Exhibit 10.11
ANNUAL INCENTIVE PLAN
OF FREEPORT-McMoRan COPPER & GOLD INC.
ARTICLE I
PURPOSE OF PLAN
SECTION 1.1. The purpose of the Annual Incentive Plan of
Freeport-McMoRan Copper & Gold 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 Copper & Gold 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
Officer. 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, accrue
interest 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. Subject to the terms of the Plan and applicable law, the
Committee may delegate to one or more officers or assistant officers of
the Company its authority set forth in the immediately preceding sentence,
subject to such terms and limitations as the Committee shall determine.
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 Officer shall
be granted in accordance with the provisions of this Section 3.4.
(b) All Awards to Covered Officers 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 Officers 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 Officer for an Award Year is 60% 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 Officer 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 Officer, 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 6%.
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 adjustment into account in calculating Awards to Covered Officers
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 Officers with respect to a calendar year shall be equal to the
Plan Funding Amount for such year and, except as specified under Section
3.4(c), any adjustments made in accordance with or for the purposes of
subparagraphs (a) or (b) that would have the effect of increasing the Plan
Funding Amount shall be disregarded for purposes of calculating Awards to
Covered Officers. The Committee may, in the exercise of its discretion,
determine that the aggregate amount of all Awards granted to Covered
Officers 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 of Awards granted to Covered Officers shall not
be available for any Awards to Covered Officers 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 Officer 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 Officer.
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 or 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, 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 or portion thereof 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 Officer: 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 Officer" shall not include
any such individual who is designated by the Committee, in its discretion,
at the time of any grant or at any subsequent time, as reasonably expected
not to be such a "covered employee" with respect to the current taxable year
of the Company and (ii) any individual who is designated by the Committee,
in its discretion, at the time of any grant or at any subsequent time, as
reasonably expected to be such a "covered employee" with respect to the
current taxable year of the Company or with respect to the taxable year
of the Company in which any Award will be paid to such individual.
(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 reviewed by the Company's independent
auditors and released by the Company to the public; 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 reviewed by the Company's
independent auditors and released by the Company to the public; plus (or
minus) (iii) the effect of 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 reviewed by
the Company's independent auditors and released by the Company to the public.
(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 reviewed by the Company's
independent auditors and released by the Company to the public.
(h) Net Interest Expense: With respect to any year, the net
interest expense of the Company and its consolidated subsidiaries for such
year as reviewed by the Company's independent auditors and released by the
Company to the public.
(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 appropriate statutory income
tax rate for such year as reviewed by the Company's independent auditors.
(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 Inc., any subsidiary of
Freeport-McMoRan Inc., McMoRan Oil & Gas Co., any subsidiary of McMoRan Oil
& Gas Co., and any law firm rendering services to any of the foregoing
entities provided such law firm consists of at least two or more members or
associates who are or were officers of the Company or any subsidiary of
the Company.
(q) 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, (iii) the weighted average of the redeemable preferred stock
of the Company for such year and (iv) 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.