market Value (as hereinafter defined) of a share of Common Stock at the time such option or SAR is granted, but in no case shall such price be less than the par value of the Common Stock. ARTICLE V ELIGIBILITY OF RECIPIENTS Options and SARs will be granted only to persons who are Employees of the Company or a Subsidiary or who have agreed in writing to become Employees of the Company or a Subsidiary within not more than 30 days following the date on which the option or SAR is granted. Neither the members of the Committee nor any member of the Board who is not an Employee of the Company or a Subsidiary shall be eligible to receive an option or SAR under this Plan. ARTICLE VI GRANT OF OPTIONS AND SARS SECTION 1. Each option granted under this Plan shall constitute either an incentive stock option, intended to qualify under Section 422A of the Internal Revenue Code of 1986 (the "Code"), or a nonqualified stock option, not intended to qualify under said Section 422A, as determined in each case by the Committee or the Board. The aggregate Fair Market Value (determined as of the time the option is granted) of the stock for which any person may be granted incentive stock options in any calendar year prior to 1987 (under all plans of the Company and its parent and subsidiary corporations) shall not exceed $100,000 plus any "unused limit carryover to such year" within the meaning of said Section 422A. With respect to any incentive stock option granted under this Plan after December 31, 1986 and in accordance with procedures to be established by the Committee, the aggregate Fair Market Value (determined as of the time the option is granted) of the stock for which any person may be granted incentive stock options that become exercisable for the first time during any calendar year (under all plans of the Company and its Subsidiaries) shall not exceed $100,000. The instruments evidencing incentive stock options granted under this Plan shall contain such provisions with respect to sequential exercise as may be required by said Section 422A, as in effect from time to time. The Board of Directors shall have the authority to amend any incentive stock option theretofore granted under this Plan, with the consent of the optionee, in a manner that has the intent or effect of causing such incentive stock option to become a nonqualified stock option. SECTION 2. The Committee or the Board shall from time to time determine the persons to be granted options and SARs, it being understood that options and SARs may be granted at different times to the same person. In addition, the Committee or the Board shall determine (a) the number of shares subject to each option or SAR, (b) the time or times when the options and SARs will be granted, (c) the purchase price of the shares subject to each option or the exercise price of each SAR, which price shall be not less than the limit specified in Article IV, and (d) the time or times when each option or SAR may be exercised within the limits stated in this Plan. Notwithstanding the foregoing, all options and SARs granted under this Plan shall become exercisable in their entirety at such time as there shall be a Change in Control (as hereinafter defined) of the Company. SECTION 3. All instruments evidencing options and SARs granted under this Plan shall be in such form, which shall be consistent with this Plan and any applicable determinations, orders, resolutions or other actions of the Committee or the Board, as the officers of the Company shall, in their discretion, deem appropriate. SECTION 4. If the Committee or the Board shall in its discretion so determine, any nonqualified option granted after April 20, 1987 which does not contain a Stock Appreciation Right may provide that promptly following the last Income Recognition Date (as hereinafter defined) with respect to an exercise of all or any portion of such option the Company shall pay to the holder of such option an amount in cash equal to the Option Gain (as hereinafter defined) multiplied by the Applicable Rate (as hereinafter defined). SECTION 5. Any option granted under this Plan on or after April 20, 1987 may, if the Committee or the Board shall in its discretion so determine, contain a provision (a "Stock Appreciation Right" or "SAR") that the Company shall, at the election of the holder, purchase all or any part of such option to the extent that such option is exercisable at the date of such election, for an amount (payable in the form of cash, shares of Common Stock or any combination thereof, all as the Committee or the Board shall in its discretion determine) equal to the Stock Appreciation Gain (as hereinafter defined) relating to such option or part thereof so purchased on the date such election shall be made. Such purchase pursuant to the exercise of a Stock Appreciation Right shall not be deemed to be an exercise of such option. The Committee, or the Board, in its discretion may also determine to grant Stock Appreciation Rights not in connection with or in tandem with any option, in which case each such SAR shall represent the right to receive upon exercise, for each share in respect of which the SAR is exercised, an amount in cash equal to the excess of the Fair Market Value of a share of Company Common Stock on the date of exercise over the exercise price of such SAR. SECTION 6. Any option granted under this Plan on or after April 20, 1987 may, if the Committee or the Board shall in its discretion so determine, contain a provision (a "Limited Right") that the Company shall, at the election of the holder (which election may be made only during the period beginning on the first day following the date of expiration of any Offer, as hereinafter defined, and ending on the forty-fifth day following such date), purchase all or any part of such option, for an amount (payable entirely in cash) equal to the sum of (a) the difference between (i) the aggregate Offer Price (as hereinafter defined) of the shares of Common Stock covered by such option or part thereof so purchased on the date such election shall be made and (ii) the aggregate exercise price of such shares so covered plus (b) the Fair Market Value of any Subsidiary Equity Securities including fractions thereof that would have been distributed or paid in the form of cash pursuant to Section 7 of Article VI hereof had there been an exercise, as of the effective date of such Limited Right exercise, of the number of shares of Company Common Stock covered by such Limited Right exercise, as such fair market values are determined in each case on the date of such exercise. Such purchase pursuant to the exercise of a Limited Right shall not be deemed to be an exercise of such option. SECTION 7. Any option granted under this Plan on or after April 20, 1987 may provide that, upon the exercise of such option or part thereof the holder thereof will be entitled to receive from the Company any Subsidiary Equity Securities distributed or distributable in respect of the shares of Common Stock covered by such exercise, to which the holder would have been entitled had such holder been a holder of record of such covered shares at all times from the date of grant of such option to the date immediately preceding the effective date of such exercise. Any such distribution will be in kind, with cash payment for fractional interests of any Subsidiary Equity Security to be valued in proportion to the Fair Market Value of the respective Subsidiary Equity Security on the date of such exercise. Notwithstanding the foregoing, if the holder is on the effective date of any such exercise ineligible to own any Subsidiary Equity Securities that would otherwise be distributable to such holder in accordance with this Section 7, such holder shall not receive such Subsidiary Equity Securities in kind but shall be entitled to receive from the Company in cash the Fair Market Value, as of such date, of any such Subsidiary Equity Securities including fractions thereof. SECTION 8. The authority with respect to the grant of options and SARs and the determination of the provisions thereof contained in Sections 1 and 2 and 4 through 7 of this Article VI may be delegated by the Committee or the Board to one or more officers of the Company, subject to such conditions and limitations as the Committee or the Board may prescribe; provided, however, that no such authority shall be delegated with respect to the grant of options or SARs to any officer or director of the Company or with respect to the determination of any of the provisions thereof. ARTICLE VII TRANSFERABILITY OF OPTIONS AND SARS No options or SARs granted hereunder may be transferred, pledged, assigned or otherwise encumbered by a person granted such options or SARs except: (a) by will; (b) by the laws of descent and distribution; (c) pursuant to a domestic relations order, as defined in the Code, if permitted by the Committee and so provided in the instrument evidencing such options or SARs or an amendment thereto; or (d) as to options only, if permitted by the Committee and so provided in the instrument evidencing such options or an amendment thereto, (i) to Immediate Family Members, (ii) to a partnership in which Immediate Family Members, or entities in which Immediate Family Members are the owners, members or beneficiaries, as appropriate, are the partners, (iii) to a limited liability company in which Immediate Family Members, or entities in which Immediate Family Members are the owners, members or beneficiaries, as appropriate, are the members, or (iv) to a trust for the benefit of Immediate Family Members; provided, however, that no more than a de minimus beneficial interest in a partnership, limited liability company or trust described in (iii), (iv) or (v) above may be owned by a person who is not an Immediate Family Member or by an entity that is not beneficially owned solely by Immediate Family Members. "Immediate Family Members" shall be defined as the spouse and natural or adopted children or grandchildren of the optionee and their spouses. To the extent that an incentive stock option is permitted to be transferred during the lifetime of the optionee, it shall be treated thereafter as a nonqualified stock option. Any attempted assignment, transfer, pledge, hypothecation or other disposition of options or SARs, or levy of attachment or similar process upon options or SARs not specifically permitted herein, shall be null and void and without