-----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, DCQjMPvzqS4F1DzlTaNE20iYf9d6BQC+p3MCtAZqcTQyH1vIX5DJvC7Fr4Z3TWB3 7VOP4tEKhhlxQijeJcMhnQ== 0000351116-97-000007.txt : 19971120 0000351116-97-000007.hdr.sgml : 19971120 ACCESSION NUMBER: 0000351116-97-000007 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 20 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19971119 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-K405/A SEC ACT: SEC FILE NUMBER: 001-08124 FILM NUMBER: 97723975 BUSINESS ADDRESS: STREET 1: 1615 POYDRAS ST CITY: NEW ORLEANS STATE: LA ZIP: 70112 BUSINESS PHONE: 5045824000 10-K405/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A (Mark One) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1996 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from .......... to .......... Commission file number 1-8124 Freeport-McMoRan Inc. (Exact name of registrant as specified in its charter) Delaware 13-3051048 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1615 Poydras Street New Orleans, Louisiana 70112 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (504) 582-4000 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock Par Value $.01 per Share New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None 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 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X The aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $644,918,000 on March 14, 1997. On March 14, 1997, there were issued and outstanding 23,859,407 shares of the Registrant's Common Stock. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's Annual Report to stockholders for the year ended December 31, 1996 are incorporated by reference into Parts II and IV of this Report and portions of the registrant's Proxy Statement dated March 21, 1997, submitted to the registrant's stockholders in connection with its 1997 Annual Meeting to be held on April 29, 1997 are incorporated by reference into Part III of this Report. Freeport-McMoRan Inc. TABLE OF CONTENTS Page Part I Items 1. and 2. Business and Properties. . . . . . . . . . . 1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . 1 Agricultural Minerals. . . . . . . . . . . . . . . . . . . 2 Fertilizer Business-IMC-Agrico Company . . . . . . . . 2 Sulphur Business . . . . . . . . . . . . . . . . . . . 4 Oil and Gas. . . . . . . . . . . . . . . . . . . . . . . . 5 Environmental Matters. . . . . . . . . . . . . . . . . . . 6 Relationship between the FTX Group and FRP . . . . . . . . 6 Management and Ownership . . . . . . . . . . . . . . . 6 Credit Facility . . . . . . . . . . . . . . . . . . . . 6 Conflicts of Interest . . . . . . . . . . . . . . . . . 7 Services Agreement . . . . . . . . . . . . . . . . . . 7 Employees. . . . . . . . . . . . . . . . . . . . . . . . . 7 Cautionary Statement . . . . . . . . . . . . . . . . . . . 7 Seasonality and Volatility of Product Markets . . . . . 8 Competition . . . . . . . . . . . . . . . . . . . . . . 8 Environmental Matters . . . . . . . . . . . . . . . . . 9 Operating Hazards . . . . . . . . . . . . . . . . . . . 9 Foreign Sales . . . . . . . . . . . . . . . . . . . . .10 Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . .10 Item 4. Submission of Matters to a Vote of Security Holders.10 Executive Officers of the Registrant . . . . . . . . . . .11 Part II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. . . . . . . . . . . . . . . . .12 Item 6. Selected Financial Data. . . . . . . . . . . . . . .12 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . .12 Item 8. Financial Statements and Supplementary Data. . . . .12 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. . . . . . . . .12 Part III Item 10. Directors and Executive Officers of the Registrant.12 Item 11. Executive Compensation. . . . . . . . . . . . . . .12 Item 12. Security Ownership of Certain Beneficial Owners and Management. . . . . . . . . . . . . . . . . . .12 Item 13. Certain Relationships and Related Transactions. . .12 Part IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . . . . . . . . . . . . . .13 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . S-1 Index to Financial Statements. . . . . . . . . . . . . . . . . F-1 Report of Independent Public Accountants . . . . . . . . . . . F-1 Exhibit Index. . . . . . . . . . . . . . . . . . . . . . . . . E-1 PART I Items 1. and 2. Business and Properties. OVERVIEW Freeport-McMoRan Inc., a Delaware corporation formed in 1981 ("FTX" or the "Company"), through Freeport-McMoRan Resource Partners, Limited Partnership ("FRP"), is one of the world's leading integrated phosphate fertilizer producers. FTX and its wholly owned subsidiary, FMRP, Inc. ("FMRP") are the managing general partners of FRP, a publicly traded Delaware limited partnership organized in 1986. As of December 31, 1996, FTX and FMRP held partnership units representing an approximate 51.6% interest in FRP, with the remaining interest being publicly owned and traded on the New York Stock Exchange. See "Relationship Between the FTX Group and FRP." FRP is a joint venture partner in IMC-Agrico Company ("IMC-Agrico"), the largest and one of the lowest cost producers, marketers and distributors of phosphate fertilizers in the world, with operations in central Florida and on the Mississippi River in Louisiana. 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. 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 materials prices. IMC-Agrico's business includes the mining and sale of phosphate rock and the production, marketing and distribution of phosphate fertilizers and animal feed ingredients. IMC-Agrico was formed as a joint venture partnership in July 1993 when FRP and IMC Global Inc. ("IMC") contributed their respective phosphate fertilizer businesses to IMC-Agrico. FRP believes that the combination of its internal production of raw materials, through its sulphur division and the IMC-Agrico joint venture, and the strategic location of IMC-Agrico's fertilizer operations provide it with a competitive advantage over other fertilizer producers. FRP's sulphur operations include the mining, purchase, transportation, terminalling and marketing of sulphur. The Main Pass deposit, which was discovered in 1988, contains the largest known sulphur reserve in North America. FRP's Main Pass offshore mining complex is the largest structure of its type in the Gulf of Mexico and one of the largest in the world. The mining complex has a design capacity of 5,500 long tons per day. FRP has a 58.3% interest in the Main Pass mine and serves as its manager and operator. In January 1995, the Company began operating the Culberson mine when it acquired substantially all of the domestic assets of Pennzoil Sulphur Co. ("Pennzoil"). As of December 31, 1996, the Main Pass and Culberson mines were estimated to contain proved and probable sulphur reserves totaling 53.1 million long tons net to FRP. Main Pass also contains proved oil reserves from which FRP produces and sells oil for the Main Pass joint venture. Oil production averaged approximately 10,700 barrels per day (5,200 barrels net to FRP) during the year ended December 31, 1996. As of December 31, 1996, Main Pass was estimated to contain 12.8 million barrels (5.2 million barrels net to FRP) of proved oil reserves. In June 1996, FRP acquired a 25% leasehold interest from McMoRan Oil & Gas Co. ("MOXY") in an oil and gas venture to explore a project area in Terrebonne Parish, Louisiana. FRP also entered into an agreement with MOXY in 1997 pursuant to which FRP will acquire an interest in certain leases acquired by MOXY. See "Oil and Gas," below. FRP continues to benefit from significant improvements in phosphate fertilizer markets that began in late 1993 and continue into 1997. FRP's 1996 average realization for its principal fertilizer product, diammonium phosphate ("DAP"), increased 65% to approximately $186 per short ton from the 1993 average of approximately $113 per short ton. In late March 1997, the spot market price for DAP as quoted in industry publications was approximately $175 per short ton, FOB central Florida. AGRICULTURAL MINERALS The Company's agricultural minerals operations consists of FRP's interest in the IMC-Agrico joint venture and FRP's sulphur business. Fertilizer Business IMC-Agrico Company In July 1993, FRP and IMC contributed to IMC-Agrico their respective phosphate fertilizer businesses, including the mining and sale of phosphate rock and the production, marketing and distribution of phosphate fertilizers. At the time, FRP and IMC were among the largest and lowest cost phosphate fertilizer producers in the world. The formation of IMC-Agrico has permitted the more efficient use of existing plant capacity as well as eliminating duplicative administrative and marketing functions. IMC-Agrico makes quarterly cash distributions to FRP and IMC, based on sharing ratios ("Current Interest"). The "Capital Interest" of FRP and IMC in IMC-Agrico reflects the purchase and sale of long-term assets and any required capital contributions. Effective March 1, 1996, FRP's Current Interest was increased by 0.85% and, on July 1, 1996, FRP's Capital Interest was also increased by 0.85%. As a result, FRP's Current Interest and Capital Interest were 54.35% and 43.05%, respectively, as of December 31, 1996. Effective July 1, 1997, FRP's Current Interest and Capital Interest will each decline to 41.45%. The IMC-Agrico policy committee establishes policies relating to the strategic direction of IMC-Agrico and assures that its policies are implemented. FRP and IMC have equal representation on this committee. The committee has the sole authority to make certain decisions affecting IMC-Agrico, including authorizing certain capital expenditures for expansion, incurring certain indebtedness, approving significant acquisitions and dispositions, and certain other decisions. In January 1996, IMC-Agrico's day-to-day management was restructured so that it operates substantially as a stand-alone entity. Included in the restructuring was the establishment of a new office of the president of IMC-Agrico who is responsible for managing its business affairs. The president is appointed by IMC subject to the approval of the policy committee. An executive officer of FRP was selected as the initial president of IMC-Agrico and has joined IMC- Agrico in that role. The president reports to IMC, which maintains responsibility for the operation of IMC-Agrico, subject to the terms of the partnership agreement and the direction of the policy committee. Phosphate Rock IMC-Agrico's phosphate mining operations and production plants, located in Polk, Hillsborough, Hardee and Manatee Counties in central Florida, produce phosphate rock principally for the manufacture of phosphate fertilizers. IMC-Agrico sells phosphate rock to domestic animal feed manufacturers and other phosphate fertilizer producers. IMC-Agrico uses phosphate rock internally in the production of phosphate fertilizers at its plants located in central Florida and in Louisiana. Phosphate rock is generally mixed with sulphuric acid to produce phosphoric acid from which various granulated phosphate products can be produced. IMC-Agrico's annual phosphate rock mining capacity is approximately 25 million tons per year and currently accounts for approximately 41% of domestic phosphate rock mining capacity and 17% of the western world's capacity. IMC-Agrico produced approximately 22 million tons of phosphate rock during the year ended December 31, 1996. In October 1996, IMC-Agrico purchased 24,000 acres of undeveloped land in central Florida for $31 million plus future payments and royalties. The land is estimated to contain in excess of 100 million tons of phosphate rock. FRP's share of the acquisition cost was approximately $13.0 million. Primarily as a result of this acquisition, FRP's share of IMC-Agrico's proved and probable phosphate rock reserves as of December 31, 1996 increased by approximately 58 million short tons (31%) from the December 31, 1995 level. As of December 31, 1996, FRP's share of IMC-Agrico's proved and probable phosphate rock reserves was estimated to be 244.3 million short tons that are mineable from existing operations, plus an additional 158.2 million short tons of phosphate rock deposits. Deposits are ore bodies which require additional economic and mining feasibility studies before they can be classified as reserves. These reserves are controlled by IMC-Agrico through ownership, long- term lease, royalty or purchase option agreements. In 1996, IMC-Agrico entered into an exclusive letter of intent with Chinese authorities to conduct joint feasibility studies and, if commercially viable, to develop phosphate ore resources in Yunnan Province. The agreement covers phosphate resources and contemplates the joint development of high-analysis phosphate fertilizer manufacturing facilities in China. In addition, FRP continues to evaluate a 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. Phosphate Fertilizers IMC-Agrico manufactures phosphate fertilizers, principally DAP, monoammonium phosphate ("MAP") and granular triple superphosphate ("GTSP"), and related products, including sulphuric acid, phosphoric acid, anhydrous ammonia and urea. IMC-Agrico's fertilizer operations consist of six phosphoric acid and fertilizer manufacturing facilities, three in central Florida and three on the Mississippi River in Louisiana. IMC-Agrico's New Wales, Nichols and South Pierce plants are located in Florida. The New Wales complex, located near Mulberry, Florida, primarily produces DAP, MAP,GTSP and merchant grade phosphoric acid. The New Wales plant also produces animal feed ingredients (see "Animal Feed Ingredients"). The Nichols, Florida plant produces DAP, sulphuric acid and phosphoric acid. The South Pierce plant, located in Bartow, Florida, produces GTSP, sulphuric acid and phosphoric acid. IMC-Agrico's Faustina, Uncle Sam and Taft plants are located in Louisiana. The Faustina plant, located in Donaldsonville, Louisiana, produces DAP, MAP, anhydrous ammonia, urea, sulphuric acid and phosphoric acid. The Uncle Sam, Louisiana plant produces sulphuric acid and phosphoric acid which is then shipped to the nearby Faustina and Taft plants, where it is used to produce DAP and MAP. The Taft, Louisiana plant produces DAP and MAP. Phosphate rock, sulphur and ammonia are the three principal raw materials used in the production of phosphate fertilizers. Phosphate rock is supplied by IMC-Agrico's Florida mines. FRP supplies its share of IMC-Agrico's sulphur requirements through its production from the Main Pass and Culberson mines and IMC supplies IMC-Agrico with its sulphur requirements from its share of Main Pass production and purchases from third parties, including FRP. IMC-Agrico's ammonia needs are fulfilled by internal production from its Faustina plant and third party domestic suppliers under long-term contracts. IMC-Agrico's phosphoric acid capacity is approximately 4.0 million tons of contained P2O5 (P2O5 is an industry term indicating a product's phosphate content measured chemically in units of phosphorous pentoxide), which represents approximately 33% of U.S. production capacity and 10% of world capacity. IMC-Agrico operated at approximately 93% of P2O5 capacity in 1996 as compared to 97% in 1995. IMC-Agrico's plants have an estimated annual sustainable capacity to produce approximately 8.2 million tons of granulated phosphates (DAP, MAP and GTSP), 10.4 million tons of sulphuric acid, 260,000 tons of urea and 565,000 tons of anhydrous ammonia. During 1996, IMC-Agrico produced approximately 7.3 million tons of granulated phosphates, as compared to 7.6 million tons in 1995. As market conditions dictate, IMC-Agrico curtails operations to avoid building excessive inventories. Animal Feed Ingredients In 1995, IMC-Agrico acquired the animal feed ingredients business of Mallinckrodt Group Inc. Prior to the acquisition, IMC-Agrico managed Mallinckrodt's animal feed plant operations on a contractual basis. The principal manufacturing facilities of the animal feed operations are located within IMC-Agrico's New Wales complex. This business is one of the world's largest producers of phosphate-based animal feed ingredients and has enhanced IMC-Agrico's flexibility in maximizing returns from its core phosphate production. Marketing IMC-Agrico sells its fertilizer products in the domestic and export markets under spot market and long-term contract terms. IMC-Agrico markets its products domestically throughout the eastern two-thirds of the United States. In 1996, approximately 40% of IMC-Agrico's phosphate fertilizer shipments were sold in the domestic market. Approximately 63% of IMC-Agrico's phosphate rock production was used in 1996 to produce phosphate fertilizers at its plants in Florida and Louisiana, with a majority of the remaining amount sold in the domestic market. Virtually all of FRP's export sales of phosphate fertilizers are marketed through the Phosphate Chemicals Export Association ("Phoschem"), a Webb- Pomerene Act association. Since January 1995, IMC has been responsible for marketing DAP, MAP and GTSP for Phoschem's members. This marketing arrangement allows IMC-Agrico to interface directly with its major international customers and enhances its ability to pursue growth and marketing opportunities on a global basis. In December 1996, IMC-Agrico, through Phoschem, reached a two- year agreement for the sale of DAP to Sinochem, the fertilizer agency for China. The agreement provides for monthly shipments of DAP at market-related prices at the time of shipment and is expected to approximate 1996 levels for each of 1997 and 1998. In conducting business abroad, IMC-Agrico is subject to the customary risks encountered in foreign operations. See "Cautionary Statement." Although phosphate fertilizer sales are fairly constant from month to month, seasonal increases occur in the domestic market prior to the fall and spring planting of crops. Generally, domestic sales taper off after the spring planting season. However, this decline in domestic sales generally coincides with a time when major international buyers such as China, India and Pakistan purchase product for mid-year delivery. Sulphur Business The Company's sulphur operations include the mining, purchase, transportation, terminalling and sale of sulphur. In 1995, FRP acquired essentially all of the domestic assets of Pennzoil, including the Culberson mine in Texas, sulphur terminals and loading facilities in Galveston, Texas and Tampa , Florida, land and marine transportation equipment and sales and other related commercial contracts and obligations. As a result, FRP now produces sulphur from its Main Pass and Culberson mines for sale to IMC-Agrico and to third parties. Production The Main Pass and Culberson mines utilize the Frasch mining process, which involves drilling wells and injecting superheated water into the underground sulphur deposit to melt the solid sulphur, which is then brought to the surface in liquid form. FRP and its predecessors have been using the Frasch process for over 80 years. FRP has also developed technology that allows it to use sea water in the Frasch process. FRP is not aware of any competitor that has developed a Frasch sulphur mine using superheated sea water. The Main Pass deposit was discovered by FRP in 1988. The mine currently has the highest production rate of any sulphur mine in the world and contains the largest known existing Frasch sulphur reserve in North America. The Main Pass offshore complex, more than a mile in length, is one of the largest structures of its type in the world and the largest in the Gulf of Mexico. The Main Pass mine has a design capacity of 5,500 long tons per day. During the year ended December 31, 1996, production averaged approximately 5,350 long tons per day. The mine is owned 58.3% by FRP, 25% by IMC and 16.7% by Homestake Sulphur Company. At December 31, 1996, the Main Pass deposit was estimated to contain proved and probable sulphur reserves totaling 66.2 million long tons (38.6 million long tons net to FRP). FRP began operating the Culberson mine in January 1995 after acquiring the mine from Pennzoil. For the year ended December 31, 1996, production at the Culberson mine averaged approximately 2,450 long tons per day. FRP continues to work on improving the operating efficiencies at the Culberson mine to further reduce costs. As of December 31, 1996, the Culberson mine was estimated to contain proved and probable sulphur reserves totaling 14.5 million long tons. FRP also supplements its sulphur production by purchasing sulphur from third parties who recover sulphur in the production of oil and natural gas and the refining of petroleum products. Marketing Sulphur produced at the Main Pass mine is transported by barge in liquid form to storage, handling and shipping facilities located at Port Sulphur, Louisiana. Sulphur production from the Culberson mine is transported in liquid form by unit train to Galveston where storage, handling and shipping facilities are located. At both Port Sulphur and Galveston, sulphur purchased from others or transported for third parties may also be received. Sulphur is transported from Port Sulphur by barge to IMC-Agrico's and other customers' plants in Louisiana on the Mississippi River. Molten sulphur is also transported from Galveston and Port Sulphur by tanker to FRP's terminals at Tampa. Similar facilities at Pensacola, Florida are used for storage, handling and shipping of sulphur purchased from others or transported for others. FRP processes and transports for a fee both IMC's and Homestake's share of Main Pass sulphur and serves as marketing agent for Homestake. FRP's production of sulphur accounted for an estimated 20% of domestic and 6% of world elemental sulphur production in 1996. FRP's sulphur is used primarily to manufacture sulphuric acid, which is used primarily to produce phosphoric acid, one of the basic materials used to produce phosphate fertilizers. OIL AND GAS Oil reserves are associated with the same caprock reservoir as the sulphur reserves at Main Pass. Oil production commenced in the fourth quarter of 1991 and averaged approximately 10,700 barrels per day (5,200 barrels per day net to FTX) during the year ended December 31, 1996. As of December 31, 1996, FTX estimated that the remaining proved recoverable oil reserves at Main Pass were approximately 12.8 million barrels (5.2 million barrels net to FTX). In June 1996, FRP acquired a 25% leasehold interest in an oil and gas venture to explore a project area in Terrebonne Parish, Louisiana. In connection with the acquisition of this interest, FRP reimbursed MOXY $2.1 million for certain costs previously incurred in the project area. FRP acquired its interest on the same proportionate basis as Phillips Petroleum Company, which owns a 50% interest and is the operator of the joint venture. The initial exploratory well on the East Fiddler's Lake prospect was not successful in the discovery of commercial hydrocarbons. The second exploratory well in the project area has commenced on the North Bay Junop prospect and is expected to reach total depth during the second quarter of 1997. FRP acquired an interest in leases acquired by MOXY at the federal offshore lease sale held on March 5, 1997. At the lease sale, MOXY was high bidder on seven offshore Gulf of Mexico tracts, with bids totaling $5.5 million. FRP will acquire a 50% working interest in the leases awarded and will bear 60% of the acquisition and exploration costs associated with these leases. MOXY will bear the remaining 40% of such costs and will retain the remaining 50% working interest. Award of the leases is subject to review and approval by the U.S. Minerals Management Service. ENVIRONMENTAL MATTERS FTX and FRP have a history of commitment to environmental responsibility. Since the 1940s, long before the general public recognized the importance of maintaining environmental quality, FTX has conducted preoperational, bioassay, marine ecological and other environmental surveys to ensure the environmental compatibility of its operations. FTX's Environmental Policy commits its operations to compliance with applicable laws and regulations. FTX has implemented corporate-wide environmental programs that include the activities of FRP and continues to study methods to reduce discharges and emissions. FRP's operations are subject to federal, state and local laws and regulations relating to the protection of the environment. Exploration, mining, development and production of natural resources and the chemical processing operations of IMC-Agrico, like similar operations of other companies, may affect the environment. The production of sulphur and phosphate fertilizer involves the handling of hazardous or toxic substances, some of which may have the potential, if released into the environment in sufficient quantities, to expose FRP and IMC - -Agrico to significant liability. For a further discussion of environmental matters and the risks associated with such matters, see "Cautionary Statement- Environmental Matters" below. RELATIONSHIP BETWEEN THE FTX GROUP AND FRP Management and Ownership FTX and FMRP serve as the managing general partners of FRP and the directors and officers of FTX, together with FRP's officers, perform all FRP management functions and carry out the activities of FRP. The officers of FRP continue to be employees and officers of FTX and its other subsidiaries but, subject to certain exceptions, are employed principally for the operation of FRP's business. As of December 31, 1996, FTX and FMRP held partnership interests that represented an approximate 51.6% interest in FRP. As a result of FTX's position as administrative managing general partner and of FTX's ownership interest, FTX has the ability to control all matters relating to the management of FRP, including any determination with respect to the acquisition or disposition of FRP's assets, future issuance of additional debt or other securities of FRP and any distributions payable in respect of FRP's partnership interests. In addition to such other obligations as it may assume, FTX has the general duty to act in good faith and to exercise its rights of control in a manner that is fair and reasonable to the holders of partnership interests. Under the terms of FRP's credit facility (the "Credit Facility"), the failure by FTX to maintain control of FRP, or the direct or indirect ownership of at least 50.1% of the partnership interests in FRP, would allow acceleration of the indebtedness thereunder. See "Credit Facility." On February 15, 1997, FRP paid a distribution of 60 cents per publicly held unit ($30.0 million) and 24 cents per FTX owned unit ($12.9 million), increasing the total unpaid distributions due FTX to $431.3 million. The preferential rights of the publicly owned FRP units to receive minimum quarterly distributions of 60 cents per unit ceased after this distribution. FRP's distributable cash will now be shared ratably by FRP's public unitholders and FTX, except that FTX will be entitled to recover its unpaid cash distributions on a quarterly basis from one-half of any excess of future quarterly distributions over 60 cents per unit for all units. Credit Facility In November 1996, FTX and FRP amended the Credit Facility to, among other things, increase the borrowing availability, lower the interest rates and extend the maturity date. The Credit Facility now provides $350 million of credit, all of which is available to FRP and $150 million of which is available to FTX through November 2001. Under the Credit Facility, FTX is required to maintain at least a 50.1% ownership interest in FRP and control of FRP. FRP is not permitted to enter into any agreement restricting its ability to make distributions and is restricted in its ability to create liens and security interests on its assets. To secure the Credit Facility, FTX has pledged its FRP units representing a minimum 50.1% ownership in FRP. The Credit Facility places restrictions on, among other things, additional borrowings and requires FRP to maintain certain minimum working capital levels and specified cash flow to interest coverage ratios and not to exceed a specified debt-to-capitalization ratio. Conflicts of Interest The nature of the respective businesses of the Company and FRP and its affiliates may give rise to conflicts of interest between the Company and FRP. Conflicts could arise, for example, with respect to transactions involving potential acquisitions of businesses or mineral properties, the issuance of additional partnership interests, the determination of distributions to be made by FRP, the allocation of general and administrative expenses between FTX and FRP and other business dealings between FRP and FTX and its affiliates. Except in cases where a different standard may have been provided for, FTX has a general duty to act in good faith and to exercise rights of control in a manner that is fair and reasonable to the holders of FRP's partnership interests. In resolving conflicts of interest, FRP's partnership agreement permits FTX to consider the relative interest of each party to a potential conflict situation which, under certain circumstances, could include the interest of FTX and its other affiliates. The extent to which this provision is enforceable under Delaware law is not clear. Services Agreement Since January 1, 1996, FM Services Company ("FMS"), a company owned 50% by each of FTX and Freeport-McMoRan Copper & Gold Inc. ("FCX"), a former subsidiary of FTX, has furnished general executive, administrative, financial, accounting, legal, environmental, insurance, personnel, engineering, tax, research and development, sales and certain other services to FTX pursuant to the terms of an Services Agreement (the "Services Agreement") in order to enable FTX to perform its duties as administrative managing general partner of the Company. The nature and timing of the services provided under the Services Agreement are similar to those historically provided directly by FTX to the Company. FRP generally reimburses FTX, at FTX's cost, including allocated overhead, for such services on a monthly basis, including amounts paid by FTX under the Services Agreement and allocated to FRP. Such costs are allocated among FRP, FTX and certain of FTX's other affiliates based on direct utilization whenever possible and an allocation formula based on a combination of the operating income, property, plant and equipment and capital expenditures of FRP, FTX and such other affiliates. EMPLOYEES As of March 1, 1997, FTX had a total of 504 employees. CAUTIONARY STATEMENT This report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact included in this report, including, without limitation, the statements under the headings "Business and Properties," "Market for Registrant's Common Equity and Related Stockholder Matters," and "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding FTX's financial position and liquidity, distributions, FTX's strategic growth initiatives, future capital needs, development and capital expenditures (including the amount and nature thereof), reserve estimates and additions, production levels, business strategies, and other plans and objectives of management of the Company for future operations and activities, are forward-looking statements. These statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate under the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, including the risk factors discussed below and in the Company's other filings with the Securities and Exchange Commission (the "SEC"), general economic and business conditions, the business opportunities that may be presented to and pursued by the Company, changes in laws or regulations and other factors, many of which are beyond the control of the Company. Readers are cautioned that any such statements are not guarantees of future performance, and the actual results or developments may differ materially from those projected, predicted or assumed in the forward- looking statements. All subsequent written and oral forward-looking statements attributable to FTX or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Important factors that could cause actual results to differ materially from anticipated results or expectations include, among others: * Fluctuations in the actual or anticipated supply of and demand for fertilizer products that are frequently affected by rapidly changing agricultural conditions * Changes in governmental policies that affect the number of acres planted, levels of grain stocks, the mix of crops planted and prevailing crop prices * Fluctuations in the supply of and demand for sulphur, oil and gas * Imprecision in estimating sulphur, phosphate rock and oil and gas reserves * Possible increased environmental costs and liabilities arising from the production, storage and distribution of phosphate fertilizers and chemicals, sulphur, oil and gas * Unanticipated industrial accidents * Plant damage caused by severe weather or natural disasters * Unexpected geological conditions resulting in cave-ins, flooding and rock-bursts and unexpected changes in rock stability conditions * Exchange rate fluctuations * Fluctuations in interest rates * Unanticipated difficulties in obtaining necessary financing * Timing of necessary governmental permits and approvals relating to operations, expansions of operations and financing of operations * Difficulties in reaching agreements, or resolving disputes, with joint venture partners, government officials, suppliers or customers * Other risk factors described from time to time in FTX's filings with the SEC Many of these factors are beyond FTX's ability to control or predict. Investors are therefore cautioned not to place undue reliance upon forward- looking statements. A more detailed discussion of certain of the foregoing factors follows: Seasonality and Volatility of Product Markets The Company sells its fertilizer products in the domestic and export markets under spot market and long-term contract terms. Agricultural demand for the Company's phosphate fertilizers is materially affected by prevailing agricultural conditions. Generally, the Company experiences seasonal increases in domestic sales prior to the fall and spring planting of crops and diminished sales after the spring planting season. Sales are also influenced by current and projected grain inventories and prices, quantities of fertilizers imported to and exported from North America and various governments' agricultural policies. Grain inventories are directly influenced by highly unpredictable weather patterns and rapidly changing field conditions (particularly during periods of high fertilizer consumption), and by trends in world-wide food consumption. Among the governmental policies that influence the fertilizer markets are those directly or indirectly influencing the number of acres planted, the level of grain stocks, the mix of crops planted and crop prices. In the United States , the Farm Bill enacted in April of 1996 ends government-guaranteed prices for corn, other feed grains, cotton, rice and wheat, and provides farmers with guaranteed payments that decline over seven years. The Farm Bill also brought an immediate end to planting controls. The Company has not yet determined