0000831259-01-500010.txt : 20011018
0000831259-01-500010.hdr.sgml : 20011018
ACCESSION NUMBER: 0000831259-01-500010
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 7
CONFORMED PERIOD OF REPORT: 20010630
FILED AS OF DATE: 20010730
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: FREEPORT MCMORAN COPPER & GOLD INC
CENTRAL INDEX KEY: 0000831259
STANDARD INDUSTRIAL CLASSIFICATION: METAL MINING [1000]
IRS NUMBER: 742480931
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-Q
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-09916
FILM NUMBER: 1692217
BUSINESS ADDRESS:
STREET 1: 1615 POYDRAS ST
CITY: NEW ORLEANS
STATE: LA
ZIP: 70112
BUSINESS PHONE: 5045824000
FORMER COMPANY:
FORMER CONFORMED NAME: FREEPORT MCMORAN COPPER COMPANY INC
DATE OF NAME CHANGE: 19910114
10-Q
1
fcxq.txt
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 2001
Commission File Number: 1-9916
Freeport-McMoRan Copper & Gold Inc.
Incorporated in Delaware 74-2480931
(IRS Employer Identification No.)
1615 Poydras Street, New Orleans, Louisiana 70112
Registrant's telephone number, including area code: (504) 582-4000
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No __
On June 30, 2001, there were issued and outstanding 55,459,026
shares of the registrant's Class A Common Stock, par value $0.10
per share, and 88,514,099 shares of its Class B Common Stock, par
value $0.10 per share.
FREEPORT-McMoRan COPPER & GOLD INC.
TABLE OF CONTENTS
Page
Part I. Financial Information
Financial Statements:
Condensed Balance Sheets 3
Statements of Operations 4
Statements of Cash Flows 5
Notes to Financial Statements 6
Remarks 10
Report of Independent Public Accountants 11
Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Part II. Other Information 24
Signature 24
Exhibit Index E-1
2
FREEPORT-McMoRan COPPER & GOLD INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
FREEPORT-McMoRan COPPER & GOLD INC.
CONDENSED BALANCE SHEETS (Unaudited)
June 30, December 31,
2001 2000
---------- ----------
(In Thousands)
ASSETS
Current Assets:
Cash and cash equivalents $ 14,946 $ 7,968
Accounts receivable 174,070 149,085
Inventories 383,984 400,607
Prepaid expenses and other 4,550 11,462
---------- ----------
Total current assets 577,550 569,122
Property, plant and equipment, net 3,215,909 3,248,710
Investment in PT Smelting 53,334 56,154
Other assets 81,186 76,755
---------- ----------
Total assets $3,927,979 $3,950,741
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 307,749 $ 313,208
Current portion of long-term debt and
short-term borrowings 113,359 202,294
Unearned customer receipts 72,649 28,688
Rio Tinto share of joint venture cash flows 39,079 78,706
Accrued income taxes 33,729 11,016
---------- ----------
Total current liabilities 566,565 633,912
Long-term debt, less current portion:
FCX and PT Freeport Indonesia credit facilities 754,000 760,000
Senior notes 450,000 450,000
Infrastructure asset financings 400,723 457,673
Atlantic Copper debt 225,355 246,727
Equipment and other loans 69,534 73,331
Accrued postretirement benefits
and other liabilities 120,274 112,831
Deferred income taxes 641,477 599,536
Minority interests 131,536 103,795
Redeemable preferred stock 475,005 475,005
Stockholders' equity 93,510 37,931
---------- ----------
Total liabilities and stockholders' equity $3,927,979 $3,950,741
========== ==========
The accompanying notes are an integral part of these financial
statements.
3
FREEPORT-McMoRan COPPER & GOLD INC.
STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
2001 2000 2001 2000
-------- -------- -------- --------
(In Thousands, Except Per Share Amounts)
Revenues $538,259 $397,348 $985,346 $864,940
Cost of sales:
Production and delivery 266,744 253,284 461,194 519,348
Depreciation and amortization 78,319 54,328 146,448 117,687
-------- -------- -------- --------
Total cost of sales 345,063 307,612 607,642 637,035
Exploration expenses 2,420 1,841 4,471 3,809
Equity in PT Smelting losses 352 5,878 2,820 3,637
General and administrative
expenses 16,142 16,518 30,551 37,267
-------- -------- -------- --------
Total costs and expenses 363,977 331,849 645,484 681,748
-------- -------- -------- --------
Operating income 174,282 65,499 339,862 183,192
Interest expense, net (41,393) (49,813) (89,830) (99,748)
Other income (expense), net (57) (1,802) 3,120 (584)
-------- -------- -------- --------
Income before income taxes and
minority interests 132,832 13,884 253,152 82,860
Provision for income taxes (72,408) (18,252) (133,023) (58,725)
Minority interests in net income
of consolidated subsidiaries (15,007) (4,808) (27,608) (14,580)
-------- -------- -------- --------
Net income (loss) 45,417 (9,176) 92,521 9,555
Preferred dividends (9,125) (9,437) (18,190) (18,927)
-------- -------- -------- --------
Net income (loss) applicable to
common stock $ 36,292 $(18,613) $ 74,331 $ (9,372)
======== ======== ======== ========
Net income (loss) per share of common stock:
Basic $0.25 $(.12) $0.52 $(.06)
===== ===== ===== =====
Diluted $0.25 $(.12) $0.51 $(.06)
===== ===== ===== =====
Average common shares outstanding:
Basic 143,954 158,379 143,930 159,851
======= ======= ======= =======
Diluted 145,232 158,379 144,977 159,851
======= ======= ======= =======
The accompanying notes are an integral part of these financial
statements.
4
FREEPORT-McMoRan COPPER & GOLD INC.
STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30,
-------------------------
2001 2000
-------- --------
(In Thousands)
Cash flow from operating activities:
Net income $ 92,521 $ 9,555
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 146,448 117,687
Deferred income taxes 42,086 13,575
Equity in PT Smelting losses 2,820 3,637
Minority interests' share of net income 27,608 14,580
Other, including deferred mining costs (14,760) 14,795
(Increases) decreases in working capital:
Accounts receivable (28,255) 59,542
Inventories 15,371 (16,295)
Prepaid expenses and other 6,861 (878)
Accounts payable and accrued liabilities 12,214 80,522
Rio Tinto share of joint venture cash flows (35,796) (12,264)
Accrued income taxes 23,706 (56,222)
-------- --------
(Increase) decrease in working capital (5,899) 54,405
-------- --------
Net cash provided by operating activities 290,824 228,234
-------- --------
Cash flow from investing activities:
PT Freeport Indonesia capital expenditures (73,339) (87,376)
Atlantic Copper capital expenditures (7,329) (3,871)
Investment in PT Smelting - (5,717)
Other 4,572 (6,442)
-------- --------
Net cash used in investing activities (76,096) (103,406)
-------- --------
Cash flow from financing activities:
Proceeds from debt 103,758 368,538
Repayments of debt (280,150) (310,483)
Purchases of FCX common shares (3,436) (122,358)
Cash dividends paid:
Preferred stock (18,265) (18,980)
Minority interests (4,181) (30,808)
Other (5,476) (11,574)
-------- --------
Net cash used in financing activities (207,750) (125,665)
-------- --------
Net increase (decrease) in cash and cash equivalents 6,978 (837)
Cash and cash equivalents at beginning of year 7,968 6,698
-------- --------
Cash and cash equivalents at end of period $ 14,946 $ 5,861
======== ========
The accompanying notes are an integral part of these financial
statements.
5
FREEPORT-McMoRan COPPER & GOLD INC.
NOTES TO FINANCIAL STATEMENTS
1. AMENDED BANK CREDIT FACILITIES
Freeport-McMoRan Copper & Gold Inc. (FCX) has commitments from all
of the members in its bank group to amend its existing bank credit
facilities to extend the maturities to December 2005 and to provide
financing for any obligations FCX may have under its guarantee of
PT Nusamba Mineral Industri's bank credit agreement. The amendment
of the bank credit facilities is conditioned on FCX's sale of $300
million of convertible notes, the negotiation and execution of
definitive agreements and satisfaction of other conditions.
2. EARNINGS PER SHARE
FCX's basic net income (loss) per share of common stock was
calculated by dividing net income (loss) applicable to common stock
by the weighted-average number of common shares outstanding during
the period. Diluted net income (loss) per share of common stock was
calculated by dividing net income (loss) applicable to common stock
by the weighted-average number of common shares outstanding during
the period plus the net effect of dilutive stock options and
restricted stock. Dilutive stock options represented 1.0 million
shares in the second quarter of 2001 and 0.7 million shares in the
2001 six-month period. Stock options representing less than 0.1
million shares in the second quarter of 2000 and 0.7 million shares
in the 2000 six-month period that otherwise would have been
considered dilutive were excluded from the diluted net income
(loss) per share calculation because of the net losses for those
periods. Dilutive restricted stock totaled 0.3 million shares in
the second quarter of 2001 and in the 2001 six-month period.
Options excluded from the computation of diluted net income
(loss) per share of common stock because their exercise prices were
greater than the average market price of the common stock during
the respective periods totaled options for 11.3 million shares
(average exercise price of $21.56 per share) in each of the 2001
periods and 11.8 million shares (average price of $21.47 per share)
in each of the 2000 periods. Convertible preferred stock
outstanding was not included in the computation of diluted net
income (loss) per share of common stock because doing so would have
increased diluted net income per share of common stock or decreased
diluted net loss per share of common stock. The preferred stock
was convertible into 11.7 million shares of common stock, and the
related accrued dividends totaled $6.1 million in the second
quarters of 2001 and 2000, and $12.2 million in the 2001 and 2000
six-month periods.
3. DERIVATIVE CONTRACTS
At times FCX and its subsidiaries have entered into derivative
contracts to manage certain risks resulting from fluctuations in
commodity prices (primarily copper and gold), foreign currency
exchange rates and interest rates by creating offsetting market
exposures. Effective January 1, 2001, FCX adopted Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133). SFAS 133, as
subsequently amended, establishes accounting and reporting
standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability
measured at its fair value. The accounting for changes in the fair
value of a derivative instrument depends on the intended use of the
derivative and the resulting designation.
Upon adoption of SFAS 133 on January 1, 2001, FCX recorded
immaterial cumulative gain adjustments totaling $0.8 million to
other income ($0.8 million to net income) to adjust the recorded
values of PT Freeport Indonesia's and Atlantic Copper's (FCX's
subsidiaries) foreign currency forward contracts to fair value and
$0.8 million to revenues ($0.4 million to net income) to adjust the
embedded derivatives in PT Freeport Indonesia's provisionally
priced copper sales to fair value, as calculated under SFAS 133.
In addition, FCX recorded a cumulative effect net loss adjustment
to other comprehensive income totaling $1.0 million for the fair
value of Atlantic Copper's interest rate swaps on January 1, 2001.
FCX has entered into derivative contracts in limited instances
to achieve specific objectives. Currently, the objectives
principally relate to managing risks associated with foreign
currency, commodity prices and interest rate risks with Atlantic
Copper's smelting operations, where certain derivative contracts
are required under financing agreements. In addition, in response
to volatility in the Indonesian rupiah and Australian dollar
currencies, FCX has sought to manage certain foreign currency risks
with PT Freeport Indonesia's mining operations. In the past, FCX
entered into derivative contracts related to its exposure to copper
and gold prices, but activities in this regard since 1997 have been
limited to establishing fixed prices for open copper sales under PT
Freeport Indonesia's concentrate sales contracts. FCX does not
enter into derivative contracts for speculative purposes. A
summary of FCX's outstanding derivative instruments at June 30,
2001 and a discussion of FCX's risk management strategies for those
designated as hedges follow.
6
Commodity Price Protection Contracts
From time to time, PT Freeport Indonesia has entered into forward
and option contracts to hedge the market risk associated with
fluctuations in the prices of commodities it sells. The primary
objective of these contracts has been to set a minimum price and
the secondary objective is to retain market upside, if available at
a reasonable cost. As of June 30, 2001, FCX had no price
protection contracts relating to its mine production. FCX has
outstanding gold- and silver-denominated redeemable preferred stock
with dividends and redemption amounts determined by commodity
prices. FCX elected to continue its historical accounting for its
redeemable preferred stock indexed to commodities under the
provisions of SFAS 133 which allow such instruments issued before
January 1, 1998 to be excluded from those instruments required to
be adjusted for changes in their fair values. Therefore, FCX's
redeemable preferred stock is carried on its books at its original
issue value less redemptions, and totaled $475.0 million at June
30, 2001.
Certain of PT Freeport Indonesia's concentrate sales contracts
allow for final pricing in future periods. Under SFAS 133, these
pricing terms cause a portion of the contracts to be considered
embedded derivatives which must be recorded at fair value. Prior
to January 1, 2001, PT Freeport Indonesia adjusted the revenues
from these provisionally priced sales based on then-current spot
prices on or near each reporting date. Effective January 1, 2001,
PT Freeport Indonesia began adjusting the revenues from these
provisionally priced sales to reflect fair value based on forward
prices for the final pricing periods on or near each reporting
date. The impact of this change was to increase revenues by $0.8
million ($0.4 million to net income) on January 1, 2001. Changes
in the fair value of these embedded derivatives are recorded in
current period revenues.
At June 30, 2001, Atlantic Copper had forward copper contracts
designed to hedge its copper price risk whenever its physical
purchases and sales pricing periods do not match. Although these
contracts provide a hedge against changes in copper prices, they do
not qualify for hedge accounting under SFAS 133 because Atlantic
Copper bases its hedging contracts on its net sales/purchases
position and contracts to hedge a net position do not qualify for
hedge accounting under SFAS 133. Atlantic Copper recorded gains
(losses) to production costs totaling $1.1 million in the second
quarter of 2001, $(0.4) million in the second quarter of 2000, $4.2
million in the first six months of 2001 and $(0.9) million in the
first six months of 2000 related to its forward copper sales
contracts. Atlantic Copper held forward copper sales contracts for
13.1 million pounds and the fair value of these contracts was a
$0.5 million gain, which is recorded in accounts payable at June
30, 2001.
Foreign Currency Exchange Contracts
PT Freeport Indonesia and Atlantic Copper enter into foreign
currency forward contracts to hedge the market risks of their
forecasted costs denominated in a currency other than the U.S.
dollar, their functional currency. The primary objective of these
contracts is either to lock-in an exchange rate or to minimize the
impact of adverse exchange rate changes. As of June 30, 2001, PT
Freeport Indonesia had foreign currency forward contracts to hedge
48.0 million of its aggregate projected Australian dollar payments
from July 2001 through December 2001, or approximately 50 percent
of its aggregate projected remaining 2001 Australian dollar
payments at an average exchange rate of $0.58 to one Australian
dollar. PT Freeport Indonesia also had foreign currency forward
contracts to hedge 698.7 billion of its aggregate projected
Indonesian rupiah payments from July 2001 through December 2002, or
approximately 50 percent of its projected remaining 2001 and 2002
rupiah payments at an average exchange rate of 12,296 rupiahs to
one U.S. dollar. Atlantic Copper had foreign currency forward
contracts to hedge 152.2 million of its projected euro payments
from July 2001 through December 2003, or approximately 50 percent
of its projected remaining 2001 peseta/euro payments and
approximately 67 percent of its projected 2002 and 2003 euro
payments at an average exchange rate of $1.02 per euro. The fair
value of PT Freeport Indonesia's and Atlantic Copper's foreign
currency contracts at June 30, 2001 totaled a loss of $27.8
million, of which $14.0 million was recorded in accrued liabilities
and $13.8 million was recorded in other long-term liabilities.
PT Freeport Indonesia and Atlantic Copper have designated their
foreign currency forward contracts as cash flow hedges. FCX
recorded losses to other comprehensive income for changes in the
unrealized fair value of its foreign currency forward contracts
totaling $6.1 million in the second quarter of 2001 and $19.8
million in the first six months of 2001. During the second quarter
of 2001, PT Freeport Indonesia reclassed losses totaling $1.2
million ($0.6 million to net income) and Atlantic Copper reclassed
losses totaling $1.0 million ($1.0 million to net income) from
accumulated other comprehensive income to production costs for
matured foreign currency forward contracts. For the first six
months of 2001, PT Freeport Indonesia reclassed losses totaling
$1.7 million ($0.8 million to net income) and Atlantic Copper
reclassed losses totaling $1.3 million ($1.3 million to net income)
from accumulated other comprehensive income to production costs for
matured contracts. No hedge ineffectiveness was recorded for the
outstanding
7
contracts at June 30, 2001. Prior to 2001, PT Freeport Indonesia
and Atlantic Copper recorded changes in the market value of their
foreign currency forward contracts to production costs as incurred.
Net gains (losses) charged to production cost for changes in market
value of foreign currency forward contracts totaled $0.1 million
for the second quarter of 2000 and $(5.9) million for the first six
months of 2000.
Interest Rate Contracts
Atlantic Copper entered into interest rate swap contracts to manage
exposure to interest rate changes on a portion of its variable-rate
debt. The primary objective of these contracts is to lock-in an
interest rate considered to be favorable. As of June 30, 2001,
Atlantic Copper had interest rate swap contracts at an average
interest rate of 6.7 percent on $66.7 million of financing,
reducing quarterly through September 2003. Atlantic Copper has
designated its interest rate swap contracts as cash flow hedges and
no ineffectiveness is expected from these hedges. Atlantic Copper
recognized additional interest costs of $0.1 million in the second
quarter of 2001, and benefits of $0.1 million in the second quarter
of 2000, $0.1 million in the first six months of 2001 and less than
$0.1 million in the first six months of 2000 related to its
interest rate swap contracts. FCX's other comprehensive income for
the first six months of 2001 included a $1.0 million cumulative
effect loss to record the fair value of Atlantic Copper's interest
rate swap contracts on January 1, 2001 and losses for changes in
the unrealized fair value of its swaps totaled $0.2 million for the
second quarter of 2001 and $1.3 million for the first six months of
2001. Atlantic Copper receives no tax benefit for these losses.
The fair value of these interest rate swap contracts totaled a loss
of $2.3 million, $1.7 million of which is recorded in accrued
liabilities and $0.6 million is recorded in other long-term
liabilities at June 30, 2001.
4. COMPREHENSIVE INCOME
The 2000 periods did not include any items of other comprehensive
income. FCX's comprehensive income for the 2001 periods is
summarized below (in thousands).
Three Six
Months Months
Ended Ended
June 30 June 30
------- -------
Net income applicable to common stock $36,292 $74,331
Other comprehensive income (loss):
Cumulative effect of change in accounting,
no tax effect - (982)
Change in unrealized derivatives' fair value
(net of tax benefit of $0.1 million and taxes
of $1.6 million, respectively) (6,314) (21,138)
Reclass to earnings (net of tax benefits of
$0.4 million and $0.6 million, respectively) 1,766 2,097
------- -------
Total comprehensive income $31,744 $54,308
======= =======
5. INTEREST COST
Interest expense excludes capitalized interest of $2.1 million in
the second quarter of 2001, $1.5 million in the second quarter of
2000, $4.1 million in the first six months of 2001 and $2.9 million
in the first six months of 2000.
6. BUSINESS SEGMENTS
FCX has two operating segments: "mining and exploration" and
"smelting and refining." The mining and exploration segment
includes the copper and gold mining operations of PT Freeport
Indonesia in Indonesia and FCX's Indonesian exploration activities.
The smelting and refining segment includes Atlantic Copper's
operations in Spain and PT Freeport Indonesia's equity investment
in PT Smelting in Gresik, Indonesia. The segment data presented
below were prepared on the same basis as the consolidated FCX
financial statements.
8
Mining Smelting
and and Eliminations FCX
Exploration Refining and Other Total
---------- -------- --------- ----------
(In Thousands)
Three months ended June 30, 2001:
Revenues $ 421,062a $194,399 $ (77,202)b $ 538,259
Production and delivery 143,539 198,866 (75,661)b 266,744
Depreciation and amortization 70,153 6,846 1,320 78,319
Exploration expenses 2,311 - 109 2,420
Equity in PT Smelting losses - 352c - 352
General and administrative
expenses 12,043 2,153 1,946 16,142
---------- -------- --------- ----------
Operating income (loss) $ 193,016 $(13,818) $ (4,916) $ 174,282
========== ======== ========= ==========
Interest expense, net $ 24,085 $ 7,073 $ 10,235 $ 41,393
========== ======== ========= ==========
Provision for income taxes $ 62,224 $ 385 $ 9,799 $ 72,408
========== ======== ========= ==========
Capital expenditures $ 37,075 $ 3,864 $ 392 $ 41,331
========== ======== ========= ==========
Total assets $3,264,190d $671,185e $ (7,396) $3,927,979
========== ======== ========= ==========
Three months ended June 30, 2000:
Revenues $ 259,885a $201,795 $ (64,332)b $ 397,348
Production and delivery 134,748 192,898 (74,362)b 253,284
Depreciation and amortization 46,123 7,088 1,117 54,328
Exploration expenses 1,487 - 354 1,841
Equity in PT Smelting losses - 5,878c - 5,878
General and administrative
expenses 13,081 1,857 1,580 16,518
---------- -------- --------- ----------
Operating income (loss) $ 64,446 $ (5,926) $ 6,979 $ 65,499
========== ======== ========= ==========
Interest expense, net $ 31,869 $ 6,094 $ 11,850 $ 49,813
========== ======== ========= ==========
Provision for income taxes $ 11,634 $ 264 $ 6,354 $ 18,252
========== ======== ========= ==========
Capital expenditures $ 30,737 $ 2,407 $ 235 $ 33,379
========== ======== ========= ==========
Total assets $3,284,735d $639,771e $ 60,146 $3,984,652
========== ======== ========= ==========
Six months ended June 30, 2001:
Revenues $ 781,108a $353,525 $(149,287)b $ 985,346
Production and delivery 258,641 349,851 (147,298)b 461,194
Depreciation and amortization 130,172 13,635 2,641 146,448
Exploration expenses 4,286 - 185 4,471
Equity in PT Smelting losses - 2,820c - 2,820
General and administrative
expenses 22,818 4,172 3,561 30,551
---------- -------- --------- ----------
Operating income (loss) $ 365,191 $(16,953) $ (8,376) $ 339,862
========== ======== ========= ==========
Interest expense, net $ 54,599 $ 14,219 $ 21,012 $ 89,830
========== ======== ========= ==========
Provision for income taxes $ 114,529 $ (46) $ 18,540 $ 133,023
========== ======== ========= ==========
Capital expenditures $ 72,641 $ 7,329 $ 698 $ 80,668
========== ======== ========= ==========
9
Mining Smelting
and and Eliminations FCX
Exploration Refining and Other Total
---------- -------- --------- ----------
(In Thousands)
Six months ended June 30, 2000:
Revenues $ 567,380a $426,682 $(129,122)b $ 864,940
Production and delivery 278,488 410,240 (169,380)b 519,348
Depreciation and amortization 101,185 14,268 2,234 117,687
Exploration expenses 3,057 - 752 3,809
Equity in PT Smelting losses - 3,637c - 3,637
General and administrative
expenses 30,017 4,174 3,076 37,267
---------- -------- --------- ----------
Operating income (loss) $ 154,633 $ (5,637) $ 34,196 $ 183,192
========== ======== ========= ==========
Interest expense, net $ 65,559 $ 12,848 $ 21,341 $ 99,748
========== ======== ========= ==========
Provision for income taxes $ 34,756 $ 1,728 $ 22,241 $ 58,725
========== ======== ========= ==========
Capital expenditures $ 87,009 $ 9,588 $ 367 $ 96,964
========== ======== ========= ==========
a. Includes PT Freeport Indonesia sales to PT Smelting totaling
$111.9 million in the second quarter of 2001, $58.9 million in the
second quarter of 2000, $202.5 million in the six-month period
ended June 30, 2001 and $129.4 million in the six-month period
ended June 30, 2000.
b. Represents elimination of intersegment sales from PT Freeport
Indonesia to Atlantic Copper and the change in deferred profits on
intersegment sales remaining in Atlantic Copper's inventories.
c. Includes effect of changes in deferred intercompany profits on
25 percent of PT Freeport Indonesia's sales to PT Smelting that
remain in PT Smelting's inventory at period end, totaling $(1.0)
million in the second quarter of 2001, $(0.7) million in the second
quarter of 2000, $0.1 million in the six-month period ended June
30, 2001 and $(4.7) million in the six-month period ended June 30,
2000.
d. Includes PT Freeport Indonesia's trade receivables with PT
Smelting totaling $26.7 million at June 30, 2001 and $8.9 million
at June 30, 2000.
e. Includes PT Freeport Indonesia's equity investment in PT
Smelting totaling $53.3 million at June 30, 2001 and $68.2 million
at June 30, 2000.
7. RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for the first six months of
2001 and 2000 was 3.7 to 1 and 1.8 to 1, respectively. For this
calculation, earnings consist of income from continuing operations
before income taxes, minority interests and fixed charges. Fixed
charges include interest and that portion of rent deemed
representative of interest.
----------------------
Remarks
The information furnished herein should be read in conjunction with
FCX's financial statements contained in its 2000 Annual Report on
Form 10-K. The information furnished herein reflects all
adjustments which are, in the opinion of management, necessary for
a fair statement of the results for the periods. All such
adjustments are, in the opinion of management, of a normal
recurring nature.
10
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Board of Directors and Stockholders of
Freeport-McMoRan Copper & Gold Inc.:
We have reviewed the accompanying condensed balance sheet of
Freeport-McMoRan Copper & Gold Inc. (a Delaware corporation) as of
June 30, 2001, the related statements of operations for the three
and six-month periods ended June 30, 2001 and 2000, and the
statements of cash flows for the six-month periods ended June 30,
2001 and 2000. These financial statements are the responsibility
of the Company's management.
We conducted our reviews in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of interim financial information consists
principally of applying analytical procedures to financial data and
making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit
conducted in accordance with auditing standards generally accepted
in the United States, the objective of which is the expression of
an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material
modifications that should be made to the financial statements
referred to above for them to be in conformity with accounting
principles generally accepted in the United States.
We have previously audited, in accordance with auditing
standards generally accepted in the United States, the balance
sheet of Freeport-McMoRan Copper & Gold Inc. as of December 31,
2000, and the related statements of income, stockholders' equity
and cash flows for the year then ended (not presented herein), and,
in our report dated January 18, 2001, we expressed an unqualified
opinion on those financial statements. In our opinion, the
information set forth in the accompanying condensed balance sheet
as of December 31, 2000, is fairly stated, in all material
respects, in relation to the balance sheet from which it has been
derived.
ARTHUR ANDERSEN LLP
New Orleans, Louisiana
July 18, 2001
11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
OVERVIEW
We operate through our majority-owned subsidiaries, PT Freeport
Indonesia and PT Irja Eastern Minerals (Eastern Minerals), and
through Atlantic Copper, S.A. (Atlantic Copper), our wholly owned
subsidiary. PT Freeport Indonesia also has a 25 percent interest
in PT Smelting, an Indonesian company that operates a copper
smelter and refinery in Gresik, Indonesia. In addition to the PT
Freeport Indonesia and Eastern Minerals exploration activities,
we conduct other mineral exploration activities in Irian Jaya
(Papua), Indonesia pursuant to joint venture and other
arrangements. The results of operations reported and summarized
below are not necessarily indicative of future operating results.
Summary comparative results for the second-quarter and six-
month periods follow (in millions, except per share amounts):
Second Quarter Six Months
---------------- ----------------
2001 2000 2001 2000
------ ------ ------ ------
Revenues $538.3 $397.3 $985.3 $864.9
Operating income 174.3 65.5 339.9 183.2
Net income (loss) applicable to
common stock 36.3 (18.6) 74.3 (9.4)
Diluted net income (loss) per
share of common stock .25 (.12) .51 (.06)
Our consolidated revenues include PT Freeport Indonesia's
sale of copper concentrates, which also contain significant
amounts of gold, and the sale by Atlantic Copper of copper
anodes, cathodes, wire and wire rod. Our revenues and net income
vary significantly with fluctuations in the market prices of
copper and gold and other factors. At various times, in response
to market conditions, we have entered into copper and gold price
protection contracts for some portion of our expected future mine
production to mitigate the risk of adverse price fluctuations.
We currently have no copper or gold price protection contracts
relating to our mine production. We have outstanding gold- and
silver-denominated preferred stock with dividends and redemption
amounts determined by commodity prices. Based on PT Freeport
Indonesia's projected share of 2001 copper sales (1.4 billion
pounds), a $0.01 per pound change in the average price realized
would have an approximate $14 million impact on our revenues and
an approximate $7 million impact on our net income. A $5 per
ounce change in the average price realized on PT Freeport
Indonesia's share of projected 2001 gold sales (2.5 million
ounces) would have an approximate $12.5 million impact on our
revenues and an approximate $6 million impact on our net income.
Our 2001 consolidated revenues improved significantly when
compared with the 2000 periods primarily because of higher copper
and gold sales volumes at PT Freeport Indonesia. Second-quarter
2001 revenues include benefits of $0.7 million ($0.4 million to
net income or less than $0.01 per share) and second-quarter 2000
revenues benefited by $6.2 million ($3.0 million to net loss or
$0.02 per share) from adjustments to prior period "open"
concentrate sales. Six-month 2001 revenues include reductions of
$2.7 million ($1.3 million to net income or $0.01 per share) for
adjustments to December 31, 2000 open concentrate sales, while
six-month 2000 revenues were increased by $10.5 million ($5.1
million to net loss or $0.03 per share) for adjustments to
December 31, 1999 open concentrate sales.
Consolidated cost of sales for the 2001 second quarter was
higher when compared with the 2000 quarter largely because of
higher PT Freeport Indonesia sales volumes partly offset by lower
unit costs. The decline in consolidated cost of sales during the
first six months of 2001 compared with the first six months of
2000 primarily reflects the significant decline in Atlantic
Copper sales volumes during the first quarter of 2001 as they
prepared for a major maintenance turnaround in April 2001.
From time to time we enter into foreign currency contracts
to hedge our projected operating costs denominated in foreign
currencies. On January 1, 2001, accounting standards for these
types of hedging contracts changed (see Note 3). Prior to
January 1, 2001, our foreign currency forward contracts did not
qualify for hedge accounting and all changes in the market values
of these contracts were included in earnings as they occurred.
As a result, our reported earnings prior to January 1, 2001
included the effects of changes in market value of all our
outstanding foreign currency forward contracts, which were
significant at times. The 2000 periods included gains totaling
$0.1 million for the second quarter and losses totaling $5.9
million for the six-month period for changes in market value of
foreign currency forward contracts, most of which would have been
charged to other comprehensive income under the new accounting
rules we adopted on January 1, 2001.