effect. ARTICLE VIII EXERCISE OF OPTIONS AND SARS SECTION 1. Each incentive stock option granted under this Plan shall terminate not later than the expiration of 10 years from the date on which it was granted. Each nonqualified stock option and each SAR granted under this Plan shall terminate not later than the expiration of 10 years and two days from the date on which it was granted. SECTION 2. Except in cases provided for in Article IX hereof, each option and SAR granted under this Plan may be exercised by the holder thereof only while the person to whom such option or SAR was granted is an Employee of the Company or a Subsidiary or provides services to any of the Related Entities. SECTION 3. A person electing to exercise an option then exercisable shall give written notice to the Company of such election and of the number of shares of Common Stock such person has elected to purchase, and shall at the time of purchase tender the full purchase price of such shares, which tender shall be made in cash or cash equivalent (which may be such person's personal check) or, if the Committee or the Board so determines either generally or with respect to a specified option or group of options, in shares of Common Stock already owned by such person (which shares shall be valued for such purpose on the basis of their Fair Market Value on the date of exercise), or in any combination thereof. The Company shall have no obligation to deliver shares of Common Stock pursuant to the exercise of any option, or any Subsidiary Equity Securities distributable in connection therewith, in whole or in part, until such payment in full of the purchase price of such shares of Common Stock is received by the Company. No optionee, or legal representative, legatee, distributee, or assignee of such optionee, shall be or be deemed to be a holder of any shares of Common Stock subject to such option or any Subsidiary Equity Securities distributable in connection therewith, or entitled to any rights of a stockholder of the Company or a Subsidiary in respect of any shares of Common Stock covered by such option or any Subsidiary Equity Securities distributable in connection therewith until such shares of Common Stock have been paid for in full and such shares of Common Stock and such Subsidiary Equity Securities have been issued or delivered by the Company. A person electing to exercise a Stock Appreciation Right or Limited Right then exercisable shall give written notice to the Company of such election and of the number of shares of Common Stock covered by the option or SAR or part thereof which is to be purchased by the Company or otherwise exercised. SECTION 4. Each option and SAR shall be subject to the requirement that if at any time the Board shall in its discretion determine that the listing, registration or qualification of the shares of Common Stock subject to such option, or the Subsidiary Equity Securities distributable in connection therewith, upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of such option or SAR or the issue or purchase of shares thereunder or the distribution of Subsidiary Equity Securities with respect thereto, such option or SAR may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free from any conditions not reasonably acceptable to the Board. SECTION 5. The Company may establish appropriate procedures to provide for payment or withholding of such income or other taxes as may be required by law to be paid or withheld in connection with the exercise of options or rights under this Plan, and to ensure that the Company receives prompt advice concerning the occurrence of any event which may create, or affect the timing or amount of, any obligation to pay or withhold any such taxes or which may make available to the Company any tax deduction resulting from the occurrence of such event. ARTICLE IX TERMINATION OF EMPLOYMENT SECTION 1. If and when the Termination of Employment of an optionee shall occur for any reason other than death, retirement under the Company's Retirement Plan, or retirement with the consent of the Company outside the Company's Retirement Plan, all of the options and SARs grantee to such optionee shall be terminated except that (a) any option to the extent then exercisable, or (b) any Stock Appreciation Right or Limited Right to the extent then exercisable, may be exercised by the holder thereof within three months after such Termination of Employment, but in either case not later than the termination date of the option or SAR or in the case of a Limited Right not later than the expiration date of such Right. SECTION 2. If and when the Termination of Employment of an optionee shall occur by reason of the optionee's early, normal or deferred retirement under the Company's Retirement Plan or retirement with the consent of the Company outside the Company's Retirement Plan, all of the options granted to such optionee shall be terminated except that (a) any Stock Appreciation Right in tandem with an option or Limited Right to the extent then exercisable or exercisable within one year thereafter may be exercised by the holder thereof within three months after such retirement, but not later than the termination date of the option or in the case of a Limited Right not later than the expiration date of such Right, and (b) any option or any SAR not in tandem with an option to the extent (in either case) then exercisable or exercisable within one year thereafter may, if it so provides, be exercised by the holder thereof within three years after such retirement, but not later than the termination date of the option or SAR, unless after such retirement the Committee or the Board determines, in its discretion, that such option or SAR may be exercised by the holder thereof within a period of greater duration (not greater than five years after such retirement, and in no event later than the termination date of the option or SAR) or unless within 45 days after such retirement the Committee or the Board determines, in its discretion, that such option or SAR may be exercised by the holder thereof only within a period of shorter duration (not less than three months following notice of such determination to the optionee or holder) to be specified by the Committee or the Board, as the case may be. SECTION 3. Any question as to whether and when there has been a retirement under the Company's Retirement Plan or a retirement with the consent of the Company outside the Company's Retirement Plan or whether or when a Termination of Employment has occurred for any other reason shall be determined by the Committee or the Board, and any such reasonable determination shall be final. SECTION 4. Should an optionee die before such optionee's Termination of Employment, all the options granted to such optionee shall be terminated, except that any option to the extent exercisable by the holder thereof at the time of such death, together with the unmatured installment (if any) of such option which at that time is next scheduled to become exercisable, may be exercised by the holder thereof within one year after the date of such death, but not later than the termination date of the option, by the holder thereof, the optionee's estate, or the person designated in the optionee's last will and testament, as appropriate. Notwithstanding the foregoing, no Stock Appreciation Right or Limited Right shall be exercisable after the death of the person granted such SAR or Limited Right or the holder thereof, except that an SAR granted not in tandem with an option may be exercised to the extent set forth in the preceding sentence. SECTION 5. Should an optionee die after such optionee's Termination of Employment, all of the options granted to such optionee shall be terminated, except that any option to the extent exercisable by the holder thereof at the time of such death may be exercised by the holder thereof within one year after the date of such death, but not later than the termination date of the option, by the holder thereof, the optionee's estate, or the person designated in the optionee's last will and testament, as appropriate. Notwithstanding the foregoing, no Stock Appreciation Right or Limited Right shall be exercisable after the death of the person granted such SAR or Limited Right or the holder thereof, except that an SAR granted not in tandem with an option may be exercised to the extent set forth in the preceding sentence. ARTICLE X AMENDMENTS SECTION 1. The Board may at any time terminate or from time to time amend, modify or suspend this Plan; provided, however, that no such amendment or modification without the approval of the stockholders shall: (a) increase the maximum number (determined as provided in this Plan) of shares of Common Stock which may be subject to options and SARs granted under this Plan; (b) permit the granting of any option or SAR under this Plan at a purchase price less than 100% of the Fair Market Value of the Common Stock at the time such option is granted; (c) permit the exercise of an option or SAR unless the full purchase price of the shares as to which the option is exercised is paid at the time of exercise; or (d) extend beyond April 18, 1992, the period during which options or SARs may be granted. SECTION 2. The Committee and the Board shall have the authority, with the consent of the option holder, to amend or modify any outstanding options or SARs previously granted hereunder in a manner not inconsistent with the provisions relating to options granted after April 20, 1987 contained in this Plan. ARTICLE XI DEFINITIONS For the purposes of this Plan, the following terms shall have the meanings indicated: Applicable Rate: The rate, expressed as a percentage, determined according to the following formula x divided by (1-x) in which x equals the maximum federal income tax rate applicable to individuals in effect on the applicable Income Recognition Date; provided, the Applicable Rate shall never exceed 100%. Change in Control: A Change in Control shall be deemed to have occurred if either (a) any person, or any two or more persons acting as a group, and all affiliates of such person or persons, shall own beneficially more than 20% of the Common Stock outstanding (exclusive of shares held in the Company's treasury or by the Company's Subsidiaries) pursuant to a tender offer, exchange offer or series of purchases or other acquisitions, or any combination of those transactions, or (b) there shall be