whether the Farm Bill will have an effect on its operations. The possibility that the U.S. government or any foreign government may remove acres from cultivation through subsidies to farmers is an important factor influencing the demand for fertilizers. All of the Company's major products are commodities, and the markets and prices for such products have been volatile historically and may continue to be volatile in the future. The Company's operating margins and cash flow are subject to substantial fluctuations in response to changes in supply and demand for its products, conditions in the domestic and foreign agriculture industry, market uncertainties and a variety of additional factors beyond the Company's control. Competition The sulphur, fertilizer and phosphate rock mining industries are highly competitive. Because competition is based largely on price, maintaining low production costs is critical to competitiveness. Any increases in the Company's costs or decreases in its competitors' costs affect the Company's ability to compete effectively. Because the market for the Company's products is global, the Company faces intense competition from overseas producers, some of which are state supported, especially those in North Africa and the former Soviet Union. Additionally, foreign competitors frequently are motivated by non-market factors such as the need for hard currency, rather than by normal financial considerations. Environmental Matters The Company's operations include exploration, mining, development and production of natural resources, chemical processing, and the extraction, handling, production, processing, treatment, storage, transportation and disposal of materials and waste products that may be toxic or hazardous. Consequently, the Company is subject to numerous environmental laws and regulations. The Company has incurred and will continue to incur, significant capital expenditures and operating costs based on these laws and regulations. Continued governmental and public emphasis on environmental issues may result in increased capital expenditures and operating costs in the future, although the impact of future laws and regulations or future changes to existing laws and regulations cannot be predicted or quantified. Federal legislation (sometimes referred to as "Superfund" legislation) imposes liability, without regard to fault, for clean-up of certain waste sites, even though waste management activities at the site may have been performed in compliance with regulations applicable at the time. Under the Superfund legislation, one responsible party may be required to bear more than its proportional share of clean-up costs if payments cannot be obtained from other responsible parties. In addition, federal and state regulatory programs and legislation mandate clean-up of certain wastes at operating sites. Governmental authorities have the power to enforce compliance with these regulations and permits, and violators are subject to civil and criminal penalties, including fines, injunctions or both. Third parties also have the right to pursue legal actions to enforce compliance. Liability under these laws can be significant and unpredictable. The Company has received notices from governmental agencies that it is one of many potentially responsible parties at certain sites under relevant federal and state environmental laws. Some of these sites involve significant cleanup costs. The ultimate settlement of liability for the clean-up of such sites usually occurs many years after the receipt of notices identifying potentially responsible parties because of the many complex, technical and financial issues associated with site clean-up. The Company cannot predict its potential liability for the clean-up costs that it may incur in the future. Operating Hazards The Company's offshore sulphur mining and oil production operations, and its marine transportation operations, are subject to marine perils, including collisions, fire, explosions, hurricanes and other adverse weather conditions. The Company's mining operations are also subject to risks such as unexpected geological conditions resulting in cave-ins, flooding and rock-bursts and unexpected changes in rock stability conditions. The Company's oil exploration and production activities are subject to risks including blowouts, cratering and fires, each of which could result in personal injury to personnel or damage to property and the environment. The Company's operations may be subject to significant interruption, and FRP may be subject to significant liability due to industrial accidents occurring at one or more of its plants, or drilling or mining operations, or severe weather or natural disaster damage to any one or more of its plants, or drilling or mining operations. The Company has in place programs to minimize the risks associated with its businesses. In addition, it has the benefit of certain liability, property damage, business interruption and other insurance coverage in types and amounts that it considers reasonable and believes to be customary in the Company's business. This insurance provides protection against loss from some, but not all, potential liabilities normally incident to the ordinary conduct of the Company's business, including coverage for certain types of damages associated with environmental and other liabilities that arise from sudden, unexpected and unforeseen events, with such coverage limits as management deems prudent. Through FTX and IMC-Agrico, property insurance is maintained to cover some, but not all of the risks of physical damage to tangible property of FRP as well as the corresponding cost of business interruption. Foreign Sales A significant portion of the Company's revenues come from sales outside of the United States. The Company's foreign sales are subject to numerous risks including changes in currency and exchange controls, the availability of foreign exchange, laws, regulatory policies and actions affecting foreign trade and government subsidies, tariffs and quotas. Item 3. Legal Proceedings. Tom Beanal v. Freeport-McMoRan Inc. and Freeport-McMoRan Copper & Gold Inc., Civ. No. 96-1474 (E.D. La. filed Apr. 29, 1996). The plaintiff alleges environmental, human rights and social/cultural violations in Indonesia. He seeks $6 billion in monetary damages and other equitable relief. The Company and its former subsidiary, Freeport-McMoRan Copper & Gold Inc. ("FCX") deny these allegations, which it believes are inconsistent with the findings of a series of independent examinations of the Indonesian mining operations of FCX's subsidiary. The Company believes the action is baseless and will vigorously defend such action. The Company has filed a motion to dismiss all claims, which motion is pending. Yosefa Alomang v. Freeport-McMoRan Inc. and Freeport-McMoRan Copper & Gold Inc., Civ. No. 96-9962 (Orleans Civ. Dist. Ct. La. filed June 19, 1996). This purported class action was dismissed by the Civil District Court of the Parish of Orleans, State of Louisiana on February 21, 1997 for lack of subject matter jurisdiction because the alleged conduct and damages occurred in Indonesia. The Court also held that venue was not proper in any Louisiana court. On March 11, 1997, the Court ruled that an amended complaint filed by the plaintiff did not cure the lack of subject matter jurisdiction. The plaintiff had alleged substantially similar violations as those alleged in the Beanal suit and sought unspecified monetary damages and other equitable relief. In addition to the foregoing proceedings, FTX may be from time to time involved in various legal proceedings of a character normally incident to the ordinary course of its business. Management believes that potential liability in any such or threatened proceedings would not have a material adverse effect on the financial condition or results of operations of FTX. FTX maintains liability insurance to cover some, but not all, potential liabilities normally incident to the ordinary course of its business as well as other insurance coverages customary in its business, with such coverage limits as management deems prudent. Item 4. Submission of Matters to a Vote of Security Holders. Not applicable. Executive Officers of the Registrant. Certain information about the executive officers of FTX as of March 14, 1997 is set forth in the following table and accompanying text: Name Age Position or Office Richard C. Adkerson 50 Vice Chairman of the Board Michael J. Arnold 44 Senior Vice President Thomas J. Egan 52 Senior Vice President W. Russell King 47 Senior Vice President Rene L. Latiolais 54 President and Chief Executive Officer James R. Moffett 58 Chairman of the Board Robert M. Wohleber 46 Senior Vice President Richard C. Adkerson has served as Vice Chairman of the Board and a Director of the Company since August 1995. Mr. Adkerson is Executive Vice President of FCX and P.T. Freeport Indonesia Company ("PT-FI"), an operating subsidiary of FCX. He is Co-Chairman of the Board, Chief Executive Officer and a Director of McMoRan Oil & Gas Co. ("MOXY"). In addition, he is Chairman of the Board, Chief Executive Officer and a Director of FM Properties Inc. ("FMPO"). From 1992 to August 1995, Mr. Adkerson was Senior Vice President of FTX. Michael J. Arnold has served as Senior Vice President of the Company since November 1996. From May 1993 to November 1996, Mr. Arnold was Vice President and Controller-Operations of the Company and was a Vice President of the Company from October 1991 to May 1993. Mr. Arnold is a Senior Vice President of FCX. From July 1994 to November 1996, Mr. Arnold was Vice President and Controller- Operations of FCX. Thomas J. Egan has served as Senior Vice President of the Company since November 1993. From November 1987 to November 1993, Mr. Egan was Vice President of the Company. Mr. Egan is a Senior Vice President of FCX. W. Russell King has served as Senior Vice President of the Company since November 1993. From October 1984 to November 1993, Mr. King was Vice President of the Company. Mr. King is a Senior Vice President of FCX. Rene L. Latiolais has served as President and Chief Executive Officer of the Company since August 1995 and as a Director of the Company since August 1993. Mr. Latiolais was Chief Operating Officer of the Company until 1995 and Executive Vice President of the Company until 1993. Mr. Latiolais has served as President and Chief Executive Officer of FRP since June 1988. Mr. Latiolais is Vice Chairman of the Board and a Director of FCX. He is a Commissioner of PT-FI. James R. Moffett has served as Chairman of the Board of the Company since May 1992 and as a Director of the Company since April 1981. Mr. Moffett is Chairman of the Board, Chief Executive Officer and a Director of FCX. He is President Commissioner PT-FI. Mr. Moffett is Co-Chairman of the Board and a Director of MOXY. Robert M. Wohleber has served as Senior Vice President of the Company and FRP since November 1996. From June 1994 to November 1996, Mr. Wohleber was Vice President of the Company. He served as Vice President and Treasurer of the Company from May 1992 to June 1994 and served as Treasurer of the Company from May 1989 to May 1992. Mr. Wohleber has also been a Vice President of FCX since July 1994. He served as Vice President and Treasurer of FCX from July 1993 to June 1994. He served as Treasurer of FCX from August 1990 to June 1993. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. The information set forth under the captions "Common Shares" and "Common Share Dividends" on the inside back cover of FTX's Annual Report to Stockholders for the year ended December 31, 1996 is incorporated herein by reference. As of March 14, 1997, there were 8,476 record holders of FTX's common stock. Item 6. Selected Financial Data. The information set forth under the caption "Selected Financial and Operating Data" on page 12 of FTX's Annual Report to Stockholders for the year ended December 31, 1996 is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. The information set forth under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 13 through 19 of FTX's Annual Report to Stockholders for the year ended December 31, 1996 is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data. The financial statements of FTX and its consolidated subsidiaries, the notes thereto and the report thereon of Arthur Andersen LLP, appearing on pages 21 through 37, and the report of management on page 20 of FTX's Annual Report to Stockholders for the year ended December 31, 1996 are incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Not applicable. PART III Items 10. Directors and Executive Officers of the Registrant. The information set forth under the caption "Information About Nominees and Directors" of the Proxy Statement submitted to the stockholders of the registrant in connection with its 1997 Annual Meeting to be held on April 29, 1997 is incorporated herein by reference. Items 11. Executive Compensation. The information set forth under the captions "Director Compensation" and "Executive Officer Compensation" of the Proxy Statement submitted to the stockholders of the registrant in connection with its 1997 Annual Meeting to be held on April 29, 1997 is incorporated herein by reference. Items 12. Security Ownership of Certain Beneficial Owners and Management. The information set forth under the captions "Securities Ownership of Directors and Executive Officers" and "Common Stock Ownership of Certain Beneficial Owners" of the Proxy Statement submitted to the stockholders of the registrant in connection with its 1997 Annual Meeting to be held on April 29, 1997 is incorporated herein by reference. Items 13. Certain Relationships and Related Transactions. The information set forth under the caption "Certain Transactions" of the Proxy Statement submitted to the stockholders of the registrant in connection with its 1997 Annual Meeting to be held on April 29, 1997 is incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a)(1), (a)(2), and (d). Financial Statements. See Index to Financial Statements appearing on page F-1 hereof. (a)(3) and (c). Exhibits. See Exhibit Index beginning on page E-1 hereof. (b). Reports on Form 8-K. During the last quarter of the period covered by this report, FTX filed a report on Form 8-K dated December 20, 1996 reporting an event under item 5 thereof. No financial statements were filed. SIGNATURES Pursuant to the requirements of Section 13 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, on November 18, 1997. FREEPORT-McMoRan INC. By: /s/ Richard C. Adkerson Richard C. Adkerson Vice Chairman of the Board and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on November 18, 1997. Signature Title * President, Chief Executive Officer and Director Rene L. Latiolais (Principal Executive Officer) * Senior Vice President and Chief Financial Officer Robert M. Wohleber (Principal Financial Officer) /s/C. Donald Whitmire Jr. Controller-Financial Reporting C. Donald Whitmire Jr. (Principal Accounting Officer) /s/Richard C. Adkerson Vice Chairman of the Board and Director Richard C. Adkerson * Director Robert W. Bruce III * Director Robert A. Day * Director William B. Harrison, Jr. * Director Henry A. Kissinger * Director Bobby Lee Lackey * Director Gabrielle K. McDonald * Chairman of the Board and Director James R. Moffett * Director George Putnam * Director B.M. Rankin, Jr. * Director J. Taylor Wharton *By: /s/ Richard C. Adkerson Richard C. Adkerson Attorney-in-fact INDEX TO FINANCIAL STATEMENTS The financial statements of FTX and its consolidated subsidiaries, the notes thereto, and the report thereon of Arthur Andersen LLP, appearing on pages 21 through 37, inclusive, of FTX's 1996 Annual Report to stockholders are incorporated by reference. The financial statement schedules listed below should be read in conjunction with such financial statements contained in FTX's 1996 Annual Report to stockholders. Page Report of Independent Public Accountants F-1 III-Condensed Financial Information of Registrant F-2 VIII-Valuation and Qualifying Accounts F-5 Schedules other than those listed above have been omitted since they are either not required, not applicable or the required information is included in the financial statements or notes thereto. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS We have audited, in accordance with generally accepted auditing standards, the financial statements as of December 31, 1996 and 1995 and for each of the three years in the period ended December 31, 1996 included in Freeport-McMoRan Inc.'s annual report to stockholders incorporated by reference in this Form 10-K, and have issued our report thereon dated January 21, 1997. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed in the index above are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. Arthur Andersen LLP New Orleans, Louisiana, January 21, 1997 FREEPORT-McMoRan INC. AND CONSOLIDATED SUBSIDIARIES SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT BALANCE SHEETS December 31, ------------------------ 1996 1995 ---------- ---------- ASSETS (In Thousands) Current assets: Accounts receivable from FRP $ - $ 24,740 Accounts receivable -other 2,659 25,661 Prepaid expenses and other 220 807 ---------- ---------- Total current assets 2,879 51,208 Property, plant and equipment -net 41,899 48,139 Investment in FRP 189,218 211,016 Long-term receivables and other assets 5,113 18,968 ---------- ---------- Total assets $ 239,109 $ 329,331 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable and accrued liabilities $ 23,515 $ 58,528 Long-term debt 38,000 - Other liabilities and deferred credits 83,292 78,866 Stockholders' equity 94,302 191,937 ---------- ---------- Total liabilities and stockholders' equity $ 239,109 $ 329,331 ========== ========== The footnotes contained in FTX's 1996 Annual Report to stockholders are an integral part of these statements. FREEPORT-McMoRan INC. AND CONSOLIDATED SUBSIDIARIES SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF INCOME Years Ended December 31, ----------------------------------- 1996 1995 1994 ---------- ---------- ---------- (In Thousands) Revenues $ 422 $ 745 $ 749 ---------- ---------- ----------- Cost of sales 1,958 2,673 7,203 Exploration expenses - - 3,738 General and administrative expenses 4,972 9,816 12,664 ---------- ---------- ---------- Total costs and expenses 6,930 12,489 23,605 ---------- ---------- ---------- Operating loss (6,508) (11,744) (22,856) Interest expense, net (1,063) (19,908) (38,591) Equity in earnings of subsidiaries 77,579 60,378 10,881 Other income, net 2,246 12,692 2,173 ---------- ---------- ---------- Income (loss) before income taxes 72,254 41,418 (48,393) Income tax (provision) benefit (27,164) 50,982 13,261 ---------- ---------- ---------- Income (loss) from continuing operations 45,090 92,400 (35,132) Discontinued operations - 340,424 107,715 ---------- ---------- ---------- Income before extraordinary item 45,090 432,824 72,583 Extraordinary loss on early extinguishment of debt, net - - (9,108) ---------- ---------- ---------- Net income 45,090 432,824 63,475 Preferred dividends (4,382) (42,283) (22,032) ---------- ---------- ---------- Net income applicable to common stock $ 40,708 $ 390,541 $ 41,443 ========== ========== ========== The footnotes contained in FTX's 1996 Annual Report to stockholders are an integral part of these statements. FREEPORT-McMoRan INC. AND CONSOLIDATED SUBSIDIARIES SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF CASH FLOW Years Ended December 31, ------------------------------------- 1996 1995 1994 ---------- ---------- ---------- Cash flow from operating activities: (In Thousands) Net income $ 45,090 $ 432,824 $ 63,475 Adjustments to reconcile net income to net cash provided by operating activities: Extraordinary loss on early extinguishment of debt - - 9,108 Depreciation and amortization 1,942 3,767 9,073 Oil and gas exploration expenses - 16 5,231 Equity in (earnings) losses of subsidiaries (77,579) (115,071) (64,973) Cash distributions from subsidiaries 100,125 141,179 92,000 Gain on sale of FCX Class A shares - (435,060) - Loss on recapitalization of FTX securities - 44,371 - Gain on conversion/distribution of FCX securities - - (114,750) Deferred income taxes 22,004 17,886 18,558 (Increase) decrease in working capital, net of effect of acquisitions and dispositions: Accounts receivable 22,596 (1,782) (2,146) Prepaid expenses and other 587 5,276 4,694 Accounts payable and accrued liabilities (24,619) (30,936) 22,389 Other (7,540) 24,734 12,867 --------- ---------- --------- Net cash provided by operating activities 82,606 87,204 55,526 ------------ --------- --------- Cash flow from investing activities: Capital expenditures (1,380) (2,059) (32,958) Sale of assets - 25,000 65,596 -------- --------- --------- Net cash provided by (used in) investing activities (1,380) 22,941 32,638 --------- ------- ------- Cash flow from financing activities: Proceeds from sale of FCX Class A shares - 497,166 - Purchase of: FTX common shares (132,118) (44,752) (67,747) FCX Class A shares - (58,906) (47,596) FRP units (1,305) (2,253) - ABC debentures - (280,826) - 6.55% Senior notes - (14,955) - 10 7/8% Senior Debentures - - (142,919) Distribution of MOXY shares - - (35,441) Borrowings (repayments) of debt -net 38,000 (165,000) 155,000 (Increase) decrease in long-term note due from FCX - 800 11,470 (Increase) decrease in long-term note due from FRP 24,740 (24,740) 100,900 Cash dividends paid: Common stock (9,346) (5,168) (44,467) Preferred stock (4,382) (8,757) (22,110) Other 3,185 (2,754) 4,746 ------- ------- ------- Net cash used in financing activities (81,226) (110,145) (88,164) -------- --------- -------- Net decrease in cash and cash equivalents - - - Cash and cash equivalents at beginning of year - - - --------- ---------- -------- Cash and cash equivalents at end of year $ - $ - $ - ========= ======== =========== The footnotes contained in FTX's 1996 Annual Report to stockholders are an integral part of these statements. FREEPORT-McMoRan INC. AND CONSOLIDATED SUBSIDIARIES SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS for the years ended December 31, 1996, 1995 and 1994 Col. A Col. B Col. C Col. D Col. E - ---------- ---------- --------------------- ---------- ---------- Additions ----------------------- Balance at Charged to Charged to Balance at Beginning of Costs and Other Other-Add End Description Period Expenses Accounts (Deduct) of Period - ---------- ---------- ---------- ---------- --------- --------- (In Thousands) Reserves and allowances deducted from asset accounts: Reclamation and mine shutdown reserves: 1996: Sulphur $ 71,954 $ 3,920 $ - $ (28,217)a $47,657 Fertilizer 35,931 10,137 - (3,781) 42,287 Oil & Gas 21,096 1,288 - (5,954) 16,430 ---------- ---------- ---------- ---------- ---------- $ 128,981 $ 15,345 $ - $ (37,952)b $106,374 ========== ========== ========== ========== ========== 1995: Sulphur $ 55,105 $ 2,643 $ - $ 14,206c $ 71,954 Fertilizer 37,683 2,785 - (4,537) 35,931 Oil & Gas 19,989 1,666 - (559) 21,096 ---------- ---------- ---------- ---------- ---------- $ 112,777 $ 7,094 $ - $ 9,110b $ 128,981 ========== ========== ========== ========== ========== 1994: Sulphur $ 57,287 $ 1,041 $ - $ (3,223) $ 55,105 Fertilizer 38,437 2,310 - (3,064) 37,683 Oil & Gas 14,963 3,799 - 1,227 19,989 ---------- ---------- ---------- ---------- ---------- $ 110,687 $ 7,150 $ - $ (5,060)b $ 112,777 ========== ========== ========== ========== ========== a. Includes a reclassification to short-term payables of $17.1 million. b. Includes expenditures of $13.6 million in 1996, $11.1 million in 1995 and $9.7 million in 1994. c. Includes $15.2 million of liabilities assumed in connection with the acquisition of the sulphur assets of Pennzoil Co. (See Note 9 to the Financial Statements). Freeport-McMoRan Inc. Exhibit Index Exhibit Number 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. 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. 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. 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 Contribution Agreement dated as of April 5, 1993 between FRP and IMC (the "FRP-IMC Contribution Agreement"). Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of FRP dated July 15, 1993 (the "FRP July 15, 1993 Form 8-K"). 10.2 First Amendment dated as of July 1, 1993 to the FRP-IMC Contribution Agreement. Incorporated by reference to Exhibit 2.2 to the FRP July 15, 1993 Form 8-K. 10.3 Amended and Restated Partnership Agreement dated as of May 26, 1995 among IMC-Agrico GP Company, Agrico, Limited Partnership and IMC-Agrico MP Inc. Incorporated by reference to Exhibit 10.3 to the Annual Report on Form 10-K of FRP for the fiscal year ended December 31, 1995 (the "FRP 1995 Form 10-K"). 10.4 Amendment and Agreement dated as of January 23, 1996 to the Amended and Restated Partnership Agreement dated May 26, 1995 by and among IMC-Agrico MP, Inc., IMC Global Operations, Inc. and IMC-Agrico Company. Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K dated February 13, 1996 of FRP. 10.5 Amended and Restated Parent Agreement dated as of May 26, 1995 among IMC Global Operations, Inc., FRP, FTX and IMC-Agrico. Incorporated by reference to the FRP 1995 Form 10-K. 10.6 Asset Purchase Agreement dated as of October 22, 1994 between FRP and Pennzoil Company (the "Asset Purchase Agreement"). Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of FRP dated January 18, 1995 (the "FRP January 18, 1995 8-K"). 10.7 Amendment No. 1 dated as of January 3, 1995 to the Asset Purchase Agreement. Incorporated by reference to Exhibit 2.2 to the FRP January 18, 1995 8-K. Executive Compensation Plans and Arrangements (Exhibits 10.8 through 10.27) 10.8 Annual Incentive Plan of FTX, as amended. 10.9 1992 Long-Term Performance Incentive Plan of FTX, as amended. 10.10 1987 Long-Term Performance Incentive Plan of FTX, as amended. 10.11 FTX Variable Compensation Incentive Program, as amended. Incorporated by reference to Exhibit 19.4 to the FTX 1991 Third Quarter Form 10-Q. 10.12 FTX Performance Incentive Awards Program, as amended. Incorporated by reference to Exhibit 10.12 to the Annual Report on Form 10-K of FTX for the fiscal year ended December 31, 1995 (the "FTX 1995 Form 10-K"). 10.13 FTX President's Award Program, as amended. Incorporated by reference to Exhibit 10.13 to the FTX 1995 Form 10-K. 10.14 FTX 1992 Stock Option Plan, as amended. 10.15 1982 Stock Option Plan of FTX, as amended. 10.16 FTX 1992 Stock Incentive Unit Plan, as amended. 10.17 1988 Stock Option Plan for Non-Employee Directors of FTX, as amended. 10.18 FTX 1991 Plan for Deferral of Directors' Fees, as amended. 10.19 FTX 1996 Stock Option Plan, as amended. 10.20 Financial Counseling and Tax Return Preparation and Certification Program of FTX, as amended. Incorporated by reference to Exhibit 10.21 to the FTX 1995 Form 10-K. 10.21 FTX Executive Universal Life Insurance Plan. Incorporated by reference to Exhibit 10.32 to the FTX 1992 Form 10-K. 10.22 FM Services Company Performance Incentive Awards Program. Incorporated by reference to Exhibit 10.14 to the Annual Report on Form 10-K of FCX for the fiscal year ended December 31, 1995 (the "FCX 1995 Form 10-K"). 10.23 Financial Counseling and Tax Return Preparation and Certification Program of FM Services Company. Incorporated by reference to Exhibit 10.15 to the FCX 1995 Form 10-K. 10.24 Agreement for Consulting Services between FTX and B. M. Rankin, Jr., effective as of January 1, 1990. Incorporated by reference to Exhibit 19.2 to the Quarterly Report on Form 10-Q of FTX for the quarter ended March 31, 1990. 10.25 Consulting Agreement dated as of December 22, 1988, between FTX and Kissinger Associates, Inc. ("Kissinger Associates"). Incorporated by reference to Exhibit 10.35 to the FTX 1992 Form 10-K. 10.26 Letter Agreement dated May 1, 1989, between FTX and Kent Associates, Inc. (predecessor in interest to Kissinger Associates). Incorporated by reference to Exhibit 10.36 to the FTX 1992 Form 10-K. 10.27 Letter Agreement dated January 27, 1997 among Kissinger Associates, Kent Associates, Inc., FTX, FCX and FM Services Company ("FMS"). Incorporated by reference to Exhibit 10.20 to the Annual Report on Form 10-K of FCX for the fiscal year ended December 31, 1996 (the "FCX 1996 Form 10-K"). 10.28 Letter Agreement dated December 18, 1996 among Charles W. Goodyear, IV, FCX, FTX, FMS and certain other entities. Incorporated by reference to Exhibit 10.23 to the FCX 1996 Form 10-K. 10.29 Letter Agreement dated December 18, 1996 between Charles W. Goodyear, IV and FMS. Incorporated by reference to Exhibit 10.24 to the FCX 1996 Form 10-K. 11.1 FTX and Consolidated Subsidiaries Computation of Net Income Per Common and Common Equivalent Share. 13.1 Those portions of the 1996 Annual Report to stockholders of FTX that are incorporated herein by reference. 21.1 Subsidiaries of FTX. 23.1 Consent of Arthur Andersen LLP dated March 28, 1997. 23.2 Consent of Ernst & Young LLP dated March 28, 1997. 24.1 Certified resolution of the Board of Directors of FTX authorizing this report to be signed on behalf of any officer or director pursuant to a Power of Attorney. 24.2 Powers of Attorney pursuant to which this report has been signed on behalf of certain officers and directors of FTX. 27.1 FTX Financial Data Schedule. 99.1 Report of Ernst & Young LLP. EX-3 2 EXHIBIT 3.2 As Amended through April 30, 1996 Freeport-McMoRan Inc. By-Laws ARTICLE I Name The name of the corporation is Freeport-McMoRan Inc. ARTICLE II Offices 1. The location of the registered office of the corporation in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle, and the name of its registered agent at such address is The Corporation Trust Company. 2. The corporation shall in addition to its registered office in the State of Delaware establish and maintain an office or offices at such place or places as the Board of Directors may from time to time find necessary or desirable. ARTICLE III Corporate Seal The corporate seal of the corporation shall have inscribed thereon the name of the corporation and the year of its creation (1980) and the words "Incorporated Delaware". Such seal may be used by causing it or a facsimile thereof to be impressed, affixed, printed or otherwise reproduced. ARTICLE IV Meeting of Stockholders 1. All meetings of the stockholders shall be held at the registered office of the corporation in the State of Delaware, or in such other place as shall be determined, from time to time, by the Board of Directors. 2. The first annual meeting of the stockholders shall be held on Monday, April 19, 1982, at eleven o'clock in the forenoon, or on such other date in that year or at such other time as may be determined by resolution of the Board of Directors. In subsequent years the annual meeting of the stockholders shall be held on the Monday immediately preceding the third Tuesday of April at eleven o'clock in the forenoon, or on such other day or at such other time as may be determined from time to time by resolution of the Board of Directors. At each annual meeting of the stockholders they shall elect by plurality vote, by written ballot, a Board of Directors to hold office until the annual meeting of the stockholders held next after their election and their successors are respectively elected and qualified or until their earlier resignation or removal. Any other proper business may be transacted at the annual meeting. 3. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business, except as otherwise expressly provided by statute, by the Certificate of Incorporation or by these By-Laws. If, however, such majority shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting (except as otherwise provided by statute), until the requisite amount of voting stock shall be present. At such adjourned meeting at which the requisite amount of voting stock shall be represented any business may be transacted which might have been transacted at the meeting as originally notified. 4. At all meetings of the stockholders each stockholder having the right to vote shall be entitled to vote in person, or by proxy appointed by an instrument in writing subscribed by such stockholder and bearing a date not more than three years prior to said meeting, unless such instrument provides for a longer period. All proxies shall be filed with the secretary of the meeting before being voted. 5. At each meeting of the stockholders each stockholder shall have one vote for each share of stock having voting power, registered in his name on the books of the corporation at the record date fixed in accordance with these By-Laws, or otherwise determined, with respect to such meeting. Except as otherwise expressly provided by statute, by the Certificate of Incorporation or by these By-Laws, all matters coming before any meeting of the stockholders shall be decided by the vote of a majority of the number of shares of stock present in person or represented by proxy at such meeting and entitled to vote thereat, a quorum being present. 6. Notice of each meeting of the stockholders shall be mailed to each stockholder entitled to vote thereat not less than 10 nor more than 60 days before the date of the meeting. Such notice shall state the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. 7. Subject to such rights to call special meetings of stockholders under specified circumstances as may be granted to holders of any shares of the Preferred Stock pursuant to the provisions of Article Fourth of the Certificate of Incorporation, special meetings of the stockholders may be called only by the Chairman of the Board or the President of the corporation, or at the request in writing or by vote of a majority of the Board of Directors, and not by any other persons. Any request for a special meeting made by the Board of Directors shall state the purpose or purposes of the proposed meeting. 8. Business transacted at each special meeting shall be confined to the purpose or purposes stated in the notice of such meeting. 9. The order of business at each meeting of the stockholders shall be determined by the chairman at such meeting. 10. At an annual meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting (a) by or at the direction of the Board of Directors or (b) by any stockholder of the corporation who complies with the notice procedures set forth in this Section 10. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the corporation not less than 60 days nor more than 90 days prior to the meeting; provided, however, that in the event that less than 70 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be received not later than the close of business on the 10th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and address, as they appear on the corporation's books, of the stockholder proposing such business, (c) the class and number of shares of the corporation which are beneficially owned by the stockholder and (d) any material interest of the stockholder in such business. Notwithstanding anything in the By- Laws to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this Section 10. The chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting and in accordance with the provisions of the By-Laws, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Notwithstanding the foregoing provisions of this Section 10, a stockholder seeking to have a proposal included in the corporation's proxy statement shall comply with the requirements of Regulation 14A under the Security Exchange Act of 1934, as amended (including, but not limited to, Rule 14a-8 or its successor provision). 