12
The lower losses we recorded during 2001 for our equity
interest in PT Smelting primarily reflects improvements in PT
Smelting's operating results during 2001, compared to 2000 when
operations were ramping up to full production capacity. General
and administrative expenses during the second quarter of 2001
were slightly lower than the second quarter of 2000 and during
the first six months of 2001 they were $6.7 million lower than
during the 2000 period. In the first quarter of 2000 we recorded
net charges of $5.3 million related to contribution commitments,
personnel severance costs and stock appreciation rights. Our
effective tax rate for the first six months of 2001 was 53
percent compared with an effective rate of 71 percent in the
first six months of 2000. The lower effective rate for the first
six months of 2001 primarily reflects the impact of higher income
at PT Freeport Indonesia. The higher level of minority interests
in net income of consolidated subsidiaries in the 2001 periods is
the result of improved earnings at PT Freeport Indonesia.
RESULTS OF OPERATIONS
We have two operating segments: "mining and exploration" and
"smelting and refining." The mining and exploration segment
includes PT Freeport Indonesia's copper and gold mining
operations in Indonesia and FCX's Indonesian exploration
activities. The smelting and refining segment includes Atlantic
Copper's operations in Spain and PT Freeport Indonesia's 25
percent equity investment in PT Smelting. Summary comparative
operating income (loss) by segment for the second-quarter and
six-month periods follows (in millions):
Second Quarter Six Months
---------------- ----------------
2001 2000 2001 2000
------ ----- ------ ------
Mining and exploration $193.0 $64.4 $365.2 $154.6
Smelting and refining (13.8) (5.9) (17.0) (5.6)
Intercompany eliminations and other (4.9) 7.0 (8.3) 34.2
------ ----- ------ ------
FCX operating income a $174.3 $65.5 $339.9 $183.2
====== ===== ====== ======
a. Profits on PT Freeport Indonesia's sales to Atlantic Copper
and on 25 percent of PT Freeport Indonesia's sales to PT Smelting
are deferred until the final sale to third parties has occurred.
Changes in the amount of these deferred profits benefited
operating income by $0.7 million in the second quarter of 2001,
$11.2 million in the second quarter of 2000, $0.6 million in the
six-month 2001 period and $46.5 million in the six-month 2000
period. Our consolidated quarterly earnings fluctuate depending
on the timing and prices of these sales.
MINING AND EXPLORATION
A summary of increases (decreases) in PT Freeport Indonesia
revenues between the periods follows (in millions):
Second Six
Quarter Months
------ ------
PT Freeport Indonesia revenues - 2000 periods $259.9 $567.4
Increases (decreases):
Sales volumes:
Copper 105.7 128.1
Gold 134.9 193.9
Price realizations:
Copper (26.9) (41.2)
Gold (9.9) (27.1)
Adjustments, primarily for copper pricing on
prior period open sales (14.1) (4.0)
Treatment charges, royalties and other (28.5) (36.0)
------ ------
PT Freeport Indonesia revenues - 2001 periods $421.1 $781.1
====== ======
PT Freeport Indonesia's 2001 revenues for both second-
quarter and six-month periods benefited from significant
increases in sales volumes compared to the 2000 periods. When
compared to the 2000 periods, copper sales volumes improved by 52
percent in the 2001 second quarter and 29 percent in the 2001 six-
month period, while gold sales volumes improved by 146 percent in
the 2001 second quarter to a quarterly record 813,600 ounces and
by 88 percent in the 2001 six-month period. The higher sale
volumes were partly offset by decreases in copper and gold price
realizations. Treatment charges and royalties in total were
higher in 2001 primarily because of higher sales volumes.
13
PT Freeport Indonesia has commitments from various parties,
including Atlantic Copper and PT Smelting, to purchase virtually
all of its estimated 2001 production at market prices. Net of
Rio Tinto plc's joint venture interest, PT Freeport Indonesia's
share of sales for the third quarter of 2001 is projected to
approximate 340 million pounds of copper and 590,000 ounces of
gold. PT Freeport Indonesia's share of sales for 2001 is
projected to approximate 1.4 billion pounds of copper and 2.5
million ounces of gold, an increase from 2000 of approximately
600,000 ounces. Projected 2001 gold sales reflect the expectation
of higher average gold ore grades compared to 2000.
PT Freeport Indonesia's concentrate sales agreements, with
regard to copper, provide for provisional billings at the time of
shipment with final pricing settlement generally based on the
average London Metal Exchange (LME) price for a specified future
month. Copper revenues on provisionally priced open pounds are
adjusted monthly based on then-current forward prices. At June
30, 2001, we had consolidated copper sales totaling 212.2 million
pounds recorded at an average price of $0.70 per pound remaining
to be finally priced. Approximately 80 percent of these open
pounds are expected to be finally priced during the third quarter
of 2001 with the remaining pounds to be priced during the fourth
quarter of 2001. A one-cent movement in the average price used
for these open pounds would have an approximate $1 million impact
on our 2001 net income.
At times PT Freeport Indonesia has entered into derivative
contracts to manage certain risks resulting from fluctuations in
commodity prices. During the first half of 2001 and as of June
30, 2001, PT Freeport Indonesia had no price protection programs
in place for its copper and gold sales other than our gold-
denominated preferred stock. As conditions warrant, PT Freeport
Indonesia may enter into new contracts for its future sales.
During the second quarter of 2000 PT Freeport Indonesia entered
into forward copper sales contracts to fix the price at $0.81 per
pound on approximately 60 percent of its March 31, 2000 open
concentrate sales. During the first quarter of 2000 PT Freeport
Indonesia entered into forward copper sales contracts to fix the
price at $0.85 per pound on approximately 50 percent of its
December 31, 1999 open concentrate sales. We recorded $0.8
million of additional revenues in the second quarter of 2000 and
$6.9 million of additional revenues in the first quarter of 2000
from these forward sales.
PT Freeport Indonesia Operating Results
Second Quarter Six Months
---------------- -------------------
2001 2000 2001 2000
------- ------- --------- -------
PT Freeport Indonesia, Net of Rio Tinto's Interest
Copper
Production (000s of recoverable pounds) 359,100 287,300 736,200 595,800
Sales (000s of recoverable pounds) 389,800 256,200 723,200 562,100
Average realized price $.72 $.79 $.74 $.79
Gold
Production (000s of recoverable pounds) 751,500 358,800 1,482,400 806,100
Sales (000s of recoverable pounds) 813,600 330,500 1,458,300 774,700
Average realized price $267.04 $279.26 $265.11 $283.70
Gross profit per pound of copper (cents):
Average realized price 72.2 79.1 73.8 79.5
------- ------- --------- -------
Production costs:
Site production and delivery 36.6a 51.1b 35.8a 49.1b
Gold and silver credits (57.1) (37.1) (54.6) (40.5)
Treatment charges 18.3 18.1 18.2 18.0
Royalty on metals 2.0 1.3 2.0 1.3
------- ------- --------- -------
Cash production costs (0.2) 33.4 1.4 27.9
Depreciation and amortization 18.0 18.0 18.0 18.0
------- ------- --------- -------
Total production costs 17.8 51.4 19.4 45.9
------- ------- --------- -------
Adjustments, primarily for copper
pricing on prior period sales (1.0) 4.6 (0.2) 0.3
------- ------- --------- -------
Gross profit per pound of copper 53.4 32.3 54.2 33.9
======= ======= ========= =======
14
Second Quarter Six Months
------------------ -------------------
2001 2000 2001 2000
--------- ------- --------- -------
PT Freeport Indonesia, 100% Operating Statistics
Ore milled (metric tons per day) 240,000 218,500 234,800 225,000
Copper grade (percent) 1.04 .94 1.08 .94
Gold grade (grams per metric ton) 1.57 .86 1.62 .93
Recovery rate (percent)
Copper 86.6 86.4 87.9 86.1
Gold 89.3 84.1 88.6 84.5
Copper (000s of recoverable pounds)
Production 412,400 336,500 847,300 697,200
Sales 447,700 300,100 832,600 658,200
Gold (000s of recoverable ounces)
Production 982,500 442,900 1,928,500 999,900
Sales 1,061,800 407,600 1,894,800 958,600
a. Net of deferred mining costs totaling $9.7 million (2.5
cents per pound) in the second quarter of 2001 and $18.0 million
(2.5 cents per pound) in the first six months of 2001. During
the fourth quarter of 2000, PT Freeport Indonesia changed its
estimated average ratio of waste rock to ore over the life of the
mine in its deferred mining calculation to 1.6 to 1 from 2.4 to
1. For additional information, see Note 1 to the consolidated
financial statements in our annual report for the year ended
December 31, 2000.
b. Includes recaptured mining costs totaling $6.0 million (2.3
cents per pound) in the second quarter of 2000 and $13.3 million
(2.4 cents per pound) in the first six months of 2000.
PT Freeport Indonesia's 2001 production benefited from
higher mill throughput rates, ore grades and recovery rates when
compared with the prior-year periods. Mill throughput averaged a
record 240,000 metric tons of ore per day during the second
quarter of 2001. Second-quarter 2001 copper grades were 11
percent higher than the prior-year quarter and gold grades were
83 percent higher. Six-month 2001 copper grades were 15 percent
higher than the prior-year period and gold grades were 74 percent
higher. Recovery rates remained strong reflecting high-recovery
ore processed during the last three quarters and recovery
initiatives achieved at the mill. As previously reported, lower
gold grades in the Grasberg pit during the first three quarters
of 2000 reflected an expected mining of lower grade ore in
accordance with the mine plan during that period and the gold
grades in the first half of 2001 reflect a continuation of the
improved grades that began to be mined during the fourth quarter
of 2000. Ore grades for the second half of 2001 are expected to
decline to an average of approximately 0.96 percent for copper
and 1.20 grams per metric ton for gold.
In May 2000, PT Freeport Indonesia, in consultation with the
Government of Indonesia, voluntarily agreed to temporarily limit
Grasberg open-pit production because of an incident at its
Wanagon overburden stockpile. In January 2001, PT Freeport
Indonesia resumed normal mining operations at Grasberg after
receiving governmental approval. Mill throughput rates will vary
based on the characteristics of the ore being processed as we
manage our operations to optimize metal production.
Unit site production and delivery costs in the second quarter
of 2001 averaged $0.37 per pound of copper, $0.14 per pound lower
than the $0.51 reported in the second quarter of 2000, primarily
because of higher sales volumes, the previously reported change
in the estimated ratio of waste rock to ore over the life of the
mine, weaker foreign currencies (the Indonesian rupiah and
Australian dollar) and implementation of operating initiatives
introduced in 2000 designed to improve processes and reduce
costs. Gold credits of $0.57 per pound in the 2001 quarter were
higher when compared with the 2000 quarter level of $0.37 per
pound because of higher gold ore grades and sales. Unit site
production and delivery costs and gold credits in the first six
months of 2001, compared with the 2000 period, benefited for the
same reasons as second-quarter 2001 unit costs. Royalties were
higher in the 2001 periods because of higher sales volumes and
totaled $8.0 million in the second quarter of 2001, $3.3 million
in the second quarter of 2000, $14.3 million in the first six
months of 2001 and $7.2 million in the first six months of 2000.
PT-FI has a labor agreement covering its hourly paid
Indonesian employees, the key provisions of which are
renegotiated biannually. PT-FI's labor agreement was scheduled
to expire on September 30,
15
2001. In June 2001, PT-FI and its workers agreed to terms for a
new labor agreement that expires September 30, 2003. PT-FI's
relations with the workers' union have generally been positive.
We conduct the majority of our operations in Indonesia and
Spain. Our functional currency is the U.S. dollar. All of our
revenues are denominated in U.S. dollars; however, certain costs
and asset and liability accounts are denominated in Indonesian
rupiahs, Australian dollars or Spanish pesetas/euros. Generally,
our results are positively affected when the U.S. dollar
strengthens against these foreign currencies and adversely
affected when the U.S. dollar weakens against these foreign
currencies.
Since 1997, the Indonesian rupiah/U.S. dollar exchange rate
has been volatile. One U.S. dollar was equivalent to 11,430
rupiahs at June 30, 2001 and 9,215 rupiahs at December 31, 2000.
PT Freeport Indonesia recorded losses totaling $0.2 million
during the second quarter of 2001, $0.4 million during the second
quarter of 2000, $0.6 million during the first six months of 2001
and $0.7 million during the first six months of 2000 related to
its rupiah-denominated net assets. The weakened rupiah currency
has resulted in lower reported costs by PT Freeport Indonesia,
primarily lower labor costs. At estimated annual aggregate
rupiah payments of 800 billion and a June 30, 2001 exchange rate
of 11,430 rupiahs to one U.S. dollar, a one-thousand-rupiah
increase in the exchange rate would result in an approximate $6
million decrease in annual operating costs and a one-thousand-
rupiah decrease in the exchange rate would result in an
approximate $7 million increase in annual operating costs, before
any hedging effects.
In April 2000, PT Freeport Indonesia entered into foreign
currency forward contracts to hedge a portion of its aggregate
anticipated Australian dollar payments for the remainder of 2000
and for 2001. As of June 30, 2001, these contracts hedge 48.0
million of Australian dollar payments from July 2001 through
December 2001, or approximately 50 percent of aggregate projected
remaining 2001 Australian dollar payments at an average exchange
rate of $0.58 to one Australian dollar. The exchange rate was
$0.51 to one Australian dollar at June 30, 2001. Each $0.01
change in the U.S. dollar/Australian dollar exchange rate impacts
the market value of these contracts by approximately $0.5
million.
In July 2000, PT Freeport Indonesia entered into foreign
currency forward contracts to hedge a portion of its aggregate
projected April through July 2001 Indonesian rupiah payments. In
June 2001, PT Freeport Indonesia entered into additional foreign
currency forward contracts to hedge a portion of its aggregate
projected August 2001 through December 2002 rupiah payments. As
of June 30, 2001, the rupiah contracts hedge 698.7 billion of
rupiah payments from July 2001 through December 2002, or
approximately 50 percent of projected remaining 2001 rupiah
payments and 2002 rupiah payments at an average exchange rate of
12,296 rupiahs to one U.S. dollar. Each 1,000-rupiah change in
the Indonesian rupiah/U.S. dollar exchange rate impacts the
market value of these contracts by approximately $5 million,
before any hedging effects. PT Freeport Indonesia recorded net
realized losses to production costs related to matured Australian
dollar and Indonesian rupiah contracts totaling $1.2 million in
the second quarter of 2001 and $1.7 million in the first six
months of 2001, compared to a gain of $1.9 million in the second
quarter and first six months of 2000 for all outstanding currency
hedging contracts in the 2000 periods.
Under new accounting standards that became effective January
1, 2001 gains or losses on qualifying hedging contracts are
recognized in earnings as the contracts are settled, with changes
in the fair value of outstanding contracts reflected in Other
Comprehensive Income, a component of stockholders' equity, until
realized (Note 3). We recorded a net gain of $0.7 million to
Other Comprehensive Income in the second quarter of 2001 and a
net loss of $1.3 million in the first six months of 2001 for PT
Freeport Indonesia's outstanding currency hedging contracts at
June 30, 2001.
Exploration Activities
Our exploration efforts continue to focus on the GBT Atas or
"GBTA" project (previously referred to as Guru Ridge), the
underground Ertsberg Stockwork Zone and Grasberg Underground.
Exploration drilling and a preliminary study of the GBTA resource
during the first quarter of 2001 concluded that open-pit mining
appears promising and PT Freeport Indonesia continues to study
the feasibility of this surface mineralization target for
possible near-term development. Drilling rigs were operating
from the surface and from underground locations to explore and
delineate the grades and geometry of the resource. Reserve
extension drilling continues at the Ertsberg Stockwork Zone
adjacent to our Deep Ore Zone mine where underground production
began in 2000 and the Grasberg Underground to define the outward
extent of mineralization adjacent to and below the current block
cave reserve.
Field exploration activities outside of our current mining
operations area have been temporarily suspended pending the
resolution of security and regulatory issues involving a possible
conflict between
16
our mining and exploration rights under ourContract of Work and
the requirements of certain recently enacted Indonesian forestry
laws.
SMELTING AND REFINING
Impact of Smelter Treatment and Refining Charges
Our investment in smelters serves an important role in our
concentrate marketing strategy. Approximately one-half of PT
Freeport Indonesia's concentrate production is sold to its
affiliated smelters, Atlantic Copper and PT Smelting, and the
remainder is sold to other customers. Through downstream
integration, we are able to achieve operating hedges for changes
in treatment charges for smelting and refining PT Freeport
Indonesia's copper concentrates. While low smelter treatment and
refining charges adversely affect the operating results of our
smelter operations, they benefit the operating results of our
mining operations of PT Freeport Indonesia. Taking into account
taxes and minority ownership interests, an equivalent change in
rates would essentially offset in our consolidated operating
results.
Atlantic Copper Operating Results
Second Quarter Six Months
------------------- ------------------
2001 2000 2001 2000
------- ------- ------- -------
Cash margin before currency
hedging (in millions) $(2.6) $10.6 $6.0 $24.6
Operating loss (in millions) $(13.5) $ - $(14.1) $(2.0)
Concentrate treated (metric tons) 195,300 238,500 400,800 483,200
Anode production (000s of pounds) 134,300 167,800 278,300 346,100
Cathode, wire rod and wire
sales (000s of pounds) 129,100 147,100 264,700 284,200
Gold sales in anodes and
slimes (ounces) 181,000 173,200 289,200 384,400
Atlantic Copper's cash margin, revenues less production
costs, before currency hedging was $13.2 million lower in the
2001 quarter compared with the 2000 quarter and $18.6 million
lower in the first six months of 2001 compared with the first six
months of 2000 primarily because of a scheduled 27-day major
maintenance turnaround in April 2001. The major maintenance
turnaround was completed on schedule at a total cost of
approximately $15 million (approximately $9 million of direct
costs and $6 million related to lower sales volumes). Atlantic
Copper's cathode cash production costs per pound of copper,
before currency hedging, averaged $0.18 in the second quarter of
2001 and $0.16 in the first six months of 2001 compared with
$0.12 in both the second quarter of 2000 and the first six months
of 2000. The increase in unit costs reflects the effects of lower
production volumes and the costs resulting from the turnaround.
The next scheduled major maintenance turnaround is not
anticipated for another three years. Atlantic Copper's treatment
rates averaged $0.18 per pound in the 2001 periods, slightly
better than the $0.17 per pound average in the 2000 periods, but
still at historically low levels.
Atlantic Copper recorded operating losses of $13.5 million
for the second quarter of 2001, including approximately $9
million for direct costs related to the major maintenance
turnaround, compared with breakeven results in the 2000 period.
Atlantic Copper's operating results include a $1.0 million loss
in the second quarter of 2001 and a $1.3 million loss in the
first six months of 2001 on currency hedging contracts maturing
during the periods compared to a $1.8 million charge in the
second quarter of 2000 and a $7.8 million charge in the first six
months of 2000 for all outstanding currency hedging contracts in
the 2000 periods. Under new accounting standards discussed
previously and in Note 3, Atlantic Copper recorded charges to
Other Comprehensive Income totaling $5.3 million in the second
quarter of 2001 and $16.4 million in the first six months of 2001
for its outstanding currency hedging contracts at June 30, 2001,
reflecting an approximate 10 percent decline in the Spanish
peseta/euro exchange rate since December 31, 2000.
Atlantic Copper had peseta/euro-denominated net monetary
liabilities at June 30, 2001 totaling $49.8 million recorded at
an exchange rate of 196.2 pesetas to one U.S. dollar or $0.85 per
euro. The December 31, 2000 exchange rate was 178.8 pesetas to
one U.S. dollar or $0.93 per euro. Adjustments to Atlantic
Copper's peseta/euro-denominated net liabilities to reflect
changes in the exchange rate are recorded in other income and
totaled gains (losses) of $1.2 million in the second quarter of
2001, $(0.3) million in the second quarter of 2000, $4.3 million
in the first six months of 2001 and $2.1 million in the first six
months of 2000.
17
At estimated annual peseta/euro payments of 15 billion
pesetas/90 million euros and a June 30, 2001 exchange rate of
196.2 pesetas to one U.S. dollar or $0.85 per euro, a 10-
peseta/$0.06 increase or decrease in the exchange rate would
result in an approximate $4 million change in annual costs,
before any hedging effects.
As part of refinancing its debt in June 2000, Atlantic
Copper was required to significantly expand its program to hedge
anticipated peseta/euro-denominated operating costs. At June 30,
2001, Atlantic Copper had contracts to purchase 25.3 billion
pesetas/152.2 million euros from July 2001 through December 2003
at an average exchange rate of 163.8 pesetas per one U.S. dollar
or $1.02 per euro. These contracts currently hedge approximately
50 percent of Atlantic Copper's projected remaining 2001
peseta/euro disbursements and approximately 67 percent of
Atlantic Copper's projected 2002 and 2003 euro disbursements.
Each $0.01 change in the US$/euro exchange rate impacts the
market value of these contracts by approximately $1.5 million.
PT Smelting Operating Results
Second Quarter Six Months
-------------- --------------
2001 2000 2001 2000
------ ----- ------ ------
(In millions)
PT Freeport Indonesia share of net losses $ 1.4 $ 6.6 $ 2.7 $ 8.3
PT Freeport Indonesia profits
deferred (recognized) (1.0) (0.7) 0.1 (4.7)
------ ----- ------ ------
Equity in PT Smelting losses $ 0.4 $ 5.9 $ 2.8 $ 3.6
====== ===== ====== ======
PT Freeport Indonesia sales to PT Smelting $111.9 $58.9 $202.5 $129.4
====== ===== ====== ======
PT Freeport Indonesia accounts for its 25 percent interest
in PT Smelting under the equity method and has provided PT
Smelting with all of its concentrate requirements. PT Smelting
operated at 109 percent of its full design capacity of 200,000
metric tons of copper per year during the second quarter of 2001
and at 107 percent of its full design capacity during the first
six months of 2001. Concentrate treated during the second quarter
of 2001 totaled 179,700 metric tons, an 80 percent increase
compared to the amounts treated in the year-ago quarter when
operations were ramping up to full capacity. PT Smelting shut
down the smelter, as planned, at the end of March 2000 for the
tie-in of a new third anode furnace as well as for planned
maintenance. The smelter restarted at the end of April 2000.
Second-quarter 2001 anode production increased by 95 percent and
cathode production increased by nearly 100 percent when compared
to the year-ago period, resulting in a 90 percent increase in PT
Smelting's cathode sales in the 2001 quarter over the 2000
quarter. Anode production was 69 percent higher and cathode
production was 78 percent higher in the first six months of 2001
compared with the first six months of 2000. The higher
production levels in 2001 benefited PT Smelting's cathode cash
production costs per pound of copper, which decreased to $0.12 in
the 2001 quarter and first six months of 2001, compared with
$0.23 in the 2000 quarter and $0.17 in the first six months of
2000.
Our revenues include PT Freeport Indonesia's sales to PT
Smelting, but we defer recognizing profits on 25 percent of PT
Freeport Indonesia sales to PT Smelting that are still in PT
Smelting's inventory at the end of the period. The effect of
changes in these deferred profits was the recognition of profits
totaling $1.0 million in the second quarter of 2001, $0.7 million
in the second quarter of 2000 and $4.7 million in the first six
months of 2000, and the deferral of profits totaling $0.1 million
in the first six months of 2001.
OTHER FINANCIAL RESULTS
The FCX/Rio Tinto joint ventures incurred exploration costs of
$3.6 million in the 2001 second quarter, $2.7 million in the 2000
second quarter, $7.1 million in the 2001 six-month period and
$5.5 million in the 2000 six-month period. All costs in the
joint venture areas are now being shared 60 percent by us and 40
percent by Rio Tinto.
Second-quarter 2001 general and administrative expenses of
$16.1 million were slightly lower than the $16.5 million reported
in the 2000 quarter, and six-month 2001 general and
administrative expenses were $6.7 million lower compared to the
2000 period primarily because of a $6.0 million charge in 2000
for contribution commitments to support small business
development programs within Irian Jaya (Papua) that was paid over
a two-year period. The six-month 2000 period also included a $0.8
million charge for personnel severance costs, offset by a $1.5
million reversal of previously recorded charges relating to stock
appreciation rights because of a decrease in our common stock
price.
18
Our total interest costs (before capitalization) were $43.5
million in the 2001 quarter, $51.4 million in the 2000 quarter,
$93.9 million in the first six months of 2001 and $102.6 million
in the first six months of 2000. The decrease in interest costs
reflects lower debt levels and interest rates. We capitalized
$2.1 million of interest costs in the second quarter of 2001,
$1.5 million in the second quarter of 2000, $4.1 million in the
first six months of 2001 and $2.9 million in the first six months
of 2000.
Our effective tax rate was 53 percent for the first six
months of 2001 and 71 percent for the first six months of 2000.
PT Freeport Indonesia's Contract of Work provides a 35 percent
corporate income tax rate and a withholding tax rate of 10
percent (based on the tax treaty between Indonesia and the United
States) on dividends and interest paid to us by PT Freeport
Indonesia. No income taxes are recorded at Atlantic Copper,
which is subject to taxation in Spain, because it has not
generated significant taxable income in recent years and has
substantial tax loss carryforwards for which no financial
statement benefit has been provided. Additionally, we only
receive a small U.S. tax benefit on costs incurred by our parent
company because it has no U.S.-sourced income. As a result, our
effective tax rate varies with the level of earnings at PT
Freeport Indonesia, Atlantic Copper and the parent company. The
lower effective tax rate for the first six months of 2001
primarily reflects the impact of higher income at PT Freeport
Indonesia.
NEW ACOUNTING STANDARD AND ENVIRONMENTAL MATTERS
In July 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 143, "Accounting
for Asset Retirement Obligations," which requires recording the
fair value of a liability for an asset retirement obligation in
the period incurred. The standard is effective for fiscal years
beginning after June 15, 2002, with earlier application
permitted. Upon adoption of the standard, we are required to use
a cumulative-effect approach to recognize transition amounts for
any existing asset retirement obligation liabilities, asset
retirement costs and accumulated depreciation. We have not
determined the transition amounts.
The costs of complying with environmental laws is a
fundamental cost of our business. We incurred environmental
capital expenditures and other environmental costs totaling
$106.1 million in 2000, $73.3 million in 1999 and $111.5 million
in 1998, including levee maintenance and mine reclamation. In
2001, we expect to incur approximately $47 million of
environmental capital expenditures, including $18.0 million of
capital expenditures in connection with our construction of a
treatment facility in the Lower Wanagon Basin to remove dissolved
copper from the acid rock drainage resulting from both mining and
overburden, and $46 million of other environmental costs. These
environmental capital expenditures are part of our $190.0 million
overall 2001 capital expenditure budget discussed below.
CAPITAL RESOURCES AND LIQUIDITY
Net cash provided by operating activities was $290.8 million for
the first six months of 2001, compared with $228.2 million for
the 2000 period. Net cash used in investing activities totaled
$76.1 million in the 2001 period, compared with $103.4 million in
the 2000 period, primarily for PT Freeport Indonesia capital
expenditures. Net cash used in financing activities totaled
$207.8 million in 2001 compared with $125.7 million in 2000.
Operating Activities
Higher net income was only partly offset by working capital
changes in the first six months of 2001, resulting in a $62.6
million increase in operating cash flow to $290.8 million, from
the year-ago period. The $5.9 million net increase in working
capital for the first six months of 2001 primarily reflects an
increase in accounts receivable and joint venture payments to Rio
Tinto partly offset by an increase in income taxes payable. The
net $54.4 million decrease in working capital for the first six
months of 2000 primarily reflects the collection of accounts
receivable and an increase in accounts payable and accrued
liabilities, partly offset by an increase in inventories and the
payment of income taxes.
Investing Activities
Our six-month 2001 capital expenditures were lower compared to
the 2000 period primarily because we paid for previously
purchased mine equipment in the first half of 2000. Our capital
expenditures for 2001 are expected to total approximately $190
million, including $40 million for continued development of the
Deep Ore Zone underground ore body, which started production in
2000 and is expected to reach full production of 25,000 metric
tons of ore per day by 2003. Capital expenditure funding is
expected to be provided by operating cash flows.
19
Financing Activities
We used available operating cash flows to repay $176.4 million of
debt in the first six months of 2001. During the first six
months of 2000 we had net borrowings of $58.1 million and
purchased $122.4 million of our common stock. Repayments to Rio
Tinto totaled $60.6 million in the first six months of 2000 from
PT Freeport Indonesia's share of incremental cash flow
attributable to the fourth concentrator mill expansion. After
less than two and one-half years, PT Freeport Indonesia fully
repaid the $450 million loan from Rio Tinto, which funded PT
Freeport Indonesia's share of the fourth concentrator mill
expansion.
We guarantee a $253.4 million loan to PT Nusamba Mineral
Industri (Nusamba), as discussed in our Form 10-K for the year
ended December 31, 2000, which matures in March 2002. Based on
current market conditions, we may be required to perform under
the guarantee. See "Refinancing Transactions" below. We also
agreed to lend Nusamba any amounts necessary to cover shortfalls
between the interest payments on the loan and dividends received
by Nusamba on the PT Indocopper Investama stock. At June 30,
2001, we had loaned $61.8 million to Nusamba for this purpose.
The amount of any future shortfalls will depend primarily on the
level of PT Freeport Indonesia's dividends to PT Indocopper
Investama. The total of the guaranteed loan and the amounts we
have subsequently loaned to Nusamba exceeded the original
purchase price ($315 million) of Nusamba's acquisition of its
interest in PT Indocopper Investama in June 2001. Any amounts in
excess of the $315 million original purchase price we loan to
Nusamba are charged to other expense.
In June 2000, our Board of Directors authorized a 20-million-
share increase in our open market share purchase program,
bringing the total shares approved for purchase under this
program to 80 million. During the first six months of 2001, we
purchased 0.2 million of our shares (all during the first
quarter) for $1.6 million, $8.35 per share. During the first six
months of 2000, we acquired 10.6 million of our shares for $129.2
million (an average of $12.15 per share). From inception of
these programs in July 1995 through July 18, 2001, we have
purchased a total of 70.7 million shares for $1.24 billion (an
average of $17.53 per share) and approximately 9.3 million shares
remain available under the program. The timing of future
purchases is dependent upon many factors, including the price of
common shares, our business and financial position, and general
economic and market conditions. See "Amended Credit Facilities"
discussion below for limitations on future repurchases.
Refinancing Transactions
We have commitments from all of the members of our bank group to
amend our existing credit facilities to extend the maturities and
to provide a mechanism for financing any obligations we may have
under our guarantee of the commercial bank loan to PT Nusamba
Mineral Industri. The amendment to our bank credit facilities is
conditioned on the sale of $300 million of convertible notes, the
negotiation and execution of definitive agreements and
satisfaction of other conditions. The sale of the convertible
notes and entering into the amended credit facilities are
collectively referred to as the "refinancing transactions." We
believe that the refinancing transactions, together with our cash
flows from operations, will enable us to fund our ongoing capital
expenditures and meet our debt maturities over the next several
years. In addition to the refinancing transactions, we are also
considering means of refinancing or restructuring our gold-
denominated preferred stock to extend its current 2003 mandatory
redemption date.
* Existing Credit Facilities and Maturities
Our existing bank credit facilities provide total
availability of $1.0 billion, subject to a borrowing base that is
redetermined annually. The facilities mature in December 2002.
