EXHIBIT 10.8
ANNUAL INCENTIVE PLAN
OF FREEPORT-MCMORAN INC.
ARTICLE I
PURPOSE OF PLAN
SECTION 1.1. The purpose of the Annual Incentive Plan of
Freeport-McMoRan Inc. (the "Plan") is to provide incentives for senior
executives whose performance in fulfilling the responsibilities of their
positions can have a major impact on the profitability and future growth
of Freeport-McMoRan Inc. (the "Company") and its Subsidiaries.
ARTICLE II
ADMINISTRATION OF THE PLAN
SECTION 2.1. Subject to the authority and powers of the Board
of Directors in relation to the Plan as hereinafter provided, the Plan
shall be administered by a Committee designated by the Board of Directors
consisting of two or more members of the Board each of whom is a "non-
employee director" within the meaning of Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of
1934. The Committee shall have full authority to interpret the Plan and
from time to time to adopt such rules and regulations for carrying out
the Plan as it may deem best; provided, however, that the Committee may
not exercise any authority otherwise granted to it hereunder if such
action would have the effect of increasing the amount of an Award to any
Covered Employee. All determinations by the Committee shall be made by
the affirmative vote of a majority of its members, but any determination
reduced to writing and signed by a majority of the members shall be fully
as effective as if it had been made by a majority vote at a meeting duly
called and held. All decisions by the Committee pursuant to the
provisions of the Plan and all orders or resolutions of the Board of
Directors pursuant thereto shall be final, conclusive and binding on all
persons, including the Participants, the Company and its Subsidiaries and
their respective equity holders.
ARTICLE III
ELIGIBILITY FOR AND PAYMENT OF AWARDS
SECTION 3.1. Subject to the provisions of the Plan, in each
calendar year the Committee may select any of the following to receive
Awards under the Plan with respect to such year and determine the amounts
of such Awards: (a) any person providing services as an officer of the
Company or a Subsidiary, whether or not employed by such entity,
including any person who is also a director of the Company, (b) any
salaried employee of the Company or a Subsidiary, including any director
who is also an employee of the Company or a Subsidiary, (c) any officer
or salaried employee of an entity with which the Company has contracted
to receive executive, management or legal services who provides services
to the Company or a Subsidiary through such arrangement and (d) any
person who has agreed in writing to become a person described in clauses
(a), (b) or (c) within not more than 30 days following the date of grant
of such person's first Award under the Plan.
SECTION 3.2. Subject to the provisions of the Plan, Awards
with respect to any year shall be paid to each Participant at such time
established by the Committee following the determination of the amounts
of such Awards, which payment shall in no event be later than February 28
of the year following such Award Year.
SECTION 3.3. Notwithstanding the provisions of Section 3.2,
if, prior to the date established by the Committee for any Award Year, a
Participant shall so elect, in accordance with procedures established by
the Committee, all or any part of an Award to such Participant with
respect to such Award Year shall be deferred and paid in one or more
periodic installments, not in excess of ten, at such time or times before
or after the date of such Participant's Termination of Employment, but
not later than ten years after such date of Termination of Employment, as
shall be specified in such election. If and only if any Award or portion
thereof is so deferred for payment after December 31 of the year
following such Award Year, such Award or portion thereof, as the case may
be, shall, commencing with January 1 of the year following such Award
Year, be increased at a rate equal to the prime commercial lending rate
announced from time to time by The Chase Manhattan Bank, N.A. (compounded
quarterly) or by another major national bank headquartered in New York,
New York and designated by the Committee. If such Participant's
Termination of Employment occurs for any reason other than death,
retirement under the Company's retirement plan, or retirement with the
consent of the Company outside the Company's retirement plan and if, on
the date of such Termination of Employment, there remain unpaid any
installments of Awards which have been deferred as provided in this
Section 3.3, the Committee may, in its sole discretion, authorize payment
to the Participant of the aggregate amount of such unpaid installments in
a lump sum, notwithstanding such election.