11. Only persons who are nominated in accordance with the procedures set forth in the By-Laws shall be eligible for election as directors. Nominations of persons for election to the Board of Directors of the corporation may be made at a meeting of stockholders (a) by or at the direction of the Board of Directors or (b) by any stockholder of the corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 11. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the corporation not less than 60 days nor more than 90 days prior to the meeting; provided, however, that in the event that less than 70 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting or such public disclosure was made. Such stockholder's notice shall set forth (a) as to each person whom the stockholder proposed to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (b) as to the stockholder giving the notice (i) the name and address, as they appear on the corporation's books, of such stockholder and (ii) the class and number of shares of the corporation which are beneficially owned by such stockholder. At the request of the Board of directors any person nominated by the Board of Directors for election as a director shall furnish to the Secretary of the corporation that information required to be set forth in a stockholder's notice of nomination which pertains to the nominee. No person shall be eligible for election as a director of the corporation unless nominated in accordance with the procedures set forth in the By-Laws. The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by the By-Laws, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. 12. Any action required or permitted to be taken by the stockholders of the corporation must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by such holders. ARTICLE V Directors 1. The business and affairs of the corporation shall be managed under the direction of a Board of Directors which may exercise all such powers and authority for and on behalf of the corporation as shall be permitted by law, the Certificate of Incorporation or these By- Laws. 2. The directors may hold their meetings and have one or more offices, and, subject to the laws of the State of Delaware, keep the stock ledger and other books and records of the corporation, outside said State, at such place or places as they may from time to time determine. 3. Subject to such rights to elect additional directors under specified circumstances as may be granted to holders of any shares of the Preferred Stock pursuant to the provisions of Article Fourth of the Certificate of Incorporation, the number of directors of the corporation shall be fixed from time to time by the Board of Directors but shall not be less than three. The directors, other those who may be elected by the holders of any class or series of Preferred Stock, shall be classified, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as possible, as determined by the Board of Directors, one class to hold office initially for a term expiring at the annual meeting of stockholders to be held in 1987, another class to hold office initially for a term expiring at the annual meeting of stockholders to be held in 1988, and another class to hold office initially for a term expiring at the annual meeting of stockholders to be held in 1989, with the members of each class to hold office until their successors are elected and qualified. At each annual meeting of stockholders, the successors of the class of directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election. 4. Subject to such rights to elect directors under specified circumstances as may be granted to holders of any shares of the Preferred Stock pursuant to the provisions of Article Fourth of the Certificate of Incorporation, newly created directorships resulting from any increase in the number of directors and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other reason shall be filled solely by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such director's successor shall have been elected and qualified. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. 5. Any director may resign at any time by giving written notice of his resignation to the Board of Directors, the Chairman of the Board or the President. Any such resignation shall take effect upon receipt thereof by the Board, the Chairman of the Board or the President, as the case may be, or at such later date as may be specified therein. Any such notice to the Board shall be addressed to it in care of the Secretary. ARTICLE VI Committees of Directors By resolutions adopted by a majority of the whole Board of Directors, the Board may designate an Executive Committee, an Audit Committee, a Corporate Personnel Committee, a Nominating Committee and a Public Policy Committee, and may designate one or more other committees, each such committee to consist of one or more directors of the corporation. The Executive Committee shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the corporation (except as otherwise expressly limited by statute) and may authorize the seal of the corporation to be affixed to all papers which may require it. The Audit Committee, the Corporate Personnel Committee, the Nominating Committee, the Public Policy Committee and each such other committee shall have such of the powers and authority of the Board as may be provided from time to time in resolutions adopted by a majority of the whole Board. Each committee shall report its proceedings to the Board when required. ARTICLE VII Compensation of Directors The directors shall receive such compensation for their services as may be authorized by resolution of the Board of Directors, which compensation may include an annual fee and a fixed sum and expenses for attendance at regular or special meetings of the Board or any committee thereof. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefor. ARTICLE VIII Meetings of Directors; Action Without a Meeting 1. Regular meetings of the Board of Directors may be held without notice at such time and place, either within or without the State of Delaware, as may be determined from time to time by resolution of the Board. 2. Special meetings of the Board of Directors may be called by the Chairman of the Board or by the President on at least 24 hours' notice to each director, and shall be called by the President or by Secretary on like notice on the request in writing of any director. Except as may be otherwise specifically provided by statute, by the Certificate of Incorporation or by these By-Laws, the purpose or purposes of any such special meeting need not be stated in such notice. 3. At all meetings of the Board of Directors the presence of a majority of the total number of directors shall be necessary and sufficient to constitute a quorum for the transaction of business, and, except as otherwise provided by statute, by the Certificate of Incorporation or by these By-Laws, if a quorum shall be present the act of a majority of the directors present shall be the act of the Board. 4. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all the members of the Board or such committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the Board or committee. Any director may participate in a meeting of the Board, or of any committee designated by the Board, by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this sentence shall constitute presence in person at such meeting. ARTICLE IX Officers 1. The officers of the corporation shall be chosen by the Board of Directors and shall be a Chairman of the Board, a President, one or more Vice Presidents, a Secretary, and a Treasurer. The Board of Directors may also choose a Vice Chairman of the Board, one or more Executive Vice Presidents, one or more Senior Vice Presidents, a General Counsel, one or more Assistant Vice Presidents, a Controller and one or more Assistant Secretaries, Assistant Treasurers or Assistant Controllers, and such other officers as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be prescribed from time to time by the Board or by the Chairman of the Board. Any number of offices may be held by the same person. 2. Annually, the Board of Directors shall choose a Chairman of the Board from among the directors, and shall choose the remaining officers who need not be members of the Board except in the event they choose a Vice Chairman of the Board. 3. The salaries of all officers of the corporation shall be fixed by the Board of Directors, or in such manner as the Board may prescribe. 4. The officers of the corporation shall hold office until their successors are respectively chosen and qualified, except that any officer may at any time resign or be removed by the Board of Directors. If the office of any officer becomes vacant for any reason, the vacancy may be filled by the Board. 5. Any officer may resign at any time by giving written notice of his resignation to the Board of Directors, the Chairman of the Board, the Vice Chairman of the Board or the President. Any such resignation shall take effect upon receipt thereof by the Board, the Chairman of the Board, the Vice Chairman of the Board or the President, as the case may be, or at such later date as may be specified therein. Any such notice to the Board shall be addressed to it in care of the Secretary. ARTICLE X Chairman of the Board The Chairman of the Board shall preside at meetings of the stockholders and at meetings of the Board of Directors. He shall have the powers and duties usually and customarily associated with the office of Chairman of the Board and shall have such other powers and duties as may be delegated to him by the Board of Directors. ARTICLE XI President The President shall be the Chief Executive Officer of the corporation. Subject to the supervision and direction of the Board of Directors, he shall be responsible for managing the affairs of the corporation. He shall have supervision and direction of all the other officers of the corporation and shall have the powers and duties usually and customarily associated with the Office of the President and the position of the Chief Executive Officer. He shall have such other powers and duties as may be delegated to him by the Chairman of the Board. ARTICLE XII Vice Chairman of the Board, Executive Vice Presidents, Senior Vice Presidents, Vice Presidents and Assistant Vice Presidents The Vice Chairman of the Board, Executive Vice Presidents, Senior Vice Presidents, Vice Presidents and Assistant Vice Presidents shall have such powers and duties as may be delegated to them by the Board of Directors or the Chairman of the Board. ARTICLE XIII General Counsel, Secretary and Assistant Secretaries 1. The General Counsel shall have the powers and duties usually and customarily associated with the position of General Counsel. He shall have such other powers and duties as may be delegated to him by the Chairman of the Board. 2. The Secretary shall attend all meetings of the Board of Directors and of the stockholders, and shall record the minutes of all proceedings in a book to be kept for that purpose. He shall perform like duties for the committees of the Board when required. 3. The Secretary shall give, or cause to be given, notice of meetings of the stockholders, of the Board of Directors and of the committees of the Board. He shall keep in safe custody the seal of the corporation, and where authorized by the Chairman of the Board, the President, a Senior Vice President or a Vice President, shall affix the same to any instrument requiring it, and when so affixed it shall be attested by his signature or by the signature of an Assistant Secretary. He shall have such other powers and duties as may be delegated to him by the Chairman of the Board. 4. The Assistant Secretaries shall, in case of the absence of the Secretary, perform the duties and exercise the powers of the Secretary, and shall have such other powers and duties as may be delegated to them by the Chairman of the Board. ARTICLE XIV Treasurer and Assistant Treasurers 1. The Treasurer shall have the custody of the corporate funds and securities, and shall deposit or cause to be deposited under his direction all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors or pursuant to authority granted by it. He shall render to the President and the Board whenever they may require it an account of all his transactions as Treasurer and of the financial condition of the corporation. He shall have such other powers and duties as may be delegated to him by the Chairman of the Board. 2. The Assistant Treasurers shall, in case of the absence of the Treasurer, perform the duties and exercise the powers of the Treasurer, and shall have such other powers and duties as may be delegated to them by the Chairman of the Board. ARTICLE XV Controller The Controller shall maintain adequate records of all assets, liabilities and transactions of the corporation, and shall see that adequate audits thereof are currently and regularly made. He shall disburse the funds of the corporation in payment of just obligations of the corporation, or as may be ordered by the Board of Directors, taking proper vouchers for such disbursements. He shall have such other powers and duties as may be delegated to him by the Chairman of the Board. ARTICLE XVI Certificates of Stock The certificates for shares of stock of the corporation shall be numbered and shall be entered in the books of the corporation as they are issued. Such certificates shall exhibit the holder's name and number of shares and shall be signed by the Chairman of the Board, the President, an Executive Vice President, a Senior Vice President or a Vice President and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary. The signature of any such officers may be facsimile if such certificate is countersigned by a transfer agent other than the corporation or its employee or by a registrar other than the corporation or its employee. In case any officer who has signed or whose facsimile signature has been placed on any such certificate shall have ceased to be such officer before such certificate is issued, then, unless the Board of Directors shall otherwise determine and cause notification thereof to be given to such transfer agent and registrar, such certificate may be issued by the corporation (and by its transfer agent) and registered by its registrar with the same effect as if he were such officer at the date of issue. ARTICLE XVII Transfers of Stock 1. All transfers of shares of the stock of the corporation shall be made on the books of the corporation by the registered holders of such shares in person or by their attorneys lawfully constituted in writing, or by their legal representatives. 2. Certificates for shares of stock shall be surrendered and cancelled at the time of transfer. ARTICLE XVIII Fixing Record Date In order that the corporation may determine the stockholders entitled to notice of and to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent in writing to any corporate action without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for any other lawful purpose, the Board of Directors may fix in advance, a record date which shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action. Only stockholders of record on the date so fixed shall be entitled to such notice of, and to vote at, such meeting and any adjournment thereof, or entitled to express such consent, or entitled to receive payment of such dividend or other distribution or allotment of rights, or entitled to exercise such rights in respect of change, conversion or exchange, as the case may be, notwithstanding any transfer of stock on the books of the corporation after any such record date fixed as aforesaid. ARTICLE XIX Registered Stockholders The corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the laws of the State of Delaware. ARTICLE XX Checks All checks, drafts and other orders for the payment of money and all promissory notes and other evidences of indebtedness of the corporation shall be signed by such officer or officers or such other person or persons as may be designated by the Board of Directors or pursuant to authority granted by it. ARTICLE XXI Fiscal Year The fiscal year of the corporation shall end on December 31 of each year. ARTICLE XXII Notices and Waiver 1. Whenever by statute, or by the Certificate of Incorporation or by these By-Laws it is provided that notice shall be given to any director or stockholder, such provision shall not be construed to require personal notice, but such notice may be given in writing, by mail, by depositing the same in the United States mail, postage prepaid, directed to such stockholder or director at his address as it appears on the records of the corporation, or, in default of other address, to such director or stockholder at the General Post Office in the City of Wilmington, Delaware, and such notice shall be deemed to be given at the time when the same shall be thus deposited. Notice of special meetings of the Board of Directors may also be given to any director by telephone or by telex, telegraph or cable and the latter event the notice shall be deemed to be given at the time such notice, addressed to such director at the address hereinabove provided, shall be transmitted or delivered to and accepted by an authorized telegraph or cable office. 2. Whenever by statute, by the Certificate of Incorporation or by these By-Laws a notice is required to be given, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of any stockholder or director at any meeting thereof shall constitute a waiver of notice of such meeting by such stockholder or director, as the case may be, except as otherwise provided by statute. ARTICLE XXIII Alteration of By-Laws These By-Laws, including, but not limited to, Section 7 of Article IV and Sections 3 and 4 of Article V, may be altered, amended, changed or repealed at any meeting of Board of Directors present or as otherwise provided by statute, except that, in the case of any amendment, alteration, change or repeal of Section 7 of Article IV or Sections 3 or 4 of Article V by the stockholders, notwithstanding any other provision of these By-Laws, the Certification of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, the affirmative vote of the holders of 85% or more of the outstanding shares of capital stock of the corporation entitled to vote generally in the election of directors shall be required to amend, alter, change or repeal such Section 7 of Article IV or such Sections 3 or 4 of Article V. ARTICLE XXIV Indemnification of Corporate Personnel The corporation shall indemnify any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise as provided in the Certificate of Incorporation. Expenses incurred by such a director, officer, employee or agent in defending a civil or criminal action, suit or proceeding shall be paid by the corporation as provided in the Certificate of Incorporation. The corporation shall have power to purchase and maintain insurance on behalf of any such persons against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify him or her against such liability under the provisions of the Certificate of Incorporation. The indemnification provisions of this Article XXIV and the Certificate of Incorporation shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any applicable law, by-law, agreement, vote of stockholders or disinterested directors or otherwise. The provisions of this Article XXIV and Article ELEVENTH of the Certificate of Incorporation shall be deemed to be a contract between the corporation and each person who serves as such director, officer, employee or agent of the corporation in any such capacity at any time while this Article XXIV and Article ELEVENTH of the Certificate of Incorporation are in effect. No repeal or modification of the provisions of this Article XXIV and Article ELEVENTH of the Certificate of Incorporation nor, to the fullest extent permitted by law, any modification of law shall adversely affect any right or protection of a director, officer, employee or agent of the corporation then existing at the time of such repeal or modification. The provisions of this Article XXIV of the By-Laws of the corporation have been adopted by the stockholders of the corporation. EX-10 3 EXHIBIT 10.8 ANNUAL INCENTIVE PLAN OF FREEPORT-MCMORAN INC. ARTICLE I PURPOSE OF PLAN SECTION 1.1. The purpose of the Annual Incentive Plan of Freeport-McMoRan Inc. (the "Plan") is to provide incentives for senior executives whose performance in fulfilling the responsibilities of their positions can have a major impact on the profitability and future growth of Freeport-McMoRan Inc. (the "Company") and its Subsidiaries. ARTICLE II ADMINISTRATION OF THE PLAN SECTION 2.1. Subject to the authority and powers of the Board of Directors in relation to the Plan as hereinafter provided, the Plan shall be administered by a Committee designated by the Board of Directors consisting of two or more members of the Board each of whom is a "non- employee director" within the meaning of Rule 16b-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934. The Committee shall have full authority to interpret the Plan and from time to time to adopt such rules and regulations for carrying out the Plan as it may deem best; provided, however, that the Committee may not exercise any authority otherwise granted to it hereunder if such action would have the effect of increasing the amount of an Award to any Covered Employee. 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 the members shall be fully as effective as if it had been made by a majority vote at a meeting duly called and held. All decisions by the Committee pursuant to the provisions of the Plan and all orders or resolutions of the Board of Directors pursuant thereto shall be final, conclusive and binding on all persons, including the Participants, the Company and its Subsidiaries and their respective equity holders. ARTICLE III ELIGIBILITY FOR AND PAYMENT OF AWARDS SECTION 3.1. Subject to the provisions of the Plan, in each calendar year the Committee may select any of the following to receive Awards under the Plan with respect to such year and determine the amounts of such Awards: (a) any person providing services as an officer of the Company or a Subsidiary, whether or not employed by such entity, including any person who is also a director of the Company, (b) any salaried employee of the Company or a Subsidiary, including any director who is also an employee of the Company or a Subsidiary, (c) any officer or salaried 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 (d) any person who has agreed in writing to become a person described in clauses (a), (b) or (c) within not more than 30 days following the date of grant of such person's first Award under the Plan. SECTION 3.2. Subject to the provisions of the Plan, Awards with respect to any year shall be paid to each Participant at such time established by the Committee following the determination of the amounts of such Awards, which payment shall in no event be later than February 28 of the year following such Award Year. SECTION 3.3. Notwithstanding the provisions of Section 3.2, if, prior to the date established by the Committee for any Award Year, a Participant shall so elect, in accordance with procedures established by the Committee, all or any part of an Award to such Participant with respect to such Award Year shall be deferred and paid in one or more periodic installments, not in excess of ten, at such time or times before or after the date of such Participant's Termination of Employment, but not later than ten years after such date of Termination of Employment, as shall be specified in such election. If and only if any Award or portion thereof is so deferred for payment after December 31 of the year following such Award Year, such Award or portion thereof, as the case may be, shall, commencing with January 1 of the year following such Award Year, be increased at a rate equal to the prime commercial lending rate announced from time to time by The Chase Manhattan Bank, N.A. (compounded quarterly) or by another major national bank headquartered in New York, New York and designated by the Committee. If such Participant's Termination of Employment occurs 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 and if, on the date of such Termination of Employment, there remain unpaid any installments of Awards which have been deferred as provided in this Section 3.3, the Committee may, in its sole discretion, authorize payment to the Participant of the aggregate amount of such unpaid installments in a lump sum, notwithstanding such election. SECTION 3.4. (a) Notwithstanding the provisions of Sections 3.1, 3.2, 3.3, 4.2(a), and 4.2(b) hereof, any Award to any Covered Employee shall be granted in accordance with the provisions of this Section 3.4. (b) All Awards to Covered Employees under the Plan will be made and administered by two or more members of the Committee who are also "outside directors" within the meaning of Section 162(m). (c) The Committee shall assign Participant Shares of the Plan Funding Amount to those Covered Employees whom the Committee designates as Participants for that Award Year (which Participant Shares in the aggregate may not exceed 100% of the Plan Funding Amount). The maximum annual Award that may be made to any Covered Employee for an Award Year is 50% of the Plan Funding Amount. (d) If the Plan Funding Amount with respect to an Award Year is to be adjusted to exclude the effect of material changes in accounting policies or practices, material acquisitions or dispositions of property or other unusual items on the Plan Funding Amount, the Committee must so provide at the time that the Participant Shares of the Plan Funding Amount for that Award Year are assigned or within the first 90 days of the Award Year, if permitted under Section 162(m). (e) Any provision of the Plan to the contrary notwithstanding, no Covered Employee shall be entitled to any payment of an Award with respect to a calendar year unless the members of the Committee referred to in Section 3.4(b) hereof shall have certified the Participant Share for each Covered Employee, the Plan Funding Amount for such year and that the condition of Section 4.1 hereof has been met for such year. ARTICLE IV GENERAL PROVISIONS SECTION 4.1. Any provision of the Plan to the contrary notwithstanding, no Award shall be made pursuant to Section 3.1 or 3.4 with respect to any calendar year if the average of the Return on Investment for such calendar year and each of the four preceding calendar years, after giving effect to the aggregate amount (if any) that was awarded or credited with respect to such prior years and the aggregate amount that would otherwise have been so awarded or credited with respect to such calendar year, would be less than six percent. SECTION 4.2. (a) In determining the aggregate amount awarded to Participants under the Plan for any calendar year, the Committee shall consider as a guideline that the aggregate amount of all Awards granted with respect to any calendar year should not exceed two and one-half percent of Net Cash Provided by Operating Activities for such year. (b) If Managed Net Income or Total Investment of Capital for any year shall have been affected by special factors (including material changes in accounting policies or practices, material acquisitions or dispositions of property, or other unusual items) which in the Committee's judgment should or should not be taken into account, in whole or in part, in the equitable administration of the Plan, the Committee may, for any purpose of the Plan, adjust Managed Net Income or Total Investment of Capital and make payments and reductions accordingly under the Plan, provided that, except as provided in Section 3.4(d) hereof, the Committee shall not take any such adjustments into account in calculating Awards to Covered Employees if the effect of such adjustment would be to increase the Plan Funding Amount. (c) Notwithstanding the provisions of subparagraphs (a) and (b) above, the amount available for the grant of Awards under the Plan to Covered Employees with respect to a calendar year shall be equal to the Plan Funding Amount for such year and, except as specified in advance under Section 3.4(c), any adjustments made in accordance with or for the purposes of subparagraphs (a) or (b) shall be disregarded for purposes of calculating the Plan Funding Amount. The Committee may, in the exercise of its discretion, determine that the aggregate amount of all Awards granted to Covered Employees with respect to a calendar year shall be less than the Plan Funding Amount for such year, but the excess of such Plan Funding Amount over such aggregate amount covered by Awards granted to Covered Employees shall not be available for any Awards to Covered Employees with respect to future years. In addition, the Committee may, in the exercise of its discretion, reduce or eliminate the amount of an Award to a Covered Employee otherwise calculated in accordance with the provisions of Section 3.4 prior to payment thereof. Any reduction of an Award shall not accrue to the benefit of any other Covered Employee. SECTION 4.3. A Participant may designate in writing a beneficiary (including the trustee or trustees of a trust) who shall upon the death of such Participant be entitled to receive all amounts which would have been payable hereunder to such Participant. A Participant may rescind or change any such designation at any time. Except as provided in this Section 4.3, none of the amounts which may be payable under the Plan may be assigned or transferred otherwise than by will or by the laws of descent and distribution. SECTION 4.4. All payments made pursuant to the Plan shall be subject to withholding in respect of income and other taxes required by law to be withheld, in accordance with procedures to be established by the Committee. SECTION 4.5. The selection of an individual for participation in the Plan shall not give such Participant any right to be retained in the employ of the Company or any of its Subsidiaries, and the right of the Company and of any such Subsidiary to dismiss or discharge any such Participant or to terminate any arrangement pursuant to which any such Participant provides services to the Company or a Subsidiary, is specifically reserved. The benefits provided for Participants under the Plan shall be in addition to, and shall in no way preclude, other forms of compensation to or in respect of such Participants. SECTION 4.6. The Board of Directors and the Committee shall be entitled to rely on the advice of counsel and other experts, including the independent public accountants for the Company. No member of the Board of Directors or of the Committee or any officers of the Company or its Subsidiaries shall be liable for any act or failure to act under the Plan, except in circumstances involving bad faith on the part of such member or officer. SECTION 4.7. Nothing contained in the Plan shall prevent the Company or any Subsidiary or affiliate of the Company from adopting or continuing in effect other compensation arrangements, which arrangements may be either generally applicable or applicable only in specific cases. ARTICLE V AMENDMENT OR TERMINATION OF THE PLAN SECTION 5.1. The Board of Directors may at any time terminate, in whole or in part, or from time to time amend the Plan, provided that, except as otherwise provided in the Plan, no such amendment or termination shall adversely affect any Awards previously made to a Participant and deferred by such Participant pursuant to Section 3.3. In the event of such termination, in whole or in part, of the Plan, the Committee may in its sole discretion direct the payment to Participants of any Awards not theretofore paid out prior to the respective dates upon which payments would otherwise be made hereunder to such Participants, and in a lump sum or installments as the Committee shall prescribe with respect to each such Participant. The Board may at any time and from time to time delegate to the Committee any or all of its authority under this Section 5.1. ARTICLE VI DEFINITIONS SECTION 6.1. For the purposes of the Plan, the following terms shall have the meanings indicated: (a) Award: The grant of an award of cash by the Committee to a Participant pursuant to Section 3.1 or 3.4. (b) Award Year: Any calendar year with respect to which an Award may be granted. (c) Board of Directors: The Board of Directors of the Company. (d) Committee: The Committee designated pursuant to Section 2.1. Until otherwise determined by the Board of Directors, the Corporate Personnel Committee designated by such Board shall be the Committee under the Plan. (e) Covered Employee: At any date, (i) any individual who, with respect to the previous taxable year of the Company, was a "covered employee" of the Company within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended, and the rules promulgated thereunder by the Internal Revenue Service of the Department of the Treasury, provided, however, the term "Covered Employee" shall not include any such individual who is designated by the Committee, in its discretion, at the time of any grant as reasonably expected not to be such a "covered employee" with respect to the current taxable year of the Company and (ii) any individual who is designated by the Committee, in its discretion, at the time of any grant as reasonably expected to be such a "covered employee" with respect to the current taxable year of the Company. Notwithstanding the foregoing, at any date in fiscal year 1994, "Covered Employee" shall mean any individual designated by the Committee, in its discretion, at the time of any grant as reasonably expected to be a "covered employee" with respect to the Company's taxable year 1994. (f) Managed Net Income: With respect to any year, the sum of (i) the net income (or net loss) of the Company and its consolidated Subsidiaries for such year as shown in the Company's Annual Report to Stockholders for such year; plus (or minus) (ii) the minority interests' share in the net income (or net loss) of the Company's consolidated Subsidiaries for such year as shown in the Company's Annual Report to Stockholders for such year; plus (or minus) (iii) changes in accounting principles of the Company and its consolidated Subsidiaries for such year plus (or minus) the minority interests' share in such changes in accounting principles as shown in the Company's Annual Report to Stockholders for such year; plus (iv) the portion for such year of the deferred gain on the 1992 sale of newly issued Freeport-McMoRan Resource Partners, Limited Partnership depositary units as shown in the Company's Annual Report to Stockholders for such year. (g) Net Cash Provided by Operating Activities: With respect to any year, the net cash provided by operating activities of the Company and its consolidated Subsidiaries for such year as shown in the Company's Annual Report to Stockholders for such year. (h) Net Interest Expense: With respect to any year, the net interest expense of the Company and its consolidated Subsidiaries for such year as shown in the Company's Annual Report to Stockholders for such year. (i) Participant: An individual who has been selected by the Committee to receive an Award. (j) Participant Share: The percentage of the Plan Funding Amount assigned to a Covered Employee by the Committee. (k) Plan Funding Amount: With respect to any year, two and one-half percent of Net Cash Provided by Operating Activities for such year. (l) Return on Investment: With respect to any year, the result (expressed as a percentage) calculated according to the following formula: a + (b - c) ----------- d in which "a" equals Managed Net Income for such year, "b" equals Net Interest Expense for such year, "c" equals Tax on Net Interest Expense for such year, and "d" equals Total Investment of Capital for such year. (m) Section 162(m): Section 162(m) of the Internal Revenue Code of 1986, as amended, and rules promulgated by the Internal Revenue Service thereunder. (n) Subsidiary: (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. (o) Tax on Net Interest Expense: With respect to any year, the tax on the net interest expense of the Company and its consolidated Subsidiaries for such year calculated at the statutory federal income tax rate for such year as shown in the Company's Annual Report to Stockholders for such year. (p) Termination of Employment: Solely for purposes of Section 3.3 hereof, the cessation of the rendering of services, whether or not as an employee, to any and all of the following 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 entity with which the Company has contracted to receive executive or management services, any Subsidiary of McMoRan Oil & Gas Co., and 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. (q) Total Investment of Capital: With respect to any year, the sum of (i) the weighted average of the stockholders' equity in the Company and its consolidated Subsidiaries for such year, (ii) the weighted average of the minority interests in the consolidated Subsidiaries of the Company for such year, and (iii) the weighted average of the long-term debt of the Company and its consolidated Subsidiaries for such year, all as shown in the quarterly balance sheets of the Company and its consolidated Subsidiaries for such year. EX-10 4 EXHIBIT 10.9 1992 LONG-TERM PERFORMANCE INCENTIVE PLAN OF FREEPORT-McMoRan INC. ARTICLE I PURPOSE OF PLAN SECTION 1.1. The purpose of the 1992 Long-Term Performance Incentive Plan of Freeport-McMoRan Inc. (the "Plan") is to provide incentives for senior executives whose performance in fulfilling the responsibilities of their positions can have a major impact on the profitability and future growth of Freeport-McMoRan Inc. (the "Company") and its subsidiaries. ARTICLE II ADMINISTRATION OF THE PLAN SECTION 2.1. Subject to the authority and powers of the Board of Directors in relation to the Plan as hereinafter provided, the Plan shall be administered by a Committee designated by the Board of Directors consisting of two or more members of the Board each of whom is a "non- employee director" within the meaning of Rule 16b-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934. The Committee shall have full authority to interpret the Plan and from time to time to adopt such rules and regulations for carrying out the Plan as it may deem best; provided, however, that the Committee may not exercise any authority granted to it hereunder if such action would have the effect of increasing the amount of any credit to or payment from the Performance Award Account of any Covered Employee. 