The outstanding balance at June 30, 2001 was $754.0 million, with
$214.0 million available to PT Freeport Indonesia and $32.0
million available to FCX.
The $253.4 million bank loan to PT Nusamba Mineral Industri
that we guarantee matures in March 2002. It is uncertain whether
Nusamba will pay its debt at maturity. If we are required to
perform under our guarantee of Nusamba's debt, the amended credit
facilities will provide a mechanism to finance our guarantee
obligation. Other significant maturities through 2006 include
the expected repayment of the senior notes of $250.0 million in
2003 and $200.0 million in 2006, and the redemption of preferred
stock totaling approximately $172.3 million in 2003 and $126.4
million in 2006, based on gold and silver prices as of June 29,
2001.
20
Our scheduled debt and redeemable preferred stock
maturities, including the Nusamba guarantee, total approximately
$1.2 billion in 2002 and $499.3 million in 2003 based on June 29,
2001 gold and silver prices, which determine the preferred stock
redemption amounts.
* Amended Credit Facilities
We have commitments from all members of our current bank
group to amend our credit facilities based on the following
terms. These terms are subject to the sale of $300 million of
convertible notes, negotiation and execution of definitive
agreements and satisfaction of other conditions.
Commitments and Availability. The aggregate commitments
under the amended credit facilities will be $760.0 million, all
of which will be available to PT Freeport Indonesia and $340.0
million of which will be available to FCX. If we sell more than
$300.0 million principal amount of convertible notes, the
additional net proceeds will be used to repay our outstanding
borrowings under the facilities and the commitments will be
reduced by the excess amount.
The aggregate commitments under the amended credit
facilities will be $954.0 million if we are called on to perform
under the Nusamba guarantee when the Nusamba loan matures in
2002. Nusamba indirectly owns 4.7 percent of PT Freeport
Indonesia through its approximate 51 percent ownership of PT
Indocopper Investama. To secure its commercial bank loan,
Nusamba pledged its ownership in PT Indocopper Investama. If
Nusamba does not pay the loan when due and we are required to
perform under the guarantee, we would fund the $253.4 million
obligation under the amended credit facilities and would seek to
recover the PT Indocopper Investama stock as provided by the
Nusamba financing documents, which are governed by Indonesian
law.
Maturities and Term Loan Conversion. Amounts that we borrow
under the amended facilities will mature on December 31, 2005.
Amounts will be available on a revolving basis until December
2003, at which time all borrowed amounts will become term loans,
except for a $150.0 million revolver for working capital
purposes.
We will be able to use the amounts available under the
amended facilities to pay interest and principal requirements on
our other debt when due. We will be required to use all
available cash flow after debt service and capital expenditures
to reduce amounts outstanding under the amended facilities.
There are no minimum principal payments under the amended
facilities until 2004 at which time the loan will be subject to
scheduled amortization in an aggregate principal amount of $130.0
million per year in each of 2004 and 2005. The cumulative
amounts of any commitment reductions prior to December 31, 2003
will be credited toward the amortization payments.
Mandatory Repayments and Reductions in Commitments. All of
the proceeds from the sale of convertible notes will be used to
pay outstanding borrowings under our credit facilities. After we
have raised $250.0 million of additional financing in excess of
the $300.0 million of gross proceeds from the sale of convertible
notes, 25 percent of the proceeds from debt issuances and 50
percent of the proceeds from equity issuances would be available
to us for general corporate purposes. All other proceeds from
financings and all available cash of FCX and PT Freeport
Indonesia will be used to pay outstanding borrowings under the
amended credit facilities and the commitments under the
facilities will be reduced by those amounts, except as necessary
to maintain availability to repay the 7.20% senior notes and to
preserve the $150.0 million revolving facility that will continue
to be available through December 31, 2005.
Interest Rates and Fees. Interest rates on all loans under
the facilities, including any amounts used to fund our
obligations under the Nusamba guarantee, will initially be LIBOR
(currently 3.8 percent) plus 4.0 percent with annual increases of
0.125 percent on each anniversary of the closing of the amended
facilities. Interest rates will be reduced to a level yet to be
determined upon the achievement of minimum public debt ratings.
We will also pay an amendment fee of up to 1.25 percent on
available borrowings.
Beginning in November 2003, if we have not raised $250.0
million of additional financing in excess of the $300.0 million
of gross proceeds from the sale of convertible notes, and we use
proceeds under the facilities to repay our 7.20% senior notes,
then we will pay interest on those borrowings (up to a maximum of
$250.0 million) of LIBOR plus 5.0 percent with annual increases
of 0.125 percent. We will also pay an additional fee of 0.75
percent on amounts used under the facilities to repay our 7.20%
senior notes (up to a maximum of $250.0 million), which we expect
to repay in November 2003.
21
7.20% Senior Notes. Amounts available under the amended
credit facilities may be used to repay our 7.20% senior notes in
November 2003 to the extent necessary. In accordance with a
schedule to be determined, we will maintain progressively greater
amounts of unused availability under the amended credit
facilities so that we will have available $250.0 million in
November 2003 to repay the 7.20% senior notes.
Gold-Denominated Preferred Stock Due in 2003. Prior to the
mandatory redemption date in August 2003, we intend to refinance
or restructure our obligation to redeem our gold-denominated
preferred stock. Under the amended credit facilities, we have
limitations on the amount of preferred stock we may redeem and,
if by August 2003 we have not extended the maturity of a
specified amount of the gold-denominated preferred stock beyond
2005, we will not thereafter be permitted to redeem or pay
dividends on any of our preferred stock.
Other Covenants. The covenants under the amended credit
facilities are expected to include (a) a minimum consolidated
debt service coverage ratio to be determined, but no greater than
1.5:1.0 and (b) a maximum ratio of consolidated debt to EBITDA
equal to 3.5:1.0. The covenants will also include prohibitions
on common stock dividends and common stock repurchases,
limitations on capital expenditures to specified budgets,
limitations on investments, limitations on liens, limitations on
transactions with affiliates, and a requirement to implement
minimum hedging protection for copper prices under certain
circumstances.
Security and Guarantees. The obligations of FCX and PT
Freeport Indonesia under the amended credit facilities will be
secured by a first security lien on most of PT Freeport
Indonesia's assets and by our pledge of (1) 50.1 percent of the
outstanding capital stock of PT Freeport Indonesia, (2) the
approximate 49 percent of the outstanding capital stock of PT
Indocopper Investama owned by us and (3) the approximate 51
percent of the outstanding capital stock of PT Indocopper
Investama securing the original Nusamba loan, if acquired by us.
PT Freeport Indonesia's obligations will also continue to be
secured by its pledge of its rights under the Contract of Work.
In addition, PT Freeport Indonesia will guarantee FCX's
obligations under the amended credit facilities.
Revised Debt and Redeemable Preferred Stock Maturities.
Assuming the sale of $300 million of convertible notes and the
amendments to the bank credit facilities as currently
contemplated, following is a summary of our debt and redeemable
preferred stock maturities, including the Nusamba loan maturity,
based on loan balances as of June 30, 2001, and gold and silver
prices (which determine the preferred stock redemption amounts)
as of June 29, 2001 (in millions):
There-
2001 2002 2003 2004 2005 2006 after
----- ------ ------ ------ ------ ------ ------
Bank credit facilities a $ - $ - $ - $130.0 $409.0 $ - $ -
Infrastructure financings
and equipment loans 32.6 110.7 56.9 62.3 47.4 47.7 187.1
7.20% Senior Notes due
2026 b - - 250.0 - - - -
7.50% Senior Notes due
2006 c - - - - - 200.0 -
Convertible Notes - - - - - 300.0 -
Atlantic Copper facilities
and other 6.0 65.0 20.1 10.1 24.1 24.1 114.9
----- ------ ------ ------ ------ ------ ------
Total debt maturities 38.6 175.7 327.0 202.4 480.5 571.8 302.0
Nusamba loan guarantee d - - - - 253.4 - -
Redeemable preferred
stock e 10.3 10.3 172.3 10.3 10.3 126.4 -
----- ------ ------ ------ ------ ------ ------
Total maturities $48.9 $186.0 $499.3 $212.7 $744.2 $698.2 $302.0
===== ====== ====== ====== ====== ====== ======
a. The amount due in 2004 represents the minimum repayment
requirement under the amended credit facilities and the amount
due in 2005 represents the loan balances as of June 30, 2001 less
the 2004 minimum repayment requirement and the estimated net
proceeds from the sale of convertible notes.
b. Although due in 2026, the holders of the 7.20% senior notes
may, and are expected to, elect early repayment in November 2003.
c. Due November 15, 2006.
d. If we are required to perform under this guarantee, we
intend to fund the $253.4 million obligation under our amended
credit facilities; as reflected, $130.0 million under the bank
credit facilities will mature in 2004 and the balance will mature
in 2005.
22
e. Represents $10.3 million each year for our silver-
denominated preferred stock, $162.0 million in August 2003 for
our gold-denominated preferred stock, and $116.1 million in
February 2006 for our series II gold-denominated preferred stock.
Increased Cost of Debt. As of June 30, 2001, our weighted
average cost of debt was 7.7 percent. Had we completed the
refinancing transactions on June 30, 2001, our average borrowing
cost would have increased by approximately 1.2 percent.
In connection with the amended bank credit facilities, we
expect to incur premiums, fees and expenses that will result in a
cash outlay of approximately $19.4 million. This cash outlay has
been reflected in the expected approximately 1.2 percent increase
in our average borrowing cost.
DEVELOPMENTS IN INDONESIA
Indonesia's economic recovery remains vulnerable to ongoing
political and social tensions. There have been repeated
challenges to the political leadership of President Abdurrahman
Wahid since his election on October 20, 1999. In May 2001,
Indonesia's highest political institution, the People's
Consultative Assembly (MPR), scheduled a special session to hear
an accountability speech from President Wahid. If his speech
were to be rejected, the MPR would have the power to withdraw the
president's mandate and force him to resign. President Wahid had
publicly stated that he would not resign. Early on the morning of
July 23, 2001, President Wahid declared a state of emergency in
Indonesia and called for new MPR elections to be held in 2002.
However, the MPR, the military and the national police refused to
recognize the decree following a Supreme Court ruling that the
presidential decree had no legal basis. Later on July 23, 2001,
the MPR voted to immediately remove President Wahid, and elected
Vice President Megawati Sukarnoputri as the new president. The
international community, including the United States, has
expressed support for the newly elected President. While
President Wahid had previously warned of violence by his
supporters, no significant incidents of violence have been
reported thus far. No incidents of violence were reported in
PT Freeport Indonesia's area of operations, where the local
community leaders continue to support peaceful solutions to the
complex issue of regional autonomy.
Indonesia's economy continues to struggle with a growing
budget deficit, a weak currency, rising local interest rates and
inflation, and a decline in exports. The political situation has
prevented the government from implementing fiscal policy,
prompting Standard & Poor's to downgrade Indonesia's credit
rating during the quarter. The government continues to work
closely with the International Monetary Fund to reach a new
agreement allowing the release of a $400 million loan
disbursement. Another factor impacting the country's economic
recovery is that its debt-restructuring agency has not generated
sufficient asset sale proceeds to meet government budget targets.
The rupiah continues to reflect the uncertain political and
social situation and the country's weak economic position. At
June 30, 2001, the rupiah exchange rate was 11,430 rupiahs to 1
U.S. dollar and is 24 percent weaker than the rate at December
31, 2000. Inflation is on the rise and local interest rates
currently exceed 16 percent.
CAUTIONARY STATEMENT
Our discussion and analysis contains forward-looking statements
in which we discuss factors we believe may affect our performance
in the future. Forward-looking statements are all statements
other than historical facts, such as those regarding anticipated
sales volumes, ore grades, commodity prices, capital
expenditures, the expected amendment to our bank credit
facilities, political, economic and social conditions in our
areas of operations, treatment charge rates and exploration
efforts and results. We caution you that these statements are
not guarantees of future performance, and our actual results may
differ materially from those projected, anticipated or assumed in
the forward-looking statements. Important factors that can cause
our actual results to differ materially from those anticipated in
the forward-looking statements include unanticipated declines in
the average grades of ore mined, unanticipated milling and other
processing problems, labor relations, weather conditions, the
speculative nature of mineral exploration, fluctuations in
interest rates and other adverse financial market conditions, and
other factors described in more detail under the heading
"Cautionary Statements" in our Form 10-K for the year ended
December 31, 2000.
23
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
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). The plaintiff alleged environmental, human
rights and social/cultural violations in Indonesia and seeks
unspecified monetary damages and other equitable relief. In
addition, the plaintiff alleged that she was a third-party
beneficiary under the 1967 and the 1991 Contracts of Work, and
claimed that she had not received fair compensation for her land
rights.
On March 21, 2000 the trial court dismissed the entire case
with prejudice, granting FCX's exception of no cause of action.
On March 24, 2000, the plaintiff filed a petition of appeal to
the Louisiana Fourth Circuit. FCX will continue to defend this
action vigorously.
In addition to the foregoing proceedings, FCX 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 proceedings
would not have a material adverse effect on the financial
condition or results of operations of FCX. FCX 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 coverage customary in its
business, with coverage limits as management deems prudent.
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) The exhibits to this report are listed
in the Exhibit Index beginning on Page
E-1 hereof.
(b) During the quarter for which this report
is filed, the registrant did not file any
Current Reports on Form 8-K.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
FREEPORT-McMoRan COPPER & GOLD INC.
By: \s\ C. Donald Whitmire, Jr.
---------------------------------
C. Donald Whitmire, Jr.
Vice President and
Controller-Financial Reporting
(authorized signatory and
Principal Accounting Officer)
Date: July 30, 2001
24
Freeport-McMoRan Copper & Gold Inc.
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
2.1 Agreement, dated as of May 2, 1995 by and between Freeport-
McMoRan Inc. (FTX) and FCX and the RTZ Corporation PLC, RTZ
Indonesia Limited, and RTZ America, Inc. (the Rio Tinto
Agreement). Incorporated by reference to Exhibit 2.1 to the
Current Report on Form 8-K of FTX dated as of May 26, 1995.
2.2 Amendment dated May 31, 1995 to the Rio Tinto Agreement.
Incorporated by reference to Exhibit 2.1 to the Quarterly
Report on Form 10-Q of FTX for the quarter ended June 30,
1995.
2.3 Distribution Agreement dated as of July 5, 1995 between FTX
and FCX. Incorporated by reference to Exhibit 2.1 to the
Quarterly Report on Form 10-Q of FTX for the quarter ended
September 30, 1995 (the FTX 1995 Third Quarter Form 10-Q).
3.1 Composite copy of the Certificate of Incorporation of FCX.
Incorporated by reference to Exhibit 3.1 to the Quarterly
Report on Form 10-Q of FCX for the quarter ended June 30, 1995
(the FCX 1995 Second Quarter Form 10-Q).
3.2 Amended By-Laws of FCX dated as of March 12, 1999.
Incorporated by reference to Exhibit 3.2 to the Annual Report
on Form 10-K of FCX for the fiscal year ended December 31,
1998 (the 1998 FCX Form 10-K).
4.1 Certificate of Designations of the Step-Up Convertible
Preferred Stock of FCX. Incorporated by reference to Exhibit
4.2 to the FCX 1995 Second Quarter Form 10-Q.
4.2 Deposit Agreement dated as of July 1, 1993 among FCX,
ChaseMellon Shareholder Services, L.L.C. (ChaseMellon), as
Depositary, and holders of depositary receipts (Step-Up
Depositary Receipts) evidencing certain Depositary Shares,
each of which, in turn, represents 0.05 shares of Step-Up
Convertible Preferred Stock. Incorporated by reference to
Exhibit 4.5 to the Annual Report on Form 10-K of FCX for the
fiscal year ended December 31, 1993 (the FCX 1993 Form 10-K).
4.3 Form of Step-Up Depositary Receipt. Incorporated by reference
to Exhibit 4.6 to the FCX 1993 Form 10-K.
4.4 Certificate of Designations of the Gold-Denominated Preferred
Stock of FCX. Incorporated by reference to Exhibit 4.3 to the
FCX 1995 Second Quarter Form 10-Q.
4.5 Deposit Agreement dated as of August 12, 1993 among FCX,
ChaseMellon, as Depositary, and holders of depositary receipts
(Gold-Denominated Depositary Receipts) evidencing certain
Depositary Shares, each of which, in turn, represents 0.05
shares of Gold-Denominated Preferred Stock. Incorporated by
reference to Exhibit 4.8 to the FCX 1993 Form 10-K.
4.6 Form of Gold-Denominated Depositary Receipt. Incorporated by
reference to Exhibit 4.9 to the FCX 1993 Form 10-K.
4.7 Certificate of Designations of the Gold-Denominated Preferred
Stock, Series II (the Gold-Denominated Preferred Stock II) of
FCX. Incorporated by reference to Exhibit 4.4 to the FCX 1995
Second Quarter Form 10-Q.
4.8 Deposit Agreement dated as of January 15, 1994, among FCX,
ChaseMellon, as Depositary, and holders of depositary receipts
(Gold-Denominated II Depositary Receipts) evidencing certain
Depositary Shares, each of which, in turn, represents 0.05
shares of Gold-Denominated Preferred Stock II. Incorporated
by reference to Exhibit 4.2 to the Quarterly Report on Form 10-
Q of FCX for the quarter ended March 31, 1994 (the FCX 1994
First Quarter Form 10-Q).
E-1
Freeport-McMoRan Copper & Gold Inc.
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
4.9 Form of Gold-Denominated II Depositary Receipt. Incorporated
by reference to Exhibit 4.3 to the FCX 1994 First Quarter Form
10-Q.
4.10 Certificate of Designations of the Silver-Denominated
Preferred Stock of FCX. Incorporated by reference to Exhibit
4.5 to the FCX 1995 Second Quarter Form 10-Q.
4.11 Deposit Agreement dated as of July 25, 1994 among FCX,
ChaseMellon, as Depositary, and holders of depositary receipts
(Silver-Denominated Depositary Receipts) evidencing certain
Depositary Shares, each of which, in turn, initially
represents 0.025 shares of Silver-Denominated Preferred Stock.
Incorporated by reference to Exhibit 4.2 to the July 15, 1994
Form 8-A.
4.12 Form of Silver-Denominated Depositary Receipt. Incorporated
by reference to Exhibit 4.1 to the July 15, 1994, Form 8-A.
4.13 $550 million Composite Restated Credit Agreement dated as of
July 17, 1995 (the PT Freeport Indonesia Credit Agreement)
among PT Freeport Indonesia, FCX, the several financial
institutions that are parties thereto, First Trust of New
York, National Association, as PT Freeport Indonesia Trustee,
Chemical Bank, as administrative agent and FCX collateral
agent, and The Chase Manhattan Bank (National Association), as
documentary agent. Incorporated by reference to Exhibit 4.16
to the Annual Report of FCX on Form 10-K for the year ended
December 31, 1995 (the FCX 1995 Form 10-K).
4.14 Amendment dated as of July 15, 1996 to the PT Freeport
Indonesia Credit Agreement among PT Freeport Indonesia, FCX,
the several financial institutions that are parties thereto,
First Trust of New York, National Association, as PT Freeport
Indonesia Trustee, Chemical Bank, as administrative agent and
FCX collateral agent, and The Chase Manhattan Bank (National
Association), as documentary agent. Incorporated by reference
to Exhibit 4.2 to the Quarterly Report of FCX on Form 10-Q for
the quarter ended September 30, 1996 (the FCX 1996 Third
Quarter Form 10-Q).
4.15 Amendment dated as of October 9, 1996 to the PT Freeport
Indonesia Credit Agreement among PT Freeport Indonesia, FCX,
the several financial institutions that are parties thereto,
First Trust of New York, National Association, as PT Freeport
Indonesia Trustee, The Chase Manhattan Bank (formerly Chemical
Bank), as administrative agent, security agent and JAA
security agent, and The Chase Manhattan Bank (as successor to
The Chase Manhattan Bank (National Association)), as
documentary agent. Incorporated by reference to Exhibit 10.2
to the Current Report on Form 8-K of FCX dated and filed
November 13, 1996 (the FCX November 13, 1996 Form 8-K).
4.16 Amendment dated as of March 7, 1997 to the PT Freeport
Indonesia Credit Agreement among PT Freeport Indonesia, FCX,
the several financial institutions that are parties thereto,
First Trust of New York, National Association, as PT Freeport
Indonesia Trustee, The Chase Manhattan Bank, as administrative
agent, security agent and JAA security agent, and The Chase
Manhattan Bank, as documentary agent. Incorporated by
reference to Exhibit 4.16 to the Annual Report of FCX on Form
10-K for the year ended December 31, 1997 (the FCX 1997 Form
10-K).
4.17 Amendment dated as of July 24, 1997 to the PT Freeport
Indonesia Credit Agreement among PT Freeport Indonesia, FCX,
the several financial institutions that are parties thereto,
First Trust of New York, National Association, as PT Freeport
Indonesia Trustee, The Chase Manhattan Bank, as administrative
agent, security agent and JAA security agent, and The Chase
Manhattan Bank, as documentary agent. Incorporated by
reference to Exhibit 4.17 to the FCX 1997 Form 10-K.
E-2
Freeport-McMoRan Copper & Gold Inc.
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
4.19 Amendment dated as of July 15, 1996 to the CDF among PT
Freeport Indonesia, FCX, the several financial institutions
that are parties thereto, First Trust of New York, National
Association, as PT Freeport Indonesia Trustee, Chemical Bank,
as administrative agent and FCX collateral agent, and The
Chase Manhattan Bank (National Association), as documentary
agent. Incorporated by reference to Exhibit 4.1 to the FCX
1996 Third Quarter Form 10-Q.
4.20 Amendment dated as of October 9, 1996 to the CDF among PT
Freeport Indonesia, FCX, the several financial institutions
that are parties thereto, First Trust of New York, National
Association, as PT Freeport Indonesia Trustee, The Chase
Manhattan Bank (formerly Chemical Bank), as administrative
agent, security agent and JAA security agent, and The Chase
Manhattan Bank (as successor to The Chase Manhattan Bank
(National Association)), as documentary agent. Incorporated
by reference to Exhibit 10.1 to the FCX November 13, 1996 Form
8-K.
4.21 Amendment dated as of March 7, 1997 to the CDF among PT
Freeport Indonesia, FCX, the several financial institutions
that are parties thereto, First Trust of New York, National
Association, as PT Freeport Indonesia Trustee, The Chase
Manhattan Bank, as administrative agent, security agent and
JAA security agent, and The Chase Manhattan Bank, as
documentary agent. Incorporated by reference to Exhibit 4.21
to the FCX 1997 Form 10-K.
4.22 Amendment dated as of July 24, 1997 to the CDF among PT
Freeport Indonesia, FCX, the several financial institutions
that are parties thereto, First Trust of New York, National
Association, as PT Freeport Indonesia Trustee, The Chase
Manhattan Bank, as administrative agent, security agent and
JAA security agent, and The Chase Manhattan Bank, as
documentary agent. Incorporated by reference to Exhibit 4.22
to the FCX 1997 Form 10-K.
4.23 Senior Indenture dated as of November 15, 1996 from FCX to The
Chase Manhattan Bank, as Trustee. Incorporated by reference
to Exhibit 4.1 to the Current Report on Form 8-K of FCX dated
November 13, 1996 and filed November 15, 1996.
4.24 First Supplemental Indenture dated as of November 18, 1996
from FCX to The Chase Manhattan Bank, as Trustee, providing
for the issuance of the Senior Notes and supplementing the
Senior Indenture dated November 15, 1996 from FCX to such
Trustee, providing for the issuance of Debt Securities.
Incorporated by reference to Exhibit 4.20 to the FCX 1996 Form
10-K.
4.25 Certificate of Designations of Series A Participating
Cumulative Preferred stock of FCX. Incorporated by reference
to Exhibit 4.25 to the Quarterly Report on Form 10-Q of FCX
for the quarter ended March 31, 2000 (the FCX 2000 First
Quarter Form 10-Q).
4.26 Rights Agreement dated as of May 3, 2000 between FCX and
Chasemellon Shareholder Services, L.L.C., as Rights Agent.
Incorporated by reference to Exhibit 4.26 to the FCX 2000
First Quarter Form 10-Q.
10.1 Contract of Work dated December 30, 1991 between the
Government of the Republic of Indonesia and PT Freeport
Indonesia. Incorporated by reference to Exhibit 10.20 to the
FCX 1991 Form 10-K.
10.2 Contract of Work dated August 15, 1994 between the Government
of the Republic of Indonesia and PT Irja Eastern Minerals
Corporation. Incorporated by reference to Exhibit 10.2 to the
FCX 1995 Form 10-K.
E-3
Freeport-McMoRan Copper & Gold Inc.
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
10.3 Agreement dated as of October 11, 1996 to Amend and Restate
Trust Agreement among PT Freeport Indonesia, FCX, the RTZ
Corporation PLC, P.T. RTZ-CRA Indonesia, RTZ Indonesian
Finance Limited and First Trust of New York, National
Association, and The Chase Manhattan Bank, as Administrative
Agent, JAA Security Agent and Security Agent. Incorporated by
reference to Exhibit 10.3 to the FCX November 13, 1996 Form 8-
K.
10.4 Concentrate Purchase and Sales Agreement dated effective
December 11, 1996 between PT Freeport Indonesia and PT
Smelting. Incorporated by reference to Exhibit 10.34 to the
Annual Report of FCX on Form 10-K for the year ended December
31, 1999 (the FCX 1999 Form 10-K).
10.5 Participation Agreement dated as of October 11, 1996 between
PT Freeport Indonesia and P.T. RTZ-CRA Indonesia with respect
to a certain contract of work. Incorporated by reference to
Exhibit 10.5 to the FCX November 13, 1996 Form 8-K.
10.6 Second Amended and Restated Joint Venture and Shareholders'
Agreement dated as of December 11, 1996 among Mitsubishi
Materials Corporation, Nippon Mining and Metals Company,
Limited and PT Freeport Indonesia. Incorporated by reference
to Exhibit 10.3 of the FCX 1996 Form 10-K.
10.7 Put and Guaranty Agreement dated as of March 21, 1997 between
FCX and The Chase Manhattan Bank. Incorporated by reference
to Exhibit 10.7 to the FCX 1997 Form 10-K.
10.8 Subordinated Loan Agreement dated as of March 21, 1997 between
FCX and PT Nusamba Mineral Industri. Incorporated by
reference to Exhibit 10.8 to the FCX 1997 Form 10-K.
10.9 Amended and Restated Power Sales Agreement dated as of
December 18, 1997 between PT Freeport Indonesia and P.T.
Puncakjaya Power. Incorporated by reference to Exhibit 10.9 to
the FCX 1997 Form 10-K.
10.10 Option, Mandatory Purchase and Right of First Refusal
Agreement dated as of December 19, 1997 among PT Freeport
Indonesia, P.T. Puncakjaya Power, Duke Irian Jaya, Inc.,
Westcoast Power, Inc. and P.T. Prasarana Nusantara Jaya.
Incorporated by reference to Exhibit 10.10 to the FCX 1997
Form 10-K.
Executive Compensation Plans and Arrangements (Exhibits 10.11
through 10.37)
10.11 Annual Incentive Plan of FCX as amended effective February 2,
1999. Incorporated by reference to Exhibit 10.11 to the 1998
FCX Form 10-K.
10.12 1995 Long-Term Performance Incentive Plan of FCX.
Incorporated by reference to Exhibit 10.9 to the FCX 1996 Form
10-K.
10.13 FCX Performance Incentive Awards Program as amended effective
February 2, 1999. Incorporated by reference to Exhibit 10.13
to the 1998 FCX Form 10-K.
10.14 FCX President's Award Program. Incorporated by reference to
Exhibit 10.8 to the FCX 1995 Form 10-K.
10.15 FCX Adjusted Stock Award Plan, as amended. Incorporated by
reference to Exhibit 10.15 to the 1997 FCX Form 10-K.
E-4
Freeport-McMoRan Copper & Gold Inc.
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
10.16 FCX 1995 Stock Option Plan. Incorporated by reference to
Exhibit 10.13 to the FCX 1996 Form 10-K.
10.17 FCX 1995 Stock Option Plan for Non-Employee Directors, as
amended. Incorporated by reference to Exhibit 10.17 to the
FCX 1997 Form 10-K.
10.18 FCX 1999 Stock Incentive Plan. Incorporated by reference to
Exhibit 10.18 to the Quarterly Report on Form 10-Q of FCX for
the quarter ended June 30, 1999.
10.19 FCX 1999 Long-Term Performance Incentive Plan. Incorporated
by reference to Exhibit 10.19 to the Annual Report of FCX on
Form 10-K for the year ended December 31, 1999 (the FCX 1999
Form 10-K).
10.20 FCX Stock Appreciation Rights Plan dated May 2, 2000.
10.21 Financial Counseling and Tax Return Preparation and
Certification Program of FCX. Incorporated by reference to
Exhibit 10.12 to the FCX 1995 Form 10-K.
10.22 FM Services Company Performance Incentive Awards Program as
amended effective February 2, 1999. Incorporated by reference
to Exhibit 10.19 to the 1998 FCX Form 10-K.
10.23 FM Services Company Financial Counseling and Tax Return
Preparation and Certification Program. Incorporated by
reference to Exhibit 10.14 to the FCX 1995 Form 10-K.
10.24 Consulting Agreement dated as of December 22, 1988 between FTX
and Kissinger Associates, Inc. (Kissinger Associates).
Incorporated by reference to Exhibit 10.21 to the FCX 1997
Form 10-K.
10.25 Letter Agreement dated May 1, 1989 between FTX and Kent
Associates, Inc. (Kent Associates, predecessor in interest to
Kissinger Associates). Incorporated by reference to Exhibit
10.22 to the FCX 1997 Form 10-K.
10.26 Letter Agreement dated January 27, 1997 among Kissinger
Associates, Kent Associates, FTX, FCX and FMS. Incorporated
by reference to Exhibit 10.20 to the FCX 1996 Form 10-K.
10.27 Agreement for Consulting Services between FTX and B. M.
Rankin, Jr. effective as of January 1, 1991 (assigned to FMS
as of January 1, 1996). Incorporated by reference to Exhibit
10.24 to the FCX 1997 Form 10-K.
10.28 Supplemental Agreement between FMS and B. M. Rankin Jr. dated
December 15, 1997. Incorporated by reference to Exhibit 10.25
to the FCX 1997 Form 10-K.
10.29 Supplemental Agreement between FMS and B.M. Rankin Jr. dated
December 7, 1998. Incorporated by reference to Exhibit 10.26
to the 1998 FCX Form 10-K.
10.30 Supplemental Agreement between FMS and B. M. Rankin, Jr. dated
February 5, 2001. Incorporated by reference to Exhibit 10.29
to the Annual Report on Form 10-K of FCX for the fiscal year
ended December 31, 2000.
10.31 Letter Agreement effective as of January 7, 1997 between Senator
J. Bennett Johnston, Jr. and FMS. Incorporated by reference to
Exhibit 10.25 of the FCX 1996 Form 10-K.