SECTION 3.4. (a) Notwithstanding the provisions of Sections
3.1, 3.2, 3.3, 4.2(a), and 4.2(b) hereof, any Award to any Covered
Employee shall be granted in accordance with the provisions of this
Section 3.4.
(b) All Awards to Covered Employees under the Plan will be
made and administered by two or more members of the Committee who are
also "outside directors" within the meaning of Section 162(m).
(c) The Committee shall assign Participant Shares of the Plan
Funding Amount to those Covered Employees whom the Committee designates
as Participants for that Award Year (which Participant Shares in the
aggregate may not exceed 100% of the Plan Funding Amount). The maximum
annual Award that may be made to any Covered Employee for an Award Year
is 50% of the Plan Funding Amount.
(d) If the Plan Funding Amount with respect to an Award Year
is to be adjusted to exclude the effect of material changes in accounting
policies or practices, material acquisitions or dispositions of property
or other unusual items on the Plan Funding Amount, the Committee must so
provide at the time that the Participant Shares of the Plan Funding
Amount for that Award Year are assigned or within the first 90 days of
the Award Year, if permitted under Section 162(m).
(e) Any provision of the Plan to the contrary notwithstanding,
no Covered Employee shall be entitled to any payment of an Award with
respect to a calendar year unless the members of the Committee referred
to in Section 3.4(b) hereof shall have certified the Participant Share
for each Covered Employee, the Plan Funding Amount for such year and that
the condition of Section 4.1 hereof has been met for such year.
ARTICLE IV
GENERAL PROVISIONS
SECTION 4.1. Any provision of the Plan to the contrary
notwithstanding, no Award shall be made pursuant to Section 3.1 or 3.4
with respect to any calendar year if the average of the Return on
Investment for such calendar year and each of the four preceding calendar
years, after giving effect to the aggregate amount (if any) that was
awarded or credited with respect to such prior years and the aggregate
amount that would otherwise have been so awarded or credited with respect
to such calendar year, would be less than six percent.
SECTION 4.2. (a) In determining the aggregate amount awarded
to Participants under the Plan for any calendar year, the Committee shall
consider as a guideline that the aggregate amount of all Awards granted
with respect to any calendar year should not exceed two and one-half
percent of Net Cash Provided by Operating Activities for such year.
(b) If Managed Net Income or Total Investment of Capital for
any year shall have been affected by special factors (including material
changes in accounting policies or practices, material acquisitions or
dispositions of property, or other unusual items) which in the
Committee's judgment should or should not be taken into account, in whole
or in part, in the equitable administration of the Plan, the Committee
may, for any purpose of the Plan, adjust Managed Net Income or Total
Investment of Capital and make payments and reductions accordingly under
the Plan, provided that, except as provided in Section 3.4(d) hereof, the
Committee shall not take any such adjustments into account in calculating
Awards to Covered Employees if the effect of such adjustment would be to
increase the Plan Funding Amount.
(c) Notwithstanding the provisions of subparagraphs (a) and
(b) above, the amount available for the grant of Awards under the Plan to
Covered Employees with respect to a calendar year shall be equal to the
Plan Funding Amount for such year and, except as specified in advance
under Section 3.4(c), any adjustments made in accordance with or for the
purposes of subparagraphs (a) or (b) shall be disregarded for purposes of
calculating the Plan Funding Amount. The Committee may, in the exercise
of its discretion, determine that the aggregate amount of all Awards
granted to Covered Employees with respect to a calendar year shall be
less than the Plan Funding Amount for such year, but the excess of such
Plan Funding Amount over such aggregate amount covered by Awards granted
to Covered Employees shall not be available for any Awards to Covered
Employees with respect to future years. In addition, the Committee may,
in the exercise of its discretion, reduce or eliminate the amount of an
Award to a Covered Employee otherwise calculated in accordance with the
provisions of Section 3.4 prior to payment thereof. Any reduction of an
Award shall not accrue to the benefit of any other Covered Employee.