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 the members shall be fully as effective as if it had been made by a majority vote at a meeting duly called and held. All decisions by the Committee pursuant to the provisions of the Plan and all orders or resolutions of the Board of Directors pursuant thereto shall be final, conclusive and binding on all persons, including but not limited to the Participants, the Company and its Subsidiaries and their respective equity holders. ARTICLE III ELIGIBILITY FOR AND GRANT OF PERFORMANCE AWARDS SECTION 3.1. Subject to the provisions of the Plan, the Committee may from time to time select any of the following to be granted Performance Awards under the Plan, and determine the number of Performance Units covered by each such Performance Award: (a) any person providing services as an officer of the Company or a Subsidiary, whether or not employed by such entity, including any person who is also a director of the Company, (b) any salaried employee of the Company or a Subsidiary, including any director who is also an employee of the Company or a Subsidiary, (c) any officer or salaried 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 (d) any person who has agreed in writing to become a person described in clauses (a), (b) or (c) within not more than 30 days following the date of grant of such person's first Performance Award under the Plan. Performance Awards may be granted at different times to the same individual. The Plan shall expire on December 31, 1997 and no Performance Awards shall be granted hereunder after such date. SECTION 3.2. Upon the grant of a Performance Award to a Participant, the Company shall establish a Performance Award Account for such Participant and shall credit to such Performance Award Account the number of Performance Units covered by such Performance Award. SECTION 3.3. The number of Performance Units outstanding at any time shall not exceed 500,000. Performance Units that shall have been forfeited or with respect to which payment has been made pursuant to Section 4.2 or deferred pursuant to Section 4.4 shall not thereafter be deemed to be credited or outstanding for any purpose of the Plan and may again be the subject of Performance Awards. SECTION 3.4. (a) Notwithstanding the provisions of Section 3.1, 3.2 and 3.3, all Performance Awards granted to Covered Employees must be granted no later than 90 days following the beginning of the Plan Year. No Covered Employee may be granted more than 75,000 Performance Units in any calendar year. (b) All Performance Awards to Covered Employees under the Plan will be made and administered by two or more members of the Committee who are also "outside directors" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended, and rules promulgated by the Internal Revenue Service of the Department of the Treasury thereunder. ARTICLE IV CREDITS TO AND PAYMENTS FROM PARTICIPANTS' PERFORMANCE AWARD ACCOUNTS SECTION 4.1. Subject to the provisions of the Plan, the Performance Award Account or Accounts of each Participant at December 31 of any year shall be credited, as of such December 31, with an amount equal to the Annual Earnings Per Share (or Net Loss Per Share) for such year times the number of Performance Units then credited to each such Performance Award Account; provided that, if in any year there shall be any outstanding Net Loss Carryforward applicable to such Performance Award Account, such Net Loss Carryforward shall be applied to reduce any amount which would otherwise be credited to such Performance Award Account pursuant to this Section 4.1 in such year until such Net Loss Carryforward has been fully so applied. SECTION 4.2. (a) Subject to the provisions of the Plan, the balance credited to a Participant's Performance Award Account shall be paid to such Participant as soon as practicable on or after the Award Valuation Date with respect to such Performance Award. (b) Payments pursuant to Section 4.2(a) shall be in cash. (c) Notwithstanding any other provision of the Plan to the contrary, no Covered Employee shall be entitled to any payment with respect to a Performance Award unless the members of the Committee referred to in Section 3.4(b) hereof shall have certified the amount of the Annual Earnings Per Share (or Net Loss Per Share) for each year covered by such Performance Award. SECTION 4.3. In addition to any amounts payable pursuant to Section 4.2, the Committee may in its sole discretion determine that there shall be payable to a former Participant, other than a Participant who is at the time of any payment a Covered Employee, a supplemental amount not exceeding the excess, if any, of (i) the amount determined in accordance with Section 4.1 which would have been payable to such former Participant if the Award Valuation Date with respect to a Performance Award of such Participant had been December 31 of the first, second or third calendar year next following the year in which such Participant's Termination of Employment occurred (the selection of such first, second or third calendar year to be in the sole discretion of the Committee subject only to the last sentence of this Section 4.3) over (ii) the amount determined in accordance with said Section 4.1 as of December 31 of the calendar year in which such Termination of Employment actually occurred. Any such supplemental amount so payable shall be paid in a lump sum as promptly as practicable on or after December 31 of the calendar year so selected by the Committee or in one or more installments ending not later than five years after such December 31, as the Committee may in its discretion direct. In no event shall any payment under this Section 4.3 be made with respect to any calendar year after the year in which such former Participant reaches his normal retirement date under the Company's retirement plan. SECTION 4.4. (a) Prior to January 1 of any calendar year in which it is anticipated that an Award Valuation Date with respect to any Performance Award may occur, a Participant may elect, in accordance with procedures established by the Committee, to defer, as and to the extent hereinafter provided, the payment of the amount, if any, which shall be paid pursuant to Section 4.2. (b) All payments deferred pursuant to Section 4.4(a) shall be paid in one or more periodic installments, not in excess of ten, at such time or times after the applicable Award Valuation Date, but not later than ten years after such Award Valuation Date, as shall be specified in such Participant's election pursuant to Section 4.4(a). (c) In the case of payments deferred as provided in Section 4.4(a), the unpaid amounts shall, commencing with the applicable Award Valuation Date, be increased at a rate equal to the prime commercial lending rate announced from time to time by The Chase Manhattan Bank, N.A. (compounded quarterly) or by another major national bank headquartered in New York, New York and designated by the Committee. If subsequent to such Participant's election pursuant to Section 4.4(a) such Participant's Termination of Employment occurs for any reason other than death, Disability, retirement under the Company's retirement plan, or retirement with the consent of the Company outside the Company's retirement plan, the Committee may, in its sole discretion, pay to such Participant in a lump sum the aggregate amount of any payments so deferred, notwithstanding such election. SECTION 4.5. Anything contained in the Plan to the contrary notwithstanding: (a) The Committee may, in its sole discretion, suspend, permanently or for a specified period of time or until further determination by the Committee, the making of any part or all of the credits which would otherwise have been made to the Performance Award Accounts of all the Participants or to such Accounts of one or more Participants as shall be designated by the Committee. (b) All Performance Units and other amounts credited to a Participant's Performance Award Account with respect to or arising from any Performance Award shall be forfeited in the event of the Discharge for Cause of such Participant prior to December 31 of the third year following the year of grant of such Performance Award. (c) All Performance Units and other amounts credited to a Participant's Performance Award Account with respect to or arising from a Performance Award shall, unless and to the extent that the Committee shall in its absolute discretion otherwise determine by reason of special mitigating circumstances, be forfeited in the event that such Participant's Termination of Employment shall occur for any reason other than death, Disability, retirement under the Company's retirement plan, or retirement with the consent of the Company outside the Company's retirement plan, at any time (except within two years after the date on which a Change in Control shall have occurred) prior to December 31 of the third year following the year of grant of such Performance Award. (d) If any suspension is in effect pursuant to Section 4.5(a) on a date when a credit would otherwise have been made pursuant to Section 4.1, the amounts which would have been credited but for such suspension shall be forfeited and no credits shall thereafter be made in lieu thereof. If the Committee shall so determine in its sole discretion, the amounts theretofore credited to any Performance Award Account or Accounts, other than any Performance Award Account of a Covered Employee, shall be increased, during the suspension period, at a rate equal to the prime commercial lending rate announced from time to time by The Chase Manhattan Bank, N.A. (compounded quarterly) or at such other rate and in such manner as shall be determined from time to time by the Committee. ARTICLE V GENERAL INFORMATION SECTION 5.1. If Net Income, Annual Earnings Per Share or Net Loss Per Share for any year shall have been affected by special factors (including material changes in accounting policies or practices, material acquisitions or dispositions of property, or other unusual items) which in the Committee's judgment should or should not be taken into account, in whole or in part, in the equitable administration of the Plan, the Committee may, for any purpose of the Plan, adjust Net Income, Annual Earnings Per Share or Net Loss Per Share, as the case may be, for such year (and subsequent years as appropriate), or any combination of them, and make credits, payments and reductions accordingly under the Plan; provided, however, the Committee shall not have the authority to make any such adjustments to payments with respect to the Performance Awards of, or credits to the Performance Award Accounts of, any Participant who is at such time a Covered Employee. Notwithstanding the foregoing, the Committee may, in the exercise of its discretion prior to the making of credits to the Performance Award Accounts of Participants with respect to a particular year, reduce or eliminate the amount of the Annual Earnings Per Share that would otherwise be credited to any Performance Award Account of any Participant, including but not limited to any Covered Employee, for such year in accordance with the terms of the Plan. SECTION 5.2. The Committee shall for purposes of Articles III and IV make appropriate adjustments in the number of Performance Units which shall remain subject to Performance Awards and in the number of Performance Units which shall have been credited to Participants' accounts, in order to reflect any merger or consolidation to which the Company is a party or any stock dividend, split-up, combination or reclassification of the outstanding shares of Company Common Stock or any other relevant change in the capitalization of the Company. SECTION 5.3. A Participant may designate in writing a beneficiary (including the trustee or trustees of a trust) who shall upon the death of such Participant be entitled to receive all amounts which would have been payable hereunder to such Participant. A Participant may rescind or change any such designation at any time. Except as provided in this Section 5.3, none of the amounts which may be payable under the Plan may be assigned or transferred otherwise than by will or by the laws of descent and distribution. SECTION 5.4. All payments made pursuant to the Plan shall be subject to withholding in respect of income and other taxes required by law to be withheld, in accordance with procedures to be established by the Committee. SECTION 5.5. The selection of an individual for participation in the Plan shall not give such Participant any right to be retained in the employ of the Company or any of its Subsidiaries, and the right of the Company and of such Subsidiary to dismiss or discharge any such Participant or to terminate any arrangement pursuant to which any such Participant provides services to the Company is specifically reserved. The benefits provided for Participants under the Plan shall be in addition to, and shall in no way preclude, other forms of compensation to or in respect of such Participants. SECTION 5.6. The Board of Directors and the Committee shall be entitled to rely on the advice of counsel and other experts, including the independent public accountants for the Company. No member of the Board of Directors or of the Committee or any officers of the Company or its Subsidiaries shall be liable for any act or failure to act under the Plan, except in circumstances involving bad faith on the part of such member or officer. SECTION 5.7. Nothing contained in the Plan shall prevent the Company or any Subsidiary or affiliate of the Company from adopting or continuing in effect other compensation arrangements, which arrangements may be either generally applicable or applicable only in specific cases. ARTICLE VI AMENDMENT OR TERMINATION OF THE PLAN SECTION 6.1. The Board of Directors may at any time terminate, in whole or in part, or from time to time amend the Plan, provided that, except as otherwise provided in the Plan, no such amendment or termination shall adversely affect the amounts credited to the Performance Award Account of a Participant with respect to Performance Awards previously made to such Participant. In the event of such termination, in whole or in part, of the Plan, the Committee may in its sole discretion direct the payment to Participants of any amounts specified in Article IV and not theretofore paid out, prior to the respective dates upon which payments would otherwise be made hereunder to such Participants, and in a lump sum or installments as the Committee shall prescribe with respect to each such Participant. Notwithstanding the foregoing, any such payment to a Covered Employee must be discounted to reflect the present value of such payment using the rate specified in Section 4.4(c). The Board may at any time and from time to time delegate to the Committee any or all of its authority under this Article VI. ARTICLE VII DEFINITIONS SECTION 7.1. For the purposes of the Plan, the following terms shall have the meanings indicated: (a) Annual Earnings Per Share: With respect to any year, the result obtained by dividing (i) Net Income for such year by (ii) the average number of issued and outstanding shares (excluding treasury shares and shares held by any Subsidiaries) of Company Common Stock during such year as shown in the Company's Annual Report to Stockholders for such year. (b) Award Valuation Date: With respect to any Performance Award, (i) December 31 of the year in which the third anniversary of the grant of such Performance Award to a Participant shall occur or, (ii) if earlier, December 31 of the year in which such Participant's Termination of Employment shall occur, if such Termination of Employment occurs (x) within two years after a Change in Control or (y) as a result of death, Disability, retirement under the Company's retirement plan or retirement with the consent of the Company outside the Company's retirement plan. (c) Board of Directors: The Board of Directors of the Company. (d) Change in Control: A Change in Control shall be deemed to have occurred if either (i) 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 Company 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 (ii) there shall be a change in the composition of the Board of Directors of the Company 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 (A) 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 first Transaction, or (B) 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 (i) and (ii). (e) Committee: The Committee designated pursuant to Section 2.1. Until otherwise determined by the Board of Directors, the Corporate Personnel Committee designated by such Board shall be the Committee under the Plan. (f) Company Common Stock: Common Stock, par value $0.01, of the Company. (g) Covered Employee: At any date, (i) any individual who, with respect to the previous taxable year of the Company, was a "covered employee" of the Company within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended, and the rules promulgated thereunder by the Internal Revenue Service of the Department of the Treasury, provided, however, the term "Covered Employee" shall not include any such individual who is designated by the Committee, in its discretion, at the time of any grant or at any subsequent time as reasonably expected not to be such a "covered employee" with respect to the current taxable year of the Company and (ii) any individual who is designated by the Committee, in its discretion, at the time of any grant or at any subsequent time as reasonably expected to be such a "covered employee" with respect to the current taxable year of the Company. Notwithstanding the foregoing, at any date in fiscal year 1994, "Covered Employee" shall mean any individual designated by the Committee, in its discretion, as reasonably expected to be a "covered employee" with respect to the Company's taxable year 1994. (h) Disability: In the case of any Participant, disability which after the expiration of more than 26 weeks after its commencement is determined to be total and permanent by a physician selected by the Company and acceptable to such Participant or his legal representatives. (i) Discharge for Cause: Involuntary Termination of Employment as a result of dishonesty or similar serious misconduct directly related to the performance of duties for any and all of the Related Entities. (j) Net Income: With respect to any year, the sum of (i) the net income (or net loss) of the Company and its consolidated subsidiaries for such year as shown in the Company's Annual Report to Stockholders for such year; plus (or minus) (ii) the minority interests' share in the net income (or net loss) of the Company's consolidated subsidiaries for such year as shown in the Company's Annual Report to Stockholders for such year; plus (or minus) (iii) changes in accounting principles of the Company and its consolidated subsidiaries for such year plus (or minus) the minority interests' share in such changes in accounting principles as shown in the Company's Annual Report to Stockholders for such year; plus (iv) the portion for such year of the deferred gain on the 1992 sale of newly issued Freeport-McMoRan Resource Partners, Limited Partnership depositary units as shown in the Company's Annual Report to Stockholders for such year. (k) Net Loss Carryforward: With respect to any Performance Award Account, (i) an amount equal to the Net Loss Per Share for any year times the number of Performance Units then outstanding and credited to such Performance Award Account, reduced by (ii) any portion thereof which has been applied in any prior year as provided in Section 4.1. (l) Net Loss Per Share: The amount obtained when the calculation of Annual Earnings Per Share results in a number that is less than zero. (m) Participant: An individual who has been selected by the Committee to receive a Performance Award and in respect of whose Performance Award Account any amounts remain payable. (n) Performance Award: The grant of Performance Units by the Committee to a Participant pursuant to Section 3.1 or 3.4. (o) Performance Award Account: An account established for a Participant pursuant to Section 3.2. (p) Performance Unit: A unit covered by Performance Awards granted or subject to grant pursuant to Article III. (q) 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., and 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. (r) Subsidiary: (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. (s) Termination of Employment: The cessation of the rendering of services, whether or not as an employee, to any and all of the Related Entities. As amended effective December 10, 1996 EX-10 5 EXHIBIT 10.10 1987 LONG-TERM PERFORMANCE INCENTIVE PLAN OF FREEPORT-MCMORAN INC. ARTICLE I PURPOSE OF PLAN SECTION 1.1. The purpose of the 1987 Long-Term Performance Incentive Plan of Freeport-McMoRan Inc. (the "Plan") is to provide incentives for senior executives whose performance in fulfilling the responsibilities of their positions can have a major impact on the profitability and future growth of Freeport-McMoRan Inc. (the "Company") and its subsidiaries. ARTICLE II ADMINISTRATION OF THE PLAN SECTION 2.1. Subject to the authority and powers of the Board of Directors in relation to the Plan as hereinafter provided, the Plan shall be administered by a Committee designated by the Board of Directors 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). The Committee shall have full authority to interpret the Plan and from time to time to adopt such rules and regulations for carrying out the 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 the members shall be fully as effective as if it had been made by a majority vote at a meeting duly called and held. All decisions by the Committee pursuant to the provisions of the Plan and all orders or resolutions of the Board of Directors pursuant thereto shall be final, conclusive and binding on all persons, including but not limited to the Participants, the Company and its Subsidiaries and their respective equity holders. ARTICLE III ELIGIBILITY FOR AND GRANT OF PERFORMANCE AWARDS SECTION 3.1. Subject to the provisions of the Plan, the Committee may from time to time select salaried officers or employees (including officers or employees who are also directors) of the Company or of any of its Subsidiaries to be granted Performance Awards under the Plan, and determine the number of Performance Units covered by each such Performance Award. Performance Awards may be granted at different times to the same individual. The Plan shall expire on December 31, 1992 and no Performance Awards shall be granted hereunder after such date. SECTION 3.2. Upon the grant of a Performance Award to a Participant, the Company shall establish a Performance Award Account for such Participant and shall credit to such Performance Award Account the number of Performance Units covered by such Performance Award. SECTION 3.3. The number of Performance Units outstanding at any time shall not exceed 1,500,000. Performance Units that shall have been forfeited or with respect to which payment has been made pursuant to Section 4.2 or deferred pursuant to Section 4.4 shall not thereafter be deemed to be credited or outstanding for any purpose of the Plan and may again be the subject of Performance Awards. ARTICLE IV CREDITS TO AND PAYMENTS FROM PARTICIPANTS' PERFORMANCE AWARD ACCOUNTS SECTION 4.1. Subject to the provisions of Section 4.5, the Performance Award Account or Accounts of each Participant at December 31 of any year shall be credited, as of such December 31, with an amount equal to the Annual Earnings Per Share (or Net Loss Per Share) for such year times the number of Performance Units then credited to each such Performance Award Account; provided that, if in any year there shall be any outstanding Net Loss Carryforward applicable to such Performance Award Account, such Net Loss Carryforward shall be applied to reduce any amount which would otherwise be credited to such Performance Award Account pursuant to this Section 4.1 in such year until such Net Loss Carryforward has been fully so applied. SECTION 4.2. (a) Subject to Section 4.4, the balance credited to a Participant's Performance Award Account shall be paid to such Participant as soon as practicable on or after the Award Valuation Date with respect to such Performance Award. (b) Payments pursuant to Section 4.2(a) shall be in cash. SECTION 4.3. In addition to any amounts payable pursuant to Section 4.2, the Committee may in its sole discretion determine that there shall be payable to a former Participant a supplemental amount not exceeding the excess, if any, of (i) the amount determined in accordance with Section 4.1 which would have been payable to such former Participant if the Award Valuation Date with respect to a Performance Award of such Participant had been December 31 of the first, second or third calendar year next following the year in which such Participant's Termination of Employment occurred (the selection of such first, second or third calendar year to be in the sole discretion of the Committee subject only to the last sentence of this Section 4.3) over (ii) the amount determined in accordance with said Section 4.1 as of December 31 of the calendar year in which such Termination of Employment actually occurred. Any such supplemental amount so payable shall be paid in a lump sum as promptly as practicable on or after December 31 of the calendar year so selected by the Committee or in one or more installments ending not later than five years after such December 31, as the Committee may in its discretion direct. In no event shall any payment under this Section 4.3 be made with respect to any calendar year after the year in which such former Participant reaches his normal retirement date under the Company's retirement plan. SECTION 4.4. (a) Prior to January 1 of any calendar year in which it is anticipated that an Award Valuation Date with respect to any Performance Award may occur, a Participant may elect, in accordance with procedures established by the Committee, to defer, as and to the extent hereinafter provided, the payment of the amount, if any, which shall be paid pursuant to Section 4.2. (b) All payments deferred pursuant to Section 4.4(a) shall be paid in one or more periodic installments, not in excess of ten, at such time or times after the applicable Award Valuation Date, but not later than ten years after such Award Valuation Date, as shall be specified in such Participant's election pursuant to Section 4.4(a). (c) In the case of payments deferred as provided in Section 4.4(a), the unpaid amounts shall, commencing with the applicable Award Valuation Date, be increased at a rate equal to the prime commercial lending rate announced from time to time by The Chase Manhattan Bank, N.A. (compounded quarterly) or at such other rate and in such manner as shall be determined from time to time by the Committee. If subsequent to such Participant's election pursuant to Section 4.4(a) such Participant's Termination of Employment occurs for any reason other than death, Disability, retirement under the Company's retirement plan, or retirement with the consent of the Company outside the Company's retirement plan, the Committee may, in its sole discretion, pay to such Participant in a lump sum the aggregate amount of any payments so deferred, notwithstanding such election. SECTION 4.5. Anything contained in the Plan to the contrary notwithstanding: (a) The Committee may, in its sole discretion, suspend, permanently or for a specified period of time or until further determination by the Committee, the making of any part or all of the credits which would otherwise have been made to the Performance Award Accounts of all the Participants or to such Accounts of one or more Participants as shall be designated by the Committee. (b) All Performance Units and other amounts credited to a Participant's Performance Award Account with respect to or arising from any Performance Award shall be forfeited in the event of the Discharge for Cause of such Participant prior to December 31 of the third year following the year of grant of such Performance Award. (c) All Performance Units and other amounts credited to a Participant's Performance Award Account with respect to or arising from a Performance Award shall, unless and to the extent that the Committee shall in its absolute discretion otherwise determine by reason of special mitigating circumstances, be forfeited in the event that such Participant's Termination of Employment shall occur for any reason other than death, Disability, retirement under the Company's retirement plan, or retirement with the consent of the Company outside the Company's retirement plan, at any time (except within two years after the date on which a Change in Control shall have occurred) prior to December 31 of the third year following the year of grant of such Performance Award. (d) If any suspension is in effect pursuant to Section 4.5(a) on a date when a credit would otherwise have been made pursuant to Section 4.1, the amounts which would have been credited but for such suspension shall be forfeited and no credits shall thereafter be made in lieu thereof. If the Committee shall so determine in its sole discretion, the amounts theretofore credited to any Performance Award Account or Accounts shall be increased, during the suspension period, at a rate equal to the prime commercial lending rate announced from time to time by The Chase Manhattan Bank, N.A. (compounded quarterly) or at such other rate and in such manner as shall be determined from time to time by the Committee. ARTICLE V GENERAL INFORMATION SECTION 5.1. If Net Income, Annual Earnings Per Share or Net Loss Per Share for any year shall have been affected by special factors (including material changes in accounting policies or practices, material acquisitions or dispositions of property, or other unusual items) which in the Committee's judgment should or should not be taken into account, in whole or in part, in the equitable administration of the Plan, the Committee may, for any purpose of the Plan, adjust Net Income, Annual Earnings Per Share or Net Loss Per Share, as the case may be, for such year (and subsequent years as appropriate), or any combination of them, and make credits, payments and reductions accordingly under the Plan. SECTION 5.2. The Committee shall for purposes of Articles III and IV make appropriate adjustments in the number of Performance Units which shall remain subject to Performance Awards and in the number of Performance Units which shall have been credited to Participants' accounts, in order to reflect any merger or consolidation to which the Company is a party or any stock dividend, split-up, combination or reclassification of the outstanding shares of Company Common Stock or any other relevant change in the capitalization of the Company. SECTION 5.3. A Participant may designate in writing a beneficiary (including the trustee or trustees of a trust) who shall upon the death of such Participant be entitled to receive all amounts which would have been payable hereunder to such Participant. A Participant may rescind or change any such designation at any time. Except as provided in this Section 5.3, none of the amounts which may be payable under the Plan may be assigned or transferred otherwise than by will or by the laws of descent and distribution. SECTION 5.4. All payments made pursuant to the Plan shall be subject to withholding in respect of income and other taxes required by law to be withheld, in accordance with procedures to be established by the Committee. SECTION 5.5. The selection of an