E-5
Freeport-McMoRan Copper & Gold Inc.
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
10.32 Supplemental Letter Agreement dated April 13, 2000 between J.
Bennett Johnston, Jr. and FMS. Incorporated by reference to
Exhibit 10.30 to the FCX 2000 First Quarter Form 10-Q.
10.33 Letter Agreement dated November 1, 1999 between FMS and
Gabrielle K. McDonald. Incorporated by reference to Exhibit
10.33 of the FCX 1999 Form 10-K.
10.34 Supplemental Letter Agreement dated May 17, 2000 between FMS
and Gabrielle K. McDonald. Incorporated by reference to
Exhibit 10.35 of the FCX 2000 Second Quarter Form 10-Q.
10.35 Executive Employment Agreement dated April 30, 2001 between
FCX and James R. Moffett.
10.36 Executive Employment Agreement dated April 30, 2001 between
FCX and Richard C. Adkerson.
10.37 Change of Control Agreement dated April 30, 2001 between FCX
and James R. Moffett.
10.38 Change of Control Agreement dated April 30, 2001 between FCX
and Richard C. Adkerson.
15.1 Letter dated July 18, 2001 from Arthur Andersen LLP regarding
unaudited interim financial statements.
E-6
EX-10
3
exh1020.txt
FREEPORT-McMoRan COPPER & GOLD INC.
STOCK APPRECIATION RIGHTS PLAN
SECTION 1
Purpose. The purpose of the Freeport-McMoRan Copper & Gold Inc. Stock
Appreciation Rights Plan (the "Plan") is to provide for the issuance and
administration of Stock Appreciation Rights in substitution of Tax-Offset
Payment Rights granted by the Company under the Adjusted Plan (as those
capitalized terms are defined herein).
SECTION 2
Definitions. As used in the Plan, the following terms shall have the
meanings set forth below:
"Adjusted Plan" shall mean the Freeport-McMoRan Copper & Gold Inc. Adjusted
Stock Award Plan.
"Award" shall mean any Stock Appreciation Right granted under this Plan.
"Award Agreement" shall mean any written agreement, contract, notice, 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 the committee of the Board that administers the Plan
that is 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. Until otherwise determined by the Board, the
Committee shall be the Corporate Personnel Committee of the Board.
"Company" shall mean Freeport-McMoRan Copper & Gold 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.
"Effective Date" shall mean May 2, 2000.
"Eligible Individual" shall mean any present or former director of the
Company who on the Effective Date holds a Stock Option.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"Participant" shall mean any Eligible Individual 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 a Stock Appreciation Right.
"SEC" shall mean the Securities and Exchange Commission, including the
staff thereof, or any successor thereto.
"Shares" shall mean the shares of Class B Common Stock, par value $.10 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 award of stock appreciation
rights granted under Section 6 of the Plan.
"Stock Option" shall mean an option to purchase Shares with Tax-Offset
Payment Rights granted by the Company under the Adjusted Plan that is
outstanding and unexercised on the Effective Date.
"Subsidiary" shall mean 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.
"Tax-Offset Payment Right" shall mean a right to receive a cash payment
upon the exercise of an option to purchase Shares granted by the Company under
the Adjusted Plan that is related to and intended to defray the income tax
liability associated with such option exercise.
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 interpret and administer the Plan and any
instrument or agreement relating to, or Award made under, the Plan; 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 make any
other determination and take any other action that the Committee deems necessary
or desirable for the administration of the Plan. The Committee shall have no
discretion relating to the timing, price and size of Awards granted under the
Plan, which shall be determined in accordance with the provisions of Section 6.
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 Eligible
Individual.
SECTION 4
Eligibility. Each Eligible Individual shall be granted an Award in
accordance with the provisions of the Plan.
SECTION 5
(a) SARs Available for Awards. Subject to adjustment as provided in
paragraph 5(b), the number of SARs that may be granted under the Plan shall be
such number of SARs as results from the application of the award formula set
forth in Section 6. If, after the Effective Date, an Award granted under the
Plan expires or is exercised, forfeited, canceled or terminated, then the SARs
covered by such Award or to which such Award relates, to the extent of any such
expiration, exercise, forfeiture, cancellation or termination, shall not
thereafter be available for grants or Awards under the Plan.
(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 similarcorporate 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 SARs subject to outstanding Awards and (ii) the
grant price with respect to any Award and, if deemed appropriate, make provision
for a cash payment to the holder of an outstanding Award; provided, that the
number of SARs subject to any Award shall always be a whole number.
SECTION 6
(a) Stock Appreciation Rights. Effective as of the Effective Date, each
holder of a Stock Option shall receive a number of Stock Appreciation Rights
equal to the number of Shares subject to such Stock Option as of the Effective
Date multiplied by .6556 (disregarding any fractional Share), provided, however,
the holder of such Stock Option shall simultaneously relinquish all Tax-Offset
Payment Rights associated with such Stock Option by means of an instrument in
form and substance satisfactory to the Company. Except as set forth below, each
such SAR shall have the same remaining term and other terms and conditions
(whether such terms and conditions are contained in the related Stock Option
agreement or in the Adjusted Plan) and shall be exercisable to the same extent
as the related Stock Option, with such changes and modifications as are
necessary to substitute the SARs for the Tax-Offset Payment Rights. The per
Share grant price of each SAR shall be the exercise price of the related Stock
Option as of the Effective Date.
(b) A Stock Appreciation Right shall entitle the holder thereof to receive
upon exercise, for each Share to which the SAR relates, 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 SAR over the grant 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, (i) 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 and (ii) any amendment, suspension or
termination made in accordance with this Section 7(a) that would affect a
holder's rights under an Award in a materially adverse manner may not be made
without such holder's consent.
(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 anything to the contrary
contained herein, any amendment, modification, or termination made in accordance
with this Section 7(b) that would affect a holder's rights under an Award in a
materially adverse manner may not be made without such holder's consent.
(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 subsection shall be made by the Committee
in its sole discretion.
SECTION 8
(a) 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 and that shall, in accordance with the
provisions of the Plan, replicate as closely as possible the terms, conditions
and other contractual attributes of the Stock Option to which the Award relates,
as in effect on the Effective Date.
(b) 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; or (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. 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 8(b).
(c) 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
stock appreciation rights (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.
(d) No Right to be Retained. The grant of an Award shall not be construed
as giving a Participant the right to be engaged or retained by the Company. The
Company may at any time dismiss a Participant from engagement, free from any
liability or any claim under the Plan, unless otherwise provided by law or
expressly provided in the Plan or in any Award Agreement or any agreement
relating to the engagement of the Participant by the Company.
(e) 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.
(f) 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.
(g) 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.
(h) 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
Effective Date.
SECTION 10
Term of the Plan. Subject to Section 5(b), no Award shall be granted under
the Plan except the Awards provided for in Section 6. Awards granted hereunder
shall continue until their respective expiration dates, and the authority of the
Committee to administer, interpret, amend, alter, adjust, suspend, discontinue,
or terminate, in accordance with the provisions of the Plan, any such Award or
to waive any conditions or rights under any such Award shall extend until the
latest such date.
EX-10
4
exh1035.txt
Execution Copy
Executive Employment Agreement
This Executive Employment Agreement ("Agreement") between
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), and James R. Moffett (the "Executive") is dated
effective as of April 30, 2001 (the "Agreement Date").
W I T N E S S E T H:
WHEREAS, the Executive currently serves as an officer of the
Company;
WHEREAS, pursuant to the terms of this Agreement, the
Company desires to retain the services of the Executive and the
Executive desires to continue to provide services to the Company;
WHEREAS, during the course of providing services to the
Company, the Executive has or will have received extensive and
unique knowledge of, experience in and access to resources
involving, the Mining Business (as defined below) at a
substantial cost to the Company, which Executive acknowledges has
enhanced or substantially will enhance Executive's skills and
knowledge in such business;
WHEREAS, during the course of providing services to the
Company, Executive has had and will continue to have access to
valuable oral and written information, knowledge and data
relating to the business and operations of the Company and its
subsidiaries that is non-public, confidential or proprietary in
nature and is particularly useful in the Mining Business; and
WHEREAS, in view of the opportunities provided by the
Company to Executive, the cost thereof to the Company, and the
need for the Company to be protected against disclosures by
Executive of the Company's and its subsidiaries' trade secrets
and other non-public, confidential or proprietary information,
the Company and Executive desire, among other things, to prohibit
Executive from disclosing or utilizing, outside the scope of his
employment with the Company, any non-public, confidential or
proprietary information, knowledge and data relating to the
business and operations of the Company or its subsidiaries
received by Executive during the course of his employment, and to
restrict the ability of Executive to compete with the Company or
its subsidiaries for a limited period of time.
NOW, THEREFORE, for and in consideration of the continued
employment of Executive by the Company and the payment of salary,
benefits and other compensation to Executive by the Company, the
parties hereto agree as follows:
Article I
Employment Capacity
1. Capacity and Duties of Executive. The Executive is
employed by the Company to render services on behalf of the
Company as Chairman of the Board and Chief Executive Officer.
The Executive will perform such duties as are assigned to the
individual holding the title or titles held by him from time to
time in the Company's By-laws and such other duties as may be
prescribed from time to time by the Company's Board of Directors
(the "Board"), which duties shall be consistent with the position
of Chairman of the Board and Chief Executive Officer.
2. Devotion to Responsibilities. The Executive will
devote significant business time to the business of the Company,
will use his best efforts to perform faithfully and efficiently
his duties under this Agreement, and will not engage in or be
employed by any other business; provided, however, that nothing
herein will prohibit the Executive from (a) serving as an officer
and director of McMoRan Exploration Co. ("McMoRan"), FM Services
Company or any of their affiliates or successors, (b) serving as
a member of the board of directors, board of trustees or the like
of any for-profit or non-profit entity that does not compete with
the Company, or performing services of any type for any civic or
community entity, whether or not the Executive receives
compensation therefor, (c) investing his assets in such form or
manner as will require no more than nominal services on the part
of the Executive in the operation of the business of the entity
in which such investment is made, or (d) serving in various
capacities with, and attending meetings of, industry or trade
groups and associations, as long as the Executive's activities
permitted by clauses (a), (b), (c) and (d) above do not
materially and unreasonably interfere with the ability of the
Executive to perform the services and discharge the
responsibilities required of him under this Agreement.
Notwithstanding clause (c) above, the Executive may not, without
the approval of the Corporate Personnel Committee of the Board,
beneficially own 5 percent or more of the equity interests of a business
organization required to file periodic reports with the
Securities and Exchange Commission under the Securities Exchange
Act of 1934 (the "Exchange Act") other than the Company or
McMoRan, and the Executive may not beneficially own more than 2 percent
of the equity interests of any business organization that
competes with the Company. For purposes of this paragraph,
"beneficially own" has the meaning ascribed to that term in Rule
13d-3 under the Exchange Act.
Article II
Compensation and Benefits
1. Salary. The Company will pay the Executive a salary
("Base Salary") at an annual rate per fiscal year of the Company
("Fiscal Year") of $2,500,000, which will be payable to the
Executive in equal semi-monthly installments. Base Salary may be
remitted to the Executive on behalf of the Company by the
Company's affiliate, FM Services Company.
2. Bonus. The Executive will be eligible to receive an
annual incentive bonus (the "Bonus"), payable, if at all, only
with respect to services that the Executive provides to the
Company. Any Bonus will be determined, accrued and paid in
accordance with the terms of the Company's Annual Incentive Plan,
as amended, that covers certain individuals designated by the
Corporate Personnel Committee of the Board (the "Committee"), or
any incentive or bonus compensation plan that is a successor or
substitute therefor. For Fiscal Years 2001 and 2002, the
Executive will be eligible to receive a Bonus not greater than
$2,750,000. Any Bonus awarded will be paid in cash not later
than 60 days following the end of the Fiscal Year in which the
Bonus has been earned; provided that, if the Company maintains a
restricted stock program that allows executives to receive
restricted stock units in lieu of all or part of their annual
cash bonus, then the Executive may, at his sole option, elect to
receive restricted stock units in lieu of all or part of his
Bonus in accordance with the restricted stock program. The
Executive acknowledges and agrees that this Section 2 imposes no
obligation on the Company to award any bonus to the Executive.
3. Stock Options and Long-Term Performance Units. Any and
all stock options and long-term performance units will be awarded
to the Executive in accordance with current and successor plans
at the discretion of the Company.
4. Vacation. The Executive will be entitled to paid
vacation and holidays as provided to executives of the Company
generally.
5. Indemnification and Insurance. In accordance with the
Company's Certificate of Incorporation, the Company will
indemnify the Executive, to the fullest extent permitted by
applicable the law, for any and all claims brought against him
arising out his services to the Company and its subsidiaries. In
addition, the Company will continue to maintain a directors' and
officers' insurance policy covering the Executive substantially
in the form of the policy in existence as of the Agreement Date
to the extent such policy remains available at reasonable
commercial terms.
6. Other Benefits. The Executive will continue to be
entitled to all benefits and perquisites presently provided to
him or generally to the most senior executives of the Company and
be eligible to participate in and receive all benefits under
welfare benefit plans, practices, policies and programs
(including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and
travel accident insurance plans and programs) available generally
to the most senior executives of the Company.
7. Expenses. The Executive will be entitled to receive
prompt reimbursement for all reasonable business expenses
(including food, transportation, entertainment and lodging)
incurred from time to time on behalf of the Company in the
performance of his duties, upon the presentation of such
supporting invoices, documents and forms as the Company
reasonably requests.
Article III
Termination of Status as Officer and Employee; Change of Control
1. Death. The Executive's status as an officer and
employee will terminate immediately and automatically upon the
Executive's death.
2. Disability. The Company may terminate Executive's
status as an officer and employee for "Disability" as follows:
(a) If the Executive has a disability that entitles him to
receive benefits under the Company's long-term disability
insurance policy in effect at the time either because he is
Totally Disabled or Partially Disabled, as such terms are defined
in the Company's policy in effect as of the Agreement Date or as
similar terms are defined in any successor policy, then the
Company may terminate Executive's status as an officer and
employee effective on the first day on which the Executive
receives a payment under such policy (or on the first day that he
would be so eligible, if he had applied timely for such
payments).
(b) If the Company has no long-term disability plan in
effect, and if (i) because of physical or mental illness the
Executive is rendered incapable of satisfactorily discharging his
duties and responsibilities under this Agreement for a period of
90 consecutive days and (ii) a duly qualified physician chosen by
the Company and reasonably acceptable to the Executive or his
legal representatives so certifies in writing, the Board will
have the power to determine that the Executive has become
disabled. If the Board makes such a determination, the Company
will have the continuing right and option, during the period that
such disability continues, and by notice given in the manner
provided in this Agreement, to terminate the status of Executive
as an officer and employee. Any such termination will become
effective 30 days after such notice of termination is given,
unless within such 30-day period, the Executive becomes capable
of rendering services of the character contemplated hereby (and a
physician chosen by the Company and reasonably acceptable to the
Executive or his legal representatives so certifies in writing)
and the Executive in fact resumes such services.
(c) The "Disability Effective Date" will mean the date on
which termination of Executive's status as an officer and
employee becomes effective due to Disability.
3. Cause. The Company may terminate the Executive's
status as an officer and employee for "Cause," which is defined
as follows:
(a) The Executive's willful and continued failure to
perform substantially the Executive's duties with the Company or
its affiliates (other than any such failure resulting from
incapacity due to physical or mental illness), after a written
demand for substantial performance is delivered to the Executive
by the Board, which specifically identifies the manner in which
the Board believes that the Executive has not substantially
performed the Executive's duties;
(b) The Executive's material breach of this Agreement after
a written demand is delivered to the Executive by the Board,
which specifically identifies the manner in which the Board
believes that the Executive has materially breached this
Agreement; or
(c) The final conviction of the Executive or an entering of
a guilty plea or a plea of no contest by the Executive to a
felony.
For purposes of this provision, no act or failure to act, on the
part of the Executive, will be considered "willful" unless it is
done, or omitted to be done, by the Executive in bad faith or
without a reasonable belief that the act or omission was in the
best interests of the Company or its affiliates. Any act, or
failure to act, based on authority given pursuant to a resolution
duly adopted by the Board or the advice of counsel to the Company
or its affiliates will be conclusively presumed to be done, or
omitted to be done, by the Executive in good faith and in the
best interests of the Company or its affiliates. The termination
of employment of the Executive will not be deemed to be for Cause
unless and until there has been delivered to the Executive a copy
of a resolution duly adopted by the affirmative vote of not less
than three-quarters of the entire membership of the Board at a
meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive
is given an opportunity, together with counsel, to be heard
before the Board), finding that, in the good faith opinion of the
Board, the Executive has engaged in the conduct described in
subparagraph (a), (b) or (c) above, and specifying the
particulars of such conduct.
4. Good Reason. The Executive may terminate his status as
an officer and employee for "Good Reason," which is defined as
follows:
(a) Any failure by the Company or its affiliates to comply
with any of the provisions of this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring in
bad faith that is remedied within 10 days after receipt by the
Company of written notice thereof from the Executive; or
(b) The assignment to the Executive of any duties
inconsistent in any material respect with Executive's position
(including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by this
Agreement, or any other action that results in a diminution in
such position, authority, duties or responsibilities, excluding
for this purpose an isolated, insubstantial and inadvertent
action not taken in bad faith that is remedied within 10 days
after receipt by the Company of written notice thereof from the
Executive.
5. Voluntary Termination by the Company. In addition to
termination for death, Disability or Cause, the Company may at
any time terminate the Executive's status as an officer and
employee for any reason or for no reason at all.
6. Retirement. In addition to termination for death or
Good Reason, the Executive may at any time retire and terminate
his status as an officer and employee. "Retirement" (and
variants thereof) for purposes of this Agreement is defined as
the Executive's voluntary termination of his status as an officer
and employee at any time after reaching age 54, but shall not
include a termination for Good Reason.
7. Notice of Termination; Termination Date. (a) Other
than as a result of the death of Executive, any termination of
Executive's status as an officer and employee shall be
communicated to the other party by Notice of Termination given in
accordance with Article VII, Section 3 of this Agreement. For
purposes of this Agreement, a "Notice of Termination" means a
written notice that (i) indicates the specific termination
provision in this Agreement on which the party relies, (ii) to
the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination
under the provisions so indicated and (iii) if the Termination
Date (as defined below) is other than the date of receipt of such
notice, specifies the Termination Date. The Company's failure to
set forth in the Notice of Termination any fact or circumstance
that contributes to a showing of Disability or Cause will not
negate the effect of the notice nor waive any right of the
Company or preclude the Company from asserting such fact or
circumstance in enforcing the Company's rights.
(b) "Termination Date" means, if Executive's status as an
officer and employee is terminated (i) by reason of Executive's
death, the date of Executive's death, (ii) by reason of
Disability, the Disability Effective Date, (iii) by the Company
other than by reason of death or Disability, the date of delivery
of the Notice of Termination or any later date specified in the
Notice of Termination, which date will not be more than 30 days
after the giving of the notice, or (iv) by the Executive other
than by reason of death, the date of delivery of the Notice of
Termination or any later date specified in the Notice of
Termination, which date will not be more than 30 days after the
giving of the notice.
8. Change of Control. Upon and following a Change of
Control of the Company, as defined in the Change of Control
Agreement between the Executive and the Company dated effective
April 30, 2001 and any amendments thereto or any subsequent
change of control agreement between the Executive and the Company
(the "Change of Control Agreement"), the rights and obligations
of the Executive and the Company will no longer be governed by
this Agreement, but will be as provided in the Change of Control
Agreement (including any rights or obligations in this Agreement
that are specifically incorporated by reference therein). Upon
the occurrence of a Change of Control, the term of the Agreement
will end, and the provisions of this Agreement will be null and
void, and of no further force and effect, except that
compensation and benefit obligations accrued by the Company with
respect to the Executive prior to the Change of Control and
during the term of the Agreement will remain valid and
enforceable, and the rights of Executive to indemnification shall
remain in effect.
Article IV
Obligations upon Termination
1. Death or Disability. If (A) the Executive's status as
an officer and employee is terminated by reason of the
Executive's death or (B) the Company terminates the Executive's
status as an officer and employee by reason of Executive's
Disability then, subject to Article IV, Section 6 hereof:
(a) The Company will pay the Executive or his legal
representatives the sum of (i) the amount of the Executive's Base
Salary earned through the Termination Date to the extent not
previously paid and (ii) any compensation previously deferred by
the Executive (together with any accrued interest on earnings
thereon) to the extent not previously paid in accordance with the
terms of the deferred compensation plans under which such
compensation was deferred (the sum of the amounts described in
clauses (i) and (ii) being hereinafter referred to as the
"Accrued Obligations");
(b) The Company will pay to the Executive or his legal
representatives a pro rata bonus in an amount determined by
calculating the bonus that the Executive would receive for the
Fiscal Year in which the Termination Date occurs based upon the
level of achievement of the applicable performance goals through
the end of the fiscal quarter in which the Termination Date
occurs, annualized as if such level of performance had continued
throughout the entire Fiscal Year and then multiplying such bonus
amount by the fraction obtained by dividing the number of days in
the year through the Termination Date by 365 (the "Pro Rata
Bonus");
(c) All stock options granted to the Executive under the
Company's stock option and stock incentive plans ("Stock
Options") that are exercisable on the Termination Date and all
Stock Options that would have become exercisable within one year
after the Termination Date, will remain exercisable until the
earlier of (i) for death, the first anniversary of the
Termination Date; for Disability, the third anniversary of the
Termination Date, or (ii) the expiration date specified in the
Stock Option;
(d) The Company will pay to the Executive or his legal
representatives an amount equal to $1,800,000;
(e) All restricted stock units granted to the Executive
will vest as of the Termination Date to the extent not previously
vested and will convert to the applicable common stock of the
Company;
(f) The Executive's performance units under the Company's
1995 and 1999 Long-Term Performance Incentive Plans and any
successor plans (the "Long-Term Performance Incentive Plans")
will be credited with the annual earnings per share or net loss
per share (as defined in the plans) for the Fiscal Year in which
the Termination Date occurs and all amounts credited to the
Executive's performance unit account will be fully vested and
will be paid out within 60 days of the end of the Fiscal Year in
which the Termination Date occurs; and
(g) The Company will pay or deliver, as appropriate, all
other benefits earned by the Executive or accrued for his benefit
pursuant to any employee benefit plans maintained by the Company
or its subsidiaries with respect to services rendered by the
Executive prior to the Termination Date.
The compensation described in paragraphs (b), (c), (e) and (f)
above was intended at the time of grant to qualify as
"performance-based compensation" under Section 162(m) of the
Internal Revenue Code. In order that such compensation may
continue to qualify and notwithstanding any provision of any such
paragraph or Article IV, Section 6, the payment of any such
compensation hereunder shall be subject to, and reduced if
necessary to comply with, the applicable requirements of Section
162(m), including but not limited to (i) satisfaction of all
applicable performance goals for the period prior to termination
of the Executive's status as an officer and employee or such
shorter or longer period provided herein, (ii) certification of
the satisfaction of the applicable performance goals by a
committee of the Board, the members of which qualify as outside
directors under Section 162(m), and (iii) the application of a
discount to reflect the time value of money where the payment of
the compensation is accelerated as a result of termination of the
Executive's status as an officer and employee.
2. Retirement. If the Executive terminates his status as
an officer and employee by reason of Retirement, then, subject to
Article IV, Section 6 hereof:
(a) The Company will pay to the Executive (i) the Accrued
Obligations and (ii) the Pro Rata Bonus;
(b) All Stock Options that are exercisable on the
Termination Date and all Stock Options that would have become
exercisable within one year after the Termination Date, will
remain exercisable until the earlier of (i) the third anniversary
of the Termination Date or (ii) the expiration date specified in
the Stock Option;
(c) The Company will pay to the Executive an amount equal
to $1,800,000;
(d) All restricted stock units granted to the Executive
will vest as of the Termination Date to the extent not previously
vested and will convert to the applicable common stock of the
Company;
(e) The Executive's performance units under the Long-Term
Performance Incentive Plans will be credited with the annual
earnings per share or net loss per share (as defined in the
plans) for the Fiscal Year in which the Termination Date occurs
and all amounts credited to the Executive's performance unit
account will be fully vested and will be paid out within 60 days
of the end of the Fiscal Year in which the Termination Date
occurs;
(f) For a period commencing on the Termination Date and
ending on the earlier of (i) the third anniversary of the
Termination Date, or (ii) the date that the Executive accepts new
employment (the "Continuation Period"), the Company will at its
expense maintain and administer for the continued benefit of
Executive all insurance and welfare benefit plans in which
Executive was entitled to participate as an employee of the
Company as of the Termination Date, except medical reimbursement
benefits under the Company's flex plans, provided that
Executive's continued participation is possible under the general
terms and provisions of such plans and all applicable laws. The
coverage and benefits (including deductibles and costs) provided
under any such benefit plan in accordance with this paragraph
during the Continuation Period will be no less favorable to
Executive than the most favorable of such coverages and benefits
as of the Termination Date. If Executive's participation in any
such benefit plan is barred or any such benefit plan is
terminated, the Company will use commercially reasonable efforts
to provide Executive with compensation or benefits substantially
similar or comparable in value to those Executive would otherwise
have been entitled to receive under such plans. At the end of
the Continuation Period, the Executive will have the option to
have assigned to him, at no cost and with no apportionment of
prepaid premiums, any assignable insurance owned by the Company
that relates specifically to the Executive. To the maximum
extent permitted by law, the Executive will be eligible for
coverage under the Consolidated Omnibus Budget Reconciliation Act
("COBRA") at the end of the Continuation Period or earlier
cessation of the Company's obligation under the foregoing
provisions of this paragraph; and
(g) The Company will pay or deliver, as appropriate, all
other benefits earned by the Executive or accrued for his benefit
pursuant to any employee benefit plans maintained by the Company
or its subsidiaries with respect to services rendered by the
Executive prior to the Termination Date.
The compensation described in paragraphs (a)(ii), (b), (d) and
(e) above was intended at the time of grant to qualify as
"performance-based compensation" under Section 162(m) of the
Internal Revenue Code. In order that such compensation may
continue to qualify and notwithstanding any provision of any such
paragraph or Article IV, Section 6, the payment of any such
compensation hereunder shall be subject to, and reduced if
necessary to comply with, the applicable requirements of Section
162(m), including but not limited to (i) satisfaction of all
applicable performance goals for the period prior to termination
of the Executive's status as an officer and employee or such
shorter or longer period provided herein, (ii) certification of
the satisfaction of the applicable performance goals by a
committee of the Board, the members of which qualify as outside
directors under Section 162(m), and (iii) the application of a
discount to reflect the time value of money where the payment of
the compensation is accelerated as a result of termination of the
Executive's status as an officer and employee.
3. Cause. If the Company terminates the Executive's
status as an officer and employee for Cause, the Company will pay
to the Executive the Accrued Obligations. The Company will have
no further obligation to the Executive other than for obligations
imposed by law and obligations for any benefits earned by the
Executive or accrued for his benefit pursuant to any employee
benefit plans maintained by the Company or its subsidiaries with
respect to services rendered by the Executive prior to the
Termination Date.
4. Termination by Executive for Good Reason or by Company
for Reasons other than Death, Disability or Cause. If the
Executive terminates his status as an officer and employee for
Good Reason or the Company terminates the Executive's status as
an officer and employee other than for death, Disability or
Cause, then, subject to Article IV, Section 6 hereof:
(a) The Company will pay to the Executive (i) the Accrued
Obligations and (ii) the Pro Rata Bonus;
(b) Within twenty business days of the Termination Date,
the Company will pay to the Executive an amount equal to four
times the sum of (i) the Executive's Base Salary in effect at the
Termination Date and (ii) the lesser of (A) the highest Bonus
paid to the Executive for any of the immediately preceding three
Fiscal Years or (B) two times Base Salary in effect at the
Termination Date;
(c) All Stock Options will become immediately exercisable
as of the Termination Date and will remain exercisable until the
expiration date specified in the Stock Option;
(d) All restricted stock units granted to the Executive
will vest as of the Termination Date to the extent not previously
vested and will convert to the applicable common stock of the
Company;
(e) The Executive's performance units under the Long-Term
Performance Incentive Plans will be credited with the annual
earnings per share or net loss per share (as defined in the
plans) for the Fiscal Year in which the Termination Date occurs
and all amounts credited to the Executive's performance unit
account will be fully vested and will be paid out within 60 days
of the end of the Fiscal Year in which the Termination Date
occurs;
(f) For the Continuation Period, the Company will at its
expense maintain and administer for the continued benefit of
Executive all insurance and welfare benefit plans in which
Executive was entitled to participate as an employee of the
Company as of the Termination Date, except medical reimbursement
benefits under the Company's flex plans, provided that
Executive's continued participation is possible under the general
terms and provisions of such plans and all applicable laws. The
coverage and benefits (including deductibles and costs) provided
under any such benefit plan in accordance with this paragraph
during the Continuation Period will be no less favorable to
Executive and his dependents and beneficiaries than the most
favorable of such coverages and benefits as of the Termination
Date; provided, however, in the event of the disability of
Executive during the Continuation Period, disability benefits
shall, to the maximum extent possible, not be paid for the
Continuation Period but shall instead commence immediately
following the end of the Continuation Period. If Executive's
participation in any such benefit plan is barred or any such
benefit plan is terminated, the Company will use commercially
reasonable efforts to provide Executive with compensation or
benefits substantially similar or comparable in value to those
Executive would otherwise have been entitled to receive under
such plans. At the end of the Continuation Period, the Executive
will have the option to have assigned to him, at no cost and with
no apportionment of prepaid premiums, any assignable insurance
owned by the Company that relates specifically to the Executive.
To the maximum extent permitted by law, the Executive will be
eligible for coverage under COBRA at the end of the Continuation
Period or earlier cessation of the Company's obligation under the
foregoing provisions of this paragraph; and
(g) The Company will pay or deliver, as appropriate, all
benefits earned by the Executive or accrued for his benefit
pursuant to any employee benefit plans maintained by the Company
or its subsidiaries with respect to services rendered by the
Executive prior to the Termination Date.
The compensation described in paragraphs (a)(ii), (c), (d) and
(e) above was intended at the time of grant to qualify as
"performance-based compensation" under Section 162(m) of the
Internal Revenue Code. In order that such compensation may
continue to qualify and notwithstanding any provision of any such
paragraph or Article IV, Section 6, the payment of any such
compensation hereunder shall be subject to, and reduced if
necessary to comply with, the applicable requirements of Section
162(m), including but not limited to (i) satisfaction of all
applicable performance goals for the period prior to termination
of the Executive's status as an officer and employee or such
shorter or longer period provided herein, (ii) certification of
the satisfaction of the applicable performance goals by a
committee of the Board, the members of which qualify as outside
directors under Section 162(m), and (iii) the application of a
discount to reflect the time value of money where the payment of
the compensation is accelerated as a result of termination of the
Executive's status as an officer and employee.