a change in the composition of the Board at any time within two years after any tender offer, exchange offer, merger, consolidation, sale of assets or contested election, or any combination of those transactions (a "Transaction"), so that (i) the persons who were directors of the Company immediately before the first such Transaction cease to constitute a majority of the Board of Directors of the corporation which shall thereafter be in control of the companies that were parties to or otherwise involved in such Transaction, or (ii) the number of persons who shall thereafter be directors of such corporation shall be fewer than two-thirds of the number of directors of the Company immediately prior to such first Transaction. A Change in Control shall be deemed to take place upon the first to occur of the events specified in the foregoing clauses (a) and (b). Employee: Such term shall include any officer of the Company or a Subsidiary whether or not employed by such entity, any employee of the Company or a Subsidiary, and any director who is also an employee of the Company or a Subsidiary. Such term shall also include an employee on approved leave of absence provided such employee's right to continue employment with the Company or a Subsidiary upon expiration of such employee's leave of absence is guaranteed either by statute or by contract with or by a policy of the Company or a Subsidiary. Fair Market Value: The average of the high and low quoted sale prices of a share of Common Stock or a Subsidiary Equity Security on the date in question (or, if there is no reported sale on such date, on the last preceding date on which any reported sale occurred) on the Composite Tape for the New York Stock Exchange-Listed Stocks or, if on such date the Common Stock or Subsidiary Equity Security is not quoted on such Composite Tape, on the New York Stock Exchange. Income Recognition Date: With respect to any share of Common Stock purchased upon the exercise of an option or any Subsidiary Equity Security distributed in connection therewith, the later of (a) the date of such exercise, or (b) the date on which the rights of the holder of such option in such security become transferable and not subject to a substantial risk of forfeiture (within the meaning of Section 83 of the Code); provided, however, that if such holder shall make an election pursuant to Section 83(b) of the Code with respect to such security the Income Recognition Date with respect thereto shall be the date of the option exercise. Offer: Any tender offer, exchange offer or series of purchases or other acquisitions, or any combination of those transactions, as a result of which any person, or any two or more persons acting as a group, and all affiliates of such person or persons, shall own beneficially more than 40% of the Common Stock outstanding (exclusive of shares held in the Company's treasury or by the Company's Subsidiaries). Offer Price: The highest price per share of Common Stock paid in any Offer which is in effect at any time beginning on the ninetieth day prior to the date on which a Limited Right is exercised. Any securities or property which are part or all of the consideration paid for shares of Common Stock in the Offer shall be valued in determining the Offer Price at the higher of (a) the valuation placed on such securities or property by the person or persons making such Offer, or (b) the valuation, if any, placed on such securities or property by the Committee or the Board. Option Gain: The sum of (a) the difference between (i) the Fair Market Value of the shares of Common Stock covered by the exercise of an option granted under the Plan and (ii) the purchase price of such shares under such option plus (b) the Fair Market Value of any Subsidiary Equity Securities including fractions thereof distributed or paid in the form of cash pursuant to Section 7 of Article VI hereof, as such fair market values are determined in each case on (x) the Income Recognition Date with respect to each such security or (y) the date of such exercise, whichever is less. Related Entities: The Company; any subsidiary of the Company; Freeport-McMoRan Copper & Gold Inc.; any subsidiary of Freeport-McMoRan Copper & Gold Inc.; McMoRan Oil & Gas Co.; any subsidiary of McMoRan Oil & Gas Co.; any law firm rendering services to any of the foregoing entities provided such law firm consists of at least two or more members or associates who are or were officers of the Company or any subsidiary of the Company; and, for purposes of any stock option or stock appreciation right granted under this Plan, IMC-Agrico Company, if so provided expressly in an amendment to the agreement evidencing such stock option or stock appreciation right. Rule 16b-3: Rule 16b-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, or any successor rule or regulation thereto as in effect from time to time. Section 162(m): Section 162(m) of the Code and all regulations promulgated thereunder as in effect from time to time. Stock Appreciation Gain: The sum of (a) the difference between (i) the Fair Market Value of the shares of Common Stock covered by the exercise of a Stock Appreciation Right granted under the Plan and (ii) the purchase price of such shares under the option relating to such Stock Appreciation Right plus (b) the Fair Market Value of any Subsidiary Equity Securities including fractions thereof that would have been distributed or paid in the form of cash pursuant to Section 7 of Article VI hereof had there been an option exercise, as of the effective date of such Stock Appreciation Right exercise, of the number of shares of Company Common Stock covered by such Stock Appreciation Right exercise, as such fair market values are determined in each case on the date of such exercise. Stock Appreciation Right or SAR: A right granted under the Plan pursuant to Section 5 of Article VI. Subsidiary: Any corporation of which stock representing at least 50% of the ordinary voting power is owned, directly or indirectly, by the Company and any other entity of which equity securities or interests representing at least 50% of the ordinary voting power or 50% of the total value of all classes of equity securities or interests of such entity are owned, directly or indirectly, by the Company. Subsidiary Equity Security: Any security or interest in the nature of an equity security or interest, according to generally accepted accounting principles, of a Subsidiary or a former Subsidiary or any security or interest representing such a security or interest; including specifically, but without limiting the generality of the foregoing, shares of common stock of Freeport-McMoRan Gold Company, Freeport-McMoRan Copper & Gold Inc., Freeport-McMoRan Oil & Gas Company, and McMoRan Oil & Gas Co. and depositary units of Freeport-McMoRan Energy Partners, Ltd. and Freeport-McMoRan Resource Partners, Limited Partnership. Termination of Employment: The cessation of the rendering of services, whether or not as an employee, to any and all of the Related Entities. EX-10 3 FREEPORT-McMoRan INC. 1992 STOCK OPTION PLAN SECTION 1 Purpose. The purposes of the Freeport-McMoRan Inc. 1992 Stock Option Plan (the "Plan") are to promote the interests of Freeport-McMoRan Inc. and its stockholders by (i) attracting and retaining executive and other key employees, as hereinafter defined, of Freeport-McMoRan Inc. and its affiliates; (ii) motivating such employees by means of performance-related incentives to achieve longer-range performance goals; and (iii) enabling such employees to participate in the long-term growth and financial success of the Company. SECTION 2 Definitions. As used in the Plan, the following terms shall have the meanings set forth below: "Award" shall mean any Option, Stock Appreciation Right, Limited Right or Other Stock-Based Award. "Award Agreement" shall mean any written agreement, contract or other instrument or document evidencing any Award, which may, but need not, be executed or acknowledged by a Participant. "Board" shall mean the Board of Directors of Freeport-McMoRan Inc. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. "Committee" shall mean a committee of the Board designated by the Board to administer the Plan and composed of not fewer than two directors, each of whom, to the extent necessary to comply with Rule 16b-3 only, is a "non-employee director" within the meaning of Rule 16b-3 and, to the extent necessary to comply with Section 162(m) only, is an "outside director" under Section 162(m). Until otherwise determined by the Board, the Committee shall be the Corporate Personnel Committee of the Board. "Company" shall mean Freeport-McMoRan Inc. "Designated Beneficiary" shall mean the beneficiary designated by the Participant, in a manner determined by the Committee, to receive the benefits due the Participant under the Plan in the event of the Participant's death. In the absence of an effective designation by the Participant, Designated Beneficiary shall mean the Participant's estate. "Employee" shall mean (i) any person providing services as an officer of the Company or a Subsidiary, whether or not employed by such entity, (ii) any employee of the Company or a Subsidiary, including any director who is also an employee of the Company or a Subsidiary, and (iii) any person who has agreed in writing to become a person described in clauses (i) or (ii) within not more than 30 days following the date of grant of such person's first Award under the Plan. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. "Incentive Stock Option" shall mean an option granted under Section 6 of the Plan that is intended to meet the requirements of Section 422 of the Code or any successor provision thereto. "Limited Right" shall mean any right granted under Section 8 of the Plan. "Nonqualified Stock Option" shall mean an option granted under Section 6 of the Plan that is not intended to be an Incentive Stock Option. "Offer" shall mean any tender offer, exchange offer or series of purchases or other acquisitions, or any combination of those transactions, as a result of which any person, or any two or more persons acting as a group, and all affiliates of such person or persons, shall own beneficially more than 40% of the Shares outstanding (exclusive of Shares held in the Company's treasury or by the Company's Subsidiaries). "Offer Price" shall mean the highest price per Share paid in any Offer that is in effect at any time during the period beginning on the ninetieth day prior to the date on which a Limited Right is exercised and ending on and including the date of exercise of such Limited Right. Any securities or property that comprise all or a portion of the consideration paid for Shares in the Offer shall be valued in determining the Offer Price at the higher of (i) the valuation placed on such securities or property by the person or persons making such Offer, or (ii) the valuation, if any, placed on such securities or property by the Committee or the Board. "Option" shall mean an Incentive Stock Option or a Nonqualified Stock Option. "Other Stock-Based Award" shall mean any right or award granted under Section 9 of the Plan. "Participant" shall mean any Employee granted an Award under the Plan. "Person" shall mean any individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization, government or political subdivision thereof or other entity. "Rule 16b-3" shall mean Rule 16b-3 promulgated by the SEC under the Exchange Act, or any successor rule or regulation thereto as in effect from time to time. "SAR" shall mean any Stock Appreciation Right. "SEC" shall mean the Securities and Exchange Commission, including the staff thereof, or any successor thereto. "Section 162(m)" shall mean Section 162(m) of the Code and all regulations promulgated thereunder as in effect from time to time. "Shares" shall mean the shares of common stock, par value $.01 per share, of Freeport-McMoRan Inc., and such other securities of the Company or a Subsidiary as the Committee may from time to time designate. "Stock Appreciation Right" shall mean any right granted under Section 7 of the Plan. "Subsidiary" shall mean Freeport-McMoRan Copper & Gold Inc., Freeport-McMoRan Resource Partners, Limited Partnership, and any corporation or other entity in which Freeport-McMoRan Inc. possesses directly or indirectly equity interests representing at least 50% of the total ordinary voting power or at least 50% of the total value of all classes of equity interests of such corporation or other entity. SECTION 3 Administration. The Plan shall be administered by the Committee. Subject to the terms of the Plan and applicable law, and in addition to other express powers and authorizations conferred on the Committee by the Plan, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to an eligible Employee; (iii) determine the number of Shares to be covered by, or with respect to which payments, rights or other matters are to be calculated in connection with, Awards; (iv) determine the terms and conditions of any Award; (v) determine whether, to what extent, and under what circumstances Awards may be settled or exercised in cash, whole Shares, other whole securities, other Awards, other property or other cash amounts payable by the Company upon the exercise of that or other Awards, or canceled, forfeited or suspended and the method or methods by which Awards may be settled, exercised, canceled, forfeited or suspended; (vi) determine whether, to what extent, and under what circumstances cash, Shares, other securities, other Awards, other property, and other amounts payable by the Company with respect to an Award shall be deferred either automatically or at the election of the holder thereof or of the Committee; (vii) interpret and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan; (viii) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (ix) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon all Persons, including the Company, any Subsidiary, any Participant, any holder or beneficiary of any Award, any stockholder of the Company and any Employee. SECTION 4 Eligibility. Any Employee who is not a member of the Committee shall be eligible to be granted an Award. SECTION 5 (a) Shares Available for Awards. Subject to adjustment as provided in Section 5(b): (i) Calculation of Number of Shares Available. The number of Shares with respect to which Awards may be granted under the Plan shall be 8,000,000. If, after the effective date of the Plan, an Award granted under the Plan expires or is exercised, forfeited, canceled or terminated without the delivery of Shares, then the Shares covered by such Award or to which such Award relates, or the number of Shares otherwise counted against the aggregate number of Shares with respect to which Awards may be granted, to the extent of any such expiration, exercise, forfeiture, cancellation or termination without the delivery of Shares, shall again be, or shall become, Shares with respect to which Awards may be granted. (ii) Substitute Awards. Any Shares delivered by the Company, any Shares with respect to which Awards are made by the Company, or any Shares with respect to which the Company becomes obligated to make Awards, through the assumption of, or in substitution for, outstanding awards previously granted by an acquired company or a company with which the Company combines, shall not be counted against the Shares available for Awards under the Plan. (iii) Sources of Shares Deliverable Under Awards. Any Shares delivered pursuant to an Award may consist of authorized and unissued Shares or of treasury Shares, including Shares held by the Company or a Subsidiary and acquired in the open market or otherwise obtained by the Company or a Subsidiary. (b) Adjustments. In the event that the Committee determines that any dividend or other distribution (whether in the form of cash, Shares, Subsidiary securities, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Committee to be appropriate to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee may, in its sole discretion and in such manner as it may deem equitable, adjust any or all of (i) the number and type of Shares (or other securities or property) with respect to which Awards may be granted, (ii) the number and type of Shares (or other securities or property) subject to outstanding Awards, and (iii) the grant or exercise price with respect to any Award or, if deemed appropriate, make provision for a cash payment to the holder of an outstanding Award or, if deemed appropriate, adjust outstanding Awards to provide the rights contemplated by Section 9(b) hereof; provided, in each case, that with respect to Awards of Incentive Stock Options no such adjustment shall be authorized to the extent that such authority would cause the Plan to violate Section 422(b)(1) of the Code or any successor provision thereto; and provided further, that the number of Shares subject to any Award denominated in Shares shall always be a whole number. SECTION 6 (a) Stock Options. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Employees to whom Options shall be granted, the number of Shares to be covered by each Option, the option price therefor and the conditions and limitations applicable to the exercise of the Option. The Committee shall have the authority to grant Incentive Stock Options, Nonqualified Stock Options or both. In the case of Incentive Stock Options, the terms and conditions of such grants shall be subject to and comply with such rules as may be required by Section 422 of the Code, as from time to time amended, and any implementing regulations. Except in the case of an Option granted in assumption of or substitution for an outstanding award of a company acquired by the Company or with which the Company combines, the exercise price of any Option granted under this Plan shall not be less than 100% of the fair market value of the underlying Shares on the date of grant. (b) Exercise. Each Option shall be exercisable at such times and subject to such terms and conditions as the Committee may, in its sole discretion, specify in the applicable Award Agreement or thereafter, provided, however, that in no event may any Option granted hereunder be exercisable after the expiration of 10 years after the date of such grant. The Committee may impose such conditions with respect to the exercise of Options, including without limitation, any condition relating to the application of Federal or state securities laws, as it may deem necessary or advisable. (c) Payment. No Shares shall be delivered pursuant to any exercise of an Option until payment in full of the option price therefor is received by the Company. Such payment may be made in cash, or its equivalent, or, if and to the extent permitted by the Committee, by applying cash amounts payable by the Company upon the exercise of such Option or other Awards by the holder thereof or by exchanging whole Shares owned by such holder (which are not the subject of any pledge or other security interest), or by a combination of the foregoing, provided that the combined value of all cash, cash equivalents, cash amounts so payable by the Company upon exercises of Awards and the fair market value of any such whole Shares so tendered to the Company, valued (in accordance with procedures established by the Committee) as of the effective date of such exercise, is at least equal to such option price. SECTION 7 (a) Stock Appreciation Rights. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Employees to whom Stock Appreciation Rights shall be granted, the number of Shares to be covered by each Stock Appreciation Right, the grant price thereof and the conditions and limitations applicable to the exercise thereof. Stock Appreciation Rights may be granted in tandem with another Award, in addition to another Award, or freestanding and unrelated to any other Award. Stock Appreciation Rights granted in tandem with or in addition to an Option or other Award may be granted either at the same time as the Option or other Award or at a later time. Stock Appreciation Rights shall not be exercisable after the expiration of 10 years after the date of grant. Except in the case of a Stock Appreciation Right granted in assumption of or substitution for an outstanding award of a company acquired by the Company or with which the Company combines, the grant price of any Stock Appreciation Right granted under this Plan shall not be less than 100% of the fair market value of the Shares covered by such Stock Appreciation Right on the date of grant or, in the case of a Stock Appreciation Right granted in tandem with a then outstanding Option or other Award, on the date of grant of such related Option or Award. (b) A Stock Appreciation Right shall entitle the holder thereof to receive an amount equal to the excess, if any, of the fair market value of a Share on the date of exercise of the Stock Appreciation Right over the grant price. Any Stock Appreciation Right shall be settled in cash, unless the Committee shall determine at the time of grant of a Stock Appreciation Right that it shall or may be settled in cash, Shares or a combination of cash and Shares. SECTION 8 (a) Limited Rights. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Employees to whom Limited Rights shall be granted, the number of Shares to be covered by each Limited Right, the grant price thereof and the conditions and limitations applicable to the exercise thereof. Limited Rights may be granted in tandem with another Award, in addition to another Award, or freestanding and unrelated to any Award. Limited Rights granted in tandem with or in addition to an Award may be granted either at the same time as the Award or at a later time. Limited Rights shall not be exercisable after the expiration of 10 years after the date of grant and shall only be exercisable during a period determined at the time of grant by the Committee beginning not earlier than one day and ending not more than ninety days after the expiration date of an Offer. Except in the case of a Limited Right granted in assumption of or substitution for an outstanding award of a company acquired by the Company or with which the Company combines, the grant price of any Limited Right granted under this Plan shall not be less than 100% of the fair market value of the Shares covered by such Limited Right on the date of grant or, in the case of a Limited Right granted in tandem with a then outstanding Option or other Award, on the date of grant of such related Option or Award. (b) A Limited Right shall entitle the holder thereof to receive an amount equal to the excess, if any, of the Offer Price on the date of exercise of the Limited Right over the grant price. Any Limited Right shall be settled in cash, unless the Committee shall determine at the time of grant of a Limited Right that it shall or may be settled in cash, Shares or a combination of cash and Shares. SECTION 9 (a) Other Stock-Based Awards. The Committee is hereby authorized to grant to eligible Employees an "Other Stock-Based Award", which shall consist of an Award, the value of which is based in whole or in part on the value of Shares, that is not an instrument or Award specified in Sections 6 through 8 of this Plan. Other Stock-Based Awards may be awards of Shares or may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible or exchangeable into or exercisable for Shares), as deemed by the Committee consistent with the purposes of the Plan. The Committee shall determine the terms and conditions of any such Other Stock-Based Award. Except in the case of an Other Stock-Based Award granted in assumption of or in substitution for an outstanding award of a company acquired by the Company or with which the Company combines, the price at which securities may be purchased pursuant to any Other Stock-Based Award granted under this Plan, or the provision, if any, of any such Award that is analogous to the purchase or exercise price, shall not be less than 100% of the fair market value of the securities to which such Award relates on the date of grant. (b) Dividend Equivalents. In the sole and complete discretion of the Committee, an Award, whether made as an Other Stock-Based Award under this Section 9 or as an Award granted pursuant to Sections 6 through 8 hereof, may provide the holder thereof with dividends or dividend equivalents, payable in cash, Shares, Subsidiary securities, other securities or other property on a current or deferred basis. SECTION 10 (a) Amendments to the Plan. The Board may amend, suspend or terminate the Plan or any portion thereof at any time, provided that no amendment shall be made without stockholder approval if such approval is necessary to comply with any tax or regulatory requirement. Notwithstanding anything to the contrary contained herein, the Committee may amend the Plan in such manner as may be necessary for the Plan to conform with local rules and regulations in any jurisdiction outside the United States. (b) Amendments to Awards. The Committee may amend, modify or terminate any outstanding Award with the holder's consent at any time prior to payment or exercise in any manner not inconsistent with the terms of the Plan, including without limitation, (i) to change the date or dates as of which an Award becomes exercisable, or (ii) to cancel an Award and grant a new Award in substitution therefor under such different terms and conditions as it determines in its sole and complete discretion to be appropriate. (c) Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. The Committee is hereby authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 5(b) hereof) affecting the Company, or the financial statements of the Company or any Subsidiary, or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan. (d) Cancellation. Any provision of this Plan or any Award Agreement to the contrary notwithstanding, the Committee may cause any Award granted hereunder to be canceled in consideration of a cash payment or alternative Award made to the holder of such canceled Award equal in value to such canceled Award. The determinations of value under this subparagraph shall be made by the Committee in its sole discretion. SECTION 11 (a) Delegation. Subject to the terms of the Plan and applicable law, the Committee may delegate to one or more officers of the Company the authority, subject to such terms and limitations as the Committee shall determine, to grant Awards to, or to cancel, modify or waive rights with respect to, or to alter, discontinue, suspend, or terminate Awards held by, Employees who are not officers or directors of the Company for purposes of Section 16 of the Exchange Act, or any successor section thereto, or who are otherwise not subject to such Section. (b) Award Agreements. Each Award hereunder shall be evidenced by a writing delivered to the Participant that shall specify the terms and conditions thereof and any rules applicable thereto, including but not limited to the effect on such Award of the death, retirement or other termination of employment of the Participant and the effect thereon, if any, of a change in control of the Company. (c) Withholding. A Participant may be required to pay to the Company, and the Company shall have the right to deduct from all amounts paid to a Participant (whether under the Plan or otherwise), any taxes required by law to be paid or withheld in respect of Awards hereunder to such Participant. The Committee may provide for additional cash payments to holders of Awards to defray or offset any tax arising from the grant, vesting, exercise or payment of any Award. (d) Transferability. No Awards granted hereunder may be transferred, pledged, assigned or otherwise encumbered by a Participant except: (i) by will; (ii) by the laws of descent and distribution; (iii) pursuant to a domestic relations order, as defined in the Code, if permitted by the Committee and so provided in the Award Agreement or an amendment thereto; or (iv) if permitted by the Committee and so provided in the Award Agreement or an amendment thereto, Options and Limited Rights granted in tandem therewith may be transferred or assigned (a) to Immediate Family Members, (b) to a partnership in which Immediate Family Members, or entities in which Immediate Family Members are the owners, members or beneficiaries, as appropriate, are the partners, (c) to a limited liability company in which Immediate Family Members, or entities in which Immediate Family Members are the owners, members or beneficiaries, as appropriate, are the members, or (d) to a trust for the benefit of Immediate Family Members; provided, however, that no more than a de minimus beneficial interest in a partnership, limited liability company or trust described in (b), (c) or (d) above may be owned by a person who is not an Immediate Family Member or by an entity that is not beneficially owned solely by Immediate Family Members. "Immediate Family Members" shall be defined as the spouse and natural or adopted children or grandchildren of the Participant and their spouses. To the extent that an Incentive Stock Option is permitted to be transferred during the lifetime of the Participant, it shall be treated thereafter as a Nonqualified Stock Option. Any attempted assignment, transfer, pledge, hypothecation or other disposition of Awards, or levy of attachment or similar process upon Awards not specifically permitted herein, shall be null and void and without effect. The designation of a Designated Beneficiary shall not be a violation of this Section 11(d). (e) Share Certificates. All certificates for Shares or other securities delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the SEC, any stock exchange upon which such Shares or other securities are then listed, and any applicable federal or state laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. (f) No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company from adopting or continuing in effect other compensation arrangements, which may, but need not, provide for the grant of options, stock appreciation rights and other types of Awards provided for hereunder (subject to stockholder approval of any such arrangement if approval is required), and such arrangements may be either generally applicable or applicable only in specific cases. (g) No Right to Employment. The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ of the Company or any Subsidiary. The Company or any Subsidiary may at any time dismiss a Participant from employment, free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement. No Employee, Participant or other person shall have any claim to be granted any Award, and there is no obligation for uniformity of treatment of Employees, Participants or holders or beneficiaries of Awards. (h) Governing Law. The validity, construction, and effect of the Plan, any rules and regulations relating to the Plan and any Award Agreement shall be determined in accordance with the laws of the State of Delaware. (i) Severability. If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person or Award and the remainder of the Plan and any such Award shall remain in full force and effect. (j) No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company. (k) No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash, other securities or other property shall be paid or transferred in lieu of any fractional Shares or whether such fractional Shares or any rights thereto shall be canceled, terminated, or otherwise eliminated. (l) Headings. Headings are given to the subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. SECTION 12 Effective Date of the Plan. The Plan shall be effective as of the date of its approval by the stockholders of the Company. SECTION 13 Term of the Plan. No Award shall be granted under the Plan after the fifth anniversary of the effective date of the Plan; however, unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award theretofore granted may, and the authority of the Committee to amend, alter, adjust, suspend, discontinue, or terminate any such Award or to waive any conditions or rights under any such Award shall, extend beyond such date. EX-10 4 FREEPORT-McMoRan INC. 1996 STOCK OPTION PLAN SECTION 1 Purpose. The purpose of the Freeport-McMoRan Inc. 1996 Stock Option Plan (the "Plan") is to motivate and reward key personnel by giving them a proprietary interest in the Company's continued success. SECTION 2 Definitions. As used in the Plan, the following terms shall have the meanings set forth below: "Award" shall mean any Option, Stock Appreciation Right, Limited Right or Other Stock-Based Award. "Award Agreement" shall mean any written agreement, contract or other instrument or document evidencing any Award, which may, but need not, be executed or acknowledged by a Participant. "Board" shall mean the Board of Directors of the Company. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. "Committee" shall mean a committee of the Board designated by the Board to administer the Plan and composed of not fewer than two directors, each of whom, to the extent necessary to comply with Rule 16b-3 only, is a "non-employee director" within the meaning of Rule 16b-3 and, to the extent necessary to comply with Section 162(m) only, is an "outside director" under Section 162(m). Until otherwise determined by the Board, the Committee shall be the Corporate Personnel Committee of the Board. "Company" shall mean Freeport-McMoRan Inc. "Designated Beneficiary" shall mean the beneficiary designated by the Participant, in a manner determined by the Committee, to receive the benefits due the Participant under the Plan in the event of the Participant's death. In the absence of an effective designation by the Participant, Designated Beneficiary shall mean the Participant's estate. "Employee" shall mean (i) any person providing services as an officer of the Company or a Subsidiary, whether or not employed by such entity, including any such person who is also a director of the Company, (ii) any employee of the Company or a Subsidiary, including any director who is also an employee of the Company or a Subsidiary, (iii) any officer or employee of an entity with which the Company has contracted to receive executive, management or legal services who provides services to the Company or a Subsidiary through such arrangement and (iv) any person who has agreed in writing to become a person described in clauses (i), (ii) or (iii) within not more than 30 days following the date of grant of such person's first Award under the Plan. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. "Incentive Stock Option" shall mean an option granted under Section 6 of the Plan that is intended to meet the requirements of Section 422 of the Code or any successor provision thereto. "Limited Right" shall mean any right granted under Section 8 of the Plan. "Nonqualified Stock Option" shall mean an option granted under Section 6 of the Plan that is not intended to be an Incentive Stock Option. "Offer" shall mean any tender offer, exchange offer or series of purchases or other acquisitions, or any combination of those transactions, as a result of which any person, or any two or more persons acting as a group, and all affiliates of such person or persons, shall beneficially own more than 40% of all classes and series of the Company's stock outstanding, taken as a whole, that has voting rights with respect to the election of directors of the Company (not including any series of preferred stock of the Company that has the right to elect directors only upon the failure of the Company to pay dividends). "Offer Price" shall mean the highest price per Share paid in any Offer that is in effect at any time during the period beginning on the ninetieth day prior to the date on which a Limited Right is exercised and ending on and including the date of exercise of such Limited Right. Any securities or property that comprise all or a portion of the consideration paid for Shares in the Offer shall be valued in determining the Offer Price at the higher of (i) the valuation placed on such securities or property by the person or persons making such Offer, or (ii) the valuation, if any, placed on such securities or property by the Committee or the Board. "Option" shall mean an Incentive Stock Option or a Nonqualified Stock Option. "Other Stock-Based Award" shall mean any right or award granted under Section 9 of the Plan. "Participant" shall mean any Employee granted an Award under the Plan. "Person" shall mean any individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization, government or political subdivision thereof or other entity. "Rule 16b-3" shall mean Rule 16b-3 promulgated by the SEC under the Exchange Act, or any successor rule or regulation thereto as in effect from time to time. "SAR" shall mean any Stock Appreciation Right. "SEC" shall mean the Securities and Exchange Commission, including the staff thereof, or any successor thereto. "Section 162(m)" shall mean Section 162(m) of the Code and all regulations promulgated thereunder as in effect from time to time. "Shares" shall mean the shares of Common Stock, par value $0.01 per share, of the Company and such other securities of the Company or a Subsidiary as the Committee may from time to time designate. "Stock Appreciation Right" shall mean any right granted under Section 7 of the Plan. "Subsidiary" shall mean (i) any corporation or other entity in which the Company possesses directly or indirectly equity interests representing at least 50% of the total ordinary voting power or at least 50% of the total value of all classes of equity interests of such corporation or other entity and (ii) any other entity in which the Company has a direct or indirect economic interest that is designated as a Subsidiary by the Committee. SECTION 3 Administration. The Plan shall be administered by the Committee. Subject to the terms of the Plan and applicable law, and in addition to other express powers and authorizations conferred on the Committee by the Plan, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to an eligible Employee; (iii) determine the number of Shares to be covered by, or with respect to which payments, rights or other matters are to be calculated in connection with, Awards; (iv) determine the terms and conditions of any Award; (v) determine whether, to what extent, and under what circumstances Awards may be settled or exercised in cash, whole Shares, other whole securities, other Awards, other property or other cash amounts payable by the Company upon the exercise of that or other Awards, or canceled, forfeited or suspended and the method or methods by which Awards may be settled, exercised, canceled, forfeited or suspended; (vi) determine whether, to what extent, and under what circumstances cash, Shares, other securities, other Awards, other property, and other amounts payable by the Company with respect to an Award shall be deferred either automatically or at the election of the holder thereof or of the Committee; (vii) interpret and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan; (viii) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (ix) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon all Persons, including the Company, any Subsidiary, any Participant, any holder or beneficiary of any Award, any stockholder of the Company and any Employee. SECTION 4 Eligibility. Any Employee shall be eligible to be granted an Award. SECTION 5 (a) Shares Available for Awards. Subject to adjustment as provided in Section 5(b): (i) Calculation of Number of Shares Available. The number of Shares with respect to which Awards payable in Shares may be granted under the Plan shall be 1,300,000. Awards that by their terms may be settled only in cash shall not be counted against such total. Grants of Stock Appreciation Rights, Limited Rights and Other Stock-Based Awards not granted in tandem with Options and payable only in cash may relate to no more than 1,300,000 Shares. If, after the effective date of the Plan, an Award granted under the Plan expires or is exercised, forfeited, canceled or terminated without the delivery of Shares, then the Shares covered by such Award or to which such Award relates, or the number of Shares otherwise counted against the aggregate number of Shares with respect to which Awards may be granted, to the extent of any such expiration, exercise, forfeiture, cancellation or termination without the delivery of Shares, shall again be, or shall become, Shares with respect to which Awards may be granted. To the extent that Shares are delivered to pay the exercise price of an Option or are delivered or withheld by the Company in payment of the withholding taxes relating to an Award, the number of Shares so delivered or withheld shall become Shares with respect to which Awards may be granted. (ii) Substitute Awards. Any Shares delivered by the Company, any Shares with respect to which Awards are made by the Company, or any Shares with respect to which the Company becomes obligated to make Awards, through the assumption of, or in substitution for, outstanding awards previously granted by an acquired company or a company with which the Company combines, shall not be counted against the Shares available for Awards under the Plan. (iii) Sources of Shares Deliverable Under Awards. Any Shares delivered pursuant to an Award may consist of authorized and unissued Shares or of treasury Shares, including Shares held by the Company or a Subsidiary and Shares acquired in the open market or otherwise obtained by the Company or a Subsidiary. (iv) Individual Limit. Any provision of the Plan to the contrary notwithstanding, no individual may receive in any year Awards under the Plan, whether payable in cash or Shares, that relate to more than 750,000 Shares. (b) Adjustments. In the event that the Committee determines that any dividend or other distribution (whether in the form of cash, Shares, Subsidiary securities, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Committee to be appropriate to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee may, in its sole discretion and in such manner as it may deem equitable, adjust any or all of (i) the number and type of Shares (or other securities or property) with respect to which Awards may be granted, (ii) the number and type of Shares (or other securities or property) subject to outstanding Awards, and (iii) the grant or exercise price with respect to any Award and, if deemed appropriate, make provision for a cash payment to the holder of an outstanding Award and, if deemed appropriate, adjust outstanding Awards to provide the rights contemplated by Section 9(b) hereof; provided, in each case, that with respect to Awards of Incentive Stock Options no such adjustment shall be authorized to the extent that such authority would cause the Plan to violate Section 422(b)(1) of the Code or any successor provision thereto and, with respect to all Awards under the Plan, no such adjustment shall be authorized to the extent that such authority would be inconsistent with the requirements for full deductibility under Section 162(m); and provided further, that the number of Shares subject to any Award denominated in Shares shall always be a whole number. SECTION 6 (a) Stock Options. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Employees to whom Options shall be granted, the number of Shares to be covered by each Option, the option price therefor and the conditions and limitations applicable to the exercise of the Option. The Committee shall have the authority to grant Incentive Stock Options, Nonqualified Stock Options or both. In the case of Incentive Stock Options, the terms and conditions of such grants shall be subject to and comply with such rules as may be required by Section 422 of the Code, as from time to time amended, and any implementing regulations. Except in the case of an Option granted in assumption of or substitution for an outstanding award of a company acquired by the Company or with which the Company combines, the exercise price of any Option granted under this Plan shall not be less than 100% of the fair market value of the underlying Shares on the date of grant. (b) Exercise. Each Option shall be exercisable at such times and subject to such terms and conditions as the Committee may, in its sole discretion, specify in the applicable Award Agreement or thereafter, provided, however, that in no event may any Option granted hereunder be exercisable after the expiration of 10 years after the date of such grant. The Committee may impose such conditions with respect to the exercise of Options, including without limitation, any condition relating to the application of Federal or state securities laws, as it may deem necessary or advisable. (c) Payment. No Shares shall be delivered pursuant to any exercise of an Option until payment in full of the option price therefor is received by the Company. Such payment may be made in cash, or its equivalent, or, if and to the extent permitted by the Committee, by applying cash amounts payable by the Company upon the exercise of such Option or other Awards by the holder thereof or by exchanging whole Shares owned by such holder (which are not the subject of any pledge or other security interest), or by a combination of the foregoing, provided that the combined value of all cash, cash equivalents, cash amounts so payable by the Company upon exercises of Awards and the fair market value of any such whole Shares so tendered to the Company, valued (in accordance with procedures established by the Committee) as of the effective date of such exercise, is at least equal to such option price. SECTION 7 (a) Stock Appreciation Rights. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Employees to whom Stock Appreciation Rights shall be granted, the number of Shares to be covered by each Award of Stock Appreciation Rights, the grant price thereof and the conditions and limitations applicable to the exercise thereof. Stock Appreciation Rights may be granted in tandem with another Award, in addition to another Award, or freestanding and unrelated to any other Award. Stock Appreciation Rights granted in tandem with or in addition to an Option or other Award may be granted either at the same time as the Option or other Award or at a later time. Stock Appreciation Rights shall not be exercisable after the expiration of 10 years after the date of grant. Except in the case of a Stock Appreciation Right granted in assumption of or substitution for an outstanding award of a company acquired by the Company or with which the Company combines, the grant price of any Stock Appreciation Right granted under this Plan shall not be less than 100% of the fair market value of the Shares covered by such Stock Appreciation Right on the date of grant or, in the case of a Stock Appreciation Right granted in tandem with a then outstanding Option or other Award, on the date of grant of such related Option or Award. (b) A Stock Appreciation Right shall entitle the holder thereof to receive upon exercise, for each Share to which the SAR relates, an amount equal to the excess, if any, of the fair market value of a Share on the date of exercise of the Stock Appreciation Right over the grant price. Any Stock Appreciation Right shall be settled in cash, unless the Committee shall determine at the time of grant of a Stock Appreciation Right that it shall or may be settled in cash, Shares or a combination of cash and Shares. SECTION 8 (a) Limited Rights. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Employees to whom Limited Rights shall be granted, the number of Shares to be covered by each Award of Limited Rights, the grant price thereof and the conditions and limitations applicable to the exercise thereof. Limited Rights may be granted in tandem with another Award, in addition to another Award, or freestanding and unrelated to any Award. Limited Rights granted in tandem with or in addition to an Award may be granted either at the same time as the Award or at a later time. Limited Rights shall not be exercisable after the expiration of 10 years after the date of grant and shall only be exercisable during a period determined at the time of grant by the Committee beginning not earlier than one day and ending not more than ninety days after the expiration date of an Offer. Except in the case of a Limited Right granted in assumption of or substitution for an outstanding award of a company acquired by the Company or with which the Company combines, the grant price of any Limited Right granted under this Plan shall not be less than 100% of the fair market value of the Shares covered by such Limited Right on the date of grant or, in the case of a Limited Right granted in tandem with a then outstanding Option or other Award, on the date of grant of such related Option or Award. (b) A Limited Right shall entitle the holder thereof to receive upon exercise, for each Share to which the Limited Right relates, an amount equal to the excess, if any, of the Offer Price on the date of exercise of the Limited Right over the grant price. Any Limited Right shall be settled in cash, unless the Committee shall determine at the time of grant of a Limited Right that it shall or may be settled in cash, Shares or a combination of cash and Shares. SECTION 9 (a) Other Stock-Based Awards. The Committee is hereby authorized to grant to eligible Employees an "Other Stock-Based Award", which shall consist of an Award, the value of which is based in whole or in part on the value of Shares, that is not an instrument or Award specified in Sections 6 through 8 of this Plan. Other Stock-Based Awards may be awards of Shares or may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible or exchangeable into or exercisable for Shares), as deemed by the Committee consistent with the purposes of the Plan. The Committee shall determine the terms and conditions of any such Other Stock-Based Award and may provide that such awards would be payable in whole or in part in cash. Except in the case of an Other Stock-Based Award granted in assumption of or in substitution for an outstanding award of a company acquired by the Company or with which the Company combines, the price at which securities may be purchased pursuant to any Other Stock-Based Award granted under this Plan, or the provision, if any, of any such Award that is analogous to the purchase or exercise price, shall not be less than 100% of the fair market value of the securities to which such Award relates on the date of grant. (b) Dividend Equivalents. In the sole and complete discretion of the Committee, an Award, whether made as an Other Stock-Based Award under this Section 9 or as an Award granted pursuant to Sections 6 through 8 hereof, may provide the holder thereof with dividends or dividend equivalents, payable in cash, Shares, Subsidiary securities, other securities or other property on a current or deferred basis. SECTION 10 (a) Amendments to the Plan. The Board may amend, suspend or terminate the Plan or any portion thereof at any time, provided that no amendment shall be made without stockholder approval if such approval is necessary to comply with any tax or regulatory requirement, including for these purposes any approval necessary to qualify Awards as "performance based" compensation under Section 162(m) or any successor provision if such qualification is deemed necessary or advisable by the Committee. Notwithstanding anything to the contrary contained herein, the Committee may amend the Plan in such manner as may be necessary for the Plan to conform with local rules and regulations in any jurisdiction outside the United States. (b) Amendments to Awards. The Committee may amend, modify or terminate any outstanding Award at any time prior to payment or exercise in any manner not inconsistent with the terms of the Plan, including without limitation, (i) to change the date or dates as of which an Award becomes exercisable, or (ii) to cancel an Award and grant a new Award in substitution therefor under such different terms and conditions as it determines in its sole and complete discretion