individual for participation in the Plan shall not give such Participant any right to be retained in the employ of the Company or any of its Subsidiaries, and the right of the Company and of such Subsidiary to dismiss or discharge any such Participant is specifically reserved. The benefits provided for Participants under the Plan shall be in addition to, and shall in no way preclude, other forms of compensation to or in respect of such Participants. SECTION 5.6. The Board of Directors and the Committee shall be entitled to rely on the advice of counsel and other experts, including the independent public accountants for the Company. No member of the Board of Directors or of the Committee or any officers of the Company or its Subsidiaries shall be liable for any act or failure to act under the Plan, except in circumstances involving bad faith on the part of such member or officer. ARTICLE VI AMENDMENT OR TERMINATION OF THE PLAN SECTION 6.1. The Board of Directors may at any time terminate, in whole or in part, or from time to time amend the Plan, provided that, except as otherwise provided in the Plan, no such amendment shall increase the number of Performance Units which may be outstanding at any time, nor shall any such amendment or termination adversely affect the amounts credited to the Performance Award Account of a Participant with respect to Performance Awards previously made to such Participant. In the event of such termination, in whole or in part, of the Plan, the Committee may in its sole discretion direct the payment to Participants of any amounts specified in Article IV and not theretofore paid out, prior to the respective dates upon which payments would otherwise be made hereunder to such Participants, and in a lump sum or installments as the Committee shall prescribe with respect to each such Participant. The Board may at any time and from time to time delegate to the Committee any or all of its authority under this Article VI. ARTICLE VII DEFINITIONS SECTION 7.1. For the purposes of the Plan, the following terms shall have the meanings indicated: (a) Annual Earnings Per Share: With respect to any year, the result obtained by dividing (i) Net Income for such year by (ii) the average number of issued and outstanding shares (excluding treasury shares and shares held by any Subsidiaries) of Company Common Stock during such year as shown in the Company's Annual Report to Stockholders for such year. (b) Award Valuation Date: With respect to any Performance Award, (i) December 31 of the year in which the third anniversary of the grant of such Performance Award to a Participant shall occur or, (ii) if earlier, December 31 of the year in which such Participant's Termination of Employment shall occur, if such Termination of Employment occurs (x) within two years after a Change in Control or (y) as a result of death, Disability, retirement under the Company's retirement plan or retirement with the consent of the Company outside the Company's retirement plan. (c) Board of Directors: The Board of Directors of the Company. (d) Change in Control: A Change in Control shall be deemed to have occurred if either (i) 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 Company 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 (ii) there shall be a change in the composition of the Board of Directors of the Company 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 (A) 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 first Transaction, or (B) 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 (i) and (ii). (e) Committee: The Committee designated pursuant to Section 2.1. Until otherwise determined by the Board of Directors, the Corporate Personnel Committee designated by such Board shall be the Committee under the Plan. (f) Company Common Stock: Common Stock, par value $.01, of the Company. (g) Disability: In the case of any Participant, disability which after the expiration of more than 26 weeks after its commencement is determined to be total and permanent by a physician selected by the Company and acceptable to such Participant or his legal representatives. (h) Discharge for Cause: Involuntary Termination of Employment as a result of dishonesty or similar serious misconduct directly related to the performance of duties for any and all Related Entities. (i) Net Income: With respect to any year, the sum of: (i) the net income (or net loss) of the Company and its consolidated subsidiaries for such year as shown in the Company's Annual Report to Stockholders for such year; plus (or minus) (ii) the net income (or net loss) of each Subsidiary that is not wholly-owned, directly or indirectly, by the Company, as shown in such Subsidiary's annual audited financial statements for such year, attributable to shares of common stock or other equity securities or interests that are not owned, directly or indirectly, by the Company for such portion of the year that the Company owned directly or indirectly equity securities or interests in such Subsidiary. (j) Net Loss Carryforward: With respect to any Performance Award Account, (i) an amount equal to the Net Loss per Share for any year times the number of Performance Units then outstanding and credited to such Performance Award Account, reduced by (ii) any portion thereof which has been applied in any prior year as provided in Section 4.1. (k) Net Loss Per Share: The amount obtained when the calculation of Annual Earnings Per Share results in a number that is less than zero. (l) Participant: An individual who has been selected by the Committee to receive a Performance Award and in respect of whose Performance Award Account any amounts remain payable. (m) Performance Award: The grant of Performance Units by the Committee to a Participant pursuant to Section 3.1. (n) Performance Award Account: An account established for a Participant pursuant to Section 3.2. (o) Performance Unit: A unit covered by Performance Awards granted or subject to grant pursuant to Article III. (p) 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., and 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. (q) 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. (r) Section 162(m): Section 162(m) of the Internal Revenue Code of 1986 and all regulations promulgated thereunder as in effect from time to time. (s) 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. (t) Termination of Employment: The cessation of the rendering of services, whether or not as an employee, to any and all of the Related Entities. As amended effective December 10, 1996 EX-10 6 EXHIBIT 10.14 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) as to Options only, if permitted by the Committee and so provided in the Award Agreement or an amendment thereto, (a) to Immediate Family Members, (b) to a partnership in which Immediate Family Members, or entities in which Immediate Family Members are the sole owners, members or beneficiaries, as appropriate, are the only partners, (c) to a limited liability company in which Immediate Family Members, or entities in which Immediate Family Members are the sole owners, members or beneficiaries, as appropriate, are the only members, or (d) to a trust for the sole benefit of 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 7 EXHIBIT 10.15 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 sole owners, members or beneficiaries, as appropriate, are the only partners, (iii) to a limited liability company in which Immediate Family Members, or entities in which Immediate Family Members are the sole owners, members or beneficiaries, as appropriate, are the only members, or (iv) to a trust for the sole benefit of 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. As amended effective February 4, 1997 EX-10 8 EXHIBIT 10.16 FREEPORT-McMoRan INC. 1992 STOCK INCENTIVE UNIT PLAN SECTION 1 Purpose. The purposes of the Freeport-McMoRan Inc. 1992 Stock Incentive Unit Plan (the "Plan") are to promote the interests of Freeport-McMoRan Inc. and its stockholders by (i) attracting and retaining key management, professional and technical employees 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: "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 any employee of the Company or a Subsidiary, including any employee-officer or employee-director of the Company or a Subsidiary. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. "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 Unit is exercised and ending on and including the date of exercise of such Unit. 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. "Participant" shall mean any Employee granted a Unit 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. "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. "Share" shall mean a share 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 Incentive Unit" shall mean an award granted under the Plan. "Subsidiary" shall mean (i) Freeport-McMoRan Copper & Gold Inc., Freeport-McMoRan Resource Partners, Limited Partnership, and IMC- Agrico Company, in each case for as long as Freeport-McMoRan Inc. shall own any equity interest in such entity, and (ii) 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. "Unit" shall mean a Stock Incentive Unit. "Unit Award" shall mean an award of Stock Incentive Units under the Plan. "Unit Award Agreement" shall mean any written agreement, contract or other instrument or document evidencing a Unit Award, which may, but need not, be executed or acknowledged by a Participant. 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 number of Units to be granted to an eligible Employee; (iii) determine the terms and conditions of any Unit Award; (iv) determine whether, to what extent, and under what circumstances Unit Awards may be cancelled, forfeited or suspended and the method or methods by which Unit Awards may be settled, exercised, cancelled, forfeited or suspended; (v) determine whether, to what extent, and under what circumstances amounts payable with respect to the exercise of a Unit shall be deferred either automatically or at the election of the holder thereof or of the Committee; (vi) interpret and administer the Plan and any instrument or agreement relating to, or Unit Award made under, the Plan; (vii) 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 (viii) 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 Unit 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 Unit 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 Units hereunder. SECTION 5 (a) Units Available for Awards. Subject to adjustment as provided in Section 5(b), the number of Units that may be granted under the Plan shall be 1,250,000. If, after the effective date of the Plan, any Unit Award granted under the Plan expires or is exercised, forfeited, cancelled or terminated without the delivery of compensation in the form of Shares, then the Units covered by such Unit Award, to the extent of any such expiration, exercise, forfeiture, cancellation, or termination, shall again be available for grant. (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 of Units with respect to which Unit Awards may be granted hereunder, (ii) the number of Units subject to outstanding Unit Awards, and (iii) the exercise price with respect to any Unit or, if deemed appropriate, make provision for a cash payment to the holder of an outstanding Unit or, if deemed appropriate, adjust outstanding Unit Awards to provide the rights contemplated by Section 5(c) hereof. (c) Dividend Equivalents. In the sole and complete discretion of the Committee, a Unit Award may provide the Participant with dividend equivalents payable in cash on a current or deferred basis. SECTION 6 (a) Stock Incentive Units. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Employees to whom Units shall be granted, the number of Units to be granted to an Employee, the exercise price thereof and the conditions and limitations applicable to the exercise thereof. Units shall not be exercisable after the expiration of 10 years after the date of grant. Except in the case of a Unit 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 Unit granted under this Plan shall not be less than 100% of the fair market value of a Share on the date of grant. (b) A Unit shall entitle the holder thereof to receive an amount in cash equal to the excess, if any, of the fair market value of a Share on the date of exercise of the Unit over the exercise price. In the event that the Unit is exercised during a period beginning not earlier than one day after the expiration date of an Offer and ending not more than ninety days after the expiration date of such Offer, a Unit shall entitle the holder thereof to receive upon exercise the higher of the amount described in the first sentence of this Section 6(b) and an amount in cash equal to the excess, if any, of the Offer Price on the date of exercise of the Unit over the exercise price. SECTION 7 (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 Unit Award Agreements. The Committee may amend, modify or terminate any outstanding Unit Award Agreement 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 a Unit Award becomes exercisable, or (ii) to cancel a Unit Award and grant a new Unit 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 Unit 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, Unit 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 Unit Award Agreement to the contrary notwithstanding, the Committee may cause any Unit Award granted hereunder to be cancelled in consideration of a cash payment made to the holder of such cancelled Unit Award equal in value to such cancelled Unit Award. The determinations of value under this subparagraph shall be made by the Committee in its sole discretion. SECTION 8 (a) Delegation. Subject to the terms of the Plan and applicable law, the Committee may delegate to the Chairman of the Board of the Company the authority, subject to such terms and limitations as the Committee shall determine, to grant Unit Awards to, or to cancel, modify or waive rights with respect to, or to alter, discontinue, suspend, or terminate Unit 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) Unit Award Agreements. Each Unit 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 Unit 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. The Company shall deduct from all amounts paid to a Participant (whether under the Plan or otherwise) any taxes required by law to be withheld in respect of Unit Awards hereunder to such Participant. The Committee may provide for additional cash payments to holders of Unit Awards to defray or offset any tax arising from the grant, vesting, exercise or payment of any Unit Award. (d) Transferability. No Unit Award shall be transferable by a Participant other than (i) by will, (ii) by the laws of descent and distribution, or (iii) pursuant to a domestic relations order, as defined in the Code, if permitted by the Committee and so provided in the Unit Award Agreement or an amendment thereto. The designation of a Designated Beneficiary shall not be a violation of this Section 8(d). (e) 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 the type 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. (f) No Right to Employment. The grant of a Unit 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 Unit Award Agreement. No Employee, Participant or other person shall have any claim to be granted any Unit Award, and there is no obligation for uniformity of treatment of Employees, Participants or holders or beneficiaries of Unit Awards. (g) Governing Law. The validity, construction, and effect of the Plan, any rules and regulations relating to the Plan and any Unit Award or Unit Award Agreement shall be determined in accordance with the laws of the State of Delaware. (h) Severability. If any provision of the Plan or any Unit Award Agreement is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any Person or Unit Award, or would disqualify the Plan or any Unit 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 Unit Award Agreement, such provision shall be stricken as to such jurisdiction, Person or Unit Award and the remainder of the Plan and any such Unit Award Agreement shall remain in full force and effect. (i) No Trust or Fund Created. Neither the Plan nor any Unit Award or Unit Award Agreement 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 a Unit Award, such right shall be no greater than the right of any unsecured general creditor of the Company. (j) 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 9 Effective Date of the Plan. The Plan shall be effective as of the date of its approval by the Board. As amended effective February 4, 1997 EX-10 9 EXHIBIT 10.17 1988 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS OF FREEPORT-MCMORAN INC. ARTICLE I PURPOSE OF THE PLAN This 1988 Stock Option Plan for Non-Employee Directors (this "Plan") is intended to provide a method whereby non-employee directors of Freeport-McMoRan Inc. (the "Company"), who are making and will continue to make substantial contributions to the success of the Company and its Subsidiaries (as hereinafter defined), may be compensated for their contributions and encouraged to acquire a proprietary interest in the Company, and whereby prospective new directors may be persuaded to serve the Company as directors, and to promote the interests of the Company and all its stockholders. Accordingly, the Company will, on or before May 1, 1997, grant to such persons as are identified in this Plan, in the manner hereinafter provided, options ("Options") to purchase shares of the Common Stock of the Company ("Common Stock"), on the terms and subject to the conditions hereinafter set forth. ARTICLE II 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%. Board: The Board of Directors of the Company. 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). Code: The Internal Revenue Code of 1986, as amended from time to time. Committee: 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. Election Period: The period beginning on the third business day following a date on which the Company releases for publication its quarterly or annual summary statements of sales and earnings, and ending on the twelfth business day following such date. Eligible Director: A director of the Company who is not, and within the preceding one year has not been, an employee of the Company or a Subsidiary or otherwise eligible for selection to participate in any plan of the Company or any Subsidiary that entitles the participants therein to acquire stock, stock options or stock appreciation rights of the Company or its Subsidiaries. Exchange Act: The Securities Exchange Act of 1934, as amended from time to time. 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. Option Cancellation Gain: With respect to the cancellation of an Option pursuant to Section 3 of Article IV hereof, the sum of (a) the excess of the Fair Market Value as of the Option Cancellation Date (as that term is defined in Section 3 of Article IV hereof) of all the outstanding shares of Common Stock covered by such Option, whether or not then exercisable, over the purchase price of such shares under such Option, (b) the Fair Market Value as of the Option Cancellation Date of any Subsidiary Equity Securities that would have been distributed pursuant to Section 5 of Article VII hereof had there been an exercise as of the Option Cancellation Date of all the outstanding shares of Common Stock covered by such Option, whether or not then exercisable, (c) the amount of any cash in lieu of any Subsidiary Equity Securities and any fractional interests therein that would have been distributed pursuant to Section 5 of Article VII hereof had there been an exercise as of the Option Cancellation Date of all the outstanding shares of Common Stock covered by such Option, whether or not then exercisable, plus (d) the amount equal to the Applicable Rate multiplied by the total of the amounts set forth in clauses (a), (b) and (c). Option Gain: The sum of (a) the excess of the Fair Market Value of the shares of Common Stock covered by the exercise of an Option over 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 as a result of such exercise pursuant to Section 5 of Article VII hereof; as such Fair Market Values are determined in each case on (i) the Income Recognition Date with respect to each such security or (ii) the date of such exercise, whichever is less. Rule 16b-3: 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. SEC: The Securities and Exchange Commission, including the staff thereof, or any successor thereto. Section 162(m): Section 162(m) of the Code and all regulations promulgated thereunder as in effect from time to time. 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 Company, Inc., and Freeport-McMoRan Oil & Gas Company and depositary units of Freeport-McMoRan Energy Partners, Ltd. and Freeport-McMoRan Resource Partners, Limited Partnership. ARTICLE III ADMINISTRATION OF THE PLAN The Plan shall be administered by the Board. The Board will interpret this Plan and may from time to time adopt such rules and regulations for carrying out the terms and provisions of this Plan as it may deem best; however, the Board shall have no discretion with respect to the selection of directors who receive Options, the number of shares of Common Stock subject to any Options or the purchase price thereof. Notwithstanding the foregoing, the Committee shall have the authority to make all determinations with respect to the transferability of Options in accordance with Article VIII hereof. All determinations by the Board or the Committee shall be made by the affirmative vote of a majority of its respective members, but any determination reduced to writing and signed by a majority of its respective 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 Board and the Committee pursuant to the provisions of this Plan, and all related orders or resolutions of the Board and the Committee, shall be final, conclusive and binding on all persons, including the Company and its stockholders, employees, directors and optionees. 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 IV STOCK SUBJECT TO THE PLAN SECTION 1. The shares to be issued or delivered upon exercise of Options 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 Board, may, upon exercise of Options granted under this Plan, cause a Subsidiary to deliver shares of Common Stock held by such Subsidiary. Any Subsidiary Equity Securities distributed pursuant to Section 5 of Article VII of this Plan shall be made available 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 IV, the aggregate number of shares of Common Stock which may be purchased pursuant to Options shall not exceed 250,000. 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 purchased under this Plan shall be increased or decreased proportionately, as the case may be, and the number of shares of Common Stock deliverable upon the exercise thereafter of any Option theretofore granted (whether or not then exercisable) shall be increased or decreased proportionately, as the case may be, without change in the aggregate purchase price. In the event the Company is merged or consolidated into or with another corporation in a transaction in which the Company is not the survivor, or in the event that substantially all of the Company's assets are sold to another entity not affiliated with the Company, any holder of an Option, whether or not then exercisable, shall be entitled to receive (unless the Company shall take such alternative action as may be necessary to preserve the economic benefit of the Option for the optionee) on the effective date of any such transaction (the "Option Cancellation Date"), in cancellation of such Option, an amount in cash equal to the Option Cancellation Gain relating thereto, determined as of the Option Cancellation Date. 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 5 of Article VII 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 theretofore granted hereunder (whether or not then exercisable) shall be subject to such adjustment as 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 of any right attached thereto or provided for therein or the substitution, on an equitable basis, of Common Stock, other Subsidiary Equity Securities, or a combination thereof for such Subsidiary Equity Securities. ARTICLE V PURCHASE PRICE OF OPTIONED SHARES The purchase price per share of Common Stock under each Option shall be 100% of the Fair Market Value of a share of Common Stock at the time such Option is granted, but in no case shall such price be less than the par value of the Common Stock. ARTICLE VI ELIGIBILITY OF RECIPIENTS Options will be granted only to individuals who are Eligible Directors at the time of such grant. No individual who is an employee of the Company or a Subsidiary at the time of such grant shall be eligible to receive an Option. ARTICLE VII GRANT OF OPTIONS SECTION 1. Each Option shall constitute a non-qualified stock option which is not intended to qualify under Section 422A of the Code. SECTION 2. On May 1, 1988 and May 1 of each subsequent year through and including 1997, each Eligible Director, as of each such date, shall be granted an Option to purchase 1,664 shares of Common Stock. Each Option shall become exercisable with respect to416 shares on each of the first, second, third and fourth anniversaries of the date of grant and may be exercised by the holder thereof with respect to all or any part of the shares comprising each installment as such holder may elect at any time after such installment becomes exercisable but no later than the termination date of such Option; provided that each Option shall become exercisable in full upon a Change in Control. SECTION 3. The purchase price of shares subject to any Option shall be the Fair Market Value thereof on the respective date of grant. SECTION 4. Each Option shall provide that, promptly following the last Income Recognition Date 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 multiplied by the Applicable Rate. If an Option has been transferred pursuant to Section VIII(c) hereof, the right to any payment under this Article VII, Section 4 remains with the original holder of the Option, except that in the case of a transfer pursuant to a domestic relations order, such payment shall be made to the spouse responsible for the federal income tax related to the Option exercise. SECTION 5. Each Option shall provide that, upon the exercise of such Option or portion thereof, the holder of such Option 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 of an Option is, on the 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, such holder will 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). ARTICLE VIII TRANSFERABILITY OF OPTIONS No Options granted hereunder may be transferred, pledged, assigned or otherwise encumbered by an optionee except: (a) by will; (b) by the laws of descent and distribution; or (c) if permitted by the Committee and so provided in the Option or an amendment thereto, (i) pursuant to a domestic relations order, as defined in the Code, (ii) to Immediate Family Members, (iii) to a partnership in which Immediate Family Members, or entities in which Immediate Family Members are the sole owners, members or beneficiaries, as appropriate, are the only partners, (iv) to a limited liability company in which Immediate Family Members, or entities in which Immediate Family Members are the sole owners, members or beneficiaries, as appropriate, are the only members, or (v) to a trust for the sole benefit of 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. Any attempted assignment, transfer, pledge, hypothecation or other disposition of Options, or levy of attachment or similar process upon Options not specifically permitted herein, shall be null and void and without effect. ARTICLE IX EXERCISE OF OPTIONS SECTION 1. Each Option shall terminate 10 years and two days from the date on which it was granted. SECTION 2. Except in cases provided for in Article X hereof, each Option may be exercised by the holder thereof only while the optionee to whom such Option was granted is an Eligible Director. SECTION 3. Each Option shall provide that the Option or any portion thereof may be exercised only during an Election Period. Each Option shall provide, however, that in the event of a Change in Control, the Election Period exercise requirement is waived. SECTION 4. A person electing to exercise an Option or any portion thereof 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 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 with the exercise thereof, 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 certificates for such shares of Common Stock and such Subsidiary Equity Securities have been issued or delivered by the Company. SECTION 5. Each Option shall be subject to the requirement that if at any time the Board shall be advised by counsel that the listing, registration or qualification of the shares of Common Stock subject to such Option, or the Subsidiary Equity Securities distributable in connection with the exercise thereof, 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 the issue or purchase of shares thereunder or the distribution of Subsidiary Equity Securities with respect thereto, such Option 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 such counsel for the Board. SECTION 6. 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, 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 X TERMINATION OF SERVICE AS AN ELIGIBLE DIRECTOR SECTION 1. If and when an optionee shall cease to be an Eligible Director for any reason other than death or retirement from the Board, all of the Options granted to such optionee shall be terminated except that any Option, to the extent then exercisable, may be exercised by the holder thereof within three months after such optionee ceases to be an Eligible Director, but not later than the termination date of the Option. SECTION 2. If and when an optionee shall cease to be an Eligible Director by reason of the optionee's retirement from the Board, all of the Options granted to such optionee shall be terminated except that any Option, to the extent then exercisable or exercisable within one year thereafter, may be exercised by the holder thereof within three years after such retirement, but not later than the termination date of the Option. SECTION 3. Should an optionee die while serving as an Eligible Director, 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 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. SECTION 4. Should an optionee die after ceasing to be an Eligible Director, 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 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. ARTICLE XI AMENDMENTS TO PLAN AND OPTIONS 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) except pursuant to Section 3 of Article IV, increase the maximum number (determined as provided in this Plan) of shares of Common Stock which may be purchased pursuant to Options, either individually or in aggregate; (b) permit the granting of any Option at a purchase price other than 100% of the Fair Market Value of the Common Stock at the time such option is granted, subject to adjustment pursuant to Section 3 of Article IV; (c) permit the exercise of an Option unless the full purchase price of the shares as to which the Option is exercised is paid at the time of exercise; (d) extend beyond May 1, 1997, the period during which Options may be granted; (e) modify in any respect the class of individuals who constitute Eligible Directors; or (f) materially increase the benefits accruing to participants hereunder. As amended effective December 10, 1996 EX-10 10 EXHIBIT 10.18 FREEPORT-MCMORAN INC. 1991 PLAN FOR DEFERRAL OF DIRECTORS' FEES 1. Election to Participate. (a) Any director of Freeport- McMoRan Inc. (the "Company") may become a Participant in this 1991 Plan for Deferral of Directors' Fees (the "Plan") by giving to the Company a written election on or before the 15th day of December of any year in accordance with this Section 1. Participation in the Plan shall be effective on the first day of the calendar year immediately following the date of such election, and the Company shall thereupon establish for such Participant a Deferred Cash Account and/or a Deferred Stock Value Account (each an "Account"), as the case may be, to which amounts shall be credited as hereinafter provided. Each election made by a Participant shall state that: (i) the entire amount of annual fees for services as a member of the Board of Directors of the Company and as a member of any committee of such Board of Directors (including any amount relating to services as the Chairman of any such committee, if applicable), or (ii) the entire amount of attendance fees for such services, or (iii) the entire amount of both annual fees and attendance fees for such services, payable to such Participant for subsequent years shall be credited to such Participant's Deferred Cash Account or Deferred Stock Value Account (or a combination of both Accounts, provided that the amount to be credited to a particular Account shall be 0, 25%, 75% or 100% of the compensation deferred) on the respective dates on which such amounts shall become payable. Each such election shall also contain a payment election providing for the manner in which amounts so credited shall be paid from such Account in accordance with Section 4 below. (b) Each director currently participating in the Company's 1981 Plan for Deferral of Director's Fees (the "Prior Plan") shall automatically become a Participant in the Plan effective as of January 1, 1992 with respect to such director's outstanding Account balances under the Prior Plan. Such outstanding Account balances under the Prior Plan shall be credited, effective January 1, 1992, to a Deferred Cash Account under the Plan, provided that, any such director may irrevocably elect in writing on or before December 15, 1991 to have such Account balance credited effective January 1, 1992 to a Deferred Stock Value Account in accordance with Section 3 hereof. Any payment election previously made by any such director pursuant to paragraphs 1 and 3 of the Prior Plan with respect to his outstanding Account balance under the Prior Plan shall be irrevocable with respect thereto and, for purposes of this Plan only, shall be deemed to be an election made pursuant to Sections 1 and 4 hereof. 