5. Resignation from Boards of Directors. If Executive is
a director of the Company and his employment is terminated for
any reason other than death, the Executive will, if requested by
the Company, immediately resign as a director of the Company and
its subsidiaries. If such resignation is not received within 20
business days after the Executive actually receives written
notice from the Company requesting the resignations, the
Executive will forfeit any right to receive any payments pursuant
to this Agreement.
6. Most Favorable Benefits. It is the intention of the
parties that the terms of this Agreement shall provide payments
and benefits to the Executive that are equivalent or more
beneficial to the Executive than are otherwise available to the
Executive under the terms of any applicable benefit plan or
related compensation agreement. To that end, the terms of this
Agreement shall govern the payments and benefits to which the
Executive shall be entitled upon the termination of Executive's
status as an officer and employee as provided herein, except that
if the terms of any applicable benefit plan or related
compensation agreement provide more favorable benefits to the
Executive than are provided hereunder, then the terms of such
plan or agreement shall control unless such terms would cause any
compensation to fail to meet the requirements of Section 162(m).
Article V
Nondisclosure, Noncompetition and Proprietary Rights
1. Certain Definitions. For purposes of this Agreement,
the following terms will have the following meanings:
(a) "Confidential Information" means any information,
knowledge or data of any nature and in any form (including
information that is electronically transmitted or stored on any
form of magnetic or electronic storage media) relating to the
past, current or prospective business or operations of the
Company and its subsidiaries, that at the time or times concerned
is not generally known to persons engaged in businesses similar
to those conducted or contemplated by the Company and its
subsidiaries (other than information known by such persons
through a violation of an obligation of confidentiality to the
Company), whether produced by the Company and its subsidiaries or
any of their consultants, agents or independent contractors or by
Executive, and whether or not marked confidential, including
without limitation information relating to the Company's or its
subsidiaries' products and services, business plans, business
acquisitions, processes, product or service research and
development ideas, methods or techniques, training methods and
materials, and other operational methods or techniques, quality
assurance procedures or standards, operating procedures, files,
plans, specifications, proposals, drawings, charts, graphs,
support data, trade secrets, supplier lists, supplier
information, purchasing methods or practices, distribution and
selling activities, consultants' reports, marketing and
engineering or other technical studies, maintenance records,
employment or personnel data, marketing data, strategies or
techniques, financial reports, budgets, projections, cost
analyses, price lists, formulae and analyses, employee lists,
customer records, customer lists, customer source lists,
proprietary computer software, and internal notes and memoranda
relating to any of the foregoing.
(b) "Mining Business" means the exploration, mining,
production, marketing and sale of metals and ore containing
metals.
2. Nondisclosure of Confidential Information. Executive
will hold in a fiduciary capacity for the benefit of the Company
all Confidential Information obtained by Executive during
Executive's employment (whether prior to or after the Agreement
Date) and will use such Confidential Information solely within
the scope of his employment with and for the exclusive benefit of
the Company. For a period of five years after the Termination
Date, Executive agrees (a) not to communicate, divulge or make
available to any person or entity (other than the Company) any
such Confidential Information, except upon the prior written
authorization of the Company or as may be required by law or
legal process, and (b) to deliver promptly to the Company any
Confidential Information in his possession, including any
duplicates thereof and any notes or other records Executive has
prepared with respect thereto. In the event that the provisions
of any applicable law or the order of any court would require
Executive to disclose or otherwise make available any
Confidential Information, Executive will give the Company prompt
prior written notice of such required disclosure and an
opportunity to contest the requirement of such disclosure or
apply for a protective order with respect to such Confidential
Information by appropriate proceedings.
3. Limited Covenant Not to Compete. For a period of two
years after the Termination Date, Executive agrees that, with
respect to each State of the United States or other jurisdiction,
or specified portions thereof, in which the Executive regularly
(a) makes contact with customers of the Company or any of its
subsidiaries, (b) conducts the business of the Company or any of
its subsidiaries, or (c) supervises the activities of other
employees of the Company or any of its subsidiaries, and in which
the Company or any of its subsidiaries engages in Mining Business
as of the Termination Date, including without limitation the
Parish of Orleans, Louisiana, and the countries of Indonesia and
Spain (collectively, the "Subject Areas"), Executive will
restrict his activities within the Subject Areas as follows:
(a) Executive will not, directly or indirectly, for himself
or others, own, manage, operate, control, be employed in an
executive, managerial or supervisory capacity by, consult with,
assist or otherwise engage or participate in or allow his skill,
knowledge, experience or reputation to be used in connection
with, the ownership, management, operation or control of, any
company or other business enterprise engaged in the Mining
Business within any of the Subject Areas; provided, however, that
nothing contained herein will prohibit Executive from making
passive investments as long as Executive does not beneficially
own more than 2 percent of the equity interests of a business enterprise
engaged in the Mining Business within any of the Subject Areas.
For purposes of this paragraph, "beneficially own" will have the
same meaning ascribed to that term in Rule 13d-3 under the
Exchange Act;
(b) Executive will not call upon any customer of the
Company or its subsidiaries for the purpose of soliciting,
diverting or enticing away the business of such person or entity,
or otherwise disrupting any previously established relationship
existing between such person or entity and the Company or its
subsidiaries;
(c) Executive will not solicit, induce, influence or
attempt to influence any supplier, lessor, lessee, licensor,
partner, joint venturer, potential acquiree or any other person
who has a business relationship with the Company or its
subsidiaries, or who on the Termination Date is engaged in
discussions or negotiations to enter into a business relationship
with the Company or its subsidiaries, to discontinue or reduce or
limit the extent of such relationship with the Company or its
subsidiaries;
(d) Without the consent of the Company, Executive will not
make contact with any of the employees of the Company or its
subsidiaries with whom he had contact during the course of his
employment with the Company for the purpose of soliciting such
employee for hire, whether as an employee or independent
contractor, or otherwise disrupting such employee's relationship
with the Company or its subsidiaries; and
(e) Without the consent of the Company, Executive further
agrees that, for a period of one year from and after the
Termination Date, Executive will not hire any employee of the
Company or its subsidiaries as an employee or independent
contractor, whether or not such engagement is solicited by
Executive.
4. Injunctive Relief; Other Remedies. Executive
acknowledges that a breach by Executive of Section 2 or 3 of this
Article V would cause immediate and irreparable harm to the
Company for which an adequate monetary remedy does not exist;
hence, Executive agrees that, in the event of a breach or
threatened breach by Executive of the provisions of Section 2 or
3 of this Article V, the Company will be entitled to injunctive
relief restraining Executive from such violation without the
necessity of proof of actual damage or the posting of any bond,
except as required by non-waivable, applicable law. Nothing
herein, however, will be construed as prohibiting the Company
from pursuing any other remedy at law or in equity to which the
Company may be entitled under applicable law in the event of a
breach or threatened breach of this Agreement by Executive,
including without limitation the recovery of damages and/or costs
and expenses, such as reasonable attorneys' fees, incurred by the
Company as a result of any such breach or threatened breach. In
addition to the exercise of the foregoing remedies, the Company
will have the right upon the occurrence of any such breach to
offset the damages of such breach as determined by the Company,
against any unpaid salary, bonus, commissions or reimbursements
otherwise owed to Executive. In particular, Executive
acknowledges that the payments provided under Article IV are
conditioned upon Executive fulfilling any noncompetition and
nondisclosure agreements contained in this Article V. If
Executive at any time materially breaches any noncompetition or
nondisclosure agreements contained in this Article V, then the
Company may offset the damages of such breach, as determined
solely by the Company, against payments otherwise due to
Executive under Article IV or, at the Company's option, suspend
payments otherwise due to Executive under Article IV during the
period of such breach. Executive acknowledges that any such
offset or suspension of payments would be an exercise of the
Company's right to offset or suspend its performance hereunder
upon Executive's breach of this Agreement; such offset or
suspension of payments would not constitute, and shall not be
characterized as, the imposition of liquidated damages.
5. Requests for Waiver in Cases of Undue Hardship. If the
Executive should find that any of the limitations in this Article
V impose a severe hardship on his ability to secure other
employment, then the Executive may ask the Company to waive the
specified limitations before accepting employment that otherwise
would be a breach of Executive's obligations under this
Agreement. Such request must be in writing and set forth the
name and address of the organization with which employment or
another prohibited relationship is sought and the position,
duties or other activities that Executive seeks to perform, and
the location of performance. The Company will consider the
request and, in its sole discretion, decide whether and on what
conditions to grant such waiver.
6. Governing Law of this Article V; Consent to
Jurisdiction. Any dispute regarding the reasonableness of the
covenants and agreements set forth in this Article V or the
territorial scope or duration thereof, or the remedies available
to the Company upon any breach of such covenants and agreements,
will be governed by and interpreted in accordance with the laws
of the State of the United States or other jurisdiction in which
the alleged prohibited competing activity or disclosure occurs,
and, with respect to each such dispute, the Company and Executive
each hereby consent to the jurisdiction of the state and federal
courts sitting in the relevant State (or, in the case of any
jurisdiction outside the United States, the relevant courts of
such jurisdiction) for resolution of such dispute, and agree that
service of process may be made upon him or it in any legal
proceeding relating to this Article V by any means allowed under
the laws of such jurisdiction.
7. Executive's Understanding of this Article. Executive
hereby represents to the Company that he has read and
understands, and agrees to be bound by, the terms of this
Article V. Executive acknowledges that the geographic scope and
duration of the covenants contained in Article V are the result
of arm's-length bargaining and are fair and reasonable in light
of (a) the importance of the functions performed by Executive and
the length of time it would take the Company to find and train a
suitable replacement, (b) the nature and wide geographic scope of
the operations of the Company and its subsidiaries, (c)
Executive's level of control over and contact with the business
and operations of the Company and its subsidiaries in various
jurisdictions where same are conducted and (d) the fact that all
facets of the Mining Business are conducted by the Company and
its subsidiaries throughout the geographic area where competition
is restricted by this Agreement. It is the desire and intent of
the parties that the provisions of this Agreement be enforced to
the fullest extent permitted under applicable law, whether now or
hereafter in effect and, therefore, to the extent permitted by
applicable law, the parties hereto waive any provision of
applicable law that would render any provision of this Article V
invalid or unenforceable.
Article VI
Binding Arbitration
1. Binding Agreement to Arbitrate. Any claim or
controversy arising out of any provision of this Agreement (other
than Article V hereof), or the breach or alleged breach of any
such provision, will be settled by binding arbitration
administered by the American Arbitration Association (the "AAA")
under its National Rules for the Resolution of Employment
Disputes as in effect at the time of the claim or controversy
(the "Rules"), and judgment on the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction
thereof.
2. Selection and Qualifications of Arbitrators. If no
party to the arbitration makes a claim in excess of $1.0 million,
exclusive of interest and attorneys' fees, the proceedings will
be conducted before a single neutral arbitrator selected in
accordance with the Rules. If any party makes a claim that
exceeds $1.0 million, the proceedings will be conducted before a
panel of three neutral arbitrators selected in accordance with
the Rules.
3. Location of Proceedings. The place of arbitration will
be in New Orleans, Louisiana.
4. Remedies. Any award in an arbitration initiated under
this Article VI will be limited to actual monetary damages,
including if determined appropriate by the arbitrator(s) an award
of costs and fees to the prevailing party. "Costs and fees" mean
all reasonable pre-award expenses of the arbitration, including
arbitrator's fees, administrative fees, travel expenses, out-of-
pocket expenses such as copying, telephone, witness fees and
attorneys' fees. The arbitrator(s) will have no authority to
award consequential, punitive or other damages not measured by
the prevailing party's actual damages, except as may be required
by statute.
5. Opinion. The award of the arbitrators will be in
writing, will be signed by a majority of the arbitrators, and
will include findings of fact and a statement of the reasons for
the disposition of any claim.
Article VII
Miscellaneous
1. Term. The term of this Agreement will commence on the
Agreement Date and will continue through April 30, 2006;
provided, however, that commencing on April 30, 2006, and each
April 30 thereafter, the term of this Agreement will
automatically be extended for one additional year unless not
later than August 1 of the immediately preceding year, the
Corporate Personnel Committee has given written notice to the
Executive that it does not wish to extend this Agreement.
2. Binding Effect.
(a) This Agreement will be binding upon and inure to the
benefit of the Company and any of its successors or assigns.
(b) This Agreement is personal to the Executive and will
not be assignable by the Executive without the consent of the
Company (there being no obligation to give such consent) other
than such rights or benefits as are transferred by will or the
laws of descent and distribution.
(c) Other than for a Change of Control (in which case this
Agreement will be superseded by the Change of Control Agreement),
the Company will require any successor to or assignee of (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) all or substantially all of the assets of the Company
(i) to assume unconditionally and expressly this Agreement and
(ii) to agree to perform all of the obligations under this
Agreement in the same manner and to the same extent as would have
been required of the Company had no assignment or succession
occurred, such assumption to be set forth in a writing reasonably
satisfactory to the Executive. In the event of any such
assignment or succession, the term "Company" as used in this
Agreement will refer also to such successor or assign.
3. Notices. All notices hereunder must be in writing and
unless otherwise specifically provided herein, will be deemed to
have been given upon receipt of delivery by: (a) hand (against a
receipt therefor), (b) certified or registered mail, postage
prepaid, return receipt requested, (c) a nationally recognized
overnight courier service (against a receipt therefor) or (d)
telecopy transmission with confirmation of receipt. All such
notices must be addressed as follows:
If to the Company, to:
Freeport-McMoRan Copper & Gold Inc.
1615 Poydras Street
New Orleans, Louisiana 70112
Attention: Chairman of Corporate Personnel Committee
If to the Executive, to:
James R. Moffett
1615 Poydras Street
New Orleans, Louisiana 70112
or such other address as to which any party hereto may have
notified the other in writing.
4 Governing Law. This Agreement will be construed and
enforced in accordance with and governed by the internal laws of
the State of Louisiana without regard to principles of conflict
of laws, except as expressly provided in Article V above with
respect to the resolution of disputes arising under, or the
Company's enforcement of, Article V of this Agreement.
5 Withholding. The Executive agrees that the Company has
the right to withhold, from the amounts payable pursuant to this
Agreement, all amounts required to be withheld under applicable
income and/or employment tax laws, or as otherwise stated in
documents granting rights that are affected by this Agreement.
6 Severability. If any term or provision of this
Agreement or the application thereof to any person or
circumstance, will at any time or to any extent be invalid,
illegal or unenforceable in any respect as written, Executive and
the Company intend for any court construing this Agreement to
modify or limit such provision temporally, spatially or otherwise
so as to render it valid and enforceable to the fullest extent
allowed by law. Any such provision that is not susceptible of
such reformation will be ignored so as to not affect any other
term or provision hereof, and the remainder of this Agreement, or
the application of such term or provision to persons or
circumstances other than those as to which it is held invalid,
illegal or unenforceable, will not be affected thereby and each
term and provision of this Agreement will be valid and enforced
to the fullest extent permitted by law.
6. Waiver of Breach. The waiver by either party of a
breach of any provision of this Agreement will not operate or be
construed as a waiver of any subsequent breach thereof.
7. Remedies Not Exclusive. Except as provided in Article
VI hereof, no remedy specified herein will be deemed to be such
party's exclusive remedy, and accordingly, in addition to all of
the rights and remedies provided for in this Agreement, the
parties will have all other rights and remedies provided to them
by applicable law, rule or regulation.
8. Legal Fees. The Company agrees to pay all legal fees
and expenses that the Executive may reasonably incur as a result
of any contest by the Company, the Executive or others with
respect to the validity or enforceability of, or liability under,
any provision of this Agreement (including as a result of any
contest by the Executive about the amount or timing of any
payment pursuant to this Agreement), provided that the Executive
prevails on any material claim.
9. Company's Reservation of Rights. The Executive
acknowledges and understands that he serves at the pleasure of
the Board and that the Company has the right at any time to
terminate or change the Executive's status as an officer and
employee of the Company, subject to the rights of the Executive
to claim the benefits conferred by this Agreement.
10. JURY TRIAL WAIVER. THE PARTIES HEREBY WAIVE TRIAL BY
JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE PARTIES
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING
OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT.
11. Survival. The rights and obligations of the Company
and Executive contained in Article V of this Agreement will
survive the termination of the Agreement. Following the
Termination Date, each party will have the right to enforce all
rights, and will be bound by all obligations, of such party that
are continuing rights and obligations under this Agreement.
12. Prior Employment Agreement. Effective as of the
Agreement Date, this Agreement supersedes any prior employment
agreement between the Executive and the Company.
13. Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed to be an original
but all of which together will constitute one and the same
instrument.
IN WITNESS WHEREOF, the Company and the Executive have
caused this Agreement to be executed as of the Agreement Date.
Freeport-McMoRan Copper & Gold Inc.
By:
H. Devon Graham, Jr.
Director and Chairman of the
Corporate Personnel Committee
of the
Board of Directors
Executive
James R. Moffett
Signature Page of Executive Employment Agreement
between Freeport-McMoRan Copper & Gold Inc.
and James R. Moffett
EX-10
5
exh1036.txt
Execution Copy
Executive Employment Agreement
This Executive Employment Agreement ("Agreement") between
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), and Richard C. Adkerson (the "Executive") is dated
effective as of April 30, 2001 (the "Agreement Date").
W I T N E S S E T H:
WHEREAS, the Executive currently serves as an officer of the
Company;
WHEREAS, pursuant to the terms of this Agreement, the
Company desires to retain the services of the Executive and the
Executive desires to continue to provide services to the Company;
WHEREAS, during the course of providing services to the
Company, the Executive has or will have received extensive and
unique knowledge of, experience in and access to resources
involving, the Mining Business (as defined below) at a
substantial cost to the Company, which Executive acknowledges has
enhanced or substantially will enhance Executive's skills and
knowledge in such business;
WHEREAS, during the course of providing services to the
Company, Executive has had and will continue to have access to
valuable oral and written information, knowledge and data
relating to the business and operations of the Company and its
subsidiaries that is non-public, confidential or proprietary in
nature and is particularly useful in the Mining Business; and
WHEREAS, in view of the opportunities provided by the
Company to Executive, the cost thereof to the Company, and the
need for the Company to be protected against disclosures by
Executive of the Company's and its subsidiaries' trade secrets
and other non-public, confidential or proprietary information,
the Company and Executive desire, among other things, to prohibit
Executive from disclosing or utilizing, outside the scope of his
employment with the Company, any non-public, confidential or
proprietary information, knowledge and data relating to the
business and operations of the Company or its subsidiaries
received by Executive during the course of his employment, and to
restrict the ability of Executive to compete with the Company or
its subsidiaries for a limited period of time.
NOW, THEREFORE, for and in consideration of the continued
employment of Executive by the Company and the payment of salary,
benefits and other compensation to Executive by the Company, the
parties hereto agree as follows:
Article I
Employment Capacity
1. Capacity and Duties of Executive. The Executive is
employed by the Company to render services on behalf of the
Company as President. The Executive will perform such duties as
are assigned to the individual holding the title or titles held
by him from time to time in the Company's By-laws and such other
duties as may be prescribed from time to time by the Chairman of
the Board and Chief Executive Officer or the Company's Board of
Directors (the "Board"), which duties shall be consistent with
the position of President.
2. Devotion to Responsibilities. The Executive will
devote significant business time to the business of the Company,
will use his best efforts to perform faithfully and efficiently
his duties under this Agreement, and will not engage in or be
employed by any other business; provided, however, that nothing
herein will prohibit the Executive from (a) serving as an officer
and director of McMoRan Exploration Co. ("McMoRan"), FM Services
Company or any of their affiliates or successors, (b) serving as
a member of the board of directors, board of trustees or the like
of any for-profit or non-profit entity that does not compete with
the Company, or performing services of any type for any civic or
community entity, whether or not the Executive receives
compensation therefor, (c) investing his assets in such form or
manner as will require no more than nominal services on the part
of the Executive in the operation of the business of the entity
in which such investment is made, or (d) serving in various
capacities with, and attending meetings of, industry or trade
groups and associations, as long as the Executive's activities
permitted by clauses (a), (b), (c) and (d) above do not
materially and unreasonably interfere with the ability of the
Executive to perform the services and discharge the
responsibilities required of him under this Agreement.
Notwithstanding clause (c) above, the Executive may not, without
the approval of the Corporate Personnel Committee of the Board,
beneficially own 5 percent or more of the equity interests of a business
organization required to file periodic reports with the
Securities and Exchange Commission under the Securities Exchange
Act of 1934 (the "Exchange Act") other than the Company or
McMoRan, and the Executive may not beneficially own more than 2 percent
of the equity interests of any business organization that
competes with the Company. For purposes of this paragraph,
"beneficially own" has the meaning ascribed to that term in Rule
13d-3 under the Exchange Act.
Article II
Compensation and Benefits
1. Salary. The Company will pay the Executive a salary
("Base Salary") at an annual rate per fiscal year of the Company
("Fiscal Year") of $1,250,000, which will be payable to the
Executive in equal semi-monthly installments. Base Salary may be
remitted to the Executive on behalf of the Company by the
Company's affiliate, FM Services Company.
2. Bonus. The Executive will be eligible to receive an
annual incentive bonus (the "Bonus"), payable, if at all, only
with respect to services that the Executive provides to the
Company. Any Bonus will be determined, accrued and paid in
accordance with the terms of the Company's Annual Incentive Plan,
as amended, that covers certain individuals designated by the
Corporate Personnel Committee of the Board (the "Committee"), or
any incentive or bonus compensation plan that is a successor or
substitute therefor. For Fiscal Years 2001 and 2002, the
Executive will be eligible to receive a Bonus not greater than
$1,375,000. Any Bonus awarded will be paid in cash not later
than 60 days following the end of the Fiscal Year in which the
Bonus has been earned; provided that, if the Company maintains a
restricted stock program that allows executives to receive
restricted stock units in lieu of all or part of their annual
cash bonus, then the Executive may, at his sole option, elect to
receive restricted stock units in lieu of all or part of his
Bonus in accordance with the restricted stock program. The
Executive acknowledges and agrees that this Section 2 imposes no
obligation on the Company to award any bonus to the Executive.
3. Stock Options and Long-Term Performance Units. Any and
all stock options and long-term performance units will be awarded
to the Executive in accordance with current and successor plans
at the discretion of the Company.
4. Vacation. The Executive will be entitled to paid
vacation and holidays as provided to executives of the Company
generally.
5. Indemnification and Insurance. In accordance with the
Company's Certificate of Incorporation, the Company will
indemnify the Executive, to the fullest extent permitted by
applicable the law, for any and all claims brought against him
arising out his services to the Company and its subsidiaries. In
addition, the Company will continue to maintain a directors' and
officers' insurance policy covering the Executive substantially
in the form of the policy in existence as of the Agreement Date
to the extent such policy remains available at reasonable
commercial terms.
6. Other Benefits. The Executive will continue to be
entitled to all benefits and perquisites presently provided to
him or generally to the most senior executives of the Company and
be eligible to participate in and receive all benefits under
welfare benefit plans, practices, policies and programs
(including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and
travel accident insurance plans and programs) available generally
to the most senior executives of the Company.
7. Expenses. The Executive will be entitled to receive
prompt reimbursement for all reasonable business expenses
(including food, transportation, entertainment and lodging)
incurred from time to time on behalf of the Company in the
performance of his duties, upon the presentation of such
supporting invoices, documents and forms as the Company
reasonably requests.
Article III
Termination of Status as Officer and Employee; Change of Control
1. Death. The Executive's status as an officer and
employee will terminate immediately and automatically upon the
Executive's death.
2. Disability. The Company may terminate Executive's
status as an officer and employee for "Disability" as follows:
(a) If the Executive has a disability that entitles him to
receive benefits under the Company's long-term disability
insurance policy in effect at the time either because he is
Totally Disabled or Partially Disabled, as such terms are defined
in the Company's policy in effect as of the Agreement Date or as
similar terms are defined in any successor policy, then the
Company may terminate Executive's status as an officer and
employee effective on the first day on which the Executive
receives a payment under such policy (or on the first day that he
would be so eligible, if he had applied timely for such
payments).
(b) If the Company has no long-term disability plan in
effect, and if (i) because of physical or mental illness the
Executive is rendered incapable of satisfactorily discharging his
duties and responsibilities under this Agreement for a period of
90 consecutive days and (ii) a duly qualified physician chosen by
the Company and reasonably acceptable to the Executive or his
legal representatives so certifies in writing, the Board will
have the power to determine that the Executive has become
disabled. If the Board makes such a determination, the Company
will have the continuing right and option, during the period that
such disability continues, and by notice given in the manner
provided in this Agreement, to terminate the status of Executive
as an officer and employee. Any such termination will become
effective 30 days after such notice of termination is given,
unless within such 30-day period, the Executive becomes capable
of rendering services of the character contemplated hereby (and a
physician chosen by the Company and reasonably acceptable to the
Executive or his legal representatives so certifies in writing)
and the Executive in fact resumes such services.
(c) The "Disability Effective Date" will mean the date on
which termination of Executive's status as an officer and
employee becomes effective due to Disability.
3. Cause. The Company may terminate the Executive's
status as an officer and employee for "Cause," which is defined
as follows:
(a) The Executive's willful and continued failure to
perform substantially the Executive's duties with the Company or
its affiliates (other than any such failure resulting from
incapacity due to physical or mental illness), after a written
demand for substantial performance is delivered to the Executive
by the Board, which specifically identifies the manner in which
the Board believes that the Executive has not substantially
performed the Executive's duties;
(b) The Executive's material breach of this Agreement after
a written demand is delivered to the Executive by the Board,
which specifically identifies the manner in which the Board
believes that the Executive has materially breached this
Agreement; or
(c) The final conviction of the Executive or an entering of
a guilty plea or a plea of no contest by the Executive to a
felony.
For purposes of this provision, no act or failure to act, on the
part of the Executive, will be considered "willful" unless it is
done, or omitted to be done, by the Executive in bad faith or
without a reasonable belief that the act or omission was in the
best interests of the Company or its affiliates. Any act, or
failure to act, based on authority given pursuant to a resolution
duly adopted by the Board, the instructions of a more senior
officer of the Company or the advice of counsel to the Company or
its affiliates will be conclusively presumed to be done, or
omitted to be done, by the Executive in good faith and in the
best interests of the Company or its affiliates. The termination
of employment of the Executive will not be deemed to be for Cause
unless and until there has been delivered to the Executive a copy
of a resolution duly adopted by the affirmative vote of not less
than three-quarters of the entire membership of the Board at a
meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive
is given an opportunity, together with counsel, to be heard
before the Board), finding that, in the good faith opinion of the
Board, the Executive has engaged in the conduct described in
subparagraph (a), (b) or (c) above, and specifying the
particulars of such conduct.
4. Good Reason. The Executive may terminate his status as
an officer and employee for "Good Reason," which is defined as
follows:
(a) Any failure by the Company or its affiliates to comply
with any of the provisions of this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring in
bad faith that is remedied within 10 days after receipt by the
Company of written notice thereof from the Executive; or
(b) The assignment to the Executive of any duties
inconsistent in any material respect with Executive's position
(including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by this
Agreement, or any other action that results in a diminution in
such position, authority, duties or responsibilities, excluding
for this purpose an isolated, insubstantial and inadvertent
action not taken in bad faith that is remedied within 10 days
after receipt by the Company of written notice thereof from the
Executive.
5. Voluntary Termination by the Company. In addition to
termination for death, Disability or Cause, the Company may at
any time terminate the Executive's status as an officer and
employee for any reason or for no reason at all.
6. Retirement. In addition to termination for death or
Good Reason, the Executive may at any time retire and terminate
his status as an officer and employee. "Retirement" (and
variants thereof) for purposes of this Agreement is defined as
the Executive's voluntary termination of his status as an officer
and employee at any time after reaching age 54, but shall not
include a termination for Good Reason.
7. Notice of Termination; Termination Date. (a) Other
than as a result of the death of Executive, any termination of
Executive's status as an officer and employee shall be
communicated to the other party by Notice of Termination given in
accordance with Article VII, Section 3 of this Agreement. For
purposes of this Agreement, a "Notice of Termination" means a
written notice that (i) indicates the specific termination
provision in this Agreement on which the party relies, (ii) to
the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination
under the provisions so indicated and (iii) if the Termination
Date (as defined below) is other than the date of receipt of such
notice, specifies the Termination Date. The Company's failure to
set forth in the Notice of Termination any fact or circumstance
that contributes to a showing of Disability or Cause will not
negate the effect of the notice nor waive any right of the
Company or preclude the Company from asserting such fact or
circumstance in enforcing the Company's rights.
(b) "Termination Date" means, if Executive's status as an
officer and employee is terminated (i) by reason of Executive's
death, the date of Executive's death, (ii) by reason of
Disability, the Disability Effective Date, (iii) by the Company
other than by reason of death or Disability, the date of delivery
of the Notice of Termination or any later date specified in the
Notice of Termination, which date will not be more than 30 days
after the giving of the notice, or (iv) by the Executive other
than by reason of death, the date of delivery of the Notice of
Termination or any later date specified in the Notice of
Termination, which date will not be more than 30 days after the
giving of the notice.
8. Change of Control. Upon and following a Change of
Control of the Company, as defined in the Change of Control
Agreement between the Executive and the Company dated effective
April 30, 2001 and any amendments thereto or any subsequent
change of control agreement between the Executive and the Company
(the "Change of Control Agreement"), the rights and obligations
of the Executive and the Company will no longer be governed by
this Agreement, but will be as provided in the Change of Control
Agreement (including any rights or obligations in this Agreement
that are specifically incorporated by reference therein). Upon
the occurrence of a Change of Control, the term of the Agreement
will end, and the provisions of this Agreement will be null and
void, and of no further force and effect, except that
compensation and benefit obligations accrued by the Company with
respect to the Executive prior to the Change of Control and
during the term of the Agreement will remain valid and
enforceable, and the rights of Executive to indemnification shall
remain in effect.