SECTION 4.3. A Participant may designate in writing a
beneficiary (including the trustee or trustees of a trust) who shall upon
the death of such Participant be entitled to receive all amounts which
would have been payable hereunder to such Participant. A Participant may
rescind or change any such designation at any time. Except as provided
in this Section 4.3, none of the amounts which may be payable under the
Plan may be assigned or transferred otherwise than by will or by the laws
of descent and distribution.
SECTION 4.4. All payments made pursuant to the Plan shall be
subject to withholding in respect of income and other taxes required by
law to be withheld, in accordance with procedures to be established by
the Committee.
SECTION 4.5. The selection of an individual for participation
in the Plan shall not give such Participant any right to be retained in
the employ of the Company or any of its Subsidiaries, and the right of
the Company and of any such Subsidiary to dismiss or discharge any such
Participant or to terminate any arrangement pursuant to which any such
Participant provides services to the Company or a Subsidiary, is
specifically reserved. The benefits provided for Participants under the
Plan shall be in addition to, and shall in no way preclude, other forms
of compensation to or in respect of such Participants.
SECTION 4.6. The Board of Directors and the Committee shall be
entitled to rely on the advice of counsel and other experts, including
the independent public accountants for the Company. No member of the
Board of Directors or of the Committee or any officers of the Company or
its Subsidiaries shall be liable for any act or failure to act under the
Plan, except in circumstances involving bad faith on the part of such
member or officer.
SECTION 4.7. Nothing contained in the Plan shall prevent the
Company or any Subsidiary or affiliate of the Company from adopting or
continuing in effect other compensation arrangements, which arrangements
may be either generally applicable or applicable only in specific cases.
ARTICLE V
AMENDMENT OR TERMINATION OF THE PLAN
SECTION 5.1. The Board of Directors may at any time terminate,
in whole or in part, or from time to time amend the Plan, provided that,
except as otherwise provided in the Plan, no such amendment or
termination shall adversely affect any Awards previously made to a
Participant and deferred by such Participant pursuant to Section 3.3. In
the event of such termination, in whole or in part, of the Plan, the
Committee may in its sole discretion direct the payment to Participants
of any Awards not theretofore paid out prior to the respective dates upon
which payments would otherwise be made hereunder to such Participants,
and in a lump sum or installments as the Committee shall prescribe with
respect to each such Participant. The Board may at any time and from
time to time delegate to the Committee any or all of its authority under
this Section 5.1.
ARTICLE VI
DEFINITIONS
SECTION 6.1. For the purposes of the Plan, the following terms
shall have the meanings indicated:
(a) Award: The grant of an award of cash by the
Committee to a Participant pursuant to Section 3.1 or 3.4.
(b) Award Year: Any calendar year with respect to which
an Award may be granted.
(c) Board of Directors: The Board of Directors of the
Company.
(d) Committee: The Committee designated pursuant to
Section 2.1. Until otherwise determined by the Board of
Directors, the Corporate Personnel Committee designated by such
Board shall be the Committee under the Plan.
(e) Covered Employee: At any date, (i) any individual
who, with respect to the previous taxable year of the Company,
was a "covered employee" of the Company within the meaning of
Section 162(m) of the Internal Revenue Code of 1986, as
amended, and the rules promulgated thereunder by the Internal
Revenue Service of the Department of the Treasury, provided,
however, the term "Covered Employee" shall not include any such
individual who is designated by the Committee, in its
discretion, at the time of any grant as reasonably expected not
to be such a "covered employee" with respect to the current
taxable year of the Company and (ii) any individual who is
designated by the Committee, in its discretion, at the time of
any grant as reasonably expected to be such a "covered
employee" with respect to the current taxable year of the
Company. Notwithstanding the foregoing, at any date in fiscal
year 1994, "Covered Employee" shall mean any individual
designated by the Committee, in its discretion, at the time of
any grant as reasonably expected to be a "covered employee"
with respect to the Company's taxable year 1994.