2. Increments to Deferred Cash Accounts. Amounts credited to each Deferred Cash Account in any year shall be increased by the Plan Rate (as hereinafter defined), compounded quarterly, from and after the applicable date of credit until the final date of payment from such Deferred Cash Account pursuant to Section 4. The "Plan Rate" shall be the prime commercial lending rate announced from time to time by The Chase Manhattan Bank, N.A., or any successor thereto, or such other rate as the Board of Directors may establish for the purpose of the Plan. 3. Deferred Stock Value Accounts. (a) Amounts credited to each Deferred Stock Value Account shall be converted into Stock Units (including fractions thereof, if necessary, rounded to the nearest one thousandth of a Stock Unit) as of the applicable date of credit. Stock Units will be computed as of the applicable date of credit by dividing the aggregate amount of compensation deferred and credited to a Deferred Stock Value Account by the Fair Market Value of the Company's common stock, $1 par value (the "Common Stock"). For purposes of the Plan, Fair Market Value of the Common Stock shall mean the average of the Daily Price (as hereinafter defined) of the Common Stock on each of the last five trading days on which reported sales of Common Stock occurred immediately preceding the month of the date in question. For purposes of the determination of Fair Market Value the Common Stock, the Daily Price of the Common Stock shall be the average of the high and low quoted per share sales prices of the Common Stock on the day in question on the Composite Tape for the New York Stock Exchange-Listed Stocks or if, on the date of any determination of the Daily Price of the Common Stock the Common Stock is not listed on such Composite Tape, the average of the high and low quoted per share sales prices on the New York Stock Exchange on such day. (b) Until the date of final payment from a Deferred Stock Value Account pursuant to Section 4, each Stock Unit that is credited to an Account as of the record date of any dividend paid on the Common Stock shall be credited, as of the payment date of any such dividend paid on the Common Stock, with a dividend equivalent equal in value to the per share amount of such dividend. Dividend equivalents so credited shall be converted to a number of additional Stock Units (including fractions thereof, if necessary, rounded to the nearest one thousandth of a Stock Unit) as of such date of credit by dividing the total dividend equivalent amount by the Fair Market Value of the Common Stock. (c) In the event of any dividend or other distribution (whether in the form of cash, Common Stock, or other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, or other similar corporate transaction or event, such adjustments shall be made to the Deferred Stock Value Account of each Participant as may be deemed appropriate by the Board of Directors of the Company in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan. 4. Payments from Accounts. (a) Each payment election by a Participant made pursuant to Section 1 above shall provide that distributions from such Participant's Account(s) shall be made in one or more annual cash payments (not exceeding ten). Each such payment election shall also provide for the determination of the date that such payment shall commence (the "Payment Commencement Date"), which shall be no earlier than the first day of the month following the date on which such Participant shall cease to be a director of the Company (or, if earlier, the last day of the calendar year in which such Participant shall cease to be a director of the Company) and no later than December 1 of the calendar year immediately following the year in which such Participant shall cease to be a director of the Company. (b) Except as otherwise provided in this Section 4, distributions from a Participant's Deferred Cash Account and Deferred Stock Value Account shall be paid in cash on the Payment Commencement Date in an amount (i) in the case of a Deferred Cash Account, equal to the balance of the Account as of such Payment Commencement Date (such amount being hereinafter referred to as the "Final Cash Balance") or (ii) in the case of a Deferred Stock Value Account, equal to the value of the number of Stock Units in such Account as of the Payment Commencement Date, which includes such Stock Units attributable to dividend equivalents determined in the manner described in Section 3 (hereinafter referred to as the "Final Unit Balance"). The value of the Final Unit Balance to be paid in cash shall be determined by multiplying the Final Unit Balance by the Fair Market Value of the Common Stock. (c) In the event that a Participant elects to receive a Final Cash Balance and/or Final Unit Balance in a number of annual payments as contemplated by paragraph (a) of this Section 4, with respect to a Final Cash Balance, each such annual payment shall be in an amount equal to the outstanding balance in such Participant's Deferred Cash Account, as of the date of such annual payment, divided by the number of annual payments remaining to be paid immediately prior to the payment in question. With respect to a Final Unit Balance, each such annual payment shall be in an amount equal to the value of the number of Stock Units in such Participant's Deferred Stock Value Account (which includes such Stock Units attributable to dividend equivalents determined in the manner described in Section 3), as of the date of such annual payment, divided by the number of annual payments remaining to be paid immediately prior to the payment in question (the "Payment Date Distribution Amount"). For purposes of this Section 4(c), the value of the Payment Date Distribution Amount shall be determined by multiplying the Payment Date Distribution Amount by the Fair Market Value of the Common Stock. Upon each such annual payment, the number of Stock Units credited to such Participant's Deferred Stock Value Account shall be reduced by the Payment Date Distribution Amount with respect to such annual payment. 5. Death of a Participant. Upon a Participant's death, the Company shall within twelve months thereafter pay to such beneficiary as such Participant may have designated by written notice to the Company (or in the absence of such designation, to such Participant's estate), the entire amount in such Participant's Deferred Cash Account and/or Deferred Stock Value Account at the date of payment. A Participant may by like notice cancel such designation, and may make a new designation as hereinabove provided. 6. Changes in Election. (a) A Participant may, by giving written notice to the Company in any year, elect to discontinue participation in the Plan with respect to annual fees and attendance fees becoming payable to such Participant for subsequent years. By like notice, a Participant may resume participation in the Plan at any time after one year from the date of such discontinuance. A Participant may, by like notice in any year, cancel any election with respect to amounts to be credited to such Participant's Accounts for subsequent years and submit a new election, made in accordance with Sections 1 and 4, with respect to such amounts. In the event such new election includes a new payment election, the Company shall thereupon establish for such Participant an additional Deferred Cash Account and/or Deferred Stock Value Account to which amounts subject to such new payment election shall be credited. (b) A Participant who has Stock Units credited to a Deferred Stock Value Account pursuant to an election may, by giving written notice to the Company, modify at any time the investment direction set forth in such election by directing the Company to transfer, effective as of the date specified in such notice, 25%, 50%, 75%, or 100% of the number of Stock Units, including any fraction thereof and any Stock Units attributable to dividend equivalents, credited in such Deferred Stock Value Account to a Deferred Cash Account established or to be established for such Participant. The number of Stock Units subject to such transfer shall be valued by multiplying the number of such Stock Units by the Fair Market Value of the Common Stock as of the transfer date specified in such notice, and such value shall be credited to such Deferred Cash Account as of such date. Similarly, a Participant who has amounts credited to a Deferred Cash Account pursuant to an election may, by giving written notice to the Company, modify at any time the investment direction set forth in such election by directing the Company to transfer, effective as of the date specified in such notice, 25%, 50%, 75%, or 100% of the amount credited in such Deferred Cash Account to a Deferred Stock Value Account established or to be established for such Participant. The amount transferred from such Deferred Cash Account shall be converted into a number of Stock Units, including any fraction thereof rounded to the nearest one thousandth of a Stock Unit, by dividing such amount by the Fair Market Value of the Common Stock as of the transfer date specified in such notice, and the resulting number of Stock Units shall be credited to such Deferred Stock Value Account as of such date. In addition, a Participant who has an outstanding election may, by giving written notice to the Company, modify at any time the investment direction set forth in such election with respect to amounts payable to such Participant on and after the date specified in such notice, the receipt of which was deferred under such election, by re- directing the Company to credit all such amounts to a Deferred Cash Account established or to be established for such Participant, a Deferred Stock Value Account established or to be established for such Participant, or both such Accounts in accordance with the allocation specified in such notice, which allocation shall be made in conformity with the relevant provisions of Section 1 hereof. (c) Except as hereinabove provided in this Section 6, all elections under the Plan shall be irrevocable. 7. Status of Accounts. Accounts established pursuant to the Plan shall represent the unsecured obligations of the Company to pay to the respective Participants the amounts in such Accounts in accordance with the Plan. In no event shall this Plan be construed as creating a trust in favor of any Participant or any beneficiary, nor shall any Participant or beneficiary have any property interest in any Account or in any other assets of the Company. Accounts shall not be assignable or transferable by Participants except as and to the extent provided in Section 5 above. 8. Plan Amendment or Termination. The Plan may be amended from time to time, and may be terminated at any time, by resolution of the Board of Directors of the Company. No such amendments shall alter the date or dates for making payments in respect of amounts theretofore credited to Accounts, and in case of such termination, the Plan shall continue in full force and effect with respect to all amounts in Accounts at the date of termination. 9. Effective Date. Except as set forth in Section 1(b), the Plan shall be effective with respect to annual fees and attendance fees payable to directors for services on and after January 1, 1992. As amended effective August 14, 1996 EX-10 11 EXHIBIT 10.19 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) as to Options only, if permitted by the Committee and so provided in the Award Agreement or an amendment thereto, (a) to Immediate Family Members, (b) to a partnership in which Immediate Family Members, or entities in which Immediate Family Members are the sole owners, members or beneficiaries, as appropriate, are the only partners, (c) to a limited liability company in which Immediate Family Members, or entities in which Immediate Family Members are the sole owners, members or beneficiaries, as appropriate, are the only members, or (d) to a trust for the sole benefit of 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. As amended effective December 10, 1996 EX-11 12 Exhibit 11.1 FREEPORT-McMoRan INC. AND CONSOLIDATED SUBSIDIARIES COMPUTATION OF NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE Years Ended December 31, ------------------------------------- 1996 1995 1994 ---------- ---------- ---------- (In Thousands,Except Per Share Amounts) Primary: Net income applicable to common stock $ 40,708 $ 390,541 $ 41,443 ========== ========== ========== Average common shares outstanding 25,993 25,839 23,106 Common stock equivalents: Stock options 282 242 98 ---------- ---------- ---------- Average common and common equivalent shares outstanding 26,275 26,081 23,204 ========== ========== ========== Net income per common and common equivalent share $ 1.55 $ 14.97 $ 1.79 ========== ========== ========== Fully Diluted: Net income applicable to common stock $ 40,708 $ 390,541 $ 41,443 Plus preferred dividends - 8,756 - Plus interest, net of tax effect, on convertible subordinated debentures - 15,921 - ---------- ---------- ---------- Net income applicable to common stock $ 40,708 $ 415,218 $ 41,443 ========== ========== ========== Average common shares outstanding 25,993 25,839 23,106 Common stock equivalents: Stock options 282 271 98 Convertible securities: Convertible subordinated debentures - 2,347 - Preferred stock - 783 - ---------- ---------- -------- Average common and common equivalent shares outstanding 26,275 29,240 23,204 ========== ========== ========== Net income per common and common equivalent share $ 1.55 $ 14.20 $ 1.79 ========== ========== ========== EX-13 13 Exhibit 13.1 FREEPORT-MCMORAN INC. SELECTED FINANCIAL AND OPERATING DATA 1996 1995 1994 1993 1992 ---------- ---------- ---------- ---------- ---------- FINANCIAL DATA (Financial Data In Millions, Except Per Share Amounts) Years Ended December 31: Revenues $957.5 $995.9 $770.1 $684.7 $940.6 Operating income (loss) 205.4a 182.9 91.9 (243.4) (24.6) Net income (loss) from: Operations $42.2b $25.3b $(35.1)b $(77.0) $(27.3) Nonrecurring gains (losses)c 2.9 67.1 - (48.6) - Discontinued opera- tions - 340.4 107.7 35.4 215.1 Changes in accounting principle and extraordinary loss - - (9.1) (13.6) - Preferred dividends (4.4) (42.3)d (22.1) (22.4) (18.7) ---- ----- ----- ------ ----- Net income (loss) applicable to common stock $40.7 $390.5 $ 41.4 $(126.2) $169.1 ===== ====== ======= ======== ======= Net income (loss) per primary share: Before discontinued operations, changes in accounting principle and extraordinary loss c $1.55b $1.92b,d $(2.46)b $(6.27) $(1.91) Discontinued operations - 13.05 4.64 1.50 8.93 Changes in accounting principle and extra- ordinary loss - - (.39) (.58) - ---- ----- ---- ---- ---- Net income (loss) applicable to common stock $1.55 $14.97 $1.79 $(5.35) $7.02 ===== ====== ====== ====== ====== Average common shares outstand- ing 26.3 26.1 23.2 23.6 24.1 Dividends per common share: Cash $.36 $.18 $1.875 $7.50 $7.50 Property e - 108.41 7.768 - 1.05 --- ------- ----- --- ----- $.36 $108.59 $9.643 $7.50 $8.55 ==== ======== ======= ====== ====== At December 31: Property, plant and equipment, net $964.8 $999.8 $964.5 $1,102.8 $1,271.2 Long-term debt, less current portion 441.0 359.5 1,122.1 1,082.8 785.5 Minority interest 174.1 196.0 217.8 239.8 418.6 Stockholders' equity 94.3 191.9 (230.5) .6 346.0 Total assets 1,251.4 1,320.5 1,649.4 1,888.6 2,157.4 OPERATING DATA Phosphate fertilizers-primarily DAP Sales (short tons) 3,201,800 3,427,700 3,193,400 3,346,600 3,984,000 Average realized price f All phosphate fertilizers$181.00 $169.07 $144.13 $110.03 $127.27 DAP 186.17 175.11 149.32 113.09 132.11 Phosphate rock Sales (short tons) 2,919,100 4,470,400 4,373,400 3,840,300 3,440,500 Average realized price f $25.60 $22.53 $21.38 $22.02 $26.96 Sulphur Sales (long tons) g 2,900,000 3,049,700 2,087,800 1,973,200 2,346,100 Oil Sales (barrels) 1,895,500 2,217,600 2,533,700 3,443,000 4,884,000 Average realized price $19.49 $15.82 $13.74 $14.43 $15.91 FREEPORT-McMoRan INC. SELECTED FINANCIAL AND OPERATING DATA NOTES a. Includes a net benefit of $8.9 million resulting primarily from the gain on the increase in FRP's ownership of IMC-Agrico. b. Includes minority interest charges totaling $9.0 million ($0.34 per share) in 1996, $14.4 million ($0.55 per share) in 1995 and $17.2 million ($0.74 per share) in 1994 because FTX was not paid its proportionate share of FRP distributions. Also includes stock appreciation rights costs totaling $5.0 million ($0.19 per share) in 1995 caused by the significant rise in FTX's common stock price during the year. c. In 1996 includes the item discussed in Note a above ($2.9 million or $0.11 per share); in 1995 includes gains related primarily to the settlement of certain insurance claims ($4.3 million or $0.16 per share) and the reversal of tax accruals no longer required ($62.8 million or $2.41 per share); and in 1993 includes the loss on restructuring activities and valuation and sale of assets ($48.6 million or $2.06 per share). d. Includes a $33.5 million charge ($1.29 per share) resulting from the $4.375 Preferred Stock exchange offer. e. Reflects the fair market value of property distributions (FCX in 1995 and 1994, MOXY in 1994 and FMPO in 1992). f. Represents average realization f.o.b. plant/mine. g. Includes internal consumption totaling 730,300 tons, 754,400 tons, 739,900 tons, 1,138,800 tons and 1,654,300 tons for 1996-1992, respectively. FREEPORT-McMoRan Inc. MANAGEMENT'S DISCUSSION AND ANALYSIS OVERVIEW The business operations of Freeport-McMoRan Inc. (FTX) primarily consist of its 51.6 percent ownership in Freeport-McMoRan Resource Partners, Limited Partnership (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 (Note 2), 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 as follows: * In June 1996, FRP, a significant consumer of natural gas in its sulphur and fertilizer operations, acquired a 25 percent leasehold interest in an oil and gas joint venture to explore a 35,000 acre project area in south Louisiana where high-potential, high-risk prospects had been identified. One non-commercial well has been drilled and another exploratory well is in progress. FTX will consider opportunities for further oil and gas investments, including activities involving McMoRan Oil & Gas Co. (MOXY). These future investments may be significant. * In September 1996, IMC-Agrico entered into an exclusive letter of intent with Chinese authorities to conduct joint feasibility studies and, if commercially viable, to develop phosphate ore resources in Yunnan Province. The agreement covers extensive phosphate resources and envisions the joint development of high-analysis phosphate fertilizer manufacturing facilities in China. * In October 1996, IMC-Agrico significantly augmented its existing strategic phosphate rock reserve position by purchasing 24,000 acres of land in central Florida. The land is estimated to contain in excess of 100 million tons of phosphate rock and helped to increase FRP's phosphate rock reserves by over 30 percent, after production. * FRP also continues to evaluate a 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. In September 1996, FTX terminated merger discussions with Arcadian Corporation. It was intended for FRP to be offered an opportunity to participate in this transaction in a manner that would convert the publicly held limited partnership units of FRP into common stock of a new company. Although this transaction was not completed, FTX and FRP will continue to consider attractive growth opportunities, including opportunities in the agricultural minerals and oil and gas industries. Transactions will also continue to be evaluated that may allow for a possible combination of FTX and FRP. Positive steps involving the FTX/FRP debt structure were also made, as follows: * In February 1996, FRP sold publicly $150 million of its 7% Senior Notes due 2008 and used the proceeds to reduce bank indebtedness. This fixed the interest cost on a large portion of FRP's debt at an attractive rate, as well as lengthened the maturity. Additionally, in January 1997, Moody's Investors Service raised its rating on FRP's publicly traded senior unsecured debt securities to Baa3, an investment grade rating. FRP's senior unsecured debt securities are now rated investment grade by the major credit agencies. * During November 1996, the FTX/FRP bank credit agreement was amended to increase the amount available to FRP to $350 million (with $150 million available to FTX), reduce the interest rates and extend the term of the facility to November 2001. RESULTS OF OPERATIONS 1996 1995 1994 ---------- ---------- ---------- (In Millions) Revenues $ 957.5 $ 995.9 $ 770.1 Operating income 205.4 182.9 91.9 Net income from: Operations a $ 42.2 $ 25.3 $ (35.1) Nonrecurring gains/losses 2.9b 67.1c - Discontinued operations (Note 3) - 340.4 107.7 Extraordinary loss (Note 4) - - (9.1) Preferred dividends (4.4) (42.3)d (22.1) ---------- ---------- ---------- Net income applicable to common stock $ 40.7 $ 390.5 $ 41.4 ========== ========== ========== a. Includes minority interest charges totaling $9.0 million in 1996, $14.4 million in 1995 and $17.2 million in 1994 because FTX was not paid its proportionate share of FRP distributions, and stock appreciation rights costs of $5.0 million in 1995. b. Primarily consists of the gain on the increase in FRP's ownership of IMC-Agrico (Note 2). c. Includes a $4.3 million insurance settlement gain (included in other income) and a $62.8 million tax benefit (Note 5). d. Includes a $33.5 million charge resulting from the $4.375 Preferred Stock exchange offer (Note 6). 1996 Compared With 1995. Operating income for 1996 benefited from higher average realizations on phosphate fertilizer, phosphate rock and oil sales (see Selected Financial and Operating Data). The animal feed ingredients business, acquired in October 1995 (Note 9), also contributed to higher operating income. Offsetting the impact of these positive factors were lower production and sales volumes for phosphate fertilizer, phosphate rock, sulphur and oil. The current year includes an $11.9 million gain resulting from the increase in FRP's ownership of IMC-Agrico, $15.6 million lower stock appreciation rights costs, a $2.5 million charge for oil and gas exploration costs and charges totaling $3.0 million for asset valuations at IMC-Agrico. Depreciation and amortization for the current year decreased $7.9 million from the 1995 amount. This reduction is attributable primarily to a decline of $4.4 million from Main Pass oil operations and $1.6 million from sulphur activities caused by lower sales volumes and a $3.5 million decrease related to FRP's disproportionate interest in IMC-Agrico cash distributions, partially offset by additional depreciation expense of $2.3 million associated with the animal feed ingredients operations. General and administrative expenses for 1996 declined $17.7 million from 1995, primarily because during 1995 the significant increase in FTX's stock price resulted in $15.6 million higher stock appreciation rights costs. General and administrative costs for 1996 included amounts associated with the acquired animal feed ingredients operations, whereas 1995 included a $1.2 million charge for the reorganization of IMC-Agrico's marketing function. Interest expense decreased from 1995 as a result of the significant reduction in average debt levels brought about by FTX's recapitalization. Minority interests' share of net income for 1996 reflects the increased level of earnings at FRP and included an additional $14.4 million charge ($23.0 million in 1995) because FTX was not paid its proportionate share of FRP distributions. In the first quarter of 1997, FTX will recognize an additional $9.3 million minority interest charge in connection with the final quarterly distribution under the public unitholders' preferential distribution priority (Note 2). However, to the extent the cumulative unpaid distributions are reduced in the future, FTX will recognize a disproportionately greater share of FRP's reported earnings. Income taxes for 1995 included a $62.8 million benefit attributable to the reversal of tax accruals no longer required because of the resolution of certain federal and state tax issues and the realization of tax credits not previously recognized. Agricultural Minerals Operations - FTX's agricultural minerals operations, which include FRP's fertilizer and phosphate rock operations and its sulphur business, reported 1996 operating income of $223.9 million on revenues of $920.0 million compared with operating income of $205.9 million on revenues of $960.0 million in 1995. Significant items impacting operating income follow (in millions): Agricultural minerals operating income -1995 $ 205.9 ---------- Increases (decreases): Sales volumes (97.9) Realizations 59.5 Other (1.6) ---------- Revenue variance (40.0) Cost of sales 29.9a Gain on IMC-Agrico investment 11.9 General and administrative 16.2b ---------- 18.0 ---------- Agricultural minerals operating income -1996 $ 223.9 ========== a. Includes a reduction to depreciation of $29.8 million in 1996 and $26.3 million in 1995 caused by FRP's disproportionate interest in IMC-Agrico cash distributions. 1996 also includes $3.0 million of asset valuation charges from IMC-Agrico. b. 1996 included $10.3 million lower stock appreciation rights costs. FRP's 1996 phosphate fertilizer sales volumes were 7 percent lower than those in 1995, with IMC-Agrico's realization for diammonium phosphate (DAP), its principal fertilizer product, averaging 6 percent higher. The year 1996 began with rising prices as a result of the tight supply/demand situation experienced during late 1995, and IMC- Agrico operating its phosphate fertilizer facilities at full capacity. Erratic domestic and foreign demand during 1996 resulted in lower price realizations during the second half of the year, with periods of record industrywide production prompting IMC-Agrico to reduce its production levels. IMC-Agrico will continue to monitor market conditions and make production adjustments it deems appropriate. FRP's unit production costs for 1996 rose slightly, as reduced production volumes and higher phosphate rock costs were partly offset by lower sulphur costs. A sharp rise in ammonia prices began at the end of the third quarter of 1996 and had a negative impact on fourth- quarter 1996 DAP production costs resulting in lower cash margins. Although the impact was significant, IMC-Agrico fulfills approximately one-third of its annual ammonia requirements with internal production, helping to mitigate the effect. Unit production costs for the near term will continue to be impacted by high ammonia prices, although ammonia prices have begun to decline and are expected to decline further. In December 1996, IMC-Agrico (through the Phosphate Chemical Export Association) reached a new agreement for the sale of DAP to Sinochem, the fertilizer buying agency for China. The agreement spans the next two calendar years and provides for substantial monthly shipments of DAP at market-related prices at the time of shipment. Total shipments under the contract will approximate 1996 levels for each of the next two years. As evidenced by the two-year DAP supply agreement with the Chinese, the long-term outlook for the phosphate fertilizer industry remains bright. Increasing world population and improving diets, combined with historically low grain stocks, necessitate greater agricultural output which will require higher fertilizer use. Strong demand growth projected in Asia and Latin America is expected to require additional supplies beyond the global industry's current capability. Additionally, FRP believes higher prices and operating margins are required before new major phosphate projects are initiated. Weather and government policies will continue to cause annual fluctuations in the overall agricultural and fertilizer supply and demand situation, as witnessed over the past year. FRP's 1996 phosphate rock sales volumes declined 35 percent reflecting primarily the October 1995 expiration of a cost-plus contract that resulted in below market realizations on annual sales volumes of 1.5 million tons net to FRP. Also contributing to the reduction was IMC-Agrico's decision 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. The impact of the 14 percent increase in 1996 realizations, caused primarily by the below market contract expiration, was offset by reduced sales volumes and higher mining costs, resulting in lower earnings from the phosphate rock operations. Sulphur sales volumes for 1996 were 5 percent lower than the 1995 level. FRP has operated its Main Pass and Culberson mines at reduced rates since March 1996 in response to lower domestic sulphur sales to U.S. phosphate fertilizer producers. Sulphur market prices were negatively affected by lower demand. Movement of Canadian sulphur to the U.S. market fell in tandem with lower prices and Canadian producers' concerns over anti-dumping actions taken by the U.S. Department of Commerce. Unit production costs for 1996 rose slightly from 1995 levels because of the reduced production levels and increased energy costs. FRP's future sulphur sales volumes and realizations 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 level. FRP does not anticipate any change would result in a material impact to its financial position or results of operations. Oil and Gas Operations - Main Pass oil operations achieved the following: 1996 1995 ---------- ---------- Sales (barrels) 1,895,500 2,217,600 Average realized price $19.49 $15.82 Operating income (in millions) $10.3 $1.9a a. Included $1.8 million of stock appreciation rights costs. Main Pass operating income for 1996 benefited from a significant increase in average realizations caused by the overall rise in world oil prices which occurred in mid-1996 and again in late 1996. Net production for 1997 is expected to approximate 1996 levels, as increased drilling activities are expected to generate production sufficient to offset declining reservoir production. In June 1996, FRP acquired a 25 percent leasehold interest in an oil and gas joint venture to explore a 35,000 acre project area in south Louisiana. In connection with the acquisition of this interest, FRP reimbursed MOXY, a formerly owned affiliate of FTX, $2.1 million for certain costs previously incurred on the project area. FRP acquired its interest on the same proportionate basis as Phillips Petroleum, which has a 50 percent leasehold interest in the project area and is the operator of the joint venture. Two high-potential, high-risk prospects have been identified to date in the project area. The initial well on the East Fiddler's Lake prospect was unsuccessful in finding commercial oil and gas reserves and resulted in a charge of $2.5 million. The geological data from this well is assisting drilling activity in the project area. Drilling operations commenced on the North Bay Junop prospect in late 1996 and completion of drilling of this well is expected to occur in the second quarter of 1997. Interpretation of the 3-D seismic survey performed over the project area continues and has identified additional leads that may develop into potential prospects. 