Article IV
Obligations upon Termination
1. Death or Disability. If (A) the Executive's status as
an officer and employee is terminated by reason of the
Executive's death or (B) the Company terminates the Executive's
status as an officer and employee by reason of Executive's
Disability then, subject to Article IV, Section 6 hereof:
(a) The Company will pay the Executive or his legal
representatives the sum of (i) the amount of the Executive's Base
Salary earned through the Termination Date to the extent not
previously paid and (ii) any compensation previously deferred by
the Executive (together with any accrued interest on earnings
thereon) to the extent not previously paid in accordance with the
terms of the deferred compensation plans under which such
compensation was deferred (the sum of the amounts described in
clauses (i) and (ii) being hereinafter referred to as the
"Accrued Obligations");
(b) The Company will pay to the Executive or his legal
representatives a pro rata bonus in an amount determined by
calculating the bonus that the Executive would receive for the
Fiscal Year in which the Termination Date occurs based upon the
level of achievement of the applicable performance goals through
the end of the fiscal quarter in which the Termination Date
occurs, annualized as if such level of performance had continued
throughout the entire Fiscal Year and then multiplying such bonus
amount by the fraction obtained by dividing the number of days in
the year through the Termination Date by 365 (the "Pro Rata
Bonus");
(c) All stock options granted to the Executive under the
Company's stock option and stock incentive plans ("Stock
Options") that are exercisable on the Termination Date and all
Stock Options that would have become exercisable within one year
after the Termination Date, will remain exercisable until the
earlier of (i) for death, the first anniversary of the
Termination Date; for Disability, the third anniversary of the
Termination Date, or (ii) the expiration date specified in the
Stock Option;
(d) The Company will pay to the Executive or his legal
representatives an amount equal to $900,000;
(e) All restricted stock units granted to the Executive
will vest as of the Termination Date to the extent not previously
vested and will convert to the applicable common stock of the
Company;
(f) The Executive's performance units under the Company's
1995 and 1999 Long-Term Performance Incentive Plans and any
successor plans (the "Long-Term Performance Incentive Plans")
will be credited with the annual earnings per share or net loss
per share (as defined in the plans) for the Fiscal Year in which
the Termination Date occurs and all amounts credited to the
Executive's performance unit account will be fully vested and
will be paid out within 60 days of the end of the Fiscal Year in
which the Termination Date occurs; and
(g) The Company will pay or deliver, as appropriate, all
other benefits earned by the Executive or accrued for his benefit
pursuant to any employee benefit plans maintained by the Company
or its subsidiaries with respect to services rendered by the
Executive prior to the Termination Date.
The compensation described in paragraphs (b), (c), (e) and (f)
above was intended at the time of grant to qualify as
"performance-based compensation" under Section 162(m) of the
Internal Revenue Code. In order that such compensation may
continue to qualify and notwithstanding any provision of any such
paragraph or Article IV, Section 6, the payment of any such
compensation hereunder shall be subject to, and reduced if
necessary to comply with, the applicable requirements of Section
162(m), including but not limited to (i) satisfaction of all
applicable performance goals for the period prior to termination
of the Executive's status as an officer and employee or such
shorter or longer period provided herein, (ii) certification of
the satisfaction of the applicable performance goals by a
committee of the Board, the members of which qualify as outside
directors under Section 162(m), and (iii) the application of a
discount to reflect the time value of money where the payment of
the compensation is accelerated as a result of termination of the
Executive's status as an officer and employee.
2. Retirement. If the Executive terminates his status as
an officer and employee by reason of Retirement, then, subject to
Article IV, Section 6 hereof:
(a) The Company will pay to the Executive (i) the Accrued
Obligations and (ii) the Pro Rata Bonus;
(b) All Stock Options that are exercisable on the
Termination Date and all Stock Options that would have become
exercisable within one year after the Termination Date, will
remain exercisable until the earlier of (i) the third anniversary
of the Termination Date or (ii) the expiration date specified in
the Stock Option;
(c) The Company will pay to the Executive an amount equal
to $900,000;
(d) All restricted stock units granted to the Executive
will vest as of the Termination Date to the extent not previously
vested and will convert to the applicable common stock of the
Company;
(e) The Executive's performance units under the Long-Term
Performance Incentive Plans will be credited with the annual
earnings per share or net loss per share (as defined in the
plans) for the Fiscal Year in which the Termination Date occurs
and all amounts credited to the Executive's performance unit
account will be fully vested and will be paid out within 60 days
of the end of the Fiscal Year in which the Termination Date
occurs;
(f) For a period commencing on the Termination Date and
ending on the earlier of (i) the third anniversary of the
Termination Date, or (ii) the date that the Executive accepts new
employment (the "Continuation Period"), the Company will at its
expense maintain and administer for the continued benefit of
Executive all insurance and welfare benefit plans in which
Executive was entitled to participate as an employee of the
Company as of the Termination Date, except medical reimbursement
benefits under the Company's flex plans, provided that
Executive's continued participation is possible under the general
terms and provisions of such plans and all applicable laws. The
coverage and benefits (including deductibles and costs) provided
under any such benefit plan in accordance with this paragraph
during the Continuation Period will be no less favorable to
Executive than the most favorable of such coverages and benefits
as of the Termination Date. If Executive's participation in any
such benefit plan is barred or any such benefit plan is
terminated, the Company will use commercially reasonable efforts
to provide Executive with compensation or benefits substantially
similar or comparable in value to those Executive would otherwise
have been entitled to receive under such plans. At the end of
the Continuation Period, the Executive will have the option to
have assigned to him, at no cost and with no apportionment of
prepaid premiums, any assignable insurance owned by the Company
that relates specifically to the Executive. To the maximum
extent permitted by law, the Executive will be eligible for
coverage under the Consolidated Omnibus Budget Reconciliation Act
("COBRA") at the end of the Continuation Period or earlier
cessation of the Company's obligation under the foregoing
provisions of this paragraph; and
(g) The Company will pay or deliver, as appropriate, all
other benefits earned by the Executive or accrued for his benefit
pursuant to any employee benefit plans maintained by the Company
or its subsidiaries with respect to services rendered by the
Executive prior to the Termination Date.
The compensation described in paragraphs (a)(ii), (b), (d) and
(e) above was intended at the time of grant to qualify as
"performance-based compensation" under Section 162(m) of the
Internal Revenue Code. In order that such compensation may
continue to qualify and notwithstanding any provision of any such
paragraph or Article IV, Section 6, the payment of any such
compensation hereunder shall be subject to, and reduced if
necessary to comply with, the applicable requirements of Section
162(m), including but not limited to (i) satisfaction of all
applicable performance goals for the period prior to termination
of the Executive's status as an officer and employee or such
shorter or longer period provided herein, (ii) certification of
the satisfaction of the applicable performance goals by a
committee of the Board, the members of which qualify as outside
directors under Section 162(m), and (iii) the application of a
discount to reflect the time value of money where the payment of
the compensation is accelerated as a result of termination of the
Executive's status as an officer and employee.
3. Cause. If the Company terminates the Executive's
status as an officer and employee for Cause, the Company will pay
to the Executive the Accrued Obligations. The Company will have
no further obligation to the Executive other than for obligations
imposed by law and obligations for any benefits earned by the
Executive or accrued for his benefit pursuant to any employee
benefit plans maintained by the Company or its subsidiaries with
respect to services rendered by the Executive prior to the
Termination Date.
4. Termination by Executive for Good Reason or by Company
for Reasons other than Death, Disability or Cause. If the
Executive terminates his status as an officer and employee for
Good Reason or the Company terminates the Executive's status as
an officer and employee other than for death, Disability or
Cause, then, subject to Article IV, Section 6 hereof:
(a) The Company will pay to the Executive (i) the Accrued
Obligations and (ii) the Pro Rata Bonus;
(b) Within twenty business days of the Termination Date,
the Company will pay to the Executive an amount equal to four
times the sum of (i) the Executive's Base Salary in effect at the
Termination Date and (ii) the lesser of (A) the highest Bonus
paid to the Executive for any of the immediately preceding three
Fiscal Years or (B) two times Base Salary in effect at the
Termination Date;
(c) All Stock Options will become immediately exercisable
as of the Termination Date and will remain exercisable until the
expiration date specified in the Stock Option;
(d) All restricted stock units granted to the Executive
will vest as of the Termination Date to the extent not previously
vested and will convert to the applicable common stock of the
Company;
(e) The Executive's performance units under the Long-Term
Performance Incentive Plans will be credited with the annual
earnings per share or net loss per share (as defined in the
plans) for the Fiscal Year in which the Termination Date occurs
and all amounts credited to the Executive's performance unit
account will be fully vested and will be paid out within 60 days
of the end of the Fiscal Year in which the Termination Date
occurs;
(f) For the Continuation Period, the Company will at its
expense maintain and administer for the continued benefit of
Executive all insurance and welfare benefit plans in which
Executive was entitled to participate as an employee of the
Company as of the Termination Date, except medical reimbursement
benefits under the Company's flex plans, provided that
Executive's continued participation is possible under the general
terms and provisions of such plans and all applicable laws. The
coverage and benefits (including deductibles and costs) provided
under any such benefit plan in accordance with this paragraph
during the Continuation Period will be no less favorable to
Executive and his dependents and beneficiaries than the most
favorable of such coverages and benefits as of the Termination
Date; provided, however, in the event of the disability of
Executive during the Continuation Period, disability benefits
shall, to the maximum extent possible, not be paid for the
Continuation Period but shall instead commence immediately
following the end of the Continuation Period. If Executive's
participation in any such benefit plan is barred or any such
benefit plan is terminated, the Company will use commercially
reasonable efforts to provide Executive with compensation or
benefits substantially similar or comparable in value to those
Executive would otherwise have been entitled to receive under
such plans. At the end of the Continuation Period, the Executive
will have the option to have assigned to him, at no cost and with
no apportionment of prepaid premiums, any assignable insurance
owned by the Company that relates specifically to the Executive.
To the maximum extent permitted by law, the Executive will be
eligible for coverage under COBRA at the end of the Continuation
Period or earlier cessation of the Company's obligation under the
foregoing provisions of this paragraph; and
(g) The Company will pay or deliver, as appropriate, all
benefits earned by the Executive or accrued for his benefit
pursuant to any employee benefit plans maintained by the Company
or its subsidiaries with respect to services rendered by the
Executive prior to the Termination Date.
The compensation described in paragraphs (a)(ii), (c), (d) and
(e) above was intended at the time of grant to qualify as
"performance-based compensation" under Section 162(m) of the
Internal Revenue Code. In order that such compensation may
continue to qualify and notwithstanding any provision of any such
paragraph or Article IV, Section 6, the payment of any such
compensation hereunder shall be subject to, and reduced if
necessary to comply with, the applicable requirements of Section
162(m), including but not limited to (i) satisfaction of all
applicable performance goals for the period prior to termination
of the Executive's status as an officer and employee or such
shorter or longer period provided herein, (ii) certification of
the satisfaction of the applicable performance goals by a
committee of the Board, the members of which qualify as outside
directors under Section 162(m), and (iii) the application of a
discount to reflect the time value of money where the payment of
the compensation is accelerated as a result of termination of the
Executive's status as an officer and employee.
5. Resignation from Boards of Directors. If Executive is
a director of the Company and his employment is terminated for
any reason other than death, the Executive will, if requested by
the Company, immediately resign as a director of the Company and
its subsidiaries. If such resignation is not received within 20
business days after the Executive actually receives written
notice from the Company requesting the resignations, the
Executive will forfeit any right to receive any payments pursuant
to this Agreement.
6. Most Favorable Benefits. It is the intention of the
parties that the terms of this Agreement shall provide payments
and benefits to the Executive that are equivalent or more
beneficial to the Executive than are otherwise available to the
Executive under the terms of any applicable benefit plan or
related compensation agreement. To that end, the terms of this
Agreement shall govern the payments and benefits to which the
Executive shall be entitled upon the termination of Executive's
status as an officer and employee as provided herein, except that
if the terms of any applicable benefit plan or related
compensation agreement provide more favorable benefits to the
Executive than are provided hereunder, then the terms of such
plan or agreement shall control unless such terms would cause any
compensation to fail to meet the requirements of Section 162(m).
Article V
Nondisclosure, Noncompetition and Proprietary Rights
1. Certain Definitions. For purposes of this Agreement,
the following terms will have the following meanings:
(a) "Confidential Information" means any information,
knowledge or data of any nature and in any form (including
information that is electronically transmitted or stored on any
form of magnetic or electronic storage media) relating to the
past, current or prospective business or operations of the
Company and its subsidiaries, that at the time or times concerned
is not generally known to persons engaged in businesses similar
to those conducted or contemplated by the Company and its
subsidiaries (other than information known by such persons
through a violation of an obligation of confidentiality to the
Company), whether produced by the Company and its subsidiaries or
any of their consultants, agents or independent contractors or by
Executive, and whether or not marked confidential, including
without limitation information relating to the Company's or its
subsidiaries' products and services, business plans, business
acquisitions, processes, product or service research and
development ideas, methods or techniques, training methods and
materials, and other operational methods or techniques, quality
assurance procedures or standards, operating procedures, files,
plans, specifications, proposals, drawings, charts, graphs,
support data, trade secrets, supplier lists, supplier
information, purchasing methods or practices, distribution and
selling activities, consultants' reports, marketing and
engineering or other technical studies, maintenance records,
employment or personnel data, marketing data, strategies or
techniques, financial reports, budgets, projections, cost
analyses, price lists, formulae and analyses, employee lists,
customer records, customer lists, customer source lists,
proprietary computer software, and internal notes and memoranda
relating to any of the foregoing.
(b) "Mining Business" means the exploration, mining,
production, marketing and sale of metals and ore containing
metals.
2. Nondisclosure of Confidential Information. Executive
will hold in a fiduciary capacity for the benefit of the Company
all Confidential Information obtained by Executive during
Executive's employment (whether prior to or after the Agreement
Date) and will use such Confidential Information solely within
the scope of his employment with and for the exclusive benefit of
the Company. For a period of five years after the Termination
Date, Executive agrees (a) not to communicate, divulge or make
available to any person or entity (other than the Company) any
such Confidential Information, except upon the prior written
authorization of the Company or as may be required by law or
legal process, and (b) to deliver promptly to the Company any
Confidential Information in his possession, including any
duplicates thereof and any notes or other records Executive has
prepared with respect thereto. In the event that the provisions
of any applicable law or the order of any court would require
Executive to disclose or otherwise make available any
Confidential Information, Executive will give the Company prompt
prior written notice of such required disclosure and an
opportunity to contest the requirement of such disclosure or
apply for a protective order with respect to such Confidential
Information by appropriate proceedings.
3. Limited Covenant Not to Compete. For a period of two
years after the Termination Date, Executive agrees that, with
respect to each State of the United States or other jurisdiction,
or specified portions thereof, in which the Executive regularly
(a) makes contact with customers of the Company or any of its
subsidiaries, (b) conducts the business of the Company or any of
its subsidiaries, or (c) supervises the activities of other
employees of the Company or any of its subsidiaries, and in which
the Company or any of its subsidiaries engages in Mining Business
as of the Termination Date, including without limitation the
Parish of Orleans, Louisiana, and the countries of Indonesia and
Spain (collectively, the "Subject Areas"), Executive will
restrict his activities within the Subject Areas as follows:
(a) Executive will not, directly or indirectly, for himself
or others, own, manage, operate, control, be employed in an
executive, managerial or supervisory capacity by, consult with,
assist or otherwise engage or participate in or allow his skill,
knowledge, experience or reputation to be used in connection
with, the ownership, management, operation or control of, any
company or other business enterprise engaged in the Mining
Business within any of the Subject Areas; provided, however, that
nothing contained herein will prohibit Executive from making
passive investments as long as Executive does not beneficially
own more than 2 percent of the equity interests of a business enterprise
engaged in the Mining Business within any of the Subject Areas.
For purposes of this paragraph, "beneficially own" will have the
same meaning ascribed to that term in Rule 13d-3 under the
Exchange Act;
(b) Executive will not call upon any customer of the
Company or its subsidiaries for the purpose of soliciting,
diverting or enticing away the business of such person or entity,
or otherwise disrupting any previously established relationship
existing between such person or entity and the Company or its
subsidiaries;
(c) Executive will not solicit, induce, influence or
attempt to influence any supplier, lessor, lessee, licensor,
partner, joint venturer, potential acquiree or any other person
who has a business relationship with the Company or its
subsidiaries, or who on the Termination Date is engaged in
discussions or negotiations to enter into a business relationship
with the Company or its subsidiaries, to discontinue or reduce or
limit the extent of such relationship with the Company or its
subsidiaries;
(d) Without the consent of the Company, Executive will not
make contact with any of the employees of the Company or its
subsidiaries with whom he had contact during the course of his
employment with the Company for the purpose of soliciting such
employee for hire, whether as an employee or independent
contractor, or otherwise disrupting such employee's relationship
with the Company or its subsidiaries; and
(e) Without the consent of the Company, Executive further
agrees that, for a period of one year from and after the
Termination Date, Executive will not hire any employee of the
Company or its subsidiaries as an employee or independent
contractor, whether or not such engagement is solicited by
Executive.
4. Injunctive Relief; Other Remedies. Executive
acknowledges that a breach by Executive of Section 2 or 3 of this
Article V would cause immediate and irreparable harm to the
Company for which an adequate monetary remedy does not exist;
hence, Executive agrees that, in the event of a breach or
threatened breach by Executive of the provisions of Section 2 or
3 of this Article V, the Company will be entitled to injunctive
relief restraining Executive from such violation without the
necessity of proof of actual damage or the posting of any bond,
except as required by non-waivable, applicable law. Nothing
herein, however, will be construed as prohibiting the Company
from pursuing any other remedy at law or in equity to which the
Company may be entitled under applicable law in the event of a
breach or threatened breach of this Agreement by Executive,
including without limitation the recovery of damages and/or costs
and expenses, such as reasonable attorneys' fees, incurred by the
Company as a result of any such breach or threatened breach. In
addition to the exercise of the foregoing remedies, the Company
will have the right upon the occurrence of any such breach to
offset the damages of such breach as determined by the Company,
against any unpaid salary, bonus, commissions or reimbursements
otherwise owed to Executive. In particular, Executive
acknowledges that the payments provided under Article IV are
conditioned upon Executive fulfilling any noncompetition and
nondisclosure agreements contained in this Article V. If
Executive at any time materially breaches any noncompetition or
nondisclosure agreements contained in this Article V, then the
Company may offset the damages of such breach, as determined
solely by the Company, against payments otherwise due to
Executive under Article IV or, at the Company's option, suspend
payments otherwise due to Executive under Article IV during the
period of such breach. Executive acknowledges that any such
offset or suspension of payments would be an exercise of the
Company's right to offset or suspend its performance hereunder
upon Executive's breach of this Agreement; such offset or
suspension of payments would not constitute, and shall not be
characterized as, the imposition of liquidated damages.
5. Requests for Waiver in Cases of Undue Hardship. If the
Executive should find that any of the limitations in this Article
V impose a severe hardship on his ability to secure other
employment, then the Executive may ask the Company to waive the
specified limitations before accepting employment that otherwise
would be a breach of Executive's obligations under this
Agreement. Such request must be in writing and set forth the
name and address of the organization with which employment or
another prohibited relationship is sought and the position,
duties or other activities that Executive seeks to perform, and
the location of performance. The Company will consider the
request and, in its sole discretion, decide whether and on what
conditions to grant such waiver.
6. Governing Law of this Article V; Consent to
Jurisdiction. Any dispute regarding the reasonableness of the
covenants and agreements set forth in this Article V or the
territorial scope or duration thereof, or the remedies available
to the Company upon any breach of such covenants and agreements,
will be governed by and interpreted in accordance with the laws
of the State of the United States or other jurisdiction in which
the alleged prohibited competing activity or disclosure occurs,
and, with respect to each such dispute, the Company and Executive
each hereby consent to the jurisdiction of the state and federal
courts sitting in the relevant State (or, in the case of any
jurisdiction outside the United States, the relevant courts of
such jurisdiction) for resolution of such dispute, and agree that
service of process may be made upon him or it in any legal
proceeding relating to this Article V by any means allowed under
the laws of such jurisdiction.
7. Executive's Understanding of this Article. Executive
hereby represents to the Company that he has read and
understands, and agrees to be bound by, the terms of this
Article V. Executive acknowledges that the geographic scope and
duration of the covenants contained in Article V are the result
of arm's-length bargaining and are fair and reasonable in light
of (a) the importance of the functions performed by Executive and
the length of time it would take the Company to find and train a
suitable replacement, (b) the nature and wide geographic scope of
the operations of the Company and its subsidiaries, (c)
Executive's level of control over and contact with the business
and operations of the Company and its subsidiaries in various
jurisdictions where same are conducted and (d) the fact that all
facets of the Mining Business are conducted by the Company and
its subsidiaries throughout the geographic area where competition
is restricted by this Agreement. It is the desire and intent of
the parties that the provisions of this Agreement be enforced to
the fullest extent permitted under applicable law, whether now or
hereafter in effect and, therefore, to the extent permitted by
applicable law, the parties hereto waive any provision of
applicable law that would render any provision of this Article V
invalid or unenforceable.
Article VI
Binding Arbitration
1. Binding Agreement to Arbitrate. Any claim or
controversy arising out of any provision of this Agreement (other
than Article V hereof), or the breach or alleged breach of any
such provision, will be settled by binding arbitration
administered by the American Arbitration Association (the "AAA")
under its National Rules for the Resolution of Employment
Disputes as in effect at the time of the claim or controversy
(the "Rules"), and judgment on the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction
thereof.
2. Selection and Qualifications of Arbitrators. If no
party to the arbitration makes a claim in excess of $1.0 million,
exclusive of interest and attorneys' fees, the proceedings will
be conducted before a single neutral arbitrator selected in
accordance with the Rules. If any party makes a claim that
exceeds $1.0 million, the proceedings will be conducted before a
panel of three neutral arbitrators selected in accordance with
the Rules.
3. Location of Proceedings. The place of arbitration will
be in New Orleans, Louisiana.
4. Remedies. Any award in an arbitration initiated under
this Article VI will be limited to actual monetary damages,
including if determined appropriate by the arbitrator(s) an award
of costs and fees to the prevailing party. "Costs and fees" mean
all reasonable pre-award expenses of the arbitration, including
arbitrator's fees, administrative fees, travel expenses, out-of-
pocket expenses such as copying, telephone, witness fees and
attorneys' fees. The arbitrator(s) will have no authority to
award consequential, punitive or other damages not measured by
the prevailing party's actual damages, except as may be required
by statute.
5. Opinion. The award of the arbitrators will be in
writing, will be signed by a majority of the arbitrators, and
will include findings of fact and a statement of the reasons for
the disposition of any claim.
Article VII
Miscellaneous
1. Term. The term of this Agreement will commence on the
Agreement Date and will continue through April 30, 2005;
provided, however, that commencing on April 30, 2005, and each
April 30 thereafter, the term of this Agreement will
automatically be extended for one additional year unless not
later than August 1 of the immediately preceding year, the
Corporate Personnel Committee has given written notice to the
Executive that it does not wish to extend this Agreement.
2. Binding Effect.
(a) This Agreement will be binding upon and inure to the
benefit of the Company and any of its successors or assigns.
(b) This Agreement is personal to the Executive and will
not be assignable by the Executive without the consent of the
Company (there being no obligation to give such consent) other
than such rights or benefits as are transferred by will or the
laws of descent and distribution.
(c) Other than for a Change of Control (in which case this
Agreement will be superseded by the Change of Control Agreement),
the Company will require any successor to or assignee of (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) all or substantially all of the assets of the Company
(i) to assume unconditionally and expressly this Agreement and
(ii) to agree to perform all of the obligations under this
Agreement in the same manner and to the same extent as would have
been required of the Company had no assignment or succession
occurred, such assumption to be set forth in a writing reasonably
satisfactory to the Executive. In the event of any such
assignment or succession, the term "Company" as used in this
Agreement will refer also to such successor or assign.
3. Notices. All notices hereunder must be in writing and
unless otherwise specifically provided herein, will be deemed to
have been given upon receipt of delivery by: (a) hand (against a
receipt therefor), (b) certified or registered mail, postage
prepaid, return receipt requested, (c) a nationally recognized
overnight courier service (against a receipt therefor) or (d)
telecopy transmission with confirmation of receipt. All such
notices must be addressed as follows:
If to the Company, to:
Freeport-McMoRan Copper & Gold Inc.
1615 Poydras Street
New Orleans, Louisiana 70112
Attention: Chairman of Corporate Personnel Committee
If to the Executive, to:
Richard C. Adkerson
1217 Burgundy Street
New Orleans, Louisiana 70116
or such other address as to which any party hereto may have
notified the other in writing.
4 Governing Law. This Agreement will be construed and
enforced in accordance with and governed by the internal laws of
the State of Louisiana without regard to principles of conflict
of laws, except as expressly provided in Article V above with
respect to the resolution of disputes arising under, or the
Company's enforcement of, Article V of this Agreement.
5 Withholding. The Executive agrees that the Company has
the right to withhold, from the amounts payable pursuant to this
Agreement, all amounts required to be withheld under applicable
income and/or employment tax laws, or as otherwise stated in
documents granting rights that are affected by this Agreement.
6 Severability. If any term or provision of this
Agreement or the application thereof to any person or
circumstance, will at any time or to any extent be invalid,
illegal or unenforceable in any respect as written, Executive and
the Company intend for any court construing this Agreement to
modify or limit such provision temporally, spatially or otherwise
so as to render it valid and enforceable to the fullest extent
allowed by law. Any such provision that is not susceptible of
such reformation will be ignored so as to not affect any other
term or provision hereof, and the remainder of this Agreement, or
the application of such term or provision to persons or
circumstances other than those as to which it is held invalid,
illegal or unenforceable, will not be affected thereby and each
term and provision of this Agreement will be valid and enforced
to the fullest extent permitted by law.
6. Waiver of Breach. The waiver by either party of a
breach of any provision of this Agreement will not operate or be
construed as a waiver of any subsequent breach thereof.
7. Remedies Not Exclusive. Except as provided in Article
VI hereof, no remedy specified herein will be deemed to be such
party's exclusive remedy, and accordingly, in addition to all of
the rights and remedies provided for in this Agreement, the
parties will have all other rights and remedies provided to them
by applicable law, rule or regulation.
8. Legal Fees. The Company agrees to pay all legal fees
and expenses that the Executive may reasonably incur as a result
of any contest by the Company, the Executive or others with
respect to the validity or enforceability of, or liability under,
any provision of this Agreement (including as a result of any
contest by the Executive about the amount or timing of any
payment pursuant to this Agreement), provided that the Executive
prevails on any material claim.
9. Company's Reservation of Rights. The Executive
acknowledges and understands that he serves at the pleasure of
the Board and that the Company has the right at any time to
terminate or change the Executive's status as an officer and
employee of the Company, subject to the rights of the Executive
to claim the benefits conferred by this Agreement.
10. JURY TRIAL WAIVER. THE PARTIES HEREBY WAIVE TRIAL BY
JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE PARTIES
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING
OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT.
11. Survival. The rights and obligations of the Company
and Executive contained in Article V of this Agreement will
survive the termination of the Agreement. Following the
Termination Date, each party will have the right to enforce all
rights, and will be bound by all obligations, of such party that
are continuing rights and obligations under this Agreement.
12. Prior Employment Agreement. Effective as of the
Agreement Date, this Agreement supersedes any prior employment
agreement between the Executive and the Company.
13. Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed to be an original
but all of which together will constitute one and the same
instrument.
IN WITNESS WHEREOF, the Company and the Executive have
caused this Agreement to be executed as of the Agreement Date.
Freeport-McMoRan Copper & Gold Inc.
By:
H. Devon Graham, Jr.
Director and Chairman of the
Corporate Personnel Committee
of the
Board of Directors
Executive
Richard C. Adkerson
Signature Page of Executive Employment Agreement
between Freeport-McMoRan Copper & Gold Inc.
and Richard C. Adkerson
EX-10
6
exh1037.txt
Execution Copy
Change of Control Agreement
This Change of Control Agreement ("Agreement") between
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), and James R. Moffett (the "Executive") is dated
effective as of April 30, 2001 (the "Change of Control Agreement
Date").
Article I
Executive Employment Agreement; Definitions
1.1 Executive Employment Agreement. Contemporaneous with a
Change of Control (defined below), this Agreement supersedes the
Executive Employment Agreement dated effective as of April 30,
2001 between Executive and the Company (the "Employment
Agreement"), except to the extent that certain provisions of the
Employment Agreement are expressly incorporated by reference
herein. After a Change of Control, the definitions in this
Agreement supersede definitions in the Employment Agreement, but
capitalized terms used herein that are not defined in this
Agreement shall have the meanings given to them in the Employment
Agreement.
1.2 Company. As used in this Agreement, "Company" means
the Company as defined above and any successor to or assignee of
(whether direct or indirect, by purchase, merger, consolidation
or otherwise) all or substantially all of the assets of the
Company.
1.3 Change of Control. (a) "Change of Control" means
(capitalized terms not otherwise defined will have the meanings
ascribed to them in paragraph (b) below):
(i) the acquisition by any Person together with all
Affiliates of such Person, of Beneficial Ownership of the
Threshold Percentage or more; provided, however, that for
purposes of this Section 1.3(a)(i), the following will not
constitute a Change of Control:
(A) any acquisition (other than a "Business
Combination," as defined below, that constitutes a Change of
Control under Section 1.3(a)(iii) hereof) of Common Stock
directly from the Company,
(B) any acquisition of Common Stock by the
Company or its subsidiaries,
(C) any acquisition of Common Stock by any
employee benefit plan (or related trust) sponsored or maintained
by the Company or any corporation or other entity controlled by
the Company, or
(D) any acquisition of Common Stock pursuant to a
Business Combination that does not constitute a Change of Control
under Section 1.3(a)(iii) hereof; or
(ii) individuals, excluding the representatives of Rio
Tinto (as defined below), who, as of the effective date of this
Agreement, constitute the Board (the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board;
provided, however, that any individual, excluding any
representative of Rio Tinto, becoming a director subsequent to
the effective date of this Agreement whose election, or
nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board will be considered a member of the
Incumbent Board, unless such individual's initial assumption of
office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or
any other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Incumbent
Board; or
(iii) the consummation of a reorganization, merger
or consolidation (including a merger or consolidation of the
Company or any direct or indirect subsidiary of the Company), or
sale or other disposition of all or substantially all of the
assets of the Company (a "Business Combination"), in each case,
unless, immediately following such Business Combination:
(A) the individuals and entities who were the
Beneficial Owners of the Company Voting Stock immediately prior
to such Business Combination have direct or indirect Beneficial
Ownership of more than 50 percent of the then outstanding shares of
common stock, and more than 50 percent of the combined voting power of
the then outstanding voting securities entitled to vote generally
in the election of directors, of the Post-Transaction
Corporation, and
(B) no Person together with all Affiliates of
such Person (excluding the Post-Transaction Corporation and any
employee benefit plan or related trust of either the Company, the
Post-Transaction Corporation or any subsidiary of either
corporation) Beneficially Owns 30 percent or more of the then
outstanding shares of common stock of the Post-Transaction
Corporation or 30 percent or more of the combined voting power of the
then outstanding voting securities of the Post-Transaction
Corporation; provided, that if that certain Agreement dated as of
May 2, 1995 by and between the Company and Rio Tinto remains in
effect as it may be amended from time to time with respect to the
Post-Transaction Corporation, then Rio Tinto and its Affiliates
may Beneficially Own any amount less than the number of shares of
the Post-Transaction Corporation that could elect a majority of
the directors of the Post-Transaction Corporation if all
directors were to be elected at a single meeting, and
(C) at least a majority of the members of the
board of directors of the Post-Transaction Corporation were
members of the Incumbent Board at the time of the execution of
the initial agreement, and of the action of the Board, providing
for such Business Combination; or
(iv) approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
(b) As used in this Section 1.3 and elsewhere in this
Agreement, the following terms have the meanings indicated:
(i) Affiliate: "Affiliate" means a Person that
directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with,
another specified Person.