to be appropriate Notwithstanding the foregoing, no amendment, modification or termination may impair the rights of a holder of an Award under such Award without the consent of the holder. (c) Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. The Committee is hereby authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 5(b) hereof) affecting the Company, or the financial statements of the Company or any Subsidiary, or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan. (d) Cancellation. Any provision of this Plan or any Award Agreement to the contrary notwithstanding, the Committee may cause any Award granted hereunder to be canceled in consideration of a cash payment or alternative Award made to the holder of such canceled Award equal in value to such canceled Award. The determinations of value under this subparagraph shall be made by the Committee in its sole discretion. SECTION 11 (a) Delegation. Subject to the terms of the Plan and applicable law, the Committee may delegate to one or more officers of the Company the authority, subject to such terms and limitations as the Committee shall determine, to grant Awards to, or to cancel, modify or waive rights with respect to, or to alter, discontinue, suspend, or terminate Awards held by, Employees who are not officers or directors of the Company for purposes of Section 16 of the Exchange Act, or any successor section thereto, or who are otherwise not subject to such Section. (b) Award Agreements. Each Award hereunder shall be evidenced by a writing delivered to the Participant that shall specify the terms and conditions thereof and any rules applicable thereto, including but not limited to the effect on such Award of the death, retirement or other termination of employment of the Participant and the effect thereon, if any, of a change in control of the Company. (c) Withholding. (i) A Participant may be required to pay to the Company, and the Company shall have the right to deduct from all amounts paid to a Participant (whether under the Plan or otherwise), any taxes required by law to be paid or withheld in respect of Awards hereunder to such Participant. The Committee may provide for additional cash payments to holders of Awards to defray or offset any tax arising from the grant, vesting, exercise or payment of any Award. (ii) At any time that a Participant is required to pay to the Company an amount required to be withheld under the applicable tax laws in connection with the issuance of shares of Common Stock under the Plan, the participant may, if permitted by the Committee, satisfy this obligation in whole or in part by electing (the "Election") to have the Company withhold from the issuance shares of Common Stock having a value equal to the amount required to be withheld. The value of the shares withheld shall be based on the fair market value of the Common Stock on the date that the amount of tax to be withheld shall be determined in accordance with applicable tax laws (the "Tax Date"). (iii) Each Election must be made prior to the Tax Date. The Committee may suspend or terminate the right to make Elections at any time. (iv) A Participant may also satisfy his or her total tax liability related to the Award by delivering Shares owned by the Participant. The value of the Shares delivered shall be based on the fair market value of the Shares on the Tax Date. (d) Transferability. No Awards granted hereunder may be transferred, pledged, assigned or otherwise encumbered by a Participant except: (i) by will; (ii) by the laws of descent and distribution; (iii) pursuant to a domestic relations order, as defined in the Code, if permitted by the Committee and so provided in the Award Agreement or an amendment thereto; or (iv) if permitted by the Committee and so provided in the Award Agreement or an amendment thereto, Options and Limited Rights granted in tandem therewith may be transferred or assigned (a) to Immediate Family Members, (b) to a partnership in which Immediate Family Members, or entities in which Immediate Family Members are the owners, members or beneficiaries, as appropriate, are the partners, (c) to a limited liability company in which Immediate Family Members, or entities in which Immediate Family Members are the owners, members or beneficiaries, as appropriate, are the members, or (d) to a trust for the benefit of Immediate Family Members; provided, however, that no more than a de minimus beneficial interest in a partnership, limited liability company or trust described in (b), (c) or (d) above may be owned by a person who is not an Immediate Family Member or by an entity that is not beneficially owned solely by Immediate Family Members. "Immediate Family Members" shall be defined as the spouse and natural or adopted children or grandchildren of the Participant and their spouses. To the extent that an Incentive Stock Option is permitted to be transferred during the lifetime of the Participant, it shall be treated thereafter as a Nonqualified Stock Option. Any attempted assignment, transfer, pledge, hypothecation or other disposition of Awards, or levy of attachment or similar process upon Awards not specifically permitted herein, shall be null and void and without effect. The designation of a Designated Beneficiary shall not be a violation of this Section 11(d). (e) Share Certificates. All certificates for Shares or other securities delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the SEC, any stock exchange upon which such Shares or other securities are then listed, and any applicable federal or state laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. (f) No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company from adopting or continuing in effect other compensation arrangements, which may, but need not, provide for the grant of options, stock appreciation rights and other types of Awards provided for hereunder (subject to stockholder approval of any such arrangement if approval is required), and such arrangements may be either generally applicable or applicable only in specific cases. (g) No Right to Employment. The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ of the Company or any Subsidiary or in the employ of any other entity providing services to the Company. The Company or any Subsidiary or any such entity may at any time dismiss a Participant from employment, or terminate any arrangement pursuant to which the Participant provides services to the Company, free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement. No Employee, Participant or other person shall have any claim to be granted any Award, and there is no obligation for uniformity of treatment of Employees, Participants or holders or beneficiaries of Awards. (h) Governing Law. The validity, construction, and effect of the Plan, any rules and regulations relating to the Plan and any Award Agreement shall be determined in accordance with the laws of the State of Delaware. (i) Severability. If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person or Award and the remainder of the Plan and any such Award shall remain in full force and effect. (j) No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company. (k) No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash, other securities or other property shall be paid or transferred in lieu of any fractional Shares or whether such fractional Shares or any rights thereto shall be canceled, terminated, or otherwise eliminated. (l) Headings. Headings are given to the subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. SECTION 12 Term of the Plan. Subject to Section 10(a), the Plan shall remain in effect until all Awards permitted to be granted under the Plan have either been satisfied, expired or cancelled under the terms of the Plan and any restrictions imposed on Shares in connection with their issuance under the Plan have lapsed. EX-11 5 EXHIBIT 11.1 FREEPORT-McMoRan INC. COMPUTATION OF NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE Three Months Ended Six Months Ended June 30, June 30, ----------------------- ----------------------- 1997 1996 1997 1996 -------- ---------- --------- --------- (In Thousands, Except Per Share Amounts) Primary: Net income applicable to common stock $ 7,236 $ 12,126 $ 8,111 $ 32,255 ========== ========== ========== ========== Average common shares outstanding 23,450 26,806 23,674 27,029 Common stock equivalents: Stock options 184 339 189 383 ---------- ---------- ---------- ---------- Common and common equivalent shares 23,634 27,145 23,863 27,412 ========== ========== ========== ========== Net income per common and common equivalent share $0.31 $0.45 $0.34 $1.18 ===== ===== ===== ===== Fully diluted: Net income applicable to common stock $ 7,236 $ 12,126 $ 8,111 $ 32,255 Plus preferred dividends - - - - ---------- ---------- ---------- ---------- Net income applicable to common stock $ 7,236 $ 12,126 $ 8,111 $ 32,255 ========== ========== ========== ========== Average common shares outstanding 23,450 26,806 23,674 27,029 Common stock equivalents: Stock options 184 339 189 383 Convertible securities: Preferred stock - - - - ---------- ---------- ---------- ---------- Common and common equivalent shares 23,634 27,145 23,863 27,412 ========== ========== ========== ========== Net income per common and common equivalent share $0.31 $0.45 $0.34 $1.18 ===== ===== ===== ===== EX-15 6 Exhibit 15.1 July 22, 1997 Freeport-McMoRan Inc. 1615 Poydras Street New Orleans, LA 70112 Gentlemen: We are aware that Freeport-McMoRan Inc. has incorporated by reference in its Registration Statements (File Nos. 2-85000, 33-14641, 33-30417, 33-29850, 33-62170, and 333-31041) its Form 10-Q for the quarter ended June 30, 1997, which includes our report dated July 22, 1997 covering the unaudited interim financial information contained therein. Pursuant to Regulation C of the Securities Act of 1993 (the Act), this report is not considered a part of the registration statements prepared or certified by our firm or a report prepared or certified by our firm within the meaning of Sections 7 and 11 of the Act. Very truly yours, Arthur Andersen LLP EX-27 7
5 0000351116 FREEPORT-MCMORAN INC. 1,000 6-MOS DEC-31-1997 JUN-30-1997 5,481 0 41,958 0 159,640 236,977 1,898,699 952,752 1,241,171 168,779 449,641 0 50,084 340 21,965 1,241,171 440,778 440,778 333,003 333,003 6,222 0 18,724 54,701 6,202 10,302 0 0 0 10,302 .34 .34
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