1995 Compared With 1994. FTX benefited from the significant strengthening in the phosphate fertilizer markets throughout 1995 and the expansion of its sulphur production capacity, resulting in higher revenues and improved operating results. Depreciation and amortization for 1995 decreased $9.6 million from the 1994 amount, caused primarily by a $10.5 million decline relating to FRP's disproportionate interest in IMC-Agrico cash distributions, partially offset by a $2.7 million increase resulting from the acquired sulphur assets. General and administrative expenses for 1995 increased by $19.6 million, primarily because of $18.5 million in stock appreciation rights costs and early retirement charges. Interest expense decreased from 1994 as a result of the significant reduction in average debt levels brought about by FTX's recapitalization. Income taxes for 1995 included the $62.8 million benefit discussed earlier. Minority interests' share of net income for 1995 rose reflecting the increased level of earnings at FRP and included an additional $23.0 million charge ($26.5 million in 1994) because FTX was not paid its proportionate share of FRP distributions. Agricultural Minerals Operations - FRP's agricultural minerals operations reported 1995 operating income of $205.9 million on revenues of $960.0 million compared with operating income of $123.8 million on revenues of $730.4 million in 1994. Significant items impacting operating income follow (in millions): Agricultural minerals operating income -1994 $ 123.8 ---------- Increases (decreases): Sales volumes 81.3 Realizations 147.7 Other 0.6 ---------- Revenue variance 229.6 Cost of sales (135.4)a General and administrative (12.1)b ---------- 82.1 ---------- Agricultural minerals operating income -1995 $ 205.9 ========== a. Includes a reduction to depreciation of $26.3 million in 1995 and $15.8 million in 1994 caused by FRP's disproportionate interest in IMC-Agrico cash distributions. b. 1995 included $10.5 million higher stock appreciation rights costs. FRP's 1995 phosphate fertilizer sales volumes were 7 percent higher than those in 1994, as IMC-Agrico experienced excellent export demand and strong domestic sales for DAP. The increased demand resulted in IMC-Agrico phosphate fertilizer facilities operating near capacity for the majority of 1995. This tight supply/demand situation was reflected in improved phosphate fertilizer realizations, with FRP's average DAP realization increasing 17 percent from 1994. FRP's 1995 DAP realizations included large forward sales to China at prices which were ultimately below market prices at the time of shipment. FRP's phosphate fertilizer unit production costs were increased from 1994, reflecting higher raw material costs for ammonia and phosphate rock. FRP's 1995 phosphate rock sales volumes were slightly higher than in 1994. Increased demand from phosphate fertilizer producers and the addition of a long-term supply contract in October 1994 were offset by the expiration of a contract in October 1995. Because of the low margin associated with sales under the expired contract, the impact to earnings was not significant. FRP's increased sulphur production capacity resulting from the Culberson mine, combined with strong demand from the domestic phosphate fertilizer industry, resulted in a 46 percent increase in sales volumes. FRP also benefited from the strengthening in Tampa, Florida sulphur prices during 1995. Main Pass unit production costs for 1995 were virtually unchanged from 1994. Oil and Gas Operations - In mid-1994, FTX distributed substantially all its non-Main Pass oil and gas exploration activities to its common stockholders as part of the MOXY distribution (Note 9). FRP's operating results at Main Pass follow: 1995 1994 ---------- ---------- Sales (barrels) 2,217,600 2,533,700 Averaged realized price $15.82 $13.74 Operating income (in millions) $1.9a $2.8 a. Included $1.8 million of stock appreciation rights costs. CAPITAL RESOURCES AND LIQUIDITY FTX's main source of cash flow is distributions from its ownership in FRP. In connection with the February 1992 offering of FRP units, FRP committed for a five-year period to providing public unitholders a preferential right to receive quarterly distributions of 60 cents per unit before paying any distributions to FTX. On January 17, 1997, FRP declared a distribution of 60 cents per publicly held unit ($30.0 million) and 24 cents per FTX-owned unit ($12.9 million), increasing the total unpaid distributions to FTX to $431.3 million. This distribution completed that commitment and the preferential rights of the publicly owned FRP units to receive minimum quarterly distributions of 60 cents per unit ceased with this distribution. FRP's distributable cash will now be shared ratably by FRP's public unitholders and FTX, except that FTX will be entitled to receive its unpaid cash distributions from one-half of the quarterly distributable cash after the payment of 60 cents per unit to all FRP unitholders. If this distribution policy had been in effect for this distribution, each FRP unitholder would have received approximately 42 cents per unit. FRP's future distributions will depend on the distributions received from IMC-Agrico, on the cash flow generated from FRP's sulphur and oil operations, and on the level of and methods of financing its capital expenditure needs, including reclamation and growth projects. FRP's distributable cash in January 1997 included $41.1 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). FRP's Current Interest is 54.35 percent until June 30, 1997 and declines to 41.45 percent thereafter. FTX's recapitalization and restructuring activities in 1995 significantly reduced its parent company obligations. However, FTX retained certain obligations reported as liabilities on its balance sheet related to its past business activities, including oil and gas payments and employee benefit liabilities. It also has guaranteed the debt of FM Properties Inc. (Note 8). FTX anticipates that its cash distributions from FRP and amounts available to it under the credit facility ($280.0 million of additional borrowings available to FRP at February 4, 1997, $119.0 million of which is available to FTX) will be sufficient to meet these obligations. In August 1995, the FTX Board of Directors established a quarterly cash dividend policy of 9 cents per common share. This dividend policy allows FTX to use additional available funds to purchase FTX stock, purchase FRP units and/or invest in 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. Net cash provided by continuing operations was $236.9 million in 1996, $241.0 million in 1995 (excludes $138.6 million from discontinued operations) and $170.6 million in 1994 (excludes $336.2 million from discontinued operations). Benefiting the 1995 and 1994 periods were working capital reductions achieved by IMC-Agrico and the sale of receivables (Note 1). Net cash used in investing activities totaled $51.0 million in 1996, $368.9 million in 1995 and $694.2 million in 1994. Investing activities for 1995 and 1994 included significant expenditures by its discontinued operations. Investing cash flows for 1996 included $13.0 million for a Florida phosphate rock reserve acquisition and 1995 included the Mallinckrodt animal feed ingredients acquisition. Based on current estimates, capital expenditures for 1997 will approximate $60 million. Sales of various non-core assets generated proceeds of $4.0 million in 1996, $26.9 million in 1995 and $112.0 million in 1994. Net cash provided by (used in) financing activities totaled $(189.4) million in 1996, $(14.0) million in 1995 and $207.2 million in 1994. During 1996, FTX acquired 3.7 million of its common shares for $132.1 million and 0.1 million FRP units for $1.3 million. During 1995, FTX's equity purchases totaled $160.8 million, acquiring 1.0 million of its common shares for $44.8 million, 5.3 million FCX shares for $111.7 million and 0.3 million FRP units for $4.3 million. During 1994, FTX's equity purchases consisted primarily of 0.6 million of its common shares for $67.7 million and 2.2 million FCX shares for $47.6 million. Net borrowings (including debt offerings and redemptions) totaled $79.4 million in 1996 and $398.3 million in 1994, compared with net repayments of $153.7 million in 1995. During 1995, FTX sold 23.9 million FCX shares for net proceeds of $497.2 million, which was used to retire all parent company debt. During 1994, FCX sold preferred stock to finance its significant expansion-related capital expenditures. Distributions to FCX minority interests reflect the mid-1995 distribution of FCX. The reduction in cash dividends results from changes in FTX's dividend policy and the conversion of FTX's preferred stock to common stock in mid-1995. ENVIRONMENTAL FTX has a history of commitment to environmental responsibility. Since the 1940s, long before public attention focused on the importance of maintaining environmental quality, FTX has conducted preoperational, bioassay, marine ecological and other environmental surveys to ensure the environmental compatibility of its operations. FTX's Environmental Policy commits its operations to compliance with local, state and federal laws and regulations, and prescribes the use of periodic environmental audits of all facilities to evaluate compliance status and communicate that information to management. FTX has access to environmental specialists who have developed and implemented corporatewide environmental programs. FTX's operating units continue to study methods to reduce discharges and emissions. Federal legislation (sometimes referred to as "Superfund") requires payments for cleanup of certain waste sites, even though waste management activities were performed in compliance with regulations applicable at the time. Under the Superfund legislation, one party may, under certain circumstances, be required to bear more than its proportional share of cleanup costs at a site where it has responsibility pursuant to the legislation, if payments cannot be obtained from other responsible parties. Other legislation mandates cleanup of certain wastes at operating sites. States also have regulatory programs that can mandate waste cleanup. Liability under these laws involves inherent uncertainties. FTX has received notices from governmental agencies that it is one of several to many potentially responsible parties at certain sites under relevant federal and state environmental laws. Some of these sites involve significant cleanup costs; however, at most of these sites other large and viable companies with equal or larger proportionate shares are among the potentially responsible parties. The ultimate settlement for such sites usually occurs several years subsequent to the receipt of notices identifying potentially responsible parties because of the many complex technical and financial issues associated with site cleanup. FTX believes that the aggregation of any costs associated with the potential liabilities at those sites for which notification has been received will not exceed amounts accrued and expects that any costs would be incurred over a period of years. FTX is aware that additional sites may receive such notices in the future. The costs associated with any sites for which notifications have not been received are uncertain and cannot be estimated at present. However, FTX believes that these costs, should they be incurred, will not have a material adverse effect on its operations or financial position. FTX maintains insurance coverage in amounts deemed prudent for certain types of damages associated with environmental liabilities which arise from unexpected and unforeseen events and has an indemnification agreement covering certain acquired sites (Note 8). FTX has made, and will continue to make, expenditures at its operations for protection of the environment. Continued government and public emphasis on environmental issues can be expected to result in increased future investments for environmental controls, which will be charged against income from future operations. Present and future environmental laws and regulations applicable to FTX's operations may require substantial capital expenditures and may affect its operations in other ways that cannot now be accurately predicted. CAUTIONARY STATEMENT Management's discussion and analysis contains forward-looking statements regarding sales and production volumes, capital expenditures, product markets, etc. Important factors that might cause future results to differ from these projections are described in more detail in FTX's Form 10-K for the year ended December 31, 1996 filed with the Securities and Exchange Commission. -------------------------------- The results of operations reported and summarized above are not necessarily indicative of future operating results. REPORT OF MANAGEMENT Freeport-McMoRan Inc. (the Company) is responsible for the preparation of the financial statements and all other information contained in this Annual Report. The financial statements have been prepared in conformity with generally accepted accounting principles and include amounts that are based on management's informed judgments and estimates. The Company maintains a system of internal accounting controls designed to provide reasonable assurance at reasonable costs that assets are safeguarded against loss or unauthorized use, that transactions are executed in accordance with management's authorization and that transactions are recorded and summarized properly. The system is tested and evaluated on a regular basis by the Company's internal auditors, Price Waterhouse LLP. In accordance with generally accepted auditing standards, the Company's independent public accountants, Arthur Andersen LLP, have developed an overall understanding of our accounting and financial controls and have conducted other tests as they consider necessary to support their opinion on the financial statements. The Board of Directors, through its Audit Committee composed solely of non-employee directors, is responsible for overseeing the integrity and reliability of the Company's accounting and financial reporting practices and the effectiveness of its system of internal controls. Arthur Andersen LLP and Price Waterhouse LLP meet regularly with, and have access to, this committee, with and without management present, to discuss the results of their audit work. Rene L. Latiolais Robert M. Wohleber President and Senior Vice President and Chief Executive Officer Chief Financial Officer REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF FREEPORT-McMoRan INC.: We have audited the accompanying balance sheets of Freeport-McMoRan Inc. (the Company), a Delaware Corporation, and consolidated subsidiaries as of December 31, 1996 and 1995, and the related statements of income, cash flow and stockholders' equity for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of IMC-Agrico Company (the Joint Venture). The Company's share of the Joint Venture constitutes 47 percent and 44 percent of assets as of December 31, 1996 and 1995, and 82 percent, 80 percent and 85 percent of the Company's total revenues for the years ended December 31, 1996, 1995 and 1994, respectively. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for the Company's interest in the Joint Venture, is based solely on the reports of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of Freeport-McMoRan Inc. and consolidated subsidiaries as of December 31, 1996 and 1995 and the results of its operations and its cash flow for each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles. New Orleans, Louisiana, Arthur Andersen LLP January 21, 1997 FREEPORT-MCMORAN INC. BALANCE SHEETS December 31, --------------------- 1996 1995 ---------- ---------- (In Thousands) ASSETS Current assets: Cash and cash equivalents $ 19,977 $ 23,496 Accounts receivable: Customers 44,256 58,220 Other 27,539 42,774 Inventories: Products 106,002 83,924 Materials and supplies 35,156 35,086 Prepaid expenses and other 5,065 4,499 ---------- ---------- Total current assets 237,995 247,999 ---------- ---------- Property, plant and equipment 1,892,577 1,978,065 Less accumulated depreciation and amortization 927,790 978,225 ---------- ---------- Net property, plant and equipment 964,787 999,840 ---------- ---------- Other assets 48,641 72,631 ---------- ---------- Total assets $1,251,423 $1,320,470 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable and accrued liabilities $ 168,557 $ 180,766 Long-term debt, less current portion 441,030 359,501 Accrued postretirement benefits and pension costs 182,832 170,542 Reclamation and mine shutdown reserves 106,374 128,981 Other liabilities and deferred credits 84,247 92,722 Minority interest 174,081 196,021 Stockholders' equity: Convertible exchangeable preferred stock, par value $1 per share, at liquidation value, authorized 50,000,000 shares 50,084 50,084 Common stock, par value $0.01 per share, authorized 100,000,000 shares 340 337 Capital in excess of par value of common stock 527,491 522,694 Retained earnings 124,044 92,746 Common stock held in treasury -9,790,000 and 6,016,800 shares, respectively, at cost (607,657) (473,924) ---------- ---------- 94,302 191,937 ---------- ---------- Total liabilities and stockholders' equity $1,251,423 $1,320,470 ========== ========== The accompanying Notes to Financial Statements are an integral part of these financial statements. FREEPORT-McMoRan INC. STATEMENTS OF INCOME Years Ended December 31, ------------------------------------------------- 1996 1995 1994 ---------- ---------- --------- (In Thousands, Except Per Share Amounts) Revenues $ 957,456 $ 995,857 $ 770,112 Cost of sales: Production and delivery 662,397 688,260 556,746 Depreciation and amortization 38,927 46,784 56,411 ---------- ---------- ---------- Total cost of sales 701,324 735,044 613,157 Gain on IMC-Agrico investment (11,917) - - Exploration expenses 2,485 - 6,672 General and admin- istrative expenses 60,208 77,933 58,379 ---------- ---------- ---------- Total costs and expenses 752,100 812,977 678,208 ---------- ---------- ---------- Operating income 205,356 182,880 91,904 Interest expense, net (34,155) (49,655) (71,565) Other income (expense), net 1,332 9,624 (1,245) ---------- --------- ---------- Income before minority interest and income taxes 172,533 142,849 19,094 Minority interest in net income of consolidated subsidiaries (100,279) (101,432) (67,364) Income tax (provision) benefit (27,164) 50,983 13,138 ---------- ---------- ---------- Income (loss) from continuing operations 45,090 92,400 (35,132) Discontinued operations - 340,424 107,715 ---------- ---------- ---------- Income before extraordinary item 45,090 432,824 72,583 Extraordinary loss on early extinguishment of debt, net - - (9,108) ---------- ---------- ---------- Net income 45,090 432,824 63,475 Preferred dividends (4,382) (42,283) (22,032) ---------- ---------- ---------- Net income applicable to common stock $ 40,708 $ 390,541 $ 41,443 ========== ========== ========== Net income per primary share: Before discon- tinued opera- tions and extraordinary loss $1.55 $1.92 $(2.46) Discontinued operations - 13.05 4.64 Extraordinary loss - - (.39) ----- ------ ------- $1.55 $14.97 $ 1.79 ===== ====== ======= Net income per fully diluted share: Before discon- tinued opera- tions and extraordinary loss $1.55 $2.56 $(2.46) Discontinued operations - 11.64 4.64 Extraordinary loss - - (.39) ----- ------ ------ $1.55 $14.20 $ 1.79 ===== ====== ====== Average common and common equivalent shares outstanding: Primary 26,275 26,081 23,204 ====== ====== ======= Fully diluted 26,275 29,240 23,204 ====== ====== ======= Dividends per common share: Cash $.36 $.18 $1.875 Property - 108.41 7.768 ---- ------- ------- $.36 $108.59 $9.643 ==== ======= ======= The accompanying Notes to Financial Statements are an integral part of these financial statements. FREEPORT-MCMORAN INC. STATEMENTS OF STOCKHOLDERS' EQUITY Years Ended December 31, ------------------------------------- 1996 1995 1994 ---------- ---------- ---------- (In Thousands) $4.375 Convertible exchangeable preferred stock: Balance at beginning of year $ 50,084 $ 250,000 $ 250,000 Conversions to common stock - (199,916) - ---------- ---------- ---------- Balance at end of year 50,084 50,084 250,000 ---------- ---------- ---------- Common stock: Balance at beginning of year 337 166,365 165,293 Conversions to common stock and other 3 32,649 1,072 One-for-six reverse stock split and change in par value - (198,677) - ---------- ---------- ---------- Balance at end of year 340 337 166,365 ---------- ---------- ---------- Capital in excess of par value of common stock: Balance at beginning of year 522,694 - 21,868 Dividends on common stock - (1,427) (35,600) Distribution of FCX - (240,721) - Conversions to common stock and other 4,797 566,165 13,732 One-for-six reverse stock split and change in par value - 198,677 - ---------- ---------- ---------- Balance at end of year 527,491 522,694 - ---------- ---------- ---------- Retained earnings (deficit): Balance at beginning of year 92,746 (221,925) (81,224) Net income 45,090 432,824 63,475 Dividends on preferred stock (4,382) (42,283) (22,032) Dividends on common stock (9,410) (39,166) (182,144) Sale of Freeport Copper Company to FCX - 15,600 - Distribution of FCX - (52,304) - ---------- ---------- ---------- Balance at end of year 124,044 92,746 (221,925) ---------- ---------- ---------- Common stock held in treasury: Balance at beginning of year (473,924) (424,907) (355,288) Purchase of 3,729,600, 981,300 and 638,600 shares, respectively (132,118) (44,752) (67,747) Other (1,615) (4,265) (1,872) ---------- ---------- ---------- Balance at end of year (607,657) (473,924) (424,907) ---------- ---------- ---------- Total stockholders' equity $ 94,302 $ 191,937 $ (230,467) ========== ========== ========== The accompanying Notes to Financial Statements are an integral part of these financial statements. FREEPORT-McMoRan INC. STATEMENTS OF CASH FLOW Years Ended December 31, ------------------------------------ 1996 1995 1994 ---------- ---------- ---------- (In Thousands) Cash flow from operating activities: Net income $ 45,090 $ 432,824 $ 63,475 Adjustments to reconcile net income to net cash provided by operating activities: Extraordinary loss on early extinguishment of debt - - 9,108 Depreciation and amortization 38,927 99,622 137,038 Gain on IMC-Agrico investment (11,917) - - Oil and gas exploration expenses 2,485 - 5,231 (Recognition) deferral of unearned income (38) (36,207) 36,207 Amortization of debt discount and financing costs 2,207 16,112 37,128 Gain on FCX securities transactions - (435,060) (114,750) Loss on recapitalization of FTX securities - 44,371 - Deferred income taxes 22,004 46,290 96,065 Minority interests' share of net income 100,279 184,425 168,951 Cash distributions from IMC-Agrico in excess of interest in capital 49,354 40,835 43,293 Reclamation and mine shutdown expenditures (13,634) (10,545) (9,837) (Increase) decrease in working capital, net of effect of acquisitions and dispositions: Accounts receivable 41,741 11,374 (44,614) Inventories (23,405) (22,851) (76,527) Prepaid expenses and other (607) 1,705 7,350 Accounts payable and accrued liabilities (34,408) (6,337) 163,283 Other 18,818 13,025 (14,574) ---------- ---------- ---------- Net cash provided by operating activities 236,896 379,583 506,827 ---------- ---------- ---------- Cash flow from investing activities: Capital expenditures: FRP (53,580) (39,485) (29,681) FCX - (308,099) (743,470) Other (1,436) (2,070) (33,070) Sale of assets: Geothermal - - 36,910 Other 4,000 26,906 75,092 Mallinckrodt purchase - (46,200) - ---------- ---------- ---------- Net cash used in investing activities $ (51,016) $ (368,948) $ (694,219) ---------- ---------- ---------- FREEPORT-McMoRan INC. STATEMENTS OF CASH FLOW Years Ended December 31, ---------------------------------- 1996 1995 1994 ---------- ------ ------- (In Thousands) Cash flow from financing activities: Purchase of FTX common shares $ (132,118) $ (44,752) $ (67,747) Purchase of FCX Class A common shares - (111,747) (47,596) Purchase of FRP units (1,305) (4,314) (1,342) Distribution of MOXY shares - - (35,441) Proceeds from debt 253,668 739,795 780,753 Repayment of debt (322,105) (597,700) (501,901) Proceeds from (purchase of) debt securities: ABC debentures - (280,826) - 6.55% Senior notes - (14,955) - 10 7/8% Senior debentures - - (142,919) FRP notes 147,831 - 146,125 FCX notes - - 116,276 Proceeds from sale of FCX equity securities - 497,166 252,985 Distributions paid to minority interests: FRP (121,994) (121,439) (121,184) FCX - (59,970) (110,312) Cash dividends paid: Common stock (9,346) (5,168) (44,467) Preferred stock (4,382) (8,757) (22,110) Other 352 (1,380) 6,088 ---------- ---------- ---------- Net cash provided by (used in) financing activities (189,399) (14,047) 207,208 ---------- ---------- ---------- Net increase (decrease) in cash and cash equivalents (3,519) (3,412) 19,816 Net (increase) decrease attributable to discontinued operations - 13,098 (30,454) Cash and cash equivalents at beginning of year 23,496 13,810 24,448 ---------- ---------- ---------- Cash and cash equivalents at end of year $ 19,977 $ 23,496 $ 13,810 ========== ========== ========== Interest paid $ 30,954 $ 85,861 $ 94,631 ========== ========== ========== Income taxes paid $ 110 $ 72,458 $ 42,576 ========== ========== ========== The accompanying Notes to Financial Statements, which include information in Notes 1-4, 6, 7 and 9 regarding noncash transactions, are an integral part of these financial statements. 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation. The consolidated financial statements of Freeport-McMoRan Inc. (FTX) include all majority-owned subsidiaries and its majority owned publicly traded partnership, Freeport-McMoRan Resource Partners, Limited Partnership (Note 2). Investments in joint ventures and partnerships (other than publicly traded entities), including IMC-Agrico Company (Note 2), are reflected using the proportionate consolidation method in accordance with standard industry practice. All significant intercompany transactions have been eliminated. Certain prior year amounts have been reclassified to conform to the 1996 presentation. Use of Estimates. The preparation of FTX's financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. The more significant areas requiring the use of management estimates include the allowances for obsolete inventory and uncollectible receivables, reclamation and environmental obligations, postretirement and other employee benefits, valuation allowances for deferred tax assets, future cash flow associated with assets, and useful lives for depreciation and amortization. Actual results could differ from those estimates. Cash and Cash Equivalents. Highly liquid investments purchased with a maturity of three months or less are considered cash equivalents. Cash and cash equivalents held by consolidated entities are not available to FTX until a distribution is paid to all owners of an entity's equity securities. Accounts Receivable. IMC-Agrico Company (IMC-Agrico) has an agreement whereby it can sell on an ongoing basis up to $65.0 million of accounts receivable. FTX's accounts receivable at December 31, 1996 and 1995 were net of $23.9 million and $28.3 million of receivables sold, respectively. Inventories. Inventories are stated at the lower of average cost or market. Property, Plant and Equipment. Property, plant and equipment are carried at cost, including interest capitalized during the construction and development period. Expenditures for replacements and improvements are capitalized. Depreciation for mining and production assets, including mineral interests, is determined using the unit-of-production method based on estimated recoverable reserves. Other assets are depreciated on a straight-line basis over estimated useful lives of 17 to 30 years for buildings and 5 to 25 years for machinery and equipment. In 1995, the Financial Accounting Standards Board issued Statement No. 121 (FAS 121) which requires a reduction of the carrying amount of long-lived assets to fair value when events indicate that the carrying amount may not be recoverable. FTX adopted FAS 121 effective January 1, 1995, the effect of which was not material. Oil and Gas Costs. FTX follows the successful efforts method of accounting for its oil and gas operations. Costs of leases, productive exploratory wells and development activities are capitalized. Other exploration costs are expensed. Depreciation and amortization is determined on a field-by-field basis using the unit- of-production method. Gain or loss is included in income when properties are sold. Environmental Remediation and Compliance. FTX incurs significant costs for environmental programs and projects. Expenditures pertaining to future revenues from operations are capitalized. Expenditures resulting from the remediation of conditions caused by past operations which do not contribute to future revenue generation are expensed. Liabilities are recognized for remedial activities when the efforts are probable and the cost can be reasonably estimated. Estimated future expenditures to restore properties and related facilities to a state required to comply with environmental and other regulations are accrued over the life of the properties. The future expenditures are estimated based on current costs, laws and regulations. As of December 31, 1996, FTX had accrued $54.3 million for abandonment and restoration of its non-operating sulphur assets, $43.2 million for reclamation of land relating to mining and processing phosphate rock and $20.3 million for the dismantlement and abandonment of certain oil and gas properties (a total of $37.0 million reflected in accounts payable, $14.6 million of which will be reimbursed by third parties). FTX's share of abandonment and restoration costs for its two operating sulphur mines is estimated to total approximately $50 million, $18.3 million of which had been accrued at December 31, 1996, with essentially all costs being incurred after mine closure. These estimates are by their nature imprecise and can be expected to be revised over time because of changes in government regulations, operations, technology and inflation. Net Income Per Share. Primary net income per share is computed by dividing net income applicable to common stock by the average common and common equivalent shares outstanding. Fully diluted net income per share is computed assuming all convertible securities, if dilutive, were converted at the beginning of the period or date of issuance, whichever is later. 2. FREEPORT-McMoRAN RESOURCE PARTNERS, LIMITED PARTNERSHIP (FRP) FTX's fertilizer and sulphur operations and its Main Pass oil operations are conducted through its publicly traded affiliate, FRP. FTX owned 51.6 percent of the FRP units outstanding at December 31, 1996. In 1993, FRP and IMC Global Inc. (IGL) formed the IMC-Agrico joint venture, operated by IGL, for their respective phosphate fertilizer businesses, including phosphate rock. FRP's "Current Interest," reflecting cash to be distributed from ongoing operations, initially was 58.6 percent and its "Capital Interest," reflecting the purchase or sale of long-term assets or any required capital contributions, was 46.5 percent. In March 1996, FRP and IGL increased FRP's ownership in IMC-Agrico by 0.85 percent, resulting in FRP recognizing a gain of $11.9 million from the increased share of IMC- Agrico's net assets. These ownership percentages were 54.35 percent and 43.05 percent, respectively, at December 31, 1996 and decline to 41.45 percent in July 1997 and remain constant thereafter. At December 31, 1996, FRP's investment in IMC-Agrico totaled $399.6 million. IMC-Agrico's assets are not available to FRP until distributions are paid by the joint venture. On January 17, 1997, FRP declared a distribution of 60 cents per publicly held unit ($30.0 million) and 24 cents per FTX-owned unit ($12.9 million), increasing the total unpaid distributions to FTX to $431.3 million. The preferential rights of the publicly owned FRP units to receive minimum quarterly distributions of 60 cents per unit ceased with this distribution. FRP's distributable cash will now be shared ratably by FRP's public unitholders and FTX, except that FTX will be entitled to receive its unpaid cash distributions from one- half of the quarterly distributable cash after the payment of 60 cents per unit to all FRP unitholders. FTX recognized additional minority interest charges of $14.4 million in 1996, $23.0 million in 1995 and $26.5 million in 1994 because it was not paid its proportionate share of FRP distributions. In the first quarter of 1997, FTX will recognize an additional $9.3 million minority interest charge in connection with the final quarterly distribution under the public unitholders' preferential distribution priority. However, to the extent the cumulative unpaid distributions are reduced in the future, FTX will recognize a disproportionately greater share of FRP's reported earnings. 3. FREEPORT-McMoRAN COPPER & GOLD INC. (FCX) In July 1995, FTX distributed 117,909,323 shares of FCX Class B common stock to FTX common stockholders. As a result of FTX no longer owning any interest in FCX, FTX's financial statements reflect activities related to FCX's operations as discontinued. In connection with a recapitalization of its liabilities, prior to the FCX distribution, FTX sold 23.9 million shares of FCX Class A common stock in 1995 to The RTZ Corporation PLC (RTZ) for net proceeds of $497.2 million, recognizing a pretax gain of $435.1 million. Discontinued operations results follow (in thousands): 1995 1994 ---------- ---------- Revenues $ 830,275 $1,212,284 ========== ========== Income from discontinued operations $ 221,927 $ 256,079 Minority interest (82,992) (101,588) Provision for taxes (95,436) (115,357) ---------- ---------- 43,499 39,134 Gain on FCX securities transactions 435,060 114,750 Recapitalization losses (Note 4) (44,371) - Provision for taxes (93,764) (46,169) ---------- ---------- $ 340,424 $ 107,715 ========== ========== Income from discontinued operations includes allocated interest from FTX totaling $16.6 million in 1995 and $21.8 million in 1994. Interest expense was allocated to discontinued operations based on the ratio of net assets to be discontinued to the sum of total consolidated net assets of FTX plus FTX's consolidated debt. In 1995, FCX paid FTX $25.0 million for 100 percent of the stock of Freeport Copper Company whose sole asset was a 50 percent interest in a joint venture controlling approximately 7,600 contiguous acres in Arizona. The joint venture was involved in a research project for an experimental in-situ leaching process that would be used to mine copper. 4. LONG-TERM DEBT December 31, ----------------------- 1996 1995 ---------- ---------- Notes payable: (In Thousands) Credit Agreement, average rate 6.4% in 1996 and 7.1% in 1995 $ 88,000 $ 196,400 IMC-Agrico debt 53,403 13,440 Publicly traded notes: FRP 7% Senior Notes due 2008 150,000 - FRP 8 3/4% Senior Subordinated Notes due 2004 150,000 150,000 ---------- ---------- 441,403 359,840 Less current portion, included in accounts payable 373 339 ---------- ---------- $ 441,030 $ 359,501 ========== ========== Notes Payable. In November 1996, FTX amended its variable rate revolving credit facility (the Credit Agreement) increasing the borrowing availability, lowering the interest rates and extending the maturity date. The facility now provides $350 million of credit, all of which is available to FRP ($262.0 million of additional borrowings available at December 31, 1996) and $150 million of which is available to FTX ($112.0 million of additional borrowings available at December 31, 1996), through November 2001. Under this facility, FTX is required to retain control of FRP and FRP is not permitted to enter into any agreement restricting its ability to make distributions or create liens on its assets. As security for the banks for FTX borrowings, FTX has pledged units representing 50.1 percent of FRP. The Credit Agreement provides for FRP minimum working capital requirements, specified cash flow to interest coverage, maximum debt to capitalization ratios and restrictions on other borrowings. IMC-Agrico has committed variable rate lines of credit aggregating $125 million. Borrowings under these facilities are unsecured with a negative pledge on substantially all of IMC-Agrico's assets. These lines have minimum capital, fixed charge and current ratio requirements for IMC-Agrico; limit IMC-Agrico indebtedness and restrict the ability of IMC-Agrico to make cash distributions in excess of distributable cash generated. FTX and FRP entered into interest rate swaps to manage exposure to rate changes on a portion of their variable rate debt. Under 1986 agreements, FTX paid an average fixed rate of 8.2 percent on $150.1 million of financing until April 1996. FTX and FRP pay 10.2 percent on agreements entered into in late 1987 and early 1988 on $41.3 million of financing at December 31, 1996, reducing annually through 1999. FTX received an average interest rate of 5.8 percent in 1996, 6.1 percent in 1995 and 4.4 percent in 1994, resulting in additional interest costs of $3.3 million, $5.4 million and $9.8 million, respectively. Based on market conditions at December 31, 1996, unwinding these interest swaps would require an estimated $2.8 million. Publicly Traded Notes. In February 1996, FRP sold publicly $150 million of its 7% Senior Notes and in February 1994, sold publicly $150 million of its 8 3/4% Senior Subordinated Notes. Based on December 31,1996 closing market prices, this debt had a fair value of $141.3 million and $155.3 million, respectively. In June 1995, FTX redeemed $749.2 million principal amount of its Zero Coupon Convertible Subordinated Debentures (ABC Debentures) for $280.8 million (equal to book value) and redeemed $16.4 million face amount of 6.55% Convertible Subordinated Notes (6.55% Notes), with a book value of $14.1 million, for $15.0 million. Prior to the redemption, FTX increased the number of common shares that would be received upon conversion of the 6.55% Notes. Holders of $356.6 million face amount of 6.55% Notes converted their notes at the enhanced rate into 3.3 million FTX common shares. FTX recorded a pretax loss on recapitalization of the ABC Debentures and 6.55% Notes totaling $44.4 million. During 1994, FTX defeased $125.3 million of its 10 7/8% Senior Subordinated Debentures resulting in a $9.1 million after-tax extraordinary loss. Minimum Principal Payments. Payments scheduled for each of the five succeeding years based on the amounts and terms outstanding at December 31, 1996 are $0.4 million, $0.4 million, $0.5 million, $0.5 million and $128.5 million. 