(ii) Beneficial Owner: "Beneficial Owner" (and
variants thereof), with respect to a security, means a Person
who, directly or indirectly (through any contract, understanding,
relationship or otherwise), has or shares (A) the power to vote,
or direct the voting of, the security, and/or (B) the power to
dispose of, or to direct the disposition of, the security.
(iii) Company Voting Stock: "Company Voting Stock"
means any capital stock of the Company that is then entitled to
vote for the election of directors.
(iv) Majority Shares: "Majority Shares" means the
number of shares of Company Voting Stock that could elect a
majority of the directors of the Company if all directors were to
be elected at a single meeting.
(v) Person: "Person" means a natural person or
entity, and will also mean the group or syndicate created when
two or more Persons act as a syndicate or other group (including
without limitation a partnership, limited partnership, joint
venture or other joint undertaking) for the purpose of acquiring,
holding, or disposing of a security, except that "Person" will
not include an underwriter temporarily holding a security
pursuant to an offering of the security.
(vi) Post-Transaction Corporation: Unless a Change of
Control includes a Business Combination, "Post-Transaction
Corporation" means the Company after the Change of Control. If a
Change of Control includes a Business Combination, "Post-
Transaction Corporation" will mean the corporation or other
entity resulting from the Business Combination unless, as a
result of such Business Combination, an ultimate parent entity
controls the Company or all or substantially all of the Company's
assets either directly or indirectly, in which case, "Post-
Transaction Corporation" will mean such ultimate parent entity.
(vii) Threshold Percentage: (A) As long as that
certain Agreement dated as of May 2, 1995, by and between the
Company and Rio Tinto Indonesia Limited ("Rio Tinto") remains in
effect as it may be amended from time to time, "Threshold
Percentage" means with respect to Rio Tinto and its Affiliates,
that percentage of Class A Common Stock, Class B Common Stock or
Common Stock that would result in Rio Tinto and its Affiliates
having Beneficial Ownership of shares of Company Voting Stock
equal to or greater than the Majority Shares; provided that,
solely for purposes of such calculation, the shares of Company
Voting Stock issuable upon exercise of warrants, options or other
rights, or upon conversion or exchange of convertible or
exchangeable securities, owned by Rio Tinto and its Affiliates,
will be treated as outstanding Company Voting Stock. (B) With
respect to any other Person and its Affiliates, "Threshold
Percentage" means (I) 30 percent of all then outstanding Class A Common
Stock and Class B Common Stock collectively, or (II) 30 percent of all
then outstanding Class B Common Stock.
1.4 Unsolicited Change of Control. "Unsolicited Change of
Control" shall mean any Change of Control in response to (a) the
Company's receipt of a bona fide written proposal for a Change of
Control transaction or (b) a public announcement of such proposal
by the proponent thereof, which, in either case, was neither
initiated, encouraged or otherwise sought by the Company.
1.5 Cause. "Cause" shall have the meaning ascribed in the
Employment Agreement.
1.6 Good Reason. "Good Reason" shall mean:
(a) Any failure of the Post-Transaction Corporation to
provide the Executive with the position, authority, duties and
responsibilities at least commensurate in all material respects
with the most significant of those held, exercised and assigned
at any time during the 120-day period immediately preceding the
Change of Control. Executive's position, authority, duties and
responsibilities after a Change of Control shall not be
considered commensurate in all material respects with Executive's
position, authority, duties and responsibilities prior to a
Change of Control unless after the Change of Control the
Executive holds an equivalent position in the Post-Transaction
Corporation.
(b) The assignment to the Executive of any duties
inconsistent in any material respect with Executive's position
(including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by Section
2.1(b) of this Agreement, or any other action that results in a
diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith that
is remedied within 10 days after receipt of written notice
thereof from the Executive to the Company;
(c) Any failure by the Post-Transaction Corporation or its
affiliates to comply with any of the provisions of this
Agreement, other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith that is remedied within 10
days after receipt of written notice thereof from the Executive
to the Company;
(d) The Post-Transaction Corporation or its affiliates
requiring the Executive to be based at any office or location
other than as provided in Section 2.1(b)(ii) hereof or requiring
the Executive to travel on business to a substantially greater
extent than required immediately prior to the Change of Control;
or
(e) Any failure by the Company to comply with and satisfy
Sections 3.1(c) and (d) of this Agreement.
For purposes of this Section 1.6, any determination of "Good
Reason" made by the Executive in good faith and based upon his
reasonable belief and understanding shall be conclusive. Anything
in this Agreement to the contrary notwithstanding, a termination
by the Executive for any reason during the 30-day period
immediately following the first anniversary of an Unsolicited
Change of Control shall be deemed to be a termination for Good
Reason.
1.7 Code. "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
Article II
Change of Control Benefit
2.1 Employment Term and Capacity after Change of Control.
(a) If the Executive continues to serve as an officer of the
Company and a Change of Control occurs on or before April 30,
2006, then the Executive's employment term (the "Employment
Term") shall continue through the third anniversary of the Change
of Control, subject to any earlier termination of Executive's
status as an officer and employee pursuant to this Agreement.
(b) After a Change of Control and during the Employment
Term, (i) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and
assigned at any time during the 120-day period immediately
preceding the Change of Control and (ii) the Executive's services
shall be performed at the location where the Executive was
employed immediately preceding the Change of Control or any
office or location less than 35 miles from such location.
Executive's position, authority, duties and responsibilities
after a Change of Control shall not be considered commensurate in
all material respects with Executive's position, authority,
duties and responsibilities prior to a Change of Control unless
after the Change of Control the Executive holds an equivalent
position in the Post-Transaction Corporation. The Executive
shall devote himself to his employment responsibilities with the
Post-Transaction Corporation as provided in Article I Section 2
of the Employment Agreement.
2.2 Compensation and Benefits. During the Employment Term,
the Executive shall be entitled to the following compensation and
benefits:
(a) Salary. A salary ("Base Salary") at the highest rate
provided for under the Employment Agreement at any time during
the 120-day period immediately preceding the Change of Control,
but not less than $2,500,000 per year, payable to the Executive
at such intervals no less frequent than the most frequent
intervals in effect at any time during the 120-day period
immediately preceding the Change of Control or, if more favorable
to the Executive, the intervals in effect at any time after the
Change of Control for other most senior executives of the Post-
Transaction Corporation and its affiliated companies.
(b) Bonus. Executive shall be entitled to participate in
an annual incentive bonus program applicable to other most senior
executives of the Post-Transaction Corporation and its affiliated
companies but in no event shall such program provide the
Executive with incentive opportunities less favorable than the
most favorable of those provided by the Company and its
affiliated companies for the Executive under the Company's Annual
Incentive Plan or similar plan as in effect at any time during
the 120-day period immediately preceding the Change of Control
or, if more favorable to the Executive, those provided generally
at any time after the Change of Control to other most senior
executives of the Post-Transaction Corporation and its affiliated
companies.
(c) Fringe Benefits. The Executive shall be entitled to
fringe benefits (including, but not limited to, automobile
allowance, air travel, and reimbursement for club membership
dues) in accordance with the most favorable agreements, plans,
practices, programs and policies of the Company and its
affiliated companies in effect for the Executive at any time
during the 120-day period immediately preceding the Change of
Control or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other most
senior executives of the Post-Transaction Corporation and its
affiliated companies.
(d) Expenses. The Executive shall be entitled to receive
prompt reimbursement for all reasonable business expenses
(including food and lodging) incurred by the Executive in
accordance with the most favorable agreements, policies,
practices and procedures of the Company and its affiliated
companies in effect for the Executive at any time during the 120-
day period immediately preceding the Change of Control or, if
more favorable to the Executive, as in effect generally at any
time thereafter with respect to other most senior executives of
the Post-Transaction Corporation and its affiliated companies.
(e) Incentive, Savings and Retirement Plans. The Executive
shall be entitled to participate in all incentive, savings and
retirement plans, practices, policies and programs applicable
generally to other most senior executives of the Post-Transaction
Corporation and its affiliated companies, but in no event shall
such plans, practices, policies and programs provide the
Executive with incentive opportunities (measured with respect to
both regular and special incentive opportunities, to the extent,
if any, that such distinction is applicable), savings
opportunities and retirement benefit opportunities, in each case,
less favorable than the most favorable of those provided by the
Company and its affiliated companies for the Executive under any
agreements, plans, practices, policies and programs as in effect
at any time during the 120-day period immediately preceding the
Change of Control.
(f) Welfare Benefit Plans. The Executive and the
Executive's family shall be eligible for participation in and
shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Post-Transaction
Corporation and its affiliated companies (including, without
limitation, medical, prescription, dental, disability, employee
life, group life, accidental death and travel accident insurance
plans and programs) to the extent applicable generally to other
most senior executives of the Post-Transaction Corporation and
its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with
benefits, in each case, less favorable than the most favorable of
any agreements, plans, practices, policies and programs of the
Company in effect for the Executive at any time during the 120-
day period immediately preceding the Change of Control.
(g) Indemnification and Insurance. The Post-Transaction
Corporation shall indemnify the Executive, to the fullest extent
permitted by applicable law, for any and all claims brought
against him arising out his services during or prior to the
Employment Term. In addition, the Post-Transaction Corporation
shall maintain a directors' and officers' insurance policy
covering the Executive substantially in the form of the policy
maintained by the Company and its affiliated companies at any
time during the 120-day period immediately preceding the Change
of Control or, if more favorable to the Executive, as provided
generally at any time thereafter with respect to other most
senior executives of the Post-Transaction Corporation and its
affiliated companies.
(h) Office and Support Staff. The Executive shall be
entitled to an office or offices of a size and with furnishings
and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the
foregoing provided to the Executive by the Company and its
affiliated companies at any time during the 120-day period
immediately preceding the Change of Control or, if more favorable
to the Executive, as provided generally at any time thereafter
with respect to other most senior executives of the Post-
Transaction Corporation and its affiliated companies.
(i) Vacation. The Executive shall be entitled to paid
vacation in accordance with the most favorable agreements, plans,
policies, programs and practices of the Company and its
affiliated companies as in effect for the Executive at any time
during the 120-day period immediately preceding the Change of
Control or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other most
senior executives of the Post-Transaction Corporation and its
affiliated companies.
2.3 Termination of Employment after a Change of Control.
After a Change of Control and during the Employment Term, the
Executive's status as an officer and employee shall terminate or
may be terminated by the Executive or the Post-Transaction
Corporation as provided in Article III of the Employment
Agreement (provided, however, that the provisions regarding "Good
Reason" shall supersede the comparable provisions in the
Employment Agreement).
2.4 Obligations upon Termination after a Change of Control.
(a) Death, Disability or Retirement. If, after a Change of
Control and during the Employment Term, (1) the Executive's
status as an officer and employee is terminated by reason of the
Executive's death, (2) the Post-Transaction Corporation
terminates the Executive's status as an officer and employee by
reason of Executive's Disability (as defined in the Employment
Agreement), or (iii) the Executive Retires (as defined in the
Employment Agreement) and terminates his status as an officer and
employee, then, subject to Section 2.4(f):
(i) The Post-Transaction Corporation will pay to the
Executive or his legal representatives the sum of (A) the amount
of the Executive's Base Salary earned through the Termination
Date to the extent not previously paid and (B) any compensation
previously deferred by the Executive (together with any accrued
interest on earnings thereon) to the extent not previously paid
in accordance with the terms of the deferred compensation plans
under which such compensation was deferred (the sum of the
amounts described in clauses (A) and (B) being hereinafter
referred to as the "Accrued Obligations");
(ii) The Post-Transaction Corporation will pay to the
Executive or his legal representatives a pro rata bonus in an
amount determined by calculating the bonus that the Executive
would receive for the Fiscal Year in which the Termination Date
occurs based upon the level of achievement of the applicable
performance goals through the end of the fiscal quarter in which
the Termination Date occurs, annualized as if such level of
performance had continued throughout the entire Fiscal Year and
then multiplying such bonus amount by the fraction obtained by
dividing the number of days in the year through the Termination
Date by 365 (the "Pro Rata Bonus");
(iii) If the Executive Retires (as defined in the
Employment Agreement), for a period commencing on the Termination
Date and ending on the earlier of (A) the third anniversary of
the Termination Date, or (B) the date that the Executive accepts
new employment (the "Continuation Period"), the Post-Transaction
Corporation will at its expense maintain and administer for the
continued benefit of Executive all insurance and welfare benefit
plans in which Executive was entitled to participate as an
employee as of the Termination Date, provided that Executive's
continued participation is possible under the general terms and
provisions of such plans and all applicable laws. The coverage
and benefits (including deductibles and costs) provided under any
such benefit plan in accordance with this paragraph during the
Continuation Period will be no less favorable to Executive than
the most favorable of such coverages and benefits as of the
Termination Date. If Executive's participation in any such
benefit plan is barred or any such benefit plan is terminated,
the Post-Transaction Corporation will provide Executive with
compensation or benefits substantially similar or comparable in
value to those Executive would otherwise have been entitled to
receive under such plans. At the end of the Continuation Period,
the Executive will have the option to have assigned to him, at no
cost and with no apportionment of prepaid premiums, any
assignable insurance owned by the Post-Transaction Corporation
that relates specifically to the Executive. To the maximum
extent permitted by law, the Executive will be eligible for
coverage under the Consolidated Omnibus Budget Reconciliation Act
("COBRA") at the end of the Continuation Period or earlier
cessation of the Post-Transaction Corporation's obligation under
the foregoing provisions of this paragraph; and
(iv) The Post-Transaction Corporation will pay or
deliver, as appropriate, all other benefits earned by the
Executive or accrued for his benefit pursuant to any employee
benefit plans maintained by the Post-Transaction Corporation or
its affiliated companies with respect to services rendered by the
Executive prior to the Termination Date.
(b) Cause. If, after a Change of Control and during the
Employment Term, the Executive's status as an officer and
employee is terminated by the Post-Transaction Corporation for
Cause, the Post-Transaction Corporation shall pay to the
Executive the Accrued Obligations without further obligation to
the Executive other than for obligations by law and obligations
for any benefits earned by the Executive or accrued for his
benefit pursuant to any employee benefit plans maintained by the
Post-Transaction Corporation and its affiliated companies with
respect to services rendered by the Executive prior to the
Termination Date.
(c) Termination by Company for Reasons other than Death,
Disability or Cause; by Executive for Good Reason. If, after a
Change of Control and during the Employment Term, the Post-
Transaction Corporation terminates the Executive's status as an
officer and employee other than for Cause, death or Disability,
or the Executive terminates his status as an officer and employee
for Good Reason, then, subject to Section 2.4(f) hereof:
(i) The Post-Transaction Corporation shall pay to the
Executive the Accrued Obligations and the Pro Rata Bonus;
(ii) The Post-Transaction Corporation shall pay to the
Executive an amount equal to four times or, in the event of an
Unsolicited Change of Control, five times, the sum of (A) the
Executive's Base Salary in effect at the Termination Date and (B)
the lesser of (1) the highest bonus paid to the Executive for any
of the immediately preceding three Fiscal Years or (2) two times
Base Salary in effect at the Termination Date;
(iii) For the Continuation Period, the Post-
Transaction Corporation shall at its expense maintain and
administer for the continued benefit of Executive all insurance
and welfare benefit plans in which Executive was entitled to
participate as an employee as of the Termination Date; provided
that Executive's continued participation is possible under the
general terms and provisions of such plans and all applicable
laws. The coverage and benefits (including deductibles and
costs) provided under any such benefit plan in accordance with
this paragraph during the Continuation Period will be no less
favorable to Executive than the most favorable of such coverages
and benefits as of the Termination Date; provided, however, in
the event of the disability of Executive during the Continuation
Period, disability benefits shall, to the maximum extent
possible, not be paid for the Continuation Period but shall
instead commence immediately following the end of the
Continuation Period. If Executive's participation in any such
benefit plan is barred or any such benefit plan is terminated,
the Post-Transaction Corporation will provide Executive with
compensation or benefits substantially similar or comparable in
value to those Executive would otherwise have been entitled to
receive under such plans. At the end of the Continuation Period,
the Executive will have the option to have assigned to him, at no
cost and with no apportionment of prepaid premiums, any
assignable insurance owned by the Post-Transaction Corporation
that relates specifically to the Executive. To the maximum
extent permitted by law, the Executive will be eligible for
coverage under COBRA at the end of the Continuation Period or
earlier cessation of the Company's obligation under the foregoing
provisions of this paragraph; and
(iv) The Post-Transaction Corporation will pay or
deliver, as appropriate, all other benefits earned by the
Executive or accrued for his benefit pursuant to any employee
benefit plans maintained by the Post-Transaction Corporation or
its affiliated companies with respect to services rendered by the
Executive prior to the Termination Date.
(d) Resignation from Board of Directors. If the Executive
is a director of the Post-Transaction Corporation and his status
as an officer and employee is terminated for any reason other
than death, the Executive shall, if requested by the Post-
Transaction Corporation, immediately resign as a director of the
Post-Transaction Corporation and its subsidiaries. If such
resignation is not received within 20 business days after the
Executive actually receives written notice from the Post-
Transaction Corporation requesting the resignation, the Executive
shall forfeit any right to receive any payments pursuant to this
Agreement.
(e) Nondisclosure, Noncompetition and Proprietary Rights.
The rights and obligations of the Company and the Executive
contained in Article V ("Nondisclosure, Noncompetition and
Proprietary Rights") of the Employment Agreement shall continue
to apply after a Change of Control.
(f) Most Favorable Benefits. It is the intention of the
parties that the terms of this Agreement shall provide payments
and benefits to the Executive that are equivalent or more
beneficial to the Executive than are otherwise available to the
Executive under the terms of any applicable benefit plan or
related compensation agreement. To that end, the terms of the
Agreement shall govern the payments and benefits to which the
Executive shall be entitled upon the termination of the
Executive's status as an officer and employee as provided herein,
except that if the terms of any applicable benefit plan or
related compensation agreement provide more favorable benefits to
the Executive than are provided hereunder, the terms of such plan
or agreement shall control.
2.5 Excise Tax Provision.
(a) Notwithstanding any other provisions of this Agreement,
if a Change of Control occurs during the original or extended
term of this Agreement, in the event that any of the payments or
benefits received or to be received by the Executive in
connection with the Change of Control or the Executive's
termination of employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the
Company, any Person whose actions result in a Change of Control
or any Person affiliated with the Company or such Person) (all
such payments and benefits, including the payments and benefits
under Section 2.4(c) hereof, but excluding any payment to be made
pursuant to this Section 2.5, being hereinafter referred to as
the "Initial Payments") will be subject (in whole or in part) to
an excise tax imposed by section 4999 of the Code or any similar
tax (the "Excise Tax"), the Company shall pay to the Executive an
additional amount (the "Gross-Up Payment") such that the net
amount retained by the Executive, after deduction of (i) any
Excise Tax on the Initial Payments, (ii) any federal, state and
local income and employment taxes on the Gross-Up Payment, (iii)
any Medicare tax on the Gross-Up Payment, and (iv) the Excise Tax
on the Gross-Up Payment, shall be equal to the Initial Payments.
(b) For purposes of determining whether any of the Initial
Payments will be subject to the Excise Tax and the amount of such
Excise Tax, (i) all of the Initial Payments shall be treated as
"parachute payments" (within the meaning of the Code) unless, in
the opinion of tax counsel ("Tax Counsel") reasonably acceptable
to the Executive and selected by the accounting firm which was,
immediately prior to the Change of Control, the Company's
independent auditor (the "Auditor"), such payments or benefits
(in whole or in part) do not constitute parachute payments, (ii)
all "excess parachute payments" within the meaning of the Code
shall be treated as subject to the Excise Tax unless, in the
opinion of Tax Counsel, such excess parachute payments (in whole
or in part) represent reasonable compensation for services
actually rendered (within the meaning of the Code) in excess of
the "Base Amount" (within the meaning set forth in the Code)
allocable to such reasonable compensation, or are otherwise not
subject to the Excise Tax, and (iii) the value of any noncash
benefits or any deferred payment or benefit shall be determined
by the Auditor in accordance with the principles of the Code.
For purposes of determining the amount of the Gross-Up Payment,
the Executive shall be deemed to pay federal income tax at the
highest marginal rate of federal income taxation in the calendar
year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rate of taxation in
the state and locality of the Executive's residence on the date
of termination of the Executive's employment (or if there is no
date of termination, then the date on which the Gross-Up Payment
is calculated for purposes of this Section 2.5), net of the
maximum reduction in federal income taxes which could be obtained
from deduction of such state and local taxes.
(c) In the event that the Excise Tax is finally determined
to be less than the amount taken into account hereunder in
calculating the Gross-Up Payment, the Executive shall repay to
the Company, within ten business days following the time that the
amount of such reduction in the Excise Tax is finally determined,
the portion of the Gross-Up Payment attributable to such
reduction (plus that portion of the Gross-Up Payment attributable
to the Excise Tax and federal, state and local income and
employment taxes imposed on the Gross-Up Payment being repaid by
the Executive, to the extent that such repayment results in a
reduction in the Excise Tax and a dollar-for-dollar reduction in
the Executive's taxable income and wages for purposes of federal,
state and local income and employment taxes, plus interest on the
amount of such repayment at 120 percent of the rate provided in section
1274(b)(2)(B) of the Code). In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder in
calculating the Gross-Up Payment (including by reason of any
payment the existence or amount of which cannot be determined at
the time of the Gross-Up Payment), the Company shall make an
additional Gross-Up Payment in respect of such excess (plus any
interest, penalties or additions payable by the Executive with
respect to such excess) within ten business days following the
time that the amount of such excess is finally determined. The
Executive and the Company shall each reasonably cooperate with
the other in connection with any administrative or judicial
proceedings concerning the existence or amount of liability for
Excise Tax with respect to the Initial Payments.
(d) The Gross-Up Payment provided in Section 2.5 shall be
made not later than the "Payment Day." The Payment Day shall be
the tenth business day following the date of termination, or, if
the Executive becomes entitled, before the Executive's employment
is terminated, to a Gross-Up Payment under this Section 2.5, then
not later than the tenth business day following the date as of
which the present value of the Initial Payments is calculated for
purposes of determining the amount of such Gross-Up Payment.
Notwithstanding the preceding provisions of this Section 2.5(d),
if the amount of the Gross-Up Payment cannot be finally
determined on or before the Payment Day, the Company shall pay to
the Executive on the Payment Day an estimate, as determined in
accordance with Section 2.5(b), of the minimum amount of the
Gross-Up Payment to which the Executive is clearly entitled and
shall pay the remainder of the Gross-Up Payment (together with
interest on the unpaid remainder at 120 percent of the rate provided in
section 1274(b)(2)(B) of the Code) as soon as the amount thereof
can be determined but in no event later than the thirtieth day
after the Payment Day. In the event that the amount of the
estimated Gross-Up Payment so made exceeds the amount
subsequently determined to have been due, such excess shall
constitute a loan by the Company to the Executive, payable on the
tenth business day after demand by the Company (together with
interest at 120 percent of the rate provided in section 1274(b)(2)(B) of
the Code). At the time that any Gross-Up Payment is made
pursuant to Section 2.5(a) (and at the time that any additional
Gross-Up Payment is made pursuant to Section 2.5(c)), the Company
shall provide the Executive with a written statement setting
forth the manner in which any such payment was calculated and the
basis for such calculations including, without limitation, any
opinions or other advice the Company has received from Tax
Counsel, the Auditor or other advisors or consultants (and any
such opinion or advice which is in writing shall be attached to
the statement).
2.6 Stock Options; Performance Units; Restricted Stock.
The foregoing benefits are intended to be in addition to the
value of any options to acquire Common Stock of the Company, the
exercisability of which is accelerated pursuant to the terms of
any stock option agreement, any related limited rights, any
restricted stock units the vesting of which is accelerated
pursuant to the terms of the restricted stock unit agreement, the
performance units under the long-term performance incentive
plans, and any other incentive or similar plan heretofore or
hereafter adopted by the Company.
2.7 Legal Fees. The Company agrees to pay as incurred all
legal fees and expenses that the Executive may reasonably incur
as a result of any contest (regardless of the outcome thereof) by
the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this
Agreement (including as a result of any contest by the Executive
about the amount or timing of any payment pursuant to this
Agreement).
Article III
Miscellaneous
3.1 Binding Effect; Successors.
(a) This Agreement shall be binding upon and inure to the
benefit of the Company and any of its successors or assigns.
(b) This Agreement is personal to the Executive and shall
not be assignable by the Executive without the consent of the
Company (there being no obligation to give such consent) other
than such rights or benefits as are transferred by will or the
laws of descent and distribution.
(c) The Company shall require any successor to or assignee
of (whether direct or indirect, by purchase, merger,
consolidation or otherwise) all or substantially all of the
assets or businesses of the Company (i) to assume unconditionally
and expressly this Agreement and (ii) to agree to perform or to
cause to be performed all of the obligations under this Agreement
in the same manner and to the same extent as would have been
required of the Company had no assignment or succession occurred,
such assumption to be set forth in a writing reasonably
satisfactory to the Executive.
(d) The Company shall also require all entities that
control or that after the transaction will control (directly or
indirectly) the Company or any such successor or assignee to
agree to cause to be performed all of the obligations under this
Agreement, such agreement to be set forth in a writing reasonably
satisfactory to the Executive.
3.2 Notices. All notices hereunder must be in writing and,
unless otherwise specifically provided herein, will be deemed to
have been given upon receipt of delivery by: (a) hand (against a
receipt therefor), (b) certified or registered mail, postage
prepaid, return receipt requested, (c) a nationally recognized
overnight courier service (against a receipt therefor) or (d)
telecopy transmission with confirmation of receipt. All such
notices must be addressed as follows:
If to the Company, to:
Freeport-McMoRan Copper & Gold Inc.
1615 Poydras Street
New Orleans, Louisiana 70112
Attention: Chairman of Corporate Personnel Committee
If to the Executive, to:
James R. Moffett
1615 Poydras Street
New Orleans, Louisiana 70112
or such other address as to which any party hereto may have
notified the other in writing.
3.3 Governing Law. This Agreement shall be construed and
enforced in accordance with and governed by the internal laws of
the State of Louisiana without regard to principles of conflict
of laws, except as expressly provided in Article V Section 6 of
the Employment Agreement with respect to the resolution of
disputes arising under, or the Company's enforcement of, such
Article V.
3.4 Withholding. The Executive agrees that the Company has
the right to withhold, from the amounts payable pursuant to this
Agreement, all amounts required to be withheld under applicable
income and/or employment tax laws, or as otherwise stated in
documents granting rights that are affected by this Agreement.
3.5 Amendment, Waiver. No provision of this Agreement may
be modified, amended or waived except by an instrument in writing
signed by both parties.
3.6 Severability. If any term or provision of this Agree
ment, or the application thereof to any person or circumstance,
shall at any time or to any extent be invalid, illegal or
unenforceable in any respect as written, Executive and the
Company intend for any court construing this Agreement to modify
or limit such provision so as to render it valid and enforceable
to the fullest extent allowed by law. Any such provision that is
not susceptible of such reformation shall be ignored so as to not
affect any other term or provision hereof, and the remainder of
this Agreement, or the application of such term or provision to
persons or circumstances other than those as to which it is held
invalid, illegal or unenforceable, shall not be affected thereby
and each term and provision of this Agreement shall be valid and
enforced to the fullest extent permitted by law.
3.7 Waiver of Breach. The waiver by either party of a
breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach thereof.
3.8 Remedies Not Exclusive. No remedy specified herein
shall be deemed to be such party's exclusive remedy, and
accordingly, in addition to all of the rights and remedies
provided for in this Agreement, the parties shall have all other
rights and remedies provided to them by applicable law, rule or
regulation.
3.9 Company's Reservation of Rights. Executive
acknowledges and understands that the Executive serves at the
pleasure of the Board and that the Company has the right at any
time to terminate Executive's status as an employee of the
Company, or to change or diminish his status during the
Employment Term, subject to the rights of the Executive to claim
the benefits conferred by this Agreement.
3.10 Prior Change of Control Agreement. Effective as of the
Change of Control Agreement Date, this Agreement supersedes any
prior change of control agreement between the Executive and the
Company.
3.11 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an
original but all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the Company and the Executive have
caused this Agreement to be executed as of the Change of Control
Agreement Date.
Freeport-McMoRan Copper & Gold Inc.
By:
H. Devon Graham, Jr.
Director and Chairman of the
Corporate Personnel Committee
of the
Board of Directors
Executive
James R. Moffett
Signature Page of Change of Control Agreement
between Freeport-McMoRan Copper & Gold Inc.
and James R. Moffett
EX-10
7
exh1038.txt
Execution Copy
Change of Control Agreement
This Change of Control Agreement ("Agreement") between
Freeport-McMoRan Copper & Gold Inc., a Delaware corporation (the
"Company"), and Richard C. Adkerson (the "Executive") is dated
effective as of April 30, 2001 (the "Change of Control Agreement
Date").
Article I
Executive Employment Agreement; Definitions
1.1 Executive Employment Agreement. Contemporaneous with a
Change of Control (defined below), this Agreement supersedes the
Executive Employment Agreement dated effective as of April 30,
2001 between Executive and the Company (the "Employment
Agreement"), except to the extent that certain provisions of the
Employment Agreement are expressly incorporated by reference
herein. After a Change of Control, the definitions in this
Agreement supersede definitions in the Employment Agreement, but
capitalized terms used herein that are not defined in this
Agreement shall have the meanings given to them in the Employment
Agreement.
1.2 Company. As used in this Agreement, "Company" means
the Company as defined above and any successor to or assignee of
(whether direct or indirect, by purchase, merger, consolidation
or otherwise) all or substantially all of the assets of the
Company.