(f) Managed Net Income: With respect to any year, the
sum of (i) the net income (or net loss) of the Company and its
consolidated Subsidiaries for such year as shown in the
Company's Annual Report to Stockholders for such year; plus (or
minus) (ii) the minority interests' share in the net income (or
net loss) of the Company's consolidated Subsidiaries for such
year as shown in the Company's Annual Report to Stockholders
for such year; plus (or minus) (iii) changes in accounting
principles of the Company and its consolidated Subsidiaries for
such year plus (or minus) the minority interests' share in such
changes in accounting principles as shown in the Company's
Annual Report to Stockholders for such year; plus (iv) the
portion for such year of the deferred gain on the 1992 sale of
newly issued Freeport-McMoRan Resource Partners, Limited
Partnership depositary units as shown in the Company's Annual
Report to Stockholders for such year.
(g) Net Cash Provided by Operating Activities: With
respect to any year, the net cash provided by operating
activities of the Company and its consolidated Subsidiaries for
such year as shown in the Company's Annual Report to
Stockholders for such year.
(h) Net Interest Expense: With respect to any year, the
net interest expense of the Company and its consolidated
Subsidiaries for such year as shown in the Company's Annual
Report to Stockholders for such year.
(i) Participant: An individual who has been selected by
the Committee to receive an Award.
(j) Participant Share: The percentage of the Plan
Funding Amount assigned to a Covered Employee by the Committee.
(k) Plan Funding Amount: With respect to any year, two
and one-half percent of Net Cash Provided by Operating
Activities for such year.
(l) Return on Investment: With respect to any year, the
result (expressed as a percentage) calculated according to the
following formula:
a + (b - c)
-----------
d
in which "a" equals Managed Net Income for such year, "b"
equals Net Interest Expense for such year, "c" equals Tax on
Net Interest Expense for such year, and "d" equals Total
Investment of Capital for such year.
(m) Section 162(m): Section 162(m) of the Internal
Revenue Code of 1986, as amended, and rules promulgated by the
Internal Revenue Service thereunder.
(n) Subsidiary: (i) Any corporation or other entity in
which the Company possesses directly or indirectly equity
interests representing at least 50% of the total ordinary
voting power or at least 50% of the total value of all classes
of equity interests of such corporation or other entity and
(ii) any other entity in which the Company has a direct or
indirect economic interest that is designated as a Subsidiary
by the Committee.
(o) Tax on Net Interest Expense: With respect to any
year, the tax on the net interest expense of the Company and
its consolidated Subsidiaries for such year calculated at the
statutory federal income tax rate for such year as shown in the
Company's Annual Report to Stockholders for such year.
(p) Termination of Employment: Solely for purposes of
Section 3.3 hereof, the cessation of the rendering of services,
whether or not as an employee, to any and all of the following
entities: the Company, any Subsidiary of the Company, Freeport-
McMoRan Copper & Gold Inc., any Subsidiary of Freeport-McMoRan
Copper & Gold Inc., McMoRan Oil & Gas Co., any entity with
which the Company has contracted to receive executive or
management services, any Subsidiary of McMoRan Oil & Gas Co.,
and any law firm rendering services to any of the foregoing
entities provided such law firm consists of at least two or
more members or associates who are or were officers of the
Company or any Subsidiary of the Company.
(q) Total Investment of Capital: With respect to any
year, the sum of (i) the weighted average of the stockholders'
equity in the Company and its consolidated Subsidiaries for
such year, (ii) the weighted average of the minority interests
in the consolidated Subsidiaries of the Company for such year,
and (iii) the weighted average of the long-term debt of the
Company and its consolidated Subsidiaries for such year, all as
shown in the quarterly balance sheets of the Company and its
consolidated Subsidiaries for such year.