5. INCOME TAXES Income taxes are recorded pursuant to FAS 109. The components of FTX's deferred taxes follow: December 31, ----------------------- 1996 1995 ---------- ---------- Deferred tax asset: (In Thousands) Alternative minimum tax credits $ 54,422 $ 49,780 Other tax carryforwards 32,385 31,256 Deferred compensation, postretirement and pension benefits 47,675 52,216 Reclamation and shutdown reserve 23,940 29,492 Basis in subsidiaries 4,736 8,094 Other 17,780 20,141 Valuation allowance (11,624) (11,489) ---------- ---------- Total deferred tax asset 169,314 179,490 ---------- ---------- Deferred tax liability: Property, plant and equipment (124,309) (106,790) IMC-Agrico earnings (19,610) (20,323) Other (33,984) (38,963) ---------- ---------- Total deferred tax liability (177,903) (166,076) ---------- ---------- Net deferred tax asset (liability) $ (8,589) $ 13,414 ========== ========== FTX believes that no valuation allowance is needed for its alternative minimum tax (AMT) credits because historically it has been able to use substantially all of its tax benefits and AMT credits can be carried forward indefinitely. During 1995, primarily because of the distribution of FCX and FTX's recapitalization, all net operating loss carryforwards were utilized. As a result of using its net operating loss carryforwards, FTX determined that it is more likely than not that the majority of its other tax credits would be utilized and, accordingly, reduced the previously established valuation allowance by $27.4 million. FTX has provided a valuation allowance for its charitable contribution carryforwards as they are limited to ten percent of taxable income and substantially all expire between 1997 and 2001. FTX does not provide deferred taxes for financial and income tax reporting basis differences related to its investment in FRP which are considered permanent in duration (approximately $320 million). FTX believes it will ultimately be able to eliminate these differences on a tax-free basis. If ownership in FRP were to fall below 50 percent or if FTX were to determine that such difference will not be eliminated tax-free, FTX would be required to charge earnings for taxes on the difference between the book and tax basis of its investment. The income tax (provision) benefit from continuing operations consists of the following: 1996 1995 1994 ---------- ---------- ---------- (In Thousands) Current income taxes: Federal $ (2,885) $ 116,920 $ (7,206) State (2,275) 13,286 788 ---------- ---------- ---------- (5,160) 130,206 (6,418) ---------- ---------- ---------- Deferred income taxes: Federal (19,793) (62,218) 20,482 State (2,211) (17,005) (926) ---------- ---------- ---------- (22,004) (79,223) 19,556 ---------- ---------- ---------- $ (27,164) $ 50,983 $ 13,138 ========== ========== ========== Reconciliations of the differences between income taxes from continuing operations computed at the federal statutory tax rate and income taxes recorded follow: 1996 1995 1994 ---------- ---------- ---------- Amount Percent Amount Percent Amount Percent ---------- -------- ------- ------- ------ ------- (Dollars In Thousands) Income taxes computed at the federal statutory tax rate $ (60,387) 35% $(49,997) 35% $(6,683) 35% (Increase) decrease attrib- utable to: Statutory depletion 4,899 (3) 5,594 (4) 1,780 (9) Partnership minority interests 37,705 (22) 38,139 (27) 25,342 (133) Taxes no longer required - - 35,449 (25) - - Change in valuation allowance 135 - 27,350 (19) - - Minimum and state taxes (4,486) 3 (3,719) 3 (138) 1 Other (5,030) 3 (1,833) 1 (7,163) 37 ---------- ------ ------- ------- ------- ------- Income tax (provision) benefit $ (27,164) 16% $50,983 (36) % $13,138 (69)% ========== ======= ======== ======= ======= ====== 6. STOCKHOLDERS' EQUITY Preferred Stock. FTX has outstanding one million shares of its $4.375 Preferred Stock, which can be redeemed at $52.1875 per share effective March 1, 1997. Each share is convertible into FTX common stock at a conversion price of $27.36 per share, the equivalent of approximately 1.8 shares of FTX common stock. In April 1995, FTX exchanged 1.9 million common shares for 4.0 million shares of its $4.375 Preferred Stock in accordance with an exchange offer whereby FTX temporarily increased the shares issuable upon conversion. As a result of the exchange offer, FTX recorded a noncash charge of $33.5 million to preferred dividends. Common Stock. In October 1995, FTX effected a one-for-six reverse stock split of its common stock and changed the par value from $1.00 per share to $0.01 per share. In June 1994, FTX changed its dividend policy and distributed quarterly 0.075 FCX common shares for each FTX common share owned in lieu of paying a $1.875 quarterly cash dividend to its stockholders. FTX recorded a pretax gain of $105.5 million in 1994 related to these property dividends which is included in discontinued operations. In August 1995, FTX established a quarterly cash dividend of 9 cents per FTX common share. Stock Options. FTX's stock option plans provide for the issuance of stock options and stock appreciation rights (SARs) at no less than market value at time of grant. FTX can grant options to eligible participants to purchase up to 1.3 million shares under its 1996 Stock Option Plans. The 1988 Stock Option Plan for Non-Employee Directors authorizes FTX to grant options to purchase up to 250,000 shares. Options are generally exercisable in 25 percent annual increments beginning one year from the date of grant and expire 10 years after the date of grant. Under certain options, FTX will pay cash to the optionee equal to an amount based on the maximum individual federal income tax rate in effect at the time of exercise. In connection with the distribution of FCX shares, each option was adjusted to preserve the economic value of the option and resulted in an adjustment to the average option price based on the value of the distribution. A summary of stock options outstanding, including 0.3 million SARs, follows: 1996 1995 ---------------------- ------------------------ Number of Average Number of Average Options Option Price Options Option Price ---------- ---------- ---------- ------------- Beginning of year 1,458,040 $18.84 2,613,588 $98.76 Granted 1,104,804 34.94 21,667 105.36 Adjustments - 63,105 Exercised (388,942) 18.21 (1,177,285) 23.98 Expired/forfeited (31,667) 21.92 (63,035) 89.46 ---------- ---------- End of year 2,142,235 27.21 1,458,040 18.84 ========== ========== At December 31, 1996, stock options representing 0.9 million shares were exercisable at an average option price of $19.01 per share. Options for approximately 543,000 shares and 73,000 shares were available for new grants under the 1996 and 1988 Stock Option Plans, respectively, as of December 31, 1996. Summary information of fixed stock options outstanding at December 31, 1996 follows: Options Outstanding Options Exercisable -------------------------------- ---------------------- Weighted Weighted Weighted Average Average Average Number of Remaining Option Number of Option Options Life Price Options Price ---------- --------- -------- --------- ------- $13.72 to $22.37 814,176 5 years $19.10 685,820 $19.00 $34.81 to $36.69 1,076,976 9 years 34.90 - - ---------- ---------- 1,891,152 685,820 ========== ========== FTX has adopted the disclosure-only provisions of FAS No. 123 and continues to apply APB Opinion No. 25 and related interpretations in accounting for its stock-based compensation plans. Accordingly, no compensation cost has been recognized for FTX's fixed stock option grants. FTX recognized no significant charges in 1996, versus $15.5 million in 1995, for the cost of SARs caused by changes in FTX's common stock price. Had compensation cost for FTX's fixed stock option grants been determined based on the fair value at the grant dates for awards under those plans consistent with FAS 123, FTX's stock based compensation costs would have been increased by $2.9 million ($1.0 million to net income or $0.04 per share) in 1996 and remained essentially unchanged in 1995. For the pro forma computations, the fair values of the fixed option grants were estimated on the dates of grant using the Black-Scholes option-pricing model. The weighted average fair value for fixed stock option grants was $16.34 per option in 1996 and $6.76 per option in 1995. The weighted average assumptions used include a risk-free interest rate of 6.6 percent in 1996 and 6.4 percent in 1995, expected volatility of 27.5 percent in 1996 and 17.3 percent in 1995, expected lives of 10 years and an annual dividend of $0.36 per share. The pro forma effects on net income for 1996 and 1995 are not representative of future years because they do not take into consideration grants made prior to 1995. No other discounts or restrictions related to vesting or the likelihood of vesting of fixed stock options were applied. 7. PENSION AND OTHER EMPLOYEE BENEFITS The FTX pension plan covers substantially all United States and certain overseas employees. Employees covered by collective bargaining agreements and most nonresident aliens, many of whom are covered by other plans, are not included. In June 1996, FTX changed the pension benefit formula to a cash balance formula from the prior benefit calculation based on years of service and final average pay. Under the amended plan, FTX credits each participant's account annually with at least 4 percent of the participant's qualifying compensation. Additionally, interest is credited annually to each participant's account balance. FTX funds its pension liability in accordance with Internal Revenue Service guidelines. Additionally, for those participants in the qualified defined benefit plan whose benefits are limited under federal income tax laws, FTX sponsors an unfunded nonqualified plan. Information on the two plans follows: December31, ----------------------- 1996 1995 ---------- ---------- Actuarial present value of benefit obligations (projected unit credit method): (In Thousands) Vested $ 92,737 $ 136,836 Nonvested 143 3,961 ---------- ---------- Accumulated benefit obligations $ 92,880 $ 140,797 ========== ========== Projected benefit obligations (projected unit credit method) $ (105,625) $ (174,074) Less plan assets at fair value 131,417 130,970 ---------- ---------- Plan assets in excess of (less than) projected benefit obligations 25,792 (43,104) Unrecognized net (gain) loss from past experience different from that assumed (32,637) 22,202 Unrecognized prior service costs (7,308) 3,848 Unrecognized net asset (2,211) (3,288) ---------- ---------- Accrued pension cost $ (16,364) $ (20,342) ========== ========== In determining the present value of benefit obligations for 1996 and 1995, FTX used a 7.75 percent and 7 percent discount rate, respectively, a 5 percent annual increase in future compensation levels and a 9 percent average expected rate of return on assets. Net pension cost for continuing operations includes the following: 1996 1995 1994 ---------- ---------- ---------- (In Thousands) Service cost $ 2,624 $ 4,429 $ 5,668 Interest cost on projected benefit obligations 8,066 10,083 9,008 Actual return on plan assets (16,444) (26,526) 126 Net amortization and deferral 6,580 17,450 (8,814) Termination benefits - 4,292 2,404 ---------- ---------- ---------- Net pension cost $ 826 $ 9,728 $ 8,392 ========== ========== ========== FTX also provides certain health care and life insurance benefits for retired employees. The related expense for continuing operations totaled $5.3 million in 1996 (including $1.2 million for service cost and $6.6 million in interest for prior period services), $10.5 million in 1995 ($1.5 million and $9.0 million, respectively) and $12.3 million in 1994 ($1.3 million and $11.0 million, respectively). Summary information of the plan follows: December 31, ---------------------- 1996 1995 ---------- ---------- (In Thousands) Actuarial present value of accumulated postretirement obligation: Retirees $ 85,623 $ 111,151 Fully eligible active plan participants 2,920 11,248 Other active plan participants 6,499 16,980 ---------- ---------- Total accumulated postretirement obligation 95,042 139,379 Unrecognized net gain (loss) 46,712 (7,498) ---------- ---------- Accrued postretirement benefit cost $ 141,754 $ 131,881 ========== ========== The initial health care cost trend rate used was 8.5 percent for 1997, decreasing 0.5 percent per year until reaching 5 percent. A one percent increase in the trend rate would increase the amounts by approximately 10 percent. The discount rate used was 7.75 percent in 1996 and 7 percent in 1995. FTX has the right to modify or terminate these benefits. As of January 1, 1996, FM Services Company (FMS), a newly formed entity owned 50 percent each by FTX and FCX, began providing certain administrative, financial and other services that were previously provided by FTX on a similar cost-reimbursement basis. All U.S. and expatriate employees performing direct services for FCX or its affiliates, other than those employed by FMS, became FCX employees. FCX and FMS established their own pension and postretirement health care and life insurance plans, assuming liabilities and assets equal to the accumulated benefit obligation for the transferred employees. FTX's share of the FMS plans was not significant for 1996. The operator of IMC-Agrico maintains non-contributory pension plans that cover substantially all of its employees. As of July 1, 1996, FRP's share of the actuarial present value of the vested projected benefit obligation was $16.3 million, based on a discount rate of 7.5 percent and a 5 percent annual increase in future compensation levels, with its share of plan assets totaling $6.2 million. FRP's share of the expense related to these plans totaled $5.1 million in 1996, $4.6 million in 1995 and $3.6 million in 1994. The operator of IMC-Agrico also provides certain health care benefits for retired employees. At July 1, 1996, FRP's share of the accumulated postretirement obligation was $5.4 million, which was unfunded. FRP's share of expense has not been material. The initial health care cost trend rate used was 9.2 percent, decreasing gradually to 5.5 percent in 2003. Employees are not vested and benefits are subject to change. FTX has other employee benefits plans, certain of which are related to its performance, which costs are recognized currently in general and administrative expense. 8. COMMITMENTS AND CONTINGENCIES Litigation. While FTX is a defendant in various lawsuits incurred in the ordinary course of its businesses, management believes the potential liability in such lawsuits is not material or is adequately covered by insurance, third party indemnity agreements or reserves previously established. FTX maintains liability and other insurance customary in its businesses, with coverage limits deemed prudent. Environmental. FTX has made, and will continue to make, expenditures at its operations for protection of the environment. FTX is subject to contingencies as a result of environmental laws and regulations. The related future cost is indeterminable because of such factors as the unknown timing and extent of the corrective actions that may be required and the application of joint and several liability. FRP has a third party indemnification for environmental remediation costs on certain identified sites and the third party has assumed management of response activities and all future expenditures for the indemnified sites. Based on FRP's review of the potential liabilities and the third party's financial condition, FRP concluded that it is remote that FRP would have any future liability at the indemnified sites. FTX believes its exposure on other sites for which notification has been received will not exceed amounts accrued and expects that any costs would be incurred over a period of years. The costs associated with those sites for which notifications have not been received are uncertain and cannot be estimated at present. However, FTX believes that these costs, should they be incurred, will not have a material adverse effect on its operations or financial position. FM Properties Inc. (FMPO). In 1992, FTX transferred substantially all of its domestic oil and gas properties and real estate held for development by it and certain of its subsidiaries to a partnership which is currently 99.8 percent owned by FMPO (FTX owns a 0.2 percent interest in the partnership and serves as its managing general partner). FTX subsequently distributed the FMPO common stock to the FTX common stockholders, with FTX guaranteeing the partnership's debt. During 1996, the partnership was able to extend its debt maturities until February 1998 and is managing its assets with an objective of reducing its debt. Under the partnership agreement, FTX maintains certain protective rights as long as the debt guarantee is outstanding. Selected financial information of the partnership follows: 1996 1995 ---------- ---------- Statements of Operations: (In Thousands) Revenues $ 79,177 $ 48,170 Operating income (loss) 3,534 (2,308) Net loss (346) (571) Cash Flow: Operating activities 68,738 47,480 Investing activities (5,943) (35,242) Financing activities (62,969) (11,156) Balance Sheets at December 31: Current assets 6,241 6,600 Current liabilities 10,125 9,605 Investment in real estate 118,029 180,040 Total assets 130,192 191,805 Long-term debt 58,325 121,294 Partners' capital 56,168 56,514 Long-Term Contracts and Operating Leases. FTX's minimum annual contractual charges under noncancelable long-term contracts and operating leases which extend to 2009 total $232.7 million, with $27.4 million in 1997, $22.5 million in 1998, $21.6 million in 1999, $21.0 million in 2000 and $20.9 million in 2001. Total expense under long- term contracts and operating leases amounted to $23.0 million in 1996, $44.3 million in 1995 and $30.0 million in 1994. 9. ACQUISITIONS AND MOXY DISTRIBUTION Pennzoil. In January 1995, FRP acquired essentially all of the domestic assets of Pennzoil Co.'s sulphur division. Pennzoil will receive quarterly payments from FRP over 20 years based on the prevailing price of sulphur. The installment payments may be terminated earlier either by FRP through the exercise of a $65 million call option or by Pennzoil through a $10 million put option. Neither option may be exercised prior to 1999. The purchase price allocation follows (in thousands): Current assets $ 5,635 Property, plant and equipment 48,837 Current liabilities (7,499) Reclamation and mine shutdown reserves (15,200) Accrued long-term liabilities (31,773) ---------- Net cash investment $ - ========== Accrued long-term liabilities include the estimated future installment payments based on the prevailing sulphur price at the time of acquisition. Mallinckrodt. In October 1995, IMC-Agrico acquired the animal feed ingredients business of Mallinckrodt Group Inc. FRP funded its portion of the purchase price with borrowings under the Credit Agreement. The purchase price allocation follows (in thousands): Current assets $ 19,503 Property, plant and equipment 35,329 Current liabilities (8,632) ---------- Net cash investment $ 46,200 ========== McMoRan Oil & Gas Co. (MOXY). In 1994, FTX distributed common shares of its newly formed, wholly owned subsidiary, MOXY, to FTX's stockholders. MOXY was organized to carry on substantially all of the oil and gas exploration activities previously conducted by FTX. The net assets transferred to MOXY at FTX's historical cost follows (in thousands): Cash and cash equivalents $ 35,441 Property, plant and equipment 13,052 Other assets 10,113 Current liabilities (1,138) ---------- $ 57,468 ========== 10. SUPPLEMENTARY MINERAL RESERVE INFORMATION (UNAUDITED) Proved and probable mineral reserves, including proved oil reserves, follow: December 31, --------------------------------------------------- 1996 1995 1994 1993 1992 ---------- ---------- ------- ------ ------ (In Thousands) Sulphur-long tons a 53,149 55,185 41,018 38,637 41,570 Phosphate rock-short tons b 244,332 186,375 206,661 215,156 208,655 Oil-barrels 5,188 6,638 7,279 9,962 13,861 a. Main Pass reserves are subject to a 12.5 percent royalty based on net mine revenues. Culberson reserves totaled 14.5 million tons for 1996 and 15.4 million tons for 1995 and are subject to a 9 percent royalty based on net mine revenues. b. For 1996-1993, represents FRP's share, based on its Capital Interest ownership, of the IMC-Agrico reserves. Contains an average of 67 percent bone phosphate of lime. 11. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Net Income Per Net Income Common Share Operating Applicable to --------------------- Revenues Income Common Stock Primary Fully Diluted ---------- ---------- ------------ ---------- ------------- 1996 (In Thousands, Except Per Share Amounts) 1st Quarter $ 256,827 $ 69,739 $ 20,129a $.73a $.72 2nd Quarter 242,793 46,430 12,126 .45 .45 3rd Quarter 222,649 43,891 2,875b .11b .11 4th Quarter 235,187 45,296 5,578b .23b .23 ---------- ---------- ---------- $ 957,456c $ 205,356 $ 40,708 1.55 1.55 ========== ========== ========== 1995 1st Quarter $ 254,479 $ 49,874 $ 19,391b,d $ .85b,d $ .85 2nd Quarter 233,398 47,184 265,485d,e 10.78d,e 8.98 3rd Quarter 243,066 31,631 24,503b,d,f .86b,d,f .86 4th Quarter 264,914 54,191 81,162b,g 2.86b,g 2.86 ---------- ---------- ---------- $ 995,857c $ 182,880 $ 390,541 14.97 14.20 ========== ========== ========== a. Includes a $2.9 million benefit ($0.11 per share) resulting primarily from the gain on the increase in FRP's ownership of IMC- Agrico. b. Because FTX was not paid its proportionate share of FRP distributions, additional minority interest charges to net income were $5.9 million ($0.23 per share) and $4.2 million ($0.17 per share) in the third and fourth quarters of 1996, respectively. Similar charges of $5.5 million ($0.24 per share), $5.2 million ($0.18 per share) and $4.1 million ($0.15 per share) were recorded in the first, third and fourth quarters of 1995, respectively. c. No customers accounted for ten percent or more of total revenues. Export sales to Asia, Australia, Latin America and Canada approximated 43 percent, 41 percent and 38 percent of total revenues for 1996-1994, respectively. d. Includes income from discontinued operations totaling $22.6 million ($0.99 per share), $292.8 million ($11.89 per share) and $25.0 million ($0.88 per share) in the first, second and third quarters of 1995, respectively. e. Includes a $33.5 million charge ($1.36 per share) for the $4.375 Preferred Stock exchange offer. f. Includes a $3.9 million charge ($0.14 per share) for stock appreciation rights costs. g. Includes a $1.8 million charge ($0.06 per share) for stock appreciation rights costs and an early retirement program, a $5.3 million gain ($0.19 per share) for the reversal of insurance accruals no longer required and a $62.8 million tax benefit ($2.21 per share). COMMON SHARES. Our common shares trade on the New York Stock Exchange (NYSE) under the symbol "FTX." The FTX share price is reported daily in the financial press under "FrptMc" in most listings of NYSE securities. At year- end 1996 the number of holders of our common stock was 14,643. Common share prices range on the NYSE composite tape, reflecting the one-for- six reverse stock split effective October 20, 1995, during 1996 and 1995 were: 1996 1995 High Low High Low First Quarter $44.50 $33.63 $111.78 $102.00 Second Quarter 39.75 34.00 111.78 101.28 Third Quarter 38.13 31.00 145.50* 27.00* Fourth Quarter 34.38 29.63 41.13 33.00 * Share prices include periods before and after FTX's July 28, 1995 tax-free distribution of FCX Class B common stock, which had a market value of $106.85 per FTX share. Common Share Dividends. In 1995, subsequent to FTX's restructuring and its 1 for 6 reverse stock split, the Board of Directors fixed the amount of the regularly quarterly common stock cash dividend at $0.09 per share. Cash and property dividends paid during 1996 and 1995 were: 1996 --------------------------------------------------------- Dividends Record Payment Per FTX Share Date Date - ------------ -------- ----------- $0.09 Feb. 15, 1996 Mar. 1, 1996 $0.09 May 16, 1996 Jun. 1, 1996 $0.09 Aug. 15, 1996 Sep. 1, 1996 $0.09 Nov. 15, 1996 Dec. 1, 1996 1995 - ----------------------------------------------------------- Dividends Record Payment Per FTX Share Date Date ____________ ______ ___________ 0.075 FCX.A share* Feb. 15, 1995 Mar. 1, 1995 4.210404 FCX shares** Jul. 17, 1995 Jul. 28, 1995 $0.09 Aug. 15, 1995 Sep. 1, 1995 $0.09 Nov. 15, 1995 Dec. 1, 1995 * The cost basis for the FCX Class A common shares (FCX.A) is $20.9375 per share. ** The July 28, 1995 dividend was a special tax-free dividend made in connection with FTX's restructuring plan completed in 1995 whereby FTX distributed its ownership in FCX through the distribution of FCX Class B common shares (FCX). The cost basis for each share of FTX stock should be reduced to 21 percent of its former basis and the remaining 79 percent of the FTX cost basis should be established as the cost basis for the FCX shares and cash in lieu of a fractional share. EX-21 14 EXHIBIT 21.1 List of Subsidiaries of FREEPORT-McMoRan INC. Name Under Which Entity Organized It Does Business - ----------------------------------- --------- ------------------ Freeport-McMoRan Resource Partners, Delaware Same Limited Partnership IMC-Agrico Company Delaware Same FM Services Company Delaware Same EX-23 15 Exhibit 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference of our reports included herein or incorporated by reference in this Form 10-K/A, into Freeport-McMoRan Inc.'s previously filed Registration Statements on Form S-8 (File Nos. 2-85000, 33-14641, 33-29850, 33-30417 and 33-62170) and IMC Global Inc.'s Form S-4 (File No. 333-40377). /s/Arthur Andersen LLP ---------------------- Arthur Andersen LLP New Orleans, Louisiana, November 18, 1997 EX-23 16 Exhibit 23.2 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements (Form S-8 Nos. 2-85000, 33-14641, 33-29850, 33-30417 and 33-62170) and related Prospectuses pertaining to various stock option plans and in IMC Global Inc.'s Registration Statement (Form S-4 No. 333-40377) and related Prospectus of our report dated January 15, 1997, with respect to the financial statements of IMC-Agrico Company [not presented separately herein] included in the Annual Report (Form 10-K) of Freeport-McMoRan Inc. for the year ended December 31, 1996, as amended by this Form 10-K/A. /s/ ERNST & YOUNG LLP ---------------------- ERNST & YOUNG LLP Chicago, Illinois November 18, 1997 EX-24 17 EXHIBIT 24.1 FREEPORT-McMoRan INC. SECRETARY'S CERTIFICATE I, Michael C. Kilanowski, Jr., Secretary of Freeport-McMoRan Inc. (the "Corporation"), a Delaware corporation, do hereby certify that the following resolution was duly adopted by the Board of Directors of the Corporation at a meeting held on February 29, 1984, and that such resolution has not been amended, modified or rescinded and is in full force and effect: RESOLVED, that any report, registration statement or other form filed on behalf of this corporation pursuant to the Securities Exchange Act of 1934, or any amendment to such report, registration statement or other form, may be signed on behalf of any director or officer of this corporation pursuant to a power of attorney executed by such director or officer. IN WITNESS WHEREOF, I have hereunto signed my name and affixed the seal of the Company on this the 28th day of March, 1997. /s/ Michael C. Kilanowski, Jr. (Seal) -------------------------------- Michael C. Kilanowski, Jr. Secretary EX-24 18 Exhibit 24.2 POWER OF ATTORNEY BE IT KNOWN: That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Inc., a Delaware corporation (the "Company"), does hereby make, constitute and appoint JAMES R. MOFFETT and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the others and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 1996, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney. EXECUTED this 4th day of February, 1997. /s/ Rene L. Latiolais ------------------------------ Rene L. Latiolais POWER OF ATTORNEY BE IT KNOWN: That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Inc., a Delaware corporation (the "Company"), does hereby make, constitute and appoint RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the others and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 1996, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney. EXECUTED this 4th day of February, 1997. /s/ James R. Moffett ------------------------------ James R. Moffett POWER OF ATTORNEY BE IT KNOWN: That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Inc., a Delaware corporation (the "Company"), does hereby make, constitute and appoint JAMES R. MOFFETT and RENE L. LATIOLAIS, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the others and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 1996, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney. EXECUTED this 4th day of February, 1997. /s/ Richard C. Adkerson ------------------------------ Richard C. Adkerson POWER OF ATTORNEY BE IT KNOWN: That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Inc., a Delaware corporation (the "Company"), does hereby make, constitute and appoint JAMES R. MOFFETT, RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the others and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 1996, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney. EXECUTED this 4th day of February, 1997. /s/ Robert W. Bruce III ------------------------------ Robert W. Bruce III POWER OF ATTORNEY BE IT KNOWN: That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Inc., a Delaware corporation (the "Company"), does hereby make, constitute and appoint JAMES R. MOFFETT, RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the others and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 1996, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney. EXECUTED this 4th day of February, 1997. /s/ William J. Blackwell ------------------------------ William J. Blackwell POWER OF ATTORNEY BE IT KNOWN: That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Inc., a Delaware corporation (the "Company"), does hereby make, constitute and appoint JAMES R. MOFFETT, RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the others and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 1996, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney. EXECUTED this 4th day of February, 1997. /s/ Robert A. Day ------------------------------ Robert A. Day POWER OF ATTORNEY BE IT KNOWN: That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Inc., a Delaware corporation (the "Company"), does hereby make, constitute and appoint JAMES R. MOFFETT, RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the others and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 1996, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney. EXECUTED this 4th day of February, 1997. /s/ William B. Harrison, Jr. ------------------------------ William B. Harrison, Jr. POWER OF ATTORNEY BE IT KNOWN: That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Inc., a Delaware corporation (the "Company"), does hereby make, constitute and appoint JAMES R. MOFFETT, RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the others and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 1996, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney. EXECUTED this 4th day of February, 1997. /s/ Henry A. Kissinger ------------------------------ Henry A. Kissinger POWER OF ATTORNEY BE IT KNOWN: That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Inc., a Delaware corporation (the "Company"), does hereby make, constitute and appoint JAMES R. MOFFETT, RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the others and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 1996, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney. EXECUTED this 4th day of February, 1997. /s/ Bobby Lee Lackey ------------------------------ Bobby Lee Lackey POWER OF ATTORNEY BE IT KNOWN: That the undersigned, in her capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Inc., a Delaware corporation (the "Company"), does hereby make, constitute and appoint JAMES R. MOFFETT, RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of them acting individually, her true and lawful attorney-in-fact with power to act without the others and with full power of substitution, to execute, deliver and file, for and on behalf of her, in her name and in her capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 1996, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney. EXECUTED this 4th day of February, 1997. /s/ Gabrielle K. McDonald ------------------------------ Gabrielle K. McDonald POWER OF ATTORNEY BE IT KNOWN: That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Inc., a Delaware corporation (the "Company"), does hereby make, constitute and appoint JAMES R. MOFFETT, RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the others and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 1996, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney. EXECUTED this 4th day of February, 1997. /s/ George Putnam ------------------------------ George Putnam POWER OF ATTORNEY BE IT KNOWN: That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Inc., a Delaware corporation (the "Company"), does hereby make, constitute and appoint JAMES R. MOFFETT, RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the others and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 1996, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney. EXECUTED this 4th day of February, 1997. /s/ B.M. Rankin, Jr. ------------------------------ B.M. Rankin, Jr. POWER OF ATTORNEY BE IT KNOWN: That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Inc., a Delaware corporation (the "Company"), does hereby make, constitute and appoint JAMES R. MOFFETT, RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the others and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 1996, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney. EXECUTED this 4th day of February, 1997. /s/ J. Taylor Wharton ------------------------------ J. Taylor Wharton POWER OF ATTORNEY BE IT KNOWN: That the undersigned, in his capacity or capacities as an officer and/or a member of the Board of Directors of Freeport-McMoRan Inc., a Delaware corporation (the "Company"), does hereby make, constitute and appoint JAMES R. MOFFETT, RENE L. LATIOLAIS and RICHARD C. ADKERSON, and each of them acting individually, his true and lawful attorney-in-fact with power to act without the others and with full power of substitution, to execute, deliver and file, for and on behalf of him, in his name and in his capacity or capacities as aforesaid, an Annual Report of the Company on Form 10-K for the year ended December 31, 1996, and any amendment or amendments thereto and any other document in support thereof or supplemental thereto, and the undersigned hereby grants to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever that said attorney or attorneys may deem necessary or advisable to carry out fully the intent of the foregoing as the undersigned might or could do personally or in the capacity or capacities as aforesaid, hereby ratifying and confirming all acts and things which said attorney or attorneys may do or cause to be done by virtue of this Power of Attorney. EXECUTED this 4th day of February, 1997. /s/ Robert M. Wohleber ------------------------------ Robert M. Wohleber EX-27 19
5 0000351116 FREEPORT-MCMORAN INC 1,000 YEAR DEC-31-1996 DEC-31-1996 19,977 0 44,256 0 141,158 237,995 1,892,577 927,790 1,251,423 168,557 441,030 0 50,084 340 43,878 1,251,423 957,456 957,456 701,324 701,324 (9,432) 0 34,155 172,533 27,164 45,090 0 0 0 45,090 1.55 1.55
EX-99 20 Exhibit 99.1 Report of Ernst & Young LLP We have audited the balance sheets of IMC-Agrico Company (a Partnership) as of December 31, 1996, 1995 and 1994, and June 30, 1996 and 1995 and the related statements of earnings, changes in partners' capital and cash flows for the six-month periods ended December 31, 1996, 1995 and 1994, and the years ended June 30, 1996 and 1995 (not presented separately herein). These financial statements are the responsibility of IMC-Agrico Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of IMC-Agrico Company as of December 31, 1996, 1995 and 1994, and June 30, 1996 and 1995 and the results of its operations and its cash flows for the six- month periods ended December 31, 1996, 1995 and 1994 and the years ended June 30, 1996 and 1995 in accordance with generally accepted accounting principles. /s/ ERNST & YOUNG LLP ------------------- ERNST & YOUNG LLP Chicago, Illinois January 15, 1997 -----END PRIVACY-ENHANCED MESSAGE-----