1.3 Change of Control. (a) "Change of Control" means
(capitalized terms not otherwise defined will have the meanings
ascribed to them in paragraph (b) below):
(i) the acquisition by any Person together with all
Affiliates of such Person, of Beneficial Ownership of the
Threshold Percentage or more; provided, however, that for
purposes of this Section 1.3(a)(i), the following will not
constitute a Change of Control:
(A) any acquisition (other than a "Business
Combination," as defined below, that constitutes a Change of
Control under Section 1.3(a)(iii) hereof) of Common Stock
directly from the Company,
(B) any acquisition of Common Stock by the
Company or its subsidiaries,
(C) any acquisition of Common Stock by any
employee benefit plan (or related trust) sponsored or maintained
by the Company or any corporation or other entity controlled by
the Company, or
(D) any acquisition of Common Stock pursuant to a
Business Combination that does not constitute a Change of Control
under Section 1.3(a)(iii) hereof; or
(ii) individuals, excluding the representatives of Rio
Tinto (as defined below), who, as of the effective date of this
Agreement, constitute the Board (the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board;
provided, however, that any individual, excluding any
representative of Rio Tinto, becoming a director subsequent to
the effective date of this Agreement whose election, or
nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board will be considered a member of the
Incumbent Board, unless such individual's initial assumption of
office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or
any other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Incumbent
Board; or
(iii) the consummation of a reorganization, merger
or consolidation (including a merger or consolidation of the
Company or any direct or indirect subsidiary of the Company), or
sale or other disposition of all or substantially all of the
assets of the Company (a "Business Combination"), in each case,
unless, immediately following such Business Combination:
(A) the individuals and entities who were the
Beneficial Owners of the Company Voting Stock immediately prior
to such Business Combination have direct or indirect Beneficial
Ownership of more than 50 percent of the then outstanding shares of
common stock, and more than 50 percent of the combined voting power of
the then outstanding voting securities entitled to vote generally
in the election of directors, of the Post-Transaction
Corporation, and
(B) no Person together with all Affiliates of
such Person (excluding the Post-Transaction Corporation and any
employee benefit plan or related trust of either the Company, the
Post-Transaction Corporation or any subsidiary of either
corporation) Beneficially Owns 30 percent or more of the then
outstanding shares of common stock of the Post-Transaction
Corporation or 30 percent or more of the combined voting power of the
then outstanding voting securities of the Post-Transaction
Corporation; provided, that if that certain Agreement dated as of
May 2, 1995 by and between the Company and Rio Tinto remains in
effect as it may be amended from time to time with respect to the
Post-Transaction Corporation, then Rio Tinto and its Affiliates
may Beneficially Own any amount less than the number of shares of
the Post-Transaction Corporation that could elect a majority of
the directors of the Post-Transaction Corporation if all
directors were to be elected at a single meeting, and
(C) at least a majority of the members of the
board of directors of the Post-Transaction Corporation were
members of the Incumbent Board at the time of the execution of
the initial agreement, and of the action of the Board, providing
for such Business Combination; or
(iv) approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
(b) As used in this Section 1.3 and elsewhere in this
Agreement, the following terms have the meanings indicated:
(i) Affiliate: "Affiliate" means a Person that
directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with,
another specified Person.
(ii) Beneficial Owner: "Beneficial Owner" (and
variants thereof), with respect to a security, means a Person
who, directly or indirectly (through any contract, understanding,
relationship or otherwise), has or shares (A) the power to vote,
or direct the voting of, the security, and/or (B) the power to
dispose of, or to direct the disposition of, the security.
(iii) Company Voting Stock: "Company Voting Stock"
means any capital stock of the Company that is then entitled to
vote for the election of directors.
(iv) Majority Shares: "Majority Shares" means the
number of shares of Company Voting Stock that could elect a
majority of the directors of the Company if all directors were to
be elected at a single meeting.
(v) Person: "Person" means a natural person or
entity, and will also mean the group or syndicate created when
two or more Persons act as a syndicate or other group (including
without limitation a partnership, limited partnership, joint
venture or other joint undertaking) for the purpose of acquiring,
holding, or disposing of a security, except that "Person" will
not include an underwriter temporarily holding a security
pursuant to an offering of the security.
(vi) Post-Transaction Corporation: Unless a Change of
Control includes a Business Combination, "Post-Transaction
Corporation" means the Company after the Change of Control. If a
Change of Control includes a Business Combination, "Post-
Transaction Corporation" will mean the corporation or other
entity resulting from the Business Combination unless, as a
result of such Business Combination, an ultimate parent entity
controls the Company or all or substantially all of the Company's
assets either directly or indirectly, in which case, "Post-
Transaction Corporation" will mean such ultimate parent entity.
(vii) Threshold Percentage: (A) As long as that
certain Agreement dated as of May 2, 1995, by and between the
Company and Rio Tinto Indonesia Limited ("Rio Tinto") remains in
effect as it may be amended from time to time, "Threshold
Percentage" means with respect to Rio Tinto and its Affiliates,
that percentage of Class A Common Stock, Class B Common Stock or
Common Stock that would result in Rio Tinto and its Affiliates
having Beneficial Ownership of shares of Company Voting Stock
equal to or greater than the Majority Shares; provided that,
solely for purposes of such calculation, the shares of Company
Voting Stock issuable upon exercise of warrants, options or other
rights, or upon conversion or exchange of convertible or
exchangeable securities, owned by Rio Tinto and its Affiliates,
will be treated as outstanding Company Voting Stock. (B) With
respect to any other Person and its Affiliates, "Threshold
Percentage" means (I) 30 percent of all then outstanding Class A Common
Stock and Class B Common Stock collectively, or (II) 30 percent of all
then outstanding Class B Common Stock.
1.4 Unsolicited Change of Control. "Unsolicited Change of
Control" shall mean any Change of Control in response to (a) the
Company's receipt of a bona fide written proposal for a Change of
Control transaction or (b) a public announcement of such proposal
by the proponent thereof, which, in either case, was neither
initiated, encouraged or otherwise sought by the Company.
1.5 Cause. "Cause" shall have the meaning ascribed in the
Employment Agreement.
1.6 Good Reason. "Good Reason" shall mean:
(a) Any failure of the Post-Transaction Corporation to
provide the Executive with the position, authority, duties and
responsibilities at least commensurate in all material respects
with the most significant of those held, exercised and assigned
at any time during the 120-day period immediately preceding the
Change of Control. Executive's position, authority, duties and
responsibilities after a Change of Control shall not be
considered commensurate in all material respects with Executive's
position, authority, duties and responsibilities prior to a
Change of Control unless after the Change of Control the
Executive holds an equivalent position in the Post-Transaction
Corporation.
(b) The assignment to the Executive of any duties
inconsistent in any material respect with Executive's position
(including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by Section
2.1(b) of this Agreement, or any other action that results in a
diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith that
is remedied within 10 days after receipt of written notice
thereof from the Executive to the Company;
(c) Any failure by the Post-Transaction Corporation or its
affiliates to comply with any of the provisions of this
Agreement, other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith that is remedied within 10
days after receipt of written notice thereof from the Executive
to the Company;
(d) The Post-Transaction Corporation or its affiliates
requiring the Executive to be based at any office or location
other than as provided in Section 2.1(b)(ii) hereof or requiring
the Executive to travel on business to a substantially greater
extent than required immediately prior to the Change of Control;
or
(e) Any failure by the Company to comply with and satisfy
Sections 3.1(c) and (d) of this Agreement.
For purposes of this Section 1.6, any determination of "Good
Reason" made by the Executive in good faith and based upon his
reasonable belief and understanding shall be conclusive. Anything
in this Agreement to the contrary notwithstanding, a termination
by the Executive for any reason during the 30-day period
immediately following the first anniversary of an Unsolicited
Change of Control shall be deemed to be a termination for Good
Reason.
1.7 Code. "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
Article II
Change of Control Benefit
2.1 Employment Term and Capacity after Change of Control.
(a) If the Executive continues to serve as an officer of the
Company and a Change of Control occurs on or before April 30,
2005, then the Executive's employment term (the "Employment
Term") shall continue through the third anniversary of the Change
of Control, subject to any earlier termination of Executive's
status as an officer and employee pursuant to this Agreement.
(b) After a Change of Control and during the Employment
Term, (i) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and
assigned at any time during the 120-day period immediately
preceding the Change of Control and (ii) the Executive's services
shall be performed at the location where the Executive was
employed immediately preceding the Change of Control or any
office or location less than 35 miles from such location.
Executive's position, authority, duties and responsibilities
after a Change of Control shall not be considered commensurate in
all material respects with Executive's position, authority,
duties and responsibilities prior to a Change of Control unless
after the Change of Control the Executive holds an equivalent
position in the Post-Transaction Corporation. The Executive
shall devote himself to his employment responsibilities with the
Post-Transaction Corporation as provided in Article I Section 2
of the Employment Agreement.
2.2 Compensation and Benefits. During the Employment Term,
the Executive shall be entitled to the following compensation and
benefits:
(a) Salary. A salary ("Base Salary") at the highest rate
provided for under the Employment Agreement at any time during
the 120-day period immediately preceding the Change of Control,
but not less than $1,250,000 per year, payable to the Executive
at such intervals no less frequent than the most frequent
intervals in effect at any time during the 120-day period
immediately preceding the Change of Control or, if more favorable
to the Executive, the intervals in effect at any time after the
Change of Control for other most senior executives of the Post-
Transaction Corporation and its affiliated companies.
(b) Bonus. Executive shall be entitled to participate in
an annual incentive bonus program applicable to other most senior
executives of the Post-Transaction Corporation and its affiliated
companies but in no event shall such program provide the
Executive with incentive opportunities less favorable than the
most favorable of those provided by the Company and its
affiliated companies for the Executive under the Company's Annual
Incentive Plan or similar plan as in effect at any time during
the 120-day period immediately preceding the Change of Control
or, if more favorable to the Executive, those provided generally
at any time after the Change of Control to other most senior
executives of the Post-Transaction Corporation and its affiliated
companies.
(c) Fringe Benefits. The Executive shall be entitled to
fringe benefits (including, but not limited to, automobile
allowance, air travel, and reimbursement for club membership
dues) in accordance with the most favorable agreements, plans,
practices, programs and policies of the Company and its
affiliated companies in effect for the Executive at any time
during the 120-day period immediately preceding the Change of
Control or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other most
senior executives of the Post-Transaction Corporation and its
affiliated companies.
(d) Expenses. The Executive shall be entitled to receive
prompt reimbursement for all reasonable business expenses
(including food and lodging) incurred by the Executive in
accordance with the most favorable agreements, policies,
practices and procedures of the Company and its affiliated
companies in effect for the Executive at any time during the 120-
day period immediately preceding the Change of Control or, if
more favorable to the Executive, as in effect generally at any
time thereafter with respect to other most senior executives of
the Post-Transaction Corporation and its affiliated companies.
(e) Incentive, Savings and Retirement Plans. The Executive
shall be entitled to participate in all incentive, savings and
retirement plans, practices, policies and programs applicable
generally to other most senior executives of the Post-Transaction
Corporation and its affiliated companies, but in no event shall
such plans, practices, policies and programs provide the
Executive with incentive opportunities (measured with respect to
both regular and special incentive opportunities, to the extent,
if any, that such distinction is applicable), savings
opportunities and retirement benefit opportunities, in each case,
less favorable than the most favorable of those provided by the
Company and its affiliated companies for the Executive under any
agreements, plans, practices, policies and programs as in effect
at any time during the 120-day period immediately preceding the
Change of Control.
(f) Welfare Benefit Plans. The Executive and the
Executive's family shall be eligible for participation in and
shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Post-Transaction
Corporation and its affiliated companies (including, without
limitation, medical, prescription, dental, disability, employee
life, group life, accidental death and travel accident insurance
plans and programs) to the extent applicable generally to other
most senior executives of the Post-Transaction Corporation and
its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with
benefits, in each case, less favorable than the most favorable of
any agreements, plans, practices, policies and programs of the
Company in effect for the Executive at any time during the 120-
day period immediately preceding the Change of Control.
(g) Indemnification and Insurance. The Post-Transaction
Corporation shall indemnify the Executive, to the fullest extent
permitted by applicable law, for any and all claims brought
against him arising out his services during or prior to the
Employment Term. In addition, the Post-Transaction Corporation
shall maintain a directors' and officers' insurance policy
covering the Executive substantially in the form of the policy
maintained by the Company and its affiliated companies at any
time during the 120-day period immediately preceding the Change
of Control or, if more favorable to the Executive, as provided
generally at any time thereafter with respect to other most
senior executives of the Post-Transaction Corporation and its
affiliated companies.
(h) Office and Support Staff. The Executive shall be
entitled to an office or offices of a size and with furnishings
and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the
foregoing provided to the Executive by the Company and its
affiliated companies at any time during the 120-day period
immediately preceding the Change of Control or, if more favorable
to the Executive, as provided generally at any time thereafter
with respect to other most senior executives of the Post-
Transaction Corporation and its affiliated companies.
(i) Vacation. The Executive shall be entitled to paid
vacation in accordance with the most favorable agreements, plans,
policies, programs and practices of the Company and its
affiliated companies as in effect for the Executive at any time
during the 120-day period immediately preceding the Change of
Control or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other most
senior executives of the Post-Transaction Corporation and its
affiliated companies.
2.3 Termination of Employment after a Change of Control.
After a Change of Control and during the Employment Term, the
Executive's status as an officer and employee shall terminate or
may be terminated by the Executive or the Post-Transaction
Corporation as provided in Article III of the Employment
Agreement (provided, however, that the provisions regarding "Good
Reason" shall supersede the comparable provisions in the
Employment Agreement).
2.4 Obligations upon Termination after a Change of Control.
(a) Death, Disability or Retirement. If, after a Change of
Control and during the Employment Term, (1) the Executive's
status as an officer and employee is terminated by reason of the
Executive's death, (2) the Post-Transaction Corporation
terminates the Executive's status as an officer and employee by
reason of Executive's Disability (as defined in the Employment
Agreement), or (iii) the Executive Retires (as defined in the
Employment Agreement) and terminates his status as an officer and
employee, then, subject to Section 2.4(f):
(i) The Post-Transaction Corporation will pay to the
Executive or his legal representatives the sum of (A) the amount
of the Executive's Base Salary earned through the Termination
Date to the extent not previously paid and (B) any compensation
previously deferred by the Executive (together with any accrued
interest on earnings thereon) to the extent not previously paid
in accordance with the terms of the deferred compensation plans
under which such compensation was deferred (the sum of the
amounts described in clauses (A) and (B) being hereinafter
referred to as the "Accrued Obligations");
(ii) The Post-Transaction Corporation will pay to the
Executive or his legal representatives a pro rata bonus in an
amount determined by calculating the bonus that the Executive
would receive for the Fiscal Year in which the Termination Date
occurs based upon the level of achievement of the applicable
performance goals through the end of the fiscal quarter in which
the Termination Date occurs, annualized as if such level of
performance had continued throughout the entire Fiscal Year and
then multiplying such bonus amount by the fraction obtained by
dividing the number of days in the year through the Termination
Date by 365 (the "Pro Rata Bonus");
(iii) If the Executive Retires (as defined in the
Employment Agreement), for a period commencing on the Termination
Date and ending on the earlier of (A) the third anniversary of
the Termination Date, or (B) the date that the Executive accepts
new employment (the "Continuation Period"), the Post-Transaction
Corporation will at its expense maintain and administer for the
continued benefit of Executive all insurance and welfare benefit
plans in which Executive was entitled to participate as an
employee as of the Termination Date, provided that Executive's
continued participation is possible under the general terms and
provisions of such plans and all applicable laws. The coverage
and benefits (including deductibles and costs) provided under any
such benefit plan in accordance with this paragraph during the
Continuation Period will be no less favorable to Executive than
the most favorable of such coverages and benefits as of the
Termination Date. If Executive's participation in any such
benefit plan is barred or any such benefit plan is terminated,
the Post-Transaction Corporation will provide Executive with
compensation or benefits substantially similar or comparable in
value to those Executive would otherwise have been entitled to
receive under such plans. At the end of the Continuation Period,
the Executive will have the option to have assigned to him, at no
cost and with no apportionment of prepaid premiums, any
assignable insurance owned by the Post-Transaction Corporation
that relates specifically to the Executive. To the maximum
extent permitted by law, the Executive will be eligible for
coverage under the Consolidated Omnibus Budget Reconciliation Act
("COBRA") at the end of the Continuation Period or earlier
cessation of the Post-Transaction Corporation's obligation under
the foregoing provisions of this paragraph; and
(iv) The Post-Transaction Corporation will pay or
deliver, as appropriate, all other benefits earned by the
Executive or accrued for his benefit pursuant to any employee
benefit plans maintained by the Post-Transaction Corporation or
its affiliated companies with respect to services rendered by the
Executive prior to the Termination Date.
(b) Cause. If, after a Change of Control and during the
Employment Term, the Executive's status as an officer and
employee is terminated by the Post-Transaction Corporation for
Cause, the Post-Transaction Corporation shall pay to the
Executive the Accrued Obligations without further obligation to
the Executive other than for obligations by law and obligations
for any benefits earned by the Executive or accrued for his
benefit pursuant to any employee benefit plans maintained by the
Post-Transaction Corporation and its affiliated companies with
respect to services rendered by the Executive prior to the
Termination Date.
(c) Termination by Company for Reasons other than Death,
Disability or Cause; by Executive for Good Reason. If, after a
Change of Control and during the Employment Term, the Post-
Transaction Corporation terminates the Executive's status as an
officer and employee other than for Cause, death or Disability,
or the Executive terminates his status as an officer and employee
for Good Reason, then, subject to Section 2.4(f) hereof:
(i) The Post-Transaction Corporation shall pay to the
Executive the Accrued Obligations and the Pro Rata Bonus;
(ii) The Post-Transaction Corporation shall pay to the
Executive an amount equal to four times or, in the event of an
Unsolicited Change of Control, five times, the sum of (A) the
Executive's Base Salary in effect at the Termination Date and (B)
the lesser of (1) the highest bonus paid to the Executive for any
of the immediately preceding three Fiscal Years or (2) two times
Base Salary in effect at the Termination Date;
(iii) For the Continuation Period, the Post-
Transaction Corporation shall at its expense maintain and
administer for the continued benefit of Executive all insurance
and welfare benefit plans in which Executive was entitled to
participate as an employee as of the Termination Date; provided
that Executive's continued participation is possible under the
general terms and provisions of such plans and all applicable
laws. The coverage and benefits (including deductibles and
costs) provided under any such benefit plan in accordance with
this paragraph during the Continuation Period will be no less
favorable to Executive than the most favorable of such coverages
and benefits as of the Termination Date; provided, however, in
the event of the disability of Executive during the Continuation
Period, disability benefits shall, to the maximum extent
possible, not be paid for the Continuation Period but shall
instead commence immediately following the end of the
Continuation Period. If Executive's participation in any such
benefit plan is barred or any such benefit plan is terminated,
the Post-Transaction Corporation will provide Executive with
compensation or benefits substantially similar or comparable in
value to those Executive would otherwise have been entitled to
receive under such plans. At the end of the Continuation Period,
the Executive will have the option to have assigned to him, at no
cost and with no apportionment of prepaid premiums, any
assignable insurance owned by the Post-Transaction Corporation
that relates specifically to the Executive. To the maximum
extent permitted by law, the Executive will be eligible for
coverage under COBRA at the end of the Continuation Period or
earlier cessation of the Company's obligation under the foregoing
provisions of this paragraph; and
(iv) The Post-Transaction Corporation will pay or
deliver, as appropriate, all other benefits earned by the
Executive or accrued for his benefit pursuant to any employee
benefit plans maintained by the Post-Transaction Corporation or
its affiliated companies with respect to services rendered by the
Executive prior to the Termination Date.
(d) Resignation from Board of Directors. If the Executive
is a director of the Post-Transaction Corporation and his status
as an officer and employee is terminated for any reason other
than death, the Executive shall, if requested by the Post-
Transaction Corporation, immediately resign as a director of the
Post-Transaction Corporation and its subsidiaries. If such
resignation is not received within 20 business days after the
Executive actually receives written notice from the Post-
Transaction Corporation requesting the resignation, the Executive
shall forfeit any right to receive any payments pursuant to this
Agreement.
(e) Nondisclosure, Noncompetition and Proprietary Rights.
The rights and obligations of the Company and the Executive
contained in Article V ("Nondisclosure, Noncompetition and
Proprietary Rights") of the Employment Agreement shall continue
to apply after a Change of Control.
(f) Most Favorable Benefits. It is the intention of the
parties that the terms of this Agreement shall provide payments
and benefits to the Executive that are equivalent or more
beneficial to the Executive than are otherwise available to the
Executive under the terms of any applicable benefit plan or
related compensation agreement. To that end, the terms of the
Agreement shall govern the payments and benefits to which the
Executive shall be entitled upon the termination of the
Executive's status as an officer and employee as provided herein,
except that if the terms of any applicable benefit plan or
related compensation agreement provide more favorable benefits to
the Executive than are provided hereunder, the terms of such plan
or agreement shall control.
2.5 Excise Tax Provision.
(a) Notwithstanding any other provisions of this Agreement,
if a Change of Control occurs during the original or extended
term of this Agreement, in the event that any of the payments or
benefits received or to be received by the Executive in
connection with the Change of Control or the Executive's
termination of employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the
Company, any Person whose actions result in a Change of Control
or any Person affiliated with the Company or such Person) (all
such payments and benefits, including the payments and benefits
under Section 2.4(c) hereof, but excluding any payment to be made
pursuant to this Section 2.5, being hereinafter referred to as
the "Initial Payments") will be subject (in whole or in part) to
an excise tax imposed by section 4999 of the Code or any similar
tax (the "Excise Tax"), the Company shall pay to the Executive an
additional amount (the "Gross-Up Payment") such that the net
amount retained by the Executive, after deduction of (i) any
Excise Tax on the Initial Payments, (ii) any federal, state and
local income and employment taxes on the Gross-Up Payment, (iii)
any Medicare tax on the Gross-Up Payment, and (iv) the Excise Tax
on the Gross-Up Payment, shall be equal to the Initial Payments.
(b) For purposes of determining whether any of the Initial
Payments will be subject to the Excise Tax and the amount of such
Excise Tax, (i) all of the Initial Payments shall be treated as
"parachute payments" (within the meaning of the Code) unless, in
the opinion of tax counsel ("Tax Counsel") reasonably acceptable
to the Executive and selected by the accounting firm which was,
immediately prior to the Change of Control, the Company's
independent auditor (the "Auditor"), such payments or benefits
(in whole or in part) do not constitute parachute payments, (ii)
all "excess parachute payments" within the meaning of the Code
shall be treated as subject to the Excise Tax unless, in the
opinion of Tax Counsel, such excess parachute payments (in whole
or in part) represent reasonable compensation for services
actually rendered (within the meaning of the Code) in excess of
the "Base Amount" (within the meaning set forth in the Code)
allocable to such reasonable compensation, or are otherwise not
subject to the Excise Tax, and (iii) the value of any noncash
benefits or any deferred payment or benefit shall be determined
by the Auditor in accordance with the principles of the Code.
For purposes of determining the amount of the Gross-Up Payment,
the Executive shall be deemed to pay federal income tax at the
highest marginal rate of federal income taxation in the calendar
year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rate of taxation in
the state and locality of the Executive's residence on the date
of termination of the Executive's employment (or if there is no
date of termination, then the date on which the Gross-Up Payment
is calculated for purposes of this Section 2.5), net of the
maximum reduction in federal income taxes which could be obtained
from deduction of such state and local taxes.
(c) In the event that the Excise Tax is finally determined
to be less than the amount taken into account hereunder in
calculating the Gross-Up Payment, the Executive shall repay to
the Company, within ten business days following the time that the
amount of such reduction in the Excise Tax is finally determined,
the portion of the Gross-Up Payment attributable to such
reduction (plus that portion of the Gross-Up Payment attributable
to the Excise Tax and federal, state and local income and
employment taxes imposed on the Gross-Up Payment being repaid by
the Executive, to the extent that such repayment results in a
reduction in the Excise Tax and a dollar-for-dollar reduction in
the Executive's taxable income and wages for purposes of federal,
state and local income and employment taxes, plus interest on the
amount of such repayment at 120 percent of the rate provided in section
1274(b)(2)(B) of the Code). In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder in
calculating the Gross-Up Payment (including by reason of any
payment the existence or amount of which cannot be determined at
the time of the Gross-Up Payment), the Company shall make an
additional Gross-Up Payment in respect of such excess (plus any
interest, penalties or additions payable by the Executive with
respect to such excess) within ten business days following the
time that the amount of such excess is finally determined. The
Executive and the Company shall each reasonably cooperate with
the other in connection with any administrative or judicial
proceedings concerning the existence or amount of liability for
Excise Tax with respect to the Initial Payments.
(d) The Gross-Up Payment provided in Section 2.5 shall be
made not later than the "Payment Day." The Payment Day shall be
the tenth business day following the date of termination, or, if
the Executive becomes entitled, before the Executive's employment
is terminated, to a Gross-Up Payment under this Section 2.5, then
not later than the tenth business day following the date as of
which the present value of the Initial Payments is calculated for
purposes of determining the amount of such Gross-Up Payment.
Notwithstanding the preceding provisions of this Section 2.5(d),
if the amount of the Gross-Up Payment cannot be finally
determined on or before the Payment Day, the Company shall pay to
the Executive on the Payment Day an estimate, as determined in
accordance with Section 2.5(b), of the minimum amount of the
Gross-Up Payment to which the Executive is clearly entitled and
shall pay the remainder of the Gross-Up Payment (together with
interest on the unpaid remainder at 120 percent of the rate provided in
section 1274(b)(2)(B) of the Code) as soon as the amount thereof
can be determined but in no event later than the thirtieth day
after the Payment Day. In the event that the amount of the
estimated Gross-Up Payment so made exceeds the amount
subsequently determined to have been due, such excess shall
constitute a loan by the Company to the Executive, payable on the
tenth business day after demand by the Company (together with
interest at 120 percent of the rate provided in section 1274(b)(2)(B) of
the Code). At the time that any Gross-Up Payment is made
pursuant to Section 2.5(a) (and at the time that any additional
Gross-Up Payment is made pursuant to Section 2.5(c)), the Company
shall provide the Executive with a written statement setting
forth the manner in which any such payment was calculated and the
basis for such calculations including, without limitation, any
opinions or other advice the Company has received from Tax
Counsel, the Auditor or other advisors or consultants (and any
such opinion or advice which is in writing shall be attached to
the statement).
2.6 Stock Options; Performance Units; Restricted Stock.
The foregoing benefits are intended to be in addition to the
value of any options to acquire Common Stock of the Company, the
exercisability of which is accelerated pursuant to the terms of
any stock option agreement, any related limited rights, any
restricted stock units the vesting of which is accelerated
pursuant to the terms of the restricted stock unit agreement, the
performance units under the long-term performance incentive
plans, and any other incentive or similar plan heretofore or
hereafter adopted by the Company.
2.7 Legal Fees. The Company agrees to pay as incurred all
legal fees and expenses that the Executive may reasonably incur
as a result of any contest (regardless of the outcome thereof) by
the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this
Agreement (including as a result of any contest by the Executive
about the amount or timing of any payment pursuant to this
Agreement).
Article III
Miscellaneous
3.1 Binding Effect; Successors.
(a) This Agreement shall be binding upon and inure to the
benefit of the Company and any of its successors or assigns.
(b) This Agreement is personal to the Executive and shall
not be assignable by the Executive without the consent of the
Company (there being no obligation to give such consent) other
than such rights or benefits as are transferred by will or the
laws of descent and distribution.
(c) The Company shall require any successor to or assignee
of (whether direct or indirect, by purchase, merger,
consolidation or otherwise) all or substantially all of the
assets or businesses of the Company (i) to assume unconditionally
and expressly this Agreement and (ii) to agree to perform or to
cause to be performed all of the obligations under this Agreement
in the same manner and to the same extent as would have been
required of the Company had no assignment or succession occurred,
such assumption to be set forth in a writing reasonably
satisfactory to the Executive.
(d) The Company shall also require all entities that
control or that after the transaction will control (directly or
indirectly) the Company or any such successor or assignee to
agree to cause to be performed all of the obligations under this
Agreement, such agreement to be set forth in a writing reasonably
satisfactory to the Executive.
3.2 Notices. All notices hereunder must be in writing and,
unless otherwise specifically provided herein, will be deemed to
have been given upon receipt of delivery by: (a) hand (against a
receipt therefor), (b) certified or registered mail, postage
prepaid, return receipt requested, (c) a nationally recognized
overnight courier service (against a receipt therefor) or (d)
telecopy transmission with confirmation of receipt. All such
notices must be addressed as follows:
If to the Company, to:
Freeport-McMoRan Copper & Gold Inc.
1615 Poydras Street
New Orleans, Louisiana 70112
Attention: Chairman of Corporate Personnel Committee
If to the Executive, to:
Richard C. Adkerson
1217 Burgundy Street
New Orleans, Louisiana 70116
or such other address as to which any party hereto may have
notified the other in writing.
3.3 Governing Law. This Agreement shall be construed and
enforced in accordance with and governed by the internal laws of
the State of Louisiana without regard to principles of conflict
of laws, except as expressly provided in Article V Section 6 of
the Employment Agreement with respect to the resolution of
disputes arising under, or the Company's enforcement of, such
Article V.
3.4 Withholding. The Executive agrees that the Company has
the right to withhold, from the amounts payable pursuant to this
Agreement, all amounts required to be withheld under applicable
income and/or employment tax laws, or as otherwise stated in
documents granting rights that are affected by this Agreement.
3.5 Amendment, Waiver. No provision of this Agreement may
be modified, amended or waived except by an instrument in writing
signed by both parties.
3.6 Severability. If any term or provision of this Agree
ment, or the application thereof to any person or circumstance,
shall at any time or to any extent be invalid, illegal or
unenforceable in any respect as written, Executive and the
Company intend for any court construing this Agreement to modify
or limit such provision so as to render it valid and enforceable
to the fullest extent allowed by law. Any such provision that is
not susceptible of such reformation shall be ignored so as to not
affect any other term or provision hereof, and the remainder of
this Agreement, or the application of such term or provision to
persons or circumstances other than those as to which it is held
invalid, illegal or unenforceable, shall not be affected thereby
and each term and provision of this Agreement shall be valid and
enforced to the fullest extent permitted by law.
3.7 Waiver of Breach. The waiver by either party of a
breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach thereof.
3.8 Remedies Not Exclusive. No remedy specified herein
shall be deemed to be such party's exclusive remedy, and
accordingly, in addition to all of the rights and remedies
provided for in this Agreement, the parties shall have all other
rights and remedies provided to them by applicable law, rule or
regulation.
3.9 Company's Reservation of Rights. Executive
acknowledges and understands that the Executive serves at the
pleasure of the Board and that the Company has the right at any
time to terminate Executive's status as an employee of the
Company, or to change or diminish his status during the
Employment Term, subject to the rights of the Executive to claim
the benefits conferred by this Agreement.
3.10 Prior Change of Control Agreement. Effective as of the
Change of Control Agreement Date, this Agreement supersedes any
prior change of control agreement between the Executive and the
Company.
3.11 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an
original but all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the Company and the Executive have
caused this Agreement to be executed as of the Change of Control
Agreement Date.
Freeport-McMoRan Copper & Gold Inc.
By:
H. Devon Graham, Jr.
Director and Chairman of the
Corporate Personnel Committee
of the
Board of Directors
Executive
Richard C. Adkerson
Signature Page of Change of Control Agreement
between Freeport-McMoRan Copper & Gold Inc.
and Richard C. Adkerson
EX-15
8
exh15.txt
Exhibit 15.1
Freeport-McMoRan Copper & Gold Inc.
1615 Poydras St.
New Orleans, LA 70112
Gentlemen:
We are aware that Freeport-McMoRan Copper & Gold Inc. has
incorporated by reference in its Registration Statements (File
Nos. 33-63271, 33-63269, 33-63267, 333-85803 and 333-31584) its
Form 10-Q for the quarter ended June 30, 2001, which includes our
report dated July 18, 2001 covering the unaudited interim
financial information contained therein. Pursuant to Regulation
C of the Securities Act of 1933 (the Act), this report is not
considered a part of the registration statements prepared or
certified by our firm or a report prepared or certified by our
firm within the meaning of Sections 7 and 11 of the Act.